Lokay v. Lehigh Valley Co-op. Farmers, Inc.

• Decision Date: 26 April 1985
• Citation: 492 A.2d 405,342 Pa.Super. 89
• Parties: Ray A. LOKAY v. LEHIGH VALLEY COOPERATIVE FARMERS, INC., Appellant.
• Court: Pennsylvania Superior Court

Page 405

492 A.2d 405

342 Pa.Super. 89

Ray A. LOKAY v. LEHIGH VALLEY COOPERATIVE FARMERS, INC., Appellant.

Superior Court of Pennsylvania.

Argued Oct. 17, 1984.

Filed April 26, 1985.

Oldrich Foucek, III, Allentown, for appellant.

Thomas E. Weaver, Jr., Allentown, for appellee.

Before CAVANAUGH, CIRILLO and JOHNSON, JJ.

CIRILLO, Judge:

Lehigh Valley Cooperative Farmers, Inc. (hereafter "Lehigh"), appeals an order of the Court of Common Pleas of Lehigh County dismissing its exceptions and denying its motions for judgment notwithstanding the verdict or, in the alternative, for a new trial. We affirm.

While motions for judgment n.o.v. and for a new trial are usually combined as alternative motions, we must review rulings on them under different standards. Judgment n.o.v. is proper only in a clear case; in reviewing its denial, we examine the evidence in the light most favorable to the verdict-winner, including all reasonable inferences arising from the evidence, and we resolve any conflicts in the evidence in favor of the verdict-winner. Giambra v. Aetna Casualty and Surety Co., 315 Pa.Super. 231, 233, 461 A.2d 1256, 1257 (1983); Mattox v. City of Philadelphia, 308 Pa.Super. 111, 115, 454 A.2d 46, 48 (1982), quoting Atkins v. Urban Redevelopment Authority of Pittsburgh, 489 Pa. 344, 351, 414 A.2d 100, 103 (1980); Schneider v. Albert Einstein Medical Center, Etc., 257 Pa.Super. 348, 354-55, 390 A.2d 1271, 1274 (1978). A verdict for the plaintiff, which survived a motion for judgment n.o.v., must stand if there is evidence upon which the jury could find that the defendant was liable. Karam v. Pennsylvania Power & Light Co., 205 Pa.Super. 318, 322, 208 A.2d 876, 878 (1965); Powell v. Wandel, 188 Pa.Super. 57, 146 A.2d 61 (1958).

By contrast, the trial court has broad discretion whether to grant a new trial. Its denial demands that we examine all the evidence and decide whether the trial court manifestly or capriciously abused that discretion or made an error of law. Yandrich v. Radic, 291 Pa.Super. 75, 79, 435 A.2d 226, 228-29, appeal dismissed 499 Pa. 271, 453 A.2d 304 (1982); Scaife Co. v. Rockwell-Standard Corp., 446 Pa. 280, 290, 285 A.2d 451, 456, cert. denied 407 U.S. 920, 92 S.Ct. 2459, 32 L.Ed.2d 806 (1972); Calabria v. Brentwood Motor Coach Co., 412 Pa. 486, 194 A.2d 918 (1963); Ferick Excavating and Grading v. Senger Trucking Co., 315 Pa.Super. 69, 74, 461 A.2d 800, 802 (1983); see also Bumbarger v. Kaminsky, 311 Pa.Super. 177, 457 A.2d 552 (1983).

Appellant Lehigh processes raw milk for sale to retail stores. In the early 1970s, appellant began negotiations with Topco Associates, Inc., an Ohio firm and appellee's former employer, for appellant's sale of milk products to various retail food chains. As part of these negotiations, appellant sent Topco copies of its financial reports for the fiscal years ending January 31, 1970, and January 31, 1971. Appellee reviewed these two reports as part of his duties as Division Manager for Topco.

Appellant's chief operating officer at that time, Richard Allison, told appellee on three occasions in 1971 that appellee might consider employment with appellant. Early in 1972, Allison and appellee began to negotiate terms for appellee's employment. This involved at least two meetings and several telephone conversations; during one meeting appellee and Allison discussed appellant's financial status. In March, 1972, appellee joined Lehigh as a vice-president.

In July, 1974, appellee was discharged by appellant's new president, Robert Barry. Appellee's dismissal did not result from any fault in his performance; rather, appellant was reducing its management staff because its financial health was not as it had believed. An audit of several of its annual reports, including those for the 1970 and 1971 fiscal years, disclosed numerous errors. Allison was fired upon the discovery of these errors; appellant claims that Allison deliberately misrepresented its finances while he was an officer of it.

Appellee sought but did not obtain new employment similar to his former office at Lehigh. Finally, he found employment as a consultant to a recycling business. He sued appellant for breach of contract and fraudulent misrepresentation, alleging, inter alia, that he was induced to resign from Topco and join appellant partly on the basis of appellant's 1970 and 1971 reports, which were discovered to have misstated appellant's economic condition.

The jury found for appellee on both his breach of contract and fraud claims. The court fixed damages at $28,490.48 on the contract count; the jury awarded $162,000.00 compensatory damages on the fraud count.

Appellant's questions before us pertain only to the fraudulent misrepresentation claim; it does not challenge the finding of liability or award of damages for breach of contract. Instead, appellant disputes the jury's interpretation of the facts under the law applicable to fraud. First, appellant asks whether the evidence was sufficient to support the jury's finding of fraudulent misrepresentation. Second, it inquires whether, assuming that the evidence was sufficient, the jury was justified in awarding appellee the stated amount of compensatory damages for fraud.

Pennsylvania law on fraud was thoroughly reviewed in Delahanty v. First Pennsylvania Bank, N.A., 318 Pa.Super. 90, 464 A.2d 1243 (1983). In that case, we stated that a determination of fraud normally requires a finding of: 1) a misrepresentation; 2) a fraudulent utterance of it; 3) the maker's intent that the recipient be induced thereby to act; 4) the recipient's justifiable reliance on the misrepresentation; and 5) damage to the recipient proximately caused. Id. at 107, 464 A.2d at 1252.

Appellant argues that appellee did not prove the third and fourth elements of his claim. Appellant asserts that it could not intend that appellee rely upon the 1970 and 1971 reports because those documents were meant for perusal only by appellant's shareholders, creditors and the like, not by prospective employees; appellee was thus not a "foreseeable reader" of the reports. In the alternative, appellant argues that, because it had no knowledge of the fabrications in the reports, it could not intend that appellee act upon their misrepresentation of appellant's financial condition.

We disagree with those claims. Appellant admits that appellee read the two reports at issue in his capacity as a Topco employee, and that it knew he read them. Therefore, appellant's characterization of appellee as outside the scope of foreseeable recipients of the reports' misrepresentations is meritless.

Likewise, appellant's argument that it was a victim of the same fraud as was appellee, and so cannot be liable to him for it, is meritless. Appellant misreads the grounds underlying its liability to appellee.

A corporation is a creature of legal fiction, and must "act" through its officers, directors or other agents. Ashley v Ashley, 482 Pa. 228, 393 A.2d 637 (1978); Pollock Industries, Inc. v. General Steel Castings Corp., 203 Pa.Super. 453, 201 A.2d 606 (1964) (allocatur denied). In Pennsylvania, a corporate officer's scope of authority to act for the corporation is established by the corporation's by-laws or, in their absence, by resolution of the board of directors. 15 P.S. § 1406. In addition, the active management of a corporation has historically governed employee relationships. Emperee v. Meyers, 440 Pa. 430, 269 A.2d 731 (1970). While appellant now alleges Allison's fraud as a defense to its own liability, it does not deny his managerial authority, as chief operating officer, to recruit upper-level employees; we would reject any such denial on two grounds.

First, corporations have long been able to confer express power to hire on one or more officers. P. Curtis Ko Eune Co. v. Manayunk Yarn Manufacturing Co., 260 Pa. 340, 103 A. 720 (1918); Section 1406, supra. However, independent of any express grant of power, a corporation is bound by its agent's acts, if those acts were performed within the agent's implied or apparent scope of authority, unless the agent acted for his own benefit without the corporation's ratification of his action. Rochez Brothers, Inc. v. Rhoades, 527 F.2d 880 (3d Cir.1975); United States v. Hougland Barge Line, Inc., 387 F.Supp. 1110 (W.D.Pa.1974); Todd v. Skelly, 384 Pa. 423, 428, 120 A.2d 906, 909 (1956); Sayre Land Co. v. Borough of Sayre, 384 Pa. 534, 121 A.2d 579 (1956); Chestnut Street Trust & Savings Fund Co. v. Record Publishing Co., 227 Pa. 235, 75 A. 1067 (1910); Pollock Industries, supra; Mickshaw v. Coca Cola Bottling Co., Inc., of Sharon, Pennsylvania, 166 Pa.Super. 148, 70 A.2d 467 (1950); Hahnemann Hospital v. Golo Slipper Co., 135 Pa.Super. 398, 5 A.2d 605 (1939); Annot., 28 A.L.R.2d 929 (1953). "Apparent authority" arises when a corporation permits its agent to assume a certain power or authority, or represents him as having it. Ervin v. City of Pittsburgh, 339 Pa. 241, 14 A.2d 297 (1940); Wood Co. v. McCutcheon, 136 Pa.Super. 446, 7 A.2d 564 (1939). Here, appellant has neither proven nor even argued that recruiting appellee was outside the express, implied or apparent scope of Allison's authority as chief operating officer, or that, in recruiting appellee, Allison acted for his own benefit without appellant's ratification.

Second, even if a corporation can raise the defense that an officer acted--specifically, contracted--outside the scope of his authority, it is estopped from doing so where it has received and enjoyed the benefits of that act or contract. Emperee v. Meyers, supra; C.L. McClain Fuel Corp., to Use of Wayne Title & Trust Co. v. Lineinger, 341 Pa. 364, 19 A.2d 478 (1941); Blumberg v. Broad Street Trust Co., 329 Pa. 471, 198 A. 27 (1938); Marian v. Peoples-Pittsburgh Trust Co., 149 Pa.Super. 653, 27 A.2d 549 (1942); Osborne v. Victor Dairies, Inc., 138 Pa.Super. 117, 10 A.2d 129 (1940); Wood Co. v. McCutcheon, supra. Appellant...