Opinion
No. COA01-1513
Filed 18 February 2003 This case not for publication
Appeal by plaintiffs and defendants from judgments entered 5 June 2001 by Judge William C. Griffin, Jr., and 27 August 2001 by Judge J. Richard Parker, in Dare County Superior Court. Heard in the Court of Appeals 12 September 2002.
Aycock, Spence Butler, by Charlie Aycock and Betsy Butler, for plaintiffs. Sharp, Michael, Outten Graham, by Starkey Sharp, for defendants.
Dare County Nos. 00 CVS 248 and 00 CVS 730.
Background
This is a single appeal of two cases, which were consolidated for the summary judgment hearing. In Dare County file number 00CVS 248, Plaintiffs David and Barbara Robinson and Jack Endsley and Barbara Geishecker sued Rapscallion Marine, Inc. for breach of contract. They alleged that Rapscallion, through its agent, John Schlegel, entered into contracts to repair plaintiffs' boats and that Rapscallion failed to perform its obligations under the contract. In Dare County file number 00 CVS 730, Plaintiff Paxton Company, Inc. sued Rapscallion and its President, James Cleary, individually, alleging that Rapscallion owed Paxton over $17,000.00 for supplies purchased by Rapscallion through its agent, John Schlegel.
After conducting discovery, defendants moved for summary judgment in both cases. The two matters were consolidated and heard on 21 May 2001. After receiving evidence — deposition of John Schlegel, numerous affidavits, and exhibits — and hearing arguments from the parties, Judge William C. Griffin, Jr. granted both of defendants' summary judgment motions. On 25 May 2001, Judge Griffin wrote a letter to the lawyers which read as follows:
I have carefully reviewed the evidence provided to me in the Rapscallion Marine cases, and I have concluded that the forecast of evidence reveals nothing from which a jury could find the existence of an agency relationship. In addition, I looked carefully at the conduct of Mr. Cleary and could find nothing from which a jury could find that he had ratified any of the conduct of Mr. Schlegal.
Therefore, I would ask Orders be prepared allowing the defendant's Motions for Summary Judgment.
For your information, I refer you to three North Carolina Supreme Court cases on this subject: Investment Properties v. Allen, 283 N.C. 277; Investment Properties v. Allen, 281 N.C. 174; and Investment Properties v. Norburn, 281 N.C. 191.
The judgments filed 5 June 2001 simply indicate that because there is no issue of material fact, summary judgment was granted and the cases were dismissed.
Following the grant of summary judgment, defendants filed a motion to discharge and release the cash bond that they had filed in lieu of attachment. In response, plaintiffs filed a motion to stay the order pending appeal. On 23 August 2001, Judge Richard J. Parker granted the plaintiffs' motion to stay the order dissolving attachment pending appeal.
From the grant of summary judgment in favor of defendants, plaintiffs appeal. From the order staying the dissolution of attachment pending appeal, defendants appeal.
Analysis
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 any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2001).
An issue is material if the facts alleged would constitute a legal defense, or would affect the result of the action, or if its resolution would prevent the party against whom it is resolved from prevailing in the action. [T]he party moving for summary judgment has the burden of establishing the lack of any triable issue of fact. Furthermore, the evidence presented by the parties must be viewed in the light most favorable to the non-movant. Adams v. Jefferson-Pilot Life Ins. Co., 148 N.C. App. 356, 358, 558 S.E.2d 504, 506 (2002) (internal citations and quotation marks omitted), disc. review denied, 356 N.C. 159, 568 S.E.2d 186 (2002).
Thus, the first step of our analysis is to determine whether there are any "genuine issues" of material fact. The central issue here is whether the pleadings and other materials create a genuine issue as to whether Schlegel was acting as an agent of Rapscallion at the time these boat owners entered into the contracts.
We believe that the record before us does create a genuine issue of material fact as to whether Schlegel was acting under the actual or apparent authority of Rapscallion. Thus, defendants were not entitled to judgment as a matter of law.
A principle is liable upon a contract made by its agent with a third party in three instances: (1) when the agent acts within the scope of her actual authority; (2) when the contract, although unauthorized, has been ratified; or (3) when the agent acts within the scope of her apparent authority. Bell Atlantic Tricon Leasing Corp. v. DRR, Inc., 114 N.C. App. 771, 774, 443 S.E.2d 374, 376 (1994).
A. Actual Authority
A principal is liable upon a contract duly made by his agent with a third person when the agent acts within the scope of his actual authority. Investment Properties v. Allen, 283 N.C. 277, 285, 196 S.E.2d 262, 267 (1973). Actual authority may be either express or implied. See Vaughn v. N.C. Dep't of Human Resources, 37 N.C. App. 86, 91, 245 S.E.2d 892, 895 (1978), affirmed, 296 N.C. 683, 252 S.E.2d 792 (1979).
Evidence of record indicating the existence of actual authority includes the following. In his affidavit, Robin Smith stated that he became the manager of the boatyard for Rapscallion Marine, Inc. and managed it according to "directions from James Cleary and from his attorney, Starkey Sharp. . . ." Smith's affidavit also states that Cleary called Smith and told him that "John Schlegel was going to take over and manage the boatyard for Rapscallion Marine, Inc.," thereby terminating his (Smith's) employment as manager of the boatyard. Smith also received a letter from Starkey Sharp instructing him to vacate the premises.
B. Ratification
Further, we believe that the evidence raises a genuine issue of fact as to ratification. For instance, in addition to the correspondence between Schlegel and Sharp, there is an abundance of correspondence from Schlegel to Cleary, the bulk of which details the operations of the boatyard. Specifically, on 22 April 1999, Schlegel wrote to Cleary that "I will be able to `manage' the yard activities and insure that Robin Smith exits in a proper manner." Moreover, in May of 1999, Schlegel reported to Cleary that he had purchased for "us the name SPORTSMANS."
Despite the numerous communications from Schlegel to Cleary, there is no evidence in the record that Cleary at any time objected to Schlegel's operation of the business for them until problems arose in the early part of 2000. In our opinion, this also raises a genuine issue of material fact as to the extent to which Cleary ratified Schlegel's actions.
C. Apparent Authority
Apparent authority is that authority which the principle has held out the agent as possessing or which he has permitted the agent to represent that he possesses. Zimmerman v. Hogg Allen, 286 N.C. 24, 30-31, 209 S.E.2d 795, 799 (1974). "[T]he determination of a principal's liability in any particular case must be determined by what authority the third person in the exercise of reasonable care was justified in believing that the principal had, under the circumstances conferred upon his agent." Id. at 31, 209 S.E.2d at 799. This record is replete with evidence from which a jury could infer that Schlegel was acting under the apparent authority of Rapscallion.
Some of the evidence tending to show that Schlegel had the apparent authority to act as an agent for Rapscallion and Cleary includes the following. According to a letter sent to Schlegel from Starkey Sharp, Schlegel was given full use of the boatyard and all of its assets without being required to pay rent or otherwise compensate Rapscallion. When Schlegel took over the management of the boatyard, he also had access to, and wrote checks on the Rapscallion checking account. Also, acting as manager of the boatyard, Schlegel hired employees and paid them out of the Rapscallion account. Schlegel also used the Rapscallion credit account at Paxton to purchase supplies used in the operation of the boatyard. Other evidence tending to indicate that Schlegel acted under the apparent authority of Rapscallion includes Schlegel's use of Rapscallion's accountant and attorneys in matters related to the operation of the boatyard. Schlegel stated in his letter to Starkey Sharp on 17 April 2000 and again 19 April 2000 that "I have always used Jim's professionals' i.e.: Legal yourself Accounting Pete Holston. The business arrangements were clear," and that "Sportsman Boatworks is not a corporation, partnership, LLC etc. it is Rapscallion Marine DBA Sportsman Boatworks. I believe that we agree that this is the actual situation. Therefore I have always assumed that you are our legal counsel." Although Schlegel also testified in his deposition in February 2001 that the two were separate businesses, the issue of fact remains.
Other affidavits and materials show that Schlegel held himself out to third parties as manager of the boatyard for Rapscallion and as answering to James Cleary. For example, Captain Bobby Sullivan states in his affidavit that Schlegel hired him "to be employed by Rapscallion Marine, Inc., under his [Schlegel's] supervision. . . ." In addition, Barbara Robinson states in her affidavit that, as a result of a visit from Schlegel and Captain Sullivan in November 1999, she contracted with Rapscallion Marine, Inc. to repair her boat. Over the following period of months, Schlegel "repeatedly referred to James ("Jim") Cleary as his `boss'."
Conclusion
Accordingly, the trial court's grant of summary judgment is reversed as to both motions. In light of the foregoing, we decline to address defendant's appeal as to whether the trial court erred in granting the plaintiff's motion to stay the attachment of defendant's property pending appeal from the grant of summary judgment.
Reversed and remanded.
Judges TIMMONS-GOODSON and CAMPBELL concur.
Judge Campbell concurred prior to 1/1/03.
Report per Rule 30(e).