Agency question from student

Hello Professor, I had a quick question regarding agency law, or more specifically the ratification portion.

Ratification

Principal will be liable to a third party for an unauthorized contract entered on its behalf, if the principal accepts benefits of the contract. The principal must have knowledge of the contract, the terms and nevertheless accept the benefits.

Does this mean that the principal, after giving either actual (implied or express) or apparent authority, and having knowledge of the contract its terms and its acceptance be ratified or must it be that he must have knowledge of the contract and terms and be required to accept the benefits?

Response: Continue reading

Is there a partnership here?

This is a brief (case summary) I wrote in 2013.  Bankruptcy case.

Utnehmer v. Crull (In re Utnehmer), 499 B.R. 705 (9th Cir. B.A.P. 2013)
Issue:   Was a partnership actually formed here such that the debtor owed fiduciary duties to the creditor which may be non-dischargeable under Section 523(a)(4)?

Holding:   No.

Judge Alan Jaroslovsky, Northern District California

Pappas, Dunn, Jury

Opinion by Pappas

The debtors decided, in 2005, to build a large “spec home” in Venice Ca which would be sold then for a profit.  They borrowed $100,000 from Crull giving Crull a promissory note which was due on sale of the property but no longer than 12 months.  “The Parties agreed that $50,000 of the initial $100,000 loan was intended to be super[s]eded by execution of a formal operating agreement which would recharacterize this $50,000 of the lenders’ interest as an investors’ equity interest in a limited liability company to be formed, with a 10% annual preferred return, and 35% participation in profits on a prorated basis.  The documents for formation of the limited liability company, and the operating agreement, were supposedly being drafted.”  The lender received interest payments for about two years.  The property was finally finished and sold but the loan was not repaid since there were insufficient funds available.  The debtors filed chapter 7 and the lenders filed a non-dischargeability complaint alleging fraud and willful and malicious injury.  The court commented that there was no fraud or willful injury but there appeared to be defalcation by a fiduciary “if a partnership arrangement is shown.”  After trial, the court stated, “If your client was a fiduciary in relation to the venture and cannot account for the proceeds, I think that that’s enough to establish defalcation.”  He entered judgment against the debtor. Continue reading

Further info re materials for Fall 2019 – Biz Org

I will not be using the Statutory Supplement previously assigned.  Don’t confuse that with my Supplement.  My Supplement has cases that we will review but are not in the Hamilton text.  It also has forms we will look at, a Glossary, an article on fiduciary duties, and some other things.  It is here.

Also, I would not bother with older versions of my Summary of Law of Business Orgs.  Get the 2019 verion ($6 bucks).  I made changes in a few areas, primarily about agency and close corps.

Nice case on Implied Actual Authority and Ratification

This is a class action against debt collectors for violation of the Telephone Consumer Protection Act.  The lender hired a loan servicing company.  It hired debt collectors.  The lender said “We didn’t make any improper calls!  Our agents did.”  Very nice summary of agency law.

“Henderson advances two agency principles that she believes makes USA Funds liable for the debt collectors’ TCPA violations—ratification and implied actual authority.”

My summary of the case.

Henderson v. United Student Aid Funds, Inc., 918 F.3d 1068 (9th Cir. March 2019)

Issue:   Did the court err in granting summary judgment here on the issue of whether the lender here was liable for the conduct of its agents?

Holding:   Yes.  “[A] reasonable jury could find that USA Funds ratified the debt collectors’ calling practices by remaining silent and continuing to accept the benefits of the collectors’ tortious conduct despite knowing what the collectors were doing or, at the very least, knowing of facts that would have led a reasonable person to investigate further.”

Appeal from district court, Southern District California Continue reading

Bankruptcy Class this Friday – March 15

This coming Friday is Class 10.  We will discuss preferences and fraudulent conveyances.  The cases are pretty short.

Class 10 – March 15, 2019

Preferences 281

Cunningham v. Brown         281

Fraudulent Conveyances 286

BFP v. Resolution Trust Corporation        287

Dean v. Davis, Jr.     292

In re Beverly 294

Shapiro v. Wilgus     304

Bailey v. Glover       306

 

Selling securities to your employees

We looked at the Ralston Purina case last semester (and every fall semester for the past 16 years) where the SEC slapped Ralston Purina around for selling unregistered securities to its own employees.  Here is a nice summary of how to accomplish that goal and keep the SEC happy.

https://www.lexology.com/library/detail.aspx?g=cb1ccb8e-62cf-495c-883a-18ad40cebcd4&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+general+section&utm_campaign=calbar+business+section+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2019-03-06&utm_term=