Com. v. L.A.L. Corp.

• Decision Date: 17 August 1987
• Citation: 400 Mass. 737,511 N.E.2d 599
• Parties: COMMONWEALTH v. L.A.L. CORPORATION 1 et al. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 599

511 N.E.2d 599

400 Mass. 737

COMMONWEALTH v.L.A.L. CORPORATION ¹ et al.²

Supreme Judicial Court of Massachusetts Hampden.

Argued March 2, 1987.

Decided Aug. 17, 1987.

Harry P. Carroll, DeputyCity Sol.(Richard T. Egan, City Sol., and John A. Rasmussen, Springfield, with him), for the Com.

James M. Smith, Springfield, for defendants.

Before HENNESSEY, C.J., and LIACOS, NOLAN, LYNCH and O'CONNOR, JJ.

O'CONNOR, Justice.

This case requires us to consider the circumstances in which a close corporation may be criminally liable for the criminal acts of its employee.Here, the defendant corporations, which we assume to be close corporations, as explained below, are charged in the District Court with violating G.L. c. 138, § 34 (1984 ed.), which provides in material part that "[w]hoever makes a sale or delivery of any alcoholic beverages or alcohol to any person under twenty-one years of age ... shall be punished by a fine of not more than one thousand dollars or by imprisonment for not more than six months, or both."

The defendant, L.A.L. Corporation, doing business as The Ranch House, filed a motion to dismiss the complaint against it and an affidavit and a memorandum in support thereof.When that motion was heard, the parties orally agreed, apparently with the District Court judge's approval, that L.A.L. Corp.'s motion would apply to the complaints against all the defendants.The motion was denied at first, but, after the parties filed statements of agreed fact, it was allowed as to all the defendants.The Commonwealth appealed, and we transferred the case to this court on our own motion.We reverse, and remand the case to the District Court.

By their terms, the agreed statements apply only to the "first instance" bench trial.We understand that the parties' intention was to test, without going through one or more trials, whether the facts provable by the Commonwealth were legally sufficient to support convictions of the defendants.Such a procedure is consistent with Mass.R.Crim.P. 13(c)(2), 378 Mass. 873(1979), which provides that "[a] defense ... which is capable of determination without trial of the general issue shall be raised before trial by motion."Of course, "where dismissal is requested because of the claimed insufficiency of the evidence of guilt, it cannot be ordered unless the Commonwealth agrees to join in the affidavit procedure [described in Commonwealth v. Brandano, 359 Mass. 332, 337, 269 N.E.2d 84(1971) ] or in a stipulation of the facts.A pretrial order or judgment of dismissal for the claimed insufficiency of the Commonwealth's evidence cannot be sustained in any case where the Commonwealth fail[s] or refuse[s] to stipulate that the appellate record contains a statement of all the Commonwealth's contemplated evidence."(Footnote omitted.)Rosenberg v. Commonwealth, 372 Mass. 59, 63, 360 N.E.2d 333(1977).Commonwealth v. Hare, 361 Mass. 263, 270, 280 N.E.2d 138(1972)("Nothing we hold today prevents the parties from testing the sufficiency of the evidence by stipulation or by some other proceeding, agreeable to the parties, which avoids a long and costly trial").But here it is apparent that the parties have attempted to make use of the procedure contemplated by rule 13(c)(2) and those cases, and we think they have done so satisfactorily.Therefore, although the parties have not expressly agreed that the "appellate record contains ... all the Commonwealth's contemplated evidence,"we consider that agreement to be implicit, and we take up the substantive issue presented.

The statements of agreed fact provide that the defendants are licensed to sell alcoholic beverages; that on specified dates a minor purchased an alcoholic beverage from a bartender employed by each defendant at its licensed premises; that none of the minors was asked for identification; and that in each instance the sale by the bartender violated G.L. c. 138, § 34.

L.A.L.'s affidavit in support of its motion to dismiss stated that L.A.L. Corp. is a close corporation whose stock is owned by only two people; that the corporation's manager, officers, and directors were not directly or indirectly involved in the illegal sale of liquor; that the corporation does not and did not approve of the sale of liquor to minors and "has steadfastly maintained and enforced a policy of prohibiting its employees from making sales of liquor to minors."The record does not show that the Commonwealth agreed to the truth of the affidavit, and nothing in the Commonwealth's brief suggests its acceptance of the affidavit as true.Therefore, we do not consider the affidavit.The defendant is not harmed, however.If the agreed facts are insufficient to warrant a conviction of a close corporation, as the defendants argue, then L.A.L. Corp. and the other defendants are entitled to acquittal because the Commonwealth has failed to show that they are other than close corporations.The burden is on the Commonwealth to prove all the essential elements of the crimes charged.We conclude, however, that whether the defendant corporations are close corporations makes no difference, and that convictions are warranted on the facts set forth in the agreed statements.

The root of the dispute between the Commonwealth and the defendants is their difference of opinion concerning the reach of Commonwealth v. Beneficial Fin. Co., 360 Mass. 188, 275 N.E.2d 33(1971), cert. denied sub nom.Farrell v. Massachusetts, 407 U.S. 910, 92 S.Ct. 2433, 32 L.Ed.2d 683, and sub nom. Beneficial Fin. Co. v. Massachusetts, 407 U.S. 914, 92 S.Ct. 2433, 32 L.Ed.2d 689(1972).The defendants argue that the principles announced in that case apply only to "endocratic" corporations, that is, to "large, publicly-held corporation[s], whose stock is scattered in small fractions among thousands of stockholders."Commonwealth v. Beneficial Fin. Co., supra, 360 Mass. at 276 n. 58, 275 N.E.2d 33, quotingNote, Increasing Community Control Over Corporate Crime--A Problem in the Law of Sanctions, 71 YaleL.J. 280, 281 n. 3(1961).On the other hand, the Commonwealth contends that the principles announced in Beneficial Fin. Co. apply to all corporations including close corporations.We agree with the Commonwealth.

In Beneficial Fin. Co., after concluding that the evidence was sufficient to establish that certain employees of the defendant corporations were parties to a conspiracy to bribe public officials, the court turned to the question whether there was sufficient evidence to support findings that the corporations were also parties to the conspiracy.In that regard, the court discussed "the applicable legal standards concerning the extent to which a corporation may be held criminally responsible for the acts of its directors, officers and agents."Id. at 253, 275 N.E.2d 33.Although the defendant corporations in that case were indeed endocratic, the discussion clearly was not limited to such corporations.

The Beneficial Fin. Co.defendants argued, as the defendants argue here, that "a corporation should not be held criminally liable for the conduct of its servants or agents unless such conduct was performed, authorized, ratified, adopted or tolerated by the corporations' directors, officers or other 'high managerial agents' who are sufficiently high in the corporate hierarchy to warrant the assumption that their acts in some substantial sense reflect corporate policy."Id. at 254, 275 N.E.2d 33.That is the standard adopted by the American Law Institute Model Penal Code approved in May, 1962.Id.We rejected the defendants' contention, and approved of the judge's jury instructions.We repeated material portions of those instructions as follows: "[T]he Commonwealth must prove beyond a reasonable doubt that there existed between the guilty individual or individuals and the corporation which is being charged with the conduct of the individuals, such a relationship that the acts and the intent of the individuals were the acts and intent of the corporation....How is that to be shown?How is the jury to determine whether the Commonwealth has proved that?First[,] ... the Commonwealth does not have to prove that the individual who acted criminally was expressly requested or authorized in advance by the corporation to do so, nor must the Commonwealth prove that the corporation expressly ratified or adopted that criminal conduct on the part of that individual or those individuals.It does not mean that the Commonwealth must prove that the individual who acted criminally was a member of the corporation's board of directors, or that he was a high officer in the corporation, or that he held any office at all.If the Commonwealth did prove that an individual for whose act it seeks to hold a corporation criminally liable was an officer of the corporation, the jury should consider that.But more important than that, it should consider what the authority of that person was as such officer in relation to the corporation.The mere fact that he has a title is not enough to...