Zimmerman v. Hogg & Allen, Professional Ass'n

• Decision Date: 26 November 1974
• Docket Number: No. 77,77
• Citation: 76 A.L.R.3d 1004,209 S.E.2d 795,286 N.C. 24
• Court: North Carolina Supreme Court
• Parties: , 76 A.L.R.3d 1004 Sam ZIMMERMAN v. HOGG & ALLEN, PROFESSIONAL ASSOCIATION, Successor to Greene, Hogg & Allen, Professional Association, and Glenn L. Greene, Jr.

Page 795

209 S.E.2d 795

286 N.C. 24, 76 A.L.R.3d 1004

Sam ZIMMERMAN v. HOGG & ALLEN, PROFESSIONAL ASSOCIATION, Successor to Greene,

Hogg & Allen, Professional Association, and Glenn

L. Greene, Jr.

No. 77.

Supreme Court of North Carolina.

Nov. 26, 1974.

McElwee, Hall & McElwee, by W. H. McElwee and T. V. Adams, North Wilkesboro, for plaintiff-appellant.

Hudson, Petree, Stockton, Stockton, & Robinson, by Ralph M. Stockton, Jr., and

James H. Kelly, Jr., Winston-Salem, for defendant-appellee, Hogg and Allen, P.A.

BRANCH, Justice.

G.S. § 1A--1, Rule 56(c), in part, provides:

'. . . The (summary) judgment sought shall be rendered forthwith 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 any party is entitled to a judgment as a matter of law . . .'

In instant case the Court considered pleadings, affidavits, and depositions furnished by both parties, and, after determining that there was no genuine issue as to any material fact necessary to determine plaintiff's claim, allowed the motion of defendant Professional Association for summary judgment and dismissed the action as to that defendant.

In ruling on a motion for summary judgment, the Court does not resolve issues of fact but goes beyond the pleadings to determine whether there is a genuine issue of material fact. The moving party has the burden of establishing the absence of any triable issue, and the Court in considering the motion carefully scrutinizes the papers of the moving party and, on the whole, regards those of the opposing party with indulgence. This burden may be carried by movant by proving that an essential element of the opposing party's claim is nonexistent or by showing through discovery that the opposing party cannot produce evidence to support an essential element of his claim. If the moving party meets this burden, the party who opposes the motion for summary judgment must either assume the burden of showing that a genuine issue of material fact for trial does exist or provide an excuse for not so doing. If a genuine issue of material fact does exist, the motion for summary judgment must be denied; the motion may be granted only where there is no such issue and the moving party is entitled to judgment as a matter of law. G.S. § 1A--1, Rule 56(e), Rule 56(f); United States v. Kansas Gas and Electric Co., 287 F.2d 601 (10th Cir.); 6 J. Moore, Moore's Federal Practice § 56.15; See also Gordon, The New Summary Judgment Rule in North Carolina, 5 Wake Forest Intramural Law Review 87, 94; William J. Kelly Co. v. Reconstruction Finance Corp., 172 F.2d 865 (1st Cir.); Singleton v. Stewart, 280 N.C. 460, 186 S.E.2d 400; Kessing v. Mortgage Corporation, 278 N.C. 523, 180 S.E.2d 823.

"The determination of what constitutes a 'genuine issue as to any material fact' is ofter difficult. It has been said that an issue is material if the facts alleged are such as to constitute a legal defense or are of such nature as to affect the result of the action, or if the resolution of the issue is so essential that the party against whom it is resolved may not prevail. . . . It has been said that a genuine issue is one which can be maintained by substantial evidence. . . ." McNair v. Boyette, 282 N.C. 230, 192 S.E.2d 457.

The question of liability of a professional association of attorneys for investment of client's funds by an officer or director of the professional association is one of first impression in this jurisdiction. In fact, we find very little authority even as to a partner's liability in a general partnership engaged in the practice of law. Since plaintiff's claims are based on the premise that defendant Greene was acting as an agent for the professional association at the times complained of, we first look to the general law of agency, particularly the law of apparent authority.

Our analysis of apparent authority of a corporate agent must begin with the recognition that the Power of an agent to bind his corporate principal is not always coterminous with his Authority to bind the principal. Dr. Robert E. Lee, in North Carolina Law of Agency and Partnership § 44 (3rd ed.), states:

'The authority of an agent should be carefully distinguished from the power of an agent. The expressions have been used with great carelessness. An act is within the authority of an agent if the agent is privileged to do that act by the principal; that is, if the agent's doing of the act is not a violation of the agent's duty to his principal. An act is within the power of an agent if the agent has the legal ability to bind the principal to a third person therby, even though the act constitutes a violation of the agent's duty to the principal. The agent always has both a power and an authority, the latter being sometimes identical with, sometimes smaller, but never larger, than the former. . . .

This Court has recognized this important distinction by stating two salient principles which govern the rights of third parties with regard to corporate entities, which of necessity must act through agents, To wit: (1) When a corporate agent acts within the scope of his apparent authority, and the third party has no notice of the limitation on such authority, the corporation will be bound by the acts of the agent, and (2) "(w)here one of two persons must suffer loss by the fraud or misconduct of a third person, he who first reposes the confidence Or by his negligent conduct, made it possible for the loss to occur, must bear the loss." (Emphasis added.) Railroad v. Lassiter and Co., 207 N.C. 408, 177 S.E. 9, quoting Railroad v. Kitchin, 91 N.C. 39.

The rights and liabilities which exist between a principal and a third party dealing with that principal's agent may be governed by the apparent scope of the agent's authority, which is that authority which the principal has held the agent out as possessing or which he has permitted the agent to represent that he possesses; however, the determination of a principal's liability in any particular case must be determined by what authority the third person in the exercise of reasonable care was justified in believing that the principal had, under the circumstances, conferred upon his agent. Warehouse Co. v. Bank, 216 N.C. 246, 4 S.E.2d 863; Railroad v. Smitherman, 178 N.C. 595, 101 S.E. 208.

A distinguished commentator on the law of corporations has stated the rationale behind the doctrine of apparent authority:

'The primary object of a corporation in employing an agent is that he shall be enabled to accomplish the purposes of the agency, and other persons are invited to deal with the agent with that understanding. Whether or not the agent is acting within the apparent scope of his authority must be determined by what the principal has done, not by the unratified acts and declarations of the agent. If the facts and circumstances of the particular case reveal that an ordinarily prudent man would have been put on notice that one with whom he was dealing was not acting within the apparent scope of his authority, the principal is not bound under well-settled principles of agency law. When one deals with a special agent of a corporation, or an agent who has only special authority to act for his principal, it devolves upon the person dealing with such agent to acquaint himself with the extent of the agent's authority. However, it seems that the corporation will be bound, as to third persons, by all acts of its agent which are within the apparent scope of the latter's authority without regard to whether or not the agent is a general or a special one. And persons dealing with a known agent of a corporation have a right to assume, in the absence of information to the contrary, that his agency is general. The name by which a corporate officer is designated is not at all necessarily determinative of his authority.'

2 W. Fletcher, Cyclopedia of the Law of Private Corporations § 434 at 307--308 (Perm. Ed.).

This general rule of law has been applied by this Court in numerous cases. See, e.g., Research Corporation v. Hardware Co., 263 N.C. 718, 140 S.E.2d 416; Moore v. WOOW, Inc., 253 N.C. 1, 116 S.E.2d 186; Sears Roebuck and Co. v. Banking Co., 191 N.C. 500, 132 S.E. 468. The fact situations of these cases, however, provide little guidance in instant case since each case turns largely upon the unique facts presented. In other words, the law of apparent authority is easy to state but difficult to apply.

Where one deals with the president of a corporation, however, the establishment of apparent authority is less difficult. Recently, in Burlington Industries v. Foil, 284 N.C. 740, 202 S.E.2d 591, we summarized and reaffirmed the reach and scope of presidential authority:

'This Court has frequently held that the president of a corporation by the very nature of his position is the head and general agent of the corporation, and accordingly he may act for the corporation in the business in which the corporation is engaged. (Citations omitted.) The authority of the president to act for the corporation is limited to those matters that are incidental to the business in which the corporation is engaged; that is, to matters that are within the corporation's ordinary course of business. (Citations omitted.)

'Generally, when some act is undertaken by the president that relates to material matters that are outside the corporation's ordinary course of business, in the absence of express authorization for such act by the board of directors, the corporation is not bound. (Citations omitted.) As stated in Brinson v. Supply Co., (219 N.C. 498, 14 S.E.2d 505), '(f)or a contract executed by the officer of a corporation to be binding on the corporation it must appear that (1) it was incidental to the business of the corporation; or (2) it was expressly authorized; and (3) it was properly executed.' And in Tuttle v....