A. Gay Jenson Farms Co. v. Cargill, Inc.
a. FACTS:
Plaintiffs entered into grain contracts with Warren Grain & Seed Co., which
was financed and controlled by Cargill, Inc., a separate entity.
b.
Creating Agency Relationship
i.
Requires
agreement, but not necessarily a contract.
ii.
Parties need not describe relationship as agency or
intend legal consequences of agency relationship to follow.
iii.
May be proved by
circumstantial evidence showing course of dealing.
1.
If proved by
circumstantial evidence à principal must be shown to have consented to the agency since one
cannot be the agent of another except by consent of the latter.
c.
Creditor/Debtor
i.
A creditor who assumes de facto control of his debtor’s business may become liable as
principal for the acts of the debtor in connection with the business,
regardless of the terms of their formal contract.
1.
Level of control
signifies agency relationship.
ii.
“A security
holder who merely exercises a veto power over the business acts of his debtor
by preventing purchases or sales above specified amounts does not thereby
become a principal. However, if he takes
over the management of the debtor’s business either in person or through an
agent, and directs what contracts may or may not be made, he becomes a
principal, liable as a principal for the obligations incurred thereafter in the
normal course of business by the debtor who has now become his general
agent. The point at which the creditor
becomes a principal is that at which he assumes de facto control over the
conduct of his debtor, whatever the terms of the formal contract with his
debtor may be.” Rest. (2d) of Agency
§ 14 O.
iii. Factors showing Cargill’s control over Warren:
1.
Cargill’s
constant recommendations to Warren by telephone;
2.
Cargill’s right
of first refusal on grain;
3.
Warren’s
inability to enter into mortgages, to purchase stock or to pay dividends
without Cargill’s approval;
4.
Cargill’s right
of entry onto Warren’s premises to carry on periodic checks and audits;
5.
Cargill’s
correspondence and criticism regarding Warren’s finances, officers salaries and
inventory;
6.
Cargill’s determination
that Warren needed “strong paternal guidance”;
7.
Provision of
drafts and forms to Warren upon which Cargill’s name was imprinted;
8.
Financing of all
Warren’s purchases of grain and operating expenses; and
9.
Cargill’s power
to discontinue the financing of Warren’s operations.
iv. Factors indicate an agency relationship, not a creditor-debtor one.
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
No comments:
Post a Comment