law-apparent-authority vs actual authority | agency |
APPARENT AUTHORITY CASE LAW
Actual authority denotes that authority which the principal intentionally confers upon the agent, or
intentionally allows the agent to believe he has, or by want of ordinary care allows the agent to believe himself to
possess. Id. at 273.
Apparent authority is the power of an agent to affect the legal relations of another person by
transactions with third persons. Ames v. Great S. Bank, 672 S.W.2d 447, 450 (Tex. 1984) (citing Restatement
(Second) Of Agency § 8 (1958)).
Apparent authority arises through acts of participation, knowledge, or acquiescence by the principal which
clothe the agent with the indicia of apparent authority. Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 672 (Tex.
A contract for lifetime employment is an extraordinary contract not usually made in the ordinary course of
business. Brown v. Grayson Enter., Inc., 401 S.W.2d 653, 657 (Tex. Civ. App.--Dallas 1966, writ ref'd n.r.e).
Consequently, when evaluating an agent's authority to make a binding contract for lifetime employment, courts
scrutinize the evidence presented. See Nelms v. A & A Liquor Stores, Inc., 445 S.W.2d 256, 259-60 (Tex. Civ.
App.--Eastland 1969, writ ref'd n.r.e.) (holding that an oral agreement for lifetime employment between
employee and the president of a corporation was not binding because it was not within the express, implied, or
apparent authority of the president); Brown, 401 S.W.2d at 657-58 (concluding that in the absence of express
authority corporate officers and agents lacked the power and authority to hire employees for life).
On appeal, Guerra acknowledges Tippens, Moore, and Williams lacked actual authority to contract with Guerra
on Wal-Mart's behalf. However, Guerra contends that Tippens, Moore, and Williams possessed apparent
authority to contract with Guerra on Wal-Mart's behalf. We agree that nothing in the record shows that Tippens,
Moore, and Williams had actual authority to enter into an employment contract on Wal-Mart's behalf. The only
issue is whether there is evidence to support the jury's implied finding that Tippens, Moore, and Williams had
apparent authority to bind Wal-Mart to an employment contract.
Certain limitations apply in determining whether apparent authority exists. Lifshutz v. Lifshutz, 199 S.W.3d 9, 22
(Tex. App.--San Antonio 2006, pet. denied); Humble Nat'l Bank v. DCV, Inc., 933 S.W.2d 224, 237 (Tex.
App.--Houston [14th Dist.] 1996, writ denied). First, apparent authority is determined by looking at the acts of
the principal and ascertaining whether those acts would lead a reasonably prudent person using diligence and
discretion to suppose the agent had the authority to act on behalf of the principal. Lifshutz, 199 S.W.3d at 22;
Humble, 933 S.W.2d at 237. Only the actions of the principal may be considered; representations of authority
made by the agent have no effect. Lifshutz, 199 S.W.3d at 22-23; Humble, 933 S.W.2d at 237. Second, the
principal must either have affirmatively held out the agent as possessing the authority, or the principal must
have knowingly and voluntarily permitted the agent to act in an unauthorized manner. Lifshutz, 199 S.W.3d at
23; Humble, 933 S.W.2d at 237. Finally, a party dealing with an agent must ascertain both the fact and the
scope of the agent's authority, and if the party deals with the agent without having made such a determination,
he does so at his own risk. Lifshutz, 199 S.W.3d at 23; Humble, 933 S.W.2d at 237. Apparent authority is not
available when the other contracting party has notice of the limitations of the agent's power. Humble, 933
S.W.2d at 238.
On appeal, Guerra argues it was reasonable for him to believe that Moore, Tippens, and Williams had the
authority to make a lifetime employment contract because they had made other employment and personnel
decisions in the past which were ratified by Wal-Mart. As support for this argument, Guerra points to evidence
that Tippens and Moore recommended Guerra for the store manager position, and Williams approved Guerra's
promotion. Guerra also points to evidence that Wal-Mart's President and Vice-President of the People Division
did not approve his promotion to store manager or any of his previous promotions.
To determine if the evidence is legally sufficient to support the jury's apparent authority finding, we must
evaluate the record in light of all three elements of apparent authority. Here, the record shows Guerra received
written notice, through his employment application and employee handbook, that only the President of Wal-Mart
or the Vice President of the Wal-Mart's People Division had authority to enter into a contract modifying his at-will
employment status. The record also shows that some employment decisions were made by Tippens, Moore, and
Williams; however, these decisions were limited in scope: Wal-Mart authorized Tippens and Moore to make
certain recommendations with respect to promotions, and authorized Williams to review and approve these
recommendations. However, there is no evidence in the record that Wal-Mart allowed Williams, Moore, and
Tippens to enter into an employment contract to modify the at-will status of Guerra or any other employee. Nor
is there any evidence that Tippens, Williams, and Moore ever entered into any other type of contract on behalf
of Wal-Mart. Finally, there is no evidence in the record that Guerra made any effort to confirm the fact and
scope of Tippen's, Moore's, and Williams's authority to make a lifetime employment contract.
We conclude the record does not contain any acts by Wal-Mart from which a reasonable person could believe
that Wal-Mart authorized Tippens, Moore, and Williams to enter into any contract on its behalf, much less an
extraordinary lifetime employment contract. We further conclude the record does not show that Wal-Mart held
out Tippens, Moore, and Williams as having the authority to enter into an employment contract on behalf of
Wal-Mart, nor does the record show Wal-Mart acted negligently in allowing Tippens, Moore, and Williams to
engage in similar conduct in the past. Based on this record, the evidence is legally insufficient to support the
jury's implied finding of apparent authority. We, therefore, conclude the evidence is legally insufficient to support
the jury's finding of the existence of an employment contract between Wal-Mart and Guerra.
09-0674 JOHN CLYDE GUERRA v. WAL-MART STORES, INC. AND ED GARZA, INDIVIDUALLY AND AS AGENT
FOR WAL-MART; from Starr County;
4th district (04-08-00146-CV, ___ SW3d ___, 07-01-09, pet. denied Oct 2009)(employment dispute, at will
employment, no employment contract - no breach of contract, no agency, actual or apparent authority to enter
contract for life-long employment, intentional infliction of emotional distress claim fails on appeal)
Because the evidence is legally insufficient to support the jury's contract finding, we need not address
Wal-Mart's and Garza's remaining breach of contract arguments.
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