Reversal voids sale of properties by unauthorized agent

The Indiana Court of Appeals reversed a decision granting summary judgment in favor of two companies who purchased real estate in a sale that was voided after the seller was found to have no authority to sell it.

In Feb. 2012, GO Properties, LLC was formed with two members, Larry Oliver of Olicorp Properties, LLC and Stacy Phillips of Gracie Properties, LLC. Olicorp was the designated member manager of GO Properties and had the sole authority to sign agreements and other instruments on behalf of GO. GO Properties then purchased four parcels of real estate in Indianapolis from Maxim Alliance Group.

Without notifying Oliver, Phillips filed a notice of change of registered officer or registered agent with the Indiana Secretary of State in Aug. 2013, which changed the registered agent from Olicorp to Gracie. Additionally, Phillips changed GO Properties’ principal address from Olicorp’s business address to her home address and handwrote her title as “Owner” of GO Properties on both documents.

Immediately, Phillips sold GO properties’ purchased land to Elden Investments. She hired Best Title Services to conduct the title examination, which failed to reveal a real estate mortgage with Maxim Alliance. Best Title relied on Phillips’ representation that she was the owner of GO Properties as it conducted its examination and later acted as closing agent for the transaction.

When the sale finalized, Elden Investments sold the properties to BER Enterprises and New Field. In April 2016, both BER and New Field filed for summary judgment, which the trial court granted when it found them to be bona fide purchasers of properties with voidable deeds.

On appeal, GO Properties argued the trial court erred by granting summary judgment in favor of BER Enterprises and New Field because the deeds were void. Both parties disagreed as to whether Phillips had apparent authority to act on behalf of GO Properties.

In its determination, the appellate court found that Go Properties made no direct or indirect statements indicating that Phillips had authority to act on its behalf, and that documents filed by Phillips with the Secretary of State did not amount to statements made by GO Properties that create an apparent agency relationship.

“Nor would it be reasonable to conclude that Phillips’s own handwritten designation of herself as ‘Owner’ of GO Properties (she did not even bother to designate herself Member Manager) on the two forms constitutes a statement made by the principal bestowing her with apparent authority to act on its behalf,” Judge John Baker wrote in the Friday opinion.

The appellate court also found that no such statements were made during the title examination, and that the individual conducting the examination testified that he relied only on Phillips herself.

“In sum, Phillips did not have actual or apparent authority to sell the Properties on behalf of GO Properties,” Baker concluded. “As a result, the original sale of the Properties to Elden Investments was void. Because the deed that Phillips executed on behalf of GO Properties was void, all future conveyances of the Properties were likewise void.”

Therefore, the judgment of the trial court was reversed and remanded with instructions to enter judgment in favor of GO Properties in GO Properties, LLC, and Maxim Alliance Group, LLC v. BER Enterprises, LLC; Mortgage Electronic Registration Systems, Inc., as Nominee for Franklin American Mortgage Company; New Field, LLC; et al., 18A-PL-176.

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