## Facts

- Edward and Jane Doe Petyak (Petyak) were engaged in importing and reselling luxury automobiles.
- In spring 1985, Petyak orally agreed with Maricopa Partnerships, Inc. (MPI) to locate and import from Europe a new Jaguar meeting MPI’s specifications and to deliver it in the United States after certain modifications.
- On June 4, 1985, MPI paid Petyak $2,500 as a down payment.
- The import did not occur promptly, and after about six months Petyak told MPI the car could take another three to four months to arrive, if it arrived at all.
- Petyak told MPI that Jaguars for similar prices were advertised in Dallas, Texas.
- Petyak went to Gerimco, a Dallas dealership, located a Jaguar meeting MPI’s requirements, and called MPI from the dealership to negotiate the price and modifications.
- MPI and Petyak agreed on a total purchase price of $29,800, including the modifications, and agreed that Gerimco would ship the Jaguar directly to MPI in Phoenix, Arizona.
- Petyak paid Gerimco with his personal check for the full purchase price, and MPI paid Petyak the balance due (the $29,800 less the $2,500 down payment).
- The Jaguar was never delivered. Petyak learned that Gerimco absconded with the money and that the Jaguar was repossessed by a Texas bank holding a lien.
- MPI demanded a refund from Petyak; Petyak refused.
- MPI sued on two theories: (1) breach of a sales contract and (2) breach of an agency agreement.
- The case was tried to a jury, and the jury was instructed on both theories. Petyak objected that the agency instructions, as given, imposed strict liability and that the jury should be instructed to decide whether Petyak failed to act in good faith (and otherwise failed to meet the agent’s duty) before imposing liability.
- The jury returned a verdict that resulted in a net judgment for MPI in the amount of $29,800, and Petyak appealed.

## Issues

1. Whether the trial court committed reversible error by instructing the jury on the agency theory in a way that permitted liability based on the loss alone, without requiring a finding that Petyak acted in bad faith or failed to exercise the ordinary care, competence, and diligence required of an agent.

## Decision

- The Arizona Court of Appeals reversed the judgment and remanded for further proceedings.
- The court held that the agency instructions improperly treated the agent as an insurer of the transaction’s success and allowed the jury to impose liability without finding a breach of the agent’s duty (such as bad faith or lack of due care).
- Because the jury was instructed on both sales-contract and agency theories and could have reached its verdict on the incorrectly instructed agency theory, the error was not harmless.

## Legal Principles

- An agent entrusted with a principal’s funds is not strictly liable for their loss when the loss occurs without the agent’s fault.
- An agent generally owes duties of good faith and the ordinary care, competence, and diligence exercised by agents in similar circumstances.
- To impose liability on an agent for loss associated with an agency undertaking, the factfinder must determine that the agent breached an applicable duty (for example, acted in bad faith or failed to use ordinary care); nonoccurrence of the desired result is not, by itself, enough.
- When a case is submitted to the jury on multiple theories and the instructions on one theory misstate the governing standard for liability, reversal is required if the appellate court cannot tell whether the verdict rests on the properly instructed theory.

## Conclusion

The court reversed and remanded because the jury instructions on agency allowed MPI to recover from Petyak simply because MPI did not receive the Jaguar or a refund, without requiring the jury to find that Petyak, as an agent handling MPI’s funds, acted in bad faith or failed to use the ordinary care and diligence Arizona law requires of an agent.


Maricopa Partnerships, Inc. v. Petyak, 790 P.2d 279 (1989)