Frontier Leasing Corporation Vs. Links Engineering, Llc D/b/a Bluff Creek Golf Course ( 2010 )

IN THE SUPREME COURT OF IOWA
No. 08–1683
Filed May 7, 2010
FRONTIER LEASING CORPORATION,
Appellee,
vs.
LINKS ENGINEERING, LLC d/b/a BLUFF CREEK GOLF COURSE,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Scott D.
Rosenberg, Judge.
Parties seek further review of court of appeals’ reversal of
district court’s grant of summary judgment on an equipment lease.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND
MODIFIED IN PART; DISTRICT COURT JUDGMENT REVERSED AND
CASE REMANDED.
Kimberly P. Knoshaug of Lewis, Webster, Van Winkle & Knoshaug,
L.L.P., Des Moines, for appellant.
Edward N. McConnell, and Aaron H. Ginkens of Ginkens &
McConnell, P.L.C., Clive, for appellee.
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TERNUS, Chief Justice.
This case involves an action to collect damages upon the default of
an equipment lease for a beverage cart to be used on a golf course. The
district court granted summary judgment in favor of appellee, Frontier
Leasing Corporation (Frontier), rejecting the arguments of the appellant,
Links Engineering, LLC d/b/a Bluff Creek Golf Course (Links), that (1)
Frontier was not the real party in interest because the lease had not been
validly assigned to it, and (2) the Links employee who signed the lease
did not have authority to bind Links to the lease. The court of appeals
reversed on the assignment issue, remanding the case to the district
court to permit a reasonable time for substitution of the real party in
interest. The court of appeals did not address the authority issue.
We granted further review to consider the district court’s summary
resolution of the authority issue and to address that portion of the court
of appeals decision instructing the district court to allow a reasonable
time for substitution. Upon our review of the record and controlling legal
principles, we hold there is a genuine issue of material fact with respect
to the Links employee’s authority to sign the lease. Therefore, we reverse
the district court’s grant of summary judgment to Frontier. In addition,
we instruct the district court to provide Links an opportunity to resist
substitution. If the court thereafter determines substitution is
appropriate, the case should proceed on its merits in a manner
consistent with this opinion. If the court determines substitution is not
warranted, judgment shall be entered in favor of Links. Accordingly, we
affirm the decision of the court of appeals reversing the district court’s
grant of summary judgment, but modify the directions to the district
court upon remand.
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I. Prior and Current Proceedings.
A. District Court Proceedings. Links and C and J Leasing
Corporation (Leasing Corp.) entered into an equipment lease, which
Frontier claimed had been assigned to it. Frontier brought suit for Links’
default under the lease and moved for summary judgment. The district
court granted summary judgment in favor of Frontier, there being no
material dispute regarding Links’ default under the lease. In its ruling,
the court rejected two arguments made by Links in resistance to
Frontier’s request for summary judgment: (1) that Frontier was not the
real party in interest because it did not hold a valid assignment of the
lease, and (2) that the person signing the lease on behalf of Links had no
authority to do so.
With respect to the assignment issue, Frontier alleged it had been
assigned the lease from C and J Special Purpose Corporation, which in
turn had been assigned the lease from C & J Vantage Leasing Company
(Vantage). The district court concluded Frontier had a valid assignment
of the lease, thereby making it the real party in interest.
The second issue addressed by the district court in its summary
judgment ruling involved whether an employee of Links, David Fleming,
had authority to enter into the lease on behalf of Links. Fleming was a
golf professional who had been hired to run the day-to-day operations of
the golf course owned by Links. Links asserted that Fleming had no
authority to bind Links with regard to any financing agreements. The
district court found that Fleming had actual and apparent authority to
enter into the lease, thereby binding Links to the transaction.
B. Court of Appeals Proceedings. The court of appeals reversed
the summary judgment, ruling that, because the lease was between
Links and Leasing Corp., Vantage could not validly assign the lease, as it
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was not a party to the lease. The court of appeals did not address the
authority issue. In deciding the assignment issue, the court of appeals
stated:
Accordingly, Frontier has no enforceable interest in the lease
and is not the real party in interest. We reverse the district
court’s grant of summary judgment in favor of Frontier. On
remand, the district court shall allow a reasonable period of
time for substitution of the real party in interest. Iowa R.
Civ. P. 1.201.
C. Current Proceedings. Through its further review application,
Links objects to the portion of the court of appeals decision that
instructs the district court to allow a reasonable time for substitution of
the real party in interest. Specifically, Links asserts that the statute of
limitations has run on Leasing Corp.’s claim, and therefore, substitution
should not be automatic, and a hearing should be held to determine
whether substitution is appropriate. Through its further review
application, Frontier objects to the court of appeals’ reversal on the
ground that the assignment of the lease was not valid.
II. Scope of Review.
A. Further Review. “On further review, we can review any or all
of the issues raised on appeal or limit our review to just those issues
brought to our attention by the application for further review.” Anderson
v. State, 692 N.W.2d 360, 363 (Iowa 2005). We have taken this case on
further review to address Links’ argument pertaining to the court of
appeals’ instruction on remand that the district court allow a reasonable
time for substitution of the real party in interest. Because we vacate this
instruction, finding the district court must hold proper proceedings to
determine if substitution is appropriate, we have also decided to address
the authority issue that the court of appeals did not address.
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B. Summary Judgment. We review grants of summary judgment
for correction of errors of law. Lobberecht v. Chendrasekhar, 744 N.W.2d
104, 106 (Iowa 2008). Summary judgment is appropriate
if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact, and
that the moving party is entitled to a judgment as a matter of
law.
Iowa R. Civ. P. 1.981(3).
We view the record in the light most favorable to the opposing
party. Lobberecht, 744 N.W.2d at 106; Lloyd v. Drake Univ., 686 N.W.2d
225, 228 (Iowa 2004). We also afford the opposing party every legitimate
inference the record will bear. Lloyd, 686 N.W.2d at 228. Even when the
facts are undisputed, summary judgment is inappropriate if reasonable
minds could draw different inferences from those facts. Colonial Baking
Co. of Des Moines v. Dowie, 330 N.W.2d 279, 282 (Iowa 1983). In
granting summary judgment, the district court is not to make credibility
assessments, as such assessments are “peculiarly the responsibility of
the fact finder.” Estate of Hagedorn ex rel. Hagedorn v. Peterson, 690
N.W.2d 84, 88 (Iowa 2004).
III. Analysis.
A. Substitution of the Real Party in Interest. Without deciding
the merits of the substitution issue, we agree with Links that it is entitled
to an opportunity to show that it will be prejudiced by substitution and
that the district court is the proper place for this issue to be determined.
See Estate of Kuhns v. Marco, 620 N.W.2d 488, 495–96 (Iowa 2000)
(discussing Iowa Rules of Civil Procedure 2 and 69(e), now rules 1.201
and 1.402(5), and stating that “the defendant should be given an
opportunity to show prejudice in the event that notice of the misnamed
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party adversely impacted the policy considerations of the statute of
limitations”); see also Richardson v. Clark Bros., 202 Iowa 1371, 1372,
212 N.W. 133, 134 (1927) (holding that substitution of the plaintiff
should be allowed, unless defendant is thereby prejudiced).
That portion of the court of appeals decision instructing the district
court to allow a reasonable time for substitution of the real party in
interest is modified. On remand, the district court shall determine
whether substitution of the real party in interest is appropriate, and if so,
the reasonable timing of such substitution. If the district court decides
substitution should not be allowed, judgment shall be entered in favor of
Links. Cf. In re R.E.K.F., 698 N.W.2d 147, 151 (Iowa 2005) (conditionally
affirming the termination of father’s parental rights pending
determination pursuant to Iowa ICWA that child was not eligible for
tribal membership).
B. Authority Issue. The party asserting an agency relationship
must prove it exists by a preponderance of the evidence. Dailey v.
Holiday Distrib. Corp., 260 Iowa 859, 868, 151 N.W.2d 477, 484 (1967).
An agency relationship can be established through the agent’s actual or
apparent authority to act on behalf of the principal. Hendricks v. Great
Plains Supply Co., 609 N.W.2d 486, 493 (Iowa 2000).
“Actual authority to act is created when a principal
intentionally confers authority on the agent either by writing
or through other conduct which, reasonably interpreted,
allows the agent to believe that he has the power to act.
Actual authority includes both express and implied
authority. Express authority is derived from specific
instructions by the principal in setting out duties, while
implied authority is actual authority circumstantially
proved.”
Id. (emphasis added) (quoting Dillon v. City of Davenport, 366 N.W.2d
918, 924 (Iowa 1985) (citations omitted)); accord Gabelmann v. NFO, Inc.,
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571 N.W.2d 476, 481 (Iowa 1997). Thus, actual authority examines the
principal’s communications to the agent. Restatement (Third) of Agency
§ 2.01, at 80 (2006).
Apparent authority is authority the principal has knowingly
permitted or held the agent out as possessing. Magnusson Agency v.
Pub. Entity Nat’l Co.-Midwest, 560 N.W.2d 20, 25–26 (Iowa 1997).
Apparent authority focuses on the principal’s communications to the
third party. Restatement (Third) of Agency §§ 2.03, 3.03, at 113, 173–74.
In other words, “[a]pparent authority must be determined by what the
principal does, rather than by any acts of the agent.” Magnusson
Agency, 560 N.W.2d at 26.
A principal may also be liable under the doctrines of estoppel and
ratification. Under the doctrine of estoppel, the principal is liable if he (1)
causes a third party to believe an agent has the authority to act, or (2)
has notice that a third party believes an agent has the authority and
does not take steps to notify the third party of the lack of authority.
Restatement (Third) of Agency § 2.05, at 145–46. Moreover, based on
principles of ratification, a principal may be liable when he knowingly
accepts the benefits of a transaction entered into by one of his agents.
Mayrath Co. v. Helgeson, 258 Iowa 543, 551, 139 N.W.2d 303, 308
(1966).
The district court based its ruling that Fleming had actual and
apparent authority to enter into the lease on behalf of Links on an
affidavit submitted by the director and owner of Links, Lance Clute.
Clute stated in his affidavit that Fleming was in charge of the day-to-day
operations of the golf course, Clute was aware of the existence of the
beverage cart and did not disavow the transaction, and Links made
payments on the cart from August 2004 through March 2005. The
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district court noted that Links did not provide an affidavit from Fleming
confirming the testimony of Clute. While these facts do support a finding
of an agency relationship, an examination of Clute’s entire affidavit,
when read in the context of the summary judgment scope of review
requiring all legitimate inferences to be drawn in Links’ favor, could also
cause one to conclude that Fleming did not have actual or apparent
authority to enter into the lease and that Clute did not ratify the
transaction or act in any way that would estop Links from rejecting the
transaction.
In particular, Clute’s affidavit refutes the existence of actual
authority with Clute’s statement that Fleming was not authorized to
enter into any financing agreements or transactions for the purchase,
lease, or financing of capital assets like the beverage cart, especially
given the lease’s hefty amount of $19,000. Clute’s affidavit refutes the
existence of apparent authority with the statement that it is customary in
the golf industry to hire a PGA golf professional to manage the day-to-day
operations of a golf course, and vendors are aware that such
professionals do not have authority to enter into the type of transaction
at issue here. Clute’s affidavit also refutes that Links is estopped from
rejecting the transaction and that Links ratified the lease. It does so with
Clute’s explanation that, when he saw the cart, he thought it was an
“even trade for advertisement” such as Links’ practice with scorecard
advertising. Clute stated that with scorecard advertisements, Links is
given the scorecards for free in exchange for the advertisements on the
cards. Clute’s affidavit also refutes the doctrines of estoppel and
ratification with its statements that he first learned of the lease through
a collection letter that was received when Fleming was no longer
employed with Links, that he immediately requested a copy of the lease
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when it could not be found in Links’ records, that he made the cart
available for repossession after determining that the lease was a “scam,”
and that the cart “to this day . . . sits idle in [Links’] garage taking up
space.” Finally, while Links does not submit an affidavit from Fleming
supporting Clute’s affidavit testimony, a jury nevertheless could believe
Clute, finding in Links’ favor. The absence of testimony from Fleming
simply goes to the weight of Links’ evidence, which is something for the
jury to decide, not a court on summary judgment.
Because reasonable minds could draw different inferences from the
record as to whether Fleming had authority to bind Links to the
equipment lease, we reverse the district court’s grant of summary
judgment. On remand, if the district court determines substitution of
the real party in interest is warranted, then the district court should
consider the case on its merits in a manner consistent with this opinion,
including with regard to the authority issue.
IV. Disposition.
The portion of the court of appeals’ decision instructing the district
court to allow a reasonable time for substitution of the real party in
interest is modified as specified above. In all other respects, the court of
appeals’ decision pertaining to the validity of the assignments and to the
real party in interest is affirmed. The district court’s grant of summary
judgment is reversed. On remand, the district court shall determine
whether substitution of the real party in interest is appropriate, and if so,
the reasonable timing of such substitution. If the district court
determines substitution of the real party in interest is warranted, then
the district court should consider the case on its merits in a manner
consistent with this opinion. If, however, the district court determines
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substitution is not appropriate, judgment shall be entered in favor of
Links.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND
MODIFIED IN PART; DISTRICT COURT JUDGMENT REVERSED AND
CASE REMANDED.