CASE v. McCONNELL FORRESTER (1934)

Plaintiffs recovered judgment for commissions earned by them in sale of certain lots in a real estate subdivision. Appellant bank held the land in trust for the purpose of assisting the parties in carrying out their project. The other four appellants were among the beneficiaries of the trust. The beneficiaries constituted themselves in effect a voluntary, unincorporated association known as “Monte Mar Vista Syndicate,” and under the trust agreement they had possession of the land for the purpose of improvement and sale. By this same agreement they appointed appellant Forrester and defendant McConnell as selling agents and also as an “executive committee,” and granted them an “irrevocable power of attorney to do any and all acts on behalf of the beneficiaries which they themselves could do,” with the sole exception that they could not obligate beneficiaries personally but only as to trust assets. The executive committee in turn employed plaintiffs, Case as advertising manager and Brockett as sales manager, to sell the property.

Appellants contend that the judgment against the four who were beneficiaries should not have been against them personally but should be recoverable only out of trust property, by reason of the provisions in the trust agreement.

The court found that: “Neither of the plaintiffs has ever read said Amended Declaration of Trust of date March 15, 1927 (in which these matters were set out), and neither of plaintiffs, prior to the filing of the answer in this action, knew of any limitation upon the authority of said W. R. McConnell and/or of said Fred W. Forrester, and plaintiffs rendered such services as were rendered by them during their said employment believing that said Fred W. Forrester and W. R. McConnell as such executive committee and exclusive sales agents had full and unlimited authority to employ them respectively as advertising manager and sales manager for said trust and the beneficiaries thereof.” The evidence is sufficient to support this finding.

It was admitted at the trial that “all the beneficiaries knew who the executive committee was,” and that the latter were acting as their agents. It is apparent that it was within the scope of their employment for this executive committee to hire plaintiffs, and the latter knew that the executive committee were agents for the beneficiaries under the trust. Sales were made by plaintiffs, and were accepted by the beneficiaries and the bank. When the sales had been completed but the commissions were not paid, plaintiffs were told about a “pool” that was to be formed by the “syndicate”; i. e., an assessment which was to be levied upon the beneficiaries for the purpose of paying the commissions which had been earned. Having entered into their mutual relationship by virtue of the trust agreement, each beneficiary was liable for debts incurred during the period that he occupied such relationship and which were necessarily contracted for the purpose of carrying out the objects for which such trust was formed, except as to persons who dealt with them on the basis of agreement limiting their liability. Leake v. City of Venice, 50 Cal. App. 462, 195 P. 440.

Plaintiffs having been employed by the executive committee acting as agents of the beneficiaries, appellants are precluded from asserting the undisclosed limitation on their agents' authority in defense of this action. Since their agents had actual authority to employ plaintiffs to sell the land and ostensible authority (Civ. Code, § 2317) to render appellants liable for the commissions they thus earned, appellants cannot accept the benefits of such sales and then seek by virtue of their agreement with the executive committee, which was not disclosed to plaintiffs, to avoid payment of the commissions earned. Fairbanks v. Crump, etc., Co., 108 Cal. App. 197, 291 P. 629, 292 P. 529. “The question of the authority of the agent must depend, so far as it involves the rights of innocent third persons who have relied thereon, upon the character bestowed, and not upon the instructions given. Or in other words, the principal is bound to third persons who have relied thereon in good faith, and in ignorance of any limitations or restrictions, by the apparent authority he has given to the agent, and not by the actual or express authority, where that differs from the apparent, and this, too, whether the agency be a general or a special one.” Whitton v. Sullivan, 96 Cal. 480, 483, 31 P. 1115; Browning v. McNear, 158 Cal. 525, 111 P. 541; Thomas v. Fursman, 39 Cal. App. 278, 178 P. 870.

Judgment against defendant bank was for the commission on sale of one lot. The lot had been sold for cash, and the purchase price was in the hands of the bank when the executive committee ordered it to pay plaintiffs their commissions as fast as the selling prices on said sales were respectively collected. The money was therefore held by the bank, subject to such order of the executive committee, and it was its duty to pay it over to plaintiffs. Upon its failure to do so, the trial court properly held it liable to plaintiffs for that amount.

No question is raised on this appeal as to misjoinder of either parties or causes of action.

Judgment affirmed.

SCOTT, Justice pro tem.

We concur: STEPHENS, P.J.; CRAIL, J.