White v. Thatcher Financial Group, Inc.

In 1987, William White (plaintiff) became the controlling shareholder of Thatcher Financial Group, Inc. (TFG) (defendant), a holding company created to hold an ownership interest in a bank. There were approximately 10 minority shareholders. Before November 1987, TFG’s board of directors consisted of four people, including White. In November 1987, two directors resigned. The following month, the board appointed one new director, who resigned shortly thereafter and was not replaced. Consequently, the board consisted of only two directors. During the next two years, White served as TFG’s chief executive officer but did not receive a salary. Additionally, White made cash advances to TFG that helped TFG transact business and develop certain projects. Subsequently, the two-director board apparently approved an agreement to pay White his unpaid salary and to reimburse White for the advances he made to TFG. In 1992, a third party became the controlling shareholder of TFG, and White resigned as a director. However, White remained unpaid, which prompted White to sue TFG for breach of contract regarding his unpaid salary and unpaid reimbursements. TFG argued that it was not bound to pay White his unpaid salary or to reimburse White because when the board of directors apparently approved the agreement, the board had fewer directors than the statutorily required minimum. The jury returned a verdict in White’s favor. TFG appealed.