Opinion ID: 1168913
Heading Depth: 1
Heading Rank: 4

Heading: Liability of Hobart Estate Company as Principal of Greene.

Text: Plaintiff seeks to hold defendant corporation on the theory that Greene was its agent. There is no claim that there was any express authority from the corporation to make the alleged misrepresentations, and there is no evidence that Greene purported to act for the corporation in the transaction or that plaintiff believed that he was so acting. Plaintiff contends, however, that the corporation is nevertheless liable under the circumstances of this case. [29] First, it is urged that Greene gave false information to an inheritance tax appraiser which led to a false appraisement of the stock in the estate of plaintiff's father at $40 per share; that the corporation was required by law to furnish the information; that Greene acted as its agent in so doing; that by such misrepresentations the corporation committed a fraud on the public; and that any member injured thereby had a cause of action against the corporation. Plaintiff's own testimony, however, shows that he did not act or rely on the appraisal. He testified that Greene told him that the value fixed by the appraiser was too high, and that he believed Greene was telling the truth in fixing the value at $25. If he did not act or rely on the $40 valuation, he was not injured by any misinformation given to the appraiser. [30] Plaintiff next contends that Greene as general manager was charged with the conduct of the business of the corporation, that he desired to get rid of plaintiff as a stockholder because he was a troublemaker, and that, accordingly, by facilitating the transaction, he acted in the interests of the corporation and hence within the scope of his agency. Actual authority may be implied as well as express and the implied powers of a general agent or manager are very broad, embracing authority to do all acts customarily connected with the business in which he is engaged. (See Los Angeles L. Co. v. Los Angeles, 106 Cal. 156, 161 [39 P. 533]; 1 Cal.Jur. 716; 2 Am.Jur. 70-73; (1934) 22 Cal.L.Rev. 392, 394; cf. Civ. Code, 2319.) [31] It does not appear, however, that Greene was acting within the scope of his duties as general manager of the company in negotiating the purchase of the stock from plaintiff. The transaction was between two indidual shareholders, namely, plaintiff and Greene's principal, Alice Lester. Ordinarily, a corporation is not interested in a sale of stock by one shareholder to another and, in the absence of special circumstances, such transactions are not within the implied authority of a general manager. (See Bisbee v. Midland Linseed Products Co., 19 F.2d 24, 27; cf. Rattray v. Wickersheim Implement Co., 36 Cal.App. 253, 256-257 [171 P. 964].) [32a] Any possible advantage to the corporation derived from elimination of plaintiff as a stockholder was but incidental to the sale between the two individual shareholders and does not render the corporation liable. [33] It cannot be said that the involuntary acceptance of the benefit, if any, justified the imposition of liability on the corporation on the theory of ratification, since any benefit from the sale was of such a nature that the corporation could not have rejected it. [32b] The company was not liable merely because Greene was its president and general manager. (See Rest., Agency, 258, Comment b, where it is said: Statements not connected with agent's employment. Except where the position occupied by an agent enables him to perpetrate a fraud, a principal is subject to liability for the deceit of an agent only in connection with matters entrusted to him. Misrepresentations concerning matters which are beyond the range of what the agent is employed to handle are no more effective to create liability against the principal than the agent's promises as to them.) [34] Plaintiff contends, finally, that the corporation is liable because of the position in which it had placed Greene, who was apparently the only person who had knowledge and information as to the value of the stock and the factors on which the value depended. This contention is based on the doctrine of ostensible authority, which is defined as such authority as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess (Civ. Code, 2317). Under this doctrine a principal is bound by acts of his agent, under a merely ostensible authority, to those persons only who have in good faith, and without want of ordinary care, incurred a liability or parted with value, upon the faith thereof (Civ. Code, 2334). The California cases hold that, under sections 2317 and 2334, a plaintiff cannot recover on the basis of ostensible authority without a showing of facts sufficient to raise an estoppel (Hansen v. Burford, 212 Cal. 100 [297 P. 908]; Ernst v. Searle, 218 Cal. 233 [22 P.2d 715]; Van Buren v. Green, 120 Cal.App. 461 [7 P.2d 1079]; see, also, 22 Cal.L.Rev. 392, 395, 396.) As said in Ernst v. Searle, 218 Cal., supra, at page 237, its essential elements are representation by the principal, justifiable reliance thereon by the third party, and change of position or injury resulting from such reliance. (See, also, Rest., Agency, 265.) [35] The evidence does not permit a finding that these elements are present here. The record is devoid of any showing that plaintiff at the time of the transaction thought or believed that Greene was acting for the corporation, or that he relied on any such belief. His attorney, Harris, wrote to Crocker's attorney that plaintiff's stock was to be transferred to the nominee of the representatives of the estate and that they would make payment therefor. [36] Unless it can be said that Greene was acting or purporting to act for the corporation, liability should not be predicated solely on the fact that he was the only person who possessed knowledge of the value of the stock. Although the fact that Greene had special knowledge of the affairs of the corporation entitled plaintiff to rely on Greene's representations concerning those facts, it would not justify plaintiff in believing that Greene was acting on behalf of the corporation when Greene did not purport to act in that capacity and plaintiff understood that he was acting as a representative of the estate and for the purchaser of the stock. The case of Rutherford v. Rideout Bank, 11 Cal.2d 479 [80 P.2d 978, 117 A.L.R. 383], is clearly distinguishable in that there the bank manager who was guilty of the fraudulent representations purported to be acting for the bank, plaintiff believed he was so acting and was authorized to do so, and, in addition, it was customary for the manager to make statements to customers upon matters such as those embraced by the representations. The judgments are reversed.