Brunswick Corporation v. Sittason

167 So. 2d 126, 277 Ala. 45, 1964 Ala. LEXIS 453

• Court: Supreme Court of Alabama
• Decided: May 21, 1964
• Docket: 8 Div. 114
• Status: Published

Opinions

SIMPSON, Justice.

The dissenting opinion of Mr. Justice Harwood contains a full statement of the facts which should be referred to in connection with a study of this opinion.

The dissenting opinion concludes that the Brunswick Corporation had within the State of Alabama a “soliciting agent”; that said agent took an order from one Dr. Sittason for bowling equipment; that such order provided that to be binding upon Brunswick Corporation it must be accepted by an officer of the company at his home office in Chicago, Illinois; and finally that the “soliciting agent” nor any other agent had authority to make any representations outside of those contained in the order.

So viewed, Mr. Justice Harwood concluded that there was only a question of law involved and that the affirmative charge was due to be given for the Brunswick Corporation, relying on such authorities as Gould v. Cates Chair Company, 147 Ala. 629, 41 So. 675.

Courts throughout the nation have, upon different legal theories, placed exceptions upon the rule as announced in Gould v. Cates Chair Company, supra.

“Apparent Authority”. This doctrine holds that the servant’s duties may be accompanied by significant appearances. In an appearance of (or ostensible) authority there may be a holding out by the employer; to that may be added a reliance on the authority so appearing; and finally a resulting injury. See Anno. East Coast Freight Lines, Inc., et al. v. Mayor and City Council of Baltimore, 190 Md. 256, 58 A.2d 290, 2 A.L.R.2d 386 (406).

“Estoppel — Implied Acceptance”. The Wisconsin Court in speaking to this theory said in Sell v. General Electric Supply Corporation, 227 Wis. 242, 278 N.W. 442:

“ ‘ “Generally speaking an offeree has a right to make no reply to offers, and his silence and inaction cannot be construed as an assent to the offer,” citing Grice v. Noble, 59 Mich. 515, 26 N.W. 688; Royal Ins. Co. v. Beatty, 119 Pa. 6, 12 A. 607, 4 Am.St.Rep. 622; More v. New York Bowery F. Ins. Co., 130 N.Y. 537, 29 N.E. 757. See, also, 1 Page, Contracts, § 160.’ Morris F. Fox & Co. v. Lisman, 208 Wis. 1, 13, 237 N.W. 267, 271, 240 N.W. 809, 242 N.W. 679.”

In Morris F. Fox & Co. v. Lisman, supra, speaking of the above rule, the Court said:

“This rule is of course subject to exceptions. If the relations between the parties have been such as to give to silence the significance of an assent to the offer, the offeree’s silence may amount to an implied acceptance. Hobbs v. Massaoit Whip Co., 158 Mass. 194, 33 N.E. 495. Or, if the conduct of the offeree is such as to lead the of-feror to believe that the offer has been accepted, there may be an acceptance by estoppel. 1 Page, Contracts, § 161.”

“Prior dealing and relations between parties”. In Ammons v. Wilson Co., 176 Miss. 645, 170 So. 227 the Mississippi Court held that a refusal to reject an order after the elapse of only 12 days, a price rise of 7% cents per pound on shortening, and prior dealing between the parties made up an issue for the jury as to whether or not there was an implied acceptance of the order.

“Delay in Disapproving Order”. The Tennessee Court in Cole-McIntyre-Norfleet Co. v. A. S. Holloway, 141 Tenn. 679, 214 S.W. 817, 7 A.L.R. 1683, held that a delay (March 26 to May 26) of a jobber for an unreasonable time to notify a customer of rejection of an order taken by the jobber’s traveling salesman amounts to an acceptance of it.

The Supreme Court of Vermont in Hendrickson v. International Harvester Co. of America, 100 Vt. 161, 135 A. 702, held:

“True it is that it takes two to make a bargain, and that silence gives consent in these cases only when there is a duty to speak. Gould v. Cates Chair Co., 147 Ala. 629, 41 So. 675; Senner, etc., Co. v. Gera Mills, 185 App.Div. 562, 173 N.Y.S. 265; Prescott v. Jones, 69 N.H. 305, 41 A. 352; Bowley v. Fuller, 121 Me. 22, 115 A. 466, 467, 24 A.L.R. 964; 13 C.J. 276. And true it is that it is frequently said that one is ordinarily under no obligation to do or say anything concerning a proposition which he does not choose to accept; yet we think that, when one sends out an agent to solicit orders for his goods, authorizing such agent to take such orders subject to his (the principal’s) approval, fair dealing and the exigencies of modern business require us to hold that he shall signify to the customer within a reasonable time from the receipt of the order his rejection of it, or suffer the consequences of having his silence operate as an approval.”

See also Sioux Falls Adjustment Co. v. Penn Soo Oil Co., 53 S.D. 77, 220 N.W. 146.

For an interesting observation of the various methods by which principals can be bound by the unauthorized actions of their agents, see “Ratification by Silence”, Warren A. Seavey, 103 University of Pennsylvania Law Review, pp. 30-43.

This Court as far back as 1880 realized that a principal is in certain cases under a duty to disaffirm the unauthorized acts of his agent and in Mobile and Montgomery Railway Co. v. Jay, 65 Ala. 113, stated:

“The first head-note in the case of Powell’s Adm’r v. Henry, 27 Ala. 612, which holds, that, ‘if an agent exceeds his authority, although the principal may ratify the act; yet, to avoid it, he is not obliged to give notice that he repudiates it’, is too comprehensive in its statement of the law. It is true that mere knowledge, on the part of the principal, of an agent’s unauthorized action, will not make silence, or noninterference, in all cases amount to ratification. But it would, in those cases where the party dealing with the agent is misled or prejudiced (Smith v. Sheeley, 12 Wall. 358, 20 L.Ed. 430) ; or where the -usage of trade requires or fair dealing demands, a prompt reply from the principal.”

In Comer & Company v. Way and Edmundson, 107 Ala. 300, 19 So. 966, this Court, upon approving the doctrine set forthiiin’ Meyer v. Morgan, 51 Miss. 21, said:

“ ‘The course of business between the factor [principal] and the correspondents [agents], implies prompt responses to business letters. If the factor advises his correspondents of his acts with respect to his property, and he does not in a reasonable time disaf-firm and so notify the agent, the latter may well presume that his conduct has been approved. So large a part of the commerce of the world is done through agents of one sort or another, that it is necessary that this principle should prevail. Hence it is incorporated into all the systems of jurisprudence. Story on Agency, § 258. The principal must disaffirm. Silence will be equivalent to approval. * * * The principal, within a reasonable time, must elect to approve or disapprove the unauthorized act of the agent of which he has been informed. He cannot remain silent and await the vicissitudes of a fluctuating market, and if the price rises, disaffirm and claim the difference ; or if it declines, acquiesce in the sale.’ ”

Hartselle is a relatively small city and there is one fact that is not in dispute in this case, viz.: Brunswick Corporation decided that the city could financially support but one bowling establishment. To say that Grauer, Brunswick’s agent, made this decision would certainly arm him with more power and authority than that of a mere order taker. Brunswick Corporation made this decision and their agent busily engaged himself in making this decision known to the two groups involved.

The general rule is that officers and directors of a corporation are chargeable with knowledge of the customs and usages of their corporations. Miles Realty Co. v. Dodson, Tex.Civ.App., 8 S.W.2d 516.

We are not so disturbed with the pronouncement of the law in the dissenting opinion as we are with its interpretation of the facts. A brief review of these is in order. Time plays an important role. It is-apparent that two separate groups of persons desired to establish bowling emporiums in the relatively small city of Hartselle, Alabama and for convenience, these are referred to as the “Sittason” and “Nelson” groups. The “Sittason” group, after preliminary inquiry in December, 1960, first contacted Mr. Kenneth Grauer (salesman for Brunswick) on February 10, 1961. After a night meeting at which the sales agent made his sales talk, gave information as to terms, price, installation, and amount of equipment necessary, this group told Mr. Grauer that they would contact him later, went into executive session and decided to proceed with their plans and to place an order with the Brunswick Corporation for the necessary equipment.

The next day (February 11, 1961), Dr. Sittason contacted Grauer and placed two orders for approximately $150,000.00 worth of bowling equipment and delivered to Mr. Grauer a thousand dollars down-payment on each of the two orders.

The evidence is in dispute as to the actions and statements of Grauer from the period February 10, 1961 to March 22, 1961 in the following matters:

1. Did Grauer or did he not state to the “Sittason” group that if an order was placed with Brunswick that they would deal with no other persons in the Hartselle area for a period of one year?

2. Did Grauer or did he not state to the “Sittason” group after taking the orders that “you are now in the bowling business. Get your land and start building the building”?

3. Did Grauer or did he not state that the city of Hartselle could not support more than one bowling alley?

4. Did Grauer or did he not represent originally (February 10, 1961) that the first group to start erection of a building would be the group that Brunswick would do business with or was such representation made only after the “Nelson” group made its first contact with Grauer on or about March 19,. 1961?

5.Did Grauer or did he not state to the “Sittason” group that the approval of the order was perfunctory providing the “Sit-tason” group were financially responsible?

As stated, “time” seems to play a most important part in the drama. The order placed with Grauer provided that the equipment purchased would be shipped via truck on or about June 1, 1961. Section 10 of the Bowling Lanes Order reads in part: “The seller shall not be required to ship until the premises in which the goods are to be located are suitably lighted, heated and ready for the commencement and uninterrupted' performance of work by the seller * * The buyer warrants that these conditions, will exist on or before September 1, 1961. Certainly the terms of this order had no conditions in it which would demand that the purchaser complete its building prior to. September 1, 1961.

The “Sittason” group purchased land',, secured the architect, and on March 4, 1961, some three weeks after the placing of the order, discovered that the “Nelson” group was contemplating the establishment of a bowling emporium and contacted Grauer with reference to the matter. Grauer exclaimed that he had not been contacted by the “Nelson” group and knew nothing about them, but for the “Sittason” group to proceed with their plans. To paraphrase the earlier western writers, “Meantime, back at. the ranch,” nothing is being heard of or from the Chicago office, the Memphis office- or any other office.

Time marches on — and two weeks later, on March 15, we find the “soliciting agent”' Grauer at the building site of the “Sittason”' group talking with the architect, furnishing him literature concerning installation and. suggestion that the footings for the building be installed as soon as possible.

Four days later, on March 19, Mr. Grauer informed the “Sittason” group that he "had' to talk with the ‘Nelson’ group”. Just why he had to talk to them is not made clear from the record, but he informed Sittason that it did not amount to anything and to proceed. Grauer’s “had to” talk with the “Nelson” group could not have come from the Memphis office for the manager of that office knew nothing of the “Nelson” group until some time after March 22, 1961.

The “Sittason” group contacted their attorney and on March 22, the attorney called the Memphis office and talked to Mr. John Wackowski, who explained that he was the office manager and according to the attorney’s testimony, he told Wackowski the facts and Wackowski replied, “Let me get the file. You have such a contract. I stand behind it; Brunswick stands behind it. We aren’t dealing with that kind of people”. Mr. Wackowski testified that he was, indeed, the office manager but that his duties and responsibilities were merely clerical. Assuming this to be the limit of his authority, the jury might draw an inference that the order had, indeed, been approved by an officer in the home office of the Brunswick Corporation and that although Wackowski had no authority to approve or disapprove an order, nonetheless, he did have authority to relay such approvals. Mr. Grauer testified that his only authority was to take orders and that he processed both the “Sitta-son” order and the “Nelson” order in the same manner.

The following excerpt from 3 Am.Jur.2d 718 is apposite to Grauer’s testimony:

“On the other hand, when the facts pertaining to the existence or nonexistence of an agency are conflicting, or conflicting inferences may be drawn from the evidence, the question presented is one of fact for the jury, or for the court as the trier of fact if the case is tried without a jury. If the weight of such evidence is not full or satisfactory, it is the better practice to submit the question to the trier of fact. Moreover, notwithstanding the alleged principal and agent are the only witnesses called, and they both categorically deny the existence of the relation, the jury have the right to weigh and consider the whole of the evidence and the fair and reasonable inferences that might be drawn therefrom, and they may be entirely justified in disregarding the ‘yes or no’ answers and in reaching the conclusion that the evidence as a whole is sufficient to prove the relation of agency to exist.”

Grauer told the “Nelson” group after being informed that they were ready to proceed, “Not to dispute your word, but we hear this every day and the only way we can tell whether construction is really started is to see visible evidence of it in the ground and from that we can make our decision, but not just on statements, because there are too many of those”. And he-further testified that he told the “Nelson” group that “I will deal with whoever pours concrete first”.

There is only one way to do business with a corporation and that is through its agents, servants and employees. We have the anomalous situation of a mere salesman (who knew his company would deal with only one group) taking two orders of no validity until accepted by the home office— and yet telling the two buyers that the only order to be accepted would be that of the group first commencing its building.

Was this the action of a mere soliciting agent or the furtherance of a stated policy of the Brunswick Corporation? There is no denial by Brunswick that it was untrue or that Brunswick would not and did not accept the fruits of such a policy.

From the foregoing review of the evidence, certainly it would strain the conscience of the average juror or businessman to say that Brunswick’s home office, through its agents and employees, did not, in fact, know of the circumstances in this particular case.

The end result, namely the acceptance of the “Nelson” order and the rejection of the “Sittason” order upon the sol- ground “It would be improper to honor your order as construction has already started on another installation which makes your proposed operation a poor business risk; we, therefore are arranging cancellation of your order and full return of your deposit”, is nothing more or less than an express confirmation of the statements 'and action of Grauer. Such a course of conduct is sufficient acknowledgment that the Brunswick Corporation was, indeed, well aware of the activities of the agent Grauer and therefore, a participant in the fraud and deceit being practiced upon the “Sittason” group.

The dissenting opinion alludes to the fact that custom and usage in a particular case have the burden of proving such usage. But in this fast moving industrial country of ours there is a custom and usage general to all business and that is, business will be conducted with dispatch. The Brunswick Corporation, according to the testimony, does many millions of dollars of business each year and certainly is in a position to approve or disapprove an order within a reasonable time. It should not be allowed through its silence, delay, and reassurances of soliciting agents to lull its prospective customers into a sense of false security, have them expend money, time and effort and then hide behind its corporate structure and soliciting agents and in this manner rake financial damages to its would-be customers.

As stated, the writer finds no fault with the general principles of agency law announced in the dissenting opinion but concludes that under the facts in this case the question of authority of the agent Grauer and the apparent approval of the Brunswick Corporation in his furtherance of their business was properly submitted to the jury.

It is well to keep in mind that this is not a suit on a contract. There is no contention on the part of the appellees that the order in this case ever ripened into a contract. The action sounds in deceit and fraud and it is appellee’s contention that the Brunswick Corporation ratified, affirmed, or should be estopped by its silence, inaction, and delay from contending that the actions of the agent were limited by the written terms of the order. We would affirm on the theory that a jury could find that the Brunswick Corporation through its silence, undue delay, the rejection of the “Sittason” order, coupled with the late entry and approval of the “Nelson” order, together with the activity of its soliciting agent being ratified by the Memphis office and its silence and inaction during a period of some six weeks, was tantamount to an acquiescence and participation in the fraud of its agent.

The other points argued for a reversal have also been reviewed but we have concluded they are without merit.

Affirmed.

LIVINGSTON, C. J., and GOODWYN, MERRILL and COLEMAN, JJ., concur.