McCrillis v. a & W ENTERPRISES, INC.

Annotate this Case

155 S.E.2d 281 (1967)

270 N.C. 637

Arthur Warren McCRILLIS v. A & W ENTERPRISES, INC., a Corporation, and Root Beer Drive-Ins, Inc., a Corporation.

No. 701.

Supreme Court of North Carolina.

June 20, 1967.

*284 Cahoon & Swisher, Greensboro, for plaintiff appellant.

Smith, Moore, Smith, Schell & Hunter, Drawer G. Jefferson, by James G. Exum, Jr., Greensboro, for defendant appellees.

LAKE, Justice.

In considering a motion for judgment of nonsuit, we must interpret the evidence in the light most favorable to the plaintiff, resolve contradictions or inconsistencies in his testimony in his favor, give him the benefit of all reasonable inferences therefrom which are favorable to him, and disregard the evidence of the defendant which is contradictory to that offered by the plaintiff or which tends to establish an affirmative defense. Aaser v. City of Charlotte, 265 N.C. 494, 144 S.E.2d 610; Griffin v. Hartford Accident & Indemnity Co., 265 N.C. 443, 144 S.E.2d 201; Moss v. Tate, 264 N.C. 544, 142 S.E.2d 161; Coleman v. Colonial Stores, Inc., 259 N.C. 241, 130 S.E.2d 338; Wall v. Bain, 222 N.C. 375, 23 S.E.2d 330. The credibility of the evidence is for the jury.

When so considered, the evidence offered by the plaintiff is sufficient to support, though not to require, a finding that Lord and Chapoton agreed with the plaintiff, on behalf of the two defendants, that if he would work as general manager of the *285 operations of Root Beer Drive-Ins, Inc., after the contemplated acquisition by them of all of its outstanding shares and the contemplated formation of A & W Enterprises, Inc., the two corporate defendants would retain him in such employment for a period of five years at the specified salary, with the specified bonus opportunities and the specified stock option. The evidence is also sufficient to support, though not to require, a finding that after the acquisition of such stock the new Board of Directors of Root Beer Drive-Ins, Inc., with full knowledge of the agreement so negotiated, ratified it, both by the express resolution of the Board and by the acceptance of the plaintiff's services. The evidence is also sufficient to support, but not to require, a finding that the plaintiff performed the services required of him under the contract and was wrongfully discharged to his damage.

We do not deem the variance between the allegation in the complaint that the contract was for a period of six years and the evidence of a contract for employment for five years, later modified by mutual consent so as to begin one year after the new management assumed control, to be a material variance. Where there is a variance between allegation and proof, amounting to the allegation of one cause of action and proof of another, a nonsuit is proper. In such case there has been a failure by the plaintiff to prove the cause of action alleged in his complaint. G.S. § 1-169; Hall v. Poteat, 257 N.C. 458, 125 S.E.2d 924; Talley v. Harriss Granite Quarries Co., 174 N.C. 445, 93 S.E. 995; Wright v. Teutonia Insurance Co., 138 N.C. 488, 51 S.E. 55. However, where the variation between allegation and proof is such that the adverse party could not have been misled thereby to his prejudice, it will not be deemed a material variance. G.S. § 1-168; Dennis v. Albemarle, 242 N.C. 263, 87 S.E.2d 561, rehear. dism., 243 N.C. 221, 90 S.E.2d 532. Whether the variance is material so as to justify nonsuit must be resolved in the light of the facts of each case. Hall v. Poteat, supra.

Obviously, at the time the plaintiff's negotiations with Lord and Chapoton culminated in the contract upon which he sues, neither Lord nor Chapoton was the agent of either of the defendant corporations. A & W Enterprises, Inc., had not been formed and neither of them had then acquired stock in or become an officer of, or otherwise connected with, Root Beer Drive-Ins, Inc. It appears from the plaintiff's evidence that he was then aware of this circumstance. However, the reasonable inference to be drawn from the plaintiff's evidence is that the agreement was for employment of the plaintiff by the two corporations, not by Lord and Chapoton, and purported to be entered into on behalf of the corporations. One, upon whose behalf a contract is made without his authority, may ratify such contract even though the promisee, at the time of the making of the contract, knew the person with whom he was dealing had no authority to bind the promisor. Restatement of Agency, 2d ed., §§ 85, comment e, and 92, comment f; 3 Am.Jur.2d, Agency, § 171.

The resolution of the Board of Directors of Root Beer Drive-Ins, Inc., at the meeting on 1 April 1964 did not specify the period for which the plaintiff's employment was to continue and did not refer to the bonus arrangement or the stock option. Nevertheless, the plaintiff's evidence is to the effect that each director present at the meeting knew the details of the agreement which he had reached with Lord and Chapoton. Under these circumstances, the adoption of such resolution and the acceptance of the plaintiff's services by Root Beer Drive-Ins, Inc., would constitute a ratification by it of the entire contract so made on its behalf by Lord and Chapoton. They, in the meantime, had become its officers and directors.

*286 A contract made on behalf of a corporation to be formed cannot be ratified by the corporation since it was not in existence, and therefore could not have authorized the contract, when it was entered into. McArthur v. Times Printing Co., 48 Minn. 319, 51 N.W. 216; 18 Am. Jur.2d Corporations, § 120. It may, however, be adopted by the corporation after it comes into existence. Such adoption may result from its acceptance of benefits of the contract with knowledge of its provisions. Morgan v. Bon Bon Co., Inc., 222 N.Y. 22, 118 N.E. 205, Huron Printing & Bindery Co. v. Kittleson, 4 S.D. 520, 57 N.W. 233; Jones v. Smith (Tex.Civ.App.), 87 S.W. 210; 18 Am.Jur.2d Corporations, § 119; Annot., 17 A.L.R. 452, 477, 500.

The plaintiff's evidence, if true, is sufficient to show that A & W Enterprises, Inc., came into existence at or shortly before the time the plaintiff was to commence his services and did commence them. From its inception, it was the holding company which owned all the stock of Root Beer Drive-Ins, Inc. Lord was the chairman of its board of directors and Chapoton its president. Through the services of the plaintiff to its wholly owned subsidiary, it received the benefit it was intended to receive under the contract. Having so received the benefit of the contract, with full knowledge of its terms, it must be deemed to have adopted the contract and cannot escape its burdens.

Consequently, it was error to grant the motion for nonsuit as to either of the defendants. The credibility of the plaintiff's evidence as to the terms of the contract and the determination of whether he was wrongfully discharged or voluntarily resigned are matters to be determined by the jury in the light of the evidence to be presented at the new trial of the matter.

Reversed.