## Facts

- Utah Junk Co. regularly purchased scrap metal from Montana Power Co.
- Aaron Rosenblatt acted in those prior transactions as the person who handled purchases for Utah Junk.
- Montana Reservoir & Irrigation Co. (Montana Reservoir) was a subsidiary of Montana Power, and the same individuals served as officers of both companies.
- Although Montana Reservoir itself had not previously sold scrap to Utah Junk, its officers knew from the Montana Power dealings that Rosenblatt had been acting for Utah Junk in scrap purchases.
- Utah Junk ended its relationship with Rosenblatt but did not notify its scrap suppliers (including the Montana Power/Montana Reservoir management group) that Rosenblatt no longer had authority to buy on Utah Junk’s account.
- After the termination, Montana Reservoir sold and delivered scrap metal to Rosenblatt, believing he continued to act as Utah Junk’s purchasing representative.
- Utah Junk refused to pay Montana Reservoir for the scrap, asserting Rosenblatt lacked authority at the time of the sale.
- The trial court entered judgment for Montana Reservoir, and Utah Junk appealed to the Utah Supreme Court.

## Issues

1. Whether Utah Junk Co., after previously allowing Rosenblatt to act as its purchasing representative, could avoid liability for scrap bought through Rosenblatt by asserting his authority had been revoked when Utah Junk gave no notice of revocation to the seller.
2. Whether Montana Reservoir could rely on the apparent continuation of Rosenblatt’s authority where Montana Reservoir’s officers, through their roles in Montana Power, knew of Rosenblatt’s prior agency relationship with Utah Junk.

## Decision

- The Utah Supreme Court affirmed the judgment for Montana Reservoir.
- Utah Junk was liable for the scrap sold through Rosenblatt because Utah Junk had previously permitted Rosenblatt to appear authorized to purchase scrap on its behalf and did not give notice that the authority had been terminated.
- Montana Reservoir’s reliance on Rosenblatt’s apparent authority was reasonable given the established course of dealing known to Montana Reservoir’s officers.
- Utah Junk, having created the appearance of authority and failed to communicate its revocation, was estopped from denying Rosenblatt’s authority as against Montana Reservoir.

## Legal Principles

- A principal that, by its conduct and course of dealing, causes third parties to believe a person is authorized to act for it may be bound by that person’s acts within the scope of the apparent authority.
- Revocation of an agent’s authority is not effective against third parties who previously dealt with the agent (or reasonably relied on the appearance of authority) until the principal gives notice of the revocation.
- Where a principal’s prior conduct creates a continuing appearance of authority, the risk of loss from failure to notify counterparties of termination falls on the principal rather than on an innocent seller.
- A corporation acts through its officers, and knowledge acquired by officers in corporate affairs may be imputed to the corporation when evaluating reasonableness of reliance and the effect of prior dealings.

## Conclusion

The court held Utah Junk Co. responsible for payment because Utah Junk had previously clothed Rosenblatt with authority to purchase scrap metal and failed to notify the seller that his authority had ended, making Montana Reservoir’s reliance on the apparent continuation of that authority reasonable and barring Utah Junk from denying liability.


Montana Reservoir Irrigation Co. v. Utah Junk Co., 228 P. 201 (1924)