Beasley v. Kerr-McGee Chemical Corp., Inc., KERR-M

• Decision Date: 15 August 1979
• Docket Number: KERR-M,No. 21030,21030
• Court: South Carolina Supreme Court
• Parties: , 27 UCC Rep.Serv. 72 Charles Arthur BEASLEY, Respondent, v.cGEE CHEMICAL CORPORATION, INC., Appellant.

Page 726

257 S.E.2d 726

273 S.C. 523, 27 UCC Rep.Serv. 72

Charles Arthur BEASLEY, Respondent, v. KERR-McGEE CHEMICAL CORPORATION, INC., Appellant.

No. 21030.

Supreme Court of South Carolina.

Aug. 15, 1979.

Stephen G. Morrison, of Nelson, Mullins, Grier & Scarborough, Columbia, for appellant.

Jacob H. Jennings, of Jennings & Jennings, Bishopville, for respondent.

RHODES, Justice:

Respondent Charles Arthur Beasley instituted this products liability suit claiming that Kerr-McGee Chemical Corporation, Inc. (Kerr-McGee) was liable for breach of implied warranty with respect to the sale of cotton seed. The jury returned a favorable verdict for respondent and Kerr-McGee now appeals. We affirm.

On April 1, 1974, Beasley purchased a quantity of Pennington Stoneville 213 cotton seed, along with several other items, from the "Kerr-McGee Field Office," a separate portion of a larger rural general store known as "Houser's Supermarket." Both business entities, which are divided by a partitional wall and door, are operated by John Houser, Jr.

Beasley had an established line of credit with Kerr-McGee, and Houser charged all of the chosen items, including the cotton seed in question, to Beasley's account with Kerr-McGee. Subsequently, a bill from Kerr-McGee was mailed to respondent covering the total price of the April 1 purchase, which he promptly paid. According to respondent's allegations, the cotton seed failed to properly germinate. He then commenced this action charging that Kerr-McGee had breached an implied warranty of merchantability in selling him the defective seed.

The theory of liability advanced by respondent was that Houser was an agent of Kerr-McGee with the authority to sell the Stoneville 213 seed on its behalf and that respondent reasonably assumed Kerr-McGee would be responsible for any defects, particularly since it had ratified the transaction by receiving the proceeds therefrom. Kerr-McGee argues that its contractual arrangement with Houser rendered the latter a warehouseman and immunized Kerr-McGee from responsibility for the defective seed which it asserts were sold by Houser without the corporation's approval.

It is well established that the terms of a contractual agreement are not conclusive in determining the association between two parties where there is evidence outside the contract establishing an agency relationship. Hubbard v. Rowe, 192 S.C. 12, 5 S.E.2d 187 (1939). See also Thompson v. Ford Motor Co., 200 S.C 393, 21 S.E.2d 34 (1942). "It is not the descriptive name employed, but the nature of the business and the extent of authority given and exercised, which is determinative." Jones v. General Motors Corporation, 197 S.C. 129, 14 S.E.2d 628, 631 (1941).

The concept of apparent authority or agency by estoppel depends upon the manifestations by the alleged principal to a third party and the reasonable belief by the third party that the alleged agent is authorized to bind the principal. Gizzi v. Texaco, Inc., 437 F.2d 308 (3rd Cir. 1971); Restatement (Second) Agency §§ 8, 8B, 27 (1957). While the written contract between Kerr-McGee and Houser was denominated a "warehousing agreement," we think it clear from the evidence that Kerr-McGee not only vested Houser with authority beyond that of a mere warehouseman, but also cloaked Houser with the apparent authority to negotiate the present sale from which an implied warranty would flow.

Regarding his arrangement with Kerr-McGee, Houser testified that, for a certain percentage of the gross profit, he handled Kerr-McGee products as well as products manufactured by other companies which Kerr-McGee marketed through him for resale. In fact, he stated that of all the products he handled for Kerr-McGee, at least eighty (80%) percent were manufactured or labeled by a name other than Kerr-McGee.

Houser explained that he had the discretionary authority to purchase goods in the open market for resale through Kerr-McGee if he thought the products would sell. His testimony indicated that he had previously exercised this discretionary authority by selling products on behalf of Kerr-McGee without first attaining their formal approval through a purchase order, which actions on his part had not been previously questioned by Kerr-McGee but, on the contrary, the corporation had acquiesced in and retained all profits therefrom.

The Stoneville 213 seed in question was processed by Pennington and the package containing the seed accordingly bore the Pennington label. Houser ordered the seed directly from Pennington and placed it in the "Kerr-McGee Field Office" for resale. While admitting that at the time of the sale he had not transferred title to the seed to Kerr-McGee, Houser stated that he could have done so by simply calling Kerr-McGee and getting a purchase order from them.

The circumstances of the transaction are supportive of the conclusion that the sale was from Kerr-McGee to Beasley. At the time the purchase was consummated, Houser issued a printed Kerr-McGee delivery ticket to Beasley for the seed and other items, at the bottom of which Houser's signature appeared over the printed words "Kerr-McGee Chemical Corp." This delivery ticket was then sent to Kerr-McGee which later billed Beasley directly for the Stoneville 213 seed. Kerr-McGee then received the proceeds in the form of Beasley's check which was made out to the corporate defendant.

Apparent authority is such power as a principal holds his agent out as possessing or permits him to exercise under such circumstances as to preclude a denial of its existence. 2A C.J.S. Agency § 157 (1972); Sells Lumber & Manufacturing Co. v. Carr Lumber Co., 179 S.C. 407, 184 S.E. 674 (1936). In order for a third party to recover against the principal based upon this theory, it must be shown that he reasonably relied on the indicia of authority originated by the principal and such reliance must have effected a change of position by the third party. ZIV Television Programs, Inc. v. Associated Grocers, Inc. of S. C., 236 S.C. 448, 114 S.E.2d 826 (1960).

To respondent, Houser was Kerr-McGee's "agent" for farm supplies in his community. Beasley was a steady customer of Kerr-McGee, purchasing approximately twenty thousand dollars ($20,000) worth of farm supplies from it annually. According to his testimony, he never considered that he purchased any farm supplies from Houser individually: "I would say everything I ever bought from him was through Kerr-McGee because I charged everything through Kerr-McGee." Nor was respondent remiss in relying upon the purported agency relationship between Kerr-McGee and Houser. Kerr-McGee's own regional representative, through his testimony, referred to Houser as a "commissioned agent for me," and to Kerr-McGee as a "distributor" for various farm supply manufacturers.

In addition, the premises from which the goods were purchased were visibly identified as the "Kerr-McGee Field Office" by an appropriate sign. Kerr-McGee delivery tickets were utilized to acknowledge purchases made by respondent from the Kerr-McGee outlet. Moreover, Kerr-McGee accepted and retained all proceeds flowing from the transaction in question.

In Mortgage & Acceptance Corp. v. Stewart, 142 S.C. 375, 140 S.E. 804 (1927), a finance company had entrusted an auto dealer with collection of its payments on a chattel mortgage, received payments through the dealer, and then attempted to deny the dealer's agency. The court held that the finance company which had received the benefits of the agency by retaining to itself the monies collected for its account by the motor company could not "retain these benefits and deny the very consequences of...