Farmer's Union Oil Co. of Dickinson v. Wood, 9802

• Decision Date: 19 December 1980
• Docket Number: No. 9802,9802
• Citation: 301 N.W.2d 129
• Parties: FARMERS UNION OIL COMPANY OF DICKINSON, a corporation, Plaintiff/Appellee, v. Charles A. WOOD, Defendant/Appellant. Civ.
• Court: North Dakota Supreme Court

Page 129

301 N.W.2d 129

FARMERS UNION OIL COMPANY OF DICKINSON, a corporation Plaintiff/Appellee, v. Charles A. WOOD, Defendant/Appellant.

Civ. No. 9802.

Supreme Court of North Dakota.

Dec. 19, 1980.

Beyer & Holm, Dickinson, for defendant and appellant; argued by John O. holm.

Reichert, Howe, Hardy, Galloway & Jorgensen, Dickinson, for plaintiff and appellee; argued by Donald L. Jorgensen, Dickinson.

PAULSON, Justice.

Charles A. Wood ("Wood") appeals from a judgment entered against him by the Stark County District Court on April 10, 1980, which judgment awarded Farmers Union Oil Company of Dickinson ("Farmers Union") the sum of $1,229.16. We affirm the judgment of the district court.

On September 27, 1977, a woman representing herself as Mrs. Charles Wood completed an application for an open credit account with Farmers Union. In fact, the woman (hereinafter "Sue") associated with Wood but was not married to him. Farmers Union approved the establishment of an open credit account bearing the name of Charles A. Wood. When Farmers Union established an open credit account with a customer, the customer was extended a 30-day trial credit period in which to use the open credit account payment procedure. If payments were made promptly at the end of the 30-day trial period, Farmers Union extended the open credit account payment period to 90 days. During the period extending from October 6, 1977, through March 12, 1978, Sue and Wood purchased products and services under the open credit account. Wood made two payments on the balance due under the open credit account during the first two months after it was established. Thereafter, no monthly payments were made and Farmers Union canceled the privileges of credit purchases under the open credit account. Wood and Sue have discontinued their personal relationship.

In May of 1978, Elaine Wood, Charles Wood's former wife (from whom he was divorced in 1976, but whom he remarried in December of 1978) informed Farmers Union that no payments would be made on the balance due on the open credit account except for purchases represented by sales slips which contained the signature of Charles Wood. Thus, products and services purchased by Sue were not paid for. From October 25, 1977, through April of 1978 Farmers Union had sent Wood periodic statements which reflected the balance due on the open credit account. Wood paid for the items which both he and Sue had purchased. However, after his relationship with Sue ended, Wood disavowed knowledge of the purchases made by Sue. Wood has not disavowed knowledge that the open credit account was established in his name by Sue. On numerous occasions Wood and Sue appeared together at the Farmers Union business establishment in Dickinson to purchase goods and services. However, Wood contends that these purchases occurred on occasions where the open credit account was not used; thus, Wood asserts that he had no knowledge of separate open credit account purchases by Sue. On October 29, 1977, Wood and Sue purchased a color television set and a stereo from Farmers Union. The purchase was reflected as an open credit account purchase until Wood obtained a loan from a finance company. The sales ticket did not bear the signature of Sue or Wood because the purchase occurred after-hours and the employee from Farmers Union who delivered the items failed to secure signatures on the sales ticket.

Farmers Union initiated this action on February 23, 1979. In its complaint, Farmers Union alleged that Wood was indebted to Farmers Union in the sum of $1,229.16, by reason of Farmers Union's having delivered to Wood, upon his demand, goods, merchandise, and supplies. In his answer to Farmers Union's complaint, Wood alleged that Sue was wholly responsible and liable for the payment for the goods and services which she had purchased and received. On March 11, 1980, the trial of this case was held in the district court of Stark County. Wood objected to the introduction into evidence of sales tickets kept by Farmers Union. The sales tickets were introduced into evidence pursuant to § 31-08-01 of the North Dakota Century Code, and Rule 803(6) of the North Dakota Rules of Evidence. Wood asserted that authentication of the signatures of Wood and Sue was necessary before the sales tickets could be introduced into evidence. Sue was not available at the trial and Wood did not appear at the trial. After the action was commenced, Wood discharged his attorney and employed the attorney who acted on Wood's behalf at the trial. Wood's first attorney had orally assured the attorney representing Farmers Union that Wood would appear at the trial. Relying upon this assurance, the attorney representing Farmers Union did not apply for a subpoena to obtain Wood's presence at the trial.

Wood also objected to the introduction of evidence which sought to establish that Wood had ratified the use of the open credit account by the woman representing herself as Mrs. Charles Wood. Wood relied upon the case of Askew v. Joachim Memorial Home, 234 N.W.2d 226 (N.D.1975), in which we held that ratification must be raised in the pleadings in order to be an issue at trial or on appeal unless the issue of ratification, although not specifically pleaded, was tried with the consent of all parties. The issue of ratification was not contained in the pleadings of Farmers Union. Finally, Wood asserts that he did not authorize Sue's purchases by use of the open credit account and that no agency relationship existed between the parties. The issues presented for our consideration are as follows:

1. Whether or not an agency relationship existed between Wood and Sue, who established the open credit account, and whether or not Wood authorized the purchases made by Sue, who used the open credit account to pay for the goods and services which she purchased;

2. Whether or not the district court committed error when it permitted the admission of evidence relating to ratification of the agency relationship; and

3. Whether or not Farmers Union established that Wood and Sue had executed the purchase contracts or received the goods and services from Farmers Union.

I

The first issue concerns whether or not an agency relationship existed between Wood and the woman with whom he associated and who represented herself as his wife, Sue, when she applied for the open credit account and whether or not Sue's purchases of goods and services through the use of the open credit account were authorized. Agency is the relationship which results where one person, called the principal, authorizes another person, called the agent, to act for him in dealing with third persons. Section 3-01-01, N.D.C.C. An agency relationship is either actual or ostensible. It is actual when the agent really is employed by the principal. It is ostensible when the principal intentionally or by want of ordinary care causes a third person to believe another to be his agent, who, in actuality, is not employed by the principal. § 3-01-03, N.D.C.C. Agency is created and authority is conferred by a prior authorization or a subsequent ratification of the act. § 3-01-06, N.D.C.C. Actual authority is authority which the principal intentionally confers upon the agent or by want of ordinary care allows the agent to believe himself to possess. "Ostensible" or "apparent" authority is authority which the principal intentionally or by want of ordinary care allows a third person to believe the agent possesses. § 3-02-02, N.D.C.C. An agent never has actual or ostensible authority to do an act which is, and is known or suspected by the person with whom he deals to be, a fraud upon the principal. § 3-02-07, N.D.C.C. When an agent exceeds his authority, his principal is bound by his authorized acts so far only as they can be plainly separated from those which are unauthorized. § 3-03-02, N.D.C.C. A principal is bound by acts of his agent under a merely ostensible authority to those persons only who in good faith and without ordinary negligence have incurred a liability or parted with value upon the faith thereof. § 3-03-03, N.D.C.C.

In Lander v. Hartson, 77 N.D. 923, 47 N.W.2d 211 (1951), we held that a presumption exists that a person acts for himself and not as the agent of another. Where the existence of an agency relationship is denied the burden of proof is upon the party who affirms its existence. The burden of proof, i. e., the burden of persuasion in such cases is clear and specific clear and convincing. In Hagel v. Buckingham Wood Products, Inc., 261 N.W.2d 869 (N.D.1977), we stated that a third person acts in good faith and without ordinary negligence if the third person uses reasonable diligence and prudence in ascertaining whether the agent acts within the scope of his authority. The mere assumption of authority will not bind the principal. In Bernard v. Madsen, 52 N.D. 822, 204 N.W. 196 (1925), the court held that an ostensible agency exists where the conduct of the supposed agent is consistent with the existence of an agency, and where, in the transaction in issue, the party with whom the supposed agent dealt was justified in assuming that the agency existed. In McLane v. F.H. Peavey & Co., 72 N.D. 468, 8 N.W.2d 308 (1943), this court set down a test to determine whether or not an apparent or ostensible agency relationship existed, "It must rest upon conduct or communications of the principal which reasonably interpreted causes a third person to believe that the agent has authority to act for and on behalf of the principal." McLane, supra, 8 N.W.2d at 310.

After reviewing the record, we are satisfied that substantial evidence existed which supported the district court's finding of fact that an agency relationship existed between Wood, as principal, and the woman, Sue, who represented herself to be Mrs. Charles Wood, as agent. The evidence is sufficient to rebut the presumption that a person does not act as the agent of another and is clear and...