Menard, Inc. v. Dage-MTI, Inc.

Dage-MTI, Inc. (Dage) (defendant), an electronics manufacturer, was managed by its president Arthur Sterling for years with little board oversight. Sterling took many actions, including the purchase of land, without consulting the board. Sterling was one of six directors. In 1993, another director hired consultants and took other steps to ensure that the board played a more active role. In October 1993, Menard, Inc. (plaintiff) made a formal offer to Sterling to purchase part of a 30-acre parcel owned by Dage. Sterling forwarded the offer to the board. A majority of the board objected to a handful of provisions in the offer and rejected it. In November 1993, Sterling informed the board that Menard would make another offer, this time for the entire parcel. The board instructed Sterling that he could only solicit offers for the board to review and could not unilaterally bind the company to the sale. They stated further that if the new offer contained the same objectionable provisions as the original offer they would reject it. In mid-December, Sterling and Menard negotiated an agreement for the sale of the 30 acres. Without consulting the board, Sterling accepted the offer and signed the agreement, which contained the terms to which the board had previously objected. The agreement also included a representation that Sterling had the authority to bind Dage. The board soon learned of the deal and ordered Sterling to try to unwind it. Several months later, in March 1994, Dage’s board informed Menard that it intended to challenge the agreement. Menard sued for specific performance. The trial court found in Dage’s favor, finding that Sterling lacked express or apparent authority to bind the corporation. Menard appealed.