Phelps v. Union Central Life Ins. Co.

• Decision Date: 08 July 1937
• Docket Number: 7683.
• Citation: Phelps v. Union Central Life Ins. Co., 105 Mont. 195, 71 P.2d 887 (Mont. 1937)
• Parties: PHELPS v. UNION CENTRAL LIFE INS. CO.
• Court: Montana Supreme Court

71 P.2d 887

105 Mont. 195

PHELPS v. UNION CENTRAL LIFE INS. CO.

No. 7683.

Supreme Court of Montana

July 8, 1937

Rehearing Denied Sept. 22, 1937.

Appeal from Tenth Judicial District Court, Fergus County; Wm. T Ford, Judge.

Action by Herbert L. Phelps against the Union Central Life Insurance Company.From a judgment in favor of the plaintiff, the defendant appeals.

Reversed and cause remanded, with instruction to grant defendant a new trial.

SANDS C.J., and ANGSTMAN, J., dissenting.

Merle C. Groene, of Lewistown, for appellant.

Wm. M. Blackford and C. E. Baker, both of Lewistown, for respondent.

PER CURIAM.

The plaintiff commenced this action to collect $1,520, with interest, for plowing alleged to have been done on lands of the defendant and at the instance of H. P. Sowter, an agent of the defendant.The defendant is the owner of some 200 farms in Montana and northern Wyoming, which were under the local supervision of H. B. Smith & Son, of Billings, Montana.

The complaint alleges the formation of a partnership between the plaintiff and his father, David V. Phelps, in the spring of 1930, for the purpose of "farming a certain tract of land, the property of the defendant, lying and being in Fergus County, Montana, known as the Triepke Tract" that the copartnership furnished labor, materials, and machinery, and broke and rebroke lands of the defendant, at its special instance and request and at the agreed price of $4 per acre for fresh broke ground, and $2 per acre for rebreaking; that 300 acres of new ground was broken and 160 acres of rebreaking done under such arrangement; that the services alleged were of the reasonable value of $1,520; that subsequent to July 1, 1932, the copartnership sold and assigned the claim for such plowing to the plaintiff; and that frequent demand had been made upon the defendant for payment of the amount claimed to be due, which payment was refused.Judgment was prayed for in the amount stated, with interest from July 1, 1932, at 8 per cent. annum.

Defendant's general demurrer was overruled.The answer is a general denial of all the material allegations of the complaint.The matter was heard by Honorable Stewart McConochie, judge of the Tenth judicial district, sitting with a jury.Judgment was entered July 8, 1935, in favor of the plaintiff, and on August 30 thereafter defendant's motion for a new trial was granted.December 11, 1936, the cause came on for retrial with Honorable William L. Ford, of the Fourteenth judicial district, sitting with a jury.A verdict was again returned in favor of the plaintiff, and judgment was duly entered thereon.When the matter came on for trial defendant objected to the introduction of any evidence, which objection was overruled.When plaintiff presented his case in chief and rested, defendant moved for a nonsuit, which was denied; at the close of defendant's case it moved for a directed verdict, which was denied.Defendant then moved that David V. Phelps' testimony, wherein he stated that Sowter told him that he had authority to contract with him to do the plowing, be stricken from the record.The motion was denied.The matter is here on appeal from the judgment.

A number of errors are assigned, but we are of the opinion that the determination of the controversy depends upon whether Sowters, as the agent of the defendant, had the power to make the alleged contract for the plowing.Sowter died before this action was commenced, and the testimony of David V. Phelps as to the contract he made with Sowter is the only evidence in the record to support plaintiff's contention that such a contract was made.

The plaintiff testified that all business arrangements made and obligations incurred by the partnership were arranged by his father, and that plaintiff knew about the plowing contract only in a general way through information coming to him from his father.Irrespective of whether Sowter ever agreed upon any such contract as David V. Phelps testified was agreed upon, the plaintiff here must show that Sowter was acting within the scope of his powers as the defendant's agent, or that the defendant is estopped to deny Sowter's authority by reason of some act of the defendant which tended to confirm by implication such authority in Sowter as Phelps alleges Sowter claimed to possess, and which was sufficient to justify Phelps in believing Sowter had the power to contract to have the plowing done.

Two very recent works of outstanding character treating at length the subject of agency we think are sufficient authority here without citing the multitude of cases found in the reports.The texts of the works referred to are supported by many authorities.

3 Corpus Juris Secundum, Agency, at page 285, subdivision c of § 324, lays down the following rules: "Notwithstanding broad statements in a few cases that the declarations of an agent are admissible against the principal to show the extent of the authority of the agent, it is elementary that the acts, declarations, admissions, statements, or representations of an agent are not admissible against the principal to prove the power or authority of the agent or the scope or extent thereof, unless such acts or declarations were done or made in the presence of the principal, or were within his knowledge, or were authorized or ratified by him, or there is other evidence of authority.The rule refers to declarations made by the agent out of court, off the witness stand, or otherwise than in his sworn testimony, and it means that such declarations cannot be testified to by a third person for the purpose of proving the scope or extent of the authority of the agent.The direct testimony of an agent on the witness stand is admissible to prove his authority and the extent thereof where his powers and duties have not been reduced to writing."Sowter's power to contract for the plowing was not shown in any one of the modes here mentioned.

To the same general effect are sections 95and96 of 2 American Jurisprudence, pages 76 and 77.Section 95 is in part as follows: "A person dealing with a known agent is not authorized under any circumstances blindly to trust the agent's statements as to the extent of his powers; such person must not act negligently, but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his powers.In other words, a person dealing with an agent assumes the risk of lack of authority in the agent.He cannot charge the principal by relying upon the agent's assumption of authority which proves to be unfounded.The principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his agency. ***"

Section 96 provides: "When one deals with a special agent or an agent who has only special authority to act for his principal, he acts at his peril, for he must acquaint himself with the strict extent of the agent's authority and deal with the agent accordingly.Such third person must inquire into the extent of the agent's authority; he is not justified in relying upon any appearance of authority except that which is directly deductible from the nature of the authority actually conferred.The reason for this is that if the power of an agent is special and limited, it must be strictly pursued and construed, with the result that neither the agent nor a third person dealing with him as such can claim that the agent had a power which they had not a right to understand was actually conferred."

The foregoing rules are firmly established in this jurisdiction.Barrett v. McHattie,102 Mont. 473, 59 P.2d 794;Benema v. Union Central Life Ins. Co.,94 Mont. 138, 21 P.2d 69, 72;Moore v. Skyles,33 Mont. 135, 82 P. 799, 3 L.R.A. (N.S.) 136, 114 Am.St.Rep. 801.In Benema v. Union Central Life Ins. Co., supra, this court said: "A person dealing with a special agent must at his peril ascertain the extent of the authority of the agent."Sowter was a special agent of the defendant.Barrett v. McHattie, supra.

Phelps knew Sowter's power to act for the defendant was limited.Phelps testified that when he discussed the Triepke deal with Sowter, the latter told him that he, Sowter, could not sell the Triepke land nor lease it; that he would have to take such matters up with the company, but he did have the authority to hire Phelps to do the plowing.This was sufficient to put Phelps on inquiry to determine the extent of Sowter's authority.

Having determined that the declarations of the deceased agent Sowter as testified to by Phelps were inadmissible, this leaves the record without any competent evidence upon which the jury might find that the alleged contract was entered into by the authorized agent of the defendant.Ordinarily this would leave the record in such condition whereby we would be compelled to hold that the trial court was in error in denying the motions for nonsuit and directed verdict.However, on the trial of this caseplaintiff offered to prove by the witness Stedman that the witness had dealings and negotiations with reference to plowing contracts with the agent Sowter, which he proceeded to perform and thereafter communicated with the defendant company, stating the fact that he had made such an agreement, and that on July 30 1928, the company forwarded to him a check in partial settlement for the services, and that, upon investigation of the work done, full settlement would be made.Plaintiff further offered to show by the same witness that similar transactions to this one were consummated with the defendant life insurance company through its agent Sowter during the years 1928, 1929, 1930, and 1931.The offer was by the trial...