Title: Johnson v. Production Credit Ass'n of Fargo
Citation: 345 N.W.2d 371
Docket Number: 10480
State: north-dakota
Issuer: north-dakota Supreme Court
Date: February 23, 1984

345 N.W.2d 371 (1984) Keith JOHNSON d/b/a Johnson Oil Company, Plaintiff and Appellant, v. PRODUCTION CREDIT ASSOCIATION OF FARGO, North Dakota, Defendant and Appellee. Civ. No. 10480. Supreme Court of North Dakota. February 23, 1984. *372 Craig E. Johnson, of Wegner, Fraase, Nordeng &amp; Johnson, Fargo, for plaintiff and appellant. Renee J. Homuth, of Pancratz, Yuill, Wold, Johnson &amp; Feder, Fargo, for defendant and appellee. VANDE WALLE, Justice. This is an appeal by Keith Johnson from a judgment of dismissal entered on an order granting the motion of Production Credit Association [PCA] for a directed verdict of dismissal. The issues raised are whether or not the court erred in granting PCA's motion for a directed verdict and in denying Johnson's similar motion. We affirm. Douglas Olstad, a PCA borrower since 1977, began 1980 owing PCA, which had a security interest in all of his crops, approximately $67,000. PCA agreed to advance Olstad an additional $75,000 for operating funds in 1980. Johnson, a retail distributor of petroleum products, started supplying Olstad, a farmer, with fuel in 1977. Olstad began 1980 owing $4,591.99 to Johnson. By May 1, Olstad owed Johnson $10,786.49. On May 2, 1980, Olstad paid Johnson $6,000. When Olstad's fuel bill reached $15,341.76 in the fall of 1980, Johnson informed Olstad that he wouldn't supply any more fuel and that he intended to file a fuel lien.[1] Olstad had not yet finished harvest and had spent the entire $75,000 advanced him by PCA. Olstad met with James Rausch, a PCA loan officer, at the PCA office on September 29, 1980, and they discussed funds for securing additional fuel to finish harvest. Rausch requested Olstad to call Johnson and ask if he would accept $5,000 and furnish fuel until harvest was over. Olstad telephoned Johnson from the PCA office and reached an agreement, the substance of which is disputed, with Johnson. PCA thereafter sent a check for $5,000 to Johnson, who then supplied additional fuel in the amount of $2,410.84. Johnson asserts that PCA, through Olstad, agreed to pay $5,000 down and the balance of Olstad's fuel bill after harvest if Johnson would continue to supply fuel to enable Olstad to finish harvest. PCA asserts that it agreed to lend Olstad only an additional $5,000 to secure fuel to finish harvest. Johnson brought suit against PCA[2] for the balance remaining due on Olstad's fuel bill. Concluding that Johnson had failed to establish a prima facie case of an agency relationship, actual or ostensible, between PCA and Olstad, the trial court granted PCA's motion for a directed verdict of dismissal after Johnson rested. We said in the Syllabus in Askew v. Joachim Memorial Home, 234 N.W.2d 226, 229-230 (N.D.1975): See also Farmers Co-op. Elevator of Cavalier v. Lemier, 328 N.W.2d 833 (N.D.1982). The question to be answered on a motion for a directed verdict is whether or not there is evidence upon which the jury could properly find a verdict for the party against whom the motion is made. 9 Wright &amp; Miller, Federal Practice and Procedure: Civil § 2524, p. 543 (1971). A directed verdict is granted as a matter of law, which is fully reviewable on appeal. Haggard v. OK RV Sales, 315 N.W.2d 475 (N.D.1982). In McCarney v. Knudsen, 342 N.W.2d 380, 382 (N.D.1983), we recently noted that directed verdicts should be "sparingly granted" and quoted the following statement in Starr v. Morsette, 236 N.W.2d 183, 189 (N.D.1975): After evaluating the evidence presented at trial in the light most favorable to Johnson, we nevertheless affirm the judgment entered upon the trial court's order granting PCA's motion for a directed verdict of dismissal. In order to prevail, Johnson was required to establish that Olstad was acting as PCA's agent in dealing with Johnson and that Olstad had bound PCA to paying the fuel bill Olstad owed to Johnson. Johnson did not meet this burden. The relatively recent opinions in Pfliger v. Peavey Co., 310 N.W.2d 742 (N.D.1981), and Farmers Union Oil Co. v. Wood, 301 N.W.2d 129 (N.D.1980) distilled the relevant statutory and decisional law to be applied when the existence of an agency relationship is asserted. In Farmers Union Oil Co. v. Wood, supra, 301 N.W.2d at 133-134, we said: In Pfliger v. Peavey Co., supra, 310 N.W.2d at 745-746, we said: Insofar as is pertinent here, the foregoing decisions and the statutes they analyze may be summarized as follows: (1) One is presumed to act for himself and not as the agent of another; (2) One who deals with an agent does so at his peril; (3) Where the existence of an agency relationship is denied, the burden of proof is upon the party affirming its existence to establish it by clear and convincing evidence; (4) The existence of an apparent or ostensible agency must rest upon conduct or communications of the principal which, reasonably interpreted, causes a third person to believe that the agent has authority to act for and on behalf of the principal; and (5) A third person dealing with a known agent must determine for himself, by the exercise of reasonable diligence and prudence, the existence or nonexistence of the agent's authority to act. After the trial court sustained an objection to Johnson's testifying as to what Olstad told Johnson in their telephone conversation, Johnson made the following offer of proof[3] through his testimony: Johnson also testified that because he thought he had an agreement with PCA that PCA would pay the balance of Olstad's fuel bill after the crop came in he didn't file a fuel lien until March 1 of the following year and also that that was why he continued to advance fuel to Olstad. Thus, it is clear that Johnson relied on (1) Olstad's statement to him that Olstad was calling from the PCA office; (2) Olstad's statement that if Johnson would take a partial payment of $5,000 PCA would pay the rest when the harvest came in; (3) his hearing Olstad "say to somebody that that was all right"; and (4) his receipt of PCA's check for $5,000. As we have already said, the existence of an apparent or ostensible agency must rest upon conduct or communications of the principal which, reasonably interpreted, causes a third person to believe that the agent has authority to act for and on behalf of the principal. The only act or communication by PCA of which Johnson was aware was PCA's act of sending Johnson a check for $5,000. The other acts or communications that Johnson relied upon were made by Olstad, although it is undisputed that Olstad did make the telephone call from the PCA office. Johnson does not contend that he relied upon any statement of PCA. Johnson's receipt of the check from PCA showed only that Olstad was making an arrangement with PCA to secure funds for additional fuel when Olstad called Johnson. Where the existence of an agency relationship is denied, the burden of proof is upon the party affirming its existence to establish it by clear and convincing evidence. Because PCA has denied the existence of an agency relationship, Johnson must establish its existence by clear and convincing evidence, which must rest upon conduct or communications of PCA. The requirement of clear and convincing evidence was explained in Zundel v. Zundel, 278 N.W.2d 123, 130 (N.D.1979): Upon evaluating the evidence in the light most favorable to Johnson, we conclude that reasonable men could not disagree upon the conclusion to be reached. *376 The evidence of an agency relationship was insufficient for the jury to properly find a verdict for Johnson. While the existence of a principal-agent relationship is a question of fact [Pfliger v. Peavey Co., supra], "[w]hen the evidence is such that reasonable men can draw but one conclusion therefrom, a question of fact becomes a question of law." Malarchick v. Pierce, 264 N.W.2d 478, 479 (N.D.1978). In our view, the record evidence is such that reasonable men could draw but one conclusion therefrom: that Johnson did not establish the existence of an agency relationship between PCA and Olstad by clear and convincing evidence resting upon conduct or communications of PCA which Johnson could reasonably have interpreted to mean that Olstad had authority to bind PCA to pay the balance of Olstad's fuel bill to Johnson. Johnson's assertion that Olstad was an actual agent with authority to reach some kind of agreement with Johnson to ensure a continued fuel supply is unavailing. We have already noted that one who deals with an agent does so at his peril and that a third person dealing with a known agent must determine for himself, by the exercise of reasonable diligence and prudence, the existence or nonexistence of the agent's authority to act. Johnson testified that he didn't hear Rausch say anything during the telephone conversation between Olstad and Johnson. Johnson also testified that he didn't speak to Rausch or try to confirm the agreement with either Rausch or Bernie Johnson at PCA. Aside from the question of whether or not Olstad was a known agent of PCA, it is clear that Johnson did not exercise reasonable diligence or prudence in determining for himself the existence or nonexistence of Olstad's authority to act to bind PCA to pay the balance of Olstad's fuel bill. Our determination that the trial court properly granted PCA's motion for a directed verdict of dismissal disposes of Johnson's assertion that the court erred in not granting Johnson's motion for a directed verdict on the basis of unjust enrichment. For the reasons stated, the judgment is affirmed. ERICKSTAD, C.J., and PEDERSON, GIERKE and SAND, JJ., concur. [1] Presumably, the fuel lien referred to is that afforded by Section 35-08-04, N.D.C.C. [2] Olstad filed a petition in the United States Bankruptcy Court, District of North Dakota, in 1981 and is not a party to this action. [3] By quoting the offer of proof, we do not imply that the trial court erred in making the ruling that led to the offer of proof. We quote the offer of proof because it succinctly shows what agreement Johnson thought he had with PCA and upon what he relied in reaching the conclusion that he had that agreement.