Thesenga Land Company, Respondent, vs. Cirrus Warehouse, Inc., Defendant, The Pillsbury Company, Appellant, and The Pillsbury Company, Third Party Plaintiff, vs. Edward Slanga, Third Party Defendant.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C5-03-370

 

Thesenga Land Company,

Respondent,

 

vs.

 

Cirrus Warehouse, Inc.,

Defendant,

 

The Pillsbury Company,

Appellant,

 

and

 

The Pillsbury Company,

Third Party Plaintiff,

 

vs.

 

Edward Slanga,

Third Party Defendant.

 

Filed December 9, 2003

Affirmed
Crippen, Judge*

 

Ramsey County District Court

File No. C1995135

 

Frank R. Berman, Frank R. Berman, P.A., 7600 Parklawn Avenue, Suite 423, Edina, MN 55435 (for respondent)

 

Jerry W. Snider, Deborah A. Ellingboe, Faegre & Benson, LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402-3901 (for appellant)

 

            Considered and decided by Halbrooks, Presiding Judge, Schumacher, Judge, and Crippen, Judge.

U N P U B L I S H E D   O P I N I O N

CRIPPEN, Judge

            Appellant Pillsbury Company disputes the trial court's determination that its agent had the authority to execute a guaranty of Cirrus Warehouse Inc.'s lease obligation under an agreement with the lessor, respondent Thesenga Land Company.  Because the trial court did not clearly err in finding that appellant's agent had apparent authority, we affirm.  We decline to review the court's additional findings and conclusions that the agent had actual or implied authority, or that his act was later ratified.

FACTS

            Appellant Pillsbury disputes the trial court's determination that it is obligated to pay a $355,342.38 judgment involving rent due under a 1995 lease contract whereby warehousing space was made available for appellant's wholesale flour operation.  Although the lease contract was from respondent to Cirrus, appellant had a contractual relationship with Cirrus for use of the premises.  Appellant's agent, Edward Slanga, who was in charge of appellant's flour division and negotiated the lease agreement, executed a guaranty of the lease contract.  The trial court determined that Slanga had apparent authority for entering into the lease guaranty based on the following findings of fact:                       

4.         Slanga was the Director of Wholesale Flour Sales at the time of the execution of the Guaranty.  His duties included establishing warehousing and distribution for the Pillsbury flour that was sold by his division.  Slanga was in charge of the Wholesale Flour Division and had authority to make determinations with respect to warehousing, the terms of warehousing, and the financial undertakings that Pillsbury would effect to accomplish the warehousing and distribution of the product.

 

5.         With Pillsbury's knowledge and acquiescence Slanga held himself out to persons doing business with Pillsbury as a Vice President of Pillsbury.  His business card identified him as Vice President, Flour Merchandising, Wholesale Bakery Division.

 

6.         Although Cirrus was the party named as lessee on the lease, the lease was negotiated by Slanga on Pillsbury's behalf and with the intent that Pillsbury would utilize the leased property for warehousing and distribution of its product.

 

            . . .

 

8.         Slanga also had apparent authority to execute, deliver, and bind Pillsbury to the terms of [the] Guaranty.  Included among the facts that constitute apparent authority is the utilization and delivery of the business card designating Slanga as Vice President, that he met representatives of Thesenga with other Pillsbury employees to determine whether the warehouse was consistent with Pillsbury's needs, that Slanga directed and negotiated to obtain a favorable lease from Thesenga for Pillsbury on an arm's length basis, and the lease appeared to be and was for valid business purposes of Pillsbury and was of benefit to Pillsbury in the distribution of its wholesale flour.

 

            Appellant contends that (1) the circumstances under which the parties negotiated and executed the lease contract left respondent with a duty to inquire into Slanga's express authority, and (2) the lease guaranty was sufficiently extraordinary in nature to impose a duty to inquire into Slanga's authority.

D E C I S I O N

            Appellant argues that Slanga did not have apparent authority to sign the guaranty.  In a case tried without a jury, the scope of this court's review is limited to determining whether the trial court's findings are clearly erroneous and whether the court erred as a matter of law.  Schweich v. Ziegler, Inc., 463 N.W.2d 722, 729 (Minn. 1990).  The court's findings "shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses."  Minn. R. Civ. P. 52.01.  The findings will be reversed only if the "reviewing court is left with the definite and firm conviction" that the trial court has made a mistake.  Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987) (quotation omitted).  This court exercises independent judgment only on purely legal questions.  Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984). 

            Whether an agent is clothed with apparent authority is a question of fact.  Hagedorn v. Aid Ass'n for Lutherans, 297 Minn. 253, 257, 211 N.W.2d 154, 157 (1973).  A principal is bound not only by an agent's actual authority but also by authority that the principal has apparently delegated to him or her.  Duluth Herald & News Tribune v. Plymouth Optical Co., 286 Minn. 495, 498, 176 N.W.2d 552, 555 (1970).  "Apparent authority is that authority which a principal holds an agent out as possessing, or knowingly permits an agent to assume."  Foley v. Allard, 427 N.W.2d 647, 652 (Minn. 1988).  To find "apparent authority" for an agent's actions, (1) the principal must have held the agent out as having authority, or must have knowingly permitted the agent to act on its behalf, (2) third parties must have had actual knowledge that the agent was held out by the principal as having such authority or had been permitted by the principal to act on its behalf, and (3) proof of the agent's apparent authority must be found in the conduct of the principal, not the agent.  Hockemeyer v. Pooler, 268 Minn. 551, 562, 130 N.W.2d 367, 375 (1964). 

            "An agent's apparent authority results from statements, conduct, lack of ordinary care, or other manifestations of the principal's consent, whereby third persons are justified in believing that the agent is acting within his authority."  McGee v. Breezy Point Estates, 283 Minn. 10, 22-23, 166 N.W.2d 81, 89 (1969).  Therefore, the scope of apparent authority is determined not only by what the principal knows and acquiesces in, but also by what the principal should, in the exercise of ordinary care and prudence, know his agent is doing.  Id.  

            For the reasons given by the trial court, all of which are adequately supported by the evidence in the record, we find no clear error in the court's finding that Slanga acted with apparent authority. 

            Slanga was put in a position of negotiating a warehousing contract to accommodate appellant's needs.  His duties included locating warehouses, determining the terms of the warehouse agreements, and determining appellant's financial undertakings to bring about the storage and distribution of appellant's flour.  In this instance, Slanga negotiated the terms of the lease contract to satisfy appellant's specific needs, and thus, the lease contract was specifically aimed at benefiting appellant.  Further, the title and business card given to Slanga by appellant was intended to give the impression that Slanga had authority.  In addition, there was adequate evidence that Slanga and two other people, all employed by appellant, walked through respondent's warehouse to determine if the facility would meet appellant's needs.  Finally, respondent contacted Slanga by phone, confirming that appellant employed him.

            Appellant also argues that apparent authority fails because the guaranty is extraordinary[1] and outside the normal course of the business of negotiating a warehousing lease.   "Whether a contract is in the ordinary course of business is, in most instances, part of the fact-specific inquiry of whether apparent authority exists."  Powell v. MVE Holdings, Inc., 626 N.W.2d 451, 458 (Minn. App. 2001) (quotation omitted).  The inquiry depends on the nature of the contract, the officer negotiating it, and the corporation's usual manner of conducting business.  Id.   

            Trial court findings treat the guaranty as ordinary in nature and done in the normal course of business.  While there is some merit to appellant's assertion that it effectively signed a lease guaranty on behalf of a stranger, this argument is not persuasive on the facts in this case.  Appellant benefited from the lease contract when Slanga negotiated the terms of the lease to satisfy appellant's specific needs, and appellant used and continued to use the warehouse to store its flour.  In these circumstances, respondent had every reason to believe that appellant was part of the lease guaranty.  Much of appellant's argument focuses on the express authority of its vice president of business services to execute a lease guaranty, but we find little pertinence of this evidence on topics other than the actual authority of appellant's agents. 

            We find no clear error in the trial court's finding.  This being an adequate basis to affirm, we decline to address appellant's argument that Slanga did not have actual or implied authority to negotiate the lease guaranty or that Slanga's commitment was later ratified when appellant continued to buy this warehouse service after a 1997 investigation of  Slanga's apparent conflict of interest.

            Affirmed.

 

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] Appellant argues that because the guaranty was extraordinary in nature, Slanga could not have the authority to execute this contract and, thus, respondent had a duty to inquire into Slanga's authority.