Northwest Polymeric, Inc. v. Farmers State Bank

IN THE SUPREME COURT OF 'THE STATE OF MONTANA
1989
NORTHWEST POLYMERIC, INC., DEIRDRE
CAUGHLAN and LAURA LEE DUNLAP,
Trustees of the Estate of NORTHWEST
POLYMERIC, INC., Bankrupt; and ROBERT
C. KELLY, PATRICK KELLY and SHANE KELTJY,
Plaintiffs and Appellants,
-vs-
FARMERS STATE RANK and FIRST NATIONAL
MONTANA BANK OF MISSOULA, and F7.A. GROFF
and RALPH G. McCOY, and JOHN DOE And RALPH
ROE,
Defendants and Respondents.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Douglas G. H a r k i n , Judge presidina.
COUNSEL OF RECORD:
For Appellant:
R. Lewis Brown, Jr. and David L . Holland, Butte,
Montana
For Respondent :
Larry Persson, Hamilton, Montana
James A. Robischon, Kalispell, Montana
Garlington, Lohn & Robinson; Sherman 77. Lohn, Missoula,
Montana
Submitted on Briefs: Jan. 19, 1989
Decided: February 16, 1989
Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
This appeal from the Fourth Judicial District, Missoula
County, involves the alleged breach of an agreement to pro-
vide financing. The lower court granted summary judgment to
respondent, First National Bank of Missoula, (First Nation-
al), holding that appellant, Northwest Polymeric, Inc.,
(Northwest), failed to come forward with facts establishing
that First National could be held liable for damages from the
alleged breach. We affirm.
Northwest bid and received a Department of Defense (DOD)
contract to manufacture combat helmets. The DOD required
that Northwest submit a letter confirming credit for financ-
ing. Farmers State Bank of Victor, (Farmers) provided the
DOD a letter stating Farmers, with the participation of First
National, would provide financing. Neither bank provided
financing, and Northwest brought this suit seeking both tort
and contract damages.
First National argued that the District Court should
grant its motion for summary judgment because no contract
existed between Northwest and First National. First National
further argued that no agency relationship existed between
Farmers and First National which bound First National for
Farmers' representations.
Northwest conceded that First National did not enter an
explicit agreement to finance Northwest, but contended that
Farmers acted as First National's agent when it sent the
letter to the DOD stating First National would participate in
financing for the contract. No evidence from discovery
disclosed that First National authorized the representation.
However, discovery revealed that First National had consid-
ered participating, and that Robert Burke, President of First
Nationa J , knew about the 1etter from Farmers. Rurke deposed
that he phoned W. A. Groff, President of Farmers, and in-
formed Groff that First National would make no commitment to
participate in the loan.
Northwest contends that the District Court erred in
granting summary judgment for First National because: (1)
Farmers1 letter bound First National, (2) Farmers had appar-
ent authority to bind First National, (3) Montana law estops
First National from denying its obligation to participate in
the loan.
Northwest asserts that S 28-10-403, MCA, controls this
case and mandates the conclusion that the District Court
erred. The statute reads:
Ostensible authority defined. Ostensible
authority is such as a principal, intentionally or
by - -of ordinary care, causes or allows a third
want
person to believe the agent to possess.
Section 28-10-403, MCA (emphasis added) . Northwest cites
several cases where lack of ordinary care on the part of the
principal established the agent's authority. See, Audit
Services v. Elmo Road Corp. (1978), 175 Mont. 533, 575 P.2d
77; Coover v. Davis (1941), 112 Mont. 605, 121 P.2d 985;
Lindblom v. Employers1 JJiability Assurance Corporation
(1930), 88 Mont. 488, 295 P. 1007.
The facts in this case distinguish it from the case law
cited by Northwest. In Audit Services the alleged principal,
a corporation, held out the alleged agent as its corporate
manager, and thus the party claiming agency reasonably be-
lieved authority existed for the manager to enter agreements
on behalf of the corporation. Audit Services, 575 P. 2d at
81. The ostensible agency in Coover also sprung from the act
of the principal in holding out the agent as having authority
to contract for the principal. Coover, 121 P.2d at 988.
Lindblom involved dealings between a claimant for workers'
compensat.i.on, a J ocal insurance agency, and an employers '
insurance carrier. The carrier claimed the failure of the
claimant to notify the carrier during the period required by
statute barred the claim. The claimant responded that noti-
fication of the local agency estopped the carrier from claim-
ing the defense. This Court held that evidence supported the
conclusion that the carrier clothed the local agency with
authority for acting on the claim, and thus Montana law
estopped the carrier from claiming lack of agency. Lindblom,
295 P. at 1011.
Here, Northwest can only claim that First National
should have done more than notify Farmers they would not
participate. The lower court concluded that the controlling
law mandated summary judgment for First National because
ostensible authority cannot be proved by the declarations of
the agent whose statements are sought to be charged to the
principal. Exchange State Bank v. Occident Elevator Co.
(1933), 95 Mont. 78, 89, 24 P.2d 126, 130. We agree with the
lower court's reasoning.
Cases exist where principals failed to exercise ordinary
care in clarifying the lack of a grant of authority to
non-employee middlemen in continuing dealings between the
middlemen and the third party claiming ostensible agency.
See, Butler Manufacturing v. J & L Implement (1975), 167
Mont. 519, 540 P.2d 962; Powers Manufacturing Leon Jacobs
Enterprises (1985), 216 Mont. 407, 701 P.2d 1377. Generally,
ostensible agency may be established by omissions as well as
by commissions. 3 Am. Jur. 2d Agency § 79 (1986) . However,
the failure to disclaim authority asserted by an agent usual-
ly concerns cases where an agent attempts to extend existing
authority by his or her representations to a third party. In
such a case, the principal may fail to exercise ordinary care
in disclaiming the authority claimed by the agent. 3 Am.
Agency S 79 (1986).
Jur. 2d - -
Northwest can claim no explicit or implicit grant of
authority from First National to Farmers justifying reliance
on statements by Farmers. Northwest fails to demonstrate any
course of dealing between the parties where Farmers acted for
First National. Under these circumstances, we agree with the
District Court that no facts support an inference of any
grant of authority from First National to Farmers.
Northwest also argues that First National's silence
estops it from denying that it agreed to finance Northwest.
There exists here no silence amounting to a representation or
concealment of material facts, and thus no estoppel claim.
See, Sweet v. Colburn School Supply (1982), 196 Mont. 367,
639 P.2d 521; Northwest Potato Sales v. Beck (1984), 208
Mont. 310, 678 P.2d 1138.
District courts properly grant motions for summary
judgment where no material fact questions exist, and in light
of the substantive principles of law involved, the estab-
lished facts entitle the movant to judgment as a matter of
law. Fleming v. Fleming Farms Inc. (Mont. 1986), 717 P.2d
1103, 1106, 43 St.Rep. 776, 773. The substantive principles
of law concerning establishment of an ostensible agency and
estoppel under the agreed facts mandated the lower court's
decision. AFFIRMED. m
We Concur: - H