What is the test to determine whether a corporate officer, director, and stockholder or employee is liable to a third party for breach of section 354 of the California Civil Code of Civil Procedure?

California, United States of America


The following excerpt is from Frances T. v. Village Green Owners Assn., 229 Cal.Rptr. 456, 42 Cal.3d 490, 723 P.2d 573 (Cal. 1986):

Construing section 354, the court in Johnson devised the following test. "[T]he operative factors giving rise to the duty toward a third person in instances of this nature are: (1) the existence of a duty on the part of the [42 Cal.3d 518] principal toward the third party; (2) delegation of that duty to an agent such as a corporate officer, director, stockholder or employee, and (3) acceptance of the delegated duty by the agent and the agent's undertaking the performance thereof as part of the agent's duties to his principal. When these factors co-exist, the agent assumes and incurs an obligation or duty to the third party.[ 5 The breach of the duty thus incurred subjects the agent to liability in tort to the third party thereby injured." (Johnson v. Schneider, supra, 271 So.2d at p. 586.) 6

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