Carolina Builders Corp. v. Palms Construction Co.

BRITT, Judge. Plaintiff states the questions presented on this appeal as follows: (1) Did the Court err in excluding testimony of the statements made by defendant’s job superintendents, purchasing agent and other employees contemporaneous with and explanatory of their actions in the performance of their duties? (2) Did the Court err in failing to make any findings relating to the apparent authority of the defendant’s agents (a) to promise that defendant would guarantee payment for sheetrock, if plaintiff would ship it to defendant’s subcontractor, and (b) to direct disbursement of defendant’s checks made payable jointly to the plaintiff and to Charles E. Swaney? (3) Did the Court err in excluding testimony and in failing to find that the defendant, by inducing the plaintiff to ship sheetrock to defendant’s subcontractor, had ratified its employee’s promises that defendant would guarantee payment of the account? Due to the interrelation of the questions and principles of law involved, we will not discuss the questions separately. It appears that plaintiff’s theory is that Portefe and Clary had actual authority or apparent authority from defendant to carry out the arrangement between plaintiff and Swaney whereby plaintiff would refund certain portions of defendant’s checks in order that Swaney could pay his labor, or that defendant ratified the arrangement; and that Nichols and Gilmore, as officials of defendant, had actual or apparent authority to authorize plaintiff to continue furnishing materials to Swaney in Greensboro after plaintiff learned that the Greensboro project was in trouble. By reason of that theory, plaintiff argues that statements and declarations made by Portefe, Clary, Nichols and Gilmore to plaintiff’s representatives were erroneously excluded as evidence. [671] In 6 Strong, N. C. Index 2d, Principal and Agent § 4, p. 408, we find: “In the absence of proof of agency and that the act forming the basis of the action was within the scope of the agent’s authority, evidence of acts, representations, or warranties made by the agent are incompetent as against the alleged principal.” See also Edgewood Knoll Apartments v. Braswell, 239 N.C. 560, 80 S.E. 2d 653 (1954), reh. den., 240 N.C. 760, 83 S.E. 2d 797 (1954). Plaintiff’s evidence not only failed to show that the acts forming the basis of the action were within the scope of the authority of defendant’s Raleigh and Greensboro agents, the testimony of plaintiff’s witness Harris positively showed that the acts were not within the authority of the agents. For that reason, as well as others unnecessary to state, the trial court properly excluded the proffered testimony. In Fleming v. Insurance Co., 269 N.C. 558, 561, 153 S.E. 2d 60 (1967), our Supreme Court quoted with approval from 3 Am. Jur. 2d, Agency § 78, as follows: “A third person dealing with a known agent may not act negligently with regard to the extent of the agent’s authority or blindly trust the agent’s statements in such respect. Rather, he must use reasonable diligence and prudence to ascertain whether the agent is acting and dealing with him within the scope of his powers. The mere opinion of an agent as to the extent of his powers, or his mere assumption of authority without foundation, will not bind the principal; and a third person dealing with a known agent must bear the burden of determining for himself, by the exercise of reasonable diligence and prudence, the existence or nonexistence of the agent’s authority to act in the premises.” The evidence in the instant case showed that defendant’s main office was located in Virginia Beach, Virginia, and that its officers worked from that point. When defendant included plaintiff’s name on its checks payable to Swaney, the burden was then on plaintiff to make a proper judgment as to the portion of the funds it could refund to Swaney and the portion it must retain to insure payment of its account. While plaintiff evidently relied heavily on Portefe and Clary to assist in making that judgment, the ultimate decisions were still on plaintiff. [672] The record indicates that Portefe cooperated with plaintiff very satisfactorily and that as long as he was the job superintendent Swaney’s account stayed current. When Portefe warned plaintiff that the Greensboro project was in trouble, plaintiff was put on notice that it had to use great care in protecting itself. Plaintiff acted at its peril in relying on statements by Gilmore or Nichols that a written guarantee of the Swaney account would be obtained from the home office. The mere fact that the guarantee had to come from the home office indicated that neither Gilmore nor Nichols had authority to bind the defendant with respect to the account. Finally, it is noted that the trial court not only granted defendant’s Rule 41(b) motion for involuntary dismissal, but went further and made a determination on the merits of the case. The court found facts in favor of defendant and the findings of fact are fully supported by the evidence. The judgment appealed from is Affirmed. Chief Judge Brock and Judge Arnold concur.