No. 12860
I N THE SUPREME COURT O THE STATE O MONTANA
F F
1975
BUTLER MANUFACTURING COMPANY,
a corporation,
P l a i n t i f f and Appellant,
J & L IMPLEMENT COMPANY, a PARTNERSHIP,
Defendants and Respondents.
Appeal from: D i s t r i c t Court of t h e F i f t e e n t h J u d i c i a l D i s t r i c t ,
Honorable M. James S o r t e , Judge p r e s i d i n g .
Counsel of Record:
For Appellant :
Loren J. 0 ' ~ o o l eargued, Plentywood, Montana
For Respondents:
Habedank, Cumming & Best, Sidney, Montana
Otto Habedank argued, Sidney, Montana
Submitted: June 12, 1975
Decided : q ~p 5 5975
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Filed:
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J
air
L.
Mr. Chief Justice James T. Harrison delivered the Opinion
of the Court.
This is an appeal by Butler Manufacturing Company, plaintiff,
from a judgment entered following a jury verdict for J & L
Implement Company, defendant, in the district court, Sheridan
County.
The basic issue is whether an agency relationship, actual
or ostensible, existed between Butler Manufacturing Company
(hereinafter called Butler) and Jacobsen Construction Company,
Inc. (hereinafter called Jacobsen) upon which J & L Implement
Company, defendant, (hereinafter called J & L) could rely when
returning unsold steel grain bins to the manufacturer, Butler,
for credit.
J & L is a partnership in Plentywood, Montana, which
sells farm equipment, steel buildings and granaries. Jacobsen
was a distributor of steel buildings and granaries for Butler,
the manufacturer. J & L ordered steel buildings and granaries
through Jacobsen, receiving delivery from Jacobsen with billings
and accountings coming directly from Butler, based on information
supplied by Jacobsen.
Jacobsen had a chronic cash flowproblem which led to its
present insolvent, inactive state. Due to the unstable financial
condition of Jacobsen, Butler's credit manager devised a unique
sales arrangement whereby Butler directly billed Jacobsen's
subdealers rather than selling to Jacobsen which would resell
to the subdealers remitting payment to Butler from Jacobsen's
account.
From 1969 through 1971, J & L sold approximately 45 bins
under this arrangement, at all times dealing directly with
Jacobsen and not Butler, except for billing and accounting pur-
poses. In April 1970, J & L ordered 18 steel grain bins through
Jacobsen, but due to drought conditions and the resulting bad
crops that season, the bins did not sell. In March 1971, Jacobsen
picked up four of these bins pursuant to an understanding be-
tween Jacobsen and its subdealers. This understanding arose
out of a sales meeting called by Jacobsen for all of its sub-
dealers and attended by officers and agents of Butler, at
Jacobsen's invitation. There was no objection to this under-
standing voiced by the officers and agents of Butler attending
that meeting. This understanding had been put into force be-
tween Jacobsen and a subdealer at least one other time in Mon-
tana.
The arrangement for returning the first four bins was
made during a meeting in Plentywood attended by the president
and general manager of Jacobsen and a sales representative of
Butler. Jacobsen issued a check to Butler upon picking up the
four bins, and Butler credited J & L's account reflecting the
cost of the returned bins.
On July 9, 1971, Jacobsen picked up the remaining four-
teen bins, but did not issue a check to Butler reflecting pay-
ment for the bins, as it had done subsequent to the return of
the first four bins. Jacobsen did not issue a check due to an
agreement among Jacobsen, Butler, and Jacobsen's bank whereby,
due to Jacobsen's unstable financial condition, all of Jacobsen's
assets and cash in that bank would be applied to Jacobsen's
account with Butler. J & L's account with Butler was not credited
for the return of these fourteen bins.
On July 13, 1971, D. R. Bain, Butler's credit manager,
called J & L concerning the return of the unsold bins. During
this telephone conversation, Bain stated Butler's position that
J & L was responsible for the payment of the bins, notwithstand-
ing the physical return of the bins to Jacobsen. On July 14,
1971, Bain sent a letter to J & L again stating Butler's position
that J & L was responsible for payment on the bins.
J & L informed Butler it had no obligation to pay for
the bins, because they had been returned to Jacobsen pursuant
to the understanding.
Butler filed this action in the district court seeking
a judgment in the amount of $10,557.42, which was the balance
of J & L'saccount. The jury returned a unanimous verdict in
favor of J & L. Butler appeals from the judgment.
The issues raised in this appeal are:
(1) Was Jacobsen the ostensible agent of Butler with
apparent authority to accept the return of the steel grain bins
and credit the account of J & L for their return?
(2) If Jacobsen was the ostensible agent of Butler, did
Butler disavow the acts of its agent within a reasonable length
of time thereby terminating the apparent authority of the osten-
sible agent?
We find ample evidence on the record to establish the agency.
2A C.J.S. 5 4(a), page 551, defines agency as:
" * * * the fiduciary relation which results from
the manifestation of consent by one person to
another that the other shall act on his behalf and
subject to his control, and consent by the other
SO to act."
Montana's pertinent agency statutes are found in Title
2, Chapter 1, R.C.M. 1947.
Section 2-101, states:
"An agent is one who represents another, called the
principal, in dealings with third persons. * * * "
Section 2-104 provides there are two distinct types of
agency, actual or ostensible.
Section 2-105 provides an agency is actual when:
" * * * the agent is really employed by the principal."
Section 2-106 provides an ostensible agency is present when:
" * * * the principal intentionally, or by want of
ordinary care, causes a third person to believe
another to be his agent who is not really employed
by him."
Section 2-122 states the measure of an agent's author-
ity is:
" * * * such authority as the principal actually
or ostensibly confers upon him."
Section 2-123 provides:
"Actual authority is such as the principal in-
tentionally confers upon the agent, or inten-
tionally, or by want of ordinary care, allows
the agent to believe himself to possess."
Section 2-124, provides:
"Ostensible authority is such as a principal,
intentionally or by want of ordinary care, causes
or allows a third person to believe the agent to
possess. "
This Court stated the rule on agency in Freeman v. Withers,
104 Mont. 166, 172, 65 P.2d 601:
"An agency may be either actual or ostensible. * * *
[section 2-104, R.C.M., 1947.1 It may be created
by a precedent authorization, or a subsequent
ratification. * * * [section 2-114, R.C.M. 1947.1
It may be implied from conduct and from all the
facts and circumstances in the case (2 C.J.S. p.
1043) and may be shown by circumstantial evidence.
(Doney v. Ellison, 103 Mont. 591, 64 P.2d 348.)
Also, ratification may be implied from the acts
and conduct of the alleged principal."
This rule was affirmed in Hamilton v. Lion Head Ski
Lift, Inc., 139 Mont. 335, 340, 363 P.2d 716.
The record indicates from 1969 through 1971 J & L dealt
with Jacobsen as a Butler Agri-Builder. J & L placed orders
for Butler products through Jacobsen and received delivery
from Jacobsen. Butler did bill J & L directly, but gave no
indication that Jacobsen was not acting in an agency capacity.
At the spring sales meeting held by Jacobsen for its subdealers,
officers and agents of Butler were in attendance, including the
president of Butler. When Jacobsen's president and general
manager went to Plentywood on a collection visit, he was accom-
panied by a sales representative of Butler (it was during this
March 1971 meeting that agreement was reached on the return
of the first four bins). All these facts might lead a reasonable
man to believe Jacobsen was an agent of Butler.
Pursuant to the understanding presented by Jacobsen's
president and general manager at the spring sales meeting, at
least two other subdealers of Jacobsen had returned unsold bins
to Jacobsen without an adverse comment from Butler. J & L
returned four bins to Jacobsen in March 1971, and had its account
with Butler credited, again without adverse comment from Butler.
The Supreme Court of Wyoming in Ulen v. Knecttle, 50
Wyo. 94, 103, 58 P.2d 446, 111 A.L.R. 565, quoted in Hamilton,
sets forth the rule of evidence for implied or ostensible auth-
ority:
" * * * Implied authority may, and in fact must,
be shown by the course of dealing of the parties
and other circumstances in the case."
The course of dealing between the subdealers (including
J & L) and Jacobsen, without denial of authority on the part
of Butler prior to July, 1971, presented sufficient evidence
of ostensible agency and authority in Jacobs+en to support the
verdict of the jury.
The Montana statute, section 2-205, R.C.M. 1947,
states :
"A principal is bound by acts of his agent, under
a merely ostensible authority, to those persons
only who have in good faith, and without ordinary
negligence, incurred a liability or parted with
value upon the faith thereof."
The principal may repudiate the actions of his ostensible
agent by prompt notice to the third party who is relying on
the ostensible agency and authority. This Court in McLaren
Gold Mines Co. v. Morton, 124 Mont. 382, 396, 224 P.2d 975,
said :
"It is settled that a principal who neglects
promptly to disavow an act of his agent, by
which the latter has transcended his author-
ity, makes the act his own; he is bound to dis-
avow it the first moment the fact comes to his
knowledge."
In 2A C.J.S. Agency § 89, p. 694, this rule is set out:
"The principal does not ratify an unauthorized
act if he repudiates it with reasonable promptness
after learning the facts * * *".
Here, Butler asserts that it repudiated the ostensible
agency and authority of Jacobsen promptly upon learning the
facts. To support this assertion, Butler refers to the July 13,
1971, telephone call to J & L in which it was stated that J &
L was responsible for payment of the returned bins. This call
was followed by a letter dated July 14, 1971, from Butler's
credit manager to J & L reasserting Butler's position stated
in the telephone call of July 13, 1971.
Sufficient evidence appears in the record to permit the
jury to conclude Butler had knowledge of the bin return under-
standing between Jacobsen and the subdealers and that bins were
actually returned pursuant to the understanding, with the sub-
dealers' accounts with Butler being credited. The record contains
facts which would indicate that Butler had such knowledge as
early as 1970, without repudiation or disavowal on the part of
Butler.
On appeal, Butler objects to the refusal of the district
court to give plaintiff's proposed instructions numbers 12 and
Plaintiff's proposed instruction number 12 reads:
"You are instructed that the agent is not author-
ized from ostensible authority to collect or
receive payment to assume the debt from the third
person to the principal, and such assumption,
unless ratified, does not constitute payment. Thus,
if, instead of paying money, the debtor writes off
a debt due to him from the agent, such a trans-
action is not payment as against the principal,
who is not a party to the agreement, though it may
have been agreed to by the agent."
Butler cites Lindsey v. Keenan, Andrews & Allard,
118 Mont. 312, 317, 165 P.2d 804, (quoting from 2 Arn.Jur. § 165,
p. 133) as the basis for proposed instruction number 12:
"'The general rule is that in the absence of ex-
press authority or custom to the contrary, the power
of an agent authorized to collect or receive payment
is limited to receiving that which the law declares
to be legal tender, or which is by common consent
considered and treated as money, and passes as such
at par. This is in accordance with the general prin-
ciple that authority to receive payment implies only
an authority to receive the thing due to an obligation,
and not an authority to commute for any other thing'".
The general rule for determining the scope and extent of
ostensible authority is set forth in 2A C.J.S. Agency § 159, p.
"The scope of the apparent or ostensible author-
ity of an agent is to be gathered from all the
facts and circumstances surrounding the trans-
action. [Citing Campbell v. Oriental Trading Co.,
58 Mont. 520, 193 P. 1112.1 The considerations
which fix and determine it are the same as those
applicable to the determination of whether an
apparent agency, or agency by estoppel exists
* * *. The authority arises, when it does arise,
from the facts of the particular case. The test
is found in a determination of the exact extent
to which the principal held the agent out or per-
mitted him to hold himself out as authorized,
and what a prudent person, acting in good faith,
under the circumstances would reasonably believe
the authority to be."
The proposed instruction would have led to possible confusion
on the part of the jury.
Plaintiff's proposed instruction number 14 reads:
"If you should find that Jacobsen Construction Co.
was the ostensible agent of the Plaintiff, Butler
Manufacturing Company, and thus authorized to accept
the return of the bins and credit the account of
J & L Impaement Company, you must also examine the
facts and determine if Butler Manufacturing disa-
vowed the act of its agent, Jacobsen Construction
Company, within a reasonable length of time.
"If you determine that Butler Manufacturing Company
notified the defendant, J & L Implement Company,
within a reasonable length of time that they would
not be bound by the acts and representations made
by Jacobsen Construction Company, the act of
Jacobsen Construction Company cannot bind Butler
Manufacturing Company to credit the account of
J & L Implement Company."
Instruction number 12 given by the district court adequately
covered the issue of disavowal by Butler. Instruction number
12 reads:
"It is settled that a principal who neglects promptly
to disavow an act of his agent, by which the latter
has transcended his authority, makes the act his
own; he is bound to disavow it the first moment
the fact comes to his knowledge."
The district court's instruction number 12 is less confusing
to the jury and sets forth the disavowal rule as stated in
McLaren Gold Mines Co.
This Court held in Wollan v. Lord, 142 Mont. 498, 504,
385 P.2d 102, that:
"A trial judge will not be held in error for
refusing to give instructions where the subject
has been adequately covered by other instructions,
Carter v. Miller, 140 Mont. 426, 372 P.2d 421;
Franck v. Hudson, 140 Mont. 480, 373 P.2d 951;
Holland Furnace Co. v. Rounds, 139 Mont. 75,
360 P.2d 412; or where it is not applicable to
the pleadings and the evidence. Malano v. Bressan,
76 Mont. 366, 245 P. 871; Schumacher v. Murray
Hospital, 58 Mont. 447, 193 P. 397; Townsend v.
City of Butte, 41 Mont. 410, 109 P. 969."
Butler asserts the district court was in error in not
granting a directed verdict at the end of the presentation of
evidence. This assertion is based on Butler's contention that
the disavowal of Jacobsen's ostensible agency was within a
reasonable time after gaining knowledge of the facts.
This Court in Mueller v. Svejkovsky, 153 Mont. 416,
420, 458 P.2d 265 held:
"On an appeal from a motion denying a directed
verdict there are three rules which apply.
(1) The evidence introduced by the plaintiff will
be considered in the light most favorable to him.
(2) The conclusion sought to be drawn from the
facts must follow as a matter of law. (3) Only
the evidence of the plaintiff will be considered."
See also: Pickett v. Kyger, 151 Mont. 87, 439 P.2d 57; Pushard
v. J. C. Penney Co., 151 Mont. 82, 438 P.2d 928; Solich v. Hale,
150 Mont. 358, 435 P.2d 883; Gerard v. Sanner, 110 Mont. 71,
103 P.2d 314.
Here, viewing the evidence in the light most favorable
to the plaintiff, the conclusions sought to be drawn from the
facts do not follow as a matter of law. As stated in Freeman
"ratification may be implied from the acts and conduct of the
alleged principal." (104 Mont. 166, 172) The evidence pre-
sented by Butler did not, on its face, repudiate the ostensible
agency and authority as a matter of law; the promptness of the
disavowal remained an open question of fact.
In Estate of Dillenberg, 136 Mont. 542, 545, 349 P.2d
573, this Court held:
" * * * if there be in the record substantial evi-
dence sustaining the finding [of the jury] we must
sustain the court's action in submitting the cause
to the jury and sustain the finding of the jury and
the judgment based thereon."
The motion for a directed verdict was not improperly
denied.
The judgment is affirmed.
...............................
Chief Justice
We concur:
' . Justices
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