Smith v. Hansen, Hansen & Johnson, Inc.

• Decision Date: 04 November 1991
• Docket Number: No. 13270-2-II,13270-2-II
• Citation: 818 P.2d 1127,63 Wn.App. 355
• Court: Washington Court of Appeals
• Parties: Gerald O. SMITH, Plaintiff, v. HANSEN, HANSEN & JOHNSON, INC., Appellant.

Page 355

63 Wn.App. 355

818 P.2d 1127

Gerald O. SMITH, Plaintiff, v. HANSEN, HANSEN & JOHNSON, INC., Appellant.

No. 13270-2-II.

Court of Appeals of Washington Division 2.

Nov. 4, 1991.

Robert C. Kelley, Oseran, Hahn, Van Vallin & Watts, P.S., Bellevue, for appellant.

F. Mike Shaffer, Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, Tacoma, for respondent.

MORGAN, Judge.

The owner of a building hired Hansen, Hansen & Johnson, Inc. (HH & J) to renovate it. ¹ The renovation included design and construction of an exterior glass wall. A year or so after the new wall was finished, it began to leak. The owner of the building sought redress from HH & J, which settled with the owner for $81,000. HH & J then sued Fentron, a corporation in the business of designing and installing glass walls. HH & J sought reimbursement plus other damages. The trial court awarded damages, but we reverse.

In 1982, Lee Hansen was an architect and partner in HH & J. He was acquainted with Everett Foster socially and through Foster's former position as mayor of Sumner, Washington. Hansen also knew that Foster was employed by Fentron. Hansen trusted Foster "based on their past acquaintanceship and on Foster's status as a manager of Fentron." Finding of fact 1.

Fentron employed Everett Foster as a "manager of manufacturing services." Fentron furnished Foster with business cards, an office and a telephone. Foster's duties included purchasing material needed for manufacturing, but did not include selling products to customers. He was employed in the manufacturing department, and sales to customers were handled through the sales department.

Overall, Hansen talked with Foster an estimated six to ten times. Some of these conversations were in person at HH & J's offices; others were by telephone. When Hansen called Foster, he did it by dialing Fentron's telephone number and going through Fentron's switchboard. Hansen never visited Fentron's offices, and no Fentron letterhead or documents were used in connection with their discussions.

In 1982, Foster visited Hansen at HH & J's offices. At this time, HH & J was the general contractor for construction of the Tacoma Dome Hotel, and Foster's purpose was to solicit sales for Fentron products and services in the construction of the hotel. In the course of the conversation Foster told Hansen that Fentron had salvage glass available and was trying to find a use for it. During this visit or at a later time, Foster "presented his business card showing that he was a manager of Fentron's manufacturing services division." Finding 5. Foster led Hansen to believe that Foster had authority to sell materials on behalf of Fentron, but in fact Foster's efforts were unknown to Fentron and contrary to its policies and direction. ² Later, apparently in late 1982, Hansen called Foster at Fentron and inquired about salvage glass. Foster called back later and indicated that certain salvage glass, hereinafter called the ARCO glass, was available. In effect, Foster offered to sell the ARCO glass to HH & J at a reduced price, so that HH & J could use it on the 1111 Fawcett Building, the Tacoma office building that HH & J had been asked to renovate. Foster ostensibly made the offer on behalf of Fentron. The offer was oral, and HH & J did not request a written quotation from either Foster or Fentron. Foster told Hansen that the glass had been rejected from Fentron's ARCO project in Anchorage only because of its color, when in fact Fentron had rejected the glass for other manufacturing deficiencies. ³

HH & J accepted the offer on a date that is not clear from the evidence or findings. ⁴ HH & J accepted because it believed it was dealing with Fentron. It would not have accepted had it known it was dealing with Foster individually.

Apparently after the offer was accepted, ⁵ a man named Al Kapp drew up plans showing how the glass was to be installed in the 1111 Fawcett Building. Kapp was a Fentron employee who had actual authority to provide general designs on Fentron's behalf at the request of his supervisors. ⁶ However, Kapp was not acting at the request of a supervisor, and the plans did not bear Fentron's name, mark or logo. Instead, Kapp was acting at Foster's request, and without Fentron's knowledge or authority.

Foster or Kapp ⁷ submitted the plans to HH & J on February 4, 11, and 15, 1983. HH & J used the plans to install the glass, and installation started sometime after February 16. All installation work was done by non-Fentron employees hired by Foster. During construction, Foster delivered to HH & J glass, aluminum, sealants, gaskets and other materials which belonged to Fentron, and he placed orders with Fentron "to be delivered to HH & J, for installation, ⁸ sealants and other materials." Finding 26. Foster and Kapp also made visits to the job site and to HH & J's offices.

Starting on January 7, 1983, HH & J wrote a series of 29 checks, totalling about $20,000, in order to pay for the materials being delivered by Foster. According to the findings, the checks were made payable "to Foster," or "on his behalf," or "at his request." Finding of fact 19. The first check, for $6,300, was dated January 7, 1983; the second, for $8,300, was dated February 16, 1983. At Foster's request, Roger Hansen, another principal in HH & J, made both checks payable to Foster personally. Foster said he needed the first check because the glass was at a salvage yard and was about to be destroyed. He said he needed the second check in order to obtain metal extrusions for the project.

By February 16, Roger Hansen was "nervous about Everett." According to him, in March ⁹ it "really came to the table that Fentron was unwilling to enter in to a contract." Hansen asked Foster to sign a written subcontract on behalf of Fentron. Foster refused to sign on Fentron's behalf or in his own name.

In mid-May, 1983, Foster absconded to California. At almost the same time, Stanley Tabor, Fentron's contracts administrator, contacted HH & J to request payment for the materials Fentron had supplied. Both Fentron and HH & J then discovered that Foster had not forwarded HH & J's payments to Fentron, but instead had diverted them to his own use. Tabor demanded that Fentron be paid for the materials it had supplied, and HH & J "paid Fentron directly for the Fentron materials which Foster had supplied to the job site." Finding of fact 35. At some point, Tabor told Roger Hansen that Fentron "would like to continue a business relationship with HH & J as to the Tacoma Dome Hotel, that Fentron would cooperate and assist HH & J in pursuing criminal sanctions against Foster, and would cooperate in other unspecified areas." Finding of fact 39.

Beginning June 1, 1983, Kapp was on a self-requested leave of absence from Fentron. While on leave, he supervised the final weeks of construction, which ended in late June or early July. It is unclear whether Tabor knew in May that Kapp was involved, but Tabor did know in June. ¹⁰ Tabor and HH & J never discussed Kapp's status as a Fentron employee. Apparently, Kapp was not paid by either Fentron or HH & J while he was on leave.

After mid-May, Tabor learned that the ARCO glass was being used by HH & J. He or his superior knew that the glass panels had not met specifications for the ARCO project. ¹¹ He did not inform HH & J of that.

Twelve to eighteen months after installation, the glass began to leak. It then developed that there were various defects in Kapp's design, in installation, and in the glass itself.

The building owner sued HH & J. HH & J settled by paying $81,000. It then cross-complained against Fentron for that amount, plus interest and attorneys fees incurred in defending against the building owner. After a bench trial, the superior court granted judgment for approximately $108,000. Fentron appeals.

On these facts, it may be assumed that a contract for construction of an exterior glass wall was formed. The issue is whether the parties to the contract were Foster and HH & J, or Fentron and HH & J. According to the briefs of both Fentron and HH & J, Fentron's status as a party turns on three issues: (1) whether Foster and Kapp had apparent authority to sell products on behalf of Fentron; (2) whether Fentron made and breached implied warranties of fitness for a particular use; and (3) whether Fentron ratified Foster's and Kapp's conduct. If any one of these issues is resolved in favor of HH & J, Fentron was a party to the contract.

Apparent authority

Whether apparent authority exists in a particular case is a question of fact. Bill McCurley Chevrolet, Inc. v. Rutz, 61 Wash.App. 53, 57, 808 P.2d 1167, review denied, 117 Wash.2d 1015, 816 P.2d 1223 (1991); Mauch v. Kissling, 56 Wash.App. 312, 316, 783 P.2d 601 (1989); Barnes v. Treece, 15 Wash.App. 437, 443, 549 P.2d 1152 (1976); Lockwood v. Wolf Corp., 629 F.2d 603 (9th Cir.1980). The trial court resolved that question in favor of HH & J and against Fentron. On appeal, then, the issue is whether the court's finding of apparent authority is supported by substantial evidence. Rainier National Bank v. Clausing, 34 Wash.App. 441, 444, 661 P.2d 1015 (1983). In deciding that issue, we view the evidence and the reasonable inferences therefrom in the light most favorable to HH & J, who was the prevailing party below. Holland v. Boeing Co., 90 Wash.2d 384, 390, 583 P.2d 621 (1978); Nawrocki v. Cole, 41 Wash.2d 474, 477, 249 P.2d 969, 35 ALR2d 799 (1952).

Both actual and apparent authority depend upon objective manifestations. ¹² Restatement (Second) of Agency § 7, comment b, at 29 (1958) (hereinafter Restatement) (actual authority); Restatement § 26, comments a-f, at 101-03 (same); Restatement § 8, comment a, at 30-31; Restatement § 27, comments a-f, at 103-06 (apparent authority); Barnes v. Treece, 15 Wash.App. at 442, 549 P.2d 1152 (apparent authority). The objective manifestations must be those of the principal. Schoonover v. Carpet World,...