Langer v. Superior Court of Steel

Supreme Court of Pennsylvania · Contracts

ContractsCorporate authorityAgencycorporate authoritypresident's authorityboard of directorsbylawsactual authority

Facts

Plaintiff had worked for defendant corporation for more than thirty years and was replaced. The board of directors resolved that the treasurer was authorized, until further action of the board, to pay plaintiff $100 per month as a retired employee. The president instead sent plaintiff a letter stating that he would receive $100 per month as long as he lived, so long as he remained loyal and did not work in a competitive occupation. The corporation made payments until October 1, 1931, then discontinued them.

Issue

Whether the corporation was bound by the president's letter promising plaintiff $100 per month for life, where the board's recorded action authorized payments only until further action of the board and the bylaws vested corporate powers in the board.

Rule

Where corporate powers are vested in the board of directors and the president's authority is limited by the bylaws to duties assigned by the board and general supervision subject to board control, the president cannot bind the corporation to a broader obligation than the board authorized. Board minutes that accurately record the board's action control absent evidence that they are inaccurate.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Pittsburgh, Keystone Forge Works replaced longtime supervisor Daniel Mercer after 29 years of service. The board minutes authorized the chief financial officer to pay Daniel $1,200 per month "until further action of the board," but the company president later sent Daniel a letter stating he would receive $1,200 per month for the rest of his life if he stayed loyal and did not join a competitor.

If Daniel sues after the company stops paying three years later, which is the strongest argument for the company under the governing rule?

Explanation. Where the bylaws vest corporate powers in the board and the president acts only subject to board control and assigned duties, the president cannot enlarge the corporation's obligation beyond what the board authorized. A board resolution authorizing payments only until further board action does not authorize a lifetime promise, so the corporation is not bound to the broader commitment. (Derived from Langer v. Superior Court of Steel (n.d.).)