Court Opinion

ID: 9677417
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:51:47.344852+00
Date Added: 2024-06-11T18:16:55.875961
License: Public Domain

DISSENTING OPINION ON MOTION FOR REHEARING
McGARRY, Chief Justice,
dissenting.
[Filed Aug. 24, 1993]
I respectfully dissent.
The Court’s en banc consideration of this case was precipitated by the need to overrule OKC Corp. v. UPG, Inc., 798 S.W.2d 300 (TexApp.—Dallas 1990, writ denied). I concur with the majority’s view that OKC incorrectly stated the law with regard to the compounding of equitable prejudgment interest. However, the issue of prejudgment interest should not have been reached in this case because the trial court properly rendered judgment for Jones on his ratification defense.
In the first trial of this case, the trial court granted a directed verdict for Jones on the ground that he had proven his defense of ratification as a matter of law. In the appeal taken from that judgment, our Court could have held that ratification was not an available defense and would not support a directed verdict. We did not. Instead, we held that a genuine issue of material fact existed as to whether there was a ratification. Spangler v. Jones, 797 S.W.2d 125, 132 (Tex.App.—Dallas 1990, writ denied). We also expressly held that a ratification defense was available to Jones:
The burden was on Jones to prove knowledge of the fraud or breach and to prove a voluntary, intentional choice to ratify the contract in light of the knowledge, [citation omitted]
The key question is whether Spangler had full knowledge of the fraudulent acts or breach at the time of the ratification.
Id. at 131 (emphasis in original).
On remand, the trial court tried the case in accordance with our instructions and submitted the issue of ratification to the jury. The jury found a ratification. The majority’s *400opinion does not challenge the evidentiary support for this finding. Instead, it holds that when an agent fails to turnover to his principal all the benefits of a transaction, then ratification is not an available defense. The majority thus treats the jury’s finding of ratification as immaterial. This is in conflict with our Court’s decision in the first appeal, which is now the law of the case.
I also question the merits of the majority’s decision not to allow a ratification defense. Section 416 of the Restatement (Second) of Agency states:
The ratification or other affirmance by the principal of an unauthorized act done by an agent acting in excess of his power to bind the principal releases the agent from liability to the principal for having violated a duty to him, except when the principal:
(a) is obliged to affirm the act in order to protect his own interests; or
(b) is caused to ratify by the misrepresentation or duress of the agent.
The majority narrowly construes section 416 to limit a ratification defense to situations where an agent has merely exceeded his authority, and distinguishes situations where, as here, the agent has profited at the principal’s expense. This is not a valid distinction. An agent who profits at his principal’s expense has likely exceeded his authority. The Restatement itself recognizes that if an agent acquires something as a result of a violation of duty to the principal, the principal’s subsequent affirmance may not be a ratification because the agent may not have purported to be acting on account of the principal in the transaction. Restatement (Second) of Agency § 416, comment b. However, the principal’s affirmance is effective as a ratification if the agent purported to act on the principal’s behalf and if the principal had knowledge of all the material facts relating to the transaction at the time of the affirmance. As we held in the first appeal of this case, the key question is whether Spangler, the principal, had full knowledge of the fraudulent acts at the time of ratification. Spangler v. Jones, 797 S.W.2d at 131.
The majority’s reliance on Herider Farms-El Paso, Inc. v. Criswell, 519 S.W.2d 473 (Tex.Civ.App.—El Paso 1975, writ refd n.r.e.) is misplaced for the same reason. That case held that “there can be no ratification of an act which is not done on behalf of, and does not purport to bind, the person against whom the doctrine of ratification is invoked.” Herider, 519 S.W.2d at 477.. In addition, “ratification can only be effectual between the parties involved when the agent’s act is done openly and admittedly for the principal.” Id. Jones clearly purported to represent Spangler and to bind him to the contract being negotiated. Jones discussed the negotiations with Spangler and listened to Spangler’s suggestions. Jones’ acts were done openly and for Spangler. Just because the contract was not “fair” to Spangler does not mean that Jones was not acting as his agent.
A ratification defense should be available whenever a principal with full knowledge of the material facts affirms or acquiesces in a transaction, even if the original transaction might be characterized .as a fraud on the principal. Once a party is aware of the facts, there can no longer be an actionable fraud. See William B. Roberts, Inc. v. McDrilling Co., 579 S.W.2d 335, 339 (Tex.Civ.App.—Corpus Christi 1979, no writ); see also Moore & Moore Drilling Co. v. White, 345 S.W.2d 550 (Tex.Civ.App.—Dallas 1961, writ refd n.r.e.). As the Restatement recognizes, fraud by an agent precludes a ratification only when the fraud itself causes the ratification. § 416(b). In such cases, of course, the principal does not have full knowledge of the material facts. See Spangler v. Jones, 797 S.W.2d at 131.
The jury in this case had sufficient evidence from which to find that Spangler ratified Jones’ conduct. I would grant the motion for rehearing and affirm the trial court’s judgment.
ROSENBERG and OVARD, JJ., join the dissent.