No. 12860 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

BUTLER MANUFACTURING COMPANY, 

a corporation, 

Plaintiff and Appellant, 

J & L IMPLEMENT COMPANY, a PARTNERSHIP, 

Defendants and Respondents. 

Appeal from: District Court of the Fifteenth Judicial District, 

Honorable M. James Sorte, Judge presiding. 

Counsel of Record: 

For Appellant : 

Loren J. 0'~oole argued, Plentywood, Montana 

For Respondents: 

Habedank, Cumming & Best, Sidney, Montana 

Otto Habedank argued, Sidney, Montana 

Submitted: June 12, 1975 

Decided : q ~p 5 

'- - 5975 

'; E C' '; Filed: . .J L. 

air 
Mr. Chief Justice James T. Harrison delivered the Opinion 

of the Court. 

This is an appeal by Butler Manufacturing Company, plaintiff, 

from a judgment entered following a jury verdict for J & L 

Implement Company, defendant, in the district court, Sheridan 

County. 

The basic issue is whether an agency relationship, actual 

or ostensible, existed between Butler Manufacturing Company 

(hereinafter called Butler) and Jacobsen Construction Company, 

Inc. (hereinafter called Jacobsen) upon which J & L Implement 

Company, defendant, (hereinafter called J & L) could rely when 

returning unsold steel grain bins to the manufacturer, Butler, 

for credit. 

J & L is a partnership in Plentywood, Montana, which 

sells farm equipment, steel buildings and granaries. Jacobsen 

was a distributor of steel buildings and granaries for Butler, 

the manufacturer. J & L ordered steel buildings and granaries 

through Jacobsen, receiving delivery from Jacobsen with billings 

and accountings coming directly from Butler, based on information 

supplied by Jacobsen. 

Jacobsen had a chronic cash flowproblem which led to its 

present insolvent, inactive state. Due to the unstable financial 

condition of Jacobsen, Butler's credit manager devised a unique 

sales arrangement whereby Butler directly billed Jacobsen's 

subdealers rather than selling to Jacobsen which would resell 

to the subdealers remitting payment to Butler from Jacobsen's 

account. 

From 1969 through 1971, J & L sold approximately 45 bins 

under this arrangement, at all times dealing directly with 

Jacobsen and not Butler, except for billing and accounting purposes. In April 1970, J & L ordered 18 steel grain bins through 

Jacobsen, but due to drought conditions and the resulting bad 

crops that season, the bins did not sell. In March 1971, Jacobsen 
picked up four of these bins pursuant to an understanding between Jacobsen and its subdealers. This understanding arose 

out of a sales meeting called by Jacobsen for all of its subdealers and attended by officers and agents of Butler, at 

Jacobsen's invitation. There was no objection to this understanding voiced by the officers and agents of Butler attending 

that meeting. This understanding had been put into force between Jacobsen and a subdealer at least one other time in Montana. 

The arrangement for returning the first four bins was 

made during a meeting in Plentywood attended by the president 

and general manager of Jacobsen and a sales representative of 

Butler. Jacobsen issued a check to Butler upon picking up the 

four bins, and Butler credited J & L's account reflecting the 

cost of the returned bins. 

On July 9, 1971, Jacobsen picked up the remaining fourteen bins, but did not issue a check to Butler reflecting payment for the bins, as it had done subsequent to the return of 

the first four bins. Jacobsen did not issue a check due to an 

agreement among Jacobsen, Butler, and Jacobsen's bank whereby, 

due to Jacobsen's unstable financial condition, all of Jacobsen's 

assets and cash in that bank would be applied to Jacobsen's 

account with Butler. J & L's account with Butler was not credited 

for the return of these fourteen bins. 

On July 13, 1971, D. R. Bain, Butler's credit manager, 

called J & L concerning the return of the unsold bins. During 

this telephone conversation, Bain stated Butler's position that 

J & L was responsible for the payment of the bins, notwithstanding the physical return of the bins to Jacobsen. On July 14, 

1971, Bain sent a letter to J & L again stating Butler's position 

that J & L was responsible for payment on the bins. 
J & L informed Butler it had no obligation to pay for 

the bins, because they had been returned to Jacobsen pursuant 

to the understanding. 

Butler filed this action in the district court seeking 

a judgment in the amount of $10,557.42, which was the balance 

of J & L'saccount. The jury returned a unanimous verdict in 

favor of J & L. Butler appeals from the judgment. 

The issues raised in this appeal are: 

(1) Was Jacobsen the ostensible agent of Butler with 

apparent authority to accept the return of the steel grain bins 

and credit the account of J & L for their return? 

(2) If Jacobsen was the ostensible agent of Butler, did 

Butler disavow the acts of its agent within a reasonable length 

of time thereby terminating the apparent authority of the ostensible agent? 

We find ample evidence on the record to establish the agency. 

2A C.J.S. 5 4(a), page 551, defines agency as: 

" * * * the fiduciary relation which results from 

the manifestation of consent by one person to 

another that the other shall act on his behalf and 

subject to his control, and consent by the other 

SO to act." 

Montana's pertinent agency statutes are found in Title 

2, Chapter 1, R.C.M. 1947. 

Section 2-101, states: 

"An agent is one who represents another, called the 

principal, in dealings with third persons. * * *" 

Section 2-104 provides there are two distinct types of 

agency, actual or ostensible. 

Section 2-105 provides an agency is actual when: 

" * * * the agent is really employed by the principal." 

Section 2-106 provides an ostensible agency is present when: 

" * * * the principal intentionally, or by want of 

ordinary care, causes a third person to believe 
another to be his agent who is not really employed 

by him." 

Section 2-122 states the measure of an agent's authority is: 

" * * * such authority as the principal actually 

or ostensibly confers upon him." 

Section 2-123 provides: 

"Actual authority is such as the principal intentionally confers upon the agent, or intentionally, or by want of ordinary care, allows 

the agent to believe himself to possess." 

Section 2-124, provides: 

"Ostensible authority is such as a principal, 

intentionally or by want of ordinary care, causes 

or allows a third person to believe the agent to 

possess. " 

This Court stated the rule on agency in Freeman v. Withers, 

104 Mont. 166, 172, 65 P.2d 601: 

"An agency may be either actual or ostensible. * * * 

[section 2-104, R.C.M., 1947.1 It may be created 

by a precedent authorization, or a subsequent 

ratification. * * * [section 2-114, R.C.M. 1947.1 

It may be implied from conduct and from all the 

facts and circumstances in the case (2 C.J.S. p. 

1043) and may be shown by circumstantial evidence. 

(Doney v. Ellison, 103 Mont. 591, 64 P.2d 348.) 

Also, ratification may be implied from the acts 

and conduct of the alleged principal." 

This rule was affirmed in Hamilton v. Lion Head Ski 

Lift, Inc., 139 Mont. 335, 340, 363 P.2d 716. 

The record indicates from 1969 through 1971 J & L dealt 

with Jacobsen as a Butler Agri-Builder. J & L placed orders 

for Butler products through Jacobsen and received delivery 

from Jacobsen. Butler did bill J & L directly, but gave no 

indication that Jacobsen was not acting in an agency capacity. 

At the spring sales meeting held by Jacobsen for its subdealers, 

officers and agents of Butler were in attendance, including the 

president of Butler. When Jacobsen's president and general 

manager went to Plentywood on a collection visit, he was accompanied by a sales representative of Butler (it was during this 
March 1971 meeting that agreement was reached on the return 

of the first four bins). All these facts might lead a reasonable 

man to believe Jacobsen was an agent of Butler. 

Pursuant to the understanding presented by Jacobsen's 

president and general manager at the spring sales meeting, at 

least two other subdealers of Jacobsen had returned unsold bins 

to Jacobsen without an adverse comment from Butler. J & L 

returned four bins to Jacobsen in March 1971, and had its account 

with Butler credited, again without adverse comment from Butler. 

The Supreme Court of Wyoming in Ulen v. Knecttle, 50 

Wyo. 94, 103, 58 P.2d 446, 111 A.L.R. 565, quoted in Hamilton, 

sets forth the rule of evidence for implied or ostensible authority: 

" * * * Implied authority may, and in fact must, 

be shown by the course of dealing of the parties 

and other circumstances in the case." 

The course of dealing between the subdealers (including 

J & L) and Jacobsen, without denial of authority on the part 

of Butler prior to July, 1971, presented sufficient evidence 

of ostensible agency and authority in Jacobs+en to support the 

verdict of the jury. 

The Montana statute, section 2-205, R.C.M. 1947, 

states : 

"A principal is bound by acts of his agent, under 

a merely ostensible authority, to those persons 

only who have in good faith, and without ordinary 

negligence, incurred a liability or parted with 

value upon the faith thereof." 

The principal may repudiate the actions of his ostensible 

agent by prompt notice to the third party who is relying on 

the ostensible agency and authority. This Court in McLaren 

Gold Mines Co. v. Morton, 124 Mont. 382, 396, 224 P.2d 975, 

said : 

"It is settled that a principal who neglects 

promptly to disavow an act of his agent, by 
which the latter has transcended his authority, makes the act his own; he is bound to disavow it the first moment the fact comes to his 

knowledge." 

In 2A C.J.S. Agency § 89, p. 694, this rule is set out: 

"The principal does not ratify an unauthorized 

act if he repudiates it with reasonable promptness 

after learning the facts * * *". 

Here, Butler asserts that it repudiated the ostensible 

agency and authority of Jacobsen promptly upon learning the 

facts. To support this assertion, Butler refers to the July 13, 

1971, telephone call to J & L in which it was stated that J & 

L was responsible for payment of the returned bins. This call 

was followed by a letter dated July 14, 1971, from Butler's 

credit manager to J & L reasserting Butler's position stated 

in the telephone call of July 13, 1971. 

Sufficient evidence appears in the record to permit the 

jury to conclude Butler had knowledge of the bin return understanding between Jacobsen and the subdealers and that bins were 

actually returned pursuant to the understanding, with the subdealers' accounts with Butler being credited. The record contains 

facts which would indicate that Butler had such knowledge as 

early as 1970, without repudiation or disavowal on the part of 

Butler. 

On appeal, Butler objects to the refusal of the district 

court to give plaintiff's proposed instructions numbers 12 and 

Plaintiff's proposed instruction number 12 reads: 

"You are instructed that the agent is not authorized from ostensible authority to collect or 

receive payment to assume the debt from the third 

person to the principal, and such assumption, 

unless ratified, does not constitute payment. Thus, 

if, instead of paying money, the debtor writes off 

a debt due to him from the agent, such a transaction is not payment as against the principal, 

who is not a party to the agreement, though it may 

have been agreed to by the agent." 
Butler cites Lindsey v. Keenan, Andrews & Allard, 

118 Mont. 312, 317, 165 P.2d 804, (quoting from 2 Arn.Jur. § 165, 

p. 133) as the basis for proposed instruction number 12: 

"'The general rule is that in the absence of express authority or custom to the contrary, the power 

of an agent authorized to collect or receive payment 

is limited to receiving that which the law declares 

to be legal tender, or which is by common consent 

considered and treated as money, and passes as such 

at par. This is in accordance with the general principle that authority to receive payment implies only 

an authority to receive the thing due to an obligation, 

and not an authority to commute for any other thing'". 

The general rule for determining the scope and extent of 

ostensible authority is set forth in 2A C.J.S. Agency § 159, p. 

"The scope of the apparent or ostensible authority of an agent is to be gathered from all the 

facts and circumstances surrounding the transaction. [Citing Campbell v. Oriental Trading Co., 

58 Mont. 520, 193 P. 1112.1 The considerations 

which fix and determine it are the same as those 

applicable to the determination of whether an 

apparent agency, or agency by estoppel exists * * *. The authority arises, when it does arise, 

from the facts of the particular case. The test 

is found in a determination of the exact extent 

to which the principal held the agent out or permitted him to hold himself out as authorized, 

and what a prudent person, acting in good faith, 

under the circumstances would reasonably believe 

the authority to be." 

The proposed instruction would have led to possible confusion 

on the part of the jury. 

Plaintiff's proposed instruction number 14 reads: 

"If you should find that Jacobsen Construction Co. 

was the ostensible agent of the Plaintiff, Butler 

Manufacturing Company, and thus authorized to accept 

the return of the bins and credit the account of 

J & L Impaement Company, you must also examine the 

facts and determine if Butler Manufacturing disavowed the act of its agent, Jacobsen Construction 

Company, within a reasonable length of time. 

"If you determine that Butler Manufacturing Company 

notified the defendant, J & L Implement Company, 

within a reasonable length of time that they would 

not be bound by the acts and representations made 

by Jacobsen Construction Company, the act of 

Jacobsen Construction Company cannot bind Butler 

Manufacturing Company to credit the account of 
J & L Implement Company." 

Instruction number 12 given by the district court adequately 

covered the issue of disavowal by Butler. Instruction number 

12 reads: 

"It is settled that a principal who neglects promptly 

to disavow an act of his agent, by which the latter 

has transcended his authority, makes the act his 

own; he is bound to disavow it the first moment 

the fact comes to his knowledge." 

The district court's instruction number 12 is less confusing 

to the jury and sets forth the disavowal rule as stated in 

McLaren Gold Mines Co. 

This Court held in Wollan v. Lord, 142 Mont. 498, 504, 

385 P.2d 102, that: 

"A trial judge will not be held in error for 

refusing to give instructions where the subject 

has been adequately covered by other instructions, 

Carter v. Miller, 140 Mont. 426, 372 P.2d 421; 

Franck v. Hudson, 140 Mont. 480, 373 P.2d 951; 

Holland Furnace Co. v. Rounds, 139 Mont. 75, 

360 P.2d 412; or where it is not applicable to 

the pleadings and the evidence. Malano v. Bressan, 

76 Mont. 366, 245 P. 871; Schumacher v. Murray 

Hospital, 58 Mont. 447, 193 P. 397; Townsend v. 

City of Butte, 41 Mont. 410, 109 P. 969." 

Butler asserts the district court was in error in not 

granting a directed verdict at the end of the presentation of 

evidence. This assertion is based on Butler's contention that 

the disavowal of Jacobsen's ostensible agency was within a 

reasonable time after gaining knowledge of the facts. 

This Court in Mueller v. Svejkovsky, 153 Mont. 416, 

420, 458 P.2d 265 held: 

"On an appeal from a motion denying a directed 

verdict there are three rules which apply. 

(1) The evidence introduced by the plaintiff will 

be considered in the light most favorable to him. 

(2) The conclusion sought to be drawn from the 

facts must follow as a matter of law. (3) Only 

the evidence of the plaintiff will be considered." 

See also: Pickett v. Kyger, 151 Mont. 87, 439 P.2d 57; Pushard 

v. J. C. Penney Co., 151 Mont. 82, 438 P.2d 928; Solich v. Hale, 
150 Mont. 358, 435 P.2d 883; Gerard v. Sanner, 110 Mont. 71, 

103 P.2d 314. 

Here, viewing the evidence in the light most favorable 

to the plaintiff, the conclusions sought to be drawn from the 

facts do not follow as a matter of law. As stated in Freeman 

"ratification may be implied from the acts and conduct of the 

alleged principal." (104 Mont. 166, 172) The evidence presented by Butler did not, on its face, repudiate the ostensible 

agency and authority as a matter of law; the promptness of the 

disavowal remained an open question of fact. 

In Estate of Dillenberg, 136 Mont. 542, 545, 349 P.2d 

573, this Court held: 

" * * * if there be in the record substantial evidence sustaining the finding [of the jury] we must 

sustain the court's action in submitting the cause 

to the jury and sustain the finding of the jury and 

the judgment based thereon." 

The motion for a directed verdict was not improperly 

denied. 

The judgment is affirmed. 

............................... Chief Justice 

We concur: 

'-./ P . Justices