APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. Civil No. 72-125).
Seitz, Chief Judge, Rosenn and Garth, Circuit Judges. Seitz, Chief Judge, concurring and dissenting.
This breach of contract action in the context of the radio industry requires us to resolve questions concerning the authority of an employee to bind his principal, the occurrence of an anticipatory breach, and the damages recoverable following such breach. We hold, as did the district court, that the employee had apparent authority to contract on behalf of the radio station, and that an anticipatory breach of the contract did occur. However, we reverse the district court's determination as to the damages resulting from this breach.
I. PROCEDURAL HISTORY AND FACTS
Plaintiff William B. Tanner Company (Tanner) commenced this diversity action against defendant WIOO, Inc. (WIOO) in the United States District Court for the Middle District of Pennsylvania. Tanner is a Tennessee corporation which produces promotional and advertising services for use by radio stations throughout the country. WIOO is a Pennsylvania corporation doing business as a licensed radio station in Carlisle, Pennsylvania.
In its complaint Tanner claimed that it had produced radio jingles and promotions for WIOO under five licensing contracts for which it had not received full compensation.*fn1 F. Eugene Waite (Waite), an employee of WIOO, executed each of the contracts allegedly on behalf of the station. Under all but one of these agreements, Tanner was obligated to furnish various promotional materials to WIOO in return for cash payments and a specified number of one-minute spots.*fn2 A "spot" is a segment of radio time sold for advertising purposes. The five contracts purported to grant Tanner a large number of one-minute spots which were to be "valid until used."
After a trial without a jury, the district court filed an opinion which included the following findings of fact and conclusions of law:
(1) that Tanner had failed to establish by a preponderance of the evidence that Waite possessed actual authority to sign the contracts on behalf of WIOO;
(2) that Tanner established by a preponderance of the evidence that WIOO created in Waite apparent authority to bind the station under the contracts;
(3) that WIOO's conduct constituted an anticipatory breach of the contracts;
(4) that Tanner unreasonably delayed enforcement of Contracts Nos. 1 and 4 and therefore only Contract No. 5 was before the court;*fn3
(5) that Tanner was entitled to damages of $12,628 on Contract No. 5 measured by the monetary value of 1560 one-minute spots and an outstanding cash obligation of $928.
A judgment filed July 15, 1974 was entered in favor of the plaintiff Tanner in the amount of $12,628 plus interest. Thereafter, WIOO moved to vacate or amend the judgment or for the grant of a new trial. On December 13, 1974, the district court denied WIOO's motion. This appeal followed. We have jurisdiction under 28 U.S.C. § 1291.
Since the district court had jurisdiction on the basis of diversity of citizenship, we are bound by the choice of law rules of the forum state, Pennsylvania. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941).
All of WIOO's and Waite's actions which are relevant to a finding of apparent authority occurred in Pennsylvania. Whether Tanner relied on these actions in Pennsylvania or Tennessee need not concern us because both Pennsylvania and Tennessee adhere to the doctrine of apparent authority as expressed in the Restatements (Second) of Agency. Accordingly, we feel free to apply Pennsylvania law in the resolution of this issue.*fn4
Furthermore, Pennsylvania is the place of performance under the contracts. Although this point is not free from doubt, we interpret Pennsylvania law as providing that "matters connected with the performance of a contract are governed by the law prevailing at the place of performance." Musser v. Stauffer, 192 Pa. 398, 43 A. 1018 (1899); Atlas Credit Corp. v. Dolbow, 193 Pa. Super. 649, 653, 165 A.2d 704, 708 (1960) Cookson v. Knauff, 157 Pa. Super. 401, 43 A.2d 402 (1945). Therefore, we must look to the law of Pennsylvania, as have the parties, to determine the remaining two issues: whether there was an anticipatory breach and whether damages are recoverable.
The district court's finding that Waite possessed apparent authority to bind WIOO contractually is a mixed question of fact and law. We may not set aside the court's factual determinations, "unless [they are] clearly erroneous." Rule 52(a), Fed. R. Civ. P.; see Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972). However, in determining whether the facts as found by the district court constitute apparent authority under Pennsylvania law, we may exercise an "independent review." United States ex rel. Hayward v. Johnson, 508 F.2d 322, 325 (3d Cir. 1975).
A. Creation of Apparent Authority
The district court concluded that ". . . the defendant WIOO created in F. Eugene Waite apparent authority to act as general manager of the station. . . ." WIOO argues here that the district court improperly looked to the actions of Waite rather than to the actions of WIOO in determining the existence of apparent authority.
Under Pennsylvania law, apparent authority flows from the conduct of the principal and not that of the agent. In Revere Press, Inc. v. Blumberg, 431 Pa. 370, 246 A.2d 407, 410 (1968), the Pennsylvania Supreme Court stated:
Apparent authority is power to bind a principal which the principal has not actually granted but which he leads persons with whom his agent deals to believe that he has granted. Persons with whom the agent deals can reasonably believe that the agent has power to bind his principal if, for instance, the principal knowingly permits the agent to exercise such power or if the principal holds the agent out as possessing such power.
See also Jennings v. Pittsburgh Mercantile Co., 414 Pa. 641, 202 A.2d 51, 54 (1964); Reading Co. v. Dredge Delaware Valley, 468 F.2d 1161, 1163 (3d Cir. 1972).
The district court found that Waite held himself out to the public as the general manager of WIOO and that the owners of the station acquiesced in this conduct. Waite identified himself in four of the five contracts as the "general manager." Moreover, the industry-wide publications of the Standard Rate Data Service (SRDS) from February, 1967 to February, 1971 listed Waite as the general manager of WIOO.
Both owners of WIOO testified that they knew Waite used the title "general manager" and that they did not object.*fn5 Furthermore, the court found that the owners of WIOO signed numerous checks payable to the order of Tanner without ever inquiring as to the reason for payment.*fn6
These findings of fact, supported as they are by the testimony, are not "clearly erroneous" and therefore may not be disturbed. Based upon these facts, we conclude, as did the district court, that the owners of WIOO through their actions "knowingly permit [ted]" Waite to hold himself out to the public as the "general manager" of the station, Revere Press, Inc. v. Blumberg, supra, thereby creating in Waite apparent authority with respect to third parties.
B. Power to Enter Contracts
The district court determined that WIOO created in Waite apparent authority and that ". . . a general manager under like circumstances is empowered to enter into contracts binding the corporation. . . ." WIOO argues that contracts providing for spots that were "to be valid until used" represented so unusual ...