(234 Fed. 507) GILMAN v. LAMSON CO. LAMSON CO. v. GILMAN. (Circuit Court of Appeals, First Circuit. June 1, 1916.) 1. CORPORATIONS MINATE. Nos. 1141, 1142. 456—CONTRACT FOR ATTORNEY'S SERVICES-RIGHT TO TER A contract by a corporation for the services of an attorney for a fixed term, but providing that it might be terminated by the corporation at any time if the services were "not satisfactory to the board of directors" by a vote of the board, which vote, however, should not be taken until the employé has an opportunity to be heard at a meeting "upon the cause or reason of such termination," required some substantial cause as a ground for its termination, and the fact that the directors voted to terminate it was not conclusive of their right, and did not foreclose inquiry as to whether their action was taken in good faith because of dissatisfaction with the services, or for other reasons. [Ed. Note. For other cases, see Corporations, Cent. Dig. § 1806; Dec. Dig. 456.] 2. TRIAL 251(4)—INSTRUCTIONS-ACTION FOR BREACH OF CONTRACT. In an action by the attorney for damages for wrongful termination of such contract, it was not error to refuse to instruct that if a majority of the directors acted in good faith it was sufficient to validate their action, where it was a question in issue whether certain of the directors did not act without personal knowledge or belief as to the matters involved and vote as they did, not because of any dissatisfaction on their part, but because of misrepresentations made by others. [Ed. Note.-For other cases, see Trial, Cent. Dig. § 591; Dec. Dig. 251(4).] 3. CORPORATIONS 521-ACTIONS FOR SERVICES-INSTRUCTIONS-Burden of PROOF. In such action the defense was the termination of the contract by a vote of the directors, but on the trial the case turned upon the subordinate question whether the directors so voted in good faith because they were honestly dissatisfied with the services or for other reasons, and that was the only issue submitted to the jury. Heid, that the court properly instructed that the burden of proving that the contract was terminated in accordance with its terms rested on defendant, but that, having so instructed, it was error to refuse to clearly instruct that the burden upon the issue of good faith was on plaintiff. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 2094–2098; Dec. Dig. 521.] 4. CORPORATIONS 519(2)—ACTION FOR SERVICES-EVIDENCE-PERFORMANCE BY PLAINTIFF. The contract in suit being a renewal of a prior five-year contract, it was competent for plaintiff to introduce evidence, as bearing on the issue of good faith in terminating the contract, to show that the standard of performance of services was the same under the new as under the old contract. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 2085, 2088; Dec. Dig. 519(2).] 5. COURTS 352-OBJECTION TO EVIDENCE-STATEMENT OF Grounds. In the federal courts it is not sufficient to state that objection is made to the admission of evidence without at the same time, stating specifically the ground of the objection. [Ed. Note. For other cases, see Courts, Cent. Dig. §§ 926-932; Dec. Dig. 352.] For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes 148 C.C.A.-18 6. COURTS 367-FEDERAL COURTS-AUTHORITY OF STATE DECISIONS. Where, at the time of the making of a contract, to be performed in the state where made, there is a settled rule of decision in that state as to the damages recoverable for its breach, such rule governs in an action for its breach in a federal court. [Ed. Note. For other cases, see Courts, Cent. Dig. §§ 958, 959; Dec. Dig. 367.] 7. DAMAGES 124(1)—BREACH OF CONTRACT. On recovery against a corporation for the wrongful termination of a contract by which plaintiff agreed to act as counsel for defendant for a term of five years for an annual fee, which contract had been partly performed, plaintiff was entitled to recover the present value of what would have become due under the contract if it had been fully performed. [Ed. Note. For other cases, see Damages, Cent Dig. §§ 326-329; Dec. Dig. 124(1).] 8. CORPORATIONS 521-TERMINATION OF CONTRACT. It was error for the judge to refuse to instruct a jury that the burden is on the plaintiff to prove that the termination was invalid by reason of bad faith on the part of the directors in voting to terminate it. [Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 2094–2098; Dec. Dig. 521.] In Error to the District Court of the United States for the District of Massachusetts; Jas. M. Morton, Jr., Judge. Action at law by Edwin C. Gilman against the Lamson Company. Judgment for plaintiff, and both parties bring error. Reversed on defendant's writ of error. Herbert Parker, of Boston, Mass. (H. Ware Barnum, Charles F. Rowley, and Elder, Whitman & Barnum, all of Boston, Mass., on the brief), for E. C. Gilman. Boyd B. Jones, of Boston, Mass. (William H. Brown, of Boston, Mass., on the brief), for Lamson Company. Before PUTNAM, DODGE, and BINGHAM, Circuit Judges. PUTNAM, Circuit Judge. This was a suit at common law in which there was a verdict for Gilman, reduced on a motion for a new trial from $24,000, by the sum of $2,209.76. Suit was brought in the District Court for the District of Massachusetts by writ dated on the 19th day of August, 1914, and variously amended; but we have no occasion to elaborate the original declaration or the various amendments. The verdict was returned on the 12th day of March, 1915, and judgment was entered for the plaintiff on the 26th day of July, 1915, for $21,792.24, which, of course, included some interest from the date of the verdict. There was also a special verdict entered on the same day as the general verdict, as follows: "Was the action of the board of directors in terminating the contract taken in good faith, because the plaintiff's services were not satisfactory to it?" The jury answered, "No." The motion for new trial was based upon two alleged grounds: One was that the verdict was against the law, the evidence, and the For other casos see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes weight of the evidence; the other was that the damages were excessive. No objection was taken to the finding of the special verdict, and there were no exceptions arising therefrom either as to the form or the substance of the verdict, or in any way whatever, so the fact that a special verdict was taken in the form we stated raises no issue in the case. The action was based upon the breach of contract appearing by the agreement, of which the following is a copy: "Edwin C. Gilman, Esq., "6 Beacon Street, Boston, Mass. "Boston, Mass., July 17, 1908. "Dear Sir:-We hereby agree in behalf and representing the Lamson Consolidated Store Service Company, to employ you as counsel for this company from July 1, 1908, at a yearly stipend of seven thousand dollars for the term of five years, to act in matters that may be referred to you by the undersigned, or by the said Lamson Consolidated Store Service Company. "Provided, however, that this contract may be terminated at any time, if your services are not satisfactory to the board of directors, by a vote of the board of directors, which vote, however, shall not be taken until you, if you so desire, shall have had an opportunity to be heard by said board of directors. at a meeting upon the cause and reason of such termination. In case this contract is terminated as above provided, you are to receive payment for your services to the time of termination of the contract. The amount to be a proportionate part of the yearly stipend as above provided. "In witness whereof, we hereby subscribe ourselves "Yours very truly, [Signed] Oakes Ames, "[Signed] Gilmer Clapp," "Special Committee of the Executive Committee of the Lamson Consolidated Store Service Company." "Boston, July 21, 1913. "This contract is hereby extended for the term of five years from July 1st, 1913, upon the same terms and conditions. "[Signed] The Lamson Company, It will be noted that the suit was brought soon after the renewal of the contract was made, but during its currency, when it still had about four years to run; and it appears from the amount of damages awarded that the verdict was allowed to be taken, based upon the present value of the contract, computing to the time of its expiration by its terms. In that respect, the rule adopted by the Supreme Court of the United States was applied, and the full value of the plaintiff's services, in accordance with the terms of the contract, was allowed for and estimated in the verdict. As we will explain hereafter, it is claimed that this is not the rule of the local courts of Massachusetts, where the contract was made and was to be executed. The brief for Gilman states the issues as follows: "The decisive issues between the parties were whether the board of directors of the defendant company, in terminating its contract with the plaintiff, had acted in good faith, and whether, in truth, the contract was so terminated because the plaintiff's services were in fact 'not satisfactory to the board of directors.'' [1] The first question we have to consider is the refusal to give the following instructions, per the eighteenth assignment of error: "The vote set up in the defendant's answer, if passed by the board of directors, is conclusive evidence that the plaintiff's services were not satisfactory to the board of directors. The contract authorized the termination of the contract if the plaintiff's services were not satisfactory to the board of directors, and it is not for other persons to question the grounds of propriety of their decision." The basis for this exception by the Lamson Company was the rule stated as follows: "The personal thread which runs through agreements relating to matters of fancy, taste, or judgment has caused a uniformity of judicial opinion that here at least a promisee is practically debarred from questioning the grounds of decision on the part of the promisor, or investigating its propriety. The courts refuse to say that, where a man agrees to pay if he is satisfied with a thing, he can be compelled to pay on proof that some one else is satisfied with it. They recognize that in matters of fancy, taste, or judgment there is no absolute standard as to what is good or bad, and leave each man free to act on his ideas or prejudice as the case may be." This rule in the form in which the Lamson Company seeks to apply it is stated in Barnett v. Beggs, 208 Fed. 255, 125 C. C. A. 455, decided by the Circuit Court of Appeals for the Eighth Circuit, in October, 1913. The efficient expression in that opinion is found on page 259 of 208 Fed., on page 459 of 125 C. C. A., as follows: "The plaintiff did not agree to satisfy a court or jury, but undertook to satisfy the publishers. It was their taste, their fancy, their interest, and their judgment that was to be satisfied." Then comes the quotation which we have already cited, and it is enough to say that all the cases relied on by the Lamson Company are in the same line as what is shown by the extract we have given from the Circuit Court of Appeals, in the case referred to. It is not necessary for us to go further into details in that direction. The difficulty with this proposition as put by the Lamson Company is the peculiar phraseology of the contract in this particular case. It contains some expressions of a very specific and substantial character, differentiating it entirely from all the cases relied upon by the Lamson Company. It provides for a hearing of Gilman by the board of directors of the Lamson Company after notice. It provides also that the hearing should be "upon the cause and reason of such termination." This in no way characterized a contract which could be determined by the "taste" or the "fancy" of the corporation, but positively indicated some substantial "cause," which, of course, was far remote from "taste" or "fancy." This positively agreed for an investigation of the merits of some matter involved in the proposed termination of the contract and a hearing in reference thereto, and, of course, an adjudication by the directors in reference to the same, with all the facts brought to the surface bearing upon any such "cause," or any such "reason" for discharging Gilman from the service in which he was engaged. It is possible that by going through the details of all that was said and done something might have appeared which was. beyond the proper scope of investigation, but the case at this point was not put upon any discrimination in that direction, for the objection on the part of the Lamson Company covered the whole topic, and the whole stands or falls together. For the reasons we have given, it is plain that this assignment of error is not well sustained. [2] We will now follow through the case in the order pointed out by the brief for the Lamson Company. The next proposition is that indicated as "2," as follows: "2. It was error for the judge to refuse to instruct the jury that, if Keasbey, Mink, Loring, and Webster acted in good faith in voting to terminate the contract, the board acted in good faith." The gentlemen thus named constituted a majority of the board of directors of the Lamson Company. Nevertheless, it cannot be said categorically that the court erroneously refused to instruct the jury substantially in the manner alleged by this assignment; but if we merely left the case there, without explaining what the court said in fact, we would omit considering the question which the court sought to consider, and which it did consider, namely, that Gilman alleged that the hostility on the part of two directors, Ames and Clapp, led up wrongfully to the result reached by the corporation. Action was taken at a meeting of the board of directors at which a quorum of six directors was present; and the original good faith of the four directors named in this assignment of error, constituting a majority of the quorum, was expressly admitted. Therefore, if this assignment alleged all there was in the case, some difficulties would have been presented of a serious character, but it does not. The court enlarged considerably on this topic, covering several printed pages of the record. It started with the proposition that the jury must consider the question from what the action of the board of directors proceeded, whether it was from honest motives and views, or whether from dishonest motives and dishonest views. The court further said that the mere fact that a majority of the board was ignorant of the dishonesty practiced upon them by their associates does not save the defendant corporation, but that if the action of the board was procured by the representations of two of its members who were acting fraudulently and dishonestly, then there was not a proper termination of the contract. The court fully enlarged on these propositions. This was done with some interruptions by counsel; but these only tended to bring out the views of the court more clearly. Finally, the court said that, if there was any doubt about the matter, it would restate it; but we think there was no doubt about it as it was put, and that the court fairly explained the effect of the fact that some members of the board might have started out with honest motives, but might have been persuaded from them. Under the circumstances, if either party desired any correction of the instructions in detail, or any fuller explanation in reference thereto, it was its duty to ask the court specifically in reference to the point, and not rely on a categorical objection. such as we are considering. Texas & Pacific Railway Company v. Volk, 151 U. S. 73, 77, 78, 14 Sup. Ct. 239, 38 L. Ed. 78. In the manner in which this topic is left, so general an exception does not |