Hardy v. Sagacious Grace LC
| Decision Date | 04 March 2021 |
| Docket Number | No. 20190063-CA,20190063-CA |
| Citation | 483 P.3d 1275 |
| Parties | David HARDY, Appellant, v. SAGACIOUS GRACE LC and Leslie Mower, Appellees. |
| Court | Utah Court of Appeals |
Justin D. Heideman and Justin R. Elswick, Attorneys for Appellant
Denver C. Snuffer Jr., Attorney for Appellees
Amended Opinion*
¶1 David Hardy contends that the district court erred in denying his summary judgment motion and granting Leslie Mower and Sagacious Grace LC's motion for summary judgment based on its determination a real estate purchase contract was unenforceable because it was signed by someone other than the manager of the limited liability company that owned the property. We affirm.
¶2 Desiring to expand his business to an adjacent lot (Property) in Springville, Utah, Hardy reached out to the Property owner's legal counsel (Attorney). Attorney told Hardy that he represented Leslie Mower and Sagacious Grace LC (SG). SG owned the Property and was a manager-managed limited liability company. Leslie Mower was the sole member of SG.1
¶3 Attorney told Hardy that SG was not interested in leasing the Property but was willing to sell it. After some negotiations, Hardy prepared a real estate purchase contract (REPC) to purchase the Property for $150,000 and submitted the REPC to Attorney on August 4, 2015. Mower initialed and signed each page of the REPC. Hardy did not sign the REPC, but he initialed each page and hand printed his name below the signature line.2 Hardy tendered an earnest money deposit of $3,000 and obtained the financing necessary to complete the purchase. Hardy proceeded to make plans to incorporate the Property into his business, including changing his business model and obtaining a variance from the city for use of the Property.
¶4 On September 3, 2015, Attorney contacted Hardy to inform him that SG was repudiating the REPC.3 Attorney informed Hardy that he would be returning the earnest money, but Hardy instructed him not to because the returned earnest money would not be accepted and stated that he intended to close the transaction. Attorney reiterated that SG would not close the transaction. Hardy contacted legal counsel. That same day, Hardy's counsel contacted Attorney seeking assurances that SG would perform the contract. Hardy's counsel followed up by sending a letter demanding "additional assurances that the REPC between [Hardy and SG would] be fully executed by the stated closing date, September 8, 2015."
¶6 Hardy's counsel responded in writing the same day. "After performing some research," he had discovered that Mower was not in fact SG's manager and that another limited liability company—LC Manager, LC—managed SG. Hardy further learned that the manager of LC Manager was Jami Ross, not Mower, and that Ross had the authority to act for SG. Hardy's counsel's letter underscored two main points. First, he noted that Attorney's conduct during negotiations and obtaining the signed REPC indicated that Mower had the authority to sign the contract on SG's behalf: "Given the representation of [a]uthorization, [Hardy] had no reason to believe otherwise, and no constructive knowledge would indicate that ... Mower was not authorized." Second, he noted that even though Mower was not SG's manager, she was authorized to sign the REPC, thus binding SG to its terms. Specifically, Hardy pointed to Section 13 of the REPC, which stated, "If Buyer or Seller is a corporation, partnership, trust, estate, limited liability company or other entity, the person signing the REPC on its behalf warrants his or her authority to do so and to bind Buyer and Seller."
¶7 On September 9, Attorney wrote to Hardy's counsel, noting that he disagreed with the facts as stated and with counsel's conclusions; he also enclosed a check refunding the earnest money.
¶8 Hardy filed a complaint in district court alleging numerous causes of action: fraudulent non-disclosure/fraudulent misrepresentation as to Mower, anticipatory breach and/or breach of contract, breach of the covenant of good faith and fair dealing, apparent authority as to Mower, agency, breach of warranty as to Mower, and constructive trust as to SG.
¶9 In June 2016, the district court granted SG's motion for summary judgment and dismissed all of Hardy's causes of action except his claim of fraudulent misrepresentation. Specifically, the court determined that because Mower was not SG's manager, she lacked the authority—actual or apparent—to sign the REPC on behalf of SG. The court reasoned that apparent authority must stem from the conduct of the principal—in this case LC Manager, the sole manager of SG: Furthermore, the court determined that the REPC was
¶10 The court also ruled that Hardy's pendant claims, including the claim for breach of warranty, could not survive because they were based on an unenforceable REPC: "Because [the district court] has determined the REPC to be voidable, and because the REPC has not been ratified by [SG], the REPC fails and all claims which are dependent upon it must likewise fail." As to Hardy's claim of fraudulent misrepresentation, the court observed that "this claim necessarily entail[ed] the weighing the reasonableness of Hardy's conduct," "a fact-dependent task not properly undertaken on summary judgment."
¶11 At a bench trial on the remaining fraudulent misrepresentation claim, Mower testified that (1) she was the sole member of SG; (2) SG did not have a board of directors; (3) she regularly signed documents without reading them; (4) she should not have signed the REPC because, unbeknownst to her, it pertained to a property SG owned and therefore should not have been presented to her; (5) she was uncertain if she had the authority to sign the REPC; (6) she did not "pay attention" or "even look at" the REPC when she signed it; (7) she knew she "probably shouldn't have been signing" the REPC, but she did not "even think about it" because she trusts "people that work for [her]" when they put a paper "in front of [her] and say ‘sign it’ "; (8) she thought the REPC pertained to a piece of property she owned in Salem, Utah; (9) she did not notice the REPC identified a property in Springville as the one being sold; (10) though Mower was not its manager, she had signed documents on behalf of SG in the past; and (11) had SG been identified on the REPC, she would not have signed the REPC "because the only property at the time that [she] was selling was a house in Salem," which was owned by a different company.
¶12 Hardy testified that had he known LC Manager managed SG, he would have wanted Ross's signature on the REPC. He also revealed that he had completed "three to five" REPCs in the past, usually with the help of a realtor, but felt comfortable handling the purchase of the Property himself because he was dealing with SG's legal counsel.
¶13 Following trial, the court dismissed the fraudulent misrepresentation claim with prejudice, finding that Hardy had not met his burden of proof. Hardy appeals.
¶14 The issue on appeal is whether the district court erred in granting summary judgment in favor of SG based on its determination that because Mower lacked the authority to bind SG to the terms of the REPC as she was not its manager, the REPC was voidable and unenforceable. Berger v. Ogden Reg'l Med. Center , 2020 UT App 85, ¶ 16, 469 P.3d 1127 (quotation simplified).4
¶15 Hardy contends that the district court erroneously concluded that because Mower lacked the authority to sign the REPC on its behalf, that document was not binding on SG.
¶16 Utah law provides that "[i]n a manager-managed limited liability company ..., any matter relating to the activities and affairs of the limited liability company is decided exclusively by the manager." Utah Code Ann. § 48-3a-407(3)(a) (LexisNexis 2015). The parties agree that SG was a manager-managed limited liability company, that LC Manager was the publicly listed sole manager of SG, and that Ross was the sole manager of LC Manager. Relying on these facts and precedent, the district court concluded that only Ross had the authority to act on SG's behalf and that Mower lacked authority—actual or apparent—to bind SG to the REPC.
¶17 "Under agency law, an agent cannot make its principal responsible for the agent's actions unless the agent is acting pursuant to either actual or apparent authority." Hussein v. UBS Bank USA , 2019 UT App 100, ¶ 30, 446 P.3d 96 (quotation simplified). Here, Mower had neither type of...
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