Opinion ID: 1167447
Heading Depth: 1
Heading Rank: 3

Heading: The American National Bank

Text: On July 18, 1957, one Progar, at that time a senior salesman working under the plaintiff's supervision, obtained an order from the American National Bank for six accounting machines. Because of a change in management the bank refused to accept the machines. Thereafter, on September 16, 1958, Progar and another salesman, one Forristal, secured an order from the bank for five machines, replacing the original order. On the same date Progar signed a written agreement under the terms of which he relinquished one half of his nine per cent territory commission on the sale to the plaintiff. The plaintiff assumed the responsibility of paying a point bonus of $1,111.50 to Forristal. This agreement was approved by Greer, the branch manager, but the defendant's home office was not informed of it. The plaintiff was credited with $4,168.42 on the split sheet pursuant to this agreement. After the plaintiff's resignation from the company the machines were paid for and delivered. Progar left the employ of the defendant at approximately the same time the plaintiff did and thereafter sought to collect the full commission from the company. The company refused to recognize the side agreement and paid Progar the full commission. The trial court determined that: This agreement was made with the knowledge, approval and consent of the branch manager even though all three parties involved were aware of the fact that such side commission agreements were not to be entered into under the terms of their contracts with the Defendant. (Emphasis supplied). The court went on to state:    The Court feels that the Defendant's Denver manager having not followed the terms of the employment contract first in his agreeing to this side agreement and secondly in not submitting the matter to arbitration and not giving the Plaintiff a chance to be present during the conversations and meetings that took place with the other salesman, took action that is not fair and proper and that Plaintiff herein is entitled to the commission under the outside agreement in this particular transaction. (Emphasis supplied). Two provisions of the contract of employment are pertinent here. Under one of them any dispute between salesmen concerning the commission credit which may be properly due is to be submitted to arbitration and the decision made in such controversy shall be final. The other provision is a covenant whereby a salesman agrees:    not to share any portion of your compensation with any other employees except those assigned to your supervision and then only to the extent provided by the contracts with us;   . It is abundantly clear from the record that Greer had no actual authority to bind the company by authorizing the agreement, nor did the trial court so find. Nor does any action on the defendant's part indicate that it approved of the agreement; on the contrary, it gave the commission to Progar, thereby disaffirming it. The position we would be compelled to accept if we were to hold that the plaintiff was entitled to recover on this transaction is that Greer in effect had the authority to modify the plaintiff's contract of employment with the defendant. The evidence clearly shows that he had no such actual authority and the rule as stated in 2 C.J.S. Agency § 105 c. p. 1262 is applicable: An agent who possesses but limited authority which does not expressly include the power to modify agreements of employment, and who is not held out by the common employer as having any such power, cannot modify the arrangement which the latter makes in hiring a servant or another agent;   . See also, Lockwood v. Embalmers' Supply Co., 233 App.Div. 189, 251 N.Y.S. 321; Gaddie v. Collins of Kentucky, Inc., (Ky. App.) 248 S.W.2d 722. In a more general vein, a principal is ordinarily not liable for the independent acts of his agent, done in his own name outside the scope of his employment. Sparr v. People, 122 Colo. 35, 219 P.2d 317. Moreover, no question of apparent authority can arise here. In Restatement (Second), Agency, § 8 (1958) the following is said: Apparent authority is the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other's manifestations to such third persons. Comment c. of the above section states: Belief by third person. Apparent authority exists only to the extent that it is reasonable for the third person dealing with the agent to believe that the agent is authorized. Further, the third person must believe the agent to be authorized. In this respect apparent authority differs from authority since an agent who is authorized can bind the principal to a transaction with a third person who does not believe the agent to be authorized. The same text in § 27 states: Except for the execution of instruments under seal or for the conduct of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him. (Emphasis supplied). In this case it is clear, and the trial court so found, that all parties to the agreement knew that it was prohibited by their contracts with the defendant company. In McClellan v. Morris, 71 Colo. 304, 206 P. 575, this Court stated that if the limitation of an agent's authority is known to the person with whom he deals, the principal is not bound if the agent exceeds his authority. Greer having no authority under any conceivable theory to bind the company, we hold that the plaintiff is not entitled to recover under the agreement. Nor can he recover because no arbitration proceedings, as such, were held. He did not request an arbitration which is prerequisite to an action upon the contract, Ezell v. Rocky Mountain Bean & Elevator Co., 76 Colo. 409, 232 P. 680, and, even if he had and the company had failed or refused to arbitrate the matter, the failure or refusal to arbitrate would not create a liability where none existed under the contract. At best, such a failure or refusal to arbitrate would leave him a right to sue on the contract itself and we have already determined that the defendant company had no liability to the plaintiff on this sale under their contract with him. The judgment is reversed and the cause remanded with directions to enter a judgment consistent with the views herein expressed. McWILLIAMS, C. J., and SUTTON, J., concur.