Demetracopoulos v. Strafford Guidance Center

• Decision Date: 31 December 1987
• Docket Number: No. 86-409,86-409
• Citation: 536 A.2d 189,130 N.H. 209
• Parties: Anthony DEMETRACOPOULOS v. STRAFFORD GUIDANCE CENTER.
• Court: New Hampshire Supreme Court

Page 189

536 A.2d 189

130 N.H. 209

Anthony DEMETRACOPOULOS v. STRAFFORD GUIDANCE CENTER.

No. 86-409.

Supreme Court of New Hampshire.

Dec. 31, 1987.

Clark, Cook & Molan P.A., Concord (Robert T. Clark, on brief and orally), for plaintiff.

Shaheen, Cappiello, Stein & Gordon P.A., Dover (William H. Shaheen, on brief and Dorothy M. Bickford orally), for defendant.

THAYER, Justice.

The plaintiff appeals from a report by the Master (Russell F. Hilliard, Esq.), as approved by the Superior Court (Nadeau, J.), finding that the defendant's agent was without either actual or apparent authority to enter into a personal services contract with the plaintiff, and that thus the personal services contract in question was not binding on the defendant. We affirm.

The defendant, Strafford Guidance Center (SGC), is a non-profit corporation which receives funding from the State in order to provide mental health services. The plaintiff, Anthony Demetracopoulos, commenced formal employment with SGC in May 1980, as a business manager, following a period of work as a consultant. In the fall of 1980, the plaintiff was elected to the New Hampshire Legislature. The plaintiff and Bern Anderson, executive director of SGC, agreed that the plaintiff would terminate his formal employment with the defendant, but that the plaintiff would continue to perform work for the defendant as a consultant. Around April 5, 1981, Demetracopoulos resumed full-time employment with SGC. His position was specified as Assistant Director for Administration and Control, and his grade and salary level were specified as level X.

In August, 1981, Demetracopoulos entered law school. Anderson and Demetracopoulos agreed that the latter would continue to work part-time at SGC, and receive 80% of his former salary. In early 1982, the plaintiff and Anderson negotiated an employment contract. Later that year, on August 2, 1982, Anderson and Demetracopoulos signed a document entitled "Personal Services Contract." This contract contained a variety of provisions that distinguished it significantly from all other employment agreements at SGC; namely:

1. The contract was to last for three years.

2. The contract contained a provision for automatic raises of at least five percent per year.

3. The contract stated that Demetracopoulos would be paid at salary grade XI, although the SGC's personnel policies manual described Demetracopoulos' position as salary grade X.

4. The contract provided that, in the event Demetracopoulos was dismissed, suspended or demoted, an independent arbitrator would be appointed to review the action taken. Even if the arbitrator sustained the actions of the guidance center, Demetracopoulos would receive a year's salary and fringe benefits, or 80% of the cash equivalent of the remainder of the contract, whichever was greater.

At no time did Anderson obtain approval of the contract from the SGC board of directors (board). During the summer of 1982, the New Hampshire Attorney General's Office executed a search warrant at SGC, and seized its medical and financial records. In response to the attorney general's investigation, the board hired a certified public accountant (CPA) to audit SGC's records. The CPA disclosed to the board the existence of the personal services contract that Anderson and Demetracopoulos had engineered. The discovery of the contract disturbed the board, and it reacted by dismissing both Anderson and Demetracopoulos.

Demetracopoulos brought suit under the contract to compel the naming of an arbitrator, and the defendant brought a cross petition seeking a declaratory judgment on the validity of the contract. After hearings on February 21 and 28, 1986, the master found that Anderson had neither actual nor apparent authority to enter into the personal services contract with the plaintiff on the defendant's behalf. Consequently, the master held that the contract was not binding on the defendant.

The plaintiff argues on appeal that the master erred in concluding that Anderson was without actual or apparent authority to enter into a personal services contract with the plaintiff. He argues that Anderson had express authority to bind SGC pursuant to the by-laws and Personnel Policies Manual (manual). The plaintiff argues further that Anderson had implied authority in his capacity as executive director and as an incident of the express authority that the by-laws and manual granted. In the alternative, the plaintiff claims that Anderson had apparent authority based on the plaintiff's reasonable belief in reliance upon alleged statements of the board.

The defendant's counter-argument is that Anderson grossly exceeded the scope of his express authority as executive director by substantially deviating from the manual's guidelines. Furthermore, the defendant contends that Anderson had no implied authority because the contract was not a necessary or reasonable incident to his express authority, and he could not have reasonably believed that it was. Finally, the defendant argues that it was not reasonable for the plaintiff to believe under the circumstances that Anderson had apparent authority. The defendant maintains, therefore, that the master's ruling was correct and should be upheld. We agree.

Before we begin our analysis of Anderson's authority as executive director, we must address a further alternative theory raised by the plaintiff. He argues that the Court need not reach the issues of actual or apparent authority if, instead, it directs the reformation of the contract through deletion of the offensive language of the contract; namely, the liquidated damages or "golden parachute" provision. If the contract were to be reformed, the plaintiff contends, an arbitrator could fashion an appropriate remedy.

This argument, as the defendant correctly notes, overlooks the obvious fact that Anderson's authority was put in issue by defendant's petition for a declaratory judgment as to the validity of the contract. Since an arbitrator's authority to hear the case would derive solely from the contract, a determination of the contract's validity in the first instance is essential.

On the merits of the issue, moreover, reformation is inappropriate in this case. Contract reformation generally requires proof by clear and convincing evidence of: (1) an actual agreement between the parties; (2) an agreement to put the agreement in writing; and (3) a variation between the prior agreement and the writing. Midway Excavators, Inc. v. Chandler, Comm'r, 128 N.H. 654, 657-58, 522 A.2d 982, 984 (1986). There is nothing in this case that would suggest that a variation existed between the agreement reached by Demetracopoulos and Anderson and the written personal services contract. The plaintiff attempts to explain that the "golden parachute" clause was not intended to be read literally, and therefore the parties were not in actual agreement as to its meaning. The plaintiff's own testimony vitiates his theory, however, because the plaintiff stated on cross-examination that the contract clause means nothing more than what it actually says.

On the issue of Anderson's authority to enter into the contract with the plaintiff on behalf of SGC, we note first the standard of review to be applied in this case. The existence of authority is a question of fact. Cohen v. Frank Developers, Inc., 118 N.H. 512, 517, 389 A.2d 933, 936 (1978); see also Norberg v. Fitzgerald, 122 N.H. 1080, 1082, 453 A.2d 1301, 1303 (1982) (authority of attorney to bind client to settlement agreement). We will not disturb the findings of the master unless they are unsupported by the evidence or are erroneous as a matter of law. Gauthier v. Robinson, 122 N.H. 365, 368, 444 A.2d 564, 566 (1982). The master's findings are supported by the evidence when the record discloses "evidence from which a reasonable person could have made such findings." Town of Plaistow v. Nadeau, 126 N.H. 439, 442, 493 A.2d 1158, 1161 (1985).

The plaintiff concedes that the master applied the appropriate principles of agency law. His contention is that the master's findings of fact were incorrect, and that therefore his rulings were erroneous.

Actual authority can be either express or...