Taylor v. Ramsay-Gerding Construction Co.
345 Or. 403, 196 P.3d 532, 2008 Ore. LEXIS 1006 (2008)
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Rule of Law:
Apparent authority is created when a principal's conduct, when reasonably interpreted, causes a third party to reasonably believe that the principal consents to have the agent act on that matter. A principal's conduct can include appointing an agent to a position with generally recognized duties, clothing the agent with actual authority to perform related tasks, and providing indicia of authority like company letterhead.
Facts:
- In 1998, H. H. (Todd) Taylor and C. A. Taylor began construction of a hotel, hiring Ramsay-Gerding Construction Company as the general contractor.
- Ramsay-Gerding proposed using a stucco system called 'SonoWall,' manufactured by ChemRex, Inc., which the Taylors approved.
- During construction, Todd Taylor became concerned about the potential for galvanized fittings in the stucco system to rust, and construction was halted.
- In September 1998, Ramsay-Gerding organized a meeting to address the issue, attended by Taylor and Mike McDonald, ChemRex's territory manager for Oregon, who was introduced as a ChemRex 'representative'.
- At the meeting, to alleviate Taylor's concerns, McDonald stated, 'Mr. Taylor, did you know you’re getting a five-year warranty?', which convinced Taylor to proceed with construction.
- In July 1999, after construction was complete, McDonald sent a letter on ChemRex letterhead to the stucco installer confirming a five-year warranty for the system, which was subsequently forwarded to the Taylors.
- By the spring of 2000, the hotel's exterior walls showed signs of rust.
- Taylor notified Ramsay-Gerding, and representatives from ChemRex examined the stucco system, but the rust problem was never fixed.
Procedural Posture:
- In 2001, the Taylors (plaintiffs) sued their general contractor, Ramsay-Gerding, for breach of contract in a state trial court.
- Ramsay-Gerding filed a third-party complaint against ChemRex (third-party defendant), alleging breach of warranty.
- Plaintiffs amended their complaint to add a direct claim against ChemRex for breach of express warranty.
- At a bifurcated jury trial on the warranty claim, ChemRex moved for a directed verdict, arguing its agent, McDonald, lacked authority. The trial court denied the motion regarding apparent authority.
- The jury found for the plaintiffs, concluding McDonald had apparent authority and awarded damages. The trial court entered judgment for the plaintiffs.
- ChemRex (appellant) cross-appealed to the Oregon Court of Appeals (intermediate appellate court), challenging the denial of its motion for a directed verdict.
- The Court of Appeals reversed the trial court, holding that there was insufficient evidence of apparent authority and remanded for entry of judgment in favor of ChemRex.
- The Taylors (petitioners) petitioned for review by the Supreme Court of Oregon (highest court), which was granted.
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Issue:
Is there sufficient evidence for a jury to find that a manufacturer's territory manager has apparent authority to issue a warranty when the manufacturer (the principal) has given the manager actual authority to solve customer problems on-site and communicate with customers on company letterhead?
Opinions:
Majority - Balmer, J.
Yes. There was sufficient evidence for a jury to find that the territory manager had apparent authority to issue the warranty. Apparent authority arises from the principal's manifestations to a third party. Here, the principal, ChemRex, created the appearance of authority by appointing McDonald to the position of 'territory manager,' giving him actual authority to visit job sites to solve problems, and providing him with company letterhead to communicate with customers about warranties. These actions by ChemRex could cause a third party like Taylor to reasonably believe that McDonald was authorized to offer a warranty to resolve the specific rust concern he was sent to address. The third party's subsequent reliance on both the verbal promise to continue construction and the written confirmation to close out the project solidifies the principal's liability under the doctrine of apparent authority.
Analysis:
This decision clarifies the evidentiary foundation for apparent authority in Oregon, emphasizing that a combination of circumstantial factors can be sufficient for a jury's finding. It rejects a stricter standard that would require evidence of specific authorization for the exact act in question or proof of industry custom. The ruling reinforces that the focus of the inquiry is on the principal's overall conduct and the reasonable perceptions it creates in a third party. This approach makes it easier for third parties to hold companies liable for promises made by agents who appear to be acting within their scope of duties, particularly when they hold managerial titles and are tasked with on-site problem-solving.
