Opinion
December 2, 1965 —
January 4, 1966.
APPEALS from a judgment of the county court of Wood county: FREDERICK A. FINK, Judge. Modified and, as modified, affirmed.
For the appellant there was a brief and oral argument by Rex M. Smith of Antigo.
For the respondent there was a brief by Genrich, Terwilliger, Wakeen, Piehler Conway, attorneys, and Richard J. Weber of counsel, all of Wausau, and oral argument by Mr. Weber.
This is an action on account for purchase price of potato-harvesting supplies and deals with the apparent authority of one Vanderberg to bind the defendant.
The plaintiff, Risdon, Inc., sells bags, twine, wire, and other materials used in connection with the potato business to potato producers, brokers, and farmers. Risdon's principal place of business is Antigo, Wisconsin.
The defendant, Miller Distributing Company, Inc., is primarily a packer of frozen food.
Glenn Risdon is the president and principal officer of Risdon, Inc.; Leo Miller is the president and principal officer of Miller Distributing Company, Inc. They will be referred to as Risdon and Miller respectively.
Miller's principal place of business is Marshfield, Wisconsin. Miller leased land from the Frank Lloyd Wright Foundation near Spring Green, Wisconsin. Miller entered into a contract with Lester Vanderberg of Antigo, Wisconsin, whereby Vanderberg agreed to provide the labor and skill necessary to produce a potato crop in Spring Green, Wisconsin, in return for 50 percent of the net profit. The contract expressly stated that Lester Vanderberg was an independent contractor. The contract also provided: "The owner [defendant Miller] may advance contractor [Vanderberg] monies for expenses incurred for those items under his control (gas, oil, fertilizer, packaging materials) during the crop season, and agrees, at contractor's request, to make distributions' for such advances direct." Miller had a business policy whereby purchases could be made only as authorized by written requisition from him or his company.
Risdon knew and had had prior dealings with Lester Vanderberg as a potato broker and grower. Vanderberg owed Risdon $7,000 to $8,000; this account was delinquent. The potato-growing project in Spring Green received publicity due primarily to the fact that a unique and expensive method of irrigation was being used there. Risdon claimed to have learned of the project, and Miller's financial backing of it, through newspaper accounts, and word of mouth.
There was a meeting on August 17, 1963, between Lester Vanderberg, Glenn Risdon, and Milton Warg, an officer of Risdon. Glenn Risdon and Milton Warg testified that Vanderberg told them of his business deal with Miller; told them that they would need supplies for the operation and would purchase them from Risdon; and acknowledged the fact that he owed Risdon a large sum of money, but said, "You won't have to worry about payment. You bill Miller and he'll send you his check. He is a prompt payer. In fact, he discounts his bills."
A series of transactions followed, the last of which is the object of this action. The undisputed evidence indicates that the transactions were as follows:
The foregoing table indicates a pattern whereby Vanderberg ordered goods, Risdon delivered the goods and billed Miller, and Miller paid for the goods — except for the last transaction. The table also indicates that each successive order was filled before the prior order was paid for, e.g., Risdon supplied goods a second time before the first order was paid for, and so on. When the fourth order for goods totaling $735.42 was filled, only two bills totaling $114.26 had been paid by Miller and the third bill for $172 was still outstanding. Miller testified that he specifically authorized the first three purchases by signed requisitions. He paid for the first three purchases without dispute. Miller did not authorize the fourth transaction, and refused to pay for it.
Upon receipt of the invoice for the fourth order on about September 10th, Miller immediately wrote to Risdon wherein he denied that Vanderberg had authority to place the order and denied liability for Risdon's claim. After receiving Miller's letter Risdon called Miller by telephone. Miller reasserted his denial of liability and advised Risdon to pick up the materials. Risdon told Miller he would contact Vanderberg, which he did. Vanderberg reassured Risdon that the supplies were for Miller and that Miller would pay the bill.
Risdon and Miller had no personal contact prior to the dispute. Risdon made no effort to ascertain the extent of Vanderberg's authority. Miller made no effort to communicate to Risdon limitations on Vanderberg's authority.
Risdon brought suit against Miller to recover $735.42 for the goods delivered on the theory that Vanderberg was Miller's agent, duly authorized to bind Miller in the transaction in question.
The action was tried before the trial court without a jury. In his findings of fact the trial judge (1) reviewed the transactions stating that Vanderberg made the first three purchases "as agent for the defendant," (2) found that Risdon made no effort to ascertain the extent of Vanderberg's authority as an agent; (3) found that Miller "expressly authorized Vanderberg to purchase from the plaintiff, Risdon, Inc., a number of 100-pound burlap bags and supplies necessary to utilize the bags in a packing operation of 100-pound bags of potatoes; " (4) found that Vanderberg's authority was limited to the purchase of 100-pound burlap bags and supplies necessary to pack them; (5) found that orders for 50-pound paper bags and 25-pound paper bags should have put Risdon "on guard that something other than the operation of Miller-Vanderberg, needed the paper bags; " and (6) "that the agent, Vanderberg, had no authority, either actual or apparent, to order or purchase from the plaintiff the 50-pound and 25-pound paper bags."
The trial court made the following conclusions:
"1. That the defendant, Miller Distributing Company, Inc., is estopped from disclaiming the agency of Vanderberg.
"2. That the plaintiff, Risdon, Inc., dealing with a known agent, must act diligently and reasonably in determining the scope of Vanderberg's agency.
"3. That the plaintiff is entitled to recover from the defendant corporation the sum of Two Hundred Eighty-eight and 54/100 Dollars ($288.54) for the purchase of 1,276 100-pound burlap bags and 104-pounds of twine, under invoice number 289, dated September 5, 1963, together with interest and costs.
"4. That the defendant is not indebted to the plaintiff for the 750 50-pound paper bags and the 5,000 25-pound paper bags, under invoice number 289, dated September 5, 1963.
"Let Judgment Be Entered Accordingly."
Both Risdon and Miller appealed from the judgment dated December 11, 1964, and filed December 16, 1964. The notices of appeal were dated June 3, 1965, and June 9, 1965.
The principal issue is, Did Vanderberg have apparent authority to bind Miller for the purchase price of the fourth order?
The trial court found that Vanderberg had express authority to make the first three purchases from Risdon. Miller does not contest this finding, in fact prior to litigation he readily acknowledged liability for these purchases and paid for them in the regular course of business.
The fourth order is in dispute. Risdon claims Vanderberg had apparent authority to act for Miller and that Miller is liable for the entire disputed order. Miller claims that Vanderberg was not an agent and had no authority, express or apparent, to bind Miller to any part of the disputed order.
The trial court held Miller was estopped to deny the agency of Vanderberg and was entitled to recover that portion of the disputed order dealing with 100-pound burlap bags and twine and that Miller was not indebted to Risdon for the 50- and 25-pound paper bags.
The liability of Miller must rest upon the apparent authority of Vanderberg to act for Miller.
The trial court found that the relationship between Miller and Vanderberg was that of an independent contractor by virtue of the written agreement between them and a disclaimer of liability by Miller in the contract. Aside from the fact that the contract specifically allowed Vanderberg to purchase materials and supplies to be paid for by Miller and deducted from Miller's share, Risdon was unaware of the limitations of the contract.
An independent contractor can become an apparent agent, with or without authority, if he reasonably appears to third persons to be authorized to act as an agent of another.
In Hansche v. A. J. Conroy, Inc. (1936), 222 Wis. 553, 559-561, 269 N.W. 309, the court, in considering a like problem, stated:
"Respondent seeks to hold appellant liable on the basis of apparent agency. This brings us to consideration as to what is meant by apparent authority. The rule applicable here is thus stated in 1 Restatement, Agency, p. 25, sec. 8:
"`Apparent authority is the power of an apparent agent to affect the legal relations of an apparent principal with respect to a third person by acts done in accordance with such principal's manifestations of consent to such third person that such agent shall act as his agent.
"`Comment: a. An apparent agent is a person who, whether or not authorized, reasonably appears to third persons, because of the manifestations of another, to be authorized to act as agent for such other. An apparent principal is the person for whom an apparent agent purports to act. The apparent agent may have authority which is coextensive with his apparent authority; he may be authorized to act in other ways but not in the way as to which he has apparent authority; or he may not be authorized to act in any respect for the purported principal. If the authority and the apparent authority are coextensive, the liability of the principal resulting from conduct of the agent may be based upon either authority or apparent authority.
"` b. The manifestation that another is to act as agent may be made to the community in general, by advertisements or otherwise. Apparent authority, however, exists only with respect to a person to whom such a manifestation has been made or to whom knowledge of it comes.'
"Three elements are necessary to establish apparent agency: (1) Acts by the agent or principal justifying belief in the agency. (2) Knowledge thereof by the party sought to be held (in the present case, appellant). (3) Reliance thereon by the plaintiff, consistent with ordinary care and prudence. Domasek v. Kluck, 113 Wis. 336, 339, 89 N.W. 139.
"In Commonwealth Telephone Co. v. Paley, 203 Wis. 447, 233 N.W. 619, the court said:
"`It is the rule that a person dealing with an agent known to be acting for a principal must at his peril ascertain the extent and nature of the agent's authority. . . . Boelter v. Hilton, 194 Wis. 1, 215 N.W. 436; Pluto Powder Co. v. Cuba City State Bank, 153 Wis. 324, 141 N.W. 220. However, this rule is to be read in connection with another rule stated in McDermott v. Jackson, 97 Wis. 64, 72 N.W. 375, quoted approvingly in Voell v. Klein, 184 Wis. 620, 622, 200 N.W. 364, that "If a third person, because of appearances for which the principal was responsible, believes and has reasonable ground to believe that the agent possessed power to act for the principal in the particular transaction, if such third person was, in the exercise of reasonable prudence, justified in believing that the agent possessed the necessary authority, then the principal is responsible to such third person the same as if the agent possessed all the power he assumed to possess."'"
On three separate occasions, prior to the disputed transaction, orders were placed with Risdon in the name of Miller for supplies needed in the Miller-Vanderberg operation. Each of these orders was placed with Miller's express authority. The invoices were sent addressed to Miller. Two of the invoices were paid by Miller promptly and without question or indication as to limitations on Vanderberg's authority. These acts, by or on behalf of Miller, gave the appearance that Vanderberg possessed the authority to make purchases for supplies as claimed by Vanderberg when he talked with Risdon.
Payment by Miller is practically conclusive evidence that Miller knew Vanderberg was purchasing supplies from Risdon.
As to the reasonable reliance of the apparent authority by Risdon, the record reveals that Vanderberg told Risdon that he would be making purchases for Miller in connection with the Spring Green operation and that they would be paid for by Miller. Risdon knew Miller had a good reputation and, by virtue of newspaper articles and common trade talk, believed Miller had a financial interest in the Spring Green operation. The first two orders placed by Vanderberg were promptly paid by Miller. Miller in no way indicated to Risdon any limitation of Vanderberg's authority and Risdon made no specific inquiries of Miller as to the extent of Vanderberg's authority. Based upon this evidence the trial court concluded that Miller was estopped to deny liability for that portion of the disputed fourth order dealing with 100-pound burlap bags and twine. Implicit in estoppel is reasonable reliance. We cannot say this finding is against the great weight and clear preponderance of the evidence.
The trial court found that there was reasonable reliance by Risdon as to the burlap bags and twine but not as to the paper bags.
The disputed transaction was a single order for various items. The only difference between this order and the three preceding orders was that the fourth order called for paper bags in addition to burlap bags' and that the order was substantially larger. There is no evidence that paper bags are associated with a specialty in the potato business or that they are not generally used in potato marketing. It would seem that Risdon exercised the same care or lack of care with respect to each item of the fourth order and that if Vanderberg had apparent authority to order 100-pound burlap bags he had equal authority to order 50- and 25-pound paper bags.
We conclude that the trial court's inconsistent finding and conclusion is based upon an erroneous finding of fact.
The trial judge (without the benefit of a written transcript as we have) in his memorandum opinion, mistakenly found:
". . . The Plaintiff's President had been in the business of supplying various merchandise to potatoe brokers for a number of years and testified that he knew the operation at Spring Green wherein Miller and Vanderberg were concerned was a specialized operation whereby the potatoes would be sold in 100 pound bags to potatoe chip companies."
We have carefully searched the entire transcript of the testimony as it appears in the record and do not find that Risdon testified or that he knew of the specialized operation at Spring Green where the potatoes would be sold only in 100-pound bags. This testimony was given at the trial by Miller in his description of the Spring Green operation. There is no evidence that Risdon knew of this limitation and the finding of fact to that effect must be set aside. Without this finding of fact we find nothing to indicate that Risdon, in the exercise of reasonable care, should have been alerted to an absence of apparent authority as to any of the specific items in the disputed order.
This is one of the hard cases where the law must determine which of two innocent persons must bear the burden of a third person's wrongful act.
It is clear that Mr. Miller tried to limit the authority of Vanderberg and liability for his acts. Miller's insistence on prior written requisitions is unquestionably a good business practice. He could have protected himself by requiring acknowledgment by the seller, Risdon, of these requisitions or by advising Risdon that a written requisition was necessary.
Upon the record before us we conclude that Risdon, because of the appearances for which Miller was responsible, believed and had reasonable ground to believe that Vanderberg possessed authority to act for Miller in the disputed transaction and that Miller is liable to Risdon for the entire purchase price of the fourth order.
Because we hold that Risdon should recover as prayed for in his complaint in the amount of $735.42, together with interest thereon and the costs of the action, we do not discuss his assigned evidentiary errors.
By the Court. — Judgment to be modified consistent with the opinion and, as modified, affirmed. Costs to the appellant.