Facts
- American Express Company issued a credit card in the name of Uniworld Group, Inc., with the card issued to Manny Lopez.
- Lopez was Uniworld’s chairman of the board but was not its chief executive officer.
- Lopez used the card to incur charges, and American Express sought to recover the unpaid balance from Lopez and Uniworld.
- The case was submitted on an agreed statement of facts for determination of a single legal issue.
- The stipulated facts did not describe the specific internal duties or limits of the chairman’s authority within Uniworld.
- Uniworld argued that a chairman’s authority is limited to presiding over board meetings and does not include power to pledge corporate credit through a corporate credit card.
- Uniworld produced no showing that American Express knew, or should have known, that the charges lacked a corporate purpose or that Lopez’s authority was internally restricted.
Issues
- Whether a corporate chairman of the board, who is not the chief executive officer, has implied or apparent authority to pledge the corporation’s credit by obtaining and using a corporate American Express card.
Decision
- The court held for American Express.
- The court concluded that Lopez, as chairman, had apparent authority to obtain the card in the corporation’s name and bind Uniworld for the resulting charges.
- The court rejected Uniworld’s attempt to confine the chairman’s authority to presiding over meetings where third parties reasonably would treat the chairman as a senior corporate representative.
Legal Principles
- A corporation may be bound by an officer’s acts within the officer’s apparent authority when those acts accord with ordinary business practice and the reasonable expectations of third parties dealing with the corporation.
- Apparent authority turns on reasonable external perceptions of authority, not undisclosed internal limitations on an officer’s power.
- Even if the chairman is not a “usual officer” listed among standard statutory officers, the office is legally recognized and may, depending on business realities, reasonably appear to third parties as carrying power to commit the corporation for routine business expenditures.
- Absent notice that the officer is acting outside corporate purposes or beyond authority, a creditor may rely on the apparent authority of a senior corporate official to obtain and use customary credit instruments for ordinary corporate expenses.
Conclusion
The court held that a chairman of the board can possess apparent authority, as viewed by reasonable third parties in ordinary commerce, to obtain and use a corporate credit card, thereby binding the corporation to pay the resulting charges when the creditor lacks notice of any internal limits or improper purpose.