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Law School Case Brief

Lucey v. Hero Int'l Corp. - 361 Mass. 569, 281 N.E.2d 266 (1972)

Rule:

The authority to manage the business affairs of a corporation is primarily vested in its board of directors. Its president and treasurer, merely as the holders of those offices, have little or no inherent power to bind the corporation outside of a comparatively narrow circle of functions specially pertaining to their offices.

Facts:

Defendant Hero International Corporation was the owner of a large tract of land in Richmond. In 1969, Defendant’s board of directors voted that the corporation sell the land to Plaintiff, John Lucey, and that Defendant's President, Henry Rose, be authorized to sign the deed and any other papers needed to effectuate the transfer. No other corporate vote on the matter was ever taken. On March 13, 1969, defendant conveyed to the plaintiff by warranty deed the five-acre parcel. The transaction was consummated by the defendant’s attorney. At that same meeting, the plaintiff executed a real estate sales agreement that granted plaintiff an option to purchase additional specified land belonging to the defendant. The agreement was mailed to Rose who, without consulting the other officers of the corporation, deleted from the option paragraph the specification of the land that the plaintiff had the option to buy. In August 1969, the plaintiff met Rose and told him that the defendant was obliged to sell to the plaintiff whatever portion of the defendant’s remaining land he wished to buy. No agreement was reached, whereupon Lucey commenced the present litigation. Defendant company appealed an interlocutory and final decree confirming a master’s report ordering it to convey land to the purchaser under the agreement.

Issue:

Pursuant to the option granted to the plaintiff, did the defendant have the obligation to convey to the plaintiff whatever land the latter wished to buy?

Answer:

No.

Conclusion:

The Court determined that the authorization given by the corporation’s board of directors did not confer upon Rose the authority to grant the plaintiff an option to purchase at a subsequent time additional land belonging to the defendant. According to the Court, since the authorizing instrument was the result of the formal corporate action taken at a duly called meeting of the corporation’s board of directors, the instrument can be assumed to spell out the intent of the principal accurately with a high degree of particularity. The Court averred that no express or implied authority was granted on the part of Rose to enter into the option agreement, and neither did the corporation ratify the option. Furthermore, the Court held that an agreement giving an option to purchase land “as mutually agreed upon by both parties” was too indefinite to be specially enforced because it did not contain a sufficient description of the land subject to the option but instead left the location for future negotiation.

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