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Tennant v. Breen5/8/2002
property for the purpose of paying a trust tax obligation. He argued that the court should permit the sale under the conditions outlined in the Rakove stipulation, which Tennant had rejected. Following this discussion, the court issued its order, primarily granting Tennant's request with the added proviso that Ladan Star be permitted to sell the promissory note to pay capital gains taxes. The court ordered Ladan Star to deposit any funds remaining into the law firm's trust account and it ordered Tennant to expunge his lis pendens so she could sell the note. Subsequently, Star breached the court's order.
Tennant obtained an order to show cause re: contempt against Star, the obviously guilty party, but she filed for bankruptcy protection and Tennant has been unable to collect his fees. He then filed suit against Star's attorneys, alleging breach of warranty of authority, somewhat akin to a breach of contract action. However, there is no contract in this case between Tennant and defendants. There is only a court order.
A fundamental element to a cause of action based upon breach of warranty of authority is the existence of a contract or agreement that the agent warranted he had authority to enter into on behalf of the principal. (Yoakum v. Tarver (1967) 256 Cal.App.2d 202, 206-207 [" `The general rule is that, whenever a party assumes to act as agent for another if he has no authority, or if he exceed his authority, he will be held to be personally liable to the party with whom he deals, for the reason that by holding himself out as having authority he misleads the other party into making the agreement. . . .' "], italics added; see also Jeppi v. Brockman Holding Co. (1949) 34 Cal.2d 11, 18-19 ["Although one is not liable personally on a contract executed by him as the officer of a corporation, he may, if he acted without authority, be held to account on a theory of breach of the implied warranty of authority (Civ. Code, § 2342)"], italics added.) It is for this reason that only contract damages are available in an action for breach of the warranty of authority. (See Civ. Code, § 3318 ["The detriment caused by the breach of a warranty of an agent's authority, is deemed to be the amount which could have been recovered and collected from his principal if the warranty had been complied with, and the reasonable expenses of legal proceedings taken, in good faith, to enforce the act of the agent against his principal"].)
Here, there was no contract or agreement that the parties entered into before appearing before Judge Martin. By Tennant's own admission, he turned down Rakove's stipulation and stated he would appear at the time specified to obtain his ex parte order. Breen also appeared at that time and each of the attorneys advocated his position. The court then issued an order, which the parties were required to comply with or they would be subject to liability for contempt. Tennant's damages, as the trial court correctly found when it granted defendants' motion for summary judgment, were proximately caused by Judge Martin's order requiring Tennant to expunge his lis pendens coupled by Ladan Star's failure to comply with that order. Tennant's damages were not proximately caused by Breen's representations at the hearing, which were superseded as a matter of law by the court's order. "It has long been the rule in this state that a pre-existing agreement between the parties is extinguished upon its incorporation into a court order. Once the agreement is merged into the court's order, neither party any longer has a right of action based on the agreement because the obligations imposed are not imposed by the agreement but by the order and are enforceable as such through contempt and other sanctio
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