## Facts

- A & M Farm Center, Inc. operated a farm equipment business that regularly financed customer transactions through AGCO Finance, LLC.
- Dennis Leek managed A & M’s day-to-day operations and, over several years, signed more than 100 AGCO financing contracts and security agreements on A & M’s behalf without AGCO objecting to his authority.
- While employed by A & M, Leek formed a separate company, Cable Tech, Inc.
- Cable Tech entered into three equipment-lease transactions with A & M that were financed by AGCO.
- Each lease contained a “full recourse” provision making A & M liable to AGCO for unpaid obligations if Cable Tech defaulted.
- Leek signed the leases for A & M; Cable Tech’s president signed for Cable Tech. A & M’s president and majority owner, Louis Abbett, did not sign and later asserted he was unaware of the Cable Tech leases and recourse terms until after the deals were made.
- Cable Tech defaulted, and AGCO accelerated the debt and demanded payment from A & M under the full recourse provisions.
- AGCO sued A & M, Abbett, and Cable Tech; it obtained a default judgment against Cable Tech and sought summary judgment against A & M.

## Issues

1. Whether A & M was bound to AGCO under the leases’ full recourse provisions based on Leek’s actual, apparent, or inherent authority to execute the Cable Tech agreements for A & M.
2. Whether Leek’s self-interested conduct in arranging financing for his own company prevented AGCO from enforcing the recourse obligations against A & M when AGCO dealt with Leek as it had in prior transactions.

## Decision

- The Indiana Court of Appeals affirmed summary judgment for AGCO against A & M.
- The court held A & M was bound by the full recourse provisions because A & M’s conduct and course of dealing gave Leek apparent authority to execute the agreements, and AGCO reasonably relied on that authority.
- The court concluded A & M failed to show a genuine issue of material fact that AGCO knew or should have known Leek lacked authority for the Cable Tech transactions.

## Legal Principles

- Apparent authority arises from a principal’s manifestations—by words or conduct—to a third party that an agent is authorized; the third party must reasonably rely on that manifestation.
- A corporation can be bound by contracts signed by a managerial agent where the corporation’s repeated acquiescence in similar transactions creates a reasonable belief in the third party that the agent has authority to bind the corporation, including to recourse obligations.
- An agent’s conflict of interest does not defeat apparent authority as to a good-faith third party absent notice of limits on authority or facts that make reliance unreasonable.
- As between an innocent third party and a principal that placed the agent in a position of perceived authority with limited oversight, the principal bears the risk of loss from the agent’s misuse of that position.
- Summary judgment is proper when the evidentiary record shows no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law.

## Conclusion

The court enforced the full recourse lease obligations against A & M because A & M’s longstanding practice of allowing Leek to execute AGCO financing documents created apparent authority on which AGCO reasonably relied, even though the transactions benefited Leek’s separate company.


A & M Farm Ctr., Inc. v. AGCO Fin., LLC, 921 N.E.2d 54 (Ind. Ct. App. 2010)