Court Opinion

ID: 9640364
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:04:30.417212+00
Date Added: 2024-06-11T18:10:29.288275
License: Public Domain

Dissenting opinion by:
CATHERINE STONE, Justice,
joined by PHIL HARDBERGER, Chief Justice, and ALMA L. LÓPEZ, Justice.
Because I believe the trial court erred in failing to submit a jury issue on fraud, I *769dissent from that portion of the opinion which affirms the directed verdict on fraud. In all other regards I concur with the majority opinion.
The parties do not dispute the facts developed at trial. Rather, they dispute whether Dean Witter could be liable for Miguel Millan’s fraud. The crux of Dean Witter’s argument is that Miguel, by acting in a criminal manner, was acting outside the scope of his authority; thus, Dean Witter contends it should not be vicariously liable for his acts. On rehearing the majority has agreed with this argument. Yet, it is not a defense to liability to claim an agent was authorized only to do those acts that would be lawful. Arterbury v. Am. Bank & Trust Co., 553 S.W.2d 943, 949 (Tex.Civ.App.-Texarkana 1977, no writ). If an agent acts within the scope of his general authority, his wrongful act, although not authorized, will subject his principal to liability. Id. In general, an agent’s authority is presumed to be coextensive with the business entrusted to his care. Hedley Feedlot, Inc. v. Weatherly Trust, 855 S.W.2d 826, 837 (Tex.App.Amarillo 1993, writ denied). When an agent acts for a principal, the principal is liable for the agent’s fraud and misrepresentations, even though the principal has no knowledge of the fraud or misrepresentation and received no benefit from the fraud or misrepresentation.1 Id. Were this not so, a firm could actually rely upon its agents to embezzle from accounts, then claim ignorance. The potential for such mischief was recognized by the court in Paul F. Newton & Co. v. Tex. Commerce Bank, 630 F.2d 1111, 1118-19 (5th Cir. 1980), in which it noted, “To allow a brokerage firm to avoid secondary liability simply by showing ignorance of the acts of its registered representative contravenes Congress’s intent to protect the public, particularly unsophisticated investors, from fraudulent practices.” An exception to the principle of respondeat superior, usually applied in cases involving serious criminal activity, is that an employer is not liable for intentional and malicious acts that are unforeseeable considering the employee’s duties. Hooper v. Pitney Bowes, Inc., 895 S.W.2d 773, 778 (Tex.App.-Texar-kana 1995, no writ) (citing Adami v. Dobie, 440 S.W.2d 330, 334 (Tex.Civ.App.-San Antonio 1969, writ dism’d)). In this case Miguel’s acts were foreseeable and within the scope of his authority.
Scope of authority is generally defined as those actions an employee takes in furtherance of the employer’s business. See 1 Comm, on Pattern Juey Chaeges, State Bar of Tex., Texas Pattern Juey Charges PJC 7.6 (9th ed.2000). The test to determine an employer’s liability for the acts of its employees is whether on the occasion in question, the master had the “right and power to direct and control [the servant] in the performance of the causal act or omission at the very instance of the act or neglect.” Am. Nat’l Ins. Co. v. Denke, 128 Tex. 229, 95 S.W.2d 370, 373 (1936). To meet this test, the employee’s act must (1) fall within the scope of the employee’s general authority, (2) be in furtherance of the employer’s business, and (3) be for the accomplishment of the object for which the employee was hired. Chevron U.S.A., Inc. v. Lee, 847 S.W.2d 354, 355 (Tex.App.-El Paso 1993, no writ). The Workers’ Compensation Act defines scope of employment in a similar fashion, describing it as “an *770activity of any kind or character that has to do with and originates in the work, business, trade, or profession of the employer and that is performed by the employee while engaged in or about the furtherance of the affairs or business of the employer.” Tex. Lab.Code AnN. § 401.011(12) (Vernon Supp.2002).
The key inquiry appears to center on whether the act, if performed properly, is part of an employee’s general authority. For example, it is not ordinarily within the scope of a servant’s authority to commit an assault on a third person. Ana, Inc. v. Lowry, 31 S.W.3d 765, 769 (Tex.App.-Houston [1st Dist.] 2000, no pet.). However, an employer will be held liable for its employee’s assault on a third party if that assault stems directly from the employee’s exercise (however inappropriate or excessive) of a delegated right or duty, such as being in charge of admissions to a club. Id. at 770. The Houston court analyzed whether the employer should be held liable for the employee’s alleged assault of a customer in terms of whether the employee’s alleged actions were “an overzealous misuse of his authority as an employee or were utterly unrelated to his duties.” Id.
Without citing to any authority, the majority concludes that Miguel Millan’s acts were not related to his duties and “were not within his general scope of authority as a broker for Dean Witter.” (Opinion at p. 768). To the contrary, as a broker for Dean Witter, Miguel was entrusted with the business of opening brokerage accounts for clients, receiving deposits to those accounts, making purchases of securities as directed by clients, and selling them as directed. These acts comprised the scope of his general authority; he misused his authority, but the acts were not “utterly unrelated” to his duties. Even those acts he may have undertaken outside of his place of employment — pilfering his mother’s checks, renting a post office box, rifling his mother’s mailbox — were merely additional acts that furthered his fraud. Miguel acted within the course and scope of his employment, albeit improperly. Further, given a broker’s customary duties, it was not unforeseeable that Miguel could have used his position to defraud a customer. Indeed, Dean Witter’s policy of monitoring certain accounts — such as family accounts — more closely, recognizes the potential for fraudulent acts with such accounts.
When the standard of review is properly applied and the case is reviewed in the light most favorable to the party against whom the directed verdict was entered, I believe the trial court’s judgment on fraud must be reversed.

. Here, Dean Witter benefitted from Miguel's fraud, if unwittingly, because it profited from the stock transactions involved. Dean Witter’s claim that it cannot be vicariously liable for Miguel’s actions because Miguel was furthering his own interests and not furthering the purpose of carrying out Dean Witter’s business is belied by the fact that Dean Witter derived financial benefit from Miguel’s actions.