KANAVOS v. HANCOCK BANK
& TRUST COMPANY
14 Mass. App. 326, 439 N.E.2d
313 (1982)
KASS, JUSTICE. At the close of the plaintiff's evidence, the defendant
moved for a directed verdict, which the trial judge allowed. The judge's reason
for so doing was that the plaintiff, in his contract action, failed to introduce
sufficient evidence tending to prove that the bank officer who made the
agreement with which the plaintiff sought to charge the bank had any authority
to make it. Upon review of the record we are of opinion that there was evidence
which, if believed, warranted a finding that the bank officer had the requisite
authority or that the bank officer had apparent authority to make the agreement
in controversy. We, therefore, reverse the judgment.
For approximately ten years prior to 1975, Harold Kanavos and his
brother borrowed money on at least twenty occasions from the Hancock Bank &
Trust Company (the Bank), and, during that period, the loan officer with whom
Kanavos always dealt was James M. Brown. The aggregate loans made by the Bank
to Kanavos at any
given time went as high as $800,000.
Over that same decade, Brown's responsibilities at the Bank grew, and he
had become executive vice-president.
Brown was also the chief loan officer for the Bank, which had fourteen
or fifteen branches in addition to its head office. Physically, Brown's office
was at the head office, toward the rear of the main banking floor, opposite the
office of the president-whose name was Kelley. Often Brown would tell Kanavos that
he had to check an aspect of a loan transaction with Kelley, but Kelley always
backed Brown up on those occasions.
[The plaintiff, Harold
Kanavos, entered into an agreement with the defendant Bank whereby stock owned
by the Kavanos brothers was sold to the Bank and the plaintiff was given an
option to repurchase the stock. Kanavos' suit against the Bank was based on an
amendment to the agreement offered by Brown.]
Kanavos was never permitted to introduce in evidence the terms of the
offer Brown made. That offer was contained in a writing, dated July 16, 1976,
on bank letterhead, which read as follows: "This letter is to confirm our
conversation regarding your option to re-purchase the subject property. In lieu
of your not exercising your option, we agree to pay you $40,000 representing a
commission upon our sale of the subject property, and in addition, will give
you the option to match the price of sale of said property to extend for a 60
day period from the time our offer is received. " Brown signed the letter
as executive vice-president. The basis of exclusion was that the plaintiff had
not established the authority of Brown to make with Kanavos the arrangement
memorialized in the July 16, 1976, letter.
Whether Brown's job description impliedly authorized the right of last
refusal or cash payment modification is a question of how, in the
circumstances, a person in Brown's position could reasonably interpret his
authority. Whether Brown had apparent authority to make the July 16, 1976,
modification is a question of how, in the circumstances, a third person, e.g.,
a customer of the Bank such as Kanavos, would reasonably interpret Brown's
authority in light of the manifestations of his principal, the Bank.
Titles of office generally do not establish apparent authority. Brown's
status as executive vice-president was not, therefore, a badge of apparent
authority to modify agreements to which the Bank was a party.
Trappings of office, e.g., office and furnishing, private secretary,
while they may have some tendency to suggest executive responsibility, do not
without other evidence provide a basis for finding apparent authority.Apparent
authority is drawn from a variety of circumstances. Thus in Federal Nad. Bank
v. O'Connell, 26 N.E.2d 539 (1940), it was held apparent authority could be
found because an officer who was a directory vice-president and treasurer took
an active part in directing the affairs of the bank in question
and was seen by third parties talking with customers and negotiating
with them. In Costonis v. Medford Housing Authy., 176 N.E.2d 25 (1961), the
executive director of a public housing authority was held to have apparent
authority to vary specifications on the basis of the cumulative effect of what
he had done and what the authority appeared to permit him to do.
In the instant case there was evidence of the following variety of
circumstances: Brown's title of executive vice-president; the location of his
office opposite the president; his frequent communications with the president;
the long course of dealing and negotiations; the encouragement of Kanavos by
the president to deal with Brown; the earlier amendment of the agreement by
Brown on behalf of the Bank on material points, namely the price to be paid by
the Bank for the shares and the repurchase price; the size of the Bank
(fourteen or fifteen branches in addition to the main office); the secondary,
rather than fundamental, nature of the change in the terms of the agreement now
repudiated by the Bank, measured against the context of the overall
transaction; and Brown's broad operating authority . . . all these added
together would support a finding of apparent authority. When a corporate
officer, as here, is allowed to exercise general executive responsibilities,
the "public expectation is that the
corporation should be bound to engagements made on its behalf by those
who presume to have, and convincingly
appear to have, the power to agree." Kempin, The Corporate Officer
and the Law of Agency, 44 Va.L.Rev. 1273, 1280 (1958). This principle does not
apply, of course, where in the business context, the requirement of specific
authority is presumed, e.g., the sale of a major asset by a corporation or a
transaction which by its nature commits the corporation to an obligation
outside the scope of its usual activity. The modification agreement signed by
Brown and dated July 16, 1976, should have been admitted in evidence, and
a verdict should not have been directed.
Judgment reversed.