Monteleone v. Southern California Vending Corp.

• Decision Date: 08 August 1968
• Citation: 264 Cal.App.2d 798,70 Cal.Rptr. 703
• Court: California Court of Appeals Court of Appeals
• Parties: Marie Theresa MONTELEONE, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA VENDING CORPORATION, Defendant and Appellant. Civ. 32169.

Page 703

70 Cal.Rptr. 703

264 Cal.App.2d 798

Marie Theresa MONTELEONE, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA VENDING CORPORATION, Defendant and Appellant.

Civ. 32169.

Court of Appeal, Second District, Division 1, California.

Aug. 8, 1968.

Loeb & Loeb, and Robert A. Holtzman, Los Angeles, for defendant and appellant.

Ross & Saunders, Los Angeles, for plaintiff and respondent.

FOURT, Associate Justice.

Southern California Vending Corporation hereinafter sometimes referred to as Southern California Vending) appeals from a judgment determining that the corporation is bound as lessee under a ten-year lease for building premises owned by Mrs. Marie Theresa Monteleone.

Mrs. Monteleone as owner of property at 2201 North Figueroa Street in Los Angeles instituted the subject action for 'Declaratory Relief and Breach of Contract' to obtain an adjudication that Southern California Vending occupied the premises subject to the terms of a valid lease and a judgment in damages for breach thereof. The trial court found that although Willard R. Ausmus, who purportedly executed the lease on behalf of the corporation, was at the time neither agent nor employee of Southern California Vending, he subsequently became general manager and vice president of that corporation, with authority to bind the company which thereafter confirmed the ten-year lease obligation.

Appellant contends that Southern California Vending did not ratify the lease because (a) there was no written ratification (Civ.Code, § 2310), and (b) the acts relied upon as evidence of corporate ratification were performed while the corporation had no knowledge of the existence of the lease or its terms and conditions. Appellant further contends that, in any event, any prior ratification of the lease had been rescinded (Civil Code, § 2314) and that the lessor may not rely upon her own negligent failure to ascertain the existence and scope of Ausmus' authority in order to establish the validity of the lease. These contentions are without merit.

It was disclosed at the trial that on or about May 11, 1965, Willard R. Ausmus visited the then vacant premises at 2201 N. Figueroa for which Mrs. Monteleone desired to obtain a tenant. Ausmus was accompanied by his secretary, Mrs. Perea, and her husband, a carpenter. Mrs. Monteleone showed them the building and they carefully examined the interior and exterior to determine what changes might be required to render the space suitable for their intended business purposes. Ausmus inquired whether Mrs. Monteleone would object if they should tear down partitions, build upstairs rooms, and construct a door in the side of the building. He also inquired whether she would be willing to demolish the house on the adjacent lot, which she also owned, and to prepare a macadam parking lot there for the use of the proposed new tenants. Mrs. Monteleone agreed to the remodeling and thereafter reluctantly consented to evict the tenant from the adjacent house and demolish the building to create a parking lot on the property, in return for a ten-year lease agreement with the new tenants.

According to the understanding then reached, a written form lease for a ten-year term was prepared and executed by 'W. R. Ausmus--Pres.' purportedly acting on behalf of 'Southern California Vending Inc.' In fact, at the time Ausmus executed the lease, he was not the agent of Southern California Vending; he did not have actual, apparent or ostensible authority to execute a lease for the corporation, and he was neither an officer nor an employee of the corporation, the proper name of which was 'Southern California Vending Corporation.' However, Ausmus testified that he and one or more proposed business partners had entered negotiations to purchase from the parent company, Seeburg Corporation, the vending business of Southern California Vending. The transaction was still pending and therefore, although Ausmus on May 11, 1965, or shortly thereafter, signed the lease in the manner indicated above, he left no executed copies with Mrs. Monteleone. Instead, Ausmus told her that he wanted to take the lease with him when he would visit Jack Gordon, president of Seeburg Corporation, in Chicago the end of May, and he would mail her a copy of the lease thereafter.

The original purchase negotiations terminated unsuccessfully, but Ausmus testified that while he was in Chicago he was hired by Jack Gordon as vice- president of Southern California Vending and general manager of its local vending route operations with authority to commence his new responsibilities on June 1, 1965. Gordon gave Ausmus complete control with directions to clean house and run the corporation like a vending company. In order to assure that there would be no misunderstanding with local personnel, Gordon signed and delivered to Ausmus a letter dated May 28, 1965, which stated: 'To whom it may concern: This is to advise that effective June 1, 1965, Willard Ausmus is appointed vice-president and general manager of the Southern California Vending Corporation.' When Ausmus advised Gordon that he was going to rent other premises for the company, Gordon gave him authority to use his own judgment. Ausmus' appointment as vice president was officially confirmed by the board of directors on June 15, 1965.

Meanwhile, on or about June 1, 1965, Ausmus returned to Los Angeles where he proceeded as general manager of Southern California Vending to purchase trucks and equipment, hire and fire employees who worked for and were paid by the company, and Southern California Vending started extensive remodeling of the leased premises which included tearing down walls, putting up new partitions, and constructing a loading dock. Mrs. Monteleone on her part paid $85.99 for plumbing work required by the company, evicted the tenant from the house on the adjacent lot, paid that tenant's final utility bills, and paid $500 to have the house demolished (thereby losing $110 per month rental income) and $970 to have the lot paved. On June 17 Ausmus sent a company truck to help move the evicted next-door tenant to make way for construction of the parking lot. The second week in June, Southern California Vending moved into their new offices and Mrs. Monteleone obtained from Ausmus an executed copy of the written lease which had never been mailed to her.

The corporate officers in Chicago were notified in early June 1965 that the company had moved into its newly remodeled headquarters on North Figueroa Street and thereafter mail from the home office was sent to that address. Tney were further advised that extensive alterations of the building were under way and the ultimate cost of this remodeling was approximately $5000. In early June, also, Mr. Bright, the controller of Southern California Vending, at Ausmus' direction wrote and signed a check intended to represent the deposit called for in the lease, which was the sum of one month's current rental ($600 per month) and the rent for the last two months of the lease (at $800 per month). Because the check was written for $2400 instead of the correct amount of $2200, Bright shortly thereafter was notified by Mr. Peake, Mrs. Monteleone's accountant, that the amount of the deposit was incorrectly computed pursuant to the terms of the lease. Bright thereafter, according to agreement, recouped the difference by paying only $400 for the July rental instead of the $600 called for by the lease. The officers of the company later testified that Ausmus was in reality made general manager and vice president pending the anticipated purchase of the company by another group, which also included Ausmus, and that his authority was expressly limited to the rental of new premises on a month-to-month tenancy. However, when questions arose about the arrangements for occupancy of the Monteleone property, Ausmus explained to the other corporate officers that he had secured a month-to-month tenancy with a two-month guaranteed rental pending the time he and his associates should complete the purchase and enter a long term lease with the owner.

When the second series of purchase negotiations terminated unsuccessfully, and it became apparent to the corporate officers in Chicago that Southern California Vending, which had been operating for sometime at a deficit, would continue to lose money, Ausmus was discharged. On July 23, 1965, the company terminated his engagement as vice president and general manager, and placed Terry Morrissey in charge of vending route operations. The corporation did not have actual knowledge of the existence of the lease or of its terms until Bright was once again contacted by Peake in early August to tell him that the August rent had not been received. Bright responded that although the check was prepared, it had not been sent because Ausmus had left the company and no one else knew Mrs. Monteleone's address. In the course of their...