Court Opinion

ID: 2680767
Source: CourtListenerOpinion
Date Created: 2014-06-27 14:04:19.096568+00
Date Added: 2024-06-11T13:15:00.647245
License: Public Domain

Nebraska Advance Sheets
404	288 NEBRASKA REPORTS

not to award attorney fees, particularly where that ruling was
premised on the county court’s erroneous conclusion that Kim
had failed to prove a breach of trust. But we hesitate to award
fees ourselves, because we are reviewing a cold record and the
county court oversaw the litigation. The county court is thus
in the best position to determine, in light of our disposition of
the merits of this appeal, whether “justice and equity” require
attorney fees, and in what amount. We reverse, and remand for
the court to do so.
                          CONCLUSION
   We agree with the Court of Appeals’ general legal frame-
work and ultimate conclusion that the trustee’s breach was
harmless. We disagree, however, with the Court of Appeals’
conclusion that annual schedule K-1 tax reports were sufficient
to reasonably inform beneficiaries of the trust and its adminis-
tration. And we conclude that the county court should revisit
the issue of attorney fees in light of our disposition of the mer-
its of this appeal.
	Affirmed in part, and in part reversed and
	                   remanded for further proceedings
	                   on the issue of attorney fees.
   Wright, J., not participating.

                    P erry Elting et al., appellees, v.
                        K erwin Elting, appellant.
                                  ___ N.W.2d ___

                        Filed June 27, 2014.   No. S-13-551.

 1.	 Trial: Witnesses. In a bench trial of an action at law, the trial court is the
     sole judge of the credibility of the witnesses and the weight to be given
     their testimony.
 2.	 Judgments: Appeal and Error. In reviewing a judgment awarded in a bench
     trial of a law action, an appellate court does not reweigh evidence, but consid-
     ers the evidence in the light most favorable to the successful party and resolves
     evidentiary conflicts in favor of the successful party, who is entitled to every
     reasonable inference deducible from the evidence.
 3.	 ____: ____. In a bench trial of a law action, the trial court’s factual findings
     have the effect of a jury verdict and will not be disturbed on appeal unless
     clearly wrong.
                         Nebraska Advance Sheets
	                               ELTING v. ELTING	405
	                               Cite as 288 Neb. 404

 4.	 Actions: Pleadings: Equity. The nature of an action, whether legal or equitable,
      is determinable from its main object, as disclosed by the averments of the plead-
      ings and the relief sought.
 5.	 Equity: Appeal and Error. On appeal from an equity action, an appellate
      court resolves questions of law and fact independently of the trial court’s
      determinations.
 6.	 Breach of Contract: Damages. A suit for damages arising from breach of a
      contract presents an action at law.
 7.	 Principal and Agent. Actual authority is authority that the principal expressly
      grants to the agent or authority to which the principal consents.
  8.	 ____. The scope of an agent’s authority is a question of fact.
 9.	 Ratification: Agents. Ratification of an agent’s unauthorized acts may be made
      by overt action or inferred from silence and inaction.
10.	 ____: ____. Retention of benefits secured by an agent’s unauthorized act with
      knowledge of the source of such benefits and the means by which they were
      obtained is a ratification of the agent’s act.
11.	 Ratification. Whether there has been a ratification is ultimately and ordinarily a
      question of fact.
12.	 Ratification: Proof. Because ratification is an affirmative defense, the burden of
      proving ratification rests on the party alleging the defense.

   Appeal from the District Court for Nuckolls County: Vicky
L. Johnson, Judge. Affirmed.
  Daniel E. Klaus and Sheila A. Bentzen, of Rembolt Ludtke,
L.L.P., for appellant.
  Steven E. Guenzel and Cameron E. Guenzel, of Johnson,
Flodman, Guenzel & Wedger, for appellees.
  Heavican, C.J., Wright, Connolly, Stephan, McCormack,
Miller-Lerman, and Cassel, JJ.
    Miller-Lerman, J.
                      NATURE OF CASE
   Glenn Elting and Sons was a family farming partnership
that was formed in 1976 among Glenn Elting and his sons,
Kerwin Elting and Perry Elting, all as managing partners.
The partners who comprised the partnership changed over the
years. The managing partners during the time period relevant
to the issues in this case were: Kerwin; Perry; Kerwin’s son,
Carl Elting; and Perry’s son, Knud Elting. On March 30, 2011,
Perry, Knud, and Perry’s wife, ReJean Elting, the appellees,
filed this action in the district court for Nuckolls County
    Nebraska Advance Sheets
406	288 NEBRASKA REPORTS

against Kerwin, the appellant. The amended complaint was
filed on January 22, 2013. The appellees alleged that Kerwin
had entered into a series of grain contracts on behalf of the
partnership without the authority to do so, resulting in signifi-
cant losses to the partnership. The appellees sought damages
based on these losses.
   After a bench trial, the district court filed its order on May
30, 2013, in which it found in favor of the appellees. The
district court determined that Kerwin did not have authority
to enter into the contracts and that his actions were not rati-
fied. The district court further determined that Kerwin was not
shielded by the limitation of liability clause contained in the
controlling partnership agreement. The district court awarded
judgment in favor of the appellees in the amount of $1,072,175
plus prejudgment interest. Kerwin appeals. Finding no error,
we affirm.

                   STATEMENT OF FACTS
   In 1976, Glenn Elting and Sons, a farming partnership, was
formed among Glenn and his two sons, Kerwin and Perry.
The partnership was later expanded and included as partners
Glenn’s wife, Esther Elting; Kerwin’s wife, Patricia Elting; and
Perry’s wife, ReJean Elting; however, the management of the
partnership remained with Glenn, Kerwin, and Perry.
   The partnership had an established decisionmaking proc­
ess: The managing partners would have informal discussions
regarding whether and how to proceed, and once a consen-
sus was reached, the partners would proceed. No documents
recorded the discussions or decisions of the managing partners.
Once a decision was made, Glenn, and later Kerwin, was
responsible for carrying out the decision, including signing
contracts on the partnership’s behalf.
   On January 31, 2005, the partners entered into the “Amended
and Restated Partnership Agreement for Glenn Elting and
Sons” (Partnership Agreement). The Partnership Agreement
did not change how the partnership made decisions. Paragraph
5.1 of the Partnership Agreement provided that the partnership
was to be managed by the managing partners, and paragraph
5.2 provided that the managing partners were Glenn, Kerwin,
                   Nebraska Advance Sheets
	                       ELTING v. ELTING	407
	                       Cite as 288 Neb. 404

and Perry. Paragraph 5.3 provided that at any time there were
more than two managing partners, “the approval of a majority
of the Managing Partners shall be required for the Managing
Partners to act on behalf of the Partnership, unless unani-
mous approval of the Managing Partners is required for such
action by another provision of [the Partnership] Agreement.”
Paragraph 5.4 of the Partnership Agreement contained a limita-
tion of liability clause, which provided:
      Liability of Managing Partners. No Managing Partner
      shall be liable to the Partnership or to any other Partner
      for any action taken in good faith and reasonably
      believed by such Managing Partner to be in the best
      interest of the Partnership or taken in reliance on the
      provisions of [the Partnership] Agreement, or for good
      faith errors of judgment, but shall only be liable for will-
      ful misconduct or gross negligence in the performance
      of his or her duties.
   In 2008, Kerwin’s son, Carl, and Perry’s son, Knud, joined
the partnership and became additional managing partners. At
this point, the managing partners were Kerwin, Perry, Carl, and
Knud. On February 8, 2008, the partners entered into the “First
Amendment to Amended and Restated Partnership Agreement
for Glenn Elting and Sons” to reflect this change. This amend-
ment to the Partnership Agreement did not change any other
provisions of the Partnership Agreement regarding how deci-
sions were made. When this amendment to the Partnership
Agreement was signed, Glenn and Esther were no longer
partners, and they are not involved in this appeal. As noted,
the managing partners in 2008 thus were Kerwin, Perry, Carl,
and Knud. Kerwin’s wife, Patty, and Perry’s wife, ReJean,
remained as partners, but they did not have a significant role in
managing the partnership.
   In December 2008, Knud withdrew from active participation
in the partnership and ceased his day-to-day involvement in the
partnership’s activities. However, Knud’s status as a managing
partner remained unchanged. Kerwin, Perry, and Carl contin-
ued to make the decisions involving the partnership.
   In 2007, prior to the time that Carl and Knud became part-
ners, the partnership had entered into hedge contracts with
    Nebraska Advance Sheets
408	288 NEBRASKA REPORTS

Cargill, Inc., and Aurora Cooperative to sell all of the partner-
ship’s anticipated corn production for the years 2008, 2009,
and 2010. The partnership contracted to sell approximately half
of its corn production to Cargill and the other half to Aurora
Cooperative. It is undisputed that the initial hedge contracts
with Cargill and Aurora Cooperative were entered into with the
knowledge and consent of the managing partners at the time,
Glenn, Kerwin, and Perry.
   In approximately 2008, Cargill began offering a product
called a focal point contract. The focal point contract allowed
a farmer to “unlock” the price of hedged corn and allow it to
float with the market based upon the increase or decrease in
the market between the opening and closing dates specified
in the focal point contract. The focal point contract generally
was an amendment to the original hedge contract. If the mar-
ket moved up and the price per bushel increased between the
opening and closing dates, then the increased amount would be
added to the price per bushel agreed to in the original hedge
contract, minus a service fee of 3 cents per bushel. If the price
per bushel decreased between the opening and closing dates,
then the decreased amount, plus the 3-cent service fee, would
be subtracted from the price per bushel agreed to in the original
hedge contract. Because all the focal point contracts assessed
the same 3-cent fee per bushel, a farmer entering into the focal
point contract was predicting and hoping that the market would
move up at least 3 cents per bushel during the time that the
contract was open in order to maintain at least the same return
as would have obtained on the original hedge contract after the
payment of service fees.
   In 2008 and 2009, Kerwin entered into a series of focal
point contracts with Cargill on behalf of the partnership (Focal
Point contracts). Cargill’s local representative had in-person
and telephone conversations with Kerwin regarding the Focal
Point contracts. Kerwin entered into the Focal Point contracts
on behalf of the partnership at three times. The first set of
contracts opened with 240,000 bushels on May 2, 2008, and
closed on May 8. The second set of contracts opened with
1,750,000 bushels on September 8 and 26, 2008, and closed
on September 12 and October 7, respectively. The third set of
                  Nebraska Advance Sheets
	                       ELTING v. ELTING	409
	                       Cite as 288 Neb. 404

contracts opened on June 23, 2009, and closed on July 1. As
a result of the first set of Focal Point contracts, the partner-
ship gained $23,400. As a result of the second and third sets
of contracts, the partnership lost significant money. In total,
the partnership lost $2,144,350 on the three sets of Focal Point
contracts from the originally contracted price.
   Sometime in late 2008 or early 2009, Kerwin and Perry
started having discussions with respect to dissolving the
partnership. A “Partnership Separation Agreement” had been
signed on February 8, 2008, which was the same date that
the amendment to the Partnership Agreement changing mem-
bership was signed. On April 27, 2009, Kerwin, Patricia,
and Carl signed a separation notice stating that they wished
to dissolve the partnership in accordance with the partner-
ship separation agreement. According to the findings of the
district court, the performance of the first two sets of Focal
Point contracts did not affect the decision to dissolve the
partnership.
   Before the partnership dissolved, in late 2007 or early 2008,
the partnership began banking with the First National Bank
of Fairbury (FNB). The partnership worked primarily with
Dick Hoppe, a senior vice president and senior agriculture
loan specialist. The partnership’s primary purpose of bank-
ing with FNB was to secure an operating note, which oper-
ated as a line of credit to secure the year’s farming expenses.
Before agreeing to lend the partnership money, Hoppe needed
to review the partnership’s financial information. Kerwin was
primarily responsible for compiling the information. Kerwin
provided Hoppe with the raw data, and Hoppe prepared a bal-
ance sheet and cashflow projections. FNB determined that the
partnership was creditworthy, and the banking relationship
began in January 2008. The 2007 balance sheet was signed by
Glenn, Perry, and Kerwin, who were the managing partners at
that time.
   On January 9, 2009, Hoppe met with Kerwin, Carl, Perry,
and ReJean for their annual meeting to review the partner-
ship’s financial information, including the 2008 balance sheet
and cashflow projections for 2009, in order to renew the part-
nership’s line of credit. At that meeting, Kerwin, Perry, and
    Nebraska Advance Sheets
410	288 NEBRASKA REPORTS

Carl each signed the 2008 balance sheet for the partnership.
Immediately above their signatures, the balance sheet stated:
          For the purpose of securing credit from time to time
      this statement is furnished and is certified to be true
      and correct. I (or We) agree to notify the bank promptly
      of any material change herein. . . . False statement
      may be subject to prosecution under Title 18 of the US
      Code. I (or We) have read the above statement before
      s
      ­ igning . . . .
The 2008 balance sheet, as well as the cashflow projections for
the upcoming 2009 crop year, reflected the price of the Cargill
corn after the gains from the May 2008 Focal Point contracts
and the losses from the September 2008 Focal Point contracts.
There is dispute as to how specific the review of the partner-
ship’s financial information was during the annual meetings
with Hoppe, including the January 2009 meeting.
   After the proceedings to dissolve the partnership began,
Kerwin and Carl began farming together and Perry and Knud
began farming together. Once the partnership stopped farming,
Kerwin and Perry needed to establish separate relationships
with FNB. To do so, they each needed to provide FNB with
financial information to show that they were creditworthy.
   When Perry and Knud began the preparation of their bal-
ance sheets and cashflow projections for 2010, they called
various vendors to obtain input costs. They also called the
Cargill elevator to determine their contract grain price, and
the numbers they were provided were apparently based on the
price in the original hedge contracts from 2008 and did not
include adjustments due to the Focal Point contracts. Knud
provided this information to Hoppe, who then completed the
balance sheet.
   In Hoppe’s review of Perry and Knud’s financial informa-
tion, he noticed that Perry and Knud’s numbers differed from
Kerwin and Carl’s numbers with respect to the price of the
contracted corn. The Focal Point contracts with Cargill had
been divided evenly between Kerwin and Perry in the dis-
solution documents, so the numbers should have matched.
Kerwin’s numbers reflected the prices that had been adjusted
due to the Focal Point contracts, whereas Perry’s did not.
                  Nebraska Advance Sheets
	                       ELTING v. ELTING	411
	                       Cite as 288 Neb. 404

Hoppe informed Perry and Knud that their financial num-
bers did not match Kerwin and Carl’s. Perry and Knud
testified that this is the first time they learned of the Focal
Point contracts.
   On March 30, 2011, the appellees filed their complaint in
the district court against Kerwin, seeking $867,000 in dam-
ages, which represented their understanding of their portion
of the total partnership losses from the Focal Point con-
tracts. The appellees alleged that Perry and Knud had not
been consulted regarding whether the partnership should enter
into the Focal Point contracts, that they had never voted to
enter into the Focal Point contracts, and that Kerwin lacked
authority to enter into the Focal Point contracts on behalf of
the partnership.
   On January 14, 2013, the appellees moved to amend their
complaint, because they learned through discovery docu-
ments that there were other Focal Point contracts that Kerwin
had entered into on behalf of the partnership of which the
appellees were unaware. Based on these other Focal Point
contracts, the appellees alleged that they were entitled to an
additional $226,525, which represented their share of the
losses resulting from these additional Focal Point contracts.
The district court granted the appellees’ motion to amend
their complaint.
   In response to the appellees’ complaint and amended com-
plaint, Kerwin alleged in his answer that he had received
authorization to enter into the Focal Point contracts on behalf
of the partnership and that even if he lacked such authority, the
appellees had ratified his actions. Kerwin further alleged that
he was shielded from any liability by the limitation of liability
clause in the Partnership Agreement. He also alleged that the
appellees’ additional claims in their amended complaint were
barred by the statute of limitations.
   A bench trial was held on January 29 and 30, 2013. The
appellees called three witnesses, including Perry, Knud, and
the Cargill representative. Portions of Kerwin’s deposition
were also read into the record. The appellees offered and
the court received seven exhibits, including: the Partnership
Agreement, the first amendment to the Partnership Agreement,
    Nebraska Advance Sheets
412	288 NEBRASKA REPORTS

purchase contracts with Cargill, and the Focal Point contracts
with Cargill. Kerwin called three additional witnesses, includ-
ing Kerwin, Hoppe, and Carl. Kerwin offered, and the court
received, 24 exhibits, including: the partnership separation
agreement; Hoppe’s notes regarding meetings with the part-
ners; the partnership’s financial information, including bal-
ance sheets and projected cashflow statements; and contracts
between the partnership and Aurora Cooperative.
   At trial, Kerwin and Carl generally testified that they were
familiar with the Focal Point contracts, and that the contracts
were entered into after all the managing partners—Kerwin,
Perry, Knud, and Carl—had fully discussed the matter and had
come to a consensus that all partners wanted to enter into the
Focal Point contracts. In contrast, Perry and Knud generally
testified that they were not aware of the Focal Point contracts
prior to the partnership’s entering into them and that they
had not authorized Kerwin to enter into them on behalf of
the partnership.
   After the bench trial, on May 30, 2013, the court filed its
order in which it determined that Kerwin lacked authority to
enter into the Focal Point contracts on behalf of the partner-
ship; that Kerwin’s actions had not been ratified; and that
because Kerwin lacked authority, he was not shielded from lia-
bility by the limitation of liability provision in the Partnership
Agreement. The court found Kerwin liable to the appellees for
$1,072,175 plus prejudgment interest.
   Kerwin appeals.
                  ASSIGNMENTS OF ERROR
   Kerwin claims on appeal that the district court erred when
it (1) found that Kerwin did not have authority to enter into
the Focal Point contracts on behalf of the partnership, (2)
found that the other managing partners did not ratify Kerwin’s
actions in entering into the Focal Point contracts, (3) found that
the limitation of liability clause did not shield Kerwin from
liability, and (4) awarded prejudgment interest to the appel-
lees. Because the fourth assignment of error is not argued in
Kerwin’s brief, we do not consider it. See C.E. v. Prairie Fields
Family Medicine, 287 Neb. 667, 844 N.W.2d 56 (2014).
                   Nebraska Advance Sheets
	                       ELTING v. ELTING	413
	                       Cite as 288 Neb. 404

                   STANDARDS OF REVIEW
   [1-3] In a bench trial of an action at law, the trial court
is the sole judge of the credibility of the witnesses and the
weight to be given their testimony. Liljestrand v. Dell Enters.,
287 Neb. 242, 842 N.W.2d 575 (2014). In reviewing a judg-
ment awarded in a bench trial of a law action, an appellate
court does not reweigh evidence, but considers the evidence
in the light most favorable to the successful party and resolves
evidentiary conflicts in favor of the successful party, who
is entitled to every reasonable inference deducible from the
evidence. Hooper v. Freedom Fin. Group, 280 Neb. 111, 784
N.W.2d 437 (2010). See, also, Black v. Brooks, 285 Neb. 440,
827 N.W.2d 256 (2013). In a bench trial of a law action, the
trial court’s factual findings have the effect of a jury verdict
and will not be disturbed on appeal unless clearly wrong.
Black v. Brooks, supra.
                          ANALYSIS
   The legal framework for our analysis is Nebraska’s Uniform
Partnership Act of 1998 (1998 UPA), found at Neb. Rev. Stat.
§§ 67-401 to 67-467 (Reissue 2009), as well as the terms of the
Partnership Agreement. The 1998 UPA is Nebraska’s counter-
part to the model act known as the Revised Uniform Partnership
Act (RUPA). See, Robertson v. Jacobs Cattle Co., 285 Neb.
859, 830 N.W.2d 191 (2013); Shoemaker v. Shoemaker, 275
Neb. 112, 745 N.W.2d 299 (2008). After January 1, 2001, the
1998 UPA became applicable to any Nebraska partnership,
including those partnerships formed prior to January 1, 1998.
See §§ 67-464 and 67-467. It is not disputed that the 1998 UPA
applies to this case.
   [4] As an initial matter, we must determine the nature
of the action brought by the appellees, because the nature
of the action will determine our standard of review. Under
§ 67-425(2)(a) of the 1998 UPA, a partner may maintain an
action against another partner for legal or equitable relief. The
nature of an action, whether legal or equitable, is determin-
able from its main object, as disclosed by the averments of the
pleadings and the relief sought. Genetti v. Caterpillar, Inc., 261
Neb. 98, 621 N.W.2d 529 (2001).
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   [5] Kerwin contends that because this case involves an
action among partners, it is necessarily an action in equity
rather than an action at law and that our standard of review
should be de novo on the record. Kerwin refers us to cases
such as Robertson v. Jacobs Cattle Co., supra, involving an
action for a partnership dissolution and accounting between
partners which we deemed as one in equity and properly
reviewed de novo on the record. In Robertson, we noted that
on appeal from an equity action, an appellate court resolves
questions of law and fact independently of the trial court’s
determinations.
   [6] Kerwin’s characterization of this case as an action in
equity does not accurately assess the substance of the appel-
lees’ claim. In this case, the appellees alleged that Kerwin
breached the Partnership Agreement, a contract, and sought
damages. The appellees did not request an accounting nor
did they seek to dissolve the partnership. We have stated
that a suit for damages arising from breach of a contract pre­
sents an action at law. Thomas & Thomas Court Reporters v.
Switzer, 283 Neb. 19, 810 N.W.2d 677 (2012). Because this
is a suit for damages arising from breach of the Partnership
Agreement, the action is one at law, and we apply the appli-
cable standards of review recited earlier in this opinion. In
this regard, we repeat that the trial court’s factual findings
have the effect of a jury verdict and will not be disturbed
on appeal unless clearly wrong and add that an appellate
court will not reevaluate the credibility of witnesses or
reweigh testimony but will review the evidence for clear
error. Henderson v. City of Columbus, 285 Neb. 482, 827
N.W.2d 486 (2013). With the foregoing framework and stan-
dard of review in mind, we turn to Kerwin’s assignments of
error and in so doing, refer at length to the district court’s
detailed findings and opinion.

Kerwin Was Not Authorized by the
Partnership to Enter Into the
Focal Point Contracts.
   In Kerwin’s first assignment of error, he claims that the
district court erred when it determined that Kerwin did not
                  Nebraska Advance Sheets
	                       ELTING v. ELTING	415
	                       Cite as 288 Neb. 404

have authority to enter into the Focal Point contracts on
behalf of the partnership. We find no merit to this assignment
of error.
   [7,8] With respect to a partner’s agency to act on behalf
of a partnership, § 67-413(1) of the 1998 UPA provides that
“[e]ach partner is an agent of the partnership for the purpose
of its business.” Because each partner is an agent of the
partnership, the partner must have authority in order to act
on behalf of the partnership. We have stated that “[a]ctual
authority is authority that the principal expressly grants to the
agent or authority to which the principal consents.” Koricic v.
Beverly Enters. - Neb., 278 Neb. 713, 717, 773 N.W.2d 145,
150 (2009). See, also, Restatement (Third) of Agency § 2.01,
comment c. at 81 (2006) (stating that “[a]ctual authority is
a consequence of a principal’s expressive conduct toward
an agent, through which the principal manifests assent to
be affected by the agent’s action, and the agent’s reasonable
understanding of the principal’s manifestation”). The scope of
an agent’s authority is a question of fact. Koricic v. Beverly
Enters. - Neb., supra.
   The Partnership Agreement in this case contains language
regarding the partners’ authority to act on behalf of the part-
nership. Paragraph 5.1 of the Partnership Agreement provides
that the management of the partnership is vested in the manag-
ing partners. At all relevant times, the four managing partners
were Kerwin, Perry, Carl, and Knud. Paragraph 5.1 further
provides that the managing partners “shall have power and
authority to manage all business and affairs of the Partnership,
which power and authority shall include, but is not limited
to . . . entering into and terminating lease agreements and
other contracts.” Paragraph 5.3 states in part that “[a]t any
time in which there are more than two (2) Managing Partners,
the approval of a majority of the Managing Partners shall be
required for the Managing Partners to act on behalf of the
Partnership . . . .”
   Pursuant to the language of the Partnership Agreement,
approval of at least three of the four managing partners was
required in order for Kerwin to have had authority to act on
behalf of the partnership and to enter the partnership into
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the Focal Point contracts. For completeness, we note that the
record indicates that in the course of the conduct of the partner-
ship’s affairs, some incidental decisions, such as getting a tire
fixed, were not viewed as requiring the approval of a majority
of the managing partners. However, it is undisputed that enter-
ing into the Focal Point contracts was viewed as a significant
decision, and it naturally follows that such decision required
approval of a majority of the managing partners as provided in
paragraph 5.3 of the Partnership Agreement.
   At the bench trial, evidence was adduced regarding whether
Kerwin was authorized to enter into the Focal Point contracts
on the partnership’s behalf. The partners agree that Kerwin
was generally responsible for handling the paperwork of the
partnership, including the signing of contracts on behalf of the
partnership. Kerwin and Carl both testified that the manag-
ing partners discussed and agreed that the partnership should
enter into the Focal Point contracts. In contrast, Perry and
Knud both testified that they were unaware of the Focal Point
contracts prior to the time the partnership entered into them.
Perry and Knud testified that the managing partners never
discussed entering into the Focal Point contracts and that they
never agreed to authorize Kerwin to enter into them on behalf
of the partnership.
   In its order, the district court delineated a number of factors
it considered in making its finding that Perry and Knud did not
authorize Kerwin to enter the partnership into the Focal Point
contracts. The district court evaluated the credibility of the
witnesses and found Perry and Knud to be credible. As stated
above, in a bench trial of an action at law, the trial court is the
sole judge of the credibility of the witnesses and the weight to
be given their testimony. Liljestrand v. Dell Enters., 287 Neb.
242, 842 N.W.2d 575 (2014). We generally defer to a trial
court’s assessment of conflicting evidence, because the trial
court had the advantage of hearing and observing important
parts of evidence that are not readily apparent from a cold
record. Id. The court stated that it considered the fact that
after it was decided that the partnership would be dissolved
and the families had agreed to begin farming separately, Perry
and Knud prepared their separate 2010 financial information
                  Nebraska Advance Sheets
	                       ELTING v. ELTING	417
	                       Cite as 288 Neb. 404

for FNB without adjusting the price of corn for the losses due
to the Focal Point contracts. In this regard, the court noted
“the consternation which erupted once it became known that
Perry and Kerwin were presenting corn prices to [FNB] which
should have matched, but did not.” Also in support of its
decision finding Perry and Knud more credible was the fact
that when filing their original complaint, the appellees omit-
ted some of the Focal Point contracts entered into in 2008, of
which they were apparently unaware of until discovery took
place prior to trial.
   In support of its findings, the court further stated that
      [i]t has considered that if all four [managing] partners
      were aware of the opening up of the [Focal Point] con-
      tracts, and watched the spectacular drops in the value
      of their corn crop, it would seem that someone would
      remember a specific, undoubtedly unpleasant conversa-
      tion, between [sic] the partners regarding the ultimate
      decisions to close the [Focal Point] contracts. One would
      also think that such an incredible loss in corn contract
      prices would have been cited as a reason to end the
      partnership, but it was not. [The court] has considered
      the fact that the last group of Focal Point contracts were
      [sic] apparently entered into after the parties had agreed
      to dissolve the partnership and go their separate ways.
      It does not seem plausible that partners whose business
      relationship had reached to the point of dissolution a
      few short weeks or months earlier would agree to open
      up additional contracts with another potential for signifi-
      cant loss.
   The district court added that it “considered the demeanor,
conduct, testimony, statements in conflict between witnesses,
and conflicts within the witness’s own testimony. It credits
the version that Perry and Knud told and finds that they were
unaware of the Focal Point contracts until Perry and Knud
began their separate relationship with FNB.” Given the forego-
ing, the district court found that Perry and Knud were unaware
of the Focal Point contracts until after they were entered
into and it found that Perry and Knud did not agree to enter
the partnership into the Focal Point contracts. Therefore, the
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district court found that Kerwin was not authorized to enter
into the Focal Point contracts on the partnership’s behalf.
   As stated above, the scope of an agent’s authority is a ques-
tion of fact. Koricic v. Beverly Enters. - Neb., 278 Neb. 713,
773 N.W.2d 145 (2009). The district court found that Perry
and Knud did not agree to enter into the Focal Point contracts
and that therefore, there was not approval by a majority of the
managing partners to enter into the Focal Point contracts as
was required by paragraph 5.3 of the Partnership Agreement.
There is sufficient evidence to support these findings. The
district court’s finding that Kerwin did not have authority to
enter the partnership into the Focal Point contracts was not
clearly wrong.

Kerwin’s Actions of Entering the Partnership
Into the Focal Point Contracts
Were Not Ratified.
   In Kerwin’s second assignment of error, he claims that the
district court erred when it found that his actions were not
ratified. Kerwin argues that even if he lacked authority to
enter into the Focal Point contracts on behalf of the partner-
ship, Perry and/or Knud nevertheless ratified his actions, and
he is relieved of liability. We find no merit to this assignment
of error.
   [9-12] As we have noted above, “[e]ach partner is an agent
of the partnership for the purpose of its business.” § 67-413(1).
Regarding ratification, § 4.01 of the Restatement (Third) of
Agency (2006) provides in part:
         (1) Ratification is the affirmance of a prior act done by
      another, whereby the act is given effect as if done by an
      agent acting with actual authority.
         (2) A person ratifies an act by
         (a) manifesting assent that the act shall affect the per-
      son’s legal relations, or
         (b) conduct that justifies a reasonable assumption that
      the person so consents.
Id. at 304. We have previously stated:
      Ratification of an agent’s unauthorized acts may be made
      by overt action or inferred from silence and inaction.
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      Further, retention of benefits secured by an agent’s unau-
      thorized act with knowledge of the source of such ben-
      efits and the means by which they were obtained is a
      ratification of the agent’s act. And whether there has been
      a ratification is ultimately and ordinarily a question of
      fact. Because ratification is an affirmative defense, the
      burden of proving ratification rest[s] on the [party alleg-
      ing the defense].
Brook Valley Ltd. Part. v. Mutual of Omaha Bank, 285 Neb.
157, 168-69, 825 N.W.2d 779, 789 (2013). In this case,
Kerwin affirmatively pled ratification in his “Third Affirmative
Defense” and therefore, Kerwin had the burden to show that
his actions were ratified. The district court found that they
were not.
   In order for a previously unauthorized act to be ratified, the
ratifying partners must have actual knowledge of the unau-
thorized act before they can ratify the action. Section 4.06
of the Restatement provides that “[a] person is not bound
by a ratification made without knowledge of material facts
involved in the original act when the person was unaware of
such lack of knowledge.” Id. at 336. Comment b. to § 4.06
further explains:
      A person who has ratified is not bound by the ratification
      if it was made without knowledge of material facts about
      the act of the agent or other actor. Thus, ratification con-
      cerns actions that have already taken place, of which the
      person is aware, not actions or events that may occur in
      the future. The burden of establishing that a ratification
      was made with knowledge is on the party attempting to
      establish that ratification occurred.
Id. at 336.
   Comment b. to § 4.06 at 336 clarifies the nature of the
knowledge needed for ratification, providing that “[r]atification
requires that the principal have actual knowledge of material
facts, not notice as defined in § 1.04(4).” The definition of
notice in § 1.04(4) of the Restatement includes constructive
knowledge, and states in part that “[a] person has notice of a
fact if the person knows the fact, has reason to know the fact,
has received an effective notification of the fact, or should
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know the fact to fulfill a duty owed to another person.” Id.
at 70. Therefore, the Restatement (Third) of Agency makes
it clear that the ratifying partners must have actual knowl-
edge, not merely constructive knowledge, of the previously
unauthorized act before they can ratify the act. Mere notice as
defined in § 1.04(4) does not equate to knowledge for ratifica-
tion purposes.
    Kerwin argues that evidence of constructive knowledge on
the part of the ratifying partners is sufficient for the other part-
ners to have ratified a previously unauthorized act. He asserts
that both Perry and Knud ratified the partnership’s participa-
tion in the Focal Point contracts. In particular, he contends that
Perry had constructive knowledge of the Focal Point contracts,
because at the FNB meeting on January 9, 2009, Perry signed
the first page of the 2008 balance sheet, and elsewhere in the
document, the price of corn was adjusted for the Focal Point
contracts. Kerwin contends that in signing the balance sheet,
Perry indicated that he had read the entire document and was
aware of its contents. Kerwin asserts that if Perry had had
any questions or concerns regarding the price of the corn, he
would have raised them at the FNB meeting. Kerwin further
asserts that the Focal Point contracts were kept in an unlocked
filing cabinet in the partnership’s office and that the manag-
ing partners had access to them at any time and could have
reviewed them.
    We reject Kerwin’s argument that constructive knowledge
is sufficient for ratification in this case. None of the cases
upon which Kerwin relies involved partners or a partnership
ratifying the previously unauthorized act of another partner
based upon constructive knowledge. By way of example,
Eicher v. Mid America Fin. Invest. Corp., 275 Neb. 462, 748
N.W.2d 1 (2008), involved whether a person who signed a
contract for the sale of his home had constructive knowl-
edge of the content contained in the contract. Gonzalez v.
Union Pacific RR. Co., 282 Neb. 47, 803 N.W.2d 424 (2011),
involved whether a person who had signed a release of
liability had constructive knowledge of the contents of the
release. In the instant case, the 2008 balance sheet signed by
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Perry has not been determined to be a contract, and it is not
a release of liability, therefore, neither Eicher nor Gonzalez
controls our analysis.
   As noted above, the Restatement (Third) of Agency (2006)
provides that actual knowledge, not constructive knowledge, is
required for ratification, and we determine that this principle is
applicable in this case. Whether there has been a ratification is
ultimately and ordinarily a question of fact. Brook Valley Ltd.
Part. v. Mutual of Omaha Bank, 285 Neb. 157, 825 N.W.2d
779 (2013). In the bench trial, both Perry and Knud testified
and the court found that they were “adamant that they had no
knowledge of the Focal Point contracts.” In the district court’s
order, the court stated that it considered Perry’s testimony that
he trusted Kerwin “to do the book work” for the partnership
and that “[i]t is clear that Perry is not a detail-oriented per-
son.” In weighing the testimony, the court stated that although
“[t]here is some evidence that Perry, at a minimum, had the
ability to notice that the contract price had changed on some
of the corn,” the district court found that Perry and Knud were
credible witnesses and ultimately found that neither Perry nor
Knud had actual knowledge of the Focal Point contracts for
purposes of ratification.
   Because actual knowledge of the Focal Point contracts was
required in order for Perry or Knud to ratify Kerwin’s decision
to enter into them on behalf of the partnership, and because
Perry and Knud lacked such actual knowledge, they could not,
and did not, ratify Kerwin’s decision to enter into the Focal
Point contracts on the partnership’s behalf. Given our standard
of review, we cannot say that the district court was clearly
wrong when it found that neither Perry nor Knud ratified
Kerwin’s actions.

The Limitation of Liability Clause in the
Partnership Agreement Does Not
Shield Kerwin From Liability.
   In Kerwin’s third assignment of error, he argues that the
limitation of liability clause found in paragraph 5.4 of the
Partnership Agreement shields him from liability for the losses
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resulting from his unauthorized actions, and he claims that the
district court erred in not so determining. We find no merit to
this assignment of error.
   Paragraph 5.4 of the Partnership Agreement states:
      Liability of Managing Partners. No Managing Partner
      shall be liable to the Partnership or to any other Partner
      for any action taken in good faith and reasonably
      believed by such Managing Partner to be in the best
      interest of the Partnership or taken in reliance on the
      provisions of [the Partnership] Agreement, or for good
      faith errors of judgment, but shall only be liable for will-
      ful misconduct or gross negligence in the performance
      of his or her duties.
   The 1998 UPA provides that the relations among the part-
ners and between the partners and the partnership are gener-
ally governed by their partnership agreement. § 67-404(1).
Under the 1998 UPA, a partnership agreement may place
some limitations on the partners’ duty of care, as is done in
paragraph 5.4 of the Partnership Agreement, but it may not
unreasonably reduce the duty of care in some scenarios. See,
e.g., §§ 67-404(2)(d) and 67-424(3) (regarding conduct and
winding up of partnership). See, also, § 67-433(2)(c) (regard-
ing dissociation). Section 67-404 of the 1998 UPA provides
in part:
         (1) Except as otherwise provided in subsection (2) of
      this section, relations among the partners and between the
      partners and the partnership are governed by the partner-
      ship agreement. To the extent the partnership agreement
      does not otherwise provide, the [1998 UPA] governs rela-
      tions among the partners and between the partners and
      the partnership.
   The 1998 UPA is Nebraska’s counterpart to the model act
known as RUPA. Section 67-404 of the 1998 UPA is equivalent
to § 103 of RUPA. Comment 6 to § 103 of RUPA states:
      [P]artnership agreements frequently contain provisions
      releasing a partner from liability for actions taken in good
      faith and in the honest belief that the actions are in the
      best interests of the partnership and indemnifying the
      partner against any liability incurred in connection with
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      the business of the partnership if the partner acts in a
      good faith belief that he has authority to act.
Robert W. Hillman et al., The Revised Uniform Partnership
Act § 103, comment 6 at 44 (2013-14 ed. 2013) (empha-
sis supplied).
   In this case, the district court determined that because
Kerwin’s actions in entering into the Focal Point contracts were
not authorized by the partnership, his actions were not shielded
by the limitation of liability clause. The district court reasoned
that “[a]s Kerwin had no right to bind [the partnership] to the
Focal Point contracts without a majority vote of the [manag-
ing] partners, his entering into the [Focal Point] contracts
was outside his duties as a partner and therefore not ‘taken
in reliance on the provisions of’ the Partnership Agreement.”
The district court therefore determined that Kerwin was not
shielded by the limitation of liability clause in the Partnership
Agreement. We believe the district court’s reasoning is incom-
plete, but we agree with the ultimate determination that Kerwin
is not shielded from liability under paragraph 5.4 of the
Partnership Agreement.
   Paragraph 5.4 quoted above provides for several scenarios
which excuse liability, and as we read it, the actions which
gave rise to each scenario must have been taken in good faith.
The district court made no specific comment on whether
Kerwin’s conduct was taken in “good faith,” but we believe
the court’s factual findings are inconsistent with good faith;
thus, Kerwin is not shielded from liability under any scenario
in paragraph 5.4 of the Partnership Agreement.
   According to the court’s findings, Kerwin acknowledged
that a consensus of the managing partners was required to enter
into the Focal Point contracts and contended that a consensus
had been reached. To the contrary, the district court found that
Perry and Knud had no prior knowledge of the Focal Point
contracts. The court found that “consternation . . . erupted once
it became known that Perry and Kerwin were presenting corn
prices to [FNB] which should have matched, but did not.” The
court stated that, if all four managing partners had watched
the “spectacular drops in the value of their corn crop, it would
seem that someone would remember a specific, undoubtedly
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unpleasant conversation,” but that there was no such exchange.
The district court noted that the Focal Point contracts led to
an “incredible loss in corn contract prices [which] would have
been cited as a reason to end the partnership, but it was not.”
The district court found that “the partnership lost significant
money” as a result of the second and third series of contracts.
The district court found the total loss was $2,144,350. The
district court determined that Kerwin’s actions were outside
and therefore not “‘taken in reliance on the provisions of’” the
Partnership Agreement.
   The findings by the district court in this case wherein
Kerwin shared neither the fact of entering into the Focal Point
contracts nor the fact of repeated significant losses with his
partners cannot be explained by oversight or forgetfulness.
Kerwin’s failure to mention the exposure of the partnership on
the front side of the Focal Point contracts and the over $2 mil-
lion loss on the back side, does not meet the measure of candor
expected among partners. Despite his assertion of good faith,
Kerwin was not forthright with his partners about important
matters and the facts are inconsistent with Kerwin’s having
taken action in good faith. Because good faith is required to
shield Kerwin from liability under each scenario in paragraph
5.4 of the Partnership Agreement, given the absence of good
faith, Kerwin cannot take advantage of the provisions of para-
graph 5.4, as the district court determined.
                         CONCLUSION
   We determine that the district court was not clearly wrong
when it determined that Kerwin was not authorized to enter
into the Focal Point contracts on behalf of the partnership
and when it determined that Kerwin’s actions of entering into
the Focal Point contracts on the partnership’s behalf were not
ratified. We further determine that the limitation of liability
clause in the Partnership Agreement did not shield Kerwin
from liability for the partnership’s losses due to the Focal Point
contracts. We therefore affirm the order of the district court
awarding judgment and damages to the appellees.
                                                       Affirmed.