Court Opinion

ID: 9774854
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:35:42.385698+00
Date Added: 2024-06-11T07:32:17.052532
License: Public Domain

McGEE, Justice.
I respectfully dissent. I would hold that in this case the summary judgment proof established as a matter of law that Lyon had neither the actual nor the apparent authority to represent the law firm in the fraud perpetrated upon the petitioners. Further, no liability should rest upon the law firm under any of the controlling provisions of the Texas Uniform Partnership Act. Tex.Rev.Civ.Stat.Ann. art. 6132b (1970).
The record clearly reveals that Mrs. Cook initially asked Lyon whether he knew of someone to whom she could speak concerning the possible investment of certain monies in Texas properties. Thus, aside from her legal problems Mrs. Cook inquired of Lyon whether he knew of someone she could discuss investments with — apparently realizing that any discussion relative to legal matters had ceased. She specifically *760inquired as to whether he knew of “either an investment counselor or a real estate person.” Lyon’s answer was that he was a silent partner in a different field — a real estate firm, and that he could therefore be of some service to her in that separate capacity. It is undisputed that no member of the law firm other than Lyon played any part in, or received any benefit from, Lyon’s alleged misapplication of funds. The funds were not deposited in, nor handled by, or through any account of the law firm. Thus, it is clear that the investment counseling by Lyon was done without the knowledge of anyone else in the law firm and that the firm neither received a fee, nor profited in any way by Lyon’s actions. The end result is that the pleadings, affidavits and depositions reveal that the activities out of which the defalcations arose did not constitute a partnership endeavor.
In Randall v. Meredith, 76 Tex. 669, 13 S.W. 576, 581 (1890), the court stated:
“Third persons dealing with a member of a firm in reference to partnership matters, in the absence of power expressly conferred, must recognize the fact that the partner’s power to bind his firm is restricted to the doing of such things as are within the scope of the particular business.”
Nevertheless, the majority has held that the liability of the law firm may ultimately be established under the applicable provisions of the Texas Uniform Partnership Act. Section 4(3) of the Act expressly states that “[t]he law of agency shall apply under this Act.” Upon recognizing this fact the majority states that assuming misapplication of the funds, the crucial questions determinative of whether the law firm is to be held liable for Lyon’s misdeeds are: “ . whether in receiving the funds of Betty L. Cook, et al, in the sum of $60,343.25, Lyon was ‘apparently carrying on in the usual way the business of the partnership,’ (Sec. 9); or, as also expressed, whether he was ‘acting in the ordinary course of the business of the partnership’. (Sec. 13). If so, it would follow that Lyon was ‘acting within the scope of his apparent authority’ when he received the money and property of Betty L. Cook, et al; and that the law firm is ‘bound to make good the loss’ from his misapplication of the funds. (Sec. 14).”
Thus, as viewed by the majority, the key is obviously the receipt of the funds. Though I would not limit the construction of the Act simply to the mere receipt of the funds, and aside from the confusion inherent in the majority’s statement, I maintain that the liability provisions of the act are clear and well defined. In the present case, it is not claimed that Lyon had been authorized by the partnership to act as he did with reference to the Yummers investment. Nor does anyone claim that Betty Cook, et al, had notice or knowledge that Lyon had no authority to act as he did. Thus, the key questions that must be answered in order to determine whether the law firm is to be held liable are whether Lyon was “acting in the ordinary course of the business of the partnership.” (Sec. 13); or, whether he was “apparently carrying on in the usual way the business of the partnership.” (Sec. 9). Further, liability may also attach to the law firm if Lyon was “acting within the scope of his apparent authority.” (Sec. 14).
Based on my construction of the statutory liability provisions set out in the Texas Uniform Partnership Act as they apply to the present fact situation, I would uphold the summary judgment entered in favor of the law firm. I would hold that the law firm met its summary judgment burden and established that Lyon was not acting in the ordinary course of the partnership business. I would further hold that Lyon was not acting within the scope of his apparent authority, nor was he apparently carrying on in the usual way the business of the partnership within the meaning of the Texas Uniform Partnership Act. The authority of a partner to act as an agent for his partnership is limited to such transactions as are within the scope of the partnership business; and neither the partnership nor the other partners are bound by the unau*761thorized acts of one partner in a matter not within the usual or apparent scope of business of the partnership. Neither a partnership nor its innocent partners are liable for a conversion which is not effected in the course of the firm’s business. Similarly, as was revealed in the Randall case, supra, third persons dealing with a member of a firm must recognize that the partner’s power to bind his firm is restricted to doing things that are within the scope of the particular business. Perhaps the initial respect which Mrs. Cook entertained for Lyon’s business sagacity and investment acumen was seeded in the fact that he was a member of that particular law firm; but he was a member of that firm for the practice of law, and that membership did not per se create liability by his partners for his acts outside the general scope of the practice of law. Rouse v. Pollard, 130 N.J.Eq. 204, 21 A.2d 801 (1941).
Mrs. Cook’s inquiry related to whether Lyon knew of an individual who could serve in the distinct capacity of an investment counselor. Lyon’s answer clearly indicated to her that he would be acting in her behalf in a separate, nonlegal capacity. It therefore may not be said that Lyon was “apparently carrying on in the usual way the business of the partnership.” Such representations and financial failure arose out of Lyon’s own private deal and not in the course of the partnership business. Where a person deals with one of the partners in a matter not within the scope of the partnership, the intendment of the law is that he deals with him on his own private account.
When Mrs. Cook went to the offices of Brundidge, Fountain, Elliott & Churchill in reliance upon their reputation as a law firm to obtain legal advice and met with Lyon as a member of the firm who would render the desired service, she had no justification therein for relying upon the responsibility of the partnership for any disconnected service assumed by Lyon outside one that was characteristically within the practice of law. When Lyon volunteered himself as a real estate and investment counselor in the present case due to Mrs. Cook’s instigating inquiry he was not “apparently carrying on in the usual way the business of the partnership,” nor was he “acting in the ordinary course of the business of the partnership” within the meaning of the Partnership Act. In this case Lyon was acting in a private, nonlegal advisory capacity, and he was therefore entirely outside the scope of his authority and without the scope of the business carried on by this law firm. Such actions were not incidental to the business of a firm engaged exclusively in the practice of law. Because of these conclusions, it is clear that Lyon was also not “acting within the scope of his apparent authority” when he received the monies of Betty Cook, et al.
This court described “apparent authority” in Douglass v. Panama, Inc., 504 S.W.2d 776, 778 (Tex.1974), as follows:
“Apparent authority is based on estoppel, and one seeking to charge a principal through apparent authority of an agent to bind the principal must prove such conduct on the part of the principal as would lead a reasonably prudent person to suppose that the agent had the authority he purports to exercise.” [Emphasis added].
Since apparent authority is based on es-toppel, it cannot be established by the acts of the agent; “it must arise from words or conduct of the principal.” Custom Leasing, Inc. v. Texas Bank and Trust Company of Dallas, 516 S.W.2d 138, 144 (Tex.1974); Rourke v. Garza, 19 Tex.Sup.Ct.J. 36, 530 S.W.2d 794 (Tex.1975). Further, apparent authority in such cases exists only as to those things ordinarily entrusted to one occupying such a position. Rourke, supra. In the instant case we find no actions by the principal law firm that would induce Mrs. Cook to believe that Lyon was authorized to act for the firm as a real estate broker or investment counselor. The firm did nothing to indicate to Mrs. Cook that Lyon was authorized to act in their behalf outside of the practice of law. Mrs. Cook herself stat*762ed in her affidavit and deposition that she had no contact with any other member of the law firm beyond greeting Mr. Churchill briefly on a few occasions. The mere fact that the law firm had conferred upon Lyon the authority to practice law within the scope of their partnership would not create the apparent authority to engage in investment counseling transactions as a service disconnected from the practice of law. See, Great American Casualty Co. v. Eichelberger, 37 S.W.2d 1050 (Tex.Civ.App.—Waco 1931, writ ref’d).
As a final note, I maintain that it is clearly evident that the majority has failed in its duty to lend a guiding hand to the trial court below. For instance, in what fashion do the three statutory liability provisions interrelate so as to possibly affix liability to the law firm? Since the ultimate outcome is dependent upon these pertinent liability provisions, what are the special issues that should be submitted in such cases? Whose viewpoint or actions determine the existence or nonexistence of liability? What does “apparently carrying on in the usual way the business of the partnership” mean? It is inevitable that the jury will require some form of instruction as to these matters. And, since the term “apparent authority” as set out in the statute has obviously not received its traditional interpretation, that concept will also require further specification and delineation. That problems and confusion are created is evident. The questions which arise call for and deserve answers. This case presents the initial instance in which the partnership liability provisions have been directly confronted and analyzed in such a fashion, and therefore, further guidance is essential.
Nevertheless, as I view the Texas Uniform Partnership Act, even under the petitioners’ version of the facts there was no genuine issue as to any material fact, and the matters before the court failed to show any liability on the part of the law firm. Accordingly, summary judgment was properly entered and the judgment of the court of civil appeals should be affirmed.
GREENHILL, C. J., joins in this dissent.