Full question:
We have a business/family issue. This business was setup as an LLC. The owners of the business are Mother, Father (deceased 2006), oldest son, and youngest son. The middle son is a employee charged with locating business, purchasing materials, and providing service but is not a partner (member) in the business. The Mother tried to keep the business going until approximately November of 2006 when the decision to terminate the business was made. At that point no further jobs from new customers or existing ones were taken and no further purchases from the suppliers were authorized. At that time, the middle son was fired for theft of business property. On Tuesday May 1, 2007, the property owner where the business resided contacted the Mother to inform her that there was a lot of mail he was holding. When the mail was received, we found that the middle son had been purchasing materials from some suppliers against the accounts the business had set up for him. We went to the local police department and they told us there was no case because the companies he made the purchases through were in a different city and we needed to contact that city. I called and spoke with a detective in the fraud department where I was informed that we could not file a complaint against him because he did not steal anything from us. The companies from whom he made the purchases would have to be the ones to file a complaint. Is this correct? Won’t the companies feel that our business is the liable party even though we have closed the business and it has no money. Are we liable? Can we press charges against the son and what type of charges would they be?
- Category: Civil Actions
- Subcategory: Conversion
- Date:
- State: Texas
Answer:
Agency is a relationship where one person, the agent, acts on behalf of another, the principal. An agent can negotiate and make contracts for the principal, and their actions can obligate the principal to third parties. An ordinary employee is not an agent unless authorized to represent the employer in dealings with others. The middle son was likely acting as a purchasing agent for the LLC at one time.
A person has apparent authority as an agent when the principal's actions lead a third party to believe the agent has the authority they appear to have. This area of agency law is often litigated. Third parties must verify the extent of an agent's authority. If an agent's authority is revoked, they can still bind the principal until the third parties are notified. Without notice, the agent may retain apparent authority, leading to potential liability for the principal.
If the middle son made unauthorized purchases, the companies he bought from would need to file a complaint against him, not you. If they successfully sued the LLC based on apparent agency, the LLC could then pursue a civil claim against the middle son for damages. Embezzlement involves taking property entrusted to someone without permission, but since no tangible property was entrusted to the middle son, embezzlement charges may not apply.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.