## Facts

- Drive-In Development Corporation (Drive-In) was a subsidiary of Tastee Freez Industries, Inc., which controlled several related corporations, including Allied Business Credit Corporation (Allied).  
- The National Boulevard Bank of Chicago extended credit based on a guaranty of Allied’s obligations executed by Drive-In and other subsidiaries.  
- Leo S. Maranz signed the guaranty on behalf of Drive-In as a corporate officer (Chairman).  
- George Dick, Drive-In’s corporate secretary, attested the guaranty and provided the bank a certified copy of a purported board resolution authorizing Maranz to execute the guaranty on Drive-In’s behalf. Preparing and certifying resolutions and guaranties were part of Dick’s regular duties.  
- No such resolution authorizing the guaranty was ever actually adopted by Drive-In’s board, and no record of it appeared in the corporate minutes.  
- Drive-In later entered Chapter XI bankruptcy proceedings; National Boulevard Bank filed a claim based on the guaranty.  
- The bankruptcy referee disallowed the bank’s claim, finding that Maranz lacked actual or apparent authority to bind Drive-In, and the district court affirmed that decision.  
- National Boulevard Bank appealed to the United States Court of Appeals for the Seventh Circuit.  

## Issues

1. Whether Drive-In Development Corporation was bound by a guaranty executed by its officer for the obligations of an affiliated corporation when the officer allegedly lacked actual or apparent authority.  
2. Whether the corporation was estopped from denying the officer’s authority where its secretary certified a board resolution purporting to confer such authority, even though no record of formal adoption existed.  

## Decision

- The Seventh Circuit held that Drive-In was bound by the guaranty.  
- The court concluded that Drive-In was estopped from denying Maranz’s authority because the corporate secretary, acting within the scope of his duties, certified a resolution granting Maranz express authority to execute the guaranty.  
- The appellate court reversed the disallowance of the bank’s claim and held that the guaranty was enforceable against Drive-In.  

## Legal Principles

- A corporation may be bound by a guaranty executed by one of its officers when a corporate resolution, certified by the corporate secretary as duly adopted, grants that officer authority to act, even if no formal record of the resolution exists in the minutes.  
- The corporate secretary has the duty and authority to maintain corporate records and to certify resolutions; third parties are entitled to rely on such certifications in good faith.  
- A corporation is estopped from denying the authority of an officer to bind it when the corporation, through its authorized agents and official documents, has represented that such authority exists and a third party has relied on that representation to its detriment.  
- In the context of related corporations, a subsidiary may validly guarantee the obligations of an affiliate when properly authorized, and disputes will often turn on corporate authority and estoppel rather than on the intercorporate relationship itself.  

## Conclusion

The Seventh Circuit held that Drive-In Development Corporation was bound by the guaranty executed by its officer because the bank reasonably relied on the corporate secretary’s certified resolution. The corporation was estopped from denying the officer’s authority, and the bank’s claim based on the guaranty had to be allowed in the bankruptcy proceeding.


In re Drive-In Development Corp., 371 F.2d 215 (7th Cir. 1967)