Elting v. Elting - 288 Neb. 404, 849 N.W.2d 444 (2014)

Rule:

With respect to a partner's agency to act on behalf of a partnership, Neb. Rev. Stat. § 67-413(1) of Nebraska's Uniform Partnership Act of 1998 (1998 UPA), found at Neb. Rev. Stat. §§ 67-401 to 67-467 (Reissue 2009), provides that each partner is an agent of the partnership for the purpose of its business. Because each partner is an agent of the partnership, the partner must have authority in order to act on behalf of the partnership. Actual authority is authority that the principal expressly grants to the agent or authority to which the principal consents. Actual authority is a consequence of a principal's expressive conduct toward an agent, through which the principal manifests assent to be affected by the agent's action, and the agent's reasonable understanding of the principal's manifestation. The scope of an agent's authority is a question of fact. 

Facts:

Glenn Elting and Sons was a family farming partnership that was formed in 1976 among Glenn Elting and his sons, Kerwin Elting and Perry Elting, all as managing partners. The partners who comprised the partnership changed over the years. The managing partners during the time period relevant to the issues in this case were: Kerwin; Perry; Kerwin's son, Carl Elting; and Perry's son, Knud Elting. On March 30, 2011, Perry, Knud, and Perry's wife, ReJean Elting, the appellees, filed this action in the district court for Nuckolls County against Kerwin, the appellant. The amended complaint was filed on January 22, 2013. The appellees alleged that Kerwin had entered into a series of grain contracts on behalf of the partnership without the authority to do so, resulting in significant losses to the partnership. The appellees sought damages based on these losses. The district court found in favor of the appellees. The district court determined that Kerwin did not have authority to enter into the contracts and that his actions were not ratified. The district court further determined that Kerwin was not shielded by the limitation of liability clause contained in the controlling partnership agreement. The district court awarded judgment in favor of the appellees in the amount of $1,072,175 plus prejudgment interest. Kerwin appealed.

Issue:

Did Kerwin have the authority to enter into the said contracts?

Answer:

No.

Conclusion:

The court held that the trial court's finding that Kerwin did not have authority to enter into focal point contracts with floating sales prices for the partnership's corn was supported by the partnership agreement and the partners' past business dealings, which involved majority votes. The other partners did not and could not have ratified that rogue partner's actions in entering the focal point contracts because the trial court found that the other partners were unaware of these contracts, as shown in part by their amending their complaint when they discovered additional focal point contracts. Because Kerwin’s actions in entering into the focal point contracts were not authorized by the partnership, his actions were not shielded by the limitation of liability clause in the partnership agreement because he did not act in good faith.