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Gumpert v. Bon Ami Co.

decided: January 17, 1958.

LOUIS J. GUMPERT, PLAINTIFF-APPELLANT,
v.
THE BON AMI COMPANY, DEFENDANT-APPELLEE.



Author: Clark

Before CLARK, Chief Judge, MOORE, Circuit Judge, and LEIBELL, District Judge.

CLARK, Chief Judge.

In this action for unpaid salary, plaintiff, Gumpert, alleged and testified that on June 1, 1955, Arthur Rosenberg, a director and member of the executive committee of defendant's board of directors, orally hired him as vice president in charge of sales and advertising of defendant for one year at a salary of $25,000 cash and $25,000 in defendant's stock, and that before the end of the year he was wrongfully discharged. After the jury brought in a verdict of $10,416.65 in favor of Gumpert, the court gave defendant judgment, notwithstanding the verdict, on the ground that Gumpert had failed to prove Rosenberg's authority to hire him. Gumpert appeals.

As plaintiff testified, he was a retired executive previously employed in the cleanser field. Through the offices of a mutual friend he was put in contact with Arthur Rosenberg, who was interested in obtaining for defendant a new executive to increase sales of defendant's cleaning products. Gumpert and Rosenberg met for the first time on June 1, 1955, in Rosenberg's hotel room to discuss employment of Gumpert by defendant. Rosenberg represented that he was executive vice president of defendant and that the defendant was owned and controlled by Rosenberg and two others. After some discussion of terms of employment, Rosenberg orally hired Gumpert for one year at a salary of $25,000 in cash and $25,000 in common stock of defendant - the latter to be delivered before or at the end of the contract term. Plaintiff further testified that Rosenberg asked him to keep quiet about the stock to allay jealousies among other executives and told him to commence work on June 6, 1955. Plaintiff assumed the duties of vice president on that day and was paid every two weeks at the rate of $25,000 a year. He was discharged the following December, having already received $14,583.30.

Defendant vigorously denied that Rosenberg hired plaintiff on June 1, 1955. It maintained that Rosenberg and Gumpert discussed employment on that day, but that Gumpert was hired on June 2, 1955, for an indeterminate period at a salary payable on the basis of $25,000 a year. Rosenberg testified that this took place at an executive committee meeting which Gumpert attended. The minutes of that meeting record that Gumpert was present and further state: "The Committee acted upon the following matters: 1. Authorized the employment of Louis J. Gumpert as Vice President in charge of Sales and Advertising at a salary of $25,000. per annum." Gumpert denied having been present at the June 2 meeting or having communicated with any officer or director of defendant between June 1 and June 6 - the day he commenced working for defendant.

Defendant also denied that Rosenberg had authority to hire Gumpert and pointed to its bylaws which invest such authority in the board of directors or executive committee. Gumpert argued that the executive committee's resolution of June 2 proved that Rosenberg must have had authority to hire him because it was passed without the Committee's hearing anything from him. Defendant maintained that the authorization was a reflection of what had occurred on June 2, the day it claimed Gumpert was hired. Gumpert also pointed to the testimony of Clark, secretary and treasurer and later general manager, president, and treasurer of defendant, to prove that Rosenberg must have had authority to hire plaintiff. Clark testified that Gumpert was considered officially hired on June 1, 1955. He was uncertain of the date of the executive committee meeting and whether Gumpert was considered officially hired before or after that meeting.

The jury's verdict of $10,416.65, which is the difference between what Gumpert had received and $25,000, was inconsistent with the proof of either party. The jury must have found either that a one-year contract was entered into on June 2 or that Rosenberg had the authority and hired Gumpert on June 1 for one year at $25,000. Neither side argued for this result: Gumpert claimed a $50,000 contract on June 1, which defendant denied, while defendant claimed a contract at will on June 2, which Gumpert denied.

On this appeal we must resolve all conflicts in evidence in favor of plaintiff and view the evidence in a light most favorable to him. Dailey v. Palmer, 2 Cir., 161 F.2d 960; Caten v. Salt City Movers & Storage Co., 2 Cir., 149 F.2d 428; Nattens v. Grolier Soc., Inc., 7 Cir., 195 F.2d 449. Granting both these presumptions, there was only a glimmer of evidence from which to infer authority and a complete failure of proof of the contract upon which the verdict must have been based.

Gumpert first contends that Rosenberg was actually authorized to hire him on the alleged terms. The defendant's bylaws clearly invest such authority only in the board of directors or the executive committee. To sustain this contention, therefore, Gumpert must show that the executive committee delegated this authority to Rosenberg. See Ford v. Magee, 2 Cir., 160 F.2d 457, certiorari denied 332 U.S. 759, 68 S. Ct. 58, 92 L. Ed. 345. There is no direct evidence of an express delegation. At best there are only three items of circumstantial evidence to support Gumpert's claim that such delegation must have been made.This evidence consists of the executive committee's resolution of June 2, Clark's testimony that Gumpert was considered officially hired on June 1, and the fact that just prior to June 1 Rosenberg informed two of the other four members of the executive committee that he was going to interview Gumpert. But we agree with Judge Dimock that in the context of all the evidence presented this was scanty proof to support a finding of actual authority. First, the resolution on its face appears to authorize the hiring of Gumpert in the future. Retrospectively applied, it appears at most to be a ratification of an unauthorized hiring on the terms prescribed in its text. It is hardly a recognition that Rosenberg previously had been delegated the authority to hire Gumpert on terms unmentioned in the resolution itself - the very proof proffered of the "authorization." Second, Clark's testimony is particularly meaningless because, as he admitted, he was unsure of the dates important to the controversy and could not remember whether Gumpert was considered officially hired before or after the executive committee meeting. The juxtaposition of these two dates is crucial to the circumstantial value of this testimony as to when defendant officially considered Gumpert hired. Third, Rosenberg's telephone conversations with two of the five members of the executive committee mean little unless it can be shown that these members knew that Rosenberg was negotiating with Gumpert and assented to the hiring of Gumpert at Rosenberg's discretion. This was not shown by Gumpert; Rosenberg himself testified that in these conversations he merely informed the two members that he was going to talk to Gumpert.

Gumpert also asserts that Rosenberg's position with defendant carried with it the authority to hire him. He means either that Rosenberg's position as director and executive committee member invested him with the inherent or incidental authority to hire vice presidents or that defendant clothed Rosenberg with apparent authority to undertake such action. Inherent or incidental authority is a species of actual authority and means that the position or status of a particular agent normally carries with it certain powers to bind the principal. See Mechem, Outlines of Agency ยง 43 (4th Ed. 1952). Rosenberg, at the time, was a director and member of the executive committee of defendant's board of directors. Neither of these positions normally carries with it the inherent power to hire corporate officers, for that authority is normally invested in the board or committee as a body. Gerard v. Empire Square Realty Co., 195 App.Div. 244, 187 N.Y.S. 306; Knapp v. Rochester Dog Protective Ass'n, 235 App.Div. 436, 257 N.Y.S. 356; Bayer v. Beran, Sup., 49 N.Y.S.2d 2, 11.*fn1 The lack of such inherent power is emphasized in this case where Rosenberg is alleged to have offered Gumpert a most unusual employment contract whereby Gumpert was to receive stock of defendant as part of his compensation. Even if Rosenberg was chief executive officer of defendant, it is doubtful that he would possess power to make such an arrangement as a normal incident of his position. Cf. Noyes v. Irving Trust Co., 250 App.Div. 274, 294 N.Y.S. 2, affirmed 275 N.Y. 520, 11 N.E.2d 323.

Likewise Gumpert failed to show that Rosenberg was held out by defendant to possess the alleged authority. Gumpert had never met Rosenberg prior to June 1 and knew from no source other than Rosenberg of Rosenberg's supposed status in defendant's corporate setup. Practically all of Gumpert's testimony concerning Rosenberg's importance to defendant's operations is based on incidents and observations occurring after Gumpert commenced working for defendant.*fn2 These incidents are irrelevant in considering Rosenberg's apparent authority on June 1 and could not have misled Gumpert at that time. Jacobus v. Jamestown Mantel Co., 211 N.Y. 154, 105 N.E. 210; Bussing v. Lowell Film Productions, Inc., 233 App.Div. 493, 253 N.Y.S. 719, affirmed 259 N.Y. 593, 182 N.E. 194. Other than these, Rosenberg's alleged misrepresentations provide the sole basis for Gumpert's misplaced reliance on his apparent authority. It is axiomatic that such unauthorized representations of the agent are not a holding out by the principal and cannot be a basis for apparent authority. Brownell v. Tide Water Associated Oil Co., 1 Cir., 121 F.2d 239; O. A. Skutt, Inc. v. J. & H. Goodwin, Ltd., 251 App.Div. 84, 295 N.Y.S. 772; Bussing v. Lowell Film Productions, Inc., supra.

Even had Gumpert succeeded in introducing sufficient circumstantial evidence to warrant a finding that Rosenberg had actual authority to hire him, he must lose, since he failed to prove the contract on which the verdict must have been based. Either Gumpert was hired on June 1 for one year at $50,000 as he "proved" or he was hired on June 2 for an indeterminate period at a salary of $25,000 a year as defendant "proved." There was no evidence that he was hired on June 1 for one year at $25,000 or on June 2 for a one-year term at that salary.Plaintiff gambled for a big recovery and in so doing failed to provide a basis in the evidence for the more modest verdict he would now accept. Thus, even if the trial court was in error in basing its judgment solely on the point of authority, the judgment must be affirmed.

Judgment affirmed.

LEIBELL, District Judge (dissenting).

The majority opinion states that the "jury's verdict of $10,416.65, which is the difference between what Gumpert had received and $25,000, was inconsistent with the proof of either party." Although the jury's verdict was inconsistent with the full contention of each party, considered separately, it is not without substantial support when the evidence of both sides is considered as a whole.*fn1

The majority opinion also states that in view of the jury's verdict, the indication is that the "jury must have found either that a one-year contract was entered into on June 2 or that Rosenberg had the authority and hired Gumpert on June 1 for one year at $25,000." I believe the trial record, including the charge of the court to the jury, indicates that the jury must have found that Gumpert was hired by Rosenberg on June 1, 1955, for a term of one year at the rate of $25,000 a year;*fn2 and that Rosenberg either had actual authority to make such a contract on behalf of defendant corporation; or if Rosenberg lacked the necessary authority to so bind the defendant corporation ...


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