Anchor Crane & Hoist Service Co. v. Sumrall Personnel Service, Inc.
1981 Tex. App. LEXIS 3611, 620 S.W.2d 653 (1981)
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Rule of Law:
A principal's conduct creates apparent authority in an agent if it would lead a reasonably prudent person, using diligence and discretion, to believe that the agent has the authority to act on the principal's behalf.
Facts:
- Sumrall Personnel Service, Inc. (Sumrall), an employment agency, telephoned Anchor Crane & Hoist Service Company (Anchor Crane) about placing an engineer.
- Virginia Sumrall, Sumrall's vice president, was first connected to Laura Mays, Anchor Crane's president.
- Mays referred Virginia Sumrall to Ed Warren, Anchor Crane's works manager, stating Warren would interview the candidate and Mays would later discuss salary with Warren.
- Virginia Sumrall and Warren subsequently had several conversations, during which Sumrall claimed they negotiated and agreed to a commission of 15% of the engineer's $20,000 annual salary.
- Warren acknowledged the conversations but denied that they reached an agreement on paying a commission.
- Mays testified that Warren did not have actual authority to hire employees or agree to pay commissions.
- Anchor Crane subsequently hired the engineer that Sumrall had referred.
Procedural Posture:
- Sumrall Personnel Service, Inc. sued Anchor Crane & Hoist Service Company in a Texas trial court for breach of an oral contract.
- A bench trial was held (trial before the court without a jury).
- The trial court found in favor of the plaintiff, Sumrall, holding that Anchor Crane's works manager acted with apparent authority.
- The trial court entered a judgment for Sumrall, awarding a commission.
- Anchor Crane & Hoist Service Company, as appellant, appealed the judgment to the Texas Court of Civil Appeals.
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Issue:
Does a company president create apparent authority in a works manager to bind the company to an employment agency's commission contract by referring the agency's initial call to that manager for the purpose of interviewing a potential employee?
Opinions:
Majority - Storey, Justice
Yes. A principal's conduct can create apparent authority in an agent if it would cause a reasonably prudent person to believe the agent is authorized to act. Here, Anchor Crane's president, Mays, knew the nature of Sumrall's business and the purpose of her call. By directing Sumrall to deal with the works manager, Warren, Mays's conduct could lead a reasonably prudent person to believe that Warren was clothed with the authority to negotiate the terms of the placement, including the commission. The reasonable conclusion from Mays's referral was that further discussion with Mays was unnecessary and that Warren was the designated agent for this matter, thereby satisfying the test for apparent authority established in Chastain v. Cooper & Reed.
Dissenting - Carver, Justice
No. Apparent authority is not created when a principal's referral explicitly limits the scope of the agent's duties, and the third party has notice of that limitation. Mays referred Sumrall to Warren for the limited and stated purpose of having Warren interview the engineer, not to hire the employment agency. This specific instruction constituted notice to Sumrall of Warren's limited authority. A reasonably prudent person would not conclude that authority to interview an applicant also confers authority to bind the company to a commission contract. Because Sumrall had notice of the limited scope of Warren's authority, it cannot now rely on the doctrine of apparent authority.
Analysis:
This case demonstrates how the doctrine of apparent authority is highly fact-dependent, focusing on the principal's manifestations from the perspective of a reasonable third party. The majority's holding emphasizes that even a simple act like referring a phone call can create broad authority if the context suggests the agent is the designated point of contact for the entire transaction. This decision serves as a caution to principals to be exceedingly clear when delegating tasks and communicating the limits of their agents' authority to third parties, as ambiguity will likely be resolved in favor of the third party who reasonably relies on the agent's purported power.
