Gab Business Services Inc. v. Lindsey & Newsom Claim Services Inc.

GAB BUSINESS SERVICES, INC., Plaintiff and Appellant, v. LINDSEY & NEWSOM CLAIM SERVICES, INC. et al., Defendants and Appellants.
No. G021350 (Super. Ct. No. 669766) California Court of Appeal Fourth Appellate District Division Three Filed September 26, 2000
MODIFICATION OF OPINION AND DENIAL OF PETITION FOR REHEARING; NO CHANGE IN JUDGMENT
        It is hereby ORDERED that the opinion filed on August 29, 2000, be modified as follows:

        1. In the first paragraph on page 121, delete the last two sentences and insert in their place the following new sentences:

Whether a particular officer participates in management is a question of fact. We expect that in most cases this test will be easily met. And, as in all legally recognized fiduciary relationships, once this factual prerequisite is established, the law imposes a fiduciary duty. (See, e.g., Violette v. Shoup (1993) 16 Cal.App.4th 611, 619 [existence of agency relationship is question of fact, agent's fiduciary duty is a matter of law]; Maglica v. Maglica, supra, 66 Cal.App.4th 442, 448 [factual finding of formal marriage is prerequisite to imposition of statutory fiduciary duty between spouses regarding management and control of community assets]; Johnson v Superior Court (1995) 38 Cal.App.4th 463, 477 [finder of fact must resolve conflicting evidence bearing upon question of existence of attorney-client relationship, issue of duty is resolved as a matter of law].)

        2. On page 132, delete the first and final sentences of the first paragraph following the heading "B. Neal Was a Fiduciary of GAB," and insert the following new first sentence:

Turning to the facts of the present case, we find the evidence clearly establishes that Neal participated in management as an officer at GAB.

3. On page 133, delete the second and third paragraphs in the section under the heading "B. Neal Was a Fiduciary of GAB," and insert the following new paragraphs:

        Neal's trial testimony further confirmed his management authority at GAB. Neal testified that as regional vice-president he was "at the top of [the] organizational structure" for the Los Angeles region. Neal explained that he received directives from the national office to achieve certain results within his region, and he had the discretion to determine how to achieve those results. He conceded that as regional vice-president he was "responsible for overall regional planning, sales, quality control, budgeting and performance of the region."

        Defendants' attempts to characterize Neal as a nominal officer with no real authority are unconvincing. Defendants argue that he lacked the authority to take "unilateral" actions in areas such as hiring, firing, or signing documents as an officer. But the test for fiduciary status is not control; it is, instead, merely participation in management. This low threshold is easily met in this case.

        Defendants also contend Neal's authority was "virtually dissolved" after Bergs became president. The contention is irrelevant. As we explained earlier, an officer's fiduciary duty does not dissolve when the officer's power is curtailed.

        Because "the evidence is susceptible of but a single inference[,]" we conclude as a matter of law that Neal was an officer who participated in management of the corporation. (Violette v. Shoup, supra, 16 Cal.App.4th 611, 619.) Thus, he owed a fiduciary duty of loyalty to GAB as a matter of law. The court manifestly erred in failing to instruct the jury accordingly. Making matters worse, the jury, having been handed the question in error, wrongly answered it. We must now decide whether this error requires a reversal of the judgment.

        This modification does not effect a change in the judgment. The petition for rehearing is denied.


We concur:
        CROSBY, J.
        O'LEARY, J.


1        See Daily Appellate Report of August 31, 2000, page 9656, column 1, lines 2-15, fourth full paragraph.

2        See Daily Appellate Report of August 31, 2000, page 9656, column 1, first sentence of the last paragraph and column 2, lines 3-4, from the top.

3        See Daily Appellate Report of August 31, 2000, page 9656, column 2, first and second full paragraph.