Zions Gate R.V. Resort v. Oliphant

1. The Honorable Judith M. Billings, Senior Judge, sat by special
assignment as authorized by law. See generally Utah Code Jud.
Admin. R. 11-201(6).
2014 UT App 98
_________________________________________________________
THE UTAH COURT OF APPEALS
ZIONS GATE R.V. RESORT, LLC,
Plaintiff, Appellee, and Cross-appellant,
v.
MICHAEL LEROY OLIPHANT,
Defendant, Appellant, and Cross-appellee.
Opinion
No. 20121093-CA
Filed May 1, 2014
Fifth District Court, St. George Department
The Honorable James L. Shumate
No. 080503610
Justin D. Heideman and Justin R. Elswick,
Attorneys for Appellant
Heath H. Snow and Stephen R. Schwendiman,
Attorneys for Appellee
JUDGE MICHELE M. CHRISTIANSEN authored this Opinion, in
which JUDGE GREGORY K. ORME and SENIOR JUDGE JUDITH M.
BILLINGS concurred.1
CHRISTIANSEN, Judge:
¶1 Michael LeRoy Oliphant appeals from the district court’s
denial of his request for attorney fees after the district court quieted
title to certain real property in Oliphant for the term of a lease.
Zions Gate R.V. Resort, LLC cross-appeals the district court’s
summary judgment ruling in favor of Oliphant on Zions Gate’s

Zions Gate v. Oliphant
20121093-CA 2 2014 UT App 98
challenge to the validity of that lease. We affirm in part, reverse in
part, vacate in part, and remand to the district court.
BACKGROUND
¶2 This case arises from a dispute over the validity of a ninety-
nine-year lease between Zions Gate and Oliphant that conveyed
rights to a recreational-vehicle pad and lot to Oliphant (the Lease).
On June 1, 2007, Darcy Sorpold, a member and manager of Zions
Gate, signed the Lease, purportedly on behalf of Zions Gate, as
payment for work that Oliphant had performed at Sorpold’s
direction. On December 19, 2008, Zions Gate brought the present
action against Oliphant for unlawful detainer of the leased
premises, asserting that Oliphant was a tenant-at-will because the
Lease was invalid. Zions Gate argued that the Lease was invalid
because Sorpold had no authority to enter into the Lease without
the consent of Dale Jones, Zions Gate’s other manager. Oliphant
brought a counterclaim asserting that the Lease was valid and
requesting that title to the leased premises be quieted in him for the
term of the Lease.
¶3 Oliphant moved for summary judgment, arguing that
Sorpold had apparent authority to enter into the Lease or, if
Sorpold lacked authority, that Jones and Zions Gate had
subsequently ratified the Lease. Zions Gate also moved for
summary judgment, arguing that Sorpold lacked authority to enter
into the lease because Zions Gate’s articles of organization (the
Articles) expressly limited Sorpold’s authority to unilaterally act on
behalf of Zions Gate. The district court granted summary judgment
in favor of Oliphant, and both parties appeal from parts of that
judgment.
ISSUES AND STANDARD OF REVIEW
¶4 Zions Gate challenges the district court’s conclusion that the
Lease was valid and enforceable and the court’s ruling in favor of

Zions Gate v. Oliphant
2. The Utah Revised Limited Liability Company Act applies to all
limited liability companies formed on or before December 31, 2013.
Utah Code Ann. § 48-2c-100 (LexisNexis Supp. 2013). Zions Gate
was formed on December 20, 2004, and the Act therefore applies to
this appeal. We cite the current edition of the Utah Code Annotated
because the relevant provisions have not been amended since the
events at issue occurred.
20121093-CA 3 2014 UT App 98
Oliphant on the parties’ cross-motions for summary judgment. We
review the district court’s legal conclusions and ultimate grant of
summary judgment for correctness. Orvis v. Johnson, 2008 UT 2, ¶ 6,
177 P.3d 600.
¶5 Oliphant appeals from the district court’s denial of his
request for attorney fees. However, we do not reach this issue due
to our disposition of Zions Gate’s appeal.
ANALYSIS
I. Validity of the Lease
¶6 Zions Gate argues that the district court erred in concluding
that the Lease was valid and enforceable, because the Articles
required both Sorpold and the other manager, Jones, to consent to
any act taken on Zions Gate’s behalf. “[A]n agent cannot make its
principal responsible for the agent’s actions unless the agent is
acting pursuant to either actual or apparent authority.” Zions First
Nat’l Bank v. Clark Clinic Corp., 762 P.2d 1090, 1094 (Utah 1988).
Based on the specific language in the Articles, the parties do not
dispute that Sorpold lacked actual authority to bind Zions Gate to
the Lease. Accordingly, we consider only whether Sorpold had
authority under the Utah Revised Limited Liability Company Act
(the Act), whether he had apparent authority under common-law2
agency principles, or whether Zions Gate subsequently ratified
Sorpold’s otherwise unauthorized actions.

Zions Gate v. Oliphant
20121093-CA 4 2014 UT App 98
A. Sorpold Did Not Have Statutory Authority to Enter into the
Lease Without Jones’s Consent.
¶7 Zions Gate first argues that Sorpold had no authority under
section 802 of the Act to bind Zions Gate to the Lease. “When
interpreting a statute, . . . [w]e employ plain language analysis to
carry out the legislative purpose of the statute as expressed
through the enacted text.” Richards v. Brown, 2012 UT 14, ¶ 23, 274
P.3d 911 (citation omitted). Section 802 provides that for a
manager-managed LLC,
an act of a manager, including the signing of a
document in the company name, for apparently
carrying on in the ordinary course of the company
business, . . . binds the company unless the manager
had no authority to act for the company in the
particular matter and the lack of authority was
expressly described in the articles of organization or
the person with whom the manager was dealing
knew or otherwise had notice that the manager
lacked authority.
Utah Code Ann. § 48-2c-802(2)(c) (LexisNexis 2010). Zions Gate
argues that the Articles expressly require the consent of both
managers in order to bind the company and that Sorpold therefore
lacked authority under section 802 to unilaterally enter into the
Lease.
¶8 The Articles provide that Zions Gate “shall be managed by
managers” and that Jones and Sorpold are the managers of the
company. The Articles also state, “It shall require the agreement,
approval or consent of both Managers to act on behalf of or to
constitute the act of [Zions Gate].” This provision of the Articles
expressly limits the authority of one manager to act unilaterally to
bind the company or otherwise act on its behalf. Thus, Sorpold
lacked authority to bind Zions Gate to the Lease without Jones’s
consent or approval, and the Articles expressly described this lack
of authority.

Zions Gate v. Oliphant
20121093-CA 5 2014 UT App 98
¶9 Oliphant argues that a manager’s act is ineffective to bind
the company under section 802 only if the manager is “completely
devoid of authority” and not merely limited in authority as
Sorpold was here. Oliphant bases this argument on his reading of
the statute as only limiting the effect of a manager’s acts “when the
manager had no authority to act for the company.” However, the
plain language of the statute provides that a manager’s act is not
binding when “the manager had no authority to act for the
company in the particular matter,” that is, when the manager
lacked authority to bind the company through the act at issue. See
id. And in this case, Sorpold had “no authority” to unilaterally bind
Zions Gate to the Lease—an act that would require Jones’s
approval. We therefore conclude that Sorpold had no authority
under section 802 to bind Zions Gate to the Lease.
B. Sorpold Did Not Have Apparent Authority to Enter into the
Lease Because Oliphant Had Notice of the Limitation on
Sorpold’s Authority.
¶10 Zions Gate claims that because Sorpold had no authority
under section 802, the Lease is invalid and unenforceable.
However, section 802 sets forth the circumstances in which
authority to act on behalf of an LLC is presumed under the Act.
The absence of authority under the Act does not preclude the
possibility that authority exists under common-law agency
principles. And Oliphant argues that Sorpold had apparent
authority to enter into the Lease because he reasonably believed
that Sorpold had authority to enter into the Lease, and he changed
his position in reliance on that appearance of authority.
¶11 “Apparent authority exists where the conduct of the
principal causes a third party to reasonably believe that someone
has authority to act on the principal’s behalf, and the third party
relies on this appearance of authority and will suffer loss if an
agency relationship is not found.” Hale v. Big H Constr., Inc., 2012
UT App 283, ¶ 64, 288 P.3d 1046. However, “[k]nowledge of an
agent’s lack of authority defeats a claim for apparent authority.”
Horrocks v. Westfalia Systemat, 892 P.2d 14, 16 n.1 (Utah Ct. App.

Zions Gate v. Oliphant
3. The division of corporations is required to make all filings
required by the Act available for inspection and copying upon
request and the payment of a reasonable fee by any member of the
public. Utah Code Ann. § 48-2c-202 (LexisNexis 2010). Thus, the
articles of organization for Zions Gate were readily available to
Oliphant for inspection.
20121093-CA 6 2014 UT App 98
1995) (citing Restatement (Second) of Agency § 166 (1958) (“A
person with notice of a limitation of an agent’s authority cannot
subject the principal to liability upon a transaction with the agent
if he should know that the agent is acting improperly.”)).
¶12 Zions Gate argues that regardless of whether Oliphant had
actual knowledge of the limitation on Sorpold’s authority, Oliphant
had notice of that limitation by operation of Utah Code section 48-
2c-121. That section provides, “Articles of organization that have
been filed with the [state division of corporations] constitute notice
to third persons . . . of all statements set forth in the articles of
organization that are . . . expressly permitted to be set forth in the
articles of organization by [Utah Code section] 48-2c-403(4).” Utah
Code Ann. § 48-2c-121(1) (LexisNexis 2010). And Utah Code section
48-2c-403(4) provides, in relevant part, “The articles of organization
may contain any other provision not inconsistent with law,
including . . . a statement of whether there are limitations on the
authority of managers or members to bind the company and, if so,
what the limitations are . . . .”
¶13 We conclude, in accordance with Utah Code section 48-2c-
121, that the filing of the Articles with the state division of
corporations, and the ready availability of the Articles to Oliphant
by virtue of that filing, gave notice to Oliphant of the limitation on
Sorpold’s authority therein. The limitation on Sorpold’s authority3
was clearly set forth in the Articles as filed with the state. Because
such limitations are expressly permitted by statute to be set forth
in a company’s articles of organization, the filing of the Articles
constituted notice to third parties of the limitation. See id. § 48-2c-
121(1). And because Oliphant had notice of the limitation on

Zions Gate v. Oliphant
20121093-CA 7 2014 UT App 98
Sorpold’s authority, he neither had “reason to believe” that
Sorpold possessed the authority to unilaterally enter into the Lease,
nor was his reliance on any perceived authority reasonable under
these circumstances. See Luddington v. Bodenvest Ltd., 855 P.2d 204,
209–10 (Utah 1993). Accordingly, Oliphant’s claim that Sorpold had
apparent authority to enter into the Lease fails.
¶14 Oliphant argues that it is unreasonable and unrealistic to
expect individuals or companies entering into an agreement with
an LLC to acquire the articles of organization for that LLC to
determine if the signatory to an agreement is authorized to enter
into that agreement on behalf of the LLC. However, “one who
deals exclusively with an agent has the responsibility to ascertain
that agent’s authority despite the agent’s representations.” Zions
First Nat’l Bank v. Clark Clinic Corp., 762 P.2d 1090, 1095 (Utah 1988)
(citation and internal quotation marks omitted). Like a corporation,
an LLC can act only through its agents. Cf. Orlob v. Wasatch Mgmt.,
2001 UT App 287, ¶ 18, 33 P.3d 1078. And the Act clearly
establishes that by filing the Articles with the state, Zions Gate gave
notice to all third parties of the limitations placed on the authority
of its managers. Thus, the law imposed on Oliphant the obligation
to ascertain whether Sorpold had authority to enter into the
Lease—including obtaining a copy of the Articles from the state if
necessary. And while Oliphant may believe the law imposes an
unrealistic burden on those doing business with LLCs, it is not the
prerogative of this court to question the wisdom of the statutory
scheme enacted by the legislature. See Gottling v. P.R. Inc., 2002 UT
95, ¶ 23, 61 P.3d 989.
¶15 Accordingly, we determine that Oliphant had notice of the
restriction on Sorpold’s authority as set forth in the Articles filed
with the state. Oliphant thus could not reasonably believe that
Sorpold had authority to unilaterally enter into the lease or
reasonably rely on any perceived authority. See Luddington, 855
P.2d at 210. We therefore conclude that Sorpold lacked apparent
authority to bind Zions Gate to the Lease.

Zions Gate v. Oliphant
20121093-CA 8 2014 UT App 98
C. Summary Judgment Is Not Appropriate Because There
Remain Issues of Disputed Fact Material to Ratification.
¶16 Our determination that Sorpold had no authority to enter
into the Lease does not, however, conclusively establish the
invalidity of the Lease. “A principal may impliedly or expressly
ratify an agreement made by an unauthorized agent.” Zions First,
762 P.2d at 1098 (citation and internal quotation marks omitted).
“Ratification is premised upon the knowledge of all material facts
and upon an express or implied intention on the part of the
principal to ratify.” City Elec. v. Dean Evans Chrysler-Plymouth, 672
P.2d 89, 91 (Utah 1983). An intention to ratify may be implied from
the principal’s failure to disaffirm the agent’s acts or the principal’s
retention of the fruits of a contract. See Bullock v. Department of
Transp., 966 P.2d 1215, 1219–20 (Utah Ct. App. 1998). While the
district court did not base its ruling on ratification of the Lease,
Oliphant asks us to affirm on this alternative ground.
¶17 Oliphant argues that even if Sorpold initially lacked
authority to enter into the lease, Zions Gate ratified the lease by
failing to timely object to Sorpold’s unauthorized act. A principal’s
intent to ratify may be found “under circumstances of acquiescence
or where a duty to disaffirm is not promptly exercised,” so long as
the principal had “full knowledge of all the material facts.” Zions
First, 762 P.2d at 1098 (citations and internal quotation marks
omitted). In other words, an intent to ratify may be implied where
the principal knows that another has purported to act as its agent
and the principal fails to object within a reasonable time. See Moses
v. Archie McFarland & Son, 230 P.2d 571, 574–75 (Utah 1951); Moran
v. Knights of Columbus, 151 P. 353, 360 (Utah 1915); cf. Hatch v. Lucky
Bill Mining Co., 71 P. 865, 866 (Utah 1903) (explaining that a
stockholder who does not intend to ratify unauthorized acts by a
corporation must act to disaffirm “within a reasonable time after he
learns of the injury done [to] him”).
¶18 Here, we conclude that there remain disputed issues of
material fact relating to ratification that make summary judgment
on the issue of the validity of the Lease inappropriate. The parties
dispute when Zions Gate had knowledge that Sorpold had entered

Zions Gate v. Oliphant
20121093-CA 9 2014 UT App 98
into the Lease without authority to do so. Generally, an agent’s
knowledge is imputed to the principal so long as the agent
obtained such knowledge within the scope of his authority. Wardley
Better Homes & Gardens v. Cannon, 2002 UT 99, ¶ 19, 61 P.3d 1009.
However, “[i]mputing the knowledge of an unauthorized or
unfaithful agent to her principal for purposes of demonstrating his
knowledge of her acts would nullify the knowledge requirement.”
Franklin Credit Mgmt. Corp. v. Hanney, 2011 UT App 213, ¶ 36, 262
P.3d 406. Because we have determined that Sorpold acted outside
the scope of his authority in entering into the lease, see supra
¶¶ 9, 13, Zions Gate cannot be charged with Sorpold’s knowledge
of his unauthorized acts in June 2007 simply because Sorpold was
aware of his own acts.
¶19 The only evidence in the record relevant to Zions Gate’s
knowledge of Sorpold’s acts are averments by Jones that he learned
of the unauthorized Lease only “after Mr. Sorpold was deported to
Canada” “some time in the early part of 2008.” While Oliphant
argues that Sorpold signed other leases during the same time
period as the Lease and that Jones and Zions Gate therefore should
have been aware that “someone was signing leases with the
incoming tenants,” Oliphant has not identified any evidence in the
record showing that Jones or Zions Gate were aware that Sorpold
had entered into this particular lease at that time. Accordingly, it is
unclear precisely when Zions Gate had knowledge of Sorpold’s
unauthorized acts—a fact that is highly relevant to a determination
of whether Zions Gate acted to repudiate those acts within a
reasonable time. The record on this issue is therefore not
sufficiently developed to determine as a matter of law whether
Zions Gate ratified the Lease.
¶20 Moreover, the ultimate determination of whether Zions Gate
disaffirmed Sorpold’s actions within a reasonable time itself
presents an issue of fact, rather than a legal question appropriate
for decision on summary judgment. “The question as to what is a
reasonable time cannot be decided by the application of purely
legal principles, but must necessarily be determined by the
particular facts and circumstances of each case.” Hatch, 71 P. at 866;
accord Theis v. duPont, Glore Forgan Inc., 510 P.2d 1212, 1216 (Kan.

Zions Gate v. Oliphant
20121093-CA 10 2014 UT App 98
1973) (“Whether there has been a repudiation within a reasonable
time is a question of fact . . . .”). While summary judgment may be
appropriate in a case with undisputed and unequivocal facts such
that a reasonable jury could only come to one conclusion, see Arnold
v. All Am. Assurance Co., 499 S.W.2d 861, 866 (Ark. 1973), this is not
such a case. Accordingly, we conclude that the trial court
incorrectly granted summary judgment in this case. We reverse the
district court’s grant of Oliphant’s motion for summary judgment
and affirm the district court’s denial of Zions Gate’s motion for
summary judgment.
¶21 Because the issue is likely to arise on remand, see Wilson v.
IHC Hosps., Inc., 2012 UT 43, ¶ 19, 289 P.3d 369, we note that “the
Utah statute of frauds requires that any agent executing an
agreement conveying an interest in land on behalf of his principal
must be authorized in writing,” and “[w]here the law requires the
authority to be given in writing, the ratification must also generally
be in writing,” Bradshaw v. McBride, 649 P.2d 74, 78, 79 (Utah 1982).
However, because neither party addressed this issue below, the
record before us is not adequately developed for this court to
consider the effect of this rule without further proceedings in the
district court.
II. Remaining Issues
¶22 The district court’s rulings on the issues of attorney fees and
quiet title are premised on its determination that the Lease was
valid and enforceable. Because we conclude that summary
judgment on the validity of the Lease was incorrectly granted, the
district court’s rulings on the remaining issues are premature.
Accordingly, we vacate the remainder of the district court’s order
and remand for further proceedings.
CONCLUSION
¶23 Sorpold had neither statutory authority nor common-law
apparent authority to enter into the Lease. However, disputed
issues of fact material to the question of ratification preclude the

Zions Gate v. Oliphant
20121093-CA 11 2014 UT App 98
entry of summary judgment on the validity of the Lease.
Accordingly, we affirm the denial of Zions Gate’s motion for
summary judgment, reverse the grant of Oliphant’s motion for
summary judgment, vacate the remainder of the district court’s
order, and remand for further proceedings consistent with this
opinion.