QUESTION: We have a director who is under the impression he is the only one who can sign checks because he is the treasurer. Without board approval, he has called special meetings of vendors, refused to pay vendors and has even torn up a large check in front of a vendor. He has told vendors that he will refuse to sign any more checks until they do what he wants. They now refuse to work. This is creating chaos for the association. The treasurer threatened to file a lawsuit if anyone tries to remove him from office. What can we do?
ANSWER: Your treasurer is acting outside his
scope of authority. Treasurers do not have unchecked power over the association’s finances. They answer to the board. Treasurers do not have the right to threaten vendors and tear up checks nor do they have sole authority to
sign checks.
Duty to Sign Checks. If the board authorizes payment to a vendor, the treasurer has a duty to pay the vendor. He cannot withhold funds just because he disagrees with the board’s decision. If cash flow is a problem, the treasurer can put a temporary hold on a check until funds become available. If the treasurer (or any other director) discovers circumstances that would cause the board to reconsider payment to a vendor, that director should bring the matter to the
attention of the board. Absent that, the treasurer must pay the association’s bills.
Removal from Office. The treasurer holds his office at the pleasure of the board and can be
removed by the board at any time with or without cause. Removing your treasurer from office is not by itself sufficient cause for him to file a lawsuit. That does not mean he won’t sue. If he does, he is going to have a very difficult time explaining to a court why he should be reinstated since the appointment of officers is discretionary with the board (unless your governing documents state otherwise). If your treasurer is foolish enough to file a lawsuit, he would be open to a counterclaim for any damage he caused the association for his unauthorized actions as treasurer.
Recommendation: If the board remains silent, it could be seen as an endorsement of your treasurer’s bad behavior. That could put the association at risk for litigation from vendors. You should work with your attorney to create a paper trail of written demands that your treasurer cease acting outside the scope of his authority. If he refuses to fall into line, remove him from office. If you’ve already made written demands which he has ignored, immediately remove him from office.
ASSISTANCE: Associations needing legal assistance can
contact us.
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