## Facts

- In 1987, William M. White became the controlling shareholder of Thatcher Financial Group, Inc. (TFG), a holding company created to hold an ownership interest in a bank; TFG also had about ten minority shareholders.
- Before November 1987, TFG’s board of directors had four members, including White.
- In November 1987, two directors resigned. In December 1987, the board appointed a replacement director, but that director resigned soon afterward and was not replaced.
- As a result, TFG operated for an extended period with only two directors (including White).
- For roughly the next two years, White served as TFG’s chief executive officer and chairman of the board but received no salary.
- During that time, White made cash advances and paid expenses to allow TFG to transact business and pursue projects, including work related to preparing a private placement memorandum.
- The two-director board later approved an arrangement to pay White salary for his CEO services and to reimburse him for the advances and expenses he incurred on TFG’s behalf.
- In 1992, a third party became TFG’s controlling shareholder, and White resigned as a director.
- White remained unpaid and sued TFG for breach of contract, seeking unpaid salary and reimbursement/repayment of the advances and expenditures.
- A jury found for White and awarded amounts for past salary, private placement memorandum expenses, and miscellaneous advances; the trial court entered judgment on the verdict.
- TFG appealed, arguing it was not bound because the board that approved the compensation and reimbursement agreement had fewer directors than the minimum required by statute.

## Issues

1. Whether board action taken when a corporation’s board has fewer directors than the statutory minimum is necessarily invalid, allowing the corporation to avoid an obligation approved by that board.
2. Whether, given White’s services and advances to TFG, sufficient evidence supported the jury’s finding that TFG was bound to pay salary and reimburse/repay White.

## Decision

- The Colorado Court of Appeals affirmed the judgment entered on the jury verdict for White.
- The court rejected TFG’s argument that the compensation and reimbursement arrangement was unenforceable solely because the board had fewer directors than the statutory minimum.
- The court concluded the evidence supported the jury’s finding that White was entitled to back salary and reimbursement/repayment for advances and expenses incurred for TFG, including private placement memorandum costs.

## Legal Principles

- Corporate action is not automatically void simply because the corporation failed to maintain the minimum number of directors required by statute.
- Acts of directors functioning as the corporation’s governing body may bind the corporation even if the board is improperly constituted, where the directors act under color of office and the corporation conducts its affairs through them.
- A corporation that accepts the benefits of an officer’s services and expenditures may not avoid payment by pointing to defects in its own internal governance structure.
- A compensation or reimbursement obligation may be established by evidence of board approval and performance (services rendered and funds advanced) that benefits the corporation.
- On appeal from a jury verdict, an appellate court does not reweigh credibility or substitute its view of the evidence where the record contains support for the verdict.

## Conclusion

White v. Thatcher Financial Group, Inc. holds that TFG could not escape liability for its CEO’s unpaid salary and unreimbursed advances by arguing that the board approving the arrangement lacked the statutorily required number of directors; because TFG operated through that two-director board and accepted the benefits of White’s services and expenditures, the jury’s contract-based award was affirmed.


White v. Thatcher Financial Group, Inc., 940 P.2d 1034 (1996)