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AAA Tire & Export, Inc. v. Big Chief Truck Lines, Inc.

Louisiana Court of Appeal
1980 La. App. LEXIS 3963, 385 So.2d 426 (1980)
ELI5:

Sections

Rule of Law:

A principal is liable for the acts of an agent only if the agent possesses actual authority (express or implied) or apparent authority; apparent authority exists only when the principal's own actions cause a third party to reasonably believe the agent is authorized to act.


Facts:

  • Big Chief Truck Lines operated as a carrier that leased all its trucks and trailers from other firms, meaning it did not handle maintenance or purchase tires itself.
  • Adam Dixon was employed as Big Chief's terminal manager in Baton Rouge, with duties including sales, dispatching, and 'maintenance,' though the company owned no vehicles to maintain.
  • Robert Taylor, president of AAA Tire, cold-called Dixon based on a Dunn & Bradstreet listing to solicit business.
  • Dixon ordered tires from AAA to be delivered to the terminal, providing credit references that belonged to his personal side business, Dixon and Company.
  • AAA shipped the tires on credit without verifying if the references belonged to Big Chief or investigating whether Dixon had purchasing authority.
  • The tires were delivered to the terminal, but Big Chief never authorized payment, and the tires were allegedly used by Dixon for his personal business or went missing.

Procedural Posture:

  • AAA Tire & Export, Inc. filed a suit on an open account against Big Chief Truck Lines, Inc. in the trial court.
  • Big Chief filed a third-party demand for indemnification against Adam Dixon and his associated companies.
  • The trial court ruled that Dixon lacked authority to bind Big Chief and dismissed AAA's suit.
  • AAA Tire & Export, Inc. appealed the dismissal to the Court of Appeal of Louisiana, First Circuit.

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Issue:

Does a terminal manager for a trucking company that leases all its vehicles possess the actual or apparent authority to purchase tires on the company's behalf, thereby making the company liable for the debt?


Opinions:

Majority - Lottinger

No, a terminal manager does not possess authority to bind the principal when the principal's business model excludes such purchases and the principal did nothing to mislead the seller. The court reasoned that 'actual authority' did not exist because Dixon's employment agreement did not explicitly include tire purchasing, and such authority could not be 'implied' because purchasing tires was not a reasonable necessity for a manager of a company that owned no trucks. Regarding 'apparent authority,' the court held that this doctrine applies only when the principal (Big Chief) acts in a way that gives a third party (AAA) a reasonable belief of authority. Here, AAA relied solely on Dixon's own representations and title. Big Chief took no action to signal to AAA that Dixon had buying power, and simply holding the title of 'terminal manager' is insufficient to create apparent authority for purchases not standard to the business.



Analysis:

This case clarifies the boundaries of 'apparent authority' in commercial agency law, specifically placing a burden of due diligence on vendors. It establishes that a job title alone (such as 'terminal manager') does not automatically grant apparent authority to bind a company to contracts, especially when the nature of the contract (buying tires) contradicts the company's actual business model (leasing trucks). The decision protects companies from liability for the unauthorized fraudulent acts of employees when the third party fails to verify the employee's specific powers with the principal.

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