Storer Broadcasting Co. v. Jack the Bellboy
| Decision Date | 11 September 1952 |
| Docket Number | No. 11271.,11271. |
| Citation | 107 F. Supp. 988 |
| Parties | STORER BROADCASTING CO. v. JACK THE BELLBOY, Inc. et al. |
| Court | U.S. District Court — Western District of Michigan |
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Poole, Warren & Littell, Detroit, Mich., for plaintiff.
George Trendle, Jr., Detroit, Mich., for all defendants except Richard Connell.
Findings of Fact.
This is an action seeking redress for the conversion by defendants of a Detroit radio program using the name of "Jack the Bellboy." Jurisdiction is predicated upon diversity of citizenship, with more than $3,000 in controversy, under 28 U.S.C.A. § 1332. The initial conversion occurred after the parties were advised that the Federal Communications Commission would approve a purchase agreement whereby plaintiff was to acquire all property of Detroit Radio Station WJBK from various defendants upon FCC approval. Such radio program was an asset of Station WJBK at the time the purchase agreement was executed and should have passed to plaintiff upon consummation of the purchase after FCC approval. Under circumstances hereinafter detailed, the conversion was accomplished by incorporating such program as a separate Michigan corporation and concealing from plaintiff the fact that such program had ever been an asset of the station being sold. Plaintiff presently is owner and licensee of Detroit Station WJBK. Defendant WXYZ, Inc., has been broadcasting this program over its Detroit Station WXYZ for six months with notice of plaintiff's claims.
On September 14, 1946, plaintiff, with Henrietta Connell and defendants Richard A. Connell, Jr., and James F. Hopkins, executed a purchase agreement whereby the latter three agreed to sell and plaintiff agreed to purchase all capital stock of James F. Hopkins, Inc., a Michigan corporation. This corporation was owner, licensee and operator of said Station WJBK. Such purchase agreement provided that it was conditioned upon transfer approval being granted by the FCC.
In April, 1947, the parties were advised through Washington counsel that the FCC would approve the sale. The formal order of approval was issued June 19, 1947. In accordance with the purchase agreement, as approved by the FCC, all capital stock of James F. Hopkins, Inc., was assigned to plaintiff on July 9, 1947.
Plaintiff thereupon changed the corporate name of the seller corporation to Detroit Broadcasting Company, took over its assets, assumed its liabilities, dissolved the corporation, and has continued to carry on the radio station business formerly conducted by it.
At all times material hereto, plaintiff corporation was represented by its President, George B. Storer, and the selling corporation, James F. Hopkins, Inc., by its President and General Manager, James F. Hopkins, and its Secretary and Treasurer, Richard A. Connell, Jr. The latter two constituted a majority of the Board of Directors of the selling corporation, and, with Henrietta Connell, owned the stock of the selling corporation.
Prior to the purchase agreement of September 14, 1946, and continuously up to May 1, 1947, the selling corporation owned and broadcast the program, "Jack the Bellboy" over the facilities of its Station WJBK. This program was conceived and developed by defendant Edmond T. McKenzie during the summer of 1945, while an employee of the selling corporation. The name was appropriated from a musical composition similarly entitled, which was played as a theme at the beginning and close of the program. The program was presented on regular station time, during McKenzie's regular workday, as a regular assigned duty. For McKenzie's services in preparing and presenting the program, the selling corporation compensated him by regular salary and talent payment commissions on advertising, without any special agreement as to ownership.
On May 1, 1947, defendants James F. Hopkins and Richard A. Connell, Jr., managing officers of the selling corporation, executed an instrument to transfer the name "Jack the Bellboy" to a Michigan corporation known as Jack the Bellboy, Inc. This latter corporation was then in process of incorporation. Its articles of incorporation were signed May 1, 1947, and filed May 19, 1947. The incorporators were defendants Edmond T. McKenzie and wife, Madeline McKenzie, Richard A. Connell, James F. Hopkins and wife, Ruth L. Hopkins. The transfer was without consideration as to the selling corporation. After the transfer, defendants James F. Hopkins, Ruth L. Hopkins and Richard A. Connell, Jr., owned 51 per cent of the capital stock of Jack the Bellboy, Inc., and defendants Edmond T. McKenzie and Madeline McKenzie owned the remaining 49 per cent, which ownership has remained unchanged since that time. No consideration was paid by any of these parties for such stock in Jack the Bellboy, Inc.
Edmond T. McKenzie continued his services for Station WJBK after plaintiff was substituted as his employer on July 9, 1947, until he resigned on January 16, 1952. His broadcasts of the program "Jack the Bellboy" were purportedly through his arrangement with Jack the Bellboy, Inc. Just prior to his resignation, McKenzie entered into an executory contract with Station WXYZ to present the program "Jack the Bellboy" over the facilities of Station WXYZ beginning February 4, 1952.
On January 22, 1952, plaintiff notified WXYZ, Inc., that plaintiff was the lawful owner of the program "Jack the Bellboy" and entitled to the exclusive use of such name for radio broadcast purposes in Detroit. Notwithstanding, WXYZ, Inc., has broadcast "Jack the Bellboy" programs under that name over the facilities of Station WXYZ, beginning February 4, 1952, and continuing to date. This action for injunction and other relief was commenced January 28, 1952.
By the terms of the purchase agreement of September 14, 1946, James F. Hopkins, Richard A. Connell, Jr., and Henrietta A. Connell agreed with plaintiff that they would not cause or permit the selling corporation to sell or dispose of any of its property during the period pending FCC approval, except in the ordinary and regular course of its business. At the time the purchase agreement was executed, the program "Jack the Bellboy" was being broadcast over Station WJBK and was a property of the selling corporation. Transfer of the program "Jack the Bellboy" on May 1, 1947, by the selling corporation to the new company being organized by the individual defendants was not in the ordinary course of the seller's business and violated the said purchase agreement.
Neither prior to nor at the time the purchase agreement was executed was any discussion had between plaintiff and defendants concerning the program "Jack the Bellboy." Inquiry concerning the program and its ownership was first raised by plaintiff's President Storer with the seller's managing officers, James F. Hopkins and Richard A. Connell, Jr., shortly before the sale was consummated on July 9, 1947, after FCC approval had been issued. At this time, defendants Hopkins and Connell stated to Storer that the name was owned by a separate corporation, that it had never been an asset of the selling corporation, and did not pass to plaintiff with the sale. Defendants Hopkins and Connell did not disclose that a transfer of the program and name to a new corporation of the same name had occurred in May, 1947, six months after execution of said purchase agreement. Neither did they then claim or inform Mr. Storer that the name "Jack the Bellboy" was the property of McKenzie. Until January, 1952, Mr. Storer had no knowledge or reason to suspect that the name had been transferred on May 1, 1947, in violation of the purchase agreement. Accordingly, plaintiff did not waive any right thereto.
The statements made to Mr. Storer, together with the facts concealed, being material to the question of ownership, were the equivalent of affirmative statements that the program "Jack the Bellboy" had not been owned by the selling corporation on September 14, 1946, and hence was not within the scope of the purchase agreement of that date. The statements constituted, and were intended, as an affirmation by Hopkins and Connell of the seller's full performance under the purchase agreement. This was false. Hopkins and Connell knew that it was false and intended that Storer should reach the conclusion intended and rely in good faith thereon. He did so believe and rely, and it was reasonable under these circumstances that he should do so. Storer continued to recognize Jack the Bellboy, Inc., as the owner of the name "Jack the Bellboy" until the circumstances of McKenzie's resignation from Station WJBK on January 18, 1952 caused Storer to investigate. During such investigation, Storer learned for the first time that the transfer and incorporation had occurred during May, 1947, eight months after execution of the purchase agreement.
As of September 14, 1946, the program "Jack the Bellboy" had only nominal value. Beginning in February, 1947, it began to develop increasing acceptance and value. Station revenue for the first six months of 1947 exceeded total income for the preceding year. McKenzie's income in May, 1947, the month in which the name was transferred to Jack the Bellboy, Inc., was three times as large as that earned in February of the same year. By the time of the transfer and incorporation on May 1, 1947, defendants James F. Hopkins, Richard A. Connell and Edmond T. McKenzie knew that the program had achieved very substantial value.
The conduct of the individual defendants reveals a deliberate design to deprive plaintiff and its predecessor of beneficial interest in said program and name to which they were entitled. Between consummation of the sale on July 9, 1947, and the time of defendant McKenzie's resignation on January 16, 1952, the payments made by plaintiff and its predecessor to defendant McKenzie...
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