From 1983 through 1991, Arthur Sensenig was Grease Monkey’s President, COO (chief operating officer), and Chairman of the Board. During that time, Mr. Sensenig ran Grease Monkey and had authority to raise capital from banks and other lenders. Nick Montoya met Mr. Sensenig in the mid-1960s when Mr. Sensenig was a teller at a bank where Mr. Montoya was a customer. During the 1960s and 1970s, Mr. Sensenig gave Mr. Montoya investment advice.
Mr. Montoya was impressed by Mr. Sensenig, who ultimately became vice president of the bank before leaving. Mr. Montoya also knew Mr. Sensenig through a church connection. From 1983 through 1991, Mr. Sensenig got payments from the Montoyas under the guise that the payments were investments in Grease Monkey. Mr. Sensenig told the Montoyas that because Grease Monkey was a new company, it did not have its own account, and that as President and Chairman of the Board, Mr. Sensenig used his personal account as the corporate account. Mr. Sensenig took Mr. Montoya to the Grease Monkey offices and showed him a promotional slide show presentation used by Grease Monkey to solicit franchise business. However, none of the payments were invested in Grease Monkey, and Grease Monkey did not receive any of the funds. Rather, Mr. Sensenig used the Montoyas’ money for his own personal benefit. The Montoyas filed suit against Grease Monkey, as Mr. Sensenig’s employer, for breach of contract, fraud, misrepresentation, breach of duty of good faith and fair dealing, promissory estoppel, extreme and outrageous conduct, and negligent hiring and supervision. After a trial to the court, the trial court entered judgment against Grease Monkey for the outstanding balance due on the promissory notes. The court of appeals affirmed the trial court judgment. Grease Monkey appealed. What should the court decide and why? [Montoya v. Grease Monkey Holding Corp., 904 P. 2d 468 ( Colo. 1995).]