would become a substantial stockholder thereof. Because Impacts, Inc. had no funds with which to conduct its operations, its alleged employees and officers, as well as its expenses for raw materials and other financial obligations, were paid by defendant and thereafter charged back against Impacts, Inc. on defendant's books.
Although Gamerov, defendant's President, testified that neither he nor his Board of Directors ever authorized the purchase of the merchandise from plaintiff in the defendant's behalf, he admitted that the purchase order form employed by Suggs in the transaction under consideration was authorized and intended for use in purchasing raw material for the defendant.
Although contradicted by Suggs, Braun testified that Suggs told him that he was the Purchasing Agent of the defendant when the purchase order was signed by Suggs in such a represented capacity. The evidence is barren of any suggestion that during the negotiations between Suggs and plaintiff's salesman any reference was made either to the actual or contemplated existence of Impacts, Inc., or to any contemplation on the part of Suggs that merchandise admittedly sold and delivered by the plaintiff to the defendant was intended for or to be charged to Impacts, Inc. Impacts, Inc. was not incorporated until February 14, 1955. The purchase order was signed by Suggs on February 2, 1955.
The factual picture presented in this case fits quite neatly into the pattern recognized as supportive of a finding of apparent authority. Accepting arguendo defendant's contention that Suggs was not expressly authorized to order the merchandise from the plaintiff in behalf of and at the expense of the defendant, there is, nevertheless, ample evidence that the defendant held out to the plaintiff and its representative a display of apparent authority in Suggs to act for the defendant. Applying to this diversity case, as we must, the law of New Jersey, in which this Court sits, we adopt the language of its Court of Errors and Appeals in J. Wiss & Sons Co. v. H. G. Vogel Co., 1914, 86 N.J.L. 618, at page 621, 92 A. 360, 361:
'As between the principal and third persons the true limit of the agent's power to bind the principal is the apparent authority with which the agent is invested. The principal is bound by the acts of the agent within the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing. And the reason is that to permit the principal to dispute the authority of the agent in such cases would be to enable him to commit a fraud upon innocent persons.' Citing Law v. Stokes, 32 N.J.L. 249.
The foregoing principle has been more recently recognized by the Appellate Division of the Superior Court of the same State in Herron v. Sheridan Gardens, Inc., 1954, 31 N.J.Super. 584, 107 A.2d 564, and by its Supreme Court in Yannuzzi v. United States Casualty Co., 1955, 19 N.J. 201, 115 A.2d 557. In the Herron case (31 N.J.Super. 584, 107 A.2d 566), the language of Judge Jayne in Mesce v. Automobile Association of New Jersey, App.Div.1950, 8 N.J.Super. 130, 73 A.2d 586, is employed to describe the factual issue presented in a case of apparent authority, as follows:
"The factual question is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business uses, and the nature of the particular business, is justified in presuming that such agent has the authority to perform the particular act in question. (Citing cases.) When established, the authority, implied or apparent, can neither be qualified by the secret instructions of the principal nor enlarged by the unauthorized misrepresentations of the agent."
In the case at bar plaintiff's salesman went to defendant's premises to solicit the purchase of merchandise from the plaintiff similar to that which had previously been shipped by the plaintiff to another purchaser to the same premises in the defendant's care. The defendant had provided printed purchase order forms for use in ordering such materials for itself. It had an actual or a contemplated controlling stock interest in Impacts, Inc. By its control over the latter company and its employees, through which it intended to conduct manufacturing operations using the ordered material at the plant of which the defendant was still in possession and which still bore its name, it did, by its voluntary act, place Suggs in such a situation that Braun, plaintiff's salesman, whom I find to be a 'person of ordinary prudence and conversant with business uses and the nature of the particular business' for which the merchandise was intended, was justified in presuming that Suggs had the authority to order and to commit defendant to the payment of the cost of the merchandise which the plaintiff sold and which was delivered to defendant's premises.
Defendant was in existence and possession of the premises to which and at the time when the merchandise was delivered and the invoice received. Defendant made no protest of the charge in the invoice, nor did it refuse or offer to return the merchandise. Neither did plaintiff's confirmation of the purchase order before any material was shipped nor did the plaintiff's follow-up letter demanding payment of April 21, 1955, over a month after receipt of the shipment, evoke any denial on the part of the defendant that it had ordered the merchandise or that it was properly chargeable with its price. Under these circumstances, I find that the plaintiff was justified in assuming the ostensible authority of Suggs, and the acceptance and tacit undertaking to pay for the merchandise by the defendant. Defendant is now estopped to deny Suggs' authorized agency and to disclaim its obligation for payment of the price of the merchandise.
I find that the plaintiff is entitled to recover from the defendant the sum of $ 3,988.44, the amount of the net price of the merchandise sold and delivered in accordance with the terms of the invoice covering the same, together with interest thereon from April 4, 1955 (30 days after the date of the invoice) at the rate of 6% per annum. Plaintiff is entitled to judgment accordingly. This opinion shall constitute the Court's findings of fact and conclusions of law, as required by Rule 52 of the Federal Rules of Civil Procedure, 28 U.S.C. An order for judgment may be submitted in accordance herewith.
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