Rivoli Theatre Co. v. Allison

152 A.2d 449, 396 Pa. 343

• Court: Supreme Court of Pennsylvania
• Decided: June 30, 1959
• Docket: Appeal, 100
• Status: Published

Opinions

Opinion by

Me. Justice Boic,

In 1927 three men — George Wilson, Sr., defendant, and Myer — formed a corporation to operate, among others, the Rivoli Theatre in Portage, Cambria County. Wilson died in 1937 and was succeeded by his son, who has also died. Defendant has at all times been Vice-President of the corporation and Manager of the theatre.

The suit was to recover $7053.16, with interest, representing concession money allegedly received and retained by defendant between 1946 and 1951. In 1954 a jury found in favor of defendant and a new trial was granted. In the instant trial a verdict in the total sum of $9498.14 was returned by the jury at the direction of the trial judge, who granted plaintiff’s motion for a directed verdict on the ground that defendant admitted the case against him. A motion for a new trial was overruled and this appeal followed.

There are two grounds offered in support of the motion. First, the jury should 'have been allowed to pass upon the defense of ratification and estoppel. Second, the plaintiff’s testimony, though uncontradicted by defendant, should have been submitted to the jury because of flaws between his testimony in chief and on cross-examination.

The basic law is clear. The Business Corporation Law of May 5, 1933, P. L. 364, Art. IV, §408; 15 P.S. §2852-408, provides: “Officers and directors shall be deemed to stand in a fiduciary relation to the corporation, and shall discharge the duties of their respective positions in good faith and with that diligence, care, and skill which ordinarily prudent men would exercise under similar circumstances in their personal business affairs.”

Decisionally, the rule is well stated in Howell v. McCloskey, 375 Pa. 100, 99 A. 2d 610 (1953) : “The rule of law is that officers and directors 'must act in the utmost good faith, and cannot deal with the funds and property of the corporation, nor utilize the influence and advantage of their offices, for any but the common interest ... It is immaterial that their dealings may not have caused a loss or been harmful to the corporation; the test of liability is whether they have unjustly gained enrichment’: Bailey v. Jacobs, 325 Pa. 187, 194, 189 A. 320. They must devote themselves to the corporate affairs with a view to promote the common interests and not their own, and they cannot, either directly or indirectly, utilize their position to obtain any personal profit or advantage other than that enjoyed also by their fellow shareholders ... In short, there is demanded of the officer or director of a corporation that he furnish to it his undivided loyalty; if there is presented to him a business opportunity which is within the scope of its own activities and of present or potential advantage to it, the law will not permit him to seize the opportunity for himself . . .’: Lutherland, Inc. v. Dahlen, 357 Pa. 143, 151, 53 A. 2d 143.”

Defendant made contracts in his own name with various concerns for advertising film, candy, and popcorn. He relied on a conversation with Wilson, Sr., in 1928, when he said that Wilson left the matter of sideline concessions up to him. He accordingly pocketed the proceeds without ever mentioning it to Myer or bringing it before a meeting of the stockholders or directors of the corporation. Defendant admitted these facts. It is therefore quite clear that he enriched himself at the corporation’s expense.

Defendant’s suggestion of ratification must fall. His single conversation with Wilson in 1928, before there were any concessions let, and Myer’s possible suspicions when he went to the theatre and saw the vending machines fall far short of the full and frank disclosure to all of the stockholders required for ratification or estoppel by the Lutherland and Bailey cases. Further in Weissman v. Weissman, Inc., 374 Pa. 470, 97 A. 2d 870 (1953), the corporation consisted of father, mother, and son, with mother inactive. The son acquired a mortgage for $800 of his own money on a property owned by the corporation and ultimately collected the full debt, with interest and costs, in the sum of $7700. His father knew all about the deal but his mother did not, and there was no evidence of corporate approval. This court reversed the verdict for the son.

Nor is there merit in defendant’s contention that the jury should have passed on uncontradicted oral testimony, with especial reference to certain differences between Myer’s testimony on direct and on cross-examination. He cites Nanty-Glo Borough v. American Surety Co., 309 Pa. 236, 163 A. 523 (1932), but the case is not in point. It involved uncontradicted oral testimony, while the instant case involves admitted evidence and testimony, and there is a vast difference. Defendant’s basic admissions left no issue for the jury to resolve, and there is no authority known to us that requires such an admission to run the gantlet in the jury room. It has, rather, the effect of an unintentional but still unconditional surrender.

The judgment is affirmed.