Storm v. Marsischke

• Decision Date: 28 December 1973
• Docket Number: No. 272A64,272A64
• Citation: 304 N.E.2d 840,159 Ind.App. 136
• Parties: Ralph Raymond STORM and Ralph Thomas Storm, Appellants, v. Robert MARSISCHKE et al., Appellees.
• Court: Indiana Appellate Court

Page 840

304 N.E.2d 840

159 Ind.App. 136

Ralph Raymond STORM and Ralph Thomas Storm, Appellants, v. Robert MARSISCHKE et al., Appellees.

No. 272A64.

Court of Appeals of Indiana, Second District.

Dec. 28, 1973.

Richard P. Watson, John C. Carvey, Carvey, Watson & McNevin, Indianapolis, for appellants.

Ted B. Lewis, Samuel A. Fuller, Richard L. Fairchild, Stewart, Irwin, Gilliom, Fuller & Meyer, Indianapolis, for appellees.

PER CURIAM.

Ralph R. Storm and his son, Ralph T. Storm (the Storms), owners of land in Morgan County, entered into a written contract with Robert Marsischke and Albert F. Wagner d/b/a Duane Construction Company (Construction Co.) for the construction of two apartment buildings on their land. Craig Winters, an employee of McCormick Lumber Company, Inc. (Lumber Co.), arranged for the execution of the contract, but the defendant Lumber Co. was not a party to the writing. Erection of the buildings was never completed to Storms' satisfaction. They brought an action for damages against Marsischke, Wagner, Construction Co., and Lumber Co., alleging breach of contract.

Following the entry of a default judgment against Marsischke, Wagner, and Construction Co., a trial without jury was commenced on the Storms' second amended complaint against Lumber Co. At the conclusion of the plaintiffs' evidence, defendant Lumber Co. moved for dismissal and judgment pursuant to Trial Rule 41(B), IC 1971, 34--5--1--1. ¹ The court sustained the motion and entered judgment for the defendant.

What is before us in the appeal is fairly stated in the appellants' summary of argument, as follows:

'Plaintiffs' (appellants here) position is that considering the evidence and reasonable inferences thereon most favorable to Plaintiffs that they established that defendant, McCormick Lumber Company, Inc., acting through its agent, Craig Winters, contracted to build two (2) apartment buildings for Plaintiffs in Mooresville, Indiana, which he had actual authority or apparent authority to negotiate and that it failed to complete the contract on time or otherwise, and that the work was so poorly performed that Plaintiffs suffered diminution of value and were faced with substantial numbers of liens, of suppliers and laborers on the premises, which together with the moneys paid out, greatly exceeded the contract price.

'Defendants' (Appellees herein) position is that the consideration of the evidence and reasonable inferences thereon most favorable to Plaintiffs that they failed to establish that the agent Craig Winters had actual or apparent authority to bind his principal the defendant, to such a construction contract, and therefore Plaintiffs must suffer the loss caused by its agent.

'In summation, it can be said that Plaintiffs contend that their evidence showed that Craig Winters was a general agent, or at the very least, had the appearance of a general agent and that as innocent third persons they should not be made to suffer for the consequences of the acts of the agent who may have exceeded his authority, but the principal (defendant) who installed him in a position where he could prey upon innocent third persons should bear the loss.'

Looking first to the concept of apparent authority, it is axiomatic that such authority exists only where there is a manifestation by the principal to a third party which causes the third party reasonably to believe that the particular person with whom the third party is dealing has the authority to enter into negotiations or to make representations on behalf of the principal. The State Life Insurance Co. v. Thiel (1939), 107 Ind.App. 75, 20 N.E.2d 693; Kody Engineering Company, Inc. et al. v. Fox and Fox Insurance Agency, Inc. (1973), Ind.App., 303 N.E.2d 307, 39 Ind.Dec. 537. Such a manifestation by the principal may be found when the principal holds out an agent as a general agent and the third party reasonably believes that the authority exhibited is the type usually held by one in such a position; ² or, where the principal clothes or allows a special agent to act with the appearance of possessing more authority than is actually conferred. See: Farm Bureau Mutual Life Insurance Company v. Coffin (1962), 136 Ind.App. 12, 186 N.E.2d 180. Thus, to prove the existence of apparent authority, it is necessary to establish some conduct on the part of the principal which created the appearance of authority. The representations of the agent will not suffice, for it is the 'well established rule that agency cannot be proven by the declarations of the agent, alone.' Pan American World Airways, Inc. v. Local Readers Service, Inc. (1968), 143 Ind.App. 370, 377, 240 N.E.2d 552, 556, 15 Ind.Dec. 429, 435.

Our review of the record fails to show any substantial evidence of probative value to sustain the existence of apparent authority.

There is no evidence upon which it can be said Craig Winters was a general agent. The only evidence on this point is an attempt on the part of Lumber Co.'s counsel to stipulate that Winters was an 'outside salesman'. Though the statement establishes that Winters was an employee of Lumber Co., there is no evidence that establishes the capacity in which he was employed. Consequently, it cannot be said that Lumber Co. put Winters in a position which would allow a third party reasonably to believe that the authority exhibited is the type normally held by one in that position.

Nor can we find any evidence to support the proposition that Lumber Co. clothed Winters with the appearance of authority. A summary of appellants' evidence on this point reveals that Winters was a man of considerable activity. He contacted the Storms after learning of the proposed construction through a trade magazine, requested an appointment and procured blueprints upon which to submit a bid. At a second meeting Winters introduced the Storms to Marsischke and Wagner, representing that if Lumber Co. was the successful bidder Construction Co. would be the contractor. Further negotiations resulted in an approval of financing and the subsequent execution of the construction contract. The contract clearly identified 'DUANE CONSTRUCTION COMPANY as General Contractor, by Robert Marsischke and Albert F. Wagner'. When Winters was asked by the Storms why the name of McCormick Lumber Company did not appear on the contract, his response was that Lumber Co. normally conducted its business in this manner.

Appellants suggest that Winters' explanation was consistent with the authority he had already exhibited and supported by his actions at the job site during the construction. Actions such as frequent visits to the project, the driving of a McCormick Lumber Company car, the removal of a premature delivery of roofing and his attempts to reconcile the eventual construction problems between Construction Co. and the Storms.

Though Winters' activities give rise to a suspicion of involvement on the part of Lumber Co., there exists no evidence of any conduct on the part of the principal creating an appearance of authority. Once the statements and representations of Winters are removed, there remains nothing which establishes authority to enter into a contract on behalf of Lumber Co. Pan American Airways, supra; Holland v. Farrier (1921), 75 Ind.App. 368, 130 N.E. 823.

The appellants present a more persuasive argument by asserting that Winters possessed inherent agency power to bind Lumber Co. to the contract. Unlike apparent authority, inherent agency power exists apart from any manifestation by the principal and rests solely in the agency relationship. Though we are unaware of any Indiana case which expressly recognizes this principle, ³ the A.L.I. Restatement (Second) of Agency § 8A (1975) defines it as follows:

'Inherent agency power is a term used in the restatement of this subject to indicate the power of an agent which is derived not from authority, apparent authority or estoppel, but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent.'

Of the situations the Restatement finds this type of power...