Majestic Co. v. Orpheum Circuit

• Decision Date: 13 September 1927
• Docket Number: No. 7699.,7699.
• Citation: 21 F.2d 720
• Parties: MAJESTIC CO. v. ORPHEUM CIRCUIT, Inc.
• Court: U.S. Court of Appeals — Eighth Circuit

21 F.2d 720 (1927)

MAJESTIC CO. v. ORPHEUM CIRCUIT, Inc.

No. 7699.

Circuit Court of Appeals, Eighth Circuit.

September 13, 1927.

Oscar Strauss, of Des Moines, Iowa (O. M. Brockett, of Des Moines, Iowa, on the brief), for plaintiff in error.

R. L. Read, of Des Moines, Iowa (B. B Kahane, of Chicago, Ill., and Sargent, Gamble & Read, of Des Moines, Iowa, on the brief), for defendant in error.

Before KENYON, Circuit Judge, and MOLYNEAUX and JOHN B. SANBORN, District Judges.

MOLYNEAUX, District Judge.

This action was brought by the Majestic Company, plaintiff in error, against Orpheum Circuit, Inc., defendant in error, to recover upon the covenants of a lease executed between the plaintiff, an Iowa corporation, and the Des Moines Amusement Company, a corporation organized under the laws of Illinois, the theory of the plaintiff being that the Des Moines Amusement Company was a mere agent or instrumentality of the defendant company.

In March, 1907, Emma Lederer et al., the owners of certain real estate in the city of Des Moines, entered into a written contract with Charles E. Kohl et al., which provided for the building and construction of a theater on the premises owned by the proposed lessor, the organization of a corporation by the said Kohl et al., and the execution of a lease to the corporation to be formed. The corporation, Des Moines Amusement Company, was organized by Kohl et al., under the laws of the state of Illinois, obtained a permit to transact business within the state of Iowa, and the lease was duly entered into by the Majestic Company as lessor, and Des Moines Amusement Company, as lessee.

Emma Lederer et al. had caused to be organized the Majestic Company, an Iowa corporation, and had conveyed or leased to it, the real estate before referred to, and had assigned to it the agreement before mentioned. The term of the lease was 15 years 5½ months, commencing November 16, 1907, and ending May 18, 1923. The rent reserved was $900 per month, payable on the 1st of each month commencing with December 1, 1907.

The lease covenanted to "use said premises as a theater and for no other purpose." The lessor reserved the landlord's lien upon the unexpired term of the lease and all personal property of the lessee on the leased premises during the term of the lease.

The Des Moines Amusement Company, the lessee, was capitalized at $25,000. Its entire capital stock was paid for in cash, and its entire authorized stock, to wit, 250 shares was issued to Kohl et al., the incorporators, in proportion to their respective ownership.

The lease provided for a deposit by the lessee of the sum of $20,000 with the lessor, upon the execution of the lease, to be held by lessor as security for all of the covenants and agreements of the lessee in the lease contained. Three per cent. annual interest was to be allowed by the lessor on the sum on deposit. Any part of the sum remaining otherwise unused at the time of the fourteenth and fifteenth years of the lease was to be applied by the lessor upon the rent due for those years (the last two of the lease).

On December 27, 1920, a written agreement was entered into by and between the Majestic Company and the Des Moines Amusement Company extending the lease to the 30th day of April, 1928, and providing for a monthly rental to be paid during the extension period, in the sum of $1,083.33 1/3, payable monthly in advance.

It was expressly agreed by the terms of the lease that no deposit of advance rent should be required by the Des Moines Amusement Company under the extension of the agreement.

The Des Moines Amusement Company entered into possession under the original lease and continued in possession until approximately July, 1923, when it surrendered possession of the re-leased premises to the lessor and abandoned the lease.

All of the rental due under the lease up until the 1st of June, 1923, has been paid to the lessor in full. All of the advance deposits of rent, to wit, the sum of $20,000, deposited with the lessor under the terms of the original lease, was, in conformity with the lease agreement, applied by the lessor to payment of the rental installment for the last two years of the original term.

It further appears that during the year 1919, certain parties including Richardson, Hill & Co., bankers, of the city of Boston, and the Central Trust Company of Illinois, formulated a plan of organizing a corporation to be known as Orpheum Circuit, Inc., which was duly incorporated under the laws of the state of Delaware on or about the 20th day of December, 1919, with an authorized capital stock of 100,000 shares of preferred stock, of the par value of $100 per share, aggregating $10,000,000, and 1,000,000 shares of common stock without nominal or par value.

On January 1, 1920, Orpheum Circuit, Inc., acquired and became the owner of the capital stock (250 shares) of the Des Moines Amusement Company; the stock so acquired by it being issued by the Des Moines Amusement Company, 247 shares to Orpheum Circuit, Inc., one share to J. M. Beck, one share to Marcus Heiman, and one share to M. H. Singer.

On or about January 1, 1920, Orpheum Circuit, Inc., also acquired and became the owner of all or a substantial amount of the capital stock of approximately thirty-two other corporations which owned and were operating theaters in various parts of the United States and Canada.

After the acquisition of the capital stock of the Des Moines Amusement Company by Orpheum Circuit, Inc., as above stated, a stockholders' meeting was held at which Martin Beck, M. H. Singer, and Marcus Heiman were elected as the board of directors of the Des Moines Amusement Company, and they were by re-election continued as the board until on or about July 18, 1922, at which time they resigned, pursuant to the sale of all of the capital stock of Des Moines Amusement Company to B. F. Elbert and J. A. Getchell, and during the same period of time, either Beck or Heiman was elected as president and Singer as treasurer of the Des Moines Amusement Company.

During the time that said individuals, to wit, Beck, Heiman, and Singer, were directors and officers of Des Moines Amusement Company, they were also directors of Orpheum Circuit, Inc., and part of the time Beck was president of Orpheum Circuit, Inc., and part of the time Heiman was president, and Singer one of the vice presidents, of Orpheum Circuit, Inc.

In July, 1922, Bonnie L. Elbert, wife of B. F. Elbert, and Ellen Getchell, wife of J. A. Getchell, were the owners and holders by assignments from their husbands, of a lease covering a theater building in the city of Des Moines, known as Sherman Theater. They entered into a written agreement with B. B. Kahane, subleasing their rights as lessee to the said Kahane, in and to the Sherman Theater. By said agreement the said Kahane had the right to assign his sublease to a corporation, and in August, 1922, he did assign his sublease to the Valley Amusement Company, a corporation, of which Orpheum Circuit, Inc., owned all of the capital stock, with the exception of directors' qualifying shares; and said corporation thereupon changed its name to Des Moines Orpheum Company, and qualified as provided by law under the state of Iowa, and obtained a permit to transact business in Iowa.

On or about July 19, 1922, pursuant to a written contract by and between Orpheum Circuit, Inc., and B. F. Elbert and J. A. Getchell, Orpheum Circuit, Inc., and Beck, Heiman, and Singer, sold and transferred to the said Elbert and Getchell all of the stock of Des Moines Amusement Company, to wit, 250 shares issued and outstanding; the consideration being stated in the contract agreement.

The stock of the Des Moines Amusement Company was reissued as follows: To B. F. Elbert, 186 shares; J. A. Getchell, 63 shares; E. H. Hays, 1 share. And at the next ensuing stockholders' meeting Elbert and Getchell and Hays were elected as directors of Des Moines Amusement Company, and at the next ensuing directors' meeting Elbert was elected president and Getchell secretary and treasurer of the corporation.

At the time of the sale of the capital stock of Des Moines Amusement Company to Elbert and Getchell, the rent due the Majestic Company under the original lease between it and the Des Moines Amusement Company had been paid, and the lease was not in default under the lease, and at the time there remained unused of the original $20,000 deposit made by the Des Moines Amusement Company to the Majestic Company, as provided in the lease, a balance of $9,000; and, pursuant to the agreement of lease, the Majestic Company continued to apply said fund on deposit to the installments of rental due under the lease as they accrued, from time to time.

After the sale of the stock to Elbert and Getchell, the Des Moines Amusement Company changed the name of the theater to "Iowa Theater," and continued to operate the theater as a place of public entertainment until about July, 1923.

The advance deposit of rent in the hands of the Majestic Company was sufficient to pay the rent accruing monthly to the installment due May 1, 1923. The Des Moines Amusement company paid the rent under the extension agreement for the month of May, 1923, but failed to pay in June, and, as testified by Mr. Strauss, president of the Majestic Company, "early in July, 1923, Mr. Getchell and Mr. Elbert indicated to me that they did not think they would be able to continue the operation of the theater, * * * and along toward the end of July, 1923, they said they would not continue, and then attempted to abandon the premises and surrender possession."

The Des Moines Amusement Company did, in fact, surrender possession; and thereupon, on July 26, 1923, the Majestic Company, by Arthur Strauss, president, sent to Des Moines Amusement Company, to Orpheum Circuit, Inc., and to Elbert and Getchell, a letter, which reads as follows:

"Gentlemen: This is to notify you and each of you that anything...