Chesapeake & Potomac Tel. Co. of Baltimore City v. Murray

• Decision Date: 06 December 1951
• Docket Number: No. 39,39
• Parties: , 28 A.L.R.2d 920 CHESAPEAKE & POTOMAC TEL. CO. OF BALTIMORE CITY v. MURRAY.
• Court: Maryland Court of Appeals

Page 526

198 Md. 526

84 A.2d 870, 28 A.L.R.2d 920

CHESAPEAKE & POTOMAC TEL. CO. OF BALTIMORE CITY v. MURRAY.

No. 39.

Court of Appeals of Maryland.

Dec. 6, 1951.

R. Dorsey Watkins, Baltimore (Piper, Watkins, Avirett & Egerton, Baltimore on the brief), for appellant.

Frank L. Fuller, III, Baltimore (Cornelius P. Mundy and Marshall, Carey, Doub & Mundy, Baltimore, on the brief), for appellee.

Before MARBURY, C. J., and DELAPLAINE, COLLINS, HENDERSON and MARKELL, JJ.

DELAPLAINE, Judge.

This suit for breach of contract was brought by Edward T. Murray against the Chesapeake and Potomac Telephone Company of Baltimore City to recover damages for his discharge from employment as a salesman of telephone directories.

The contract, which was oral, was made in 1926. Prior to that time the only telephone directories which defendant issued listed subscribers alphabetically. Other Bell telephone companies having been successfully issuing street address directories in New York, Philadelphia and Pittsburgh, defendant decided to compile and publish a Baltimore directory in that form. Plaintiff was employed as one of the directory salesmen. He had been selling directories in Baltimore and Washington for the Crisscross Company. In 1926 that company discontinued its work in Baltimore and Washington, but continued to publish directories in Detroit, Buffalo, Rochester, Toledo, Columbus and Battle Creek.

After entering the employ of defendant, plaintiff sold 113 directories to 87 of his old Crisscross customers. As his earnings were not large, he later accepted the suggestion of defendant's director of advertising that he use some of his time in soliciting advertisements for the yellow pages in the directory. He continued as one of defendant's salesmen for 23 years. In 1949 defendant decided to change its methods of compiling and selling its street address directories. It decided to delegate the work of soliciting advertisements to an advertising agency, and to handle the sale of directories itself without the aid of commission salesmen. When plaintiff was notified of the new plans, he expressed the hope that he might be allowed to continue to sell to his own customers, but he was informed that thenceforward the sale of all directories would be entirely 'a company operation.'

Plaintiff testified that he was employed in 1926 by Randolph K. Wheat, directory sales manager, now assistant vice president of the telephone company. He asserted that Wheat promised him that the company would pay him a commission of 20 per cent on all street address directories that he sold as long as the company continued in the street address directory business. He claimed that he was assured that he would be employed for life and that the company would not terminate his employment.

On the contrary, Wheat testified that he had never employed plaintiff on a lifetime basis. He stated definitely that plaintiff had been employed on exactly the same terms as all other salesmen. He disclosed that he had never been authorized to make a contract on behalf of the company for life employment, and that he had never made any such contract in his entire career. Francis S. Whitman, the company's directory manager, now retired, testified that he had never authorized Wheat to employ a salesman on a lifetime basis, and that he had never possessed any such authority himself.

The trial judge overruled defendant's motion for a directed verdict, and the jury awarded plaintiff $6,411.50. After a motion for judgment n. o. v. was overruled, judgment was entered on the jury's verdict. Defendant thereupon appealed to this Court.

We have announced the rule that a general manager or a managing agent of a corporation ordinarily has implied authority to hire employees when the employment is usual and necessary and within the scope of the corporate purposes. Atholwood Development Co. v. Houston, 179 Md. 441, 445, 19 A.2d 706. But it is also accepted that an officer of a corporation ordinarily has no implied authority to bind it by a contract of employment for life. The law contemplates the right of stockholders to change the management of the affairs of their corporation periodically by providing for the election of a board of directors. If corporate officers could enter into contracts giving persons of their selection employment for life, the directors might be deprived of their authority. To justify the Court in finding such an employment, there must be proof that there was definite authority, by by-law, action by the board of directors, or otherwise, to make such a contract. Accordingly, when an employee of a corporation claims that he has been employed on a lifetime basis, he must show either (1) that the officer who made the contract of employment acted on behalf of the corporation with authority for that purpose, or (2) that the contract was ratified by the corporation or its fruits were accepted with full knowledge of the circumstances of their acquisition. Heaman v. E. N. Rowell Co., 261 N.Y. 229, 185 N.E. 83; General Paint Corporation v. Kramer, 10 Cir., 57 F.2d 698, 703; 2 Fletcher, Private Corporations, Perm. Ed., sec. 677.

Even the president of a corporation ordinarily does not possess authority to hire employees for life. In Carney v. New York Life Insurance Co., 162 N.Y. 453, 57 N.E. 78, 79, 49 L.R.A. 471, the Court held that, although the by-laws of the insurance company authorized the president to appoint, remove, and fix the compensation of every person employed by the company, a contract made by the president to employ the plaintiff for the rest of his life in a medical capacity was not within the president's authority. The Court ruled that the contract was not contemplated by the by-laws and was unreasonable, because 'the hands of the future officers should not be tied, or their action unreasonably hampered'. Likewise in Rennie v. Mutual Life Insurance Co. of New York, 1 Cir., 176 F. 202, 204, 206, where the by-laws of the company gave the president 'the general direction and superintendence of the affairs and of the officers of the company,' the Court held that he was not vested with authority to make a contract with a general agent binding the company after the termination of his agency to pay him a certain sum annually during the remainder of his life, and consequently such a contract was not enforceable in the absence of ratification by the company or a course of dealing from which the authority of the president could be inferred.

In the case at bar there was no evidence that the directory sales manager had ever been authorized to bind the defendant corporation by a contract for life employment. On the contrary, he declared that he had never possessed such authority. In addition, there was no evidence that the board of directors of the corporation had ever ratified the alleged contract for life employment. Plaintiff based his claim upon an alleged oral promise of the directory sales manager. If plaintiff had proved the alleged promise without ratification by the board of directors, he would still have failed to establish a cause of action. He would have shown merely an unauthorized contract of employment which was unenforceable against the corporation.

Plaintiff now claims that there was sufficient consideration in addition to the services incident to the employment to bind the defendant corporation to a contract for life employment. He claims that the Crisscross Company offered to employ him as a salesman in Detroit, where the company had been selling about 1,300 directories a year for a total of about $30,000, and that his commissions thereon at 25 per cent would have amounted to about $7,500 a year, and that the company also offered to give him permission to sell directories in Buffalo, Rochester, Toledo and Battle Creek, where he could earn $7,500 more. Thus he claims that he was offered a $15,000 job, but that he hurned it down in order to work for the telephone company. He further claims that when he entered the employ of the telephone company, he had more experience than the other salesmen in selling directories, and that he also had the benefit of a substantial list of customers.

We assume, without deciding, that where an employee has given consideration in addition to the services incident to the employment, a contract for permanent or life employment is valid and continues to operate as long as the employer remains in the business and has work for the employee and the employee is able and willing to do his work satisfactorily and does not give good cause for his discharge. If the employee has purchased permanent or life employment for a valuable consideration additional to the services which he has contracted to render, a discharge without good cause may constitute a breach of contract. Dugan v. Anderson, 36 Md. 567, 585, 11 Am.Rep. 509; Fisher v. John L. Roper Lumber Co., 183 N.C. 485, 111 S.E. 857, 35 A.L.R. 1417; Rape v. Mobile & Ohio R. Co., 136 Miss. 38, 100 So. 585, 35 A.L.R. 1422; Eilen v. Tappin's, Inc., 16 N.J.Super. 53, 83 A.2d 817; 35 Am.Jur., Master and Servant, sec. 25.

However, the mere giving up of a job, business or profession by one who decides to accept a contract for alleged life employment is but an incident necessary on his part to place himself in a position to accept and perform the contract, and is not consideration for a contract of life employment. Adolph v. Cookware Co. of America, 283 Mich. 561, 278 N.W. 687, 689; Edwards v. Kentucky Utilities Co., 286 Ky. 341, 150 S.W.2d 916, 135 A.L.R. 642.

Carnig v. Carr, 167 Mass. 544, 46 N.E. 117, 35 L.R.A. 512 was cited in support of the view that the giving up of another employment constitutes a consideration for permanent or life employment. In that case the plaintiff was a competitor of the defendant, and the defendant for his own advantage persuaded the plaintiff to give up...