Pasadena Medi-Center Associates v. Superior Court

In Pasadena Medi-Center Associates v. Superior Court (1973) 9 Cal.3d 773, the California Supreme Court held that a plaintiff could validly serve a person listed in corporate documents as an officer, although the document was erroneous and the person served was not in fact an officer. The defendant corporation had not designated an agent for service of process, so counsel for plaintiff examined the Commissioner of Corporations' file on the defendant in an effort to identify the proper person to be served. (Id. at pp. 775-776.) Counsel for plaintiff personally served the person erroneously designated as secretary-treasurer of defendant. When defendants did not respond, their default was taken. The Supreme Court held that defendant corporation had clothed the person served with ostensible authority to accept service of process, service was proper, and there was no valid basis to set aside the default judgment. (Pasadena Medi-Center, supra, 9 Cal.3d at p. 777.) It cited Civil Code section 2317, which provides: "Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess." (Id. at p. 780.) Having concluded that defendant corporation had conferred ostensible authority on the person served by filing an erroneous designation of him as an officer with the Commissioner of Corporations, the court considered whether the plaintiff's reliance on the designation was reasonable. It cited Civil Code section 2334 which states: "A principal is bound by acts of his agent, under a merely ostensible authority, to those persons only who have in good faith, and without want of ordinary care, incurred a liability or parted with value, upon the faith thereof." (Id. at p. 780.) The Supreme Court concluded: "The present record demonstrates without doubt that plaintiff in fact relied upon defendant's representation, that plaintiff so relied in good faith, and that in so relying plaintiff incurred detriment." (Ibid.) The court reasoned: "Plaintiff's counsel could reasonably rely on a list of officers prepared by defendant corporation which bore no indicia of error or mistake. . . . To hold that plaintiff's counsel negligently relied upon the application for the stock permit would be to impose a potentially expensive and actually unfair burden upon litigants against corporate defendants." (Ibid.)