Bullock v. State of Utah, Department of Transportation et al

OPINION
(For Official Publication)

IN THE UTAH COURT OF APPEALS

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Richard B. Bullock,
Plaintiff and Appellant,

v.

State of Utah, Department of Transportation; Eugene H. Findlay; Craig Zwick; P.K. Mohanty; Dean W. Holbrook; Alan W. Deardon; J. Vance Beatty; Faye B. Beatty; Estate of Reed A. Bullock, deceased; personal representative of Reed A. Bullock,
Defendants and Appellees.

Case No. 971582-CA

F I L E D
(October 16, 1998)

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Third District, Salt Lake Department
The Honorable Sandra N. Peuler

Attorneys:
Kevin V. Olsen, Salt Lake City, for Appellant
Richard L. Bird, Jr., Salt Lake City, for Appellees Beatty and Bullock
Jan Graham and Nancy L. Kemp, Salt Lake City, for Appellees State, UDOT, Findlay, Zwick, Mohanty, Holbrook, and Deardon

----- Before Judges Wilkins, Billings, and Jackson.

BILLINGS, Judge:

Appellant Richard B. Bullock appeals the trial court's dismissal of his suit against the State of Utah Department of Transportation (UDOT) and several individual defendants. We affirm.

FACTS

Appellant and the individual defendants in this case were partners who owned land in Provo canyon. The Provo canyon property was the sole asset of the partnership. In October 1991, appellant's partners negotiated a contract between the partnership and UDOT to sell the Provo canyon property to the State of Utah. Appellant learned of this contract after it was negotiated but before the sale was finalized. Appellant opposed the sale because he felt it was below market value.

In January 1992, appellant discussed the contemplated sale with a UDOT employee. Appellant told the employee that he believed the sale would be invalid under the partnership agreement unless all of the partners consented to it. Appellant followed up this conversation with a letter to UDOT which indicated his familiarity with the terms of the sale. The letter concluded: "I have not yet received any information from you and would appreciate receiving whatever you are able to provide so hopefully a sale to the State of Utah can be effectuated."

In March 1992, the other partners deeded the Provo canyon property to UDOT in accordance with the 1991 contract of sale. Appellant did not sign the deed. In September 1992, the individual defendants, acting for the partnership, sent appellant a check for $67,198.43. This check was identified as appellant's share of the proceeds from the sale of the Provo canyon property, and it was accompanied by a note totaling the proceeds of the sale and explaining how they had been disbursed among the partners. Appellant endorsed and negotiated the check on September 18, 1992. Appellant did not respond in any other way to his receiving the check and the sales information.

In March 1993, one year after the title transfer and six months after appellant had accepted payment for the sale, he served notice of suit against the State of Utah. In May 1994, appellant filed suit in federal court against UDOT and the individual defendants and offered to return his share of the sale proceeds. Appellant's federal suit was dismissed in November 1994. In March 1996, appellant filed suit against UDOT and the individual defendants in state court and again tendered a check for his share of the sale proceeds. The state trial court dismissed appellant's claims against the State as untimely. The trial court also dismissed appellant's suit against the individual defendants, concluding appellant had ratified the sale. Appellant now appeals.
 

ANALYSIS

I. Did the trial court err in dismissing appellant's claims against UDOT as time-barred under the Utah Governmental Immunity Act?

Appellant argues the trial court erred when it dismissed his claims against the State as time-barred under the Utah Governmental Immunity Act (the Act); See Utah Code Ann. 63-30-1 to -38 (1997). The trial court concluded that appellant's claim against the State was a claim involving property under section 63-30-6 of the Act. Section 63-30-6 provides as follows: Immunity from suit of all governmental entities is waived for the recovery of any property real or personal or for the possession thereof or to quiet title thereto, or to foreclose mortgages or other liens thereon or to determine any adverse claim thereon, or secure any adjudication touching any mortgage or other lien said entity may have or claim on the property involved. Id. 63-30-6. Claims under section 63-30-6 are subject to the notice and filing requirements of the Act, and must therefore be filed "within one year after the claim arises." Id. 63-30-12. The trial court concluded that appellant's claim was time-barred because he did not file his state suit until well after the one-year limitation.(1)

Appellant argues, however, that his claim involved a contractual obligation under section 63-30-5, which states: Immunity from suit of all governmental entities is waived as to any contractual obligation. Actions arising out of contractual rights or contractual obligations shall not be subject to the requirements of Sections 63-30-11, 63-30-12, 63-30-13, 63-30-14, 63-30-15 or 63-30-19. Utah Code Ann. 63-30-5 (1997). Under this section, "[a]ctions arising out of contractual rights or obligations" are not subject to the section 63-30-12 statute of limitations. Id. Consequently, if appellant's claim was a contractual claim under section 60-30-5, it is exempt from the Act's statute of limitations and remains valid. Thus, we must decide whether appellant's claim against the State is a claim for breach of contract under section 63-30-5 or a claim for recovery of property under section 63-30-6.

"[T]he structure of the Utah Governmental Immunity Act . . . focuses on the conduct or situation out of which the injury arose, not on the theory of liability crafted by the plaintiff or the type of negligence alleged." Ledfors v. Emery County Dist., 849 P.2d 1162, 1166 (Utah 1993). Numerous Utah cases have established the principle that "[a] plaintiff's claim should be refused when it is drafted in an attempt to "'evade [the Act's] statutory categories by recharacterizing the supposed cause of the injury.'" De Villiers v. Utah County, 882 P.2d 1161, 1166 (Utah Ct. App. 1994) (citation omitted).

Utah case law does not support appellant's contention that his claim is a cause of action arising out of contract as contemplated in section 63-30-5. Other Utah cases recognizing claims under section 63-30-5 have all dealt with contractual claims in which the State's breach of a contract was the root of the plaintiff's injury. See, e.g., Farmers New World Life Ins. Co. v. Bountiful City, 803 P.2d 1241, 1248 (Utah 1990) (holding claimant had section 63-30-5 claim where city breached written right-of-way agreement for creek easement); Brown v. Weis, 871 P.2d 552, 563-65 (Utah Ct. App. 1994) (holding State's breach of implied covenant of good faith and fair dealing pursuant to real estate contract was actionable under section 63-30-5); Neel v. State, 854 P.2d 581, 583 (Utah Ct. App. 1993), remanded on other grounds, 889 P.2d 922 (Utah 1995) (holding insured's third party beneficiary suit to recover insurance benefits from State in its capacity as insurer was section 63-30-5 action).

Appellant does not argue, as did the plaintiffs in the above-cited cases, that the State injured him by breaching a contract to which he was a party.(2) Rather, appellant claims that the partnership's sale of the Provo canyon property to UDOT was invalid from its inception because it violated the partnership agreement between himself and the individual defendants. The only breach of contract appellant alleges was his partners' violation of the partnership agreement. The core of appellant's claim against the State is not that the State violated his contractual rights but that the State is in wrongful possession of appellant's property. This claim is properly cognizable under section 63-30-6 as a claim "for the recovery of [real property] . . . or for the possession thereof or to quiet title thereto." We conclude that appellant's claim is subject to the one-year statute of limitations under section 63-30-12, and the trial court correctly dismissed appellant's claim against UDOT.

II. Did the trial court err in dismissing appellant's claims against the individual defendants because appellant had ratified the sale to UDOT?

A. Did appellant ratify the sale to UDOT?

Appellant argues the trial court erroneously concluded that he ratified the sale of the Provo canyon property and thus erred in dismissing his claims against his partners. In reviewing the trial court's conclusion that appellant ratified the contract, we bear in mind that this is a review of a Motion for Dismissal. Thus we will reverse the trial court if we find that the facts, viewed in the light most favorable to appellant, "argue against the determinations that [appellant] had 'knowledge of all material facts and an intent to ratify'" the contract. Zions First Nat'l Bank v. Clark Clinic Corp., 762 P.2d 1090, 1099-1100 (Utah 1988).

It is well-established under Utah law that "'[s]ubsequent affirmance by a principal of a contract made on his behalf by one who had at the time neither actual nor apparent authority constitutes a ratification, which in general is as effectual as an original authorization.'" Moses v. Archie McFarland & Son, 119 Utah 602, 607, 230 P.2d 571, 573 (1951). A principal may impliedly or expressly ratify an agreement made by an unauthorized agent. Ratification of an agent's acts relates back to the time the unauthorized act occurred and is sufficient to create the relationship of principal and agent. Ratification is premised upon the knowledge of all material facts and upon an express or implied intention on the part of the principal to ratify. Bradshaw v. McBride, 649 P.2d 74, 78 (Utah 1982); Harlin Constr. Co. v. Continental Bank & Trust Co., 23 Utah 2d 422, 427, 464 P.2d 585, 588 (1970).

In Moses, the Utah Supreme Court explained the reasoning behind the doctrine of implied ratification: Ratification, like original authority, need not be express. Any conduct which indicates assent by the purported principal to become a party to the transaction or which is justifiable only if there is ratification is sufficient. Even silence with full knowledge of the facts may manifest affirmance and thus operate as a ratification. The person with whom the agent dealt will so obviously be deceived by assuming the professed agent was authorized to act as such, that the principal is under a duty to undeceive him So a purported principal may not be wilfully ignorant, nor may he purposely shut his eyes to means of information within his possession and control and thereby escape ratification "if the circumstances are such that he could reasonably have been expected to dissent unless he were willing to be a party to the transaction." Moses, 230 P.2d at 573-74 (citation omitted) (emphasis added).

In essence, the doctrine of implied ratification protects both a principal's agent and the co-parties to a contract by ensuring that the principal cannot repudiate the contract after the fact if any reasonable person would have concluded from the principal's actions at the time of the transaction that the principal endorsed the contract.

However, we will not infer ratification of a contract unless we conclude that the principal knowingly assented to the material terms of the contract. See Bradshaw, 649 P.2d at 78. Thus, "'ratification requires the principal to have knowledge of all material facts and an intent to ratify.'" Zion's First Nat'l Bank, 762 P.2d at 1098 (citations omitted).

Here, the trial court concluded, and we agree, that appellant had sufficient knowledge of the material facts of the sale to enable him to ratify the sale. Appellant knew in October 1991 that his partners were negotiating a sale to UDOT and was aware of the general terms of the sale. In September 1992, appellant was informed of the sale price and the manner in which the sale proceeds were distributed among the partners. Thus, appellant had unequivocal information that the sale had occurred and sufficient material facts about the sale that his ratification of the sale can reasonably be inferred from his actions. Cf. Kidd v. Maldonado, 688 P.2d 461, 462 (Utah 1984); Van Tassel v. Lewis, 118 Utah 356, 222 P.2d 350 (1950).

The trial court also concluded that appellant ratified the sale by his conduct. "Under some circumstances failure to disaffirm may constitute ratification of the agent's acts." Zion's First Nat'l Bank, 762 P.2d at 1098 (citations omitted). "Implied [ratification may arise] under circumstances of acquiescence or where a duty to disaffirm is not promptly exercised." Lowe v. April Indus., Inc., 531 P.2d 1297, 1299 (Utah 1974) (footnote omitted).

Any conduct which indicates assent . . . which is justifiable only if there is ratification is sufficient [to ratify a contract]. Even silence with full knowledge of the facts may manifest affirmance and thus operate as a ratification [when t]he person with whom the agent dealt will so obviously be deceived [by the principal's silence] that the principal is under a duty to undeceive him.

Moses, 230 P.2d at 574 (citation omitted). A duty to educate other parties to a contract arises whenever "the circumstances are such that [the principal] could reasonably have been expected to dissent unless he were a willing party to the transaction." Id.
 

A principal's retention of the fruits of a contract can also serve as an implied ratification of the contract. As the Zions First Nat'l Bank court noted: The retention by a purported principal, with knowledge of the facts and before he has changed his position, of something which he is not entitled to retain unless an act purported to be done on his account is affirmed, and to which he makes no claim except through such act, constitutes an affirmance unless at the time of such retention he repudiates the act. Even if he repudiates the act, his retention constitutes an affirmance at the election of the other party to the transaction. Zion's First Nat'l Bank,762 P.2d at 1099 (citation omitted).
 

In this case, appellant had knowledge both of the existence of the contract and of its material terms. Although appellant had voiced objections to the sale before it took place, he had framed his objections to imply that he would consent to a sale if the terms were satisfactory. When the other partners sent him a check for his portion of the proceeds and a note explaining the sale transaction and the disposition of the sale proceeds, appellant endorsed and negotiated the check and took no other action. Appellant made no objection until one year after the sale, by which time he had held his share of the sale proceeds for over six months. Under these circumstances, appellant "could reasonably be expected to dissent unless he were willing to be a party to the transaction." Moses, 230 P.2d at 574. Thus, the only reasonable conclusion the other parties to the transaction could draw from appellant's actions was that appellant had withdrawn his earlier objections to the sale and had ratified the contract.
 

We conclude that, even under the heightened standard applicable to summary judgment, the undisputed facts, viewed in the light most favorable to appellant, cannot reasonably support appellant's contention that he did not ratify the sale. Consequently, we rule the trial court was correct in finding that appellant had ratified the contract. B. Did appellant's ratification release his partners from liability for violating the partnership agreement? Finally, appellant argues even if he ratified the sale with respect to UDOT, his ratification was insufficient to release his partners from liability for their own breach of the partnership agreement. Appellant argues that his partners remain liable to him for damages because he was obligated to ratify his partners' act in order to protect his own interest and because his partners secured his ratification by means of duress and misrepresentation. Appellant cites Kidd v. Maldonado, 688 P.2d 461 (Utah 1984), to support his position. However, in Maldonado, the supreme court concluded that an agent who had violated his fiduciary duty to the principal was not liable to his principal because the principal failed to contest the agent's actions after they were brought to his attention, thereby implicitly ratifying them. See Maldonado, 688 P.2d at 462. The Maldonado court stated that "[w]hen a principal sees an act done by his agent and the act is not subject to misunderstanding by a reasonable person, the law does not permit the principal to ignore what is obvious, even if it be contrary to his instructions." Id. Thus the Maldonado court concluded, as we do in this case, that the principal's acquiescence in unauthorized acts once he had reason to know about them, constituted a ratification sufficient to release the agent from liability. See id.
 

CONCLUSION

We conclude that appellant's claim against the State is a claim for recovery of property and is therefore time-barred under Utah Code Ann. 63-30-12 (1997). We also conclude that by accepting his portion of the sale proceeds and by failing to disaffirm the sale for over six months, appellant implicitly ratified the sale contract. This ratification validated the sale of the Provo canyon property to UDOT and released appellant's partners from liability for their violation of the partnership agreement. We therefore hold that the trial court correctly dismissed appellant's claims against the State and the individual defendants.
 

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Judith M. Billings, Judge
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WE CONCUR:
 

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Michael J. Wilkins, Associate Presiding Judge
 

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Norman H. Jackson, Judge

1. Because appellant filed an earlier federal suit, section 78-12-40 of the Utah Code allowed him to file his second state suit up to one year after the dismissal of the federal claims. See Utah Code Ann. 78-12-40 (1996). However, appellant also missed this deadline by filing his state suit fifteen months after the dismissal in federal court.

2. Appellant does argue that he has a contractual claim against UDOT as the intended third party beneficiary of the 1991 sale contract. However, there is no foundation for such a claim because appellant received his share of the sale proceeds under the sale contract and has not alleged that either UDOT or his partners violated the contract. Thus, on the facts he himself alleged, appellant's third party beneficiary claim is meritless.