David v. Serges

129 N.W.2d 882, 373 Mich. 442, 1964 Mich. LEXIS 227

• Court: Michigan Supreme Court
• Decided: September 2, 1964
• Docket: Calendar 23, Docket 50,303
• Status: Published

Opinions

Souris, J.

When an agent purporting to act for his principal exceeds his actual or apparent authority, the act of the agent still may bind the principal if he ratifies it. The Restatement of Agency (2d), § 82, defines ratification thusly:

“Ratification is the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account, whereby the act, as to some or all persons, is given effect as if originally authorized by him.”

“Affirmance” is defined in section 83 of the Restatement:

“Affirmance is either

“(a) a manifestation óf an election by one on whose account an unauthorized act has been done to treat the act as authorized, or

“(b) conduct by him justifiable only if there were such an election.”

Although Michigan cases in which ratification has been discussed usually have involved receipt of direct benefits by the ratifying principal,¹ evidence of receipt of benefits, while it lends plausibility to an allegation of ratification and, indeed, may in itself constitute ratification,² is not a sine qua non of ratification. Paragraph (d) of the comment to section 82 of the Restatement, supra, discusses the matter in these terms:

“That the doctrine of ratification may at times operate unfairly must be admitted, since it gives to the purported principal an election to blow hot or cold upon a transaction to which, in contract cases, the other party normally believes himself to be bound. But this hardship is minimized by denying a power to ratify when it would obviously be unfair. See sections 88-90. Further, if the transaction is not ratified normally the pseudo-agent is responsible; if not, it is because the third party knew, or agreed to take the risk, of lack of authority by the agent. In many cases, the third person is a distinct gainer as where the purported principal ratifies a tort or a loan for which he was not liable and for which he receives nothing. This result is not, however, unjust, since although the creation of liability against the ratifier may run counter to established tort or contract principles, the liability is self-imposed. Even one who ratifies to protect his business reputation or who retains unwanted goods rather than defend a law suit, chooses ratification as preferable to the alternative.”³

In this case the only testimony taken was plaintiff’s, who testified that defendant’s managing agent had borrowed from him $3,500 upon defendant’s behalf and for use in defendant’s business, a retail meat market. Plaintiff further testified that defendant subsequently had paid to him $200 on the alleged loan and had upon several occasions stated to plaintiff that the full sum would eventually be paid. With this testimony in the record plaintiff rested his case and defendant, without likewise resting, moved for a judgment of no cause on the theory that plaintiff had failed to prove a prima facie case.

The trial court erred in granting defendant’s motion. Defendant not having rested, the procedural posture of the case then was such that the court was required to consider defendant’s motion as if it had been a motion for directed verdict made at conclusion of plaintiff’s proofs in a trial to a jury. Stolt v. Shalogian, 326 Mich 435, and Schian v. Bierlein, 369 Mich 219. Only if plaintiff’s testimony, viewed' in its most favorable light, could be said to be insufficient as a matter of law to support a judgment in his favor would the judgment of no cause be permissible under our former practice.

Even if borrowing money were not within the agent’s actual or apparent authority, plaintiff’s evidence, viewed favorably, was legally sufficient to establish defendant’s liability for the alleged loan upon a theory of ratification. Thus, plaintiff’s evidence was sufficient to require defendant to be put to his proofs.

Reversed and remanded. Costs to plaintiff.

Kavanagh, C. J., and Black, Smith, and Adams, JJ., concurred with Souris, J.

1 See, e. g., Langel v. Boscaglia, 330 Mich 655 at 659.

2 Such long has been the law in Michigan. See, e. g., Bacon v. Johnson, 56 Mich 182, 185.

3 Cf. Texas Pacific Coal # Oil Co. v. Smith (Tex Civ App 1939), 130 SW2d 425, 430, for a contrary view as to the necessity of receipt of “benefits” from the original transaction before an alleged ratification by oral agreement can be valid. We prefer the reasoning of the Restatement.