Cooke v. Lynn Sand & Stone Company

640 N.E.2d 786 (1994)

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Nature of the Case

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Facts

James Cooke (P) worked for the family business Lynn Sand (D). P was a director, officer, and shareholder of this closely held corporation. P served at will without a written contract. Robert Prosperi, not a member of the family, asked for a written contract in 1979. A contract was drafted by corporate counsel and was signed by Prosperi with knowledge by the board. In April 30, 1979, the board voted unanimously to authorize the president and the vice presidents to sign contracts and documents in the name of the corporation when they believe such actions to be in the best interests of the company. The Prosperi contract was superseded by a five-year contract signed by P as president and Prosperi as an employee. That contract was not referred to the board. P was worried about the company being sold and also drafted his own employment contract, and when Prosperi's contract was against renewed to run afresh for five years in 1982, P had Prosperi sign his contract and P signed as an employee. A group eventually came in to take over the company, and P notified them of his contract. Everyone thought it was void except P and P sued after the new group took over the company. The court held that P's contract was executed in violation of his duty of candor.