American Lease Plans, Inc. v. Silver Sand Co. of Leesburg, Inc.

• Decision Date: 17 February 1981
• Docket Number: No. 78-3136,78-3136
• Citation: 637 F.2d 311
• Parties: AMERICAN LEASE PLANS, INC., a Foreign Corporation, Plaintiff-Appellee, v. SILVER SAND COMPANY OF LEESBURG, INC., a Florida Corporation, Defendant and Third-Party Plaintiff-Appellant, v. Ronald D. and Janet M. ALLEN, etc., et al., Third-Party Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 311

637 F.2d 311

AMERICAN LEASE PLANS, INC., a Foreign Corporation, Plaintiff-Appellee, v. SILVER SAND COMPANY OF LEESBURG, INC., a Florida

Corporation, Defendant and Third-Party Plaintiff-Appellant, v. Ronald D. and Janet M. ALLEN, etc., et al., Third-Party

Defendants-Appellees.

No. 78-3136.

United States Court of Appeals Fifth Circuit.

Feb. 17, 1981.

Jeffry R. Jontz, Jerry R. Linscott, Orlando, Fla., for defendant and third-party plaintiff-appellant.

Akerman, Senterfitt & Edison, J. Thomas Cardwell, Michael P. McMahon, Orlando, Fla., for plaintiff-appellee.

John W. Rodgers, Orlando, Fla., for Ronald and Janet Allen.

Appeal from the United States District Court for the Middle District of Florida.

Before GODBOLD, TJOFLAT and SAM D. JOHNSON, Circuit Judges.

TJOFLAT, Circuit Judge:

This case comes to us on appeal from a summary judgment for the plaintiff below, American Lease Plans, Inc. Jurisdiction is based on diversity of citizenship, 28 U.S.C. § 1332 (1976); therefore, we must apply the relevant state law. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). It is clear that Florida law will apply in this case. Charles L. Bowman Co. v. Erwin, 468 F.2d 1293 (5th Cir. 1972); Boat Town U.S.A., Inc. v. Mercury Marine Div. of Brunswick Corp., 364 So.2d 15 (Fla.App.1978); Regal Shoe Shops v. Kleinman, 361 So.2d 765 (Fla.App.1978). See also Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Although we approach this case in a slightly different manner, on consideration of Florida law and the record before us, we affirm the decision of the district court.

I

The facts of this case are not in dispute. Silver Sand Company of Leesburg, Inc. (Silver Sand) is a wholly owned subsidiary of United States Industries. Silver Sand's primary business activity is the sale and transportation of sand and other aggregates in central Florida. During the time relevant to this case, the chief operating officer and general manager of Silver Sand was Kenneth Surbaugh. Mr. Surbaugh served as both the Executive Vice-president and Secretary of Silver Sand.

As part of his duties as chief operating officer of Silver Sand, Surbaugh had occasion to evaluate Silver Sand's business procedures. As a result of this inquiry, Surbaugh recommended to his superiors in the United States Industries organization that Silver Sand reduce the capital it had currently invested in trucks by selling the majority of its trucks and contracting with independent lease operators for trucking services. Surbaugh's recommendation was accepted.

To implement this plan, the following scheme was devised: An independent truck lease operator would negotiate terms for acquiring a truck from a vendor, often times Silver Sand. A corporation engaged in the business of financing trucks and trailers (the "truck financier") would then purchase the truck on the agreed terms, thus merely stepping into the shoes of the lease operator in the purchase transaction. The truck financier would, in turn, enter into a leasing agreement with the lease operator. Payment under this lease was then guaranteed by Silver Sand. Finally, the lease operator would enter into a hauling contract with Silver Sand.

Silver Sand acted as guarantor in a series of these transactions. American Lease Plans, Inc., a corporation engaged in the business of truck financing, was one of several companies that leased trucks to operators pursuant to Silver Sand's plan. Several trucking companies that had leased trucks from American Lease Plans defaulted on their lease payments; American Lease Plans now seeks to hold Silver Sand liable as guarantor.

A recital of the relevant facts in further detail is important for a proper resolution of this appeal. It is uncontested that Surbaugh's superiors had placed him in control of the everyday business activities of Silver Sand. Other than regular monitoring, conducted by the President of Silver Sand, of Silver Sand's earnings and loss record, Surbaugh was free of managerial restraints. It is also uncontested that it was common knowledge in the business community that Surbaugh was the individual in charge at Silver Sand. Furthermore, Surbaugh's unfettered control of Silver Sand's business affairs was complemented by the trappings of corporate power: Surbaugh conducted business from a large executive office and was accorded the deference within the Silver Sand organization appropriate to one in a position of authority.

The particular facts of the transactions forming the basis of this action are also undisputed. Prior to execution of the lease guarantees, American Lease Plans sought to confirm Surbaugh's authority to bind Silver Sand. Pursuant to the company's standard operating procedure, American Lease Plans required a properly certified corporate resolution from Silver Sand evidencing Surbaugh's authority to execute the guarantees. On each occasion that Surbaugh, on behalf of Silver Sand, guaranteed leases with American Lease Plans, execution of the guarantees was preceded by presentation of Silver Sand corporate resolutions, certified by Surbaugh in his capacity as secretary, which authorized any officer of Silver Sand to execute guarantees with American Lease Plans. These resolutions recited that Silver Sand would be economically benefitted by the recommended business transaction. Although these resolutions appeared to be in proper form, Surbaugh had prepared and falsely certified them without the knowledge of any other Silver Sand officer.

American Lease Plans accepted these resolutions as authentic. Surbaugh then executed the guarantees with American Lease Plans, signing as Vice President of Silver Sand. He also signed the guarantees as Secretary of Silver Sand, although there is no indication that his signature in that capacity was required for proper execution of the guarantees. Surbaugh's execution of the guarantees was also accomplished without the knowledge of any other officer of Silver Sand. American Lease Plans accepted the guarantees as authentic.

It is further undisputed that an internal management guide of Silver Sand's parent, United States Industries, forbade an executive vice-president from executing guarantees without specific authorization, and that American Lease Plans was unaware of this United States Industries internal operating procedure.

After Silver Sand refused to comply with the terms of these guarantees, American Lease Plans filed suit in federal district court. Summary judgment on both liability and damages was eventually entered for American Lease Plans. The district court held that Surbaugh had acted as Silver Sand's agent in the guarantee transactions and that, because Surbaugh had been clothed with the apparent authority to enter these transactions, Silver Sand was liable as principal. Silver Sand appeals from this finding of liability.

II

Silver Sand alleges three points of error: first, that summary judgment for American Lease Plans was improper because there were undecided material issues of fact concerning Surbaugh's apparent authority; second, that previous section 608.40 of the Florida General Corporation Act renders the relevant guarantees void and thus precludes summary judgment as a matter of law; and third, that summary judgment was improper because the district court incorrectly denied Silver Sand's motion for a continuance to allow for additional discovery.

We note at the outset that summary judgment is only proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Shahid v. Gulf Power Co., 291 F.2d 422 (5th Cir. 1961). It follows that "when a movant makes out a convincing showing that genuine issues of facts are lacking, we require that the adversary adequately demonstrate by receivable facts that a real, not formal, controversy exists ...." Bruce Construction Corp. v. United States, 242 F.2d 873, 875 (5th Cir. 1957) (footnote omitted). We must address appellant's arguments with these standards in mind.

A.

Appellant first contends that material issues of fact exist concerning Surbaugh's apparent authority. This contention is obscured by appellant's hermeneutics of the sometimes arcane law of agency authority. It is thus necessary to clarify the law that we must apply in this case.

It has long been the law of Florida that:

Where a principal has, by his voluntary act, placed an agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform a particular act, and therefore deals with the agent, the principal is estopped, as against such third person, from denying the agent's authority.

T.G. Bush Grocery Co. v. Conely, 61 Fla. 131, 55 So. 867, 869 (1911). See also Doric Company v. Leo Jay Rosen Associates, Inc., 303 F.2d 817, 820 (5th Cir. 1962). In other words,

A principal who puts a servant or other agent in a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud.

Restatement (Second) of Agency § 261 (1958). See Industrial Insurance Co. of New Jersey v. First National Bank of Miami, 57 So.2d 23 (Fla. 1952).

A third party dealing with the principal's agent must, as was stated in T.G. Bush, supra, be justified in relying on the authority in question; the third party must not have been confronted with circumstances adequate to put him on inquiry as to the legitimacy of the agent's authority. Industrial Insurance Co. of New Jersey v. First National Bank of Miami, 57 So.2d 23, 26 (Fla. 1952).

Applying this law to the undisputed facts...