Corporate Officer Personal Liability on Torts In California

The legal fiction of the corporation as an independent entity was never intended to insulate officers and directors from liability for their own tortious conduct. (Frances T. v. Village Green Owners Assn. (1986), 42 Cal. 3d at pp. 507-508; Michaelis v. Benavides (1998) 61 Cal. App. 4th 681, 688 [71 Cal. Rptr. 2d 776].) the Supreme Court has held: "The legal fiction of the corporation as an independent entity--and the special benefit of limited liability permitted thereby --is intended to insulate stockholders from personal liability for corporate acts and to insulate officers from liability for corporate contracts; ..." (Frances T., supra, 42 Cal. 3d at pp. 507-508.) A corporate officer or director, like any other person, owes a duty to refrain from injuring others. In the context of a negligence claim, the Supreme Court has held that, like any other person, "directors individually owe a duty of care, independent of the corporate entity's own duty, to refrain from acting in a manner that creates an unreasonable risk of personal injury to third parties. " (Frances T., supra, 42 Cal. 3d at p. 505.) Stated differently, the Supreme Court held: "Like any other citizen, corporate officers have a societal duty to refrain from acts that are unreasonably risky to third persons even when their shareholders or creditors would agree that such conduct serves the institution's best interests. ... 'The only duty which an executive officer of a corporation owes to a third person, whether he be an employee of the corporation or a complete stranger, is the same duty to exercise due care not to injure him which any person owes to another. If an injury is sustained by a third party as the result of the independent negligence of the corporate officer, or as the result of a breach of the duty which that officer, as an individual, owes to the third party, then the injured third party may have a cause of action for damages against the officer personally." ( Frances T., supra, 42 Cal. 3d at p. 506, fn. 12.) If a corporate officer or director were not liable for his or her own tortious conduct, he or she "could inflict injuries upon others and then escape liability behind the shield of his or her representative character, even though the corporation might be insolvent or irresponsible." (Frances T., supra, 42 Cal. 3d at p. 505.) The California Supreme Court has held that the rule imposing liability on an officer or director for participation in or authorization of tortious conduct has its roots in agency law. ( Frances T., supra, 42 Cal. 3d at pp. 504-505; Seagate Technology v. A.J. Kogyo Co. (1990) 219 Cal. App. 3d 696, 702 [268 Cal. Rptr. 586].) Directors and officers are agents of the corporate principal. ( Frances T., supra, at p. 505; see APSB Bancorp. v. Thornton Grant (1994) 26 Cal. App. 4th 926, 931 [31 Cal. Rptr. 2d 736].) And an agent is liable for her or his own acts, regardless whether the principal is also liable. ( Frances T., supra, at p. 505; Civ. Code, 2343.) Civil Code section 2343 provides: "One who assumes to act as an agent is responsible to third persons as a principal for his acts in the course of his agency, in any of the following cases, and in no others:... 3. When his acts are wrongful in their nature." This rule applies to officers and directors. (Frances T., supra, 42 Cal. 3d at p. 505; Mears v. Crocker First Nat. Bank (1948) 84 Cal. App. 2d 637, 642 [191 P.2d 501].)