Unpublished Disposition, 844 F.2d 792 (9th Cir. 1983)Annotate this Case
SPRINT INVESTMENTS S.A., Plaintiff-Appellant,v.SECURITY PACIFIC NATIONAL BANK; Pillsbury, Madison & Sutro,a partnership; Jay L. Margulies, Defendants-Appellees.
Nos. 87-2158, 87-2254.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Feb. 12, 1988.Decided April 7, 1988.
Before SCHROEDER, REINHARDT and LEAVY, Circuit Judges.
Appellant, Sprint Investments S.A., (Sprint), brought this diversity action against Pillsbury, Madison & Sutro (Pillsbury), a law firm; one of Pillsbury's partners, Jay Margulies; and Security Pacific National Bank (Bank). Sprint alleged that defendants failed to deliver a stock certificate on a required date, that the price of the stock declined between that date and the date of actual delivery, and that Sprint suffered a loss measured by the price difference when it later sold the stock. The district court granted defendants' motions for summary judgment against Sprint's claims. Sprint timely appealed. The appeal of the action against Pillsbury, Madison & Sutro and Jay Margulies became moot, by reason of settlement. We affirm the grant of the defendant Bank's motion for summary judgment against Sprint's claims.
FACTS AND PROCEEDINGS BELOW
Sprint was established in 1981 by Christopher Fish. Fish and two other individuals had earlier formed Sirius Systems Technology, Ltd. On April 6, 1982, Sprint purchased 876,000 shares of Sirius stock from Fish. Sirius later changed its name to Victor Technologies, Inc. (Victor). It is a Victor stock certificate at issue here.
In March 1983 Victor made an initial public offering of stock. Pillsbury prepared the registration statement and prospectus for the offering. Margulies was the partner at Pillsbury responsible for the Victor account. The defendant Bank acted as the stock registrar and transfer agent in the offering. As part of the public offering, existing Victor shareholders, including Sprint, could sell a portion of their shares. The selling shareholders were required to turn in all of their stock certificates to the Bank. After the sales period, the Bank was to send the selling stockholders the proceeds of the shares sold and their remaining shares. The selling shareholders also signed lock-up letters providing that they would not sell any of their remaining shares within ninety days after the offering commenced.
Pillsbury sent to each selling shareholder a Custody Agreement and a Power of Attorney. Both documents were executed by Sprint. The Custody Agreement incorporated the Power of Attorney by reference and allowed the Bank to rely on behalf of Sprint on instructions given by any one of the attorneys-in-fact:
You shall be entitled to act and rely upon any statement, request, notice or instructions respecting this Custody Agreement given to you on behalf of [Sprint], if the same shall have been made or given to you by [Sprint] or by the Attorneys, or any one of them.
The Power of Attorney appointed Margulies an attorney-in-fact and gave him full power to act on behalf of Sprint with respect to all matters arising in connection with the stock sale. This irrevocable power included the authority to amend the Custody Agreement and to instruct Security Pacific with respect to the return to Sprint of the new certificate representing any excess unsold shares. The Bank received copies of the Custody Agreement and Power of Attorney.
Because the Victor offering commenced on March 23, 1983, the lock-up period expired on June 21. Sprint received in a timely fashion the proceeds from its Victor shares that had been sold.
On or before March 30, 1983, Margulies directed an associate and a paralegal at Pillsbury to tell the Bank to return the unsold shares to Pillsbury. The Bank was so directed and returned the shares to Pillsbury on May 6, 1983. Pillsbury delivered the certificate to Sprint on August 23. The day the lock-up period expired Victor stock was selling at $19.50 per share. Its per share price on August 23 was $7.50. Sprint later sold all its Victor stock.
Sprint brought this diversity action against Security Pacific, Pillsbury, and Margulies, asserting claims for conversion, breach of bailment agreement, breach of fiduciary duty, breach of contract, and negligence. Pillsbury moved for summary judgment. The Bank joined in Pillsbury's motion. The district court granted the motions for summary judgment on the ground that Sprint's sale of the stock at the end of the lock-up period would have been unlawful under section 5 of the 1933 Securities Act. See 15 U.S.C. § 77e.
STANDARD OF REVIEW
A grant of summary judgment is reviewed de novo. Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir. 1986) (citing Lojek v. Thomas, 716 F.2d 675, 677 (9th Cir. 1983)). The appellant court's review is governed by the same standard used by the trial court under Federal Rule of Civil Procedure 56(c). Id. The appellate court must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir. 1986). We may affirm a grant of summary judgment on any ground supported by the record. Fristoe v. Reynolds Metal Co., 615 F.2d 1209, 1213 (9th Cir. 1980) (citations omitted).
The Bank asserts that it is entitled to summary judgment because it reasonably relied upon the actual authority Sprint vested in Margulies when it delivered, at Margulies' direction, the stock certificate to Pillsbury instead of Sprint. California Civ.Code Sec. 2316 (West 1985) defines actual authority as "such as a principal intentionally confers upon the agent, or intentionally, or by want of ordinary care, allows the agent to believe himself to possess." See Ripani v. Liberty Loan Corp., 95 Cal. App. 3d 603, 611, 157 Cal. Rptr. 272, 277 (1979). "Where the agent acts within the scope of his actual authority, it is immaterial whether or not an inquiry into the extent of the authority has been made by the person dealing with the agent." Myers v. Stephens, 233 Cal. App. 2d 104, 115, 43 Cal. Rptr. 420, 429 (1965). Under California law an agent can delegate "purely mechanical" acts within his powers to another person. Cal.Civ.Code Sec. 2349 (West 1985).
Through the Custody Agreement and Power of Attorney, Sprint gave Margulies the authority to instruct the Bank regarding return of Sprint's unsold shares. Margulies told a paralegal and an associate to instruct the Bank to return the shares to Pillsbury. This was a purely mechanical act within Margulies' authority and properly delegable. Sprint does not dispute that Margulies, as attorney-in-fact, had authority to direct delivery of the certificate or to delegate mechanical acts to others. Sprint argues there is a material issue of fact whether Margulies was acting as attorney-in-fact when he directed the shares returned to Pillsbury. Sprint cites deposition testimony by Margulies that his only act as attorney-in-fact was signing documents at the closing.
Because Margulies was acting within the scope of his actual authority, it was reasonable for the Bank to deliver the certificate according to his directions. Because actual authority is created by acts of the principal, Margulies' testimony does not undermine our legal conclusion regarding the scope of the authority he exercised. See House v. California, 119 Cal. App. 3d 861, 875, 174 Cal. Rptr. 279, 287 (1981). Nor does his testimony create a material issue of fact.
The district court's grant of summary judgment for the Bank and against Sprint is affirmed.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3