## Facts

- Carps, Inc. was a small, closely held Delaware corporation; Herbert M. Carp was president and Emile S. Carp was executive vice-president.
- Herbert and Emile sought a bank loan in their personal capacities to repay personal obligations and avoid having corporate financial statements reflect loans to officers.
- Lindell Trust Company made a loan (about $267,000) to Herbert and Emile; the bank requested a corporate resolution but proceeded without obtaining one.
- Herbert signed the bank note in a manner suggesting corporate involvement, but no board resolution, minutes, or written authorization approved any corporate endorsement or guaranty.
- Two of seven directors were not informed; what Herbert and Emile described as family “blessing” by certain relatives who were directors was not documented as board action.
- The Carp brothers asked Allan Molasky to endorse the Lindell note; Molasky relied on their oral assurances of authority and did not seek a corporate resolution or confirm authority with other directors.
- In connection with Molasky’s endorsement, the Carp brothers executed a separate promissory note payable to Molasky and an agreement containing their personal guaranty; later collateral documents did not name Carps, Inc.
- The Carp brothers defaulted; Molasky paid the balance due to Lindell and received an assignment of the note, which was ultimately endorsed to Molasky Enterprises, Inc.
- Molasky Enterprises sued Carps, Inc., asserting the corporation was liable on the instrument/guaranty; after a bench trial, the court entered judgment for Carps, Inc.

## Issues

1. Whether the corporate officers had actual authority to bind the corporation as endorser/guarantor on a note securing the officers’ personal debt.
2. Whether the officers had apparent authority, based on corporate manifestations, sufficient to bind the corporation.
3. Whether the corporation ratified the officers’ acts through knowledge, acquiescence, or subsequent conduct.
4. Whether an assignee of the note could recover from the corporation despite the asserted lack of authority.

## Decision

- The appellate court affirmed the defense judgment for Carps, Inc.
- The officers lacked actual authority to bind the corporation because there was no board authorization (no resolution, minutes, or comparable corporate act) and not all directors were informed.
- The officers lacked apparent authority because any claimed reliance was based on the officers’ own statements, and the bank’s request for a corporate resolution (never obtained) undermined reasonable reliance on authority.
- The corporation did not ratify the endorsement/guaranty because there was no showing that the board, with knowledge of material facts, adopted or approved the transaction.
- As assignee, Molasky Enterprises could not recover because the corporation was never validly obligated in the first instance.

## Legal Principles

- A corporation is not bound by an officer’s accommodation endorsement or guaranty for the officer’s personal debt absent proper corporate authorization.
- Actual authority requires proof of authorization by the corporation through valid corporate action; an officer’s title alone does not establish authority to issue accommodation paper.
- Apparent authority must arise from manifestations of the corporation, not from the agent’s representations; third-party reliance must be reasonable under the circumstances.
- Ratification requires that the corporation, with knowledge of material facts, affirmatively adopt the unauthorized act through appropriate corporate decision-making; informal family approval or uninformed silence is insufficient.
- An assignee takes subject to defenses based on lack of corporate authority where the corporation was never validly bound.

## Conclusion

The court held that a closely held corporation was not liable on an accommodation endorsement or guaranty tied to officers’ personal borrowing where no formal corporate authorization existed, no reasonable corporate-based appearances supported apparent authority, and the board did not ratify the transaction.


Molasky Enters., Inc. v. Carps, Inc., 615 S.W.2d 83 (Mo. Ct. App. 1981)