Court Opinion

ID: 9492240
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:35:58.327311+00
Date Added: 2024-06-11T17:55:12.093808
License: Public Domain

BOGGS, Circuit Judge,
dissenting.
The facts of this case seem to be relatively straightforward, though there could be contention about the legal principles involved. The opinion of the court, however, appears to be based on a set of facts that I do not see supported either in the record in general or in the factual determination of the jury in response to a specific interrogatory, which the text of the court’s opinion fails even to mention. Based on the set of facts found by the jury, it appears to me that the law is quite clear that the plaintiff, Soberay, should prevail as a matter of law. I therefore dissent from the court’s decision for the defendant.
Soberay wanted to sell a very expensive and complicated piece of industrial machinery. Soberay was contacted about selling the machine directly by MRF, an Indian corporation. After extensive and very specific negotiations between the two parties, MRF introduced into the equation “Inky” Myers, the Ohio-based president of IPEC. Eventually MRF and Soberay agreed to a price for the sale of the machine, to be invoiced to IPEC. The price agreed to between Soberay and MRF would have a five percent commission for IPEC added to the price. In due time, the machine was shipped, MRF sent payment to IPEC, and IPEC remitted to Soberay only a little more than half of the money. Apparently IPEC pocketed the remainder of the money, and is now in bankruptcy.
Thus, we have a classic commercial conundrum. A deal has gone sour due to the defalcation of a party involved in the deal. Who is to bear the loss? Soberay has been grossly underpaid for a very valuable machine. MRF has already paid once for the machine, and, understandably, does not wish to do so again. The solution to this conflict should lie in the question of the relationship between IPEC and MRF. Ohio law on this question seems to be quite clear. In a case adverted to by the court only in passing, James G. Smith & Assoc., Inc. v. Everett, 1 Ohio App.3d 118, 439 N.E.2d 932 (Ohio App.1981), the Ohio Court of Appeals carefully laid out three possible types of principal-agent relationships:
1) A “disclosed principal,” where both the existence of the agency and the identity of the principal are known;
*7732) A “partially disclosed principal,” where the existence of the agency is known, but the identity of the principal is not; and
3) An “undisclosed principal,” where neither the existence of an agency nor the identity of the principal is known.
See id. at 935.
The exegesis in the opinion might make sense if this were a case of the third category, where Soberay thought it was dealing solely with IPEC, or if IPEC’s relationship to MRF was as a true reseller, with the purchase being made by IPEC for its own account. However, the jury specifically found, and the facts of the case amply support the finding, that IPEC “was the agent of MRF in the sale ... from Soberay and that MRF gave [IPEC] the authority to act as MRF’s agent and to enter into a contract with Soberay on MRF’s behalf....”
Under these circumstances, it is impossible to reach any conclusion other than that this case involves a situation of the first class, with MRF serving as the “disclosed principal.” The Ohio Court of Appeals in Everett went on to state, 439 N.E.2d at 935, the legal result of this categorization: “An agent who acts for a disclosed principal and who acts within the scope of his authority and in name of the principal is ordinarily not liable on the contracts he makes.” The rationale for this rule is that, in this situation, the third party intends to deal with the principal, not his agent. The only possible qualification in this language is the phrase “and in the name of the principal.” Here, IPEC is the name on the invoices (not an integrated contract) but, as both found by the jury and admitted by MRF (see, e.g., appellee’s brief at 29: “Soberay Machine, believing that IPEC was MRF’s agent”), Soberay knew that IPEC was acting for MRF.
In fact, Everett explains, at 935, that there is no situation such as is contended here, where only the agent and not the principal is liable.1 This could only be the case if the purported agent was not in fact truly an agent, but was acting for its own account, and this outcome is strictly negated by the .jury finding. Once the jury had made this determination, judgment should have been rendered for Soberay as a matter of law.
Instead, the court gave a second interrogatory. This one asked whether IPEC was acting within the scope of its agency when it pocketed over $100,000 of MRF’s payment, rather than turning it over to Soberay. In other words, it asked whether IPEC stole the money on its own behalf, or on behalf of MRF. Under Ohio law as noted above, this question was irrelevant. As the Ohio Supreme Court said more than a century ago, “where one of two parties must suffer loss by the . reason of the fraud of an unfaithful agent, it must be the company that [has accredited him]”.... Massachusetts Life Ins. Co. v. Eshelman, 30 Ohio St. 647, 659 (Ohio 1876). As recently as 1986, the Ohio Court of Appeals held that the principal is responsible for all obligations incurred by the agent within the scope of the agency, including a loss in connection with the obligation caused by the agent’s fraud, regardless of whether the principal authorized or benefitted from the agent’s fraud. See, e.g., DeSantis v. Smedley, 34 Ohio App.3d 218, 220-21, 517 N.E.2d 1038 (1986). That is exactly what happened here.
. Now that the facts and state law contract issues are set forth clearly, we can turn to the impact of Rule 19. In short, since IPEC is in no way indispensable to the key question in the litigation, the liability of MRF to Soberay for payments So-beray has not received, there is nothing in Rule 19 that should have prevented what actually happened, the trial and jury deter*774mination of this suit. The fact that a party that is liable may have options to attempt to recover some of its liability from a third party made does not make that third party indispensable. In fact, it is clear that “complete relief’ means the relief sought by the plaintiff and to which the plaintiff is entitled. Section 2(ii) of Rule 19(a) does not apply based on making MRF liable for obligations “by reason of the claimed interest” (of IPEC). The key statement in the court’s opinion, at page • 11, that “IPEC was not employed by defendant, [and] acted independently in entering into the contract with plaintiff’ is simply belied by both the state of the record and the jury verdict. Thus, under the clear state of Ohio law, and based on the fully supported factual finding of the jury in answer to interrogatory no. 1, the judgment of the district court should be reversed and the matter remanded to the district court with instructions to enter judgment for Soberay in the full amount of its claim.

. The court’s reliance on Ohio State Univ. Hosps. v. Evans, at pages 15-16, is irrelevant. Evans only stands for the proposition that sometimes an agent of a disclosed principal may also be held liable. It certainly does not hold the principal is not liable, as well. ■