McLaughlin, Seitz and Aldisert, Circuit Judges. Seitz, Circuit Judge (dissenting).
GERALD McLAUGHLIN, Circuit Judge.
The question posed on this appeal is whether the trial judge properly granted appellee Texaco's motion for a directed verdict in this personal injury action. Jurisdiction in the district court was based on diversity of citizenship and requisite amount in controversy.
Appellant Augustine Gizzi was a steady patron of a Texaco service station located on Route 130 and Chestnut Street, Westville, New Jersey. The real estate upon which the station was situated was owned by a third party and was leased to the operator of the station, Russell Hinman. Texaco owned certain pieces of equipment and also supplied the operator with the normal insignia to indicate that Texaco products were being sold there.
In June of 1965, the station operator, Hinman, interested Gizzi in a 1958 Volkswagen van, which Hinman offered to put in good working order and sell for $400. Gizzi agreed to make the purchase and Hinman commenced his work on the vehicle. The work took about two weeks and included the installation of a new master braking cylinder and a complete examination and testing of the entire braking system. On June 18, 1965 Gizzi came to the station and paid the $400. He was given a receipt for the payment and was told that the car would be ready that evening. Gizzi returned at about six o'clock, accompanied by appellant Anthony Giaccio. They took the van and then departed for Philadelphia, Pennsylvania, to pick up and deliver some air-conditioning equipment. While driving on the Schuylkill Expressway, Gizzi attempted to stop the vehicle by applying the brakes. He discovered that the brakes did not work and, as a result, the vehicle collided with the rear end of a tractor trailer causing serious injuries to both Gizzi and Giaccio.
Texaco, Inc. was the only defendant named in the complaint and at trial, the testimony was all directed to the corporation's liability, the court having asked for an offer of proof on that question.
With regard to the sale of this vehicle, no actual agency existed between Texaco and Hinman. Although most of the negotiations involved in the transaction took place at the Texaco station, the record indicates that Hinman was selling the van on his own behalf, and not on behalf of Texaco. Texaco received no portion of the proceeds. The corporation was not designated the seller on the bill of sale, title to the vehicle being listed in the name of a company located in Atlantic City, New Jersey. Gizzi did receive a Texaco credit invoice as a receipt for the cash he paid. It would seem that this was an available convenience utilized by Hinman to record the transaction.
The repair work performed by Hinman was incidental to the sale of the vehicle. He offered to put the vehicle into good working order to further induce Gizzi to purchase it. Some work was done on the van after the money had been paid on June 18 and all work on the braking system was completed prior to that date.
The theory of liability advanced by appellants below was that Texaco had clothed Hinman with apparent authority to make the necessary repairs and sell the vehicle on its behalf and that Gizzi reasonably assumed that Texaco would be responsible for any defects, especially defects in those portions of the van which were repaired or replaced by Hinman. It was further contended that Gizzi entered into the transaction relying on this apparent authority, thereby creating a situation in which Texaco was estopped from denying that an agency did in fact exist.
The concepts of apparent authority, and agency by estoppel are closely related. Both depend on manifestations by the alleged principal to a third person, and reasonable belief by the third person that the alleged agent is authorized to bind the principal. The manifestations of the principal may be made directly to the third person, or may be made to the community, by signs or advertising. Restatement (Second), Agency §§ 8, 8B, 27 (1957). In order for the third person to recover against the principal, he must have relied on the indicia of authority originated by the principal, Bowman v. Home Life Ins. Co. of America, 260 F.2d 521 (3 Cir. 1958); Restatement (Second), Agency § 267 and such reliance must have been reasonable under the circumstances. N. Rothenberg & Son, Inc. v. Nako, 49 N.J.Super. 372, 139 A.2d 783 (App.Div.1958); Hoddeson v. Koos Bros., 47 N.J.Super. 224, 135 A.2d 702 (App.Div.1957); Mattia v. Northern Ins. Co. of New York, 35 N.J.Super. 503, 114 A.2d 582 (App.Div.1955); Elger v. Lindsay, 71 N.J.Super. 82, 176 A.2d 309 (County Court 1961).
In support of their theory of liability, appellants introduced evidence to show that Texaco exercised control over the activities of the service station in question. They showed that Texaco insignia and the slogan "Trust your car to the man who wears the star" were prominently displayed. It was further established that Texaco engaged in substantial national advertising, the purpose of which was to convey the impression that Texaco dealers are skilled in automotive servicing, as well as to promote Texaco products, and that this advertising was not limited to certain services or products. The record reveals that approximately 30 per cent of the Texaco dealers in the country engage in the selling of used cars and that this activity is known to and acquiesced in by the corporation. Actually Texaco had a regional office located directly opposite the service station in question and Texaco personnel working in this office were aware of the fact that used vehicles were being sold from the station. It was further established that there were signs displayed indicating that an "Expert foreign car mechanic" was on the premises.
Appellant Gizzi testified that he was aware of the advertising engaged in by Texaco and that it had instilled in him a certain sense of ...