Carroll v. Morrison Hotel Corporation, 8592.

• Decision Date: 15 May 1945
• Docket Number: No. 8592.,8592.
• Citation: 149 F.2d 404
• Parties: CARROLL et al. v. MORRISON HOTEL CORPORATION et al.
• Court: U.S. Court of Appeals — Seventh Circuit

149 F.2d 404 (1945)

CARROLL et al. v. MORRISON HOTEL CORPORATION et al.

No. 8592.

Circuit Court of Appeals, Seventh Circuit.

May 15, 1945.

Austin L. Wyman and Daniel P. Nagle, both of Chicago, Ill., for appellants.

Joseph B. Fleming, J. Roy Browning, and Joseph H. Pleck, all of Chicago, Ill., for appellees.

Before MAJOR, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

Plaintiff¹ sued defendants to recover damages for breach of a contract. Jurisdiction rests upon diversity of citizenship and the requisite amount in controversy. The District Court on motion of defendants under Rule 12(b) (6) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, dismissed the complaint as amended, for failure to state a claim upon which relief could be granted.

The contract involved provided for the leasing of the Terrace Room in the Morrison Hotel. The complaint alleged that one Leonard Hicks was known and advertised by the Morrison Hotel Corporation (hereinafter referred to as Hotel) to the public as Managing Director, which in the hotel business and trade is a title customarily given to one who has complete authority to deal with the public in matters pertaining to the operation of the hotel business, including the making of agreements with respect to occupancy of space in the hotel property; that at Hicks' direction or suggestion, other negotiations occurred with Best, assistant secretary, and Bolt, treasurer or assistant treasurer of Hotel; that Hicks informed Carroll he was taking up the matter with the directors, and at all times led Carroll to believe that he was acting for and on behalf of the corporation and had complete authority to so act; that Hicks never led Carroll to believe he was without actual or apparent authority to act for and on behalf of the corporation. It also alleged that McCahey, president of Hotel, due to other interests, gave very little time to the affairs of Hotel, so when Carroll tendered a contract, McCahey suggested and recommended Bolt as an officer of Hotel. Bolt thus acted under McCahey's direction. Best, in executing the contract, which was signed "Morrison Hotel Corporation, by Frederick J. Best, Assistant Secretary," acted pursuant to Bolt's instructions so to do. On August 14, 1942, the contract was signed by Carroll and by Morrison Hotel Corporation, by Best, assistant secretary, acting under the direction of Hicks.

The complaint also averred that on information and belief Best had actual or apparent authority to execute the contract, but if not, by the acts of the managing director and others associated with Hotel, Best was held out by Hotel as having such authority and the officers caused Carroll to believe Best was so authorized to sign the contract; that both Bolt and Hicks were present when the contract was signed, and assisted in making changes in a draft contract which Carroll had submitted; that immediately upon the execution of the contract, the publicity agent of Hotel personally gave the information concerning the contract to the press and a substantial amount of publicity was given to it, whereupon Carroll began rehearsals and "try outs" which were held in the hotel with the consent and approval of Hotel; that he signed contracts for stage costumes, scenery, etc.; that Carroll, after a discussion with Bolt, rented the check room and photography concessions to a reputable lessee for $40,000 annual rental, and a $10,000 check therefor was deposited, which was turned over to and retained by Hotel; that Bolt and Carroll agreed that the first $20,000 was to go to Hotel to pay for most of the cost of alterations to be made by Hotel; that Best agreed in writing on August 26, 1942, to Carroll's assignment of the contract to Hollywood Theatrical Corporation; that Hotel assigned several rooms without charge in the hotel to Carroll for office space; that in the first days in September Carroll held many discussions with Hicks, Bolt, and other Hotel employees concerning structural changes, reconditioning, admission prices to the theatre restaurant, and other administrative matters; that a large painted sign advertising the opening of the theatre restaurant was made for the lobby and placed there by Hotel's employees; that Hotel began demolition work to adapt the Terrace Room to permit a rearrangement of stage facilities; and that by reason of such acts, it was alleged that if there was any question of the officers' authority to make the contract, the contract was ratified by the corporation by its delay in attempting to repudiate it.

The complaint further alleged that on September 4, 1942, Hicks informed Carroll for the first time that he was "having a little difficulty" in connection with the contract, and on September 8 Hicks telephoned Carroll that his "directors were kicking up a fuss" and it would be better if rehearsals were not held in the hotel for the time being; that Carroll asked to meet McCahey and the board of directors but was not permitted to do so; that on September 11, Hicks told Carroll that the board of directors would not sanction the contract, and on September 14, Hicks delivered a written letter signed by McCahey as president of Hotel, disaffirming the contract.

The complaint alleged further that if Hotel was not bound by the contract, then the defendants Hicks, Bolt, and Best are personally liable, Best for having signed it, Bolt and Hicks for having induced the making thereof, and by their acts and words having stated and implied that they had authority to act for the Morrison Hotel Corporation.

By way of damages Carroll asks $26,820 spent in securing the contract and attempting to perform it, for stage and musical talent, hotel and transportation costs, costumes, and stage appurtenances, and a large sum for profits that would have resulted. Damages are not important to a decision of the ruling presented by this appeal, so we put aside the arguments made in the briefs about them.

On a motion to dismiss on the ground that the complaint does not state a claim on which relief can be granted, the rule is that the complaint must be viewed in the light most favorable to plaintiff and the truth of all facts well pleaded, admitted, Galbreath v. Metropolitan Trust Co., 10 Cir., 134 F.2d 569. This includes facts alleged on information and belief. There is no specific provision covering such allegations in the Federal Rules of Civil Procedure, but Rule 8(f) states that "All pleadings shall be so construed as to do substantial justice"; consequently to refuse to give credence to them on defendants' motion to dismiss would be opposed to the spirit of the Rules. Furthermore, Rule 11 provides that the signature of an attorney to the pleading is a certificate that "to the best of his knowledge, information, and belief" there appears to be good ground to support the pleading; so the concept of "information, and belief" is recognized under the Rules, and there appears to be no good reason why such pleading is not permissible, as in the instant case, where the matters are peculiarly within the knowledge of the defendants.

It has also been held that the complaint should not be dismissed unless it appears certain that plaintiff is not entitled to relief under any state of facts which could be proved in support thereof, Leimer v. State Mut. Life Assur. Co., 8 Cir., 108 F.2d 302, and Tahir Erk v. Glenn L. Martin Co., 4 Cir., 116 F.2d 865. No matter how likely it may seem that the pleader will be unable to prove his case, he is entitled, upon averring a claim, to an opportunity to try to prove it, Continental Collieries v. Shober, 3 Cir., 130 F.2d 631, 635.

In support of the motion to dismiss, defendants asserted three grounds: (1) That the contract was not enforceable because it had not been approved by the United States District Court which had "jurisdiction, supervision and control" over the Morrison Hotel Corporation; (2) that the complaint did not set forth the essential elements of a claim against Hotel; and (3) that the complaint did not set forth the essential elements of a claim against Hicks, Bolt or Best, or any of them. The trial judge gave as his reasons for dismissing the complaint that the contract was not executed in a manner binding upon the corporation and that the District Court, in prior reorganization proceedings, had retained jurisdiction to pass upon such contracts, so that Carroll was negligent in dealing with the officers and managers of Hotel without obtaining court approval.

Ordinarily upon a defendant's motion to...