Facts
In the summer of 1963, Erich Frischknecht and Max Wyler founded Prospera GmbH with a share capital of 50,000 Swiss francs. Through an amendment to the articles of association in November 1963, the capital was increased to 2 million Swiss francs, with Willy Schmitz and his daughter Christel Wentzel becoming the new shareholders. Frischknecht and Schmitz were registered as sole authorized signatories as managing directors.
In March 1964, Frischknecht, in the name of Prospera GmbH, took out a loan of 1.8 million German marks from Bank for Public Economy AG. For this, Prospera GmbH provided a joint and several guarantee and pledged its securities deposited with Swiss Bank Corporation. The loan was used by Frischknecht to repurchase shares of Société Chimique de Gerland, which he had previously recommended to his clients.
In December 1964, Prospera GmbH was declared bankrupt. Bank for Public Economy then asserted its claim from the guarantee and claimed a right of pledge on the deposited securities. However, the Bankruptcy Office of Glarus rejected the claim, as Frischknecht had exceeded his power of representation.
Bank for Public Economy then filed a claim for the collocation of its claim and the establishment of the right of pledge. The Civil Court of the Canton of Glarus upheld the claim, but the High Court of the Canton of Glarus dismissed it. The Bank appealed against this judgment to the Federal Supreme Court.
Considerations
The Federal Supreme Court confirmed the judgment of the High Court. It stated that the power of representation of the managing directors of a limited liability company under Art. 718 para. 1 CO is limited to legal acts that are in line with the purpose of the company. However, the guarantee and pledge in favor of Frischknecht's personal transactions were outside the corporate purpose of Prospera GmbH.
Frischknecht had provided the guarantee and pledge without authorization or approval of a superior body, which, according to the case law of the Federal…