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Newberry v. Barth, Inc. - 252 N.W.2d 711 (Iowa 1977)

Rule:

Implied authority of a corporate officer or agent includes all such incidental authority as is necessary, usual and proper to effectuate the main authority expressly conferred. But although a general or managing officer will be presumed, in absence of proof to the contrary, to have authority to contract in the usual course of corporate business, this implied authority ordinarily does not extend to contracts for the sale of the fixed assets of the corporation.

Facts:

Defendant Barth, Inc. owned an apartment complex, which was its principal asset. It was purchased from defendant Florence Barth and her husband Paul Barth who died in July 1968. Mrs. Barth managed the apartment complex. The articles of incorporation placed extensive corporate control in the Federal Housing Commissioner (FHA), which was Barth, Inc.'s ole preferred stockholder. Mrs. Barth listed the apartment complex for sale on Aug. 13, 1968 for a sale price of $220,000. The listing agreement disclosed the owner as "Barth, Inc." Plaintiff Donald E. Newberry executed a contract to purchase the complex in Nov. 1968. When Barth, Inc. refused to sell, Newberry filed a lawsuit in Iowa state court against Mrs. Barth and Barth, Inc., seeking specific performance of the contract. Barth, Inc. contended that Mrs. Barth was without authority to sell the apartment complex and had no authority to bind Barth, Inc. to the sales transaction. The trial court rendered judgment for Newberry. Defendants appealed.

Issue:

Did the Mrs. Barth have the authority to sell the apartment complex to Newberry?

Answer:

No.

Conclusion:

On appeal, the state supreme court reversed the trial court's judgment and remanded the case for a new trial. The court ruled that there was little support in the record to find that Mrs. Barth was the alter ego of Barth, Inc. or that Barth, Inc. should have been disregarded. Mrs. Barth had no actual authority to sell the property and she did not have the apparent authority to Barth, Inc. to the contract.  The court observed that Barth, Inc.'s articles of incorporation placed many restrictions Mrs. Barth and almost every major decision required prior approval of the preferred stockholder, F.H.A. Contrary to trial court's finding, there was no evidence Mrs. Barth could readily deliver the property without F.H.A.'s prior consent.

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