Sunday, November 24, 2013

Blackburn v. Witter case brief

Blackburn v. Witter case brief summary
19 Cal. Rptr. 842 (1962)

Appellant brokerage companies and their bonding agencies (brokerage companies) challenged the decision of the Superior Court of Stanislaus County (California), which entered judgment for respondent client in her action for fraud after an agent of the brokerage companies misappropriated funds.

The client was the widow of a dairy farmer who did not have business experience. She selected an agent of the brokerage companies to serve as her investment advisor. The agent told the client that the brokerage companies had research divisions that advised when to buy and sell stock. The agent persuaded the client to invest in a nonexistent company. The client filed an action against the brokerage companies for fraud to recover the misappropriated money.

The trial court entered judgment in favor of the client under the theory of ostensible authority. The brokerage companies appealed.


  • The court affirmed, finding that there was substantial evidence to support the trial court's judgment that the client acted with ordinary care. 
  • The court reasoned that the research services that the brokerage companies used to induce the client to rely upon them for advice contributed to the fraud. 
  • The court also found that the brokerage companies failed to inform the client of the limitations to the agent's authority. 
  • The court noted that the brokerage companies could not accept the benefits of the sale of the stock by the agent and also deny liability for the fraudulent misuse of the money.

The court affirmed the trial court's judgment for the client in the client's action against the brokerage companies for fraud.

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