Court Opinion

ID: 4314455
Source: CourtListenerOpinion
Date Created: 2018-09-21 15:08:46.493855+00
Date Added: 2024-06-11T14:44:41.823251
License: Public Domain

FILED
                                                                Sep 21 2018, 5:39 am

                                                                     CLERK
                                                                 Indiana Supreme Court
                                                                    Court of Appeals
                                                                      and Tax Court

ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEES
GO PROPERTIES, LLC                                         BER ENTERPRISES, LLC, AND
Thomas M. Beeman                                           NEW FIELD, LLC
Alex Beeman                                                Christopher E. Clark
Beeman Law                                                 Abaigeal F. Musser
Anderson, Indiana                                          Goodin Abernathy, LLP
                                                           Indianapolis, Indiana
                                                           ATTORNEY FOR APPELLEE
                                                           MORTGAGE ELECTRONIC
                                                           REGISTRATION SYSTEMS, INC., AS
                                                           NOMINEE FOR FRANKLIN
                                                           AMERICAN MORTGAGE COMPANY
                                                           Angela Field Trapp
                                                           Trapp Law, LLC
                                                           Indianapolis, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

GO Properties, LLC, and                                    September 21, 2018
Maxim Alliance Group, LLC,                                 Court of Appeals Case No.
Appellants-Plaintiffs,                                     18A-PL-176
                                                           Appeal from the Marion Superior
        v.                                                 Court
                                                           The Honorable James A. Joven,
BER Enterprises, LLC;                                      Judge
Mortgage Electronic Registration                           Trial Court Cause No.
Systems, Inc., as Nominee for                              49D13-1504-PL-12790
Franklin American Mortgage

Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018                    Page 1 of 11
      Company; New Field, LLC;
      Elden Investments, LLC; and
      Shannon R. Fawcett and
      Roxanne G. Fawcett, Trustees of
      the Shannon R. and Roxanne G.
      Revocable Trust Agreement
      dated 05/18/2017,
      Appellees-Defendants

      Baker, Judge.

[1]   GO Properties, LLC (GO Properties) had two members that were, themselves,

      limited liability companies (LLCs). Stacy Phillips, who was the sole member of

      one of those LLCs, went rogue. She falsely held herself out as having the

      authority to act on behalf of GO Properties in an endeavor to sell real estate

      that belonged to the LLC. The title insurance agent relied on Phillips’s

      representations and permitted the transaction to occur. Because Phillips had no

      actual or apparent authority to act on behalf of GO Properties, the deed was

      void. The real estate has since been sold again, but because the original deed

      was void, all future deeds are likewise void.

[2]   GO Properties appeals the trial court’s order granting summary judgment in

      favor of BER Enterprises, LLC (BER Enterprises), and New Field, LLC (New

      Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018      Page 2 of 11
      Field) (collectively, the appellees),1 on GO Properties’ quiet title action.

      Finding that the trial court should have entered summary judgment in favor of

      GO Properties, we reverse and remand with instructions.

                                                        Facts     2

[3]   In February 2012, GO Properties was formed as an LLC in Indiana with two

      members: Olicorp Properties, LLC (Olicorp), and Gracie Properties, LLC

      (Gracie). Olicorp’s sole member was Larry Oliver; Gracie’s sole member was

      Phillips. Olicorp was the designated Member Manager of GO Properties and

      had the sole authority “to sign agreements and other instruments on behalf of

      Company without the signature and/or written consent of any other Member . .

      . .” Appellant’s App. Vol. II p. 38-39. Neither Oliver nor Phillips was

      authorized, as an individual, to do any business on behalf of GO Properties.

[4]   On February 24, 2012, GO Properties purchased four parcels of real estate (the

      Properties) in Indianapolis from Maxim Alliance Group. To purchase the

      Properties, GO Properties executed a real estate mortgage, which was recorded

      on March 15, 2012.

[5]   On August 1, 2013, Phillips, without any authority under the GO Properties

      Operating Agreement and without notifying Oliver, filed a Notice of Change of

      1
       Mortgage Electronic Registration Systems, Inc., as Nominee for Franklin American Mortgage Company,
      has also filed an Appellee’s Brief in this matter, explaining that while the summary judgment order did not
      directly affect it, its interests align with BER Enterprises and New Field.
      2
          We held oral argument in this case in Indianapolis on August 31, 2018.

      Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018                            Page 3 of 11
      Registered Officer or Registered Agent with the Indiana Secretary of State,

      which changed the registered agent from Olicorp to Gracie. She also filed a

      Notice of Change of Principal Office Address, which changed GO Properties’

      principal address from Olicorp’s business address to Phillips’s home address.

      Phillips handwrote her title as “Owner” of GO Properties on both documents.

      Appellant’s App. Vol. III p. 95-96.

[6]   Phillips then immediately began the process of selling the Properties to Elden

      Investments for $60,000. She hired Best Title Services (Best Title) to perform a

      title examination of the Properties. The title examination failed to reveal the

      existence of the real estate mortgage given to Maxim Alliance Group by GO

      Properties because the mortgage did not have a legal description for any of the

      Properties. Best Title relied on Phillips’s representation that she was the owner

      of GO Properties as it conducted its examination and later acted as closing

      agent for the transaction. Specifically, Tim West, the owner of Best Title and

      the individual who conducted the examination and closing, attested as follows:

          • “[I]t looked like to me that Stacy Phillips . . . , when she changed the
            address for the LLC to [her own address], and she represented herself as
            the owner, and the new registered agent was Gracie Properties . . . .” Id.
            at 111.
          • It was “[c]orrect” that “the only thing in [West’s] file right now to
            indicate that Stacy Phillips had operating authority to sell this property
            [was] her Secretary of State change of office address and her changing the
            registered agent to herself,” as well as “her just telling [the title company
            employee] basically that she had the right to do this.” Id.
          • West did not rely on the Secretary of State documents; instead, he “was
            relying on the representations of Stacy Phillips.” Id. at 112.

      Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018    Page 4 of 11
[7]   The sale of the Properties closed on August 13, 2013. At the closing, Phillips,

      purportedly acting on behalf of GO Properties, conveyed the Properties to

      Elden Investments by way of warranty deed, which was recorded on August 22,

      2013. Elden Investments quickly sold the Properties after obtaining the

      warranty deed; all the appellees (other than Elden) derived their title claims

      from later deeds stemming from Elden’s sales.

[8]   On April 16, 2015, GO Properties filed a complaint against the appellees

      seeking, among other things, to quiet title to the Properties. On October 14,

      2016, BER Enterprises and New Field, which had each purchased one of the

      Properties from Elden Investments, filed a motion for summary judgment. On

      November 7, 2016, GO Properties filed a cross-motion for summary judgment.

      Following briefing and a hearing, on November 20, 2017, the trial court granted

      summary judgment in favor of BER Enterprises and New Field. In pertinent

      part, the trial court found and concluded as follows:

                                               Findings of Fact

                                                        ***

              4.       On or about August 1, 2013, Gracie Properties was listed
                       as the Registered Agent for GO Properties with the
                       Indiana Secretary of State, with Phillips listed as
                       Managing Member of GO Properties.

                                                        ***

              28.      GO Properties alleged that the transfer from GO
                       Properties to Elden Investments is void ab initio, alleging
                       that Phillips did not have authority to execute a deed for

      Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018          Page 5 of 11
                 GO Properties notwithstanding public documents to the
                 contrary.

                                                  ***

                                       Conclusions of Law

                                                  ***

        1.       An unauthorized deed, or a deed made without the proper
                 authority, is distinguishable from an inauthentic deed, and
                 therefore should be treated as voidable.

                                                  ***

        10.      In this case, the problem with the transactions lay in
                 Phillip’s [sic] holding herself out as having the authority to
                 sign the Deeds as a managing member of GO Properties.
                 The falsity did not lie in the Deeds themselves. Publically
                 [sic] available corporate documents served to support her
                 misrepresentations. To all involved, Phillips appeared to
                 have the authority to execute the instruments.

        11.      Unlike cases involving forgery, the Deeds at issue were not
                 documents made by a minor nor were they signed with a
                 forged signature. Rather, Phillips misrepresented her
                 authority within GO Properties. . . . [T]he Phillips[]
                 misrepresentations did not make the Deeds executed . . .
                 false, and thus the Deeds were not forgeries.

        12.      . . . The desirability of stability and predictability in the
                 field of property law must be considered by this Court. . . .
                 Holding the Deeds here to be void would ultimately do
                 more to undermine any dependability of the field of
                 property law and harm buyers’ trust in the recording
                 system, than to resolve an unaddressed area of Indiana
                 property law.

                                                  ***

Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018         Page 6 of 11
               14.      When a deed is procured by fraud, the grantee may still
                        transfer good title to a bona fide purchaser for value.

                                                         ***

               27.      . . . BER Enterprises and New Field are bona fide
                        purchasers for value.

                                                         ***

               29.      A voidable deed may be enforced by a bona fide purchaser
                        for value.

                                                         ***

               31.      Accordingly, as bona fide purchasers of properties with
                        unauthorized (voidable) deeds, title should be quieted in
                        the name of BER Enterprises . . . and New Field . . . .

       Appealed Order p. 6-11 (some internal citations omitted). GO Properties now

       appeals.

                                     Discussion and Decision
[9]    GO Properties makes a number of arguments on appeal, one of which we find

       dispositive: the trial court erred by granting summary judgment in favor of

       BER Enterprises and New Field because the deeds are void.

[10]   Our standard of review on summary judgment is well settled:

               The party moving for summary judgment has the burden of
               making a prima facie showing that there is no genuine issue of
               material fact and that the moving party is entitled to judgment as
               a matter of law. Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012).
               Once these two requirements are met by the moving party, the
               burden then shifts to the non-moving party to show the existence
       Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018        Page 7 of 11
                  of a genuine issue by setting forth specifically designated
                  facts. Id. Any doubt as to any facts or inferences to be drawn
                  therefrom must be resolved in favor of the non-moving
                  party. Id. Summary judgment should be granted only if the
                  evidence sanctioned by Indiana Trial Rule 56(C) shows there is
                  no genuine issue of material fact and that the moving party
                  deserves judgment as a matter of law. Freidline v. Shelby Ins.
                  Co., 774 N.E.2d 37, 39 (Ind. 2002).

       Goodwin v. Yeakle’s Sports Bar and Grill, Inc., 62 N.E.3d 384, 386 (Ind. 2016).

[11]   The parties disagree as to whether Phillips had apparent authority to act on

       behalf of GO Properties.3 Apparent authority is the authority that a third

       person reasonably believes an agent to possess because of some manifestation

       from the agent’s principal. E.g., Rogers v. Sigma Chi Int’l Fraternity, 9 N.E.3d

       755, 764 (Ind. Ct. App. 2014). To find that a person had apparent authority to

       act for the principal, it is essential that there be some form of communication,

       direct or indirect, by the principal, which instills a reasonable belief in the mind

       of the third party. Pepkowski v. Life of Ind. Ins. Co., 535 N.E.2d 1164, 1166 (Ind.

       1989). Statements or manifestations made by the agent are not sufficient to

       create an apparent agency relationship. Id.

[12]   Here, GO Properties made absolutely no direct or indirect statements indicating

       that Phillips had authority to act on its behalf. The Operating Agreement

       plainly states that Olicorp was the sole Member Manager. Neither Oliver and

       3
           It is undisputed that Phillips did not have actual authority to convey the Properties to Elden Investments.

       Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018                                Page 8 of 11
       Phillips as individuals nor Gracie Properties as an entity was authorized to act

       on behalf of GO Properties.

[13]   Moreover, the documents filed by Phillips with the Secretary of State do not

       amount to statements made by GO Properties that create an apparent agency

       relationship. Neither the location of a business’s address nor the identity of that

       business’s registered agent suffices to create apparent authority. See, e.g., Ind.

       Code § 23-0.5-1.5-36 (explaining that a registered agent is merely a person or

       entity that is authorized “to receive service of any process, notice, or demand

       required or permitted by law to be served” on the principal). Nor would it be

       reasonable to conclude that Phillips’s own handwritten designation of herself as

       “Owner” of GO Properties (she did not even bother to designate herself

       Member Manager) on the two forms constitutes a statement made by the

       principal bestowing her with apparent authority to act on its behalf. Appellant’s

       App. Vol. III p. 95-96, 112 (West attesting that he did not rely on the Secretary

       of State forms because anyone can file such documents—“I can go record a

       shoestring, too”).

[14]   In any event, West explicitly attested that he relied on Phillips’s own

       representations in concluding that she had authority to act on behalf of GO

       Properties. Appellant’s App. Vol. III p. 112. As noted above, to find apparent

       authority, there must be statements or manifestations made by the principal

       instilling a reasonable belief in the mind of the third party. E.g., Gallant Ins. Co.

       v. Isaac, 751 N.E.2d 672, 677 (Ind. 2001). Here, there were no such statements

       and West explicitly testified that he relied only on Phillips herself. Under these

       Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018       Page 9 of 11
       circumstances, we can only conclude that Phillips did not have apparent

       authority to act on behalf of GO Properties.

[15]   At the trial court’s request, GO Properties provided examples of underwriting

       standards for title insurance. Among other things, to insure title from an LLC,

       it is necessary to obtain a copy of the LLC’s operating agreement, any and all

       amendments thereto, and a certificate that the operating agreement is a true and

       correct copy of the agreement in effect at the time of the sale. Appellant’s App.

       Vol. IV p. 71. This practice is wise because it protects both the other members

       of the LLC and all future purchasers of the property. Had this practice been

       observed in this case, neither the original nor subsequent transactions would

       have occurred.4

[16]   In sum, Phillips did not have actual or apparent authority to sell the Properties

       on behalf of GO Properties. As a result, the original sale of the Properties to

       Elden Investments was void.5 Because the deed that Phillips executed on behalf

       of GO Properties was void, all future conveyances of the Properties were

       likewise void. Therefore, the trial court erred by entering summary judgment in

       4
         West attested that he believed that he reviewed GO Properties’ Operating Agreement but did not retain a
       copy of the agreement in his file. Appellant’s App. Vol. III p. 111. He also stated that he believed he would
       have seen an agreement or resolution bestowing Phillips with the authority to engage in the transaction on
       behalf of GO Properties, but no such document has been produced. Id. at 111-12. As Olicorp was the only
       other member of GO Properties and did not ever execute such a resolution, the only reasonable conclusion is
       that no such resolution existed.
       5
        At oral argument, counsel for appellees argued that because more sales of the Properties have occurred, we
       should not find the transaction(s) void. But we decline to find that multiple transactions stemming from a
       void deed can cleanse that deed—or themselves—of the original voidness.

       Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018                           Page 10 of 11
       favor of BER Enterprises and New Field and by denying GO Properties’

       summary judgment motion.

[17]   The judgment of the trial court is reversed and remanded with instructions to

       enter judgment in favor of GO Properties.

       May, J., and Robb, J., concur.

       Court of Appeals of Indiana | Opinion 18A-PL-176 | September 21, 2018   Page 11 of 11