Intersparex Leddin KG v. Al-Haddad

• Decision Date: 23 October 1992
• Docket Number: AL-HADDAD and S
• Citation: 852 S.W.2d 245
• Parties: INTERSPAREX LEDDIN KG, Plaintiff/Appellee, v. Sahibharon K.T. Al-Haddad, Defendants, Mansorah Hassan Ismail, Intervenor/Appellant.
• Court: Tennessee Court of Appeals

Page 245

852 S.W.2d 245

INTERSPAREX LEDDIN KG, Plaintiff/Appellee, v. Sahib AL-HADDAD and Sharon K.T. Al-Haddad, Defendants, Mansorah Hassan Ismail, Intervenor/Appellant.

Court of Appeals of Tennessee,

Middle Section, at Nashville.

Oct. 23, 1992.

Application for Permission to Appeal

Denied by Supreme Court

March 1, 1993.

Guy B. Humphries, Waldbaum, Corn, Koff & Berger, Denver, CO, Ronald E. Miles, Blackburn, Little, Smith & Slobey, Nashville, for plaintiff/appellee.

Harlan Dodson, III, Dodson, Parker & Behm, Nashville, for intervenor/appellant.

OPINION

LEWIS, Judge.

This is an appeal by Mansorah Hassan Ismail, intervening plaintiff (intervenor), from the trial court's dismissal of her intervening complaint after finding that the portion of the intervening complaint relating to plaintiff, Intersparex Leddin KG (Intersparex), failed to state a claim upon which relief can be granted.

This case began on 27 October 1978 when the Intervenor executed a general power of attorney to her son, Sahib Al Haddad. The general power of attorney gave Mr. Al-Haddad the right to convey any property in the Intervenor's name upon such terms as Mr. Al-Haddad thought proper. On 1 November 1978, the Intervenor purchased property at 2220 East Main Street, Murfreesboro, Tennessee (the Property) from Richard and Alice Douglas. The affidavit of consideration in the deed was executed by Mr. Al-Haddad.

On 1 March 1982, pursuant to the terms of the power of attorney, Mr. Al-Haddad, as attorney, quitclaimed the property to himself. On 5 October 1988, a judgment was entered in a case against Mr. Al-Haddad and in favor of plaintiff Intersparex in the sum of $386,685.00, plus ten (10%) percent interest from 28 June 1978. So far as the record shows the Intervenor was not involved in this lawsuit in any way. Intersparex recorded its judgment in Rutherford County, Tennessee on 3 March 1989, and, on 6 June 1989, Intersparex filed a complaint and attachment to enforce its judgment.

Both defendants Sharon K.T. Al-Haddad and Sahib Al-Haddad were named as defendants since Mr. Al-Haddad had quitclaimed his interest in the property to Sharon Al-Haddad, on 30 March 1989, subsequent to Intersparex recording its judgment lien.

The Intervenor's subsequent intervening complaint ¹ does not make any allegation that Intersparex knew or had reason to know of Ismail's claim that the 1982 conveyance was unauthorized. The intervening complaint does not in any wise question the legitimacy of Intersparex's claim against Mr. Al-Haddad.

The power of attorney executed by the Intervenor gave very broad authority to Mr. Al-Haddad to manage and conduct his mother's, the Intervenor's, affairs. Specifically, it gave Mr. Al-Haddad the following authority:

To buy, receive, lease, accept, or otherwise acquire; to sell, convey, mortgage, hypothecate, pledge, quitclaim or otherwise encumber or dispose of; or to contract or agree for the acquisition, disposal or encumbrance of any property whatsoever or in any custody, possession, interest, or right therein, upon such terms as my said attorney shall think proper.

This gave virtually unlimited authority to Mr. Al-Haddad to convey any property in his mother's name upon any terms Mr. Al-Haddad thought proper. The 1 March 1982 conveyance from the Intervenor to Mr. Al-Haddad was made pursuant to the power of attorney and was within the scope of the terms of the power of attorney.

The Intervenor is bound by the acts of her agent. The Intervenor is bound by the acts of Mr. Al-Haddad within the scope of his apparent or ostensible authority. Rich Printing Co. v. Estate of McKellar, 46 Tenn.App. 444, 330 S.W.2d 361, 376 (1959). See also O'Shea v. First Federal Savings & Loan, 218 Tenn. 619, 405 S.W.2d 180, 183 (1966); Tosco v. FDIC, 723 F.2d 1242, 1248 (6th Cir.1983).

The power of attorney in the instant case gave Mr. Al-Haddad both apparent and ostensible authority to make the 1982 conveyance. Apparent authority of an agent is such authority as the principal knowingly permits the agent to assume or which the principal holds the agent out as possessing. Rich Printing Co., 330 S.W.2d at 376. Mr. Al-Haddad had apparent authority to make the 1982 conveyance on behalf of the Intervenor by the plain language of the power of attorney. Ostensible authority is such authority as a principal intentionally or by lack of ordinary care causes or allows a third person to believe the agent possesses. It is essential to ostensible authority that the principal hold the agent out to the public as possessing sufficient authority to embrace the particular act in question when the agent does not actually have such authority, or allows the agent to exercise such authority even though not actually granted, and the person dealing with the agent, acting in good faith, believed or had reason to believe the agent had the necessary authority. Id. Mr. Al-Haddad had ostensible authority because any innocent third person who read the recorded power of attorney would believe the Intervenor had given Mr. Al-Haddad, her son, the authority to make the 1982 conveyance.

Apparent authority of an agent must be determined by the acts of the principal. Durham v. Waddell & Reed, Inc., 723 S.W.2d 129, 130 (Tenn.App.1986). Here, the Intervenor's act of giving her son the power of attorney cloaked him with apparent authority to make the 1982 conveyance.

When an agent acts within the scope of his apparent or ostensible authority, the principal cannot prevail against a third party unless it shows that the third party knew or had reason to believe the agent did not have the claimed authority. See V.L. Nicholson Co. v. Transcon Inv., 595 S.W.2d 474, 483 (Tenn.1980); Jones v. First Equity Corp. of Florida, 607 F.Supp. 350, 352 (E.D.Tenn.1985).

Here, the intervening complaint does not make any allegations that Intersparex knew or had reason to believe the agent did not have the claimed authority. Instead, the Intervenor avers in her intervening complaint that she had no knowledge of any facts relating to the Intersparex lien. The intervening complaint, by failing to allege that Intersparex had knowledge or reason to believe that Mr. Al-Haddad did not have the authority to make the 1982 conveyance to himself on behalf of the Intervenor, fails as a matter of law to state a claim that would establish a right of Intervenor to the property superior to Intersparex's lien.

While the legal elements are the same, Tennessee case law sometimes has alternatively expressed the holding that a principal is bound by the acts of the agent within the scope of his apparent authority "and that the principal is estopped from denying the agent's authority." Reed v. Maryland National Ins. Co., 222 Tenn. 579, 439 S.W.2d 256, 257 (1969).

In Adams v. Duncan Transfer & Storage, 757 S.W.2d 336, 339 (Tenn.App.1988), it was held that even though an agent might have acted outside the scope of his authority, the principal was estopped to assert this lack of authority because the agent was acting within the scope of his apparent authority in dealing with an innocent third party. See also Nashville Trust Co. v. Southern Buyers, Inc., 40 Tenn.App. 11, 288 S.W.2d 469, 472 (1956).

Intersparex's motion to dismiss the intervening complaint alleged that Intersparex was an innocent third party without any notice of the Intervenor's claim that her son had breached his fiduciary duty. Intersparex further alleged that the intervening complaint did not allege that Intersparex had any knowledge of Mr. Al-Haddad's alleged lack of authority. The Intervenor, while she could have under Tennessee Rule of Civil Procedure 11, amended her complaint under Tennessee Rule of Civil Procedure 15 to allege such facts or submitted an affidavit showing the factual dispute on this issue, failed to do so but, instead, rested on the allegations of the intervening complaint.

The Intervenor's argument that the 1982 conveyance is void because the power of attorney was not recorded on the...