Cain Family Farm v. Schrader Real Estate & Auction Co.
991 N.E.2d 971
Ind. Ct. App.2013Background
- The Cain Family Farm, L.P. (Limited Partnership) owns ~400 acres; The Cain Family Farm, LLC (LLC) is sole general partner and is member-managed by four Cain siblings (Candace, Melanie, John, Patricia).
- The siblings authorized an auction via Schrader Real Estate & Auction Co.; the LLC reserved the right to accept or reject bids. Candace signed the Auction Contract on behalf of the entities.
- At the October 25, 2008 auction, Antlers Ridge (Drerup) bid successfully on Tracts 2–4 and 6–17 for $1,350,000; after bidding, Schrader presented a Purchase Agreement which Candace signed in the name of the LLC.
- Cain Family Farm refused to close, rescinded the agreement through counsel, and sued Schrader, Antlers Ridge, and Candace seeking, inter alia, to quiet title and claiming breach of fiduciary duty; Antlers Ridge sought specific performance and moved for summary judgment.
- The trial court granted summary judgment to Antlers Ridge, concluding Candace had apparent (and alternatively inherent/statutory) authority to bind the LLC and Limited Partnership; Cain Family Farm appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Candace had apparent authority to bind the LLC by signing the Purchase Agreement | Candace lacked apparent authority; any apparent authority was misplaced because unanimous member consent was required and the sale was not a routine LLC affair | Candace led the auction process, signed the Auction Contract, Schrader (the entities’ agent) presented the purchase agreement, and bidders reasonably believed she had authority | Court held Candace had apparent authority as a matter of law; no genuine issue of material fact |
| Whether I.C. § 23-18-3-1.1(b) (member as agent when act is apparently for usual business) applies | The sale was not part of the LLC’s usual business but a liquidation/major endeavor; subsection (d) controls, requiring unanimous consent or written authorization | The LLC acted as general partner of the partnership whose business is owning/selling the real estate; prior conduct and the Partnership Agreement vested sale authority in the general partner | Court held § 23-18-3-1.1(b) applies: signing was apparently carrying on the LLC’s usual business and the statute binds the LLC absent knowledge Candace lacked authority |
Key Cases Cited
- Gallant Ins. Co. v. Isaac, 751 N.E.2d 672 (Ind. 2001) (placing an agent in a position to perform acts that appear reasonable to third parties can establish apparent authority as a matter of law)
- AutoXchange.com, Inc. v. Dreyer & Reinbold, Inc., 816 N.E.2d 40 (Ind. Ct. App. 2004) (apparent authority can arise from customary conduct and the principal’s representations)
- Pepkowski v. Life of Indiana Ins. Co., 535 N.E.2d 1164 (Ind. 1989) (apparent authority requires a manifestation by the principal that reasonably induces third-party belief)
- Douglas v. Monroe, 743 N.E.2d 1181 (Ind. Ct. App. 2001) (agency questions are generally factual but may be resolved on summary judgment if evidence is undisputed)