BENJAMIN W. MORSE vs. FALL RIVER LINE PIER, INC.

WHITTEMORE, J. These are the defendant's exceptions in an action of contract in which the plaintiff had a verdict for breach of a contract for his employment as pier manager for three years from March 1, 1957.

1. The defendant's motion for a directed verdict was rightly denied.

The defendant relies on the absence of any action by directors valid to impose an obligation upon the corporation. The evidence shows at best a de facto board. The directors who acted to make the contract should have been elected by the members (an ex officio board of ten Fall River officials) but were elected by the directors. When the corporation was founded in 1946 sixteen directors were chosen, although fifteen was the largest number permitted by the by-laws, and succeeding boards stemmed from that oversized board. "At the January 16, 1957, meeting [at which the contract was voted] nine people were listed as present, six of whom were . . . [members] . . . [and] all nine acted as directors. Listed as absent were ten persons, some of whom were . . . [members], all of whom purported to be

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directors." Further, the required three day written notice to all directors was not given for that meeting and the alternative provision for waivers was not fully met.

"Where persons having color of title are permitted by the corporation to act in the position and with the reputation of being directors, third persons who deal with them in ignorance of their want of legal right to the offices are entitled to assume that there is no defect in their appointment." Stratton Mass. Gold Mines Co. v. Davis, 222 Mass. 549, 553. Lazenby v. Henderson, 241 Mass. 177, 180. Tufts v. Waltham Auto Bus Co. 273 Mass. 390, 395-396. The grounds are "public policy and practical necessity." Stratton case, p. 553. The defendant contends that the plaintiff knew or should have known "that the persons pretending to be officers . . . [were] not officers de jure." Ibid., 554 (issue between corporation and stockholders). Sears v. Corr Mfg. Co. 242 Mass. 395, 399-400 (the plaintiff, long a director, charged with knowledge of the limits of the treasurer's authority). See Richards v. Attleborough Natl. Bank, 148 Mass. 187, 195. But the evidence does not require this conclusion. The defendant cites cases holding that paid officers, as well as directors, are bound to know of internal affairs and by-laws. The plaintiff, however, was not an officer. The by-laws provide for a pier manager in "the event that the corporation shall become lessee of the pier proposed to be constructed by the Commonwealth" and that "the conduct of the business of the corporation upon and in connection with said pier" be in his charge, and that he be appointed by the directors with "such powers as the directors may delegate to him. The terms of employment of the Pier Manager shall be three years, at a salary not exceeding $ per annum. He shall have full charge, when the power is given to him by the Board of Directors, of the management and operation of the pier and he may employ and discharge necessary laborers, clerical help and other employees or assistants from time to time, subject to approval of the Board of Directors as to the number and classification of such employees and the wages or salaries which they

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shall be paid. The pier Manager shall be directly responsible to the Board of Directors and shall render such reports and accounts to the Board as the Board may from time to time direct."

True, the plaintiff was a key employee, but as pier manager he was unconcerned with the election of directors or with notice or conduct of meetings. There is no evidence that he knew of the defects now relied on. It is inconsequential that, although absent when his contract was voted, he was present on January 16, 1957, when the directors were elected. There is no basis for inferring that the directors then spoke of their lack of authority or of the defect in respect of notice.

The law is not, as the defendant contends, that de facto authority cannot arise where "the election or tenure is . . . void." In Clark v. Easton, 146 Mass. 43, the town, although it had not accepted the act permitting it to do so, purported to elect road commissioners. It was held that they were officers de facto inasmuch as there was an office created by the Legislature which the town had purported to fill and in which the persons elected purported to act. Here there were directorships in which the apparent directors purported to act. That the members of the corporation were at least acquiescing in the irregular conduct of the business of their corporation can be inferred from the evidence which showed that in 1957 over six of them were acting as directors and that six attended the January 16, 1957, meeting.

There is nothing in the point that no contract was made because the written contract contemplated by the vote of January 16, 1957, was never executed. The minutes of the meeting recite as follows: "Pier Manager Morse and his assistant . . . were temporarily excused from the meeting. The forthcoming expiration of the Pier Manager's contract was discussed at length by the board. Upon a motion . . . it was voted to renew the contract for the same salary per year, $12,000. under the same conditions, for a three-year period, beginning March 1, 1957, or for such period that Fall River Line Pier, Inc. holds a lease on the property,

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whichever is shorter. And it shall provide for a three-month cancellation clause for cause." The plaintiff had had a written contract for one year from March 1, 1955. On February 8, 1956, at a meeting purporting to be a directors' meeting, it was voted that the contract be renewed for one year "as presently in effect." There is no basis for the assertion in the defendant's brief that "the mere vote of the board [was] not communicated to the plaintiff, nor acted upon by him." The jury could have inferred that upon the plaintiff's return to the meeting, or promptly thereafter, he was informed of the vote. He continued at work for two years. Plainly an offer and an acceptance could be found even though no new contract was executed.

2. The judge did not err in failing to rule that damages were confined to salary for three months.

On January 19, 1959, a duly constituted board appointed a committee consisting of the president and an attorney with authority to give a termination notice to the plaintiff if it found that the corporation was not "legally bound to employ Mr. Morse." At a meeting held on February 2, 1959, a letter was read from the attorney which noted his opinion that the corporation was not bound. The president added that "his reasons why the plaintiff could not continue . . . were: 1. Lack of Mr. Morse's attracting pier business. 2. The fact that the corporation cannot afford his salary. A motion duly made . . . was passed by unanimous vote that a committee be appointed by the President to work out details of a new contract on an incentive basis for the plaintiff. The letter of . . . (the attorney) was read . . . and . . . [it] stated (in part) that the contract . . . was in violation of . . . (the Statute of Frauds)." [Note 1] Under date of February 15, 1959, the plaintiff received a notice signed for the defendant by its president which stated: "You are hereby advised that, in accordance with a vote of the board of directors, your services are terminated as of the date of this letter." There was no vote authorizing this action other than the vote of January 19, 1959.

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There was testimony that from 1954 to the first part of 1959 only two commercial ships used the pier for a total of one week and two days. The committee "considered this, and this was one of the reasons that prompted their decision to send the letter of discharge . . .. The other reasons . . . [were] that the Board had authorized it; also because of . . . [the attorney's] opinion that there was no legal contract . . .."

There was also testimony of a contract between the defendant and the Commonwealth dated May 17, 1948, which "was in effect between March 1, 1957 and March 1, 1960 . . .; also [of] a lease between the defendant and the United States Navy signed May 6, 1959, for a ten-year period to yield $68,000 per year."

It is not clear that the jury could have found that there was termination for cause with consequent limitation of damages to the period specified in the contract. See Williston, Contracts (Rev. ed.) Section 1359. The short answer, however, is that the defendant presented no request, either before or after the charge, to instruct that in such event the damages should be limited to the three months' notice period. Even if the case was so tried that such issue was one of "the leading points of the case," so that a prior request was not required, a request after the charge was necessary to give any ground for exception. Brick v. Bosworth, 162 Mass. 334, 337-338. Commonwealth v. Enwright, 259 Mass. 152, 158-159. Gibbons v. Davis, 324 Mass. 286, 288, and cases cited.

3. It was not error to refuse to instruct, in terms, that "[d]irectors . . . may remove . . . at any time for cause." The judge instructed that the defendant contended that there was "justifiable cause" and that the jury must find if there was such from all the evidence and exhibits.

Requests to instruct in respect of the plaintiff's presumptive knowledge from his position and his presence at the meeting on January 16, 1957, could not have been given for reasons hereinbefore stated. The instructions as to de facto officers adequately covered the issue that "[d]irectors

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elected . . . other than as prescribed . . . are not legally elected."

4. There was no error in the admission of excerpts of the minutes of meetings of "the supposed board of directors." It was not necessary to show that "these minutes were of meetings duly called by a legal board."

No prejudice is shown from the exclusion of the following question addressed to a witness who was assistant pier manager during the plaintiff's employment: "During the course of that time (April 1, 1955 to approximately June 1959), did Mr. Morse . . . bring any commercial business to the pier, with the exception of the Naval lease?" We assume that no offer of proof was required, this being cross-examination, but there was other evidence as to the limited use of the pier and there is no basis for assuming that any testimony more adverse to the plaintiff would have been elicited than that on which the defendant's president, as he said, acted in purporting to terminate the contract.

It was within the judge's discretion to allow the plaintiff to testify that he was "ready, able and willing to complete his part of the agreement." The plaintiff was at work in his contract job when the notice of termination was given and, apart from this testimony, the jury could not infer that he had defaulted or was about to do so.

Exceptions overruled.