Lagerquist v. Stergo

• Decision Date: 02 July 2008
• Docket Number: No. 20070285.,20070285.
• Citation: 752 N.W.2d 168,2008 ND 138
• Parties: Dave LAGERQUIST, Plaintiff and Appellee v. Rudy STERGO a.k.a. Rudy Strgo, Just Wire Corp., West Side Metals Corp., Midwest Industrial Metals Corporation, and John Doe, Defendants. West Side Metals Corp., Defendant and Appellant.
• Court: North Dakota Supreme Court

752 N.W.2d 168

2008 ND 138

Dave LAGERQUIST, Plaintiff and Appellee v. Rudy STERGO a.k.a. Rudy Strgo, Just Wire Corp., West Side Metals Corp., Midwest Industrial Metals Corporation, and John Doe, Defendants West Side Metals Corp., Defendant and Appellant.

No. 20070285.

Supreme Court of North Dakota.

July 2, 2008.

David R. Phillips (argued) and Scott K. Porsborg (appeared), Smith Bakke Porsborg & Schweigert, Bismarck, ND, for plaintiff and appellee.

Jerome C. Kettleson (argued) and Zachary E. Pelham (appeared), Pearce & Durick, Bismarck, ND, for defendant and appellant West Side Metals Corp.

KAPSNER, Justice.

[¶ 1] West Side Metals Corporation ("West Side") appeals an amended judgment holding West Side liable for money damages, costs, and disbursements in the amount of $86,702. We affirm the amended judgment of the district court to the extent that it finds the existence of an actual agency relationship and awards damages, costs, and disbursements, but reverse the district court's holding that an ostensible agency relationship existed.

I

[¶ 2] This action arises out of a contract for the purchase of scrap metal between Rudy Stergo and Dave Lagerquist. Lagerquist brought a lawsuit against Stergo, a scrap metal purchaser, and West Side, another scrap metal purchaser, for breach of contract. Stergo is an individual scrap metal buyer, who purchases scrap metal and sells the metal to other larger scrap metal purchasers, like West Side, at a profit. Most of West Side's scrap metal purchases come from "peddler trade," meaning independent buyers, like Stergo, come to West Side's physical location with scrap metal to sell. West Side purchases its scrap metal from several hundred independent buyers each day.

[¶ 3] In the spring of 2005, Stergo learned Lagerquist had scrap metal and switch gear, which Lagerquist was interested in selling. West Side and Lagerquist both concede the contract to sell and purchase the material was formed on May 3, 2005, following a series of emails on that date, during which both parties agreed to specific pricing on various scrap metal held by Lagerquist. The contract provided Lagerquist and Stergo would meet in person on May 9, 2005, at which time Stergo would provide a down payment of $30,000 for the scrap metal purchase. The May 3, 2005, contract also provided Stergo would take delivery of the scrap metal on May 9, 2005. None of the May 3, 2005, emails make reference to West Side, and West Side does not appear in the final terms of the contract between Stergo and Lagerquist.

[¶ 4] Following the formation of the contract, Lagerquist showed the material to Stergo, and on May 9, 2005, Stergo gave Lagerquist $30,000 as a down payment on all of the scrap metal and switch gear he wished to purchase. Stergo began loading and hauling away the purchased scrap metal on May 9, 2005.

[¶ 5] The $30,000 down payment Stergo gave to Lagerquist on May 9, 2005, was money supplied to Stergo by West Side. Lagerquist discovered the $30,000 check for the down payment was drawn against West Side's account, rather than Stergo's account, "quite a bit" after receiving the check on May 9, 2005. Lagerquist alleges, and the district court found, Stergo indicated he was associated with and a buyer for West Side on May 9, 2005, while Stergo was loading the scrap metal. After Stergo loaded part of the scrap metal onto trucks on May 9, 2005, Lagerquist gave Stergo two invoices totaling $115,009, the total price of the material, and reminded Stergo that Lagerquist needed the balance owing on the metal, $85,009, within two weeks under the terms of their contract.

[¶ 6] For unknown reasons, Lagerquist became concerned about the balance owed on the metal and called West Side on the telephone on May 10, 2005. Lagerquist testified an employee of West Side, Donna, told him West Side was familiar with Stergo and confirmed Stergo was a buyer for West Side. Before the two weeks for payment had elapsed, Lagerquist called Stergo to inquire about the payment of the balance owed. When Lagerquist contacted Stergo during the two-week payment period, Stergo said the scrap metal was contaminated with asbestos and lead and the metal had been buried. Stergo then contacted Lagerquist about three days after their initial telephone conversation and offered Lagerquist $10,000 to settle the unpaid portion of the contract price. Lagerquist refused Stergo's settlement offer. According to Lagerquist, Stergo also informed him that Stergo would not pay the remaining balance due on the scrap metal. Lagerquist learned Stergo had sold the scrap metal to another company, Midwest Industrial Metals Corporation ("Midwest"), instead of West Side. Lagerquist also discovered Stergo had received a total of $136,502 in checks from Midwest for the scrap metal. Evidence also established Stergo paid West Side over $30,000 of the $136,502 Stergo had received, apparently to compensate West Side for the money West Side had advanced to Stergo for down payment on the scrap metal Stergo purchased from Lagerquist. Lagerquist had difficulty reaching Stergo and could not collect the balance due on the scrap metal from Stergo.

[¶ 7] Lagerquist brought suit against Stergo, West Side, and Midwest to collect the balance due on the scrap metal. Midwest negotiated a settlement with Lagerquist, relieving Midwest of further liability in this lawsuit. After a bench trial, the district court found Stergo was an agent of West Side and, as such, West Side was held jointly and severally liable for Stergo's breach of contract and ordered to pay Lagerquist damages and costs in the amount of $86,702.

[¶ 8] West Side appeals the amended judgment, arguing the district court erred in concluding Stergo was both an ostensible and actual agent of West Side and thus erred in assessing damages against West Side as Stergo's principal.

II

[¶ 9] "Agency is generally a question of fact." Stockman Bank of Montana v. AGSCO, Inc., 2007 ND 26, ¶ 11, 728 N.W.2d 142 (citing Red River Commodities, Inc. v. Eidsness, 459 N.W.2d 805, 810 (N.D.1990)). "Agency is never presumed, and if an agency relationship is denied, the party alleging agency must establish it by clear and convincing evidence." Stockman Bank of Montana, at ¶ 11 (citing Argabright v. Rodgers, 2003 ND 59, ¶ 6, 659 N.W.2d 369). We review a district court's finding of agency under the clearly erroneous standard of review. Argabright, at ¶ 6 (citing Fleck v. Jacques Seed Co., 445 N.W.2d 649, 651 (N.D.1989)).

[¶ 10] An agency relationship is created when one person, called the principal, authorizes another, called the agent, to act for the principal in dealing with third persons. Argabright, at ¶ 6 (citing N.D.C.C. § 3-01-01). Agency is either actual or ostensible. Id. (citing N.D.C.C. § 3-01-03). "An agency is actual when the agent really is employed by the principal." Id. (citing N.D.C.C. § 3-01-03). "An agency is ostensible when the principal intentionally or by want of ordinary care causes a third person to believe another to be his agent, who really is not employed by him." Id. (citing N.D.C.C. § 3-01-03). "An apparent or ostensible agency 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." Id. (citing Krank v. A.O. Smith Harvestore Prods., Inc., 456 N.W.2d 125, 128 (N.D.1990)). "Agency is never presumed and, if an agency relationship is denied, the party alleging agency must establish it by clear and convincing evidence." Id. (citing Hector v. Metro Ctrs., Inc., 498 N.W.2d 113, 118 (N.D.1993)). "A finding of fact is clearly erroneous if it is not supported by any evidence, if, although there is some evidence supporting the finding, a reviewing court is left with a definite and firm conviction a mistake has been made, or if the finding is induced by an erroneous conception of the law." Auction Effertz, Ltd. v. Schecher, 2000 ND 109, ¶ 10, 611 N.W.2d 173 (citation omitted).

III

[¶ 11] In this case, the district court made specific factual findings with respect to the existence of both ostensible and actual agency. The district court found Lagerquist and Stergo entered into a contract for the sale and purchase of the scrap metal on May 9, 2005. The district court found that at the time the parties were negotiating and entering into the contract, relying on the premise that the contract was formed on May 9, 2005, "St[e]rgo indicated he was associated with West Side Metal and indicated he was a buyer for them." The district court found Stergo was "authorized to buy metal for West Side, [and] he was provided with advances to pay for the metal with the clear expectation that any metal he bought would be re-sold to West Side Metals." The district court found that after Lagerquist became worried about the balance due and called West Side on May 10, 2005, "he was told that St[e]rgo was acting for West Side Metal in purchasing scrap metal from Lagerquist." The district court further concluded that Donna, one of West Side's employees, "conferred with someone at West Side Metal before providing that information to Lagerquist." The district court found "Lagerquist reasonably relied on the information he received when he telephoned West Side Metal." The district court found "[Stergo] was assisted in allowing [himself] to present himself as an agent of West Side Metal." The district court based these factual findings on the testimony of several witnesses; thus, there is evidence in the record to support the district court's findings. See, e.g., Williston Coop. Credit Union v. Pesek, 363 N.W.2d 548, 550 (N.D.1985) ("The trial court had an opportunity to view the witnesses as they testified and assess their credibility. Where two parties present conflicting testimony on material issues of fact, we will not reexamine the trial court's findings based upon the testimony. On the record before us, we...