## Facts

- American Center for Education, Inc. (ACE) was a nonprofit, nonmembership, tax-exempt corporation organized under District of Columbia law, operating from Los Angeles.
- Hurst B. Amyx founded ACE and served as president; Samuel M. Cavnar and George Todt served as vice presidents and as treasurer/secretary, respectively.
- ACE’s articles and bylaws required at least three directors, and a quorum of three for both the board of directors and the executive committee.
- After another director resigned and was not replaced, the remaining directors/executive-committee members were Amyx, Cavnar, and Todt.
- Due to internal disagreements, Cavnar and Todt attempted to convene an executive-committee meeting to remove Amyx as president, director, and executive-committee member; Amyx left, preventing a quorum.
- Cavnar and Todt then went to ACE’s bank (United California Bank) and purported to hold an executive-committee meeting without Amyx, voting to remove Amyx, appoint Robert Davies as a director, transfer ACE funds to a new account inaccessible to Amyx, and exclude Amyx from ACE offices.
- Cavnar, Todt, and Davies later held a board meeting purporting to confirm the prior actions; Amyx received notice but did not attend.
- Amyx sued individually and on behalf of ACE, challenging the validity of the purported corporate actions and seeking relief for the diversion of corporate funds.
- A jury found for ACE and Amyx on key issues; judgment ordered Cavnar, Todt, and Davies removed from any claimed positions with ACE and awarded ACE $80,000 plus 7% simple interest from May 15, 1970 (damages assessed against Cavnar and Todt, not Davies).
- Cavnar, Todt, Davies, and the bank appealed; ACE cross-appealed after denial of its motion for judgment notwithstanding the verdict (JNOV) seeking a higher award against the bank.

## Issues

1. Whether actions taken at a purported executive-committee meeting without a quorum (including removal of a director/officer and appointment of a replacement director) were valid under ACE’s articles and bylaws.
2. Whether an executive committee, even if properly convened, had authority under the bylaws to remove a director.
3. Whether Cavnar and Todt breached duties to ACE by taking control of corporate funds and excluding Amyx from corporate operations, supporting damages and equitable removal relief.
4. Whether the bank’s handling of the account changes supported a larger money judgment as a matter of law, and whether denial of ACE’s JNOV motion was proper.

## Decision

- The court affirmed the judgment granting ACE relief against Cavnar and Todt, including their removal from claimed corporate positions and the damages award.
- The court held the purported bank-meeting actions were unauthorized and ineffective because ACE’s governing documents required a three-person quorum and Amyx’s absence meant no quorum existed.
- The court also agreed that the executive committee lacked authority under the bylaws to remove a director, independently invalidating that aspect of the attempted ouster.
- The court sustained the trial court’s disposition regarding Davies and the bank and affirmed denial of ACE’s cross-appeal seeking a higher judgment against the bank via JNOV.

## Legal Principles

- Corporate acts taken without the quorum required by governing documents are not valid acts of the corporation and cannot effect changes in directors, officers, or control of corporate property.
- Delegated authority to an executive committee is limited by the bylaws; an executive committee cannot exercise powers the bylaws withhold, including removal of directors where that power is not delegated.
- “At-will” authority to appoint or remove directors/officers in a nonmembership nonprofit corporation must be exercised by the proper corporate body and through procedures consistent with the articles, bylaws, and applicable law.
- Officers and directors who seize control of corporate funds or operations through unauthorized corporate actions may be subject to equitable relief (including removal) and monetary liability for resulting harm to the corporation.
- JNOV is improper where substantial evidence supports the jury’s verdict when conflicts are disregarded and all reasonable inferences are drawn in favor of the prevailing party.

## Conclusion

The court enforced ACE’s quorum and authority limits, invalidated an attempted coup carried out without a quorum and beyond executive-committee power, and affirmed both the removal of the offending insiders from corporate positions and damages for the wrongful diversion of corporate funds, while upholding the denial of a larger JNOV-based award against the bank.


Am. Ctr. for Educ., Inc. v. Cavnar, 80 Cal. App. 3d 476, 145 Cal. Rptr. 736 (Cal. Ct. App. 1978)