Walker v. Pacific Mobile Homes, Inc.
1966 Wash. LEXIS 741, 413 P.2d 3, 68 Wash. 2d 347 (1966)
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Rule of Law:
A principal is bound by the acts of its agent when the principal's conduct causes a third party to reasonably believe the agent has the authority to perform those acts, even if the agent's actions exceed their actual, undisclosed authority.
Facts:
- Plaintiff Walker sought to sell his trailer on consignment and spoke with Robert Stewart at a lot with a large sign reading "Pacific Mobile Homes, Inc."
- Stewart was the sole employee present on the lot during Walker's visits.
- Stewart towed Walker's trailer to the Pacific Mobile Homes lot and displayed it for sale among the other trailers.
- Stewart had Walker sign a "Trailer Consignment Agreement" form, though the consignee was barely legibly written as "Southgate Trailers."
- After Stewart left the company, another salesman, Bob Henderson, contacted Walker about the trailer from the same lot.
- Henderson corresponded with Walker using Pacific Mobile Homes, Inc. business stationery.
- Henderson sold the trailer for cash, sent Walker three partial payments via personal check, and then absconded with the remaining proceeds.
Procedural Posture:
- Walker sued Pacific Mobile Homes, Inc. in a state trial court.
- The trial court found in favor of Walker and entered a judgment against Pacific Mobile Homes for $1,290.51.
- Pacific Mobile Homes, Inc., as the defendant-appellant, appealed this judgment to the reviewing appellate court.
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Issue:
Does a principal create apparent authority for its agent to enter into a consignment agreement when it places the agent in sole charge of its place of business, under a large company sign, allowing the agent to possess company business forms and display the third party's property for sale on its lot?
Opinions:
Majority - Hale, J.
Yes. A principal creates apparent authority for its agent by clothing the agent with the appearance of authority. Pacific Mobile Homes placed its salesmen, Stewart and later Henderson, in solitary control of its business premises, which featured a large sign with the company's name and trailers on display. These circumstances, along with the agents' use of company business forms and stationery, would lead a person of ordinary business prudence to reasonably assume the salesmen had authority to take trailers on consignment and complete sales. A principal is bound by the actions of an agent acting within the scope of their apparent authority, and third parties are not bound by undisclosed limitations on that agent's power.
Dissenting - Hill, J.
No. The plaintiff failed to establish that he relied on any apparent authority created by Pacific Mobile Homes. The dissent argues that the evidence shows Walker knew he was dealing with Stewart and Henderson personally, not with the corporation. This is supported by the facts that the consignment form did not name Pacific Mobile Homes, the payments were made via personal check from Henderson, and Walker spent over a year trying to locate the absconded salesman rather than contacting the company. Without proof that the plaintiff relied on the agent's apparent authority, the principal cannot be held liable.
Analysis:
This decision reinforces the doctrine of apparent authority, emphasizing that a principal's liability is determined by the outward manifestations of authority it creates, not by secret internal limitations placed on its agents. The ruling places the risk of loss from a dishonest agent onto the principal who put the agent in a position to commit the misconduct, rather than on an innocent third party who reasonably relied on the appearances created by the principal. It serves as a precedent for holding businesses accountable for the actions of employees who appear to be acting within the scope of their employment, thereby encouraging principals to exercise greater supervision over their agents and business operations.
