APSB BANCORP v. Thornton Grant

— In this appeal, we affirm the judgment of the trial court and hold that appellant is not eligible for indemnification pursuant to Corporations Code section 317, subdivision (d). In so holding, we determine that section 317 allows indemnification for corporate “agents” sued for carrying out activities on behalf of a corporation within the common law meaning of agency, but not where the acts giving rise to the underlying suit arose out of retention of an independent contractor performing business for its own benefit, even though the activities may directly benefit the corporation.

Facts

For the years 1980 to 1983, appellant Alexander Grant and Company (now Thornton Grant), a certified public accounting firm, was retained by respondent, American Pacific State Bank, to carry out independent annual audits for the bank. Pursuant to the engagement letters between the two parties, appellant was to examine the statement of financial condition, statement of earnings, stockholder’s equity and changes in financial status and issue a report for the year so engaged. Appellant performed the day-today aspects of the audits independent from respondent and in accordance with generally…