James C. PARSONS, Plaintiff,
v.
Adrian F. BAILEY et al., Defendants.
No. 7618DC184.
Court of Appeals of North Carolina.
August 18, 1976. Certiorari Denied November 4, 1976.*167 Clark, Tanner, Williams & Sharp, by Eugene S. Tanner, Jr., Greensboro, for plaintiff appellants.
No counsel for defendant appellees, Trade Leasing and Liberty.
No counsel for defendants Bailey and T.F.C.
Certiorari Denied by Supreme Court November 4, 1976.
HEDRICK, Judge.
Plaintiff assigns as error the granting of Trade Leasing's and Liberty's motions for a directed verdict. The pertinent evidence offered at trial by plaintiff is summarized as follows:
Liberty owned 100% of the stock in L.F.C. Realty Corporation. L.F.C. Realty owned 70% of the stock in Trade Leasing and Bailey owned the other 30%. James Johnson, as executive Vice-President of Trade Leasing entered into a contract with Bailey wherein Bailey became President and Sales Manager of Trade Leasing. Johnson was also executive Vice-President of Liberty and President of L.F.C. Realty.
Subsequent to the signing of the contract between Bailey and Trade Leasing, Bailey began marketing a franchise dealership in North Carolina which was purchased by Fred Bunge. In the spring of 1973, at approximately the same time Bailey was negotiating with Bunge, the plaintiff saw an advertisement in the newspaper for an opportunity to enter into a leasing franchise. In response to the ad, he called the defendant Bailey who was staying at a motel in Greensboro. Bailey was on the way out of town, but he agreed to leave a "packet" of information regarding the leasing franchise opportunity at the motel desk, which information the plaintiff picked up. This packet was introduced into evidence. Contained in the packet were financial references for Trade Leasing and Liberty, a sample contract of a franchising agreement with Trade Leasing listing Trade Leasing *168 as a subsidiary of Liberty, a financial statement of Liberty, and other miscellaneous items. Throughout the packet there appears "TLC", "LFC", used in abbreviation of the corporations, and "The Trade Leasing Corporation, hereafter referred to as Trade" appears in the preamble to the sample contract.
Plaintiff contacted Bailey again and Bailey told him he was an agent for Trade Leasing. Bailey flew up from Atlanta and, together, he and plaintiff discussed the leasing franchise. Plaintiff was told the franchise was to secure contracts for Trade Leasing wherein Trade Leasing would lease equipment to the agreeing party. After talking with Bailey, plaintiff checked out the references listed in the "packet" and received a favorable response as to the financial situation of Trade Leasing and Liberty.
Subsequently, plaintiff entered into "a license agreement", the first paragraph of which reads in part:
"Agreement made this 4th day of May, 1973, between TFC Corporation (hereinafter referred to as Trade) . . . ."
The agreement was executed by Bailey. When plaintiff signed the agreement, he gave Bailey a cashier's check made payable to TFC Leasing Corporation. At the time plaintiff entered into the contract, he had read it over carefully including the first paragraph. He saw that it said TFC Corporation. He also directed the bank to draw the check to TFC Leasing Corporation. He "assumed", however that "it was the original name or the true name of the parent company" and that "it was all part of the same organization", since Bailey had represented to plaintiff that he was signing a Trade Leasing contract.
Approximately a month after signing the agreement, he learned that Bunge already had the franchise dealership in North Carolina. Plaintiff called Bailey and was informed that TFC and Trade Leasing were different companies, but that "the backing [was] the same". Plaintiff asked for his money back but was unsuccessful. Eventually he was unable to even contact Bailey.
Sam Johnson testified that acting in his capacity as Executive Vice-President of L.F.C. Realty, he had fired Bailey.
Because plaintiff alleged and now contends that Liberty was the parent company of Trade Leasing and derived its liability from the close relationship of the two corporations and from the active involvement of Liberty in the affairs of Trade Leasing, it is clear that Liberty will be liable only if it is first determined that Trade Leasing is liable. Accordingly, we limit consideration of this assignment of error to the question of whether the trial court erred in granting a directed verdict for Trade Leasing. We hold that it did not.
"The general rule is that a principal is responsible to third parties for injuries resulting from the fraud of his agent committed during the existence of the agency and within the scope of the agent's actual or apparent authority from the principal, even though the principal did not know or authorize the commission of the fraudulent acts (citations omitted)." Norburn v. Mackie, 262 N.C. 16, 23, 136 S.E.2d 279, 284-285 (1964).
Thrower v. Dairy Products, 249 N.C. 109, 105 S.E.2d 428 (1958).
It makes no difference that the agent was acting in his own behalf and not in the interests of the principal when the fraudulent act was perpetrated unless the third parties had notice of that fact. Restatement (Second) of Agency, § 262.
"It would seem to be clear that if the agent is purporting to act as an agent and doing the things which such agents normally do, and the third person has no reason to know that the agent is acting on his own account, the principal should be liable because he has invited third persons to deal with the agent within the limits of what, to such third persons, would seem to be the agent's authority. To go beyond this, however, and to permit the third persons to recover in every case where the agent takes advantage of the standing and position of his principal to perpetrate a fraud would seem to be *169 going too far." Restatement (Second) of Agency § 261, Reporter's Notes.
In the present case, there seems to be sufficient evidence to support a finding that Bailey was an agent of Trade Leasing at the time he was negotiating with plaintiff. Plaintiff's case against Trade Leasing must fail, however, because there is no evidence in this record to support a finding that he was acting within the scope of authority of such agency when he was negotiating with the plaintiff. Indeed, plaintiff's own evidence affirmatively discloses that Bailey was acting in his own behalf, or in behalf of T.F.C., or both, in his negotiations with plaintiff. The very contract signed by plaintiff and Bailey which defrauded plaintiff of his $2,500.00 and the very check given by plaintiff to Bailey made payable to T.F.C. show conclusively, as a matter of law, that plaintiff had notice that Bailey was not acting as the agent for Trade Leasing. The court properly directed a verdict for the defendants, Trade Leasing and Liberty.
In light of our holding in the assignment of error discussed above, it is not necessary that we discuss plaintiff's other assignments of error relating to the exclusion of evidence.
The judgment appealed from is affirmed.
Affirmed.
PARKER and ARNOLD, JJ., concur.