Lee v. Peoples Cooperative Sales Agency

Supreme Court of Minnesota · 1937 · Corporations

276 N.W. 214 (1937)

Updated August 22, 2026

CorporationsAgencyactual authorityapparent authoritymanifestation of consentcontrollivestock draftscommission merchant

Facts

Plaintiff sold 12 head of livestock to Max Seerup, who paid with a draft drawn on defendant's account; defendant later refused payment. Defendant was a commission firm that had agreed with Seerup to honor drafts only for the net proceeds of cattle shipped to it, and it had supplied him with pre-stamped drafts containing language limiting payment to a particular fund created by the shipment. Seerup testified that he bought and sold livestock for himself, bore the profit or loss, chose what and where to buy, paid defendant a commission to resell livestock shipped to it, and signed the draft in his own name. Six of plaintiff's cattle were shipped to defendant with others bought by Seerup, but the sale proceeds were insufficient to cover all drafts; the other six were sold or traded by Seerup himself.

Issue

Was there sufficient evidence for the jury to find that Seerup was defendant's actual agent in purchasing plaintiff's cattle, or that he had apparent authority binding defendant? More specifically, did defendant manifest consent that Seerup act on its behalf and did plaintiff rely on any appearance of authority?

Rule

An agency relationship exists only if the alleged principal manifests consent to another that the other shall act on the principal's account and subject to the principal's control, and the other consents so to act. Evidence that a party supplies forms, honors prior drafts, or acts as a commission seller does not by itself establish agency. Apparent authority cannot impose liability unless the third party knew of and relied on the facts allegedly creating the appearance of authority.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Omaha, Nolan Pierce regularly buys used farm equipment in his own name and resells it for profit. He sometimes consigns items to Prairie Gate Auction House, a fictional Nebraska commission seller, which charges him a resale commission and has never told him what prices to pay or where to buy. After Nolan gives a seller a draft drawn on Prairie Gate that is later dishonored, the seller sues Prairie Gate, claiming Nolan was its agent in the purchase.

Is the seller most likely to prevail on an actual-agency theory?

Explanation. Actual agency exists only if the alleged principal manifests consent that the other act on its account and subject to its control, and the other consents so to act. Here, Nolan bought in his own name, pursued his own profit, and received no purchasing instructions, which points away from agency and toward independent dealing for himself. The wrong statement in choice D is that agency requires action in the principal's name; the majority recognized that an agent may bind an undisclosed principal while acting in his own name.