Hart v. First Nat. of Memphis

• Court: Tennessee Court of Appeals
• Writing for the Court: HIGHERS
• Citation: Hart v. First Nat. of Memphis, 690 S.W.2d 536 (Tenn. App. 1985)
• Decision Date: 06 February 1985
• Parties: A.S. HART and A.S. Hart & Company, Inc., Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF MEMPHIS, Milton C. Picard, David E. Caywood and Louis P. Santi, Defendants-Appellees.

Page 536

690 S.W.2d 536

A.S. HART and A.S. Hart & Company, Inc., Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF MEMPHIS, Milton C. Picard, David E Caywood and Louis P. Santi, Defendants-Appellees.

Court of Appeals of Tennessee Western Section, at Jackson.

Feb. 6, 1985.

Permission to Appeal Denied by

Supreme Court May 13, 1985.

J.N. Raines, Oscar C. Carr, III, Dorothy J. Pounders, Memphis, for plaintiffs-appellants.

James S. Cox, William F. Kirsch, Jr., Leo Bearman, Jr., Samuel H. Mays, Jr., Memphis, for defendants-appellees.

HIGHERS, Judge.

This case involves issues of apparent authority and interference with contractual relations. The facts may be stated in abbreviated form as follows:

In 1975, First National Bank (currently First Tennessee Bank), held $200,000 par value debentures issued by Pure Packed Foods, Inc. On July 23, 1975, the bank held a public sale for the debentures. Only defendant Picard made a bid which was rejected by the bank. Another public sale was scheduled for August 19, 1975. In the week of August 11, Michael Robinson, attorney for A.S. Hart, discussed the sale of the debentures with Boyd Rhodes, attorney for the bank. Through Robinson, in a letter dated August 15, plaintiffs Hart and his company offered to purchase the debentures for $170,000. The letter asked Rhodes to reply "as soon as you can determine the disposition of your client." The offer was good only until 2:30 of that afternoon and was not accepted by the bank. Rhodes explained to Robinson's law firm that "the decision makers at the bank could not decide by the deadline of the offer."

In the meantime, Milton Picard and David Caywood were also interested in purchasing the debentures. ¹ In an effort to maintain or raise the sale price of the debentures by competition between Hart on the one hand and Picard and Caywood on the other, Frank Bloom who, along with Kenneth Plunk, was the bank officer in charge of handling the debentures, suggested that Rhodes speak with Robinson again on Monday, August 10. In a phone conversation on that day, Rhodes asked Robinson if Hart could raise his offer by at least $5,000. According to Rhodes' testimony Robinson said he would "see if we can get the money together." According to his own testimony, Robinson said, "It's a deal" or "You can book it." When, later that afternoon, Robinson sent a check for $175,000 to Rhodes, the bank rejected the check. The debentures were sold at public sale the next day to Picard and Caywood for $176,000. Before the sale at a meeting between Rhodes, Bloom, Robinson, and other members of Robinson's law firm, Bloom denied that Rhodes ever had authority to contract for the sale of the debentures.

The plaintiffs sued First National, claiming that a contract was formed between Robinson, acting for Hart, and Rhodes, acting as the agent of the bank, and that this contract was breached when the debentures were sold to Picard and Caywood. The plaintiffs also averred that Picard and Caywood interfered with the contractual relationship.

The plaintiffs argue that Rhodes, as the bank's agent, bound the bank to a contract with Hart for the sale of the debentures for $175,000, under the general rule that a principal is bound by the acts of an agent within his apparent authority. Tosco Corp. v. Federal Deposit Ins. Corp., 723 F.2d 1242 (6th Cir.1983). The plaintiffs contend that the trial court erred in ruling that Rhodes could not bind the bank to a contract absent explicit or express authority. They further maintain that except in cases where an attorney is employed with reference to pending litigation, he is the same as any other agent.

The plaintiffs never contend and the record does not support the assertion that there was any express authority from the bank to Rhodes empowering him to make a contract with Hart or any of the other parties. Whether express authority is necessary for First National to be bound by the purported agreement between Rhodes and appellant's attorney, Robinson, is argued forcefully and well by both sides. The law on this point apparently varies somewhat from one jurisdiction to another. According to 7A C.J.S. Attorney & Client Sec. 211, "the attorney may enter into contracts on behalf of his client where he has been expressly or ostensibly authorized to do so ..." (Emphasis added). In 7 Am.Jur.2d Attorneys at Law Sec. 129, it is indicated, however, that:

where an attorney is employed for a definite purpose not involving litigation in court, the authority of the attorney does not extend to transacting the business of the client generally, nor in the particular transaction for which he was employed, except as the attorney may be specifically authorized by the client to act.

As between these apparently contradictory positions, we believe the law in Tennessee follows more closely the latter rule. In Davis v. Home Ins. Co., 127 Tenn. 330, 155 S.W. 131 (1913), attorneys were entrusted with the collection of a premium note on an insurance policy payable to Home Insurance and upon which a judgment had been issued. Davis, in conferring with the attorneys for Home Insurance, was advised by them that a stay of the judgment would be equivalent to paying the note, a very attractive result to complainant as he was low on funds at the time. When Home Insurance later pressed for payment or for forfeiture of the insurance policy, complainant raised the attorneys' advice by way of estoppel. Stating that "[a]ttorneys have no power to surrender substantial rights of their clients without express authority," the Tennessee Supreme Court refused to bind Home Insurance by the conduct of its attorneys, "even if [the attorneys] had undertaken to make a definite agreement with complainant to accept a stayed judgment as payment of this premium note." 155 S.W. at 133. See also Garrett v. Corry Foam Products, Inc., 596 S.W.2d 808 (Tenn.1980), (reaffirming the principle of Davis v. Home Ins. Co.). In Moses v. Marcrief, 2 Tenn.Cas. (Shannon) 181 (1876) the Court held that an attorney was not authorized to receive anything but money for his client in the satisfaction of a judgment and that the client was not bound by any contrary agreements made by the attorney. See also Washington v. Johnson, 26 Tenn. (7 Humphrey) 468 (1846) and Watson v. McCabe, 527 F.2d 286 (6th Cir.1975), (an attorney may not purchase real estate for his client unless so authorized). Of course, an attorney in the conduct of litigation has certain powers by which his client may be bound, East Tennessee V. & G.R. Co. v. Williams, 3 Tenn.Cas. (Shannon) 8 (1878); Long v. Kirby-Smith, 40 Tenn.App. 446, 292 S.W.2d 216 (1956). This authority, however, is implied and is distinguishable because it involves the attorney-client relationship in litigation. 7A Am.Jur.2d Attorneys at Law Sec. 211; Long v. Kirby-Smith, supra (in which the court reiterated the rule in Davis v. Home Ins. Co.).

Even if apparent authority could bind a client to a contract made by his attorney in a non-litigation context, such authority is lacking in the facts of this case. In Rich Printing Company v. McKellar's Estate, 46 Tenn.App. 444, 330 S.W.2d 361 (1959), this Court set forth three definitions of apparent authority:

Apparent authority in an agent is such authority as the principal knowingly permits the agent to assume or which he holds the agent out as possessing; such authority as he appears to have by reason of the actual authority which he has; such authority as...