Cain Family Farm LP v. Schrader Real Estate & Auction (IN)

Summary: Purchase contract executed by member of LLC was enforceable because the member had apparent authority to execute on behalf of the LLC and was carrying on in the usual way of business.


Cain Family Farm, L.P. v. Schrader Real Estate & Auction Co., Inc., 991 N.E.2d 971 (Ind. Ct. App. 2013).


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Facts: Candace, Melanie, John and Patricia are siblings and the sole members of the Cain Family Farm Limited Partnership (“L.P.”). The L.P. holds title to approximately 400 acres of property, consisting of 17 tracts. The four siblings are also the sole members of the Cain Family Farm LLC ("LLC"). The LLC is the sole general partner of the L.P. and has exclusive control to manage and operate the L.P.

On August 6, 2008, the L.P. entered into an auction contract with Schrader Real Estate and Auction Company (“Schrader”) for the sale of each tract of the property. Candace signed the contract as a member of the LLC, with the consent of the other Cain siblings. Schrader advertised the property and scheduled the sale at public auction for October 25, 2008. Also in August, Candace was propositioned by Charles Drerup, member of Antler Ridge, to purchase the property. Candace rejected Drerup’s proposal and informed him that all four of the Cain siblings have to approve the sale of the property.

Prior to the auction, the Cain siblings established reserve prices for Tracts 2 through 17 and agreed that unanimous consent was necessary to sell any tract of the property. On October 25, Candace, Melanie and John attended the auction with Patricia available by phone. The auction commenced and at some point late in the auction, Schrader met with Candace, Melanie and John in private to discuss the bidding. During the meeting, the siblings rejected the bid on Tract 5 because it was too low. Then Candace told Melanie and John that she would be “happy with whatever they wanted to do” and left the meeting and returned to the auction. After the meeting, John and Melanie returned to the auction and the auctioneer announced that all the tracts beside Tract 5 would be sold that day. Neither John nor Melanie did anything to interrupt the auction. The total purchase price of the property was well below the reserve price. Candace was the highest bidder on Tract 1 but informed Schrader that Tract 1 would not be sold because it did not meet the reserved price. Schrader responded to Candace by stating that all the tracts besides Tract 5 were selling that day.

At the conclusion of the bidding, Candace and Drerup, the purchaser of Tracts 2-4 and 6-17, signed a purchase agreement. Candace executed the purchase agreement in the name of the LLC.

Two weeks later, the L.P. and LLC wrote a letter to Schrader demanding that the purchase agreement be rescinded, and on December 23, 2008, the L.P. filed a complaint against Schrader, Drerup, and Candace alleging breach of fiduciary duty, seeking to quiet title, declaratory judgment and attorney’s fees. The trial court entered summary judgment in favor of Drerup.


Holding: Affirmed. On appeal, the court held that Candace had apparent authority to execute the purchase agreement because Drerup was under the impression that Candace had authority. The conduct of the Cain siblings and their designated agent, Schrader, indirectly communicated to Drerup that they had accepted their bid at the close of the auction. The court added that since the Cain siblings did not indicate to Drerup that they had rejected his bids, and because Schrader presented the purchase agreement for Candace and Drerup’s signatures, it is reasonable that Drerup believed that the Cain siblings authorized the purchase agreement.

The court also held that the LLC was acting as general partner of the L.P. The court reasoned that when Candace signed the purchase agreement she was apparently carrying on in the usual way of business because she had also signed the auction contract with Schrader in August. The court further noted that because Drerup had no knowledge or reason to believe that Candace did not have authority to bind the LLC, the purchase agreement was enforceable.


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By: ATG Underwriting Department | Posted on: Thu, 04/02/2015 - 3:09pm