295 Mass. 419 | Mass. | 1936
This is an action of tort for deceit. It was submitted to the jury upon three counts of the declaration which were not for the same cause of action. It was alleged in those counts in substance that in October, 1928, the defendant through its duly authorized agents represented to
The record is long and contains many exceptions. The only ones which need be considered relate to the denial of the motions for the entry of verdicts in favor of the defendant. The question thus raised is whether there was. any evidence that the representations on which the plaintiff relied were made by authorized agents of the defendant. In the view that we take, the same principles of law apply to each count. They will be combined in a single discussion.
The evidence relevant to the grounds of this decision may be succinctly stated. The defendant is a corporation organized under the laws of New York. Its corporate purposes as set forth in its certificate of incorporation are to purchase, lease, erect and maintain buildings, laboratories, studios, film developing and printing plants, factories, tenements and manufactories, and to purchase, sell and deal in personal property of the same general kind as, therein described pertaining to its business. It contains no mention of the buying, selling, owning or leasing of theatres and theatre properties. By-laws of the defendant provided in part as follows:
"The affairs of the business of the Company shall be managed by a Board of eight Directors who shall respectively be stockholders of record, each owning at least one share, and at least one of such Directors shall be a resident of the State of New York.” ■
"Duties of Directors. — The Board of Directors shall have the control and general management of the affairs and business of the Company. Such Directors shall in all cases act as a Board, regularly convened in the State of New York by a majority of the members thereof, and they may adopt such rules and regulations for the conduct of their meetings, the meetings, of the Executive Committee, and the management of the Company as they may deem proper, not inconsistent with these By-Laws and the Laws of the State of New York.”
The powers of the president are that he shall "Appoint and remove subject to the approval of the Board of Di
The plaintiff testified that from 1912 to 1928 he had a wide experience in the moving picture industry. In October, 1928, having been invited to the offices of the defendant in New York, he met there one Campbell and one Grainger, who were respectively New England manager and the general sales manager of the defendant. He was told by Grainger that the defendant had determined to get more theatres all over the country, that William Fox (who was president of the defendant) had decided to get into New England and had delegated one Blumenthal to represent the defendant in negotiations to that end. The plaintiff met Blumenthal, who said he had been appointed by the defendant to buy theatres in large quantities. He wanted the plaintiff to go to work immediately and get as many theatres as possible. In consequence of that interview the plaintiff made arrangements for the lease of a theatre in Waltham. When the contract was to be drawn, Blumenthal for the first time said that the Fox Metropolitan Company was to take title, “Of course it is the Fox Film Corporation, but the Fox Film Corporation is not taking the title itself . . . We are taking it in the name of one of our subsidiaries.” He then explained that the Fox Metropolitan Company had been organized and the Fox Northeastern Company was to be organized. “They are both organized by us. They are organized by employees of Fox Film. They have no capital but we have arranged with” bankers to underwrite a twenty million dollar bond issue for each one of these companies and “it doesn’t make any difference under those circumstances
There was ample evidence of false representations which induced the plaintiff to spend time and money in endeavoring to make transfers of leases of theatres, resulting in loss to him. These representations were made chiefly by Blumenthal, and to some extent by William Fox.
The principal business of the defendant was producing and distributing pictures, manufacturing films and selling the same to theatre owners. There was evidence to the effect that the defendant owned one theatre in each of three large cities in this country and owned stock in two corporations which had chains of theatres. William Fox was president of the defendant in 1928 and 1929. He owned a majority of its stock having voting power but there was a large issue of stock without voting power held by the general public.
The question to be decided is whether there was sufficient evidence that those who made the false representations to
It was agreed that the record books of the defendant from January 1, 1928, to January 1, 1930, show no vote of its board of directors authorizing William Fox to acquire theatres or authorizing William Fox to act as its agent in acquiring theatres or to act as its agent in employing Blumenthal to act as an agent for the corporation in acquiring theatres, and that there is nothing in the records relating to the Fox Metropolitan or Fox Northeastern companies, and, in addition to this last, no vote ratifying any action by William Fox or Blumenthal. No other evidence was introduced which showed any action by the board of directors of the defendant touching this subject. It was agreed that Blumenthal had no official connection with the defendant.
The burden was upon the plaintiff to show that the defendant was responsible for the representations upon which he relied. He must show that these representations were either made or ratified by those having authority to bind the defendant in these particulars. England v. Dearborn, 141 Mass. 590. Pritchard v. Uphams Corner Theatre Co. 238 Mass. 441, 444. Cashin v. Corporation Finance Co. 251 Mass. 60, 62, 63. It is apparent that no actual authority or ratification of this nature was shown. The records of the defendant, to which reference has already been made, are decisive on this point.
The by-laws of the defendant gave William Fox by virtue of holding the office of president, which included that of general manager, no implied authority to negotiate for the leasing or acquisition of theatres or to make representations as to the financial responsibilities of corporations which were to assume the obligations for such leasing and in which the defendant owned no stock. Such acquisition would involve
The evidence does not warrant a finding that-either Fox or Blumenthal had implied authority to enter upon negotiations with the plaintiff such as are here disclosed or to make the representations upon which he relies. The by-laws of the defendant conferred no such authority either expressly or by implication. The directors could not delegate to Fox the entire control of the defendant because this would be inconsistent with the by-laws and with the corporation law of New York. Directors of a corporation are regarded as fiduciaries and are required to exercise their own independent judgment for the highest welfare of the corporation and its stockholders. “The functions of directors may not be abdicated.” Caskie v. International Railway, 261 N. Y. 47, 55. Continental Securities Co. v. Belmont, 206 N. Y. 7, 16. McQuade v. Stoneham, 263 N. Y. 323, 328, 329. Albert E. Touchet, Inc. v. Touchet, 264 Mass. 499, 507. It is provided by § 27 of the general corporation law of New York, Laws of 1929, c. 650, § 1, that the “business of a corporation shall be managed by its board of directors .■...”
There was considerable testimony to the effect that stock in other theatres, and perhaps other. theatres, had been acquired by the defendant. The connection of William Fox with these transactions, the precedent authority conferred upon him or the subsequent ratification of his conduct by the defendant was not made clear. There was testimony by one Rogers and testimony by the plaintiff as to statements made to him by Rogers. The latter was a vice-president of the defendant, one of its directors and its general counsel. He was also connected with the Fox Theatres Company, an important corporation organized by him in 1925. There was testimony that it had acquired theatres and that the two new corporations were its subsidiaries. There was nothing to indicate that Rogers had authority to make admissions in behalf of the defendant. Another director of the defendant in his capacity as an executive officer of the Fox Metropolitan company signed contracts respecting theatres of which the plaintiff secured leaseholds. That did not bind the defendant. He was not then acting as its director. There was testimony that employees of the defendant were working at the direction of William Fox with Blumenthal in transactions in which the
One fundamental difficulty with the plaintiff’s case, is that the representations upon which he relies relate to transactions involving the expenditure of such large sums of money by the defendant that they outstripped its ordinary and usual course of business and the representations cannot be held binding upon the defendant without some corporate action beyond what is here shown. DeBlois v. Boylston & Tremont Corp. 281 Mass. 498, 520. Massachusetts Hospital Life Ins. Co. v. Nesson, 286 Mass. 216, 222. James F. Monaghan Inc. v. M. Lowenstein & Sons Inc. 290 Mass. 331, 333.
It becomes unnecessary to consider the plaintiff’s exceptions which, so far as argued, relate to damages.
The plaintiff’s exceptions are overruled. The defendant’s exceptions are sustained. In accordance with G. L. (Ter. Ed.) c. 231, § 122, judgment may be entered for the defendant.
So ordered.