F.D.I.C. v. Providence College
| Decision Date | 02 June 1997 |
| Docket Number | No. 327,D,327 |
| Citation | 115 F.3d 136 |
| Court | U.S. Court of Appeals — Second Circuit |
| Parties | 118 Ed. Law Rep. 846 FDIC as Conservator for Crossland Federal Savings Bank, Plaintiff-Appellee, v. PROVIDENCE COLLEGE, Defendant-Appellant, A R Construction, Inc., Westminster Construction, Inc., doing business as Westminster Construction, Co., Bernard Renzi, Philip B. Renzi, Attilia Renzi and Philip Renzi, Defendants. ocket 96-6097. |
Mailman & Gigante, New York City (Gary Mailman, of counsel), for Defendant-Appellant.
Cullen & Dykman, Garden City, NY (Peter J. Mastaglio, of counsel), for Plaintiff-Appellee.
Before: KEARSE, WALKER, and JACOBS, Circuit Judges.
In 1987, Providence College (the "College" or "Providence") contracted with two construction companies for a major asbestos abatement project on the campus. The construction companies, both owned by the same family, were evidently short of capital and took out a series of loans from Crossland Savings Bank ("Crossland"). When the first loan was made in 1987, Crossland required the companies' principal officer, Bernard Renzi, to obtain from the College a written guaranty of the companies' loan obligation. Renzi presented the form to his friend, Joseph Byron, the College's Vice President for Business Affairs, who signed it. The guaranty recited that the College would cover all obligations of the companies to the bank--including those incurred in the future--up to a total of $621,000.
Crossland 1 commenced this diversity action in the United States District Court for the Eastern District of New York against the construction companies, members of the Renzi family, and the College. The College defended on the grounds that Vice President Byron lacked actual or apparent authority to guarantee the loans on behalf of the College. Judge Nickerson held on summary judgment This appeal concerns the judgment--premised solely on the Byron guaranty--against the College, the lone appellant. The only issue presented is whether the district court erred in finding that Byron had apparent authority. For the reasons set forth below, we reverse.
that Byron lacked actual authority, but that there were issues of fact remaining as to the apparent authority issue. Following a bench trial, the court concluded that Byron had apparent authority to undertake the obligation on the College's behalf and entered judgment against Providence in the amount of $621,000.
The Project and Financing. Providence College is a nonprofit corporation which maintains and operates an educational institution in Providence, Rhode Island. In 1987, the College undertook a major project to remove asbestos from its buildings. Two companies that had performed various construction-related work for Providence over many years--A R Construction, Inc. and Westminster Construction, Inc. (the "construction companies" or the "Renzi companies")--were the low bidders, and were awarded the contract.
In order to finance the costly abatement project, the construction companies sought and obtained a series of loans from Crossland. 2 The loan proceeds were used primarily to finance the asbestos removal at the College; apparently, however, some of the proceeds were used to finance other construction projects undertaken by the companies, not all of which concerned Providence.
Crossland, which had never done business with the companies or any of the Renzis individually, sought and obtained detailed information concerning their net worth prior to committing to the initial loan. Bernard Renzi, the President of the construction companies, and members of his family, executed written guaranties for the corporate loan obligations.
The Guaranty at Issue. In connection with the first of the series of loans, Crossland evidently demanded that the borrowers furnish a written loan guaranty from the College. At the June 10, 1987 closing on the first loan, Crossland handed to Bernard Renzi an original and execution copies of a form on which Providence's name was typed as "Guarantor." The terms of the guaranty were that Providence would guarantee all obligations of the Renzi companies "whether now existing or hereafter incurred" up to $621,000.
Soon thereafter, Renzi brought the forms to Joseph Byron, who at the time was the Vice President for Business Affairs at Providence. (Byron and Renzi had been close friends for about nine years.) Though Byron has no specific recollection, it is undisputed that he executed the forms, that they were notarized by an individual working in the Registrar's office at the College, and that Byron gave the forms back to Renzi, who delivered them to Crossland on or after June 16, 1987. Byron's title did not appear on the forms, and he did not add it. The parties agree that there is no evidence in the record that anyone at Crossland was aware of Byron's identity or title at the time that the forms were received by the bank in June 1987.
Appearances of Authority. Because the claim of apparent authority in this case depends upon the conduct of the College vis-a-vis the bank, we recount the communications between those parties in detail. We also pause to highlight that the district court's judgment enforces the guaranty only as to the outstanding balance on the fourth through seventh of the loans made by Crossland. The first three loans were repaid in Prior to the making of the first loan and the delivery of the guaranty form, Crossland had no direct contact with Providence, oral or written. At the time of the second loan (in early 1988), the bank loan officer in charge of the account, Vice President Arnold Kastenbaum, asked his superior whether financial information on Providence was necessary, and was told that it was not because Providence was very strong financially.
full by the borrower companies or the Renzis, but Crossland has suffered enough losses on the subsequent loans to claim the full guaranty amount.
On October 27, 1987, Byron wrote to the construction companies, advising that completion of the work that was the subject of the first loan would be delayed by a strike at the College. That letter, signed by Byron as Vice President for Business Affairs, was faxed to Crossland on the day it was received, and was placed in Crossland's loan file. The October 27 letter is the earliest evidence that the bank had learned of Byron's title. A second letter from Byron, also bearing his title and also found in Crossland's loan file, is dated December 31, 1987, and passes along advice from the College's Director of Physical Plant that the work in the last two phases of construction was 75 percent complete.
The Cunningham Guaranties. In the period from January 1988 to June 1989, Crossland received eleven letters from the Director of Physical Plant, James Cunningham, reporting on the status of the asbestos abatement and the completion of various phases of the work.
When the second of the loans was made in February 1988, Crossland sought and received an additional guaranty signed by Cunningham (another close friend of Bernard Renzi), also supposedly on behalf of Providence. This guaranty provided that the College would be liable for all obligations of the Renzi construction companies "whether now existing or hereafter incurred" up to $440,000, the amount of the second loan. In conjunction with the third, fourth, and fifth loans, Cunningham obliged Crossland by executing additional guaranty forms, also covering both the current and future debts of the companies. The guaranty executed by Cunningham in connection with the fourth loan was in the amount of $1,459,500, and the guaranty in connection with the fifth was unlimited in amount. Crossland apparently sought no confirmation of Cunningham's authority to commit the College to this sizable and open-ended liability (which would appear to cover Providence's full endowment, and all its land and buildings), and relied instead on Cunningham's title as Director of Physical Plant.
Procedural History. In 1991, Crossland commenced this action, seeking to enforce as against Providence the guaranty that Cunningham had signed when the bank made its second loan. Crossland soon ascertained through discovery that Cunningham was not an officer of Providence. The bank then amended its complaint to predicate the College's liability on the Byron guaranty signed in connection with the first loan.
Providence moved for summary judgment on the grounds that Byron had neither actual nor apparent authority to execute the loan guaranty on its behalf. In a Report and Recommendation dated August 3, 1994, Magistrate Judge Chrein concluded that Byron lacked actual authority to sign the guaranty, but that there were remaining issues of fact as to whether Crossland could recover on the basis of apparent authority. The district court approved the Report and Recommendation and denied Providence's motion for summary judgment on February 24, 1995.
The court then conducted a bench trial on the question of whether Crossland reasonably relied on any act or failure to act on the part of Providence, so as to create apparent authority that would bind Providence to the guaranty. At the bench trial on February 5, 1996, the parties stipulated to many of the pertinent facts and to the admissibility of a number of deposition transcripts, and each side called a single witness. In a Memorandum and Order dated February 26, 1996, the district court determined that Crossland was entitled to recover on a theory of apparent authority and ordered judgment for Crossland in the amount of $621,000 plus interest. This appeal followed.
We will set aside a district court's findings of fact following a bench trial only if those findings are clearly erroneous. Fed.R.Civ.P. 52(a); United States v. Coppola, 85 F.3d 1015, 1019 (2d Cir.1996). Under this standard, factual findings by the district court will not be upset unless we are "left...
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