Court Opinion

ID: 9519009
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:07:14.099862+00
Date Added: 2024-06-11T12:40:45.171313
License: Public Domain

SULLIVAN, Judge,
dissenting.
The facts as recited in the earlier appeal are binding upon the parties. Although the “law of the case” doctrine is discretionary with this court, the parties are not at liberty to contest facts which have already been determined and which formed the basis of an earlier appellate decision. Certain Northeast Annexation Area Landowners v. City of Fort Wayne (1993) Ind.App., 622 N.E.2d 548, 549, trans. denied.3
In the recitation of facts, the August 30, 1993 memorandum decision noted:
“Hires acknowledged delivery of the antifreeze by signing a memorandum which listed Oü Supply as the shipper and consignee.4 Customer Equipment was listed as the carrier. Dolin’s name was nowhere on the memorandum. After receiving the antifreeze Hires released Dolin on his debt as per their previous agreement.” Hires Parts Serv. v. Oil Supply Co. (1993) Ind. App., 619 N.E.2d 612 (emphasis supplied).
Despite having notice of Oil Supply’s involvement, Hires never made inquiry and neither returned the merchandise to Oil Supply nor paid for it. Instead, Hires kept the shipment and discharged Dolin’s personal debt.
The timing of the various events which took place is of importance because until the goods were shipped and received, Oil Supply was the undisclosed principal of Dolin. However, when those goods were received and signed for, Hires had reason to know of an agency relationship. This fact is in turn important because as noted, Hires did not *95release Dolin’s personal debt until after the goods were received. Accordingly, we deal here in part with principles governing an undisclosed agency, and in part with principles governing the disclosure of an agency relationship after a commercial transaction was initiated but before it had been completed.
Because of the hybrid nature of the legal analysis required in this case, it is difficult to isolate principles of apparent or implied authority which are applicable when the agency is fully or partially disclosed from principles which apply to unauthorized acts of an agent for an undisclosed principal. Whether a principal is disclosed, partially disclosed or undisclosed is very fact sensitive and depends upon the facts and circumstances surrounding the transaction. Brown v. Owen Litho Serv., Inc. (1979) 179 Ind.App. 198, 202, 884 N.E.2d 1132, 1135. For this reason, although the facts are not essentially in dispute, my dissent utilizes well-settled principles drawn from both disclosed and undisclosed principal situations.
The authority of an agent includes only authority to act for the benefit of the principal. 3 Am.Jur.2d Agency § 71 (1986). It is therefore obvious that the agent has no authority to act to the detriment of the principal. Furthermore, in business matters, as a general proposition, an agent has no authority to seek personal advantage other than through the faithful performance of his duties. Restatement (Second) of Agency § 39 (1957). Disputes in this regard are easily solved as between agent and principal. They are not so easily resolved, however, when the dispute is between the principal and a third party. It is in the latter situation that issues of disclosure, apparent authority and the like become involved.
In situations involving disclosed or partially disclosed agency relationships, a principal may be liable for unauthorized acts of his agent if the agent had apparent authority to so act. To establish apparent authority there must be some communication by the principal which instills a reasonable belief of the agent’s authority in the mind of the third party. Jarvis Drilling, Inc. v. Midwest Oil Producing Co. (1993) Ind.App., 626 N.E.2d 821, 826, trans. denied. Statements or representations by the purported agent are insufficient to create apparent authority. State Farm Mut. Auto. Ins. Co. v. Gonterman (1994) Ind.App., 637 N.E.2d 811, 815. Here, however, there is no issue of “apparent authority” because at the time of the initial agreement made between Dolin and Hires, no reasonable purchaser would infer that Do-lin had authority from a principal, if such existed, to barter Oil Supply’s product in satisfaction of Dolin’s personal debt. But see Excel Furniture Co. v. Brock (1917) 63 Ind. App. 494, 114 N.E. 701. The position of Hires in the first appeal was and is now that Hires dealt directly and personally with Do-lin for purchase of antifreeze and that it had no business relationship with Oil Supply. That position is undercut by Hire’s contention, also made in the initial appeal, that “Dolin had authority to accept payment for Oil Supply”. Hires Parts Serv. v. Oil Supply Co., (1993) Ind.App., 619 N.E.2d 612.
Hires cannot have it both ways. As earlier noted, Hires knew of Oil Supply’s involvement in the antifreeze transaction at least by the time it accepted the shipment and before it forgave the debt owed by Dolin. In any event it would seem logical, in applying principles of apparent authority, that even if it were reasonable for Hires to infer that Dolin had authority to accept payment for Oil Supply, it would be unreasonable to infer that such authority included the right to barter the product for Dolin’s own personal debt.
As stated in Miladin v. Istrate (1954) 125 Ind. App. 46, 53-54, 119 N.E .2d 12, 17, reh’g denied, 125 Ind.App. 46, 119 N.E.2d 901:
“ ‘[I]n 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.... It is settled that an agent having authority merely to receive payment of an obligation ... is not authorized to take chattels or merchandise in payment.’ ” (quoting 2 Am.Jur. Agency § 165-66.)
This being the general rule, it stands to reason that a third party may not, in the *96belief that an agent has authority to collect payment, effect satisfaction of the debt owed to the principal by forgiving a personal debt of the agent. Again, it has been stated as a general principle that “[t]he authority to sell the principal’s personal property does not include within its scope the authority to apply or transfer the property in payment of the agent’s own debt, and one who so takes the property, though in good faith, cannot ordinarily hold the same against the principal.” 3 Am.Jur. Agency § 111.
Another general principle deemed applicable here is stated in 3 Am.Jur. Agency § 301:
“A person who knowingly receives ... property of a principal from an agent in payment of the latter’s debt does so at his peril; and if the agent acts without authority, the principal, on proof of these facts, is entitled to recover.”
The third party must know or have reason to know that the property is that of the principal. Id. Here it is clear that when Hires accepted shipment of the product it knew that Oil Supply was the shipper and that Dolin’s name was not in any way associated with the transaction. The situation is not unlike that in Robinson v. Anderson (1886) 106 Ind. 152, 6 N.E. 12, the most closely analogous Indiana ease. There, a certain machine was ordered by Anderson from Robinson. The order was placed through Robinson’s agent. When the machine was delivered, Anderson, in payment, gave to the agent promissory notes payable to Robinson. Thereafter, those notes were surrendered by the agent to Anderson without Robinson’s endorsement or other authorization and were replaced by notes payable to the agent himself. The Supreme Court held that invalidity of the verdict for Anderson upon Robinson’s claim for payment was “clear beyond any question.” 106 Ind. at 155, 6 N.E. at 14. The court stated that:
“An agent having authority to collect a debt cannot be supposed to have the right to take as payment the note of the debtor payable to himself, thus substituting himself as creditor in the room [sic] of his principal.... That a debt may be paid by the execution of the negotiable promissory note of the debtor, may be conceded, but the execution of such note to a third person, without the consent of the creditor, has no resemblance of payment.” 106 Ind. at 156, 6 N.E. at 14..
Similarly, where, as in this case, the purchaser accepts goods from a named shipper and instead of forwarding payment or awaiting invoice from the shipper, purports to satisfy the debt through cancellation of a personal debt of the seller’s agent, there is “no resemblance of payment.”
When a principal is undisclosed, a third person may set up any defenses he has as against the agent upon the rationale that where one of two innocent persons must suffer from the fraud of an agent the loss should fall upon the person whose act permitted the fraud to be committed, i.e., the principal. Stump v. Indiana Equip. Co. (1992) Ind.App., 601 N.E.2d 398, 403, trans. denied 3 Am.Jur.2d Agency § 341. This principle does not apply, however, if the party seeking refuge in the principle has wittingly or otherwise aided an unscrupulous agent to defraud the principal.
In Hamilton Natl Bank v. Nye (1906) 37 Ind.App. 464, 77 N.E. 295, a purchaser of goods issued a cheek payable to the seller and delivered the check to the agency. Instead of forwarding the check to the principal, the agent indorsed the check in the principal’s name. Although the purchaser was not shown to be at fault with regard to the transaction, it was held that the bank which obtained the cheek in good faith and for consideration could not enforce it against the original maker. Although the case is not analogous on its facts, it is instructive in that if the purchaser of the goods, as maker of the check, was held not liable upon the check issued in the name of the seller, it would seem to follow that the purchaser had not satisfied his debt to the seller-principal.
It is also the generally accepted rule that where a third person contracts with an agent who has not given notice to the third person of his agency, the third person may set off a debt or claim due him from the agent personally in an action on the contract by the undisclosed principal. Restatement (Second) of Agency § 306. Again, however, the set off may not be imposed against the principal in a *97situation such as before us. A purchaser from an agent having neither the possession or indicia of property in himself may not set off a debt due him from the agent when sued by the undisclosed principal. The reason for the rule is that the absence of apparent title should put the purchaser on inquiry as to the true status of the agent in the matter. 3 Am.Jur.2d Agency § 343. Clearly, no such set off is available where, as here, “before the contract has been consummated by delivery and acceptance of the goods, or at least before the party dealing with the agent has, by making payment or otherwise, altered his position or incurred some disadvantage^]” Id. The same rule was articulated as follows in Syriani v. Gebhart (1950) 195 Md. 69, 72 A.2d 766, 770:
“Even when a prospective purchaser believes that the agent is the owner and has no reason to believe the contrary, if the principal is disclosed before the goods are delivered or payment made, the purchaser cannot set-off against the price his debt against the agent.”
These related concepts are unmistakably synthesized and made applicable to the facts before us as set forth in Restatement § 306, supra:
“(2) If the agent is authorized only to contract in the principal’s name, the other party does not have set-off for a claim due him from the agent unless the agent has been entrusted with the possession of chattels which he disposes of as directed or unless the principal has otherwise misled the third person into extending credit to the agent.
⅝ ⅜ ⅜ ⅜ ⅜ ⅜

Illustrations:

1. A is authorized by P to contract to sell to T in P’s name goods of which A does not have possession. A sells the goods in his own name and causes them to be delivered to T. At this time A owes T $500. In an action by P against T, T may not set off the claim which he has against A.”
I would reverse and remand with instructions to enter judgment for Oil Supply in the full amount of the invoice purchase price together with interest thereon.

. Although the earlier appeal was resolved by a memorandum decision, that decision has prece-dential effect with respect to application of principles of res judicata or law of the case. Ind. Appellate Rule 15(A)(3).

. Use of the term "consignee” in relation to Oil Supply is explained by the fact that in filling the order, Oil Supply directed its antifreeze contract blender, Kinpac, Inc., to ship the cases of antifreeze, out of its inventory, directly to Hires. Thus Oil Supply was the consignee only as to Kinpac.