Underground Festival, Inc. v. McAfee Engineering Co.

447 S.E.2d 683, 214 Ga. App. 243, 94 Fulton County D. Rep. 2621, 1994 Ga. App. LEXIS 849
CourtCourt of Appeals of Georgia
DecidedJuly 15, 1994
DocketA94A0090
StatusPublished
Cited by3 cases

This text of 447 S.E.2d 683 (Underground Festival, Inc. v. McAfee Engineering Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Underground Festival, Inc. v. McAfee Engineering Co., 447 S.E.2d 683, 214 Ga. App. 243, 94 Fulton County D. Rep. 2621, 1994 Ga. App. LEXIS 849 (Ga. Ct. App. 1994).

Opinions

Smith, Judge.

Underground Festival, Inc. (“UFI”) appeals from a judgment entered on a jury verdict in favor of McAfee Engineering Company in a lien foreclosure action brought by McAfee.

The evidence at trial showed that UFI leased certain space in Underground Atlanta to DBA of Atlanta, Inc., to be used to operate a restaurant and bar known as Bourbon Street Beat. DBA’s officers were William D. Koehler, president, and Richard Fraser, corporate secretary. The lease was signed by Koehler in his capacity as president. At the time the lease was signed, the outer shell of Underground was being completed by Underground Festival Development Corporation. The interior space was to be designed and built by DBA under the terms of its lease with UFI, which provided for a “construction allowance” for DBA’s expenses in improving the leasehold premises as well as certain initial operating expenses. DBA’s construction allowance was $800,000.

Koehler oversaw DBA’s design, construction, and startup of the leased space. He contracted with McAfee Engineering Company, a California corporation, to design and install an HVAC system and grease hoods in the leased space. In drafting the contract, McAfee relied on blueprints of the space prepared by DBA’s architect. Because the architect labeled the blueprints “F & K of Atlanta, Inc.,” McAfee erroneously typed that corporate name into the contract Koehler was to sign. Koehler did not notice the error and signed the contract as president of F & K of Atlanta, Inc., which is a nonexistent entity.

McAfee designed and installed the equipment. When it was not paid, it filed a claim of lien against UFI. DBA subsequently filed for bankruptcy protection, naming McAfee as a creditor. McAfee commenced this action to foreclose its lien, and the case proceeded to trial. The jury returned a verdict in favor of McAfee in the amount of its claim, $126,100.

In seven enumerations, UFI contends the trial court erred in denying its motion for a directed verdict and in entering judgment on the jury’s verdict.

1. UFI contends McAfee was not entitled to file a lien against its property because no contract existed between it and UFI or its tenant, DBA. We do not agree.

[244]*244OCGA § 44-14-361 (b) provides that a lien such as McAfee claimed “may attach to the real estate for which the labor, services, or materials were furnished if they are furnished at instance of the owner, contractor, or some person acting for the owner or contractor.” This court has interpreted that Code section to require that a contractual relationship exist between a materialman and one contracting with the owner to prevent a stranger from ordering work done upon real estate and charging the owner. See, e.g., D & N Elec. v. Underground Festival, 202 Ga. App. 435, 438-439 (4) (414 SE2d 891) (1992). It is true that the contract Koehler signed with McAfee shows him to be the president of a corporation named “F & K of Atlanta, Inc.” and does not show him to be the president of DBA, which had the necessary contractual relationship with UFI. This does not mean, however, that no contractual relationship between McAfee and DBA existed.

The evidence presented at trial showed that DBA ratified Koeh-ler’s contract with McAfee. “A ratification by the principal shall relate back to the act ratified and shall take effect as if originally authorized. A ratification may be express or implied from the acts or silence of the principal.” OCGA § 10-6-52. Koehler testified at trial that DBA ratified the contract. In addition, circumstantial evidence was presented regarding the corporation’s conduct which implied ratification. DBA submitted McAfee’s invoices to UFI for payment from its construction allowance; Koehler and Fraser wrote a letter to UFI acknowledging that DBA owed $126,100 to McAfee; and DBA listed McAfee as a creditor in that amount in its bankruptcy filing.

Contrary to UFI’s contention and that of the dissent, DBA had complete authority to ratify this contract. UFI and the dissent misconstrue and misapply the rule derived from Broyles v. Kirkwood Ct. Apts., 97 Ga. App. 384 (103 SE2d 97) (1958), which cites Greene v. Golucke, 202 Ga. 494 (2) (43 SE2d 497) (1947). The rule is that “[a]n act can not be subject to ratification unless done in behalf of the person adopting it and attempting to ratify it. [Cit.]” Lemmons v. City of Decatur, 215 Ga. 647, 648 (112 SE2d 597) (1960). Despite the fact that the contract executed by Koehler mistakenly mentioned a different, nonexistent corporation, the evidence shows unmistakably that Koehler intended to act in behalf of DBA.

Moreover, it is undisputed that DBA used the equipment installed. “ ‘Where a corporation knowing all of the facts accepts and uses the proceeds of an unauthorized contract executed in its behalf without authority, the corporation may be bound because of ratification. (Cits.)’ [Cits.]” Holliday Constr. Co. v. Sandy Springs Assoc., 198 Ga. App. 20, 21 (2) (400 SE2d 380) (1990). If this is true where the contract is unauthorized and the corporation seeks to avoid responsibility, it is certainly so when the contract was in fact authorized, the corporation does not deny that it ratified the contract, but [245]*245another name was mistakenly placed on the contract by the material-man.

The principle applicable here is analogous to that governing misnomer situations, where “the important thing is to determine what corporation the parties intended, for it is the intent of the parties that controls. Error in the use of the corporate name will not be permitted to frustrate the intent which the name was meant to convey, and to find out the identity of the corporation intended, resort may be had to evidence aliunde.” (Citations and punctuation omitted.) Pinson v. Hartsfield Intl. Commerce Center, Ltd., 191 Ga. App. 459, 461 (382 SE2d 136) (1989).

Because Koehler intended to contract in behalf of DBA and DBA could and did ratify the contract with McAfee, that contract provides the necessary basis for enforcing McAfee’s lien. The trial court did not err in denying UFI’s motion for directed verdict or in entering judgment on the jury’s verdict on this ground.

2. UFI’s contention that McAfee failed to fulfill a condition precedent to foreclosure of its lien against UFI because it did not commence an action against DBA prior to its lien foreclosure action is without merit.

The procedure for creating and enforcing liens is set forth in OCGA § 44-14-361.1. Subsection (a) (3) provides that in order to enforce a lien against an owner, a subcontractor must first commence an action against the defaulting contractor to recover the amount of its claim within 12 months. However, subsection (a) (4) relieves the foreclosing subcontractor from this requirement where, as here, the contractor is bankrupt. OCGA § 44-14-361.1 (a) (4) provides that in such case the subcontractor “may enforce the lien directly against the property so improved in an action against the owner thereof, if filed within 12 months from the time the lien becomes due. . . .”

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Bluebook (online)
447 S.E.2d 683, 214 Ga. App. 243, 94 Fulton County D. Rep. 2621, 1994 Ga. App. LEXIS 849, Counsel Stack Legal Research, https://law.counselstack.com/opinion/underground-festival-inc-v-mcafee-engineering-co-gactapp-1994.