Court Opinion

ID: 9766763
Source: CourtListenerOpinion
Date Created: 2023-08-29 04:58:09.599756+00
Date Added: 2024-06-11T07:30:25.847930
License: Public Domain

John A. Fogleman, Justice, dissenting. I respectfully dissent because I think the court has capriciously pierced the corporate veil in holding that the evidence showed that Julian James had the authority to employ a real estate agent to sell corporate assets. I humbly submit that the case cited constitutes no authority for the majority’s position. In that case (Security Bank & Trust Co. v. Warren Light & Water Co., 170 Ark. 50, 278 S. W. 643), the evidence showed that one individual, S. R. Morgan, controlled and directed the affairs of the corporation, and the officers of the corporation obeyed his orders. Morgan handled the funds and completely dominated the firm. Bonds of the company and a mortgage securing them were the subject of the litigation. They were signed and impressed with the corporate seal by the president and secretary of the corporation, pursuant to resolution of the directors, and put into Morgan’s hands. Morgan negotiated a loan and pledged the bonds, representing that they were valid, binding obligations, notwithstanding the fact that they had not been authorized by the Arkansas Corporation Commission or countersigned by the trustee. Then, without recording the mortgage, the corporation sold its corporate property to Morgan & Co., which was actually S. R. Morgan. The court treated the corporation as a partnership and properly said that Morgan and his associates were clearly estopped by Morgan’s representations to deny liability on the notes or to repudiate the mortgage. None of the essential facts is present here. There is nothing to show that Julian James dominated the corporation or controlled or directed its affairs, or even his wife, who was the other substantial stockholder. As a matter of fact, the record clearly discloses that Mrs. James had a voice in the affairs of the corporation and used it. The fact that she was willing to authorize a sale at a substantially higher price does not mean that she was willing to, or did, authorize one at the lower price, or the employment of an agent to sell at that price. Apparently, the majority is treating the husband and wife as an entity, but this fiction was substantially weakened by the Married Women’s Acts early in the century. I have reason to entertain serious doubt that it will be revived beyond the reach of this opinion. I do not see how the letter of a corporate officer as an individual, undoing an unauthorized act, could possibly constitute either evidence of his authority or ratification of his acts by the corporation. Nor do I find any act whatever on the part of the corporation or Mrs. James to justify the application of the principle of waiver—the voluntary relinquishment of a known right. It is obvious that Mrs. James did not want to sell the property on the terms accepted by Fowler and made herself an obstacle to any corporate resolution to that effect. James was president and his wife secretary of the corporation. James’ authority was governed by Ark. Stat. Ann. § 64-310 (Repl. 1966). It was not shown that there was any corporate by-law or resolution authorizing him to sell the corporate real estate or to employ an agent to do so. The identity of the directors is not disclosed. They have very heavy responsibilities to minority as well as majority stockholders. It is not shown that the directors even knew of the action of James, unless he and his wife are directors. If so, at least one director did not approve. Thus, cases such as Bodcaw Oil Company, Inc. v. Atlantic Refining Company, 217 Ark. 50, 228 S. W. 2d 626, cannot apply, for there was neither evidence of acquiescence in this transaction nor in similar actions without prior authority. Furthermore, no question of implied authority was submitted’ to the jury. The issue as to James’ authority was clearly raised by the motion for a directed verdict. The court instructed the jury, over appellant’s objection, that James, as president and majority stockholder, had legal authority to bind the corporation. Neither the circuit judge, appellee’s counsel nor the majority has come up with any authority for this statement. I submit that the giving of the instruction and the denial of a directed verdict were error. I would reverse the judgment and remand for a new trial. Perhaps appellee can more fully develop the cause to justify a finding of agency.