Court Opinion

ID: 9542291
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:32:44.106274+00
Date Added: 2024-06-11T15:07:29.826217
License: Public Domain

McFADDEN, Justice
(dissenting).
There are certain facets of this cause which lead me to the conclusion that the trial court was in error in entering judgment for the respondent.
Mr. Hartwell, respondent’s president, testified unequivocally that he knew that Dehnert, the appellant’s agent, had only limited authority insofar as the execution of the bond as applied for was concerned. It will be recalled that Mr. Hartwell testified as follows:
“Q. At the time you furnished that [the application] to Mr. Dehnert, was *546there any discussion as to what would he done with this application?
A. It would just he submitted to a company and then they in turn would tell us the limits that they would bond.
Q. I see. And was there a discussion at that time and place as to whether or not Dr. Dehnert would give the approval on bonding?
A. Well, I don’t know whether there was a discussion at that time whether Mr. Dehnert could issue a bond, but he — I knew that he had to have authority from his company to issue bid bond, yes.
Q. I see. And you had discussed that with him ?
A. Well, prior to the bid opening, yes. I can’t say just exactly the date, but we had discussed the fact that he had to submit this information to his company before they would authorize him to write this bid bond.”
The testimony of Mr. Hartwell as to what Mr. Dehnert told him as to whether the appellant bonding company would issue the performance bond after issuance of the bid bond, is as follows:
"Q. Now would you relate, in detail, every word, as you recall, that was said by Mr. Dehnert and yourself at this time and place.
* * * * * *
A. Mr. Dehnert came to the office to bring the bid bond over for my signature, to accompany our bid. At the same time he brought this application for Commercial Insurance Company, which I have signed, and at the same time — this all took place in a matter of just a few minutes, because the time was getting short in submitting the bid — I asked Mr. Dehnert, at the time that I signed the bid and this application, if his company would give me a performance bond if I was successful as low bidder. He said, ‘They have got to.’
Q. Are these the exact words of Mr. Dehnert, as you recall them?
A. As I recall, that’s his exact words, ‘They’ve got to.’ ”
It is thus undisputed that Mr. Hartwell knew that Mr. Dehnert did not have any authority to execute the bond or any bond without the prior approval of the appellant bonding company; yet Hartwell claims that even knowing of such limited authority he was entitled to rely on statements made by this same agent as to the appellant’s obligation. The trial court concluded that Dehnert was within the scope of his apparent authority when he represented to and promised Hartwell that his company was obligated to and would provide the performance bond for the respondent, and that hence *547the appellant is estopped to deny such apparent authority.
“In so far as a third person has notice or knowledge at the time of dealing with an agent of the inconsistency between the powers which the agent has and those which he assumes to exercise, the authority of the agent is deemed not to extend beyond that actually conferred upon him, to the exclusion of whatever apparent authority might exist in the absence of such notice or knowledge.” 2 C.J.S. Agency § 92, p. 1188.
In Texas Company v. Peacock, 77 Idaho 408, 293 P.2d 949, this court stated:
“Under the circumstances shown herein, with the limitations of the agency of appellant’s representatives known to respondents, the respondents could not acquire rights against appellant contrary to those known limitations. (Citing cases).”
In 3 Am.Jur.2d, p. 481, Agency § 77, it is stated:
“It is always competent for a principal to limit the authority of his agent, and if such limitations have been brought to the attention of the party with whom the agent is dealing, the power to bind the principal is defined thereby. Accordingly, the general rule is that one who deals with an agent, knowing that he is clothed with a limited or circumscribed authority and that his act transcends his powers, cannot hold his principal.”
Restatement of the law. Agency 2d, § 166, states:
“A person with notice of a limitation of an agent’s authority cannot subject the principal to liability upon a transaction with the agent if he should know that the agent is acting improperly.”
See also: Hartford Fire Ins. Co., v. McAvoy, 177 Okl. 60, 57 P.2d 242, (1935); Travelers Indemnity Co. v. Collier, 205 Okl. 247, 237 P.2d 153 (1951); American Surety v. Lind, 132 Wash. 326, 232 P. 280, (1925); Cox v. Pabst Brewing Co., 128 F.2d 468, (CA 10th); McComb v. Quaker Oats Co., 187 F.2d 422 (CA 5th).
It is my conclusion that the trial court was in error in relying upon any apparent authority on the part of Dehnert as the basis for discharging the defendant from its liability to reimburse the appellant for payments made. The statement attributed to Dehnert, that if after the bid bond was issued, his principal had to issue the performance and payment bond, would be beyond his authority. At most it is only an agent’s opinion what the principal would do in the future, and is not a statement of an existing fact. See 19 Am.Jur. 656, Estoppel §52; Annot: 115 A.L.R. 152; 48 A.L.R.2d 1069.
*548The trial court in its conclusions of law stated:
“That the application for contract bond constituted an application for contract bond with said contract bond to include all the bonding requirements for the West Side Sewer System Project including a bid bond, and in the event of a successful bid, a performance bond and ultimately, if necessary, a payment bond, and that when said applications were accepted by the plaintiff a binding contract was formed whereby the plaintiff was obligated to provide, in the event of a successful bid, a performance bond, and ultimately, if necessary a payment bond. * * * ”
Such a conclusion is predicated on the proposition that there was only a single application or offer submitted by the respondent to encompass all the bonds. The application was entitled: “Application for Contract Bond”, and it consisted of a number of blanks to be filled in by the applicant, together with a number of specific provisions. The respondent among other items, submitted the following data:
“Amount of Bond. Bid $ 5% Contract Price, $ per unit Date 11-22-1960. Performance $100% Payment $100% 175,000.00 Est. Bid Opening
If contract price is per unit of measure, so state and give probable total of Contract.
To Whom Given? (Obligee.) Give full name and business address. * * *
_City of Idaho Falls, Idaho Falls, Idaho_
Nature of Contract (give explanatory detains) West Side Sewer_
System. Sewer Mains and service lines.”
The application also contained as one of its provisions the following:
“16. That the company reserves the right to decline to issue the bond for which application is hereby made, and that no claim may be made against the Company in consequence of its failure to execute such bond; nor shall any claim be made in case the bond executed is not accepted by or on behalf of the obligee.”
The application was an offer by the respondent to have the appellant issue the surety bond sought. Until this offer was accepted by appellant, there could be no liability between it and respondent. As in the case of insurance contracts, no liability arises until the offer has been accepted by the surety. See: 12 Insurance Law and *549Practice, Appleman, 155 § 7121. This application 'was submitted for one specific job being bid by respondent. No one contemplated that upon acceptance of the offer all three of the bonds should immediately have been written. Otherwise, the respondent would have insisted upon the performance bond and payment bond at the same time that the bid bond was written. Only by considering this to be an instrument containing more than one offer does its various provisions become meaningful. Initially it was an offer by the respondent for appellant to issue its surety bond to the city, assuring the validity of respondent’s bid. If respondent’s bid for the sewer contract was accepted by the city, then the second offer would become effective, i. e., the application then became an offer for the performance bond, and ultimately the payment bond.
The specific terms of the application (Sec. 16) emphasizes this construction to be placed upon this application, for it is provided that the appellant reserved “the right to decline to issue the bond for which application was made.”
Dealing with comparable situations, it is stated in 1 Corbin on Contracts, 225 § 53, as follows:
“There is one sort of case in which the offer is not made irrevocable either by a part performance or by an express notice of acceptance. This is the case in which an offer has been made in such terms as to create a power to make a series of separate contracts by a series of separate acceptances. The closing of one of these separate contracts by one acceptance leaves the offer still revocable as to any subsequent acceptance.”
Restatement of Law of Contracts, § 44, provides:
“A revocable offer contemplating a series of independent contracts by separate acceptances may be effectively revoked so as to terminate the power to create future contracts, though one or more of the proposed contracts have already been formed by the offeree’s acceptance.”
1 Williston on Contracts, 3rd Ed. states: p. 183 § 58:
“Most offers contemplate a single acceptance by the offeree by an indivisible act or by an indivisible promise or set of promises. It is possible, however, to make a divisible offer requesting a series of acts or promises to be given from time to time, and agreeing in return to give "a series of performances each of which is to be set off against a corresponding act or promise of the offeree. If an offer is of this divisible character it may be revoked not only before any acceptance but also as to any portion of the. offer still *550unaccepted even after acceptance of some of the series of transactions proposed by the offer.”
It is my conclusion that the trial court was in error in determining that acceptance by the appellant of the application to issue the bid bond, bound appellant then to issue the performance and payment bonds upon respondent’s bid being accepted by the city. And this is so, even if we accept as correct the finding by the trial court that there was a custom and usage “that if a bonding company wrote a bid bond for a public work construction it would also write the performance bond for such construction if the party for which it had written the bid bond was the successful bidder.”
As concerns custom and usage, this court has repeatedly held that custom and usage cannot be used to vary or contradict the terms of a contract which is plain and unambiguous. Puget Sound Nat. Bank v. C. B. Lauch Const. Co., 73 Idaho 68, 245 P.2d 800; Gramkow v. Farmers Cooperative Irr. Co., 47 Idaho 578, 277 P. 431; Ehlinger v. Washburn-Wilson Seed Co., 51 Idaho 17, 1 P.2d 188. If the respondent’s contention concerning custom and usage were correct, the express provisions of the application to the effect that the appellant reserved the right to decline to issue the bond, would be abrogated and made meaningless, which is beyond the function of use and custom. Branom v. Smith Frozen Foods of Idaho, Inc., 83 Idaho 502, 365 P.2d 958; Rest, of Law of Contracts § 246.
Finally it is my conclusion that the trial court was in error in its conclusions of law and that the payment by the plaintiff to the City of Idaho Falls in the amount of the bid bond was made voluntarily. This payment, in the face amount of the bond was made only after demand had been made to respondent to pay the amount of the bond. This demand was signed by the Mayor of the City of Idaho Falls, and a copy of the demand, with covering letter was forwarded to appellant by the city attorney. Exception to this procedure was taken by the respondent, which asserts that there were no minutes of such authority being granted by the city to the mayor or city attorney. Nonetheless, the city accepted the money paid by appellant. It is significant to note, however, that there is no contention that the mayor and city attorney were not in fact so authorized. If there was no authorization for them to make such demand, that would have become a matter of proof to be established by the respondent. Acceptance by the city council of the amount of the payment constituted a ratification of the acts of the mayor and city attorney, if they were in fact unauthorized. Thus, the conclusion reached by the trial court was in error.
The respective parties stipulated that in the event the court concludes the appellant *551was entitled to an attorney’s fee, the court should fix the amount thereof. The issue as to attorney’s fee was not considered by the court.
The trial court erred in its evaluation of the law applicable to the defenses presented by respondent. The allegations of appellant’s complaint were sustained by the evidence.
The judgment in this cause should be reversed and the cause remanded for entry of new conclusions of law in conformity with the views expressed herein and for entry of judgment in favor of the appellant, with the trial court to determine what, if any, attorney’s fee should be awarded.
SMITH, J., concurs in this dissent.