Opinion ID: 1448259
Heading Depth: 1
Heading Rank: 2

Heading: General Builder's motion for partial summary judgment on the issue of contract formation

Text: Summary judgment is only appropriate when, after a review of the record viewed in a light most favorable to the non-moving party, there remain no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Butler v. Bogdanovich, 101 Nev. 449, 451, 705 P.2d 662, 663 (1985). All of the nonmovant's statements must be accepted as true, and a district court may not pass on the credibility of affidavits. Sawyer v. Sugarless Shops, 106 Nev. 265, 267, 792 P.2d 14, 15 (1990). This court's review of an order granting summary judgment is de novo. Tore, Ltd. v. Church, 105 Nev. 183, 185, 772 P.2d 1281, 1282 (1989). In a contract of surety, one party, the surety, binds itself to answer for the debt, default or miscarriage of another, the principal obligor. First Virginia BankColonial v. Baker, 225 Va. 72, 301 S.E.2d 8, 10 (1983). The surety contract is formed at the time the surety's offer is accepted by the principal. Trident Corp. v. Reliance Ins. Co., 350 Pa.Super. 142, 504 A.2d 285, 290 (1986). In Nevada, the surety's obligation to the obligee may take the form of a surety bond. See NRS 691B.020 (authorizing issuance of corporate bonds). [3] In the present case, it is undisputed that Kim Smith of Pac Coast did not have actual authority to enter into the surety contract with General Builders on behalf of Great American. It is also undisputed that Great American had provided Smith and Pac Coast with Great American's corporate seal and unconditional Power of Attorney representing their authority to enter into surety contracts on behalf of Great American and to issue Great American bonds. The district court, therefore, granted General Builders' motion for partial summary judgment on the issue of contract formation on the ground that Great American had clothed Smith and Pac Coast with apparent authority to execute the surety contract as Great American's agent-in-fact. [4] Great American contends that the district court erred in concluding that the parties had formed a contract of surety as a matter of law because a question of fact exists as to whether General Builders' reliance on Pac Coast's apparent authority was reasonable. A party claiming apparent authority of an agent as a basis for contract formation must prove (1) that he subjectively believed that the agent had authority to act for the principal and (2) that his subjective belief in the agent's authority was objectively reasonable. Smith v. Hansen, Hansen & Johnson, 63 Wash.App. 355, 818 P.2d 1127, 1135 (1991). Apparent authority is, in essence, an application of equitable estoppel, of which reasonable reliance is a necessary element. Ellis v. Nelson, 68 Nev. 410, 418, 233 P.2d 1072, 1076 (1951); see also Cheqer, Inc. v. Painters & Decorators Joint Committee, 98 Nev. 609, 614, 655 P.2d 996, 998-99 (1982) (elements of estoppel). As previously noted by this court, the party who claims reliance must not have closed his eyes to warnings or inconsistent circumstances. Tsouras v. Southwest Plumbing and Heating, 94 Nev. 748, 751, 587 P.2d 1321, 1322 (1978). Apparent authority, including a third party's reasonable reliance on such authority, is a question of fact. Smith, 818 P.2d at 1133. Great American enumerates a number of facts that it contends makes General Builders' reliance on Pac Coast's apparent authority unreasonable. [5] According to Great American, these facts were sufficient to put General Builders on inquiry notice, requiring General Builders to contact Great American directly to verify the validity of the surety contract rather than relying on Pac Coast's power of attorney and other indicia of authority. We conclude that in light of Pac Coast's power of attorney, provided by Great American, which represented Smith and Pac Coast as agents-in-fact with authority to enter into precisely the type of surety contract at issue in this case, the facts cited by Great American are not sufficient to raise a question of fact as to Pac Coast's apparent authority. Great American also contends that no enforceable contract with General Builders exists because Great American cancelled the bonds before their effective date and before the hospital accepted them. We disagree. A surety's obligation under the bonds to answer for the default or misconduct of the principal is distinct from the surety's obligation to the principal to issue the bonds. Moreover, although a surety's obligation to the intended obligee (in this case the Hospital) does not arise until the intended obligee has accepted the offer of surety ( i.e., the bonds), the surety's obligation to the principal to issue the bonds arises at the time the surety agreement is executed by the surety and the principal. Trident Corp. v. Reliance Ins. Co., 350 Pa.Super. 142, 504 A.2d 285, 290 (1986). We hold that the district court did not err in concluding that Great American and General Builders had formed a surety contract as a matter of law; the district court, therefore, did not abuse its discretion in granting General Builders' motion for partial summary judgment on the issue of contract formation.