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Appeals court cites apparent authority to affirm auction sale

July 16, 2013

The sale of Noble County lake and farm property at auction is valid even though some siblings in a family limited liability corporation objected because reserve prices hadn’t been met, the Indiana Court of Appeals ruled in affirming the trial court.

Members of the Cain Family Farm LLC in 2008 auctioned a number of pieces of property that totaled about 400 acres in the Sylvan Lake area in northeastern Indiana. Because bids came in much lower than expected, the siblings huddled during the sale, with one, Candace Somerlot, telling others she would be “happy with whatever they wanted to do.”

Auctioneers subsequently announced all property would be sold that day, and Somerlot signed purchase agreements with winning bidders on behalf of the LLC. Some time later, the LLC sought to nullify the sales, and litigation ensued in The Cain Family Farm, L.P., and The Cain Family Farm, LLC, v. Schrader Real Estate & Auction Company, Inc., Charles O. Drerup, Antlers Ridge, LLC, and Candace J. Somerlott,
57A03-1209-PL-394.

“The dispositive issue on appeal is whether Candace had apparent authority to bind the LLC and, by extension, the Limited Partnership, when she executed the Purchase Agreement,” Judge Edward Najam wrote for the panel. “While the designated evidence reveals questions of material fact concerning whether Candace had actual authority to bind the LLC and whether Schrader breached its contract and violated its fiduciary duty to Cain Family Farm, those issues are not before us in this appeal.

“By all appearances, Candace had authority, and there are no indicia that would have placed (purchasers) on notice or inquiry notice that Candace did not have authority to sign the Purchase Agreement for the LLC. … The Purchase Agreement is also valid and enforceable under Indiana Code Section 23-18-3-1.1(b). Whether we consider the question of apparent authority under the common law or the Indiana Business Flexibility Act, the outcome is the same,” Najam wrote.

 

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