## Facts

- Inn Foods, Inc. supplied frozen vegetables to Atlantic Brands, Inc. under a Department of Defense contract.
- Atlantic failed to pay, and Inn Foods obtained a default judgment against Atlantic for over $1 million.
- In post-judgment discovery, Inn Foods learned that Atlantic’s president, Paget T. Hodge, endorsed a large U.S. Treasury check payable to Atlantic and deposited it into his personal account at Equitable Co-operative Bank.
- Equitable accepted the deposit while aware that Hodge was Atlantic’s president and, due to the check’s size, requested written verification that Atlantic authorized the deposit.
- Nine days after the deposit, Atlantic adopted a corporate resolution (copied to Equitable) confirming Hodge’s authority to endorse and deposit corporate checks into his personal account.
- Hodge later withdrew a substantial portion of the deposited funds.
- Atlantic did not sue Equitable; Inn Foods sued Equitable for conversion as Atlantic’s judgment creditor, asserting only rights Atlantic itself could have asserted.

## Issues

1. Whether Atlantic, through a post-transaction corporate resolution and related conduct, ratified its president’s endorsement and deposit of a corporate Treasury check into his personal account, eliminating any conversion claim against the bank.
2. Whether Inn Foods, as Atlantic’s judgment creditor asserting derivative rights, could recover for conversion if Atlantic itself had no viable conversion claim.

## Decision

- The First Circuit affirmed summary judgment for Equitable.
- The court held that Atlantic ratified Hodge’s endorsement and deposit as a matter of law.
- Because ratification extinguished any conversion claim Atlantic might have had, Inn Foods—suing derivatively as a judgment creditor—had no conversion claim to assert.

## Legal Principles

- Under Massachusetts law, ratification may be express or implied, but requires the principal’s knowledge of the material facts of the transaction.
- A principal’s failure to repudiate an unauthorized act, especially when paired with affirmative corporate action (such as a resolution confirming authority), can constitute ratification.
- Ratification may be effective even if the principal did not receive or retain a direct financial benefit from the agent’s act.
- A judgment creditor asserting a claim based on the debtor’s rights cannot recover if the debtor itself would have no cause of action.

## Conclusion

Atlantic’s post-deposit corporate resolution and lack of repudiation constituted knowing ratification of its president’s deposit of a corporate Treasury check into his personal account, eliminating any conversion claim against the bank; therefore, Inn Foods could not recover as Atlantic’s judgment creditor.


Inn Foods, Inc. v. Equitable Co-operative Bank, 45 F.3d 594 (1st Cir. 1995)