Start v. Shell Oil Co. , 202 Or. 99 ( 1954 )

WARNER, J.

This is an action for damages arising out of an alleged breach of warranty. The defendant C. Arntson appeals from a judgment in favor of plaintiff for $11,-250, following a jury verdict.

The plaintiff Start at all the times hereinafter mentioned and for ten years prior thereto was a commercial grower of lily bulbs on his farm near Canby, Oregon, in an area which, according to Start, produces approximately 90 per cent of the Regal lily bulbs grown for commercial consumption in the United States. His enterprise, in the spring of 1948, included a seedling planting of two and one-half acres, which normally produced from three to four million Regal lily bulblets annually.

On February 16,1948, the defendant Arntson, doing business in Portland, Oregon, as the Albina Sales Company and acting through his agent Kjome, sold plaintiff 200 gallons of a chemical prepared by Shell Oil Company and known under the tradename of “Shell Weed Killer No. 20.” Start, sometime in April 1948, used the chemical to kill the weeds by spraying on the area where the bulblets were growing. He claims that as a result of a toxic condition created in the soil by the use of that specific chemical, his entire crop of bulblets for the year 1948 was ruined.

Start asserts that when he purchased the chemical, he relied upon the agent Kjome’s specific representations that Shell Weed Killer-No. 20 would destroy the weeds on his bulb farm but could be so used without danger of any damage or injury to his bulblets.

Arntson denies making any representations of that character to Start and, as a further defense, alleged that Start had long been in the business of growing lily bulbs for commercial trade and was fully informed on the technical details of snch enterprise, including matters relating to the elimination of weeds by spraying; that Arntson informed plaintiff that the weed killer in question was still in the experimental stage and that he could not tell in advance what might be the effect of the chemical when used to destroy weeds in fields where lily bulblets were growing. Arntson further sets out that Start on his own initiative had carried on experimental tests with this particular weed eradicator prior to its application to the weeds growing in the area where he was raising lily bulbs and had thereby determined from these tests, and without the assistance of the defendant, to rely and depend upon the same.

Shell Oil Company, the manufacturer of Shell Weed Killer No. 20, was originally impleaded as a defendant and in plaintiff’s complaint was charged with a breach of an express warranty that the weed killer would not harm plaintiff’s bulblets. It was later eliminated from the case by a motion for voluntary nonsuit.

In the interest of clarifying what is hereinafter said, we pause to observe that according to the record there are three different types of herbicides. They are: (1) a general weed eradicator which destroys all growing vegetation, weed or otherwise, with which it comes in contact; (2) a selective type which, when applied directly to growing vegetation, kills only certain weeds, leaving other plant life unimpaired (herbicides employed to rid lawns of dandelions exemplify weed destroyers of this type); and (3) a pre-emergent or pregrowth spray which is applied after the noxious growths have emerged from the ground and in sufficient time before a given commercial crop has revealed itself above the surface, thus insuring that the crop will avoid contact with, the chemical previously employed to destroy the weeds of the same area.

In these terms Start contends that he sought, and on Kjome’s representations bought, what he believed to be a pre-emergent spray, whereas the defendant contends that the herbicide sold to plaintiff was, in fact, a general weed killer and was not otherwise represented or warranted and, being such, was the efficient cause of the damage to Start’s crop of bulblets.

Prior to February 1948, Start, and apparently many of the bulb growers in his vicinity, had exterminated the weeds in the bulb gardens by burning or by manual extraction, or both, expensive processes as compared with the use of a pre-emergent spray, if practical. Although he had employed chemical products sold by defendant for other purposes, such as soil fumigants, he had not theretofore used a pre-emergent spray to rid his fields of weed pests. Indeed, the record discloses that the killing of weeds by use of a chemical pre-emergent spray was a relatively-recent innovation in the business of lily bulb growing for commercial purposes, and it was a subject approached by Start and his fellow growers with eager interest, coupled with a natural caution inspired by its very novelty.

"We find that plaintiff was a member of the Eegal Lily Growers Association, composed of about 40 bulb growers engaged in that industry in the environs of Canby, where the organization had its headquarters. He evidenced a lively interest in the organization’s affairs and was instrumental in bringing to its meetings a Mr. Eieder, entomologist of Shell Oil Company’s Portland division, to discuss expertly with the members questions which they might have with reference to the betterment of their bulb crops. Eesponsive to Start’s request, Mr. Eieder appeared at a meeting of the Regal lily growers held in Canby on November 11, 1947; and Start tells us that while at that meeting “there was some talle of weedkillers”, that “pre-emergence spraying was mentioned” and “Shell’s weedkiller” was discussed. Start discloses a knowledge of weed killers in terms of their distinctive functions, that is, whether they were selective, general or pre-emergent sprays. He knew that D-D, a Shell soil fumigant, was a poison but disclaimed knowing that Shell Weed Killer No. 20 had deadly ingredients. While he may not have been qualified to anticipate the character and extent of the damage he sustained, we are impressed by his own testimony that he knew enough concerning chemical weed killers generally and the prevailing uncertainty of their efficiency and latent dangers to put him on further inquiry before assuming the perils entailed in dealing with an agent making such spectacular claims for his principal’s product as were made to him by Kjome. Pokorny v. Williams, decided by this court July 8, 1953; Graef v. Bowles et al., 119 Or 498, 508, 248 P 1090; Portland v. American Surety Co., 79 Or 38, 153 P 786, 154 P 121.

The defendant assigns as error the court’s denial of his motions for a nonsuit and a directed verdict. Both motions are challenges to the sufficiency of the evidence.

The first and most important claim in this respect is that there is no evidence that Kjome, defendant’s salesman, had authority, express or implied, to warrant that the weed killer sold to Start would not damage his growing bulbs. This was stated as a ground for defendant’s motion for a nonsuit and again reiterated as supporting his motion for a directed verdict.

Plaintiff’s assertion of warranty made by Arntson through, his agent Kjome rests upon his own testimony reading:

“* * * I asked Mr. Kjome at that time for a pre-emergence spray, what spray should I use, there were several that I had heard of but didn’t know anything about and I asked Mr. Kjome what weedkiller to use, and he says No. 20. So I then asked Mr. Kjome if using that material on the soil above the bulbs which were sprouting below the soil if there were any possibility of a toxic condition developing that might injure the crop, and Mr. Kjome replied in these words, and I quote his exact words, I quote: ‘ There can be no toxicity because it is nothing but oil’, unquote; and I repeat that those were Mr. Kjome’s exact words. * * *”

The magnitude of such warranty is emphasized when we realize that, if truly made, the agent, in return for a sale of $40 to $50 worth of his principal’s merchandise, thereby exposed his employer to a liability predicated upon the destruction of a potential $40,000 crop.

Arntson admits that Kjome was a salesman working for him, with authority to solicit orders for Shell Weed Killer No. 20 and other agricultural chemicals sold by defendant. He also admits that Kjome is the person who contacted the plaintiff Start. We are satisfied that in so acting, he was a general agent for Arntson (1 Restatement, Agency, § 3 [1]), a fact which Start had a right to assume in the absence of information to the contrary. Thomas v. Smith-Wagoner Co., 114 Or 69, 74, 234 P 814; Rae v. Heilig Theatre Co., 94 Or 408, 413, 185 P 909. The defendant urges, however, that the extent of Kjome’s authority is not a question of fact to be resolved by the jury alone but is one of law solely for determination by the court. In this the defendant is not correct. A more exact statement of the law is found in 3 CJS, Agency, 328, § 330, reading: “Questions of fact to be determined by the jury or other trier of the facts include questions as to the nature and extent of the authority of an agent as to whether his authority comprehends the act or contract in controversy, unless the evidence is undisputed and not open to inferences or it conclusively shows lack of authority or is manifestly insufficient to show authority.” Also see 2 Am Jur, Agency, 360, § 454; Neppach v. Or. & Cal. R. R. Co., 46 Or 374, 391, 80 P 482. To the extent that Clark v. Shea, 130 Or 195, 205, 279 P 539, is in conflict with the true rule as expressed in 3 CJS, supra, it is expressly overruled. As more fully disclosed later in this opinion, the manifest insufficiency of evidence to show authority in Kjome renders the matter one of law for determination by the court. The court’s denial of defendant’s motions implies that it had found that such authority had been proved to its satisfaction.

Defendant argues that “A selling agent has no power to make any unusual warranties but has apparent authority only to make such warranties as are usual and customary in the trade.”

In 2 Am Jur, Agency, 106, § 132, we find a comprehensive statement of the rules governing an agent’s powers to make warranties binding on his principal:

“The rule advanced by a majority of the decisions, as well as by the American Law Institute, is, in substance, that the authority to sell a particular article includes the authority to warrant the title, quality, or condition of the thing sold if, and only if, such warranty is usual or customary in such a transaction, and is reasonably necessary to transact the business intrusted to the agent. Thus, a general selling agent has authority to give warranties as to the article sold where such is the usage of the business in which he is employed and reasonably necessary to the transaction of the business intrusted to him * * *. It may be pointed out, however, that even a general selling agent has no authority to warrant articles sold if such is not the usage of the business in which he is employed. Accordingly, in most cases the implied power of the agent to warrant is not made dependent upon whether he is a general or special agent, but upon the usages and customs of business. * * *” (Italics ours.)

American Jurisprudence then proceeds to summarize well the foregoing statement into what we conceive to be the true rule:

“* * * The correct principle, briefly stated, is that an agent under an employment to make sales is impliedly authorized to employ only those means for the purpose usual to the business, and that the buyer cannot safely assume that he has authority to make any extraordinary guaranty or warranty, or one beyond the usage of the business in which the agent is employed.”

Also see Rector v. H. K. Mulford Co., (Mo), 185 SW 255; Nixon Mining Drill Co. v. Burk et al., 182 Term 481, 178 SW 1116, LRA 1916C, 411; Johns v. Jaycox, 67 Wash 403, 121 P 854, 39 LRA NS 1151, Ann Cas 1913D, 471.

Our own pronouncements are in accord with the principle as stated in 2 Am Jur, Agency, 106, § 132. In Reid v. Alaska Packing Co., 47 Or 215, 217, 83 P 139, this court, speaking through Mr. Justice Eobert S. Bean, held as follows:

“Webber & Co. had no authority to sell for defendant sockeye salmon, or to warrant that the quality of the fish which they agreed to sell to the plaintiff should be equal to the best Puget Sound Fancy Sockeye. They had nothing but a power to sell fish packed by the defendant company, and had no authority to warrant that such fish should be of a quality not found in Alaskan waters or packed or handled by the defendant. A mere selling agent, without express power to warrant, cannot give a warranty which will hind his principal, unless the sale is of a class which is ordinarily accompanied hy a warranty * * (Italics ours.)

Counsel for the plaintiff make no argument nor present any authority to the contrary. There is no evidence of or present claim that Kjome had express authority to make the representations which he did.

Before proceeding further to ascertain whether there is sufficient evidence that Arntson’s agent was vested with implied authority to commit Arntson as plaintiff alleges he did, it is well to note first certain pertinent rules of law which must necessarily bear upon such inquiry.

At the outset we observe that it is a well-settled rule that one deals with the agent of a third party at his peril. In Graef v. Bowles et al., supra, 119 Or 508, the court expressed itself as follows:

“It is a well-settled principle that one who deals with another as the agent of a third party does so at his peril. It is likewise a principle set forth in Portland v. American Surety Company, 79 Or. 38 (153 Pac. 786, 154 Pac. 121), cited by the plaintiff, that:

“ ‘As to third persons, the principal is bound by the acts of his agent not only when executed in pursuance of actual authority, but also in the scope of his apparent authority arising from the manner in which his principal has held him out to the public. Apparent authority and its effect vanish, however, in the presence of actual knowledge of the third party as to the real scope of the agent’s authority, or when the former has knowledge of facts which would put him upon inquiry as to the actual warrant of the agent.’ ”

Also see Pokorny v. Williams, supra; Finney v. Stanfield Frat. Assn., 131 Or 393, 399, 283 P 415; 3 CJS, Agency, 164, § 241.

The authority of an agent to bind his principal in contracts made with third persons is measured not only by the agent’s express delegation of power but also by that which he is held out by the principal as possessing; provided, however, the third party had reason to believe and did believe that the agent was acting within and not exceeding his authority and such third party would sustain a loss if the contract was not regarded as a contract of the principal. Nicholas v. Title & Trust Co., 79 Or 226, 238, 154 P 391, Ann Cas 1917A, 1149, and cases there cited; 2 Am Jur, Agency, 82, § 101.

The apparent authority for which the principal may be liable must be traceable to him and cannot be established solely by the acts or conduct of the agent. The principal is liable only for that appearance of authority caused by himself. 2 Am Jur, Agency, 85, §103.

This court has heretofore defined the “apparent power” or “apparent authority” of an agent to conform with the definition given by Professor Mechem. In Fine v. Harney Co. National Bank, 181 Or 411, 464, 170 P2d 365, 182 P2d 379, 171 ALR 867, we said:

“According to Professor Mechem, powers of an agent commonly referred to as ‘apparent’ are either (1) those which are incidental to the main authority conferred because that is the regular and ordinary way of doing business, or (2) those which are ‘sought to be deduced from special circumstances of recognition, acquiescence or holding out’, as to which ‘the principle of estoppel or something akin to it at least, must be invoked’. 1 Mechem on Agency 509-513, §§ 720-726. In the latter class of cases the author says:

“ * * it is obvious that the doctrine can apply only in those cases in which (the) element of reliance was present. It can therefore apply only to eases in which credit has been extended, action has been induced, delay has been obtained, or some other change of position has occurred, in reliance upon the appearance of authority * * *’ Ibid. 512, §724.”

Here we have but one element of the agent’s authority to determine: Is there substantial evidence that Kjome, as a general agent, had apparent authority sufficiently broad from whence it might be implied that he had power to warrant that the weed killer would create no toxicity harmful to plaintiff’s growing bulbs?

In the discovery of a proper answer to that question, it should be remembered that the burden is upon the plaintiff to show that the agent had such an authority. Jones v. Marshall-Wells Co., 104 Or 388, 394, 208 P 768; 2 Am Jur, Agency, 349, §442; 3 CJS, Agency, 257, § 317. Circumstantial evidence is ordinarily competent to establish its extent. Pokormy v. Williams, supra; Bailey v. Opp, 159 Or 301, 312, 77 P2d, 826, 80 P2d 40.

Plaintiff failed to adduce one iota of testimony from which it might be inferred that Kjome’s representations could be implied as an incident of his apparent powers of agency, that is, “those which are incidental to the main authority conferred because that is the regular and ordinary way of doing business”. Nor, indeed, is there any evidence of special circumstances of recognition, acquiescence or holding out on the part of Arntson warranting a deduction of such power as to which the principle of estoppel, or something skip to it, at least, must be invoked. Fine v. Harney Co. National Bank, supra, 181 Or 464. To the contrary, it is established by plaintiff’s testimony that he never had any personal dealings with the defendant, whose place of business was approximately 25 miles from Start’s operations and of relatively easy contact. The most that can be claimed by plaintiff as to Kjome’s apparent authority is that he was a salesman for Arntson, engaged in the sale of products merchandised by him. Even before Start made his purchase through Kjome, he knew that some of his neighbors had had varying results with chemical weed killers and that the use of pre-emergent sprays was a novelty in the bulb business; and although he had no information upon which to predicate an assumption that Kjome spoke as an expert in making the representations upon which Start relied, he, nevertheless, made no effort to determine whether Kjome spoke either as one skilled on the subject of pre-emergent herbicides or was authorized to so speak with express or implied authority to commit his employer to the extent that he did. Certainly he was in no position to assume that the giving of such a warranty under the circumstances was usual or customary to the usages and customs of the class of business in which Kjome was engaged in February 1948.

We conclude that in the absence of proof of express authority, the plaintiff has failed to sustain the burden of offering any evidence from whence it might be reasonably inferred that it was either usual or customary, in the sale of a herbicide of the class of which Shell Weed Killer No. 20 is a part, for a salesman to make a warranty binding on his principal of the kind and character made by Kjome to Start. It appeals to us as contrary to the established law of agency, as well as extremely dangerous to the commercial world, to hold that a salesman, not shown to have any apparent or express authority other than that of taking orders for a chemical of powerful toxic content, has implied authority to make a warranty of such far-reaching import as plaintiff claims was made to him and thus expose his principal to liability for damages to the extent sought here.

James R. Bain, Judge. Thaddeus W. Veness, of Portland, argued the cause for appellant. With him on the briefs was Henry Bauer, of Portland. Wesley A. Franklin argued the cause for respondent. On the briefs were Anderson, Franklin & Landye, of Portland. Before Latourette, Chief Justice, and Warner, Rossman, Lusk, Brand and Perry, Justices.

It follows that the order denying defendant’s motion for a directed verdict should be reversed.