Universal Pictures Corp. v. Roy Davidge Film Laboratory, Ltd.

COATS, J.,

pro

tem.

The plaintiff on May 10, 1930, under a license agreement rented to the defendant Roy Davidge Film Laboratories, a machine for developing motion picture films, known as the Hunter Pierce Developing Machine. The Roy Davidge Film Laboratories was a partnership composed of the defendant Roy Davidge, and the defendant Principal Pictures Corporation, whose entire stock was owned by the defendants Sol Lesser and M. Rosenberg. After the making of the contract, the defendant Roy Davidge Film Laboratory, Ltd., was organized and purchased the property of the partnership. Default having been made in the payment of royalty, plaintiff brought this present action, and recovered judgment against the defendants Lesser and Rosenberg for $5,094.65, based on their stockholders’ liability and against the other defendants for the sum of $10,189.29, from which judgment several of the defendants have appealed.

[368]

The defendants by their answers and cross-complaints set up defenses and causes of actions based on alleged misrepresentations made to induce the execution of the contract, alleged breach of the provisions of the agreement whereby plaintiff warranted the machine was “reasonably capable of performing the function for which it was intended”, and alleged breach of the provisions of the agreement whereby plaintiff agreed that it would notify the licensee of certain improvements upon the machine. The findings of the court were in favor of the plaintiff upon these issues. These findings are supported by substantial evidence and will not be disturbed upon appeal.

On this appeal the defendants Principal Pictures Corporation, Sol Lesser and M. Rosenberg now urge for the . first time that the act of the Principal Pictures Corporation in becoming a member of the partnership, the Roy Davidge Film Laboratories was

ultra vires,

in that the powers of a corporation must be exercised by its board of directors, and if it be permitted to enter into a partnership its stockholders are deprived of all choice in the selection of those who will manage its business, as the other partner or partners could effectually bind the corporation in partnership transactions. The Principal Pictures Corporation is a corporation with only two stockholders, the defendants Sol Lesser and M. Rosenberg each owning one-half of the capital stock. There appears to have been no other person associated with the corporation and in much of the oral testimony the witnesses referred to Lesser and Rosenberg instead of naming the corporation. It appears that any act taken was done with the affirmative approval of everyone connected with the corporation. Under the circumstances the defendants Lesser and Rosenberg would ordinarily be estopped from claiming that the act of entering into the partnership was