Western Fertilizer and Cordage Co., Inc. v. BRG, Inc.

• Decision Date: 17 June 1988
• Docket Number: No. 86-289,86-289
• Citation: 228 Neb. 776,424 N.W.2d 588
• Parties: WESTERN FERTILIZER AND CORDAGE COMPANY, INC., Appellee, v. BRG, INC., et al., Appellees, City of Alliance, a Municipal Corporation, Appellant and Cross-Appellee, and David K. Rice, Intervenor-Appellee and Cross-Appellant.
• Court: Nebraska Supreme Court

Page 588

424 N.W.2d 588

228 Neb. 776

WESTERN FERTILIZER AND CORDAGE COMPANY, INC., Appellee, v. BRG, INC., et al., Appellees City of Alliance, a Municipal Corporation, Appellant and Cross-Appellee and David K. Rice, Intervenor-Appellee and Cross-Appellant.

No. 86-289.

Supreme Court of Nebraska.

June 17, 1988.

Syllabus by the Court

1. Real Estate: Dedication: Words and Phrases. A dedication of real estate is a landowner's giving of a right or easement for public use.

2. Mortgages: Dedication. A mortgagor cannot, without the consent of the mortgagee, make a dedication of the mortgaged premises so as to adversely affect the interest of the mortgagee.

3. Corporations: Presumptions. Although, generally, there is a presumption that acts of corporate officers pertaining to ordinary corporate business transactions are authorized by the corporation, when a corporate officer acts outside the scope of ordinary business, no presumption of authority arises and the other party to the transaction is required to make an inquiry into the officer's authority.

4. Principal and Agent: Words and Phrases. Apparent authority is the power which enables a person to affect the legal relationships of another with third persons, professedly as agent for the other, from and in accordance with the other's manifestations to such third persons. A party who has knowingly permitted others to treat one as his agent is estopped to deny the agency.

5. Principal and Agent: Words and Phrases. Apparent or ostensible authority to act as an agent may be conferred if the alleged principal affirmatively, intentionally, or by lack of ordinary care causes third persons to act upon the apparent agency.

6. Principal and Agent: Words and Phrases. Apparent authority for which a principal may be liable must be traceable to the principal and cannot be established by the acts, declarations, or conduct of an agent.

7. Corporations: Principal and Agent: Ratification. The unauthorized acts of an officer of a corporation may be ratified by the corporation by conduct implying approval and adoption of the act in question. Such ratification may be express or may be inferred from silence and inaction, and if the corporation, after having full knowledge of the unauthorized act, does not disavow the agency and disaffirm the transaction within a reasonable time, it will be deemed to have ratified it.

8. Principal and Agent: Ratification. Essential to a valid and effective ratification of an unauthorized act is the principal's complete knowledge of the unauthorized act and all matters related to it.

Rodney P. Cathcart of Erickson & Sederstrom, P.C., Lincoln, and Walter R. Metz of Metz & Metz, Alliance, for appellant and cross-appellee.

Robert G. Simmons, Jr., of Simmons, Raymond, Olsen, Ediger, Selzer & Ballew, P.C., Scottsbluff, for appellee Western.

Herbert M. Sampson, III of Sampson & Forney, Alliance, for intervenor-appellee and cross-appellant.

BOSLAUGH, CAPORALE, SHANAHAN, and GRANT, JJ., and BURKHARD, District Judge.

PER CURIAM.

This is an action in equity filed by Western Fertilizer and Cordage Company, Inc. (Western), to foreclose a real estate mortgage and to determine the validity and priority of liens on the real estate for unpaid assessments claimed by the City of Alliance, appellant. David K. Rice, appellee, filed his "Petition in Intervention" asking for a determination of the validity and priority of a statutory construction lien which Rice claimed was due him for unpaid engineering services concerning the real estate. After denying the validity of Rice's construction lien, the district court for Box Butte County found that Western's mortgage was prior to the liens claimed by City of Alliance except as to one lot, on which priority of lien was found in favor of City of Alliance. The court ordered foreclosure of Western's mortgage and sale of the real estate, and reserved jurisdiction to determine distribution of any surplus if the sale proceeds exceeded the amount due Western. City of Alliance appeals.

Rice did not directly appeal the denial of his construction lien, but raised the issue as a cross-appeal in his "Brief of Intervener-Appellee and Cross Appellant." Pursuant to Neb.Ct.R. of Prac. 1 E (rev. 1986), Rice's cross-appeal was dismissed. See Maricle v. Spiegel, 213 Neb. 223, 329 N.W.2d 80 (1983), where this court held that an appellee cannot cross-appeal against another appellee. This appeal, therefore, does not address the district court's denial of Rice's lien.

Incorporated in 1959, Western was originally in the business of selling fertilizer and binding twine, but eventually became involved in farming and real estate investments. Western's original stockholders were Mr. and Mrs. Gordon Keeley. Gordon Keeley was president of Western at all times material to this action, and was also president of another corporation, Alliance Tractor and Implement Company (ATI). Max Garwood became an employee, and later a stockholder and vice president, of ATI. Garwood also became a stockholder and secretary-treasurer of Western, but, according to Keeley, was never a vice president of Western. Garwood initially testified that he had been a vice president of Western, but later retracted, admitting that he was only a secretary-treasurer for Western and was apparently confused due to his status as vice president of ATI.

On October 26, 1977, as president of Western, Keeley negotiated and executed a contract to sell a farm to BRG, Inc., for $239,400. Garwood was not active in this transaction. The parties do not dispute that, pursuant to the amended contract between BRG and Western, BRG became the owner of the real estate pursuant to the contract and that BRG gave Western a promissory note which was secured by a valid and recorded mortgage in favor of Western. BRG, owned by Carl Peterson, John Brittan, and David Rice, was in the business of investing in real estate, and planned to develop the property purchased from Western by building low cost, inexpensive residential homes on that land. Brittan was the president of BRG and negotiated the real estate purchase with Western's president, Keeley. The amended contract between BRG and Western provided that, upon payment of a specified amount, Western would release individual lots from its mortgage, and further provided that Western would subordinate its mortgage by joining in any platting or dedication required to develop the land so long as such platting or dedication did not reduce the value of Western's security. On August 31, 1977, Keeley, as president of Western, signed an "Owner's Certificate and Dedication" in connection with a platting of "Block 1, Homestead Addition." Keeley also signed six partial releases between June 1979 and June 1980, releasing several lots from Western's mortgage.

The real estate conveyed to BRG and mortgaged to Western was developed by BRG and platted as several various "Homestead Additions," namely, Homestead Addition, Homestead First, Homestead Second, and Homestead Third, which were then divided into residential lots for sale. City of Alliance passed several ordinances approving the plats and establishing water, sewer, and street improvement districts. Regarding these ordinances, the City of Alliance engineer and city clerk both testified that they did not discuss the matters contained in the ordinances with officers of Western.

Keeley spent part of his time in Arizona, and during that time Garwood handled Western's day-to-day business needs, such as writing checks and paying bills. In 1977 Brittan asked Garwood to sign some plats and dedications on behalf of Western because Keeley was out of town. On April 20, 1977, Garwood signed three dedications which purported to grant City of Alliance an easement or right-of-way to construct and maintain various improvements upon parcels of the real estate owned by BRG and mortgaged to Western. Brittan signed the dedications on behalf of BRG, and Garwood signed: "[S] Western Fertilizer & Cordage Co. Inc. by Max R. Garwood. " Garwood also signed a "Ratification of and Consent to Replat" on July 7, 1978, on behalf of Western, as "Vice-President." There were three other plats and dedications executed that covered parcels of property owned by BRG and mortgaged to Western which were signed by Brittan on behalf of BRG, but were not signed by anyone on behalf of Western.

Other than the one dedication Keeley signed on August 31, 1977, Keeley was never asked to sign, and never signed, any other plat or dedication on behalf of Western. Garwood never told Keeley that he had signed any plats and dedications on behalf of Western. Although Keeley drove by the land on occasion and observed construction in progress, he testified that since Western held BRG's note and mortgage on the property, he was not concerned with the activity on the land because BRG's payments were being made promptly. Keeley further testified that he had specifically told Garwood and Brittan that only he, Keeley, was to handle the platting, dedication, releases, and other matters on behalf of Western. However, neither Garwood nor Brittan could recall Keeley's telling them that.

Keeley and Garwood severed their business relationship in 1982, whereby Garwood became the owner of ATI and Keeley and his family owned Western. BRG defaulted on its note to Western late in 1982. Keeley testified that he first learned that Garwood had signed some plats and dedications on behalf of Western "in the early part of 1983." Shortly thereafter, Keeley complained to City of Alliance officials about Garwood's signing the plats and dedications on behalf of Western. In August of 1983 Keeley sent a letter to the Alliance city manager expressing his concerns about the purported plats and dedications and advised the city that Western did not join in or consent to the plats and dedications signed by Garwood. The letter also advised the city that BRG was in default and that it may...