Opinion ID: 2628309
Heading Depth: 2
Heading Rank: 1

Heading: the 1994 conveyance was voidable and ratified by ockey

Text: ¶ 15 The district court dismissed Ockey's declaratory relief and quiet title claims on summary judgment, reasoning that Ockey ratified the 1994 conveyance of his interest in the ranch to IMHG, the family-owned holding company created to facilitate developing the ranch property. On appeal, Ockey argues that the 1994 conveyance was void ab initio because his trusts terminated in 1986, on his twenty-eighth birthday, vesting both legal and equitable title in his name and leaving nothing for the trustees to convey in 1994. Because the 1994 conveyance was void ab initio, he argues, it could not be ratified. ¶ 16 The district court's summary dismissal of the quiet title claim presents an issue of law that we review for correctness. [4]
¶ 17 By their terms, both of Ockey's trusts terminated, at the latest, in 1986, when Ockey turned twenty-eight. Upon termination, the trustees retained only the authority to wind up affairs of the trusts and to transfer the corpus of the trusts, the ranch property, to the beneficiary, Ockey. [5] Ockey is therefore correct in arguing that by the time the trustees purported to convey the trust corpus to IMHG in 1994, they lacked the authority to do so. The fact that the trustees lacked the authority to execute the 1994 conveyance, however, does not resolve the dispute over ownership of the ranch, however, because it does not address whether the conveyance was void ab initio or merely voidable and therefore capable of ratification. ¶ 18 The distinction between void and voidable is important, although the terms are not always used precisely. [6] A contract or a deed that is void cannot be ratified or accepted, [7] and anyone can attack its validity in court. [8] In contrast, a contract or deed that is voidable may be ratified at the election of the injured party. Once ratified, the voidable contract or deed is deemed valid. A deed that is voidable is valid against the world, including the grantor, [9] because only the injured party has standing to ask the court to set it aside. [10] ¶ 19 In general, the difference between void and voidable contracts is whether they offend public policy. Contracts that offend an individual, such as those arising from fraud, misrepresentation, or mistake, are voidable. Only contracts that offend public policy or harm the public are void ab initio. [11] ¶ 20 In this case, Ockey asks us to hold that the 1994 conveyance was void because the trustees lacked authority to transfer the ranch property to IMHG after the trusts terminated. We decline, concluding that the 1994 conveyance was merely voidable because the trustee's actions were not contrary to public policy and did not injure anyone other than Ockey himself. ¶ 21 In determining whether the 1994 conveyance was void or voidable, we start with the presumption that contracts are voidable unless they clearly violate public policy. This presumption stems from the general rule that the law favors the right of men of full age and competent understanding to contract freely. [12] For a contract to be void on the basis of public policy, there must be a showing free from doubt that the contract is against public policy. [13] ¶ 22 For example, in Millard County School District v. State Bank of Millard County, we considered whether a contract was void or voidable. [14] At issue was whether the bank acted in excess of its statutory power by issuing securities that were different from those that the bank was statutorily authorized to issue. Acknowledging that the bank exceeded its authority by issuing the securities, we disagreed that this ultra vires act rendered the securities void. [15] [B]y the great weight of judicial authority it is well recognized that there is a distinction between an illegal or void contract and one merely ultra vires, which could become enforceable by ratification or estoppel. [16] We explained that only contracts and corporate acts and transactions which are malum in se or malum prohibitum, which contravene some rule of public policy, [or] violate some public duty... are illegal and void. [17] Although the bank had acted in excess of its authority, its action did not violate the general policy of the state so egregiously that the contract was void. ¶ 23 In contrast, in Zion's Service Corp. v. Danielson, we found a contract void where the purpose of the contract was to control prices and limit competition between the bids given by masonry contractors. [18] Finding that the contract created an unreasonable restraint on trade, we held it void as against public policy. [19] Two elements were present in Zion's Service Corp. that are important to our analysis. First, the legislature had specifically declared that contracts formed to control prices were `prohibited and declared unlawful' and would be `absolutely void.' [20] Second, the contract harmed the public as a whole  not just an individual. ¶ 24 Comparing Ockey's case to these two cases demonstrates that the 1994 conveyance was merely voidable. First, no statute declares ultra vires acts by trustees absolutely void as against public policy. Second, the trustees' actions only affected Ockey  they did not harm the general public. Finally, in light of the freedom to contract, we have a duty to employ any reasonable construction to declare contracts lawful and not in contravention of public welfare. [21]
¶ 25 Whether we characterize the facts found by the district court in the worst light or the best light, Ockey ratified the 1994 conveyance. ¶ 26 Placing the worst gloss on the facts found by the district court, it is possible that the trustees engaged in self-dealing and violated their fiduciary duty to Ockey by failing to transfer the ranch property when the trust terminated. Even if this were the case, the 1994 conveyance would be voidable and ratified by Ockey. According to well-established case law, a trustee's violation of his fiduciary duty is voidable and capable of ratification. [22] [A]fter a breach of trust has occurred, a beneficiary may expressly or impliedly express satisfaction with the trustee's action and thereby prevent himself from claiming thereafter that it was illegal. [23] As an Illinois court recognized, a trust beneficiary who consents to or approves of an act, omission, or transaction by a trustee, may upon the ground of waiver or estoppel be precluded from subsequently objecting to the impropriety of such act, omission, or transaction; this rule may arise from acquiescence, request, participation, or notification. [24] ¶ 27 Under this characterization of the facts, Ockey ratified the 1994 conveyance. First, in 1993, before the trust property was conveyed to IMHG, Ockey signed a document directing the trustees to convey his ownership in the ranch property to IMHG in exchange for his partnership interest in IMHG. Second, following the 1994 conveyance, Ockey accepted the benefits stemming from the contract. Consolidating ownership of the ranch in IMHG facilitated the successful development of the ranch. As a result, Ockey has received approximately two million dollars in profits, and he stands to receive more. In 1998, Ockey entered into a settlement agreement with IMHG's successor, promising that the outcome of this litigation would not affect ownership of the ranch. The settlement agreement enabled the ranch development to proceed and allowed Ockey to continue to profit from the development. These two facts demonstrate that Ockey acquiesced in and ratified the 1994 conveyance. [25] ¶ 28 Placing the best gloss on the facts found by the district court, it is possible that when the trust terminated, Uncle Nick's role shifted from acting as a trustee to acting as an agent on behalf of Ockey and the other family members. Of course, actions that exceed the scope of agency are merely voidable, not void, and therefore capable of ratification by the principal. [26] ¶ 29 Ockey ratified the contract under this characterization of the facts as well. Ockey owned his portion of the ranch as a tenant in common with the rest of the family, all of whom were interested in developing it. In order to develop the land, specific actions were necessary. For example, the family needed to make annual payments on the State Lease, contract with developers, and make improvements on the state property. ¶ 30 In light of these responsibilities, it makes sense that an individual within the family would take the lead. The district court found that in accordance with the family's usual business practice, Uncle Nick took that role by acting as the family communicator. Between 1969 and 1995, business decisions concerning the development of the ranch generally followed a common course of dealing. Uncle Nick contacted members of the family, solicited their input, generated a consensus, and acted as the family spokesperson for decisions that were made. During this time, Ockey was obsessed with the ranch and read everything he could about it. When Ockey asked Uncle Nick questions about the ranch, Uncle Nick directed him to the relevant records concerning the ranch, which were stored in an office that Ockey and Uncle Nick shared. ¶ 31 As we stated in Bradshaw v. McBride, a 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. [27] Ockey was thirty-six when the 1994 conveyance took place. He had access to all relevant records concerning his ownership of the ranch and he signed a document directing Uncle Nick and the other trustees to transfer his real property interest to the holding company. Ockey's failure to object to the 1994 conveyance constitutes ratification  either consciously or through willful ignorance  of the actions taken on his behalf. ¶ 32 The purpose of doctrines like ratification and apparent authority is to avoid instances where a technicality can be used to evade a contract despite the expectations of both parties. It is well established in our case law that an individual cannot go along with a contract for the purpose of enjoying benefits that although not directly conferred by the contract, are nevertheless made possible as a result of the contract, only to later claim a right to rescind when he discovers the benefits ... will not be great enough to compensate him for the loss he will sustain by reason of the fraud. [28] Ockey's entire argument regarding the illegality of the 1994 conveyance rests on the premise that when the trust terminated in 1986, ownership vested in him, rendering the latter conveyance void. But because the 1994 conveyance was merely voidable, it was capable of ratification by Ockey. Ockey ratified the conveyance by directing the trustees to convey his interest to IMHG in exchange for a partnership interest in IMHG and by accepting the benefits of his family's efforts to develop the ranch. For these reasons, we uphold the district court's determination that Ockey ratified the 1994 conveyance and affirm the court's summary dismissal of his quiet title and declaratory relief claims.