Court Opinion

ID: 9467473
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:49:53.562316+00
Date Added: 2024-06-11T17:40:22.101067
License: Public Domain

HENDERSON, Circuit Judge,
concurring in part and dissenting in part:
I concur and agree with that portion of the panel opinion holding that Parrish might have pursued the investors instead of Arizona National and, having done so, could have recovered from them.1 Contrary to the view of the majority, however, I do not believe that Parrish had the right to make that election on appeal. Parrish’s notice specifically limited its appeal to “that portion of the judgment . . . providing that plaintiff take nothing as against Bankers Ag [and the named investors].” Parrish did not request leave to amend its notice of appeal, or offer to free Arizona National, until after oral argument, by which time the parameters of the investors’ argument were well set. Parrish had its reasons for appealing only part of the judgment of the district court, and it should be bound by its decision. F.R.A.P. 3(c) and 26(b).
The Texas decisions are inconsistent in their approach to the question of when a seller must decide whether to hold a principal or his agent. Yet, with the exception of Medical Personnel Pool of Dallas, Inc. v. Seale, 554 S.W.2d 211 (Tex.Civ.App.1977), they all say that the choice must be made before entry of judgment. Cf. Fort Terrett Ranch Co. v. Bell, 275 S.W. 81, 83 (Tex.Civ. App.1925) (election permitted when both agent and principal appeal).
Some of the reported opinions conclude that a seller cannot name both principal and agent in a single action, but must elect which to sue. Heffron v. Pollard, 76 Tex. 96, 11 S.W. 165, 166 (1889) (“a plaintiff cannot sue both; he must make his election.”); Diacomis v. Wright, 20 S.W.2d 139, 140 (Tex.Civ.App.1929), rev’d in part on other grounds, 34 S.W.2d 806 (Tex.1931) (“either, but not both, may be sued for a breach”); Nail v. Boothe, 265 S.W. 1051 (Tex.Civ.App.1924) (“the plaintiff cannot recover against both the agent and undisclosed principal, but must elect which he will sue”). Other cases recognize a single action against both principal and agent, but enunciate “the rule that the seller may sue both the agent and the undisclosed principal, and at his option may, before judgment, elect to hold the undisclosed principal liable by taking a nonsuit as against the agent.” Owen v. King, 84 S.W.2d 743, 750 (Tex.Civ.App.1935); accord, Veazie v. Beach Plumbing & Heating Co., 235 S.W. 695, 697-98 (Tex.Civ.App.1921); Pittsburg Plate Glass Co. v. Roquemore, 88 S.W. 449, 450 (Tex.Civ.App.1905).
The majority focuses on two recent Texas cases from intermediate appellate courts, Medical Personnel and Sherrill v. Bruce Advertising, Inc., 538 S.W.2d 865 (Tex.Civ. App.1976), that “evince a subtle approach to the question of when the plaintiff must choose between agent and principal.” Ante, at 1369. These cases cannot really be reconciled. None of the distinctions that might be drawn were significant to the reasoning of the courts, and I do not understand the majority to find one case more in point than the other. Rather, as the majority candidly points out, our task is to choose which to follow. In my opinion, Sherrill conforms to the well-established Texas jurisprudence that a seller’s decision to appeal only part of a judgment is a constructive election.
In Sherrill an advertising company sued a real estate developer for breach of contract. When the plaintiff learned the developer had been acting as agent for the trust that owned the real estate, the trustee was joined as a defendant. After the trial judgment was entered against both defendants on a joint venture theory, only the trustee appealed. The Court of Civil Appeals held that there had been no joint venture. The court went on to “imply” that the trustee was the undisclosed principal of the devel*1374oper, but concluded that since the plaintiff had not appealed the judgment against the agent it could no longer elect to look to the undisclosed principal for payment.
An undisclosed principal is discharged from liability upon a contract if, with knowledge of the identity of the principal, the other party recovers judgment against the agent who made the contract, for breach of the contract. Restatement (Second) of Agency § 210(1) (1957). While this rule has received some discredit (See Merrill, Election Between Agent and Undisclosed Principal: Shall we follow the Restatement? 12 Neb.L.V. (1933)), the Texas courts have consistently followed it. 31 Tex.Dig. Principal & Agent § 145(4) (1974). Here, the judgment against the agent Crane-Maier has become final. On the theory of principal and agent, the principal, Sherrill Trust, cannot now be held liable since there is a final judgment had against its agent for breach of the contract.
538 S.W.2d at 867 (emphasis supplied); see also Sherrill v. Ray, 538 S.W.2d 867 (Tex. Civ.App.1976) (related case).
In Medical Personnel a woman (the agent) obtained nursing care from the plaintiff for her mother-in-law (the principal). After the bill became past due, the plaintiff sued both women. The jury, on special interrogatories, found that any agency between the women was undisclosed. The trial judge granted judgment in favor of the daughter-in-law. The Court of Civil Appeals held that it was error to grant the judgment n. o. v., and that, consequently, the nursing service had a right to elect on appeal which defendant to hold liable (citing Sherrill). 554 S.W.2d at 214. On rehearing, the daughter-in-law maintained that the plaintiff made its election when it accepted judgment against her mother-in-law. 554 S.W.2d at 215. The court rejected this argument, saying that the trial judge, and not the plaintiff, made the election by granting the daughter-in-law a judgment after the jury found facts to support relief against her. The appeal was from that very decision of the trial judge, and from that decision only. In other words, the plaintiff never made an election, since an election “contemplates a freedom by that party to choose,” which freedom the trial judge denied the plaintiff. Id.
The majority discounts Sherrill as giving “only cursory attention to the election issue,” and says “the Sherrill court merely recited the rule prohibiting double recovery.” Ante, at 1370. If that be true, it is because it was written before Medical Personnel, when the Texas law was clear.2 The court did not rely on the rule against double recovery, but rather the “consistently followed” Texas mandate that recovery of judgment against an agent discharges his principal. If either opinion is short of analysis, it is Medical Personnel, which ignores the previous Texas decisions and fails to cite any case permitting election on appeal.
When state law controls an issue in a diversity case, a federal court must look to the pronouncements of the state’s highest court for guidance. Commissioner v. Estate of Bosch, 387 U.S. 456, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967). The only relevant opinion of the Supreme Court of Texas is Heffron, which would prevent Parrish from even suing both Arizona National and the investors. Heffron is an old case, albeit one that is repeatedly cited by the lower courts, and were it clear that the Supreme Court of Texas would reach a different conclusion if faced with the question today, we might be free to ignore it. Bosch; Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 205-12, 76 S.Ct. 273, 278-280, 100 L.Ed. 199, 207—210 (1956) (J. Frankfurter, concurring). But the Supreme Court of Texas has not reversed Heffron even though it has had numerous opportunities. With the exception of Medical Personnel, “there appears to be no confusion in the . . . cases, no developing line of authorities that casts a shadow over the established ones, no dicta, doubts or ambiguities in the opinions of . . . judges on the question [and] no legislative development that promises to undermine the judi*1375cial rule.” Bernhardt, 350 U.S. 198, 76 S.Ct. 273, 100 L.Ed. at 206.
Sherrill is also consistent with the rationale behind the election rule. Although Medical Personnel holds that the essence of an election is free choice, the reason a plaintiff is put to an election at all must be found in the opinions that developed the rule. In making his contract the seller was looking to the credit of only one person' — by definition the agent — and the cases reflect the view that if the seller switches his attention to the principal, of whose existence he was unaware when he entered the contract, he should then only be permitted to hold the principal responsible. See, e. g., Heffron.
The Restatement observes that there is no entirely satisfactory explanation for the rule, and that it is “inconsistent with the basic reason underlying the liability of the undisclosed principal,” and perhaps even “unjust.” Restatement, Second, Agency § 210, comment a. Cf. Williston on Contracts § 289 (3d ed. 1959). In fact, the election rule met with wide-spread approval in Texas partly because of dissatisfaction with the logic underlying the liability of an undisclosed principal, and, just or not, it is clear that Parrish had more time than the rule contemplates to make its choice.
The Restatement’s treatment of judgments against partially disclosed principals provides a useful comparison which supports the approach of Sherrill and the older Texas cases. “Recovery of judgment against the agent of a disclosed or partially disclosed principal . . . does not thereby discharge the principal ...” Restatement, Second, Agency § 184(1). The comment on this subsection points out that a seller loses his rights against the principal when he “gets” a judgment against the agent after discovering the identity of an undisclosed principal, comment a, but only “satisfaction of the judgment against the agent terminates the liability of the [partially disclosed] principal,” comment c (emphasis supplied).3 Other jurisdictions have noted this distinction, and held that while only the satisfaction of a judgment against the agent of a partially disclosed principal will constitute an election, in actions involving undisclosed principals such a constructive election occurs prior to satisfaction of the judgment. See the discussion in Clifton Cattle Co., Inc. v. Thompson, 43 Cal.App.3d 11, 117 Cal. Rptr. 500, 503-04 (1974).
For the foregoing reasons, I respectfully dissent.

. I also adhere to the majority’s conclusion that Bankers Ag was not liable on the grain contracts.

. This conclusion is buttressed by the court’s citation to the Texas Digest.

. The comment observes that the election rules on disclosed and undisclosed principals are “not in accord.”