309 N.W.2d 285 (Minn. 1981)
In 1964 Lloyd Hill, who operated Warren Grain & Seed Co. in Warren, Minnesota, with his son Gary Hill, applied for financing from Cargill, Inc.1 Cargill officials from the Moorhead regional office investigated Warren's operations and recommended financing.2 Warren and Cargill then entered a security agreement providing open-account financing up to an initial limit of $175,000 that was later raised to $300,000 in 1967, $750,000 in 1972, and $1,250,000 in 1976.3
The agreements gave Cargill a right of first refusal to purchase market grain, required Warren to furnish annual financial statements, granted Cargill access to Warren's books, and required Cargill's consent before Warren could make capital improvements or repairs exceeding $5,000, become a guarantor on another's debt, encumber assets, declare dividends, or sell and purchase stock.4 Cargill officials visited Warren shortly after the agreement, examined financial records, and periodically reminded Warren to implement recommended improvements.5 A 1970 memo to the Cargill official in charge of the Warren account stated that the organization needed very strong paternal guidance.6
In 1970 and 1971 Warren acted as Cargill's agent in contracts for Bounty 208 wheat seed and sunflower seed, with Cargill named as the contracting party and paying farmers directly.7 Warren shipped 90 percent of its cash grain to Cargill.8 As Warren's indebtedness exceeded its credit line, Cargill contacted Warren daily, maintained a daily debit position, and in 1976 opened a bank account in Warren's name funded by drafts drawn on Cargill.9 In early 1977 an audit revealed Warren was $4 million in debt with deliberately falsified financial statements.10 Cargill refused further financing and sent an official to supervise the elevator, including disbursement of funds.11 Warren ceased operations owing Cargill $3.6 million and owing the 86 plaintiff farmers approximately $2 million.12
The farmers sued Cargill and Warren in Marshall County District Court in 1977.13 The case was bifurcated, with damages determined by the court in the first phase and liability tried to a jury in the second phase.14 The jury found that Cargill's conduct from 1973 to 1977 had made it Warren's principal with respect to the purchase and sale of grain and seed grain and the storage of grain.15 The court ruled that Cargill was a disclosed principal and entered judgment for the plaintiffs.16 Cargill appealed.17
Whether Cargill became liable as a principal on contracts made by Warren with the plaintiffs?18
Agency is the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.19 A creditor who assumes control of his debtor’s business may become liable as principal for the acts of the debtor in connection with the business.20 The point at which the creditor becomes a principal is that at which he assumes de facto control over the conduct of his debtor.21
Yes. Cargill manifested consent that Warren would act as its agent by directing implementation of recommendations and supplying financing along with imprinted drafts and forms.22 Warren acted on Cargill’s behalf by procuring grain for Cargill through operations financed entirely by Cargill and by serving as Cargill’s named agent in the Bounty 208 and sunflower seed contracts.23 Cargill exercised de facto control through daily contacts once indebtedness exceeded the credit line.24
It held the right of first refusal on grain sales.25 It required mandatory consent for capital improvements over five thousand dollars or for dividends and stock transactions.26 It conducted periodic audits and had access to books.27 The 1970 memo called for strong paternal guidance.28
Cargill dispatched an official in 1977 to supervise disbursement of funds.29 These elements cannot be viewed in isolation as ordinary debtor-creditor features.30 When examined together with the fact that Warren shipped ninety percent of its cash grain to Cargill and that Cargill extended the credit line far beyond initial limits to secure a source of market grain, the relationship demonstrates that Cargill took over management and directed the contracts Warren could make.31 The arrangement was not merely buyer-supplier because Warren lacked an independent business; all portions of its operations were financed by Cargill and Warren sold almost all market grain to Cargill.32
Cargill became liable as a principal on the contracts made by Warren with the plaintiffs.33
Whether Cargill could avoid liability to the plaintiffs by payment to Warren even if operating as an undisclosed principal?34
An undisclosed principal is not discharged from liability to the other party to a transaction conducted by an agent by payment to, or settlement of accounts with, the agent, unless he does so in reasonable reliance upon conduct of the other party which is not induced by the agent’s misrepresentations and which indicates that the agent has settled the account.35
No. Plaintiffs never indicated to Cargill that Warren had settled their accounts.36 Cargill therefore cannot escape liability by its payment to Warren.37 The court adopted the modern Restatement rule rather than the older English view that payment without notice discharges an undisclosed principal.38 Under that rule the undisclosed principal, aware that it will become liable under the original transaction, should not be permitted to escape liability by payment to the agent alone.39
Cargill could not avoid liability to the plaintiffs by payment to Warren even if operating as an undisclosed principal.40
Whether the trial court erred in refusing Cargill's requested jury instructions on agency?41
A trial court is not required to instruct against every improper inference a jury could draw.42 Its instruction on general agency law is adequate when it correctly states the controlling principles and the requested instruction would have confused the jury or was unnecessary in light of the evidence and arguments presented.43
No. The trial court properly refused the three requested instructions.44 The Restatement section 1 instruction was unnecessary because the JIG instruction given was equivalent and actually more favorable to Cargill by requiring actual physical control.45 The instruction concerning agency for a particular act at one time not extending to another time was unnecessary because Cargill’s counsel had already pointed out in closing argument that the Bounty 208 and sunflower contracts ended in 1971 while the relevant period was 1973 to 1977.46 The buyer-supplier instruction drawn from Restatement section 14K would have confused the jury because Cargill asserted that relationship only for the market-grain portion of Warren’s operations, and the general agency instruction adequately covered the applicable law.47
The trial court did not err in refusing Cargill's requested jury instructions on agency.48
Whether the trial court erred in excluding evidence of prior lawsuits against Warren?49
Evidence of prior lawsuits has no probative value on the issues in the present case when it would require detailed proof of similarity to create a usable inference and when that probative value is outweighed by the likelihood of jury confusion.50
No. The trial court correctly excluded evidence that Warren had been sued in prior years by farmers for breach of contract.51 Any relevance would have required detailed evidence to establish similarity between those cases and the present contracts, and such evidence would have concerned contracts not involved in this litigation.52 The danger of jury confusion therefore outweighed any probative value.53
The trial court did not err in excluding evidence of prior lawsuits against Warren.54
Whether the trial court erred in denying Cargill's motion for change of venue?55
A change of venue shall not be granted unless the party applying therefor uses due diligence to procure the same within a reasonable time after issue has been joined and the ground for the change has come to the knowledge of the applicant.56 The trial court exercises discretion in determining when a change is appropriate.57 Knowledge by jurors of the financial collapse does not by itself prevent a fair decision when the jurors state they will lay aside impressions and render an impartial verdict.58
No. Cargill’s motion was made during jury selection, thirteen months after the lawsuit was filed.59 Twenty-six of sixty veniremen were excused for cause, yet all fourteen seated jurors, including two later excused, stated they would lay aside impressions and render a fair decision.60 The mere fact that jurors knew of Warren’s collapse and its connection with Cargill did not indicate inability to decide fairly.61 The trial court therefore properly exercised its discretion in denying the motion.62
The trial court did not err in denying Cargill's motion for change of venue.63