## Facts

- In December 1986, Farm Credit Bank (Farm Credit) loaned funds to FCB Limited Partnership (FCB) to finance FCB’s purchase of real property.
- Under the 1986 arrangement, Farm Credit obtained a leasehold estate in the property as tenant, and FCB remained the owner and landlord.
- In late 1987 and early 1988, Farm Credit and FCB negotiated with Omega Development Corporation and Omega Investments, Inc. (Omega) about a sublease of part of the property.
- Omega allegedly acted as FCB’s representative and agent during the negotiations, and Farm Credit alleged that P. Tomas Mann (Mann), Omega’s president, negotiated on Omega’s behalf.
- On January 4, 1988, Mann sent Farm Credit a letter proposing sublease terms and proposing a change to the borrower-escrow-fund provision in the 1986 agreement; the letter included a signature line for Farm Credit.
- Farm Credit signed the letter on January 13, 1988.
- After signing, Farm Credit learned that FCB had not authorized the January 1988 letter agreement and would not recognize it.
- On September 12, 1990, Farm Credit filed a diversity action against FCB and later amended its complaint to add Mann and Omega, asserting breach of an implied warranty of authority to contract and arguing that accrual should follow a discovery-type rule.
- Mann and Omega moved for summary judgment, arguing the claim was contract-based and barred by Kansas’s three-year statute of limitations measured from the January 1988 letter.

## Issues

1. Under Kansas law, is a claim against a purported agent for breach of an implied warranty of authority to contract limited to a contract theory, or may it also be pursued under a tort theory?
2. For limitations purposes, did Farm Credit’s claim necessarily accrue when the January 1988 letter was signed, or could accrual depend on when the lack of authority and resulting injury were reasonably ascertainable?

## Decision

- The court denied Mann and Omega’s motion for summary judgment on statute-of-limitations grounds.
- The court declined to treat breach of an implied warranty of authority as exclusively a contract claim for limitations purposes under Kansas law.
- The court recognized that the theory pleaded (tort or contract) affects both the applicable limitations period and how accrual is analyzed, including whether a discovery-type accrual framework may apply.
- Because Mann and Omega did not show that Farm Credit’s claim was time-barred as a matter of law under the available legal theories and accrual rules, summary judgment was not warranted.

## Legal Principles

- A person who purports to act as an agent represents, at least implicitly, that the person has authority to bind the principal; if the representation is false, the purported agent may face personal liability to the counterparty.
- Under Kansas law, an action based on a purported agent’s lack of authority is not confined to a single label; depending on the allegations, it may be brought under contract-based warranty concepts or under tort concepts.
- Statute-of-limitations analysis follows the nature of the claim asserted, which can affect both the length of the limitations period and whether accrual is measured from the transaction date or from the time the injury and its cause became reasonably ascertainable.
- A defendant seeking summary judgment on limitations grounds must establish that the claim is untimely as a matter of law under the governing characterization and accrual rules.

## Conclusion

The court held that Farm Credit’s implied-warranty-of-authority allegations against Mann and Omega were not automatically restricted to a contract theory with accrual fixed at the January 1988 letter, and because Kansas law allowed the claim to be framed in tort or contract with potentially different accrual analysis, Mann and Omega were not entitled to summary judgment on a statute-of-limitations defense.


Farm Credit Bank v. FCB Ltd. Partnership, 825 F. Supp. 932 (1993)