Rayonier, Incorporated v. Polson

• Decision Date: 05 August 1968
• Docket Number: No. 21121.,21121.
• Citation: 400 F.2d 909
• Parties: RAYONIER, INCORPORATED, Appellant, v. F. Arnold POLSON, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

400 F.2d 909 (1968)

RAYONIER, INCORPORATED, Appellant, v. F. Arnold POLSON, Appellee.

No. 21121.

United States Court of Appeals Ninth Circuit.

August 5, 1968.

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Douglas P. Beighle (argued) of Holman, Marion, Perkins, Cole & Stone, Seattle, Wash., for appellant.

Richard Howard (argued) of Ryan, Askren, Carlson, Bush & Swanson, Seattle, Wash., for appellee.

Before BARNES, HAMLIN and KOELSCH, Circuit Judges.

KOELSCH, Circuit Judge.

This is an appeal by Rayonier, Inc.¹ from an adverse judgment in an action brought in the United States District Court by F. Arnold Polson to recover damages for the alleged wrongful cutting and removal of timber. Jurisdiction of the district court was rested upon diversity of citizenship of the parties.

During 1947, Polson and one Cleveland Jackson, now deceased, entered into a joint venture to buy and sell timber and timberland in and near the Quinault Indian Reservation in Western Washington. Jackson's position as Chief of the Quinault Indian Tribe made it advantageous for him to deal with the Indians and he did the purchasing while Polson provided the money.

In 1951 Jackson purchased for the venture the undivided one-half interest of Wallace Bumgarner in property known as the Bumgarner Allotments. This property had been set aside by the government for two Quinault Indian children, Jean and Shirley Bumgarner; on their death during minority their interests passed in equal shares to their parents, Wallace and Nina Bumgarner. Wallace, a non-Indian, had thereupon received a patent for his one-half but, since Nina was an Indian, the government continued to hold hers in trust.

In January 1960, shortly after Nina entered into contract with Rayonier, Inc. to sell to it her interest in the merchantable timber on the Bumgarner Allotments, Jackson executed a similar contract purportedly on behalf of the joint venture.² Rayonier, Inc. commenced logging in January 1961 and by July had cut and removed substantiall all timber from the property.

Thereafter in August 1962 Polson commenced this suit against Rayonier. His claim in substance was that Jackson lacked authority to sell the timber and that its removal by Rayonier was wrongful. He asserted his claim in the alternative under two Washington statutes, one of which, Wash.Rev.Code Ann. § 64.12.030, authorizes the allowance of treble damages for timber trespass and the other, Wash.Rev.Code Ann. 64.12.020, treble damages for waste.

The district court, sitting without a jury, found the issues for Polson under the trespass statute³ and, pursuant to a stipulation that the joint venture damages were $23,000, entered judgment for Polson in treble this amount together with interest at the legal rate on the single damages from the date of trespass, less an offset.⁴ The net judgment was $54,530.72 plus costs.

Rayonier, Inc. does not seriously contend that Jackson possessed actual authority to make a binding contract. The evidence was undisputed that in 1953 Jackson had signed a formal declaration of trust in which he stated that he held the interest in the Bumgarner Allotments as trustee "without power to sell, exchange, convey, mortgage, or otherwise encumber the same or contract in respect thereto except in accordance with the terms of said 1951 joint venture agreement. * * *" And the joint venture agreement provided that no valid contract could be made except with the consent of both parties. Polson had never given such consent.

Rayonier does, however, vigorously contend that Cleveland Jackson, as a member and manager of the joint venture, possessed inherent and apparent authority to enter into the contract on its behalf. See Restatement (Second) of Agency §§ 8, 8A (1958). It argues that Jackson was simply carrying on the business in the usual way and that therefore the joint venture was bound. See Wash. Rev.Code Ann. § 25.04.090(1).

A joint venture is in the nature of a partnership and, under Washington law, the relations of the parties in each of those associations are so similar that they are generally tested by the same rules Paulson v. McMillan, 8 Wash.2d 295, 298, 111 P.2d 983, 984 (1941); Barrington v. Murry, 35 Wash. 2d 744, 752, 215 P.2d 433, 438 (1950); Wash.Rev.Code Ann. § 25.04.060; thus a member of a joint venture, like the member of a partnership, is deemed to be the agent of the others when he is carrying on its business in the usual manner, even though he lacks actual authority to do so. Wash.Rev.Code Ann. § 25.04.090(1). However, if his authority is limited and the party with whom he is dealing knows of the limitation, then the partnership or joint venture is not bound by his unauthorized action Wash. Rev.Code Ann. § 25.04.090(4); and knowledge of a fact exists "* * * not only when the party has actual knowledge thereof, but also when he has knowledge of such other facts as in the circumstances shows bad faith." Wash. Rev.Code Ann. § 25.04.030(1); Lamb v. General Associates, Inc., 60 Wash.2d 623, 627-628, 374 P.2d 677, 680 (1962).

The district court did not err in concluding that Rayonier knew or ought to have known of Jackson's lack of authority. There was substantial evidence, not only that Rayonier knew that the property belonged to the joint venture but also that Rayonier knew of the terms of the joint venture agreement.⁵ Moreover, the limitations on Jackson's authority had been specifically pointed out to Rayonier on an earlier occasion. In 1954 Jackson and Rayonier negotiated a letter of intent involving rights of way over joint venture property, including the Bumgarner Allotments. Upon learning of this, Polson sent a registered letter to Rayonier stating: "Cleveland Jackson holds title as trustee only and was without power or authority to contract in respect thereto except in accordance with the terms of the 1951 joint venture agreement." He added that Jackson's action was unauthorized; that he, Polson, was one of the beneficiaries of the trust agreement and should be consulted with respect to the property. On this evidence the district court was justified in concluding that Rayonier was not in a position to assert in good faith that Jackson had inherent or apparent authority to execute the timber cutting contract.⁶

Rayonier additionally contends that the district court erred in not holding that Polson ratified the Rayonier-Jackson contract.

Ratification is the affirmance by a person of a prior unauthorized act, whereby the act is given effect as if originally authorized by him. Restatement (Second) of Agency § 82 (1958); Dorsey v. Strand, 21 Wash.2d 217, 230, 150 P.2d 702, 709 (1944). Such affirmance can be established by any conduct manifesting an election to treat an unauthorized act as authorized or conduct justifiable only if there were such an election. Restatement (Second) of Agency §§ 83, 93 (1958). Conduct which may be held to manifest an election to affirm an unauthorized contract includes the failure to repudiate the contract Restatement (Second) of Agency § 94 (1958); Tobias v. Towle, 179 Wash. 101, 105, 35 P.2d 1114, 1116 (1934) aff'd on rehearing, 179 Wash. 101, 41 P.2d 1119 (1935), as well as affirmative acts which can be justified only if there were an election to authorize the contract. Restatement (Second) of Agency §§ 97, 98 (1958). Rayonier argues that Polson is bound both because of his long delay before repudiating the contract and because of various affirmative acts.

Although Jackson and Rayonier executed the contract in January 1960, Polson did not object to it until July 1962, a period of over two years. However, the mere passage of time does not necessarily operate to establish ratification. Restatement (Second) of Agency § 94, comment a at 244 (1958). In order to infer an election to ratify a contract it is, of course, necessary that the party to be charged have full knowledge of all material facts Dorsey v. Strand, 21 Wash.2d 217, 230, 150 P.2d 702, 709 (1944); Restatement (Second) of Agency § 91 (1958); in the present case a considerable dispute existed concerning when Polson first acquired such knowledge.

To evaluate properly when Polson first acquired full knowledge it is necessary to understand the circumstances which followed the execution of the Rayonier-Jackson contract. At no time during or after the execution of that contract in January 1960 did Jackson or Rayonier communicate with Polson about it. When Cleveland Jackson died in November of 1960 Rayonier dealt solely with his executrix Anna Jackson, made all payments to Jackson's estate, and continued to neglect or avoid contacting Polson. Moreover, Jackson's death left the affairs of the joint venture in considerable confusion. Shortly before Jackson's death Polson had asked his attorneys to "check into" the holding of the joint venture. This investigation continued for well over a year after Jackson's death; it disclosed that Jackson was guilty of embezzlement and that he had violated his fiduciary duties in many other ways. However, it proved difficult to untangle the complex affairs of the joint venture. In addition, title to various joint venture properties, including the one-half interest in the Bumgarner Allotments, was the subject of dispute in the probate of Jackson's estate, until July 12, 1961, when title was finally determined. By that time Rayonier had substantially completed its logging operations. Polson was then in the difficult position of trying to preserve the proceeds of the contract, which had been paid to Jackson's estate, while establishing whether he, Polson, was bound by Jackson's acts. Investigation continued through the remainder of 1961 and early 1962; in July of 1962 Polson notified Rayonier that its contract with Jackson was unauthorized, and in August Polson commenced this action.

The district court found that Polson did not acquire full knowledge of all material facts until July 1961. In view of the evidence we cannot say that this...