Court Opinion

ID: 3492438
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:00:41.971049+00
Date Added: 2024-06-11T14:14:46.614200
License: Public Domain

This opinion is in the Wickstrand case but applies as well to the Kyselka case.
This is an appeal by defendant Michigan Fuel  Light Company, a corporation, from a judgment against it for false representations made by defendant Helmer Nelson, one of its employees, inducing plaintiffs to purchase shares of stock in the American Commonwealth Power Corporation of Delaware. Mr. Nelson's liability is not here questioned.
The alleged false representation was, in substance, that the American Commonwealth Power Corporation owned and operated the Michigan Fuel  Light Company and various other public utilities. *Page 398 
The following statement of the relation between the two corporations is taken from the brief for plaintiffs:
"The association between the Michigan Fuel  Light Company and the American Commonwealth Power Corporation (of Delaware) in 1930 and 1931, was extremely remote, the facts being as follows:
"All of the common stock of the Michigan Fuel  Light Company, except directors' qualifying shares, was owned by the Interstate Fuel  Light Company, a Michigan corporation;
"All of the common stock of the Interstate Fuel  Light Company, except directors' qualifying shares, was owned by the American Commonwealth Power Corporation of Maryland;
"All of the common stock of the American Commonwealth Power Corporation of Maryland, except directors' qualifying shares, was owned by the American Commonwealth Power Corporation of Delaware, that being the company whose preferred stock is the basis of this suit."
The Delaware corporation was not owner of defendant company. The representation by Nelson was false in fact and law. Plaintiffs, upon learning of such falsity, tendered the purchased shares of stock to both defendants, rescinded and demanded return of moneys paid.
The pivotal question is whether the corporation can be held to respond for the tortious act of one of its employees outside of the scope of his employment, beyond the corporate powers and without corporate authorization or ratification. The answer is obvious, unless there is something taking the case out of general rules on the subject.
The modern tendency to depart from the rule of ultra vires in case of torts committed by corporate agents cannot go beyond liability to respond for tortious *Page 399 
acts committed in the course of agency. The modern rule applies the doctrine of respondeat superior and requires a showing that the tort was not only by an agent but committed as an agent and not wholly apart from his employment. In other words the servant must be working for the master and, while so working, commits a tort.
As said in 10 Fletcher, Cyclopedia of Corporations (Perm. Ed.), § 4877:
"As a general rule, however, a corporation is no more liable than a natural person would be for torts not within the scope of the authority of its officers, agents or servants and committed by them outside of the course of their employment, unless it has expressly authorized or has ratified the same; and it can make no difference whether the officer, agent or servant undertakes to act for the corporation in a matter which is beyond his authority, or acts for himself." Citing, among other cases, Preston v. Marquette County Savings Bank,122 Mich. 696, and Washington Gas Light Co. v. Lansden,172 U.S. 534 (19 Sup. Ct. 296).
The evidence discloses that the stock of the American Commonwealth Power Corporation was accepted for filing by the Michigan securities commission in 1930 and 1931, and that corporation offered its preferred stock and Albert E. Pierce 
Company, brokers, had the exclusive sale thereof.
Agents of such brokers visited Traverse City and solicited employees of defendant company to make sales of the stock, upon commission from the brokers, and the local manager who was not an officer or director of defendant company, granted employees such permission. Mr. Nelson was an employee of defendant company and his work, as a collector and meter reader, brought him in contact with plaintiffs and, to earn a commission from the Pierce Company, *Page 400 
he induced plaintiffs to purchase the shares of stock here involved. To pay for the first purchase a bank cashier's check was obtained by and indorsed by plaintiff Carolina Wickstrand and a receipt given, signed "Albert E. Pierce  Company. Helmer Nelson." This check did not come into the possession of defendant company.
Two other purchases were made by plaintiffs and Mr. Nelson accepted like cashier checks and gave receipts as in the first instance. The two last cashier checks, indorsed by Mrs. Wickstrand, were turned over by Nelson to defendant company, to be transmitted to Pierce  Company, and were indorsed by defendant company and so sent and Nelson received his commission from Pierce  Company.
The local manager of defendant company gave employees of the company permission to engage in selling stock, enabled a representative of Pierce  Company to meet with and instruct the employees relative to sales, installed a rocking signboard in front of the office, advertising sale of the stock and the company trucks and office window carried the printing: "Associated with American Commonwealth Power Corporation," also advertisements were inserted in the local newspaper by the manager, such as:
"Don't overlook the American Commonwealth Power Preferred Stock, paying 6 1/2%.
"The Traverse City Gas Company
"Phone 210.
"A part of the American Commonwealth Power Corporation of New York."
None of such advertisements, however, induced plaintiffs to purchase the stock, for they relied upon the representation made by Mr. Nelson. *Page 401 
Does the case at bar fall within the following rule stated in 10 Fletcher, Cyclopedia of Corporations (Perm. Ed.), § 4886?
"But an officer or agent of a corporation may take advantage of his position to perpetrate a fraud upon third persons, acting, not for the corporation, but for his own benefit, and in violation of his duty to the corporation. In such a case he certainly does not act in the course of his employment, but he may act in the apparent course of his employment, and thus deceive the other party."
In such case, by the weight of authority, the corporation is estopped from denying liability. The stated doctrine implies, however, departure by the agent from furtherance of the master's business, and employment of his position and apparent authority to perpetrate a fraud upon a third person.
Defendant is not liable to respond for a fraud perpetrated by Nelson in his endeavor to earn a commission from Pierce 
Company.
In so holding we have not only considered the particular representation made by him to plaintiffs and relied upon by them, but as well the activities of other agents of the corporation, inclusive of the manager, in endeavors to induce purchases of the stock.
The evidence discloses no corporate action by directors or officers of the company.
The judgments should be reversed, without a new trial, as to defendant corporation, with costs to it to be taxed.
POTTER, C.J., and BUTZEL, J., concurred with WIEST, J.
  The late Justice NELSON SHARPE took no part in this decision. *Page 402