Plaintiff St. John's Holdings, LLC (SJH) seeks specific performance of an alleged written agreement with Two Electronics, LLC (Two Electronics) to buy Two Electronics' property at 2 Electronics Drive in Danvers (Property) to use as a medical marijuana facility. In my memorandum and order denying Two Electronics' special motion to dismiss, I found that a text message from Two Electronics' real estate broker, signed with his first name and explicitly incorporating an unsigned letter of intent from SJH, was sufficient under the Statute of Frauds to constitute a written counteroffer that SJH accepted by delivering the signed letter of intent to the broker. St. John's Holdings, LLC v. Two Electronics, LLC, 24 LCR 190 (2016). Assumed for the purposes of the special motion to dismiss and left undecided was whether the broker had authority to bind Two Electronics to sell the Property. See id. at 195. That question was tried to me; I heard testimony from the principals and brokers of each party and reviewed multiple text messages, emails, and other documents. SJH argues that the evidence demonstrates that the broker did have either actual or apparent authority to bind Two Electronics based on the words and conduct of the principal-seller throughout the course of the negotiations. Two Electronics, on the other hand, submits that the words and actions of the seller relied upon by SJH were insufficient to rise to the level of creating actual or apparent authority in the broker to accept an offer on behalf of Two Electronics. As explained more thoroughly below, I find that the broker did not have actual or apparent authority to bind Two Electronics. SJH's complaint will be dismissed with prejudice.
On February 12, 2016, SJH filed its Verified Complaint, a Motion for Ex Parte Approval of Memorandum of Lis Pendens, and a Motion for Temporary Restraining Order. A hearing on the Ex Parte Motion for Lis Pendens and Motion for Temporary Restraining Order was held on February 12, 2016. In its Verified Complaint, SJH pleads three causes of action: (1) Breach of Contract, (2) Declaratory Judgment, and (3) Specific Performance. The Court allowed the Ex Parte Motion for Lis Pendens and denied the Motion for Temporary Restraining Order.
On March 11, 2016, Two Electronics filed Defendant's Special Motion to Dismiss (Def. Mot. to Dismiss) and Memorandum in Support of Special Motion to Dismiss. SJH filed a Motion for Preliminary Injunction and Memorandum of Law in Support of Motion for Preliminary Injunction on March 18, 2016. Two Electronics filed its Opposition to Plaintiff's Motion for Preliminary Injunction on March 22, 2016. On March 23, 2016, a hearing on the Motion for Preliminary Injunction was held. The Court allowed the Motion for Preliminary Injunction in part, ordering that Two Electronics "shall not convey or otherwise encumber the subject property" before April 27, 2016 (the closing date with the third party purchaser). On March 29, 2016, SJH filed Plaintiff's Opposition to Defendant's Special Motion to Dismiss. On April 4, 2016, Two Electronics filed Defendant's Reply Brief to the Plaintiff's Opposition to Special Motion to Dismiss. A hearing on the Special Motion to Dismiss was held on April 4, 2016. On April 14, 2014, the court issued a Memorandum and Order Denying Defendant's Special Motion to Dismiss. On May 6, 2016, Two Electronics filed Defendant's Answer to Verified Complaint.
A trial was held on August 4, 2016. Testimony was heard from Frederick McDonald, Timothy Barry, Stephen Cefalo, and Matthew Piccione. Exhibits 1-22 were marked. On September 14, 2016, SJH filed Plaintiff's Proposed Findings of Fact, Rulings of Law, and Order for Judgment. On September 16, 2016, Two Electronics filed Defendant's Post-Trial Memorandum of Law, Proposed Finding of Facts and Rulings of Law. Closing arguments were heard on September 21, 2016, and the case was taken under advisement. This Decision follows.
Based on the testimony at trial, the admitted exhibits, and my assessment of credibility, I make the following findings of fact:
1. SJH is a Massachusetts limited liability company with a principal place of business located at 301 Edgewater Place, Suite 410, Wakefield, MA. Frederick McDonald, Jr. (McDonald) is the manager of SJH. Exh. 1, ¶¶ 1-2.
2. Two Electronics is a Massachusetts limited liability company with a principal place of business located at 2 Draper Street, Unit 4, Woburn, MA. Matthew Piccione (Piccione) is the manager of Two Electronics. Exh. 1, ¶¶ 3-4.
3. Two Electronics is the owner of the Property by a deed recorded in the Essex South District Registry of Deeds in Book 27435, Page 475. The Property is a one-story commercial building located in an industrial park at 2 Electronics Drive in Danvers. Exh. 1, ¶¶ 5- 6.
4. Stephen Cefalo (Cefalo) is a licensed Massachusetts real estate broker with Stephen Cefalo Real Estate. Cefalo acted as the broker and authorized agent of SJH at all times relevant with respect to the Property. Exh. 1, ¶¶ 7-8.
5. Timothy Barry (Barry) is a licensed Massachusetts real estate broker with Barry Realty Group. Barry had previously worked with Piccione representing Two Electronics on four lease deals for the Property during the two years prior to December 2015. There was no written listing agreement under which Barry was authorized to market the Property for sale. Exh. 1, ¶ 9; Tr. pp. 98-99, 213-214, 254.
6. Piccione and Barry often communicated with each other through text messages. Exh. 22; Tr. pp. 263-264.
7. Cefalo first reached out to Barry in the fall of 2015, initially expressing interest, on behalf of McDonald, to lease space at the Property from Two Electronics for a medical marijuana facility. Exh. 1, ¶ 10; Tr. pp. 29, 45-46, 215-216.
8. McDonald and his partner Matt Philbin (Philbin), along with Cefalo and Barry, first visited the Property sometime in the fall of 2015. They returned to the Property a second time in November or early December 2015, at which time Piccione was also in attendance. Tr. pp. 23-26, 217; Exh. 22.
9. An initial meeting between Piccione, Barry, Cefalo, and McDonald occurred in December 2015 at a restaurant. At this meeting, the parties discussed potential problems with regard to leasing the Property as a medical marijuana dispensary due to financing restrictions. At the close of the meeting, Piccione directed Cefalo and McDonald to go through Barry for any discussions about the Property. Tr. pp. 28-31, 45-46, 217-218, 226; Exh. 22.
10. The parties, including through Cefalo and Barry, engaged in multiple conversations and exchanged documentation concerning a potential lease arrangement. Exh. 1, ¶ 11.
11. Throughout January and February 2016, Cefalo and Barry communicated by telephone, email, and through text messages concerning the proposed purchase and sale of the Property. Exh. 1, ¶ 15.
12. In January 2016, Barry and Piccione advised Cefalo and McDonald that Two Electronics could not lease space to SJH, but instead, would entertain a purchase and sale of the Property. Exh. 1, ¶ 12.
13. McDonald, Piccione, Cefalo, and Barry subsequently met in person on two occasions to discuss the terms of a purchase transaction. These meetings were held at the request of McDonald because he believed that the negotiations through the two brokers were not very efficient and he wanted to speak to Piccione directly. Exh. 1, ¶ 13; Tr. pp. 31-33, 47-49, 57-59, 171-172, 218, 221-223.
14. The first of these meetings occurred on January 18, 2016 at a Starbucks coffee shop. At this meeting, certain revisions to terms in draft letters of intent were discussed. Piccione and McDonald directly spoke about the terms of the deal, with Barry and Cefalo making suggestions as to compromises that could be made. At the end of the meeting, Piccione directed McDonald to "work through Barry," or words to that effect. Exh. 1, ¶ 14; Tr. pp. 31-32, 47-51, 57-58, 171-172, 218, 221-222; Exh. 20.
15. The second of these meetings occurred on or about January 23, 2016 at a Dunkin' Donuts coffee shop. At this meeting, McDonald believed they were close to reaching a deal, but Piccione wanted a signed offer. Piccione and McDonald continued to discuss terms regarding a draft letter of intent, with the brokers providing only ancillary conversation. At the end of this meeting, Piccione again directed McDonald and Cefalo to "work through Barry" with respect to the negotiations of the terms of a purchase and sale agreement for the Property. Tr. pp. 26, 31, 33, 56-60, 92-93, 167, 222-227.
16. Following the meetings, Cefalo spoke with Barry about the revised terms and summarized his conversation with Barry in an email to McDonald stating that "[Barry] thought the new terms seemed reasonable. But of course [Barry] could not speak for Matt [Piccione]." Exh. 1, ¶ 14; Exh. 20; Tr. pp. 172-174.
17. On January 27, 2016, Cefalo, on behalf of SJH, sent by email a written "Binding Letter of Intent" to Barry that contained a description of the terms under which SJH offered to buy the Property, including the purchase price of $3,232,000, due diligence period, deposit, and the closing date (First LOI). The First LOI was not signed by a representative of SJH. Exh. 1, ¶ 16; Exh. 2.
18. Barry emailed the First LOI to Piccione, who reviewed it and made certain comments to Barry about terms to which he was not agreeable and he would like revised. Exh. 1, ¶¶ 17-19.
19. Barry conveyed the comments Piccione made about the terms of the First LOI to Cefalo. Exh. 1, ¶ 20.
20. Cefalo conveyed Piccione's comments regarding changes to the terms of the First LOI to McDonald. McDonald agreed to certain, but not all of the comments made by Piccione. Exh. 1, ¶¶ 21-22.
21. On January 29, 2016, Barry received by email a second "Binding Letter of Intent" from Cefalo on behalf of SJH (Second LOI). The Second LOI contained revisions of the essential terms in the First LOI. The Second LOI was also not signed by a representative of SJH. Exh. 1, ¶¶ 23-24; Exh. 3.
22. Barry emailed the Second LOI to Piccione to review. The only difference between the First and Second LOIs was that the nonrefundable deposit offered by SJH was increased from $128,000 to $168,000. Exh. 1, ¶ 25; Exhs. 2-3.
23. As with the First LOI, Piccione reviewed and made comments to Barry about certain terms in the letter he was not in agreement with. Exh. 1, ¶¶ 26-27; Tr. pp. 229-231
24. At 12:08 PM on February 1, 2016, Barry sent an email to Cefalo stating that Two Electronics was "ready to do this," but that Piccione had three issues regarding the terms of the purchase offer in the Second LOI. Barry wrote:
Steve. Matt is ready to do this. He had three other issues this morning after talking to Counsel. The first matter is he would like to give you guys three weeks instead of 4 on the due diligence. Number two, he doesn't want to give the 30 day extension. And number three, is he would like to have a penalty applied to the deal if the $200,000 is not paid at the end of 48 months. He believes there should be a penalty if he has to sue for the money if not paid on time. He said to me"put a date on it and lets get the Attorneys together" Get to Rick [McDonald] and pass these by him, and lets get together. He wants to do this today or tomorrow. Sounds encouraging. Tim.
Exh. 1, ¶ 28; Exh. 4.
25. Cefalo conveyed Piccione's three issues to McDonald and Philbin. Exh. 1, ¶ 29.
26. At 6:06 PM on February 1, 2016, Cefalo stated in an email to Philbin (later forwarded to McDonald) that he believed that Barry was not on the same page as Piccione with regard to the sale of the Property based on his perception that Piccione was changing his mind and kept "moving the goal post." He went on in the email to state: "Seller not willing to assist in a deal that from what I can see is the best deal he will ever have on this property. None of us get it, including the sellers broker (not to be published)." Cefalo testified that throughout the course of their dealings, he would hear from Barry that Piccione had agreed to the terms in LOIs and then later find out that Piccione had not agreed to those terms. Tr. pp. 184-187; Exh. 21.
27. After receiving the email from Cefalo, McDonald revised the Second LOI to reduce the term of the seller financing provision from 60 months to 48 months. Exh. 1, ¶ 30.
28. At 7:17 PM on February 1, 2016, Barry sent a text message to Piccione stating that he had a telephone call with Cefalo. Cefalo told Barry that he had conveyed Piccione's issues to "Rick" [McDonald], but that Rick felt "that their last offer with the 48 months was the very best they can do. They feel that they have negotiated in good faith, but can't change any more of the terms. . . ." Exh. 1, ¶ 31; Exh. 5; Tr. 233.
29. At 7:56 PM on February 1, 2016, Piccione responded to Barry's text message stating: "Have put in writing signed with check and then will respond." Exh. 1, ¶ 32; Exh. 6; Tr. 233-234
30. The following day, unbeknownst to McDonald, Cefalo, and Barry, on February 2, 2016, Two Electronics received a signed offer to purchase the Property from a third party. Tr. pp. 249-251.
31. At 5:06 PM on February 2, 2016, McDonald sent Cefalo an email attaching a third written "Binding Letter of Intent" (Final LOI) The Final LOI was also not signed by a representative of SJH. Exh. 7.
32. At 5:22 PM on February 2, 2016, Cefalo sent Barry an email attaching the Final LOI. Exh. 1, ¶ 33; Exh. 8.
33. The only revision contained in the Final LOI was the date on which the final $200,000 of the purchase price would be due and payable to the seller. It was reduced from 60 months post-closing to 48 months post-closing. None of the issues raised in the February 1, 2016 email from Barry to Cefalo were incorporated into the Final LOI. Exh. 8.
34. The Final LOI set forth a method for Two Electronics to accept the offer from SJH:
Please indicate your agreement to the above summary of discussions by signing and returning a copy of this letter to the undersigned no later than Feb. 4, 2016. If you have any questions concerning the items to be addressed, please feel free to call.
35. At 7:58 PM on February 2, 2016, Barry sent an email to Piccione with the Final LOI attached, which Piccione received. The email read: "Matt Here is the LOI with the 48 month change. Please sign and I can pick up and deliver to Rick [McDonald] and Steve [Cefalo] for their signature and check tomorrow. Let me know. Thank you. Tim. Exh. 1, ¶ 34; Exh. 9.
36. Piccione testified that he did not review the substance of the Final LOI at that time because the document was not signed by SJH. He said that in his course of business doing real estate transactions, he did not consider anything to be an offer until it was signed. I credit Piccione's testimony. Tr. pp. 222-225.
37. At 1:20 PM on February 3, 2016, Barry sent a text message to Piccione that said: "Matt. Did you review Document? They asked that u sign, then I pick up from you, get to them for signature and $32,000 check. . . ." Exh. 1, ¶ 35; Exh. 10.
38. Piccione responded to Barry by text message stating: "I'm in a meeting we can talk later but if they are making an offer they should sign 1st and send over with check. I have never seen a seller sign an offer prior to the people making offer." Exh. 1, ¶ 36; Exh. 11.
39. Barry responded to Piccione's text message stating: "I asked. They simply said that they are making the LOI, so they asked you to sign first. In the meantime I will tell them you wanted them to sign first. Tim." Exh. 1, ¶ 37; Exh. 12.
40. At 2:00 PM on February 3, 2016, Piccione sent Barry the following text message:
"Have them make final offer sign and get check then we can respond. If it is a LOI what [good] is it if it isn't signed. Lets get an offer to review. It's been weeks." Exh. 1, ¶ 38; Exh. 13; Tr. pp. 238-239.
41. At 2:12 PM on February 3, 2016, Barry sent Cefalo the following text message:
Steve. It [Two Electronics] wants you [SJH] to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or contrary, but that is the way it normally works. Can Rick [McDonald] sign today and get it to me today? Tim.
Exh. 1, ¶ 39; Exh. 14.
42. SJH argues that there may have been a telephone conversation between Piccione and Barry after receiving the Final LOI, before Barry sent the 2:12 PM text message, where Piccione gave Barry permission to accept the terms of the Final LOI on his behalf. Piccione testified that he never made such a telephone call. He consulted his telephone records to confirm his recollection. Barry could not actually remember whether such a call ever occurred, but only stated that "it must have occurred" because he would not usually send a text message without direction from a client. I credit Piccione's testimony and find that there was no such call. Piccione testified that he reviewed his telephone records to confirm his memory and his statement is supported by the fact that his 2:00 PM text message indicated that he had not yet reviewed the terms in the Final LOI since it was not signed by the buyer and he did not consider it to be a valid offer. Tr. pp. 111-112, 114, 132-133, 136, 138-139, 154-155; 222-225, 242-244, 248-249.
43. That same day, on February 3, 2016, McDonald, on behalf of SJH, executed four original copies of the Final LOI with the deposit check and gave them to Cefalo to deliver to Barry for signature by Piccione. Exh. 1, ¶¶ 40-41; Exh. 16.
44. At 4:25 PM on February 3, 2016, Cefalo sent a text message to Barry stating:
"Tim, I have the signed LOI and check it is 424 [PM] where can I meet you?" Exh. 1, ¶ 42; Exh. 15.
45. Later that day, Cefalo and Barry spoke by telephone and agreed that Cefalo would bring the signed Final LOI and the deposit check to Barry's office for Two Electronics' execution. Exh. 1, ¶ 43.
46. Cefalo met with Barry in person and delivered the four originals of the executed Final LOI and the deposit check to be passed along to Piccione to sign. Exh. 1, ¶ 44; Exhs. 16- 17.
47. At approximately 4:30 PM on February 3, 2016, Piccione accepted the offer to purchase the Property from the third party. Tr. pp. 276-277.
48. On February 4, 2016, at 12:25 PM and again at 2:56 PM, Barry sent text messages to Piccione attempting to set up a time to meet up and have Piccione sign the Final LOI. Piccione sent a text message to Barry telling him that there had been a signed offer from another party and he had taken the deal and would no longer be accepting an offer from McDonald. Tr. 252; Exh. 22, pp. 68-71.
49. The following day, at 4:30 PM on February 4, 2016, Cefalo sent a text message to Barry looking for an update on the status of the signed Final LOI. At 4:40 PM, Barry responded with a text message to Cefalo and stated: "Matt [Piccione] was out of town today. He will get back to us tomorrow." Exh. 1, ¶¶ 45-46; Exhs. 18-19.
50. On February 5, 2016, Piccione contacted McDonald by telephone to tell him that he would not enter into a purchase and sale agreement with SJH because he had already agreed to sell the Property to a third party. Two Electronics thereafter refused to execute and deliver to SJH the Final LOI. Exh. 1, ¶ 47; Tr. p. 253-354.
51. At trial, Piccione testified that he never explicitly gave Barry permission to accept, reject, or even negotiate offers from SJH on behalf of Two Electronics. There was no written agreement or other messages between Barry and Piccione as to the scope of Barry's authority. Piccione attested that in prior lease deals for the Property he never gave Barry authority to do anything other than pass information back and forth between himself and prospective tenants. To Piccione, Barry was merely a "conduit to explain to [Cefalo and McDonald] what [he] was looking for in this deal." I credit Piccione's testimony. Tr. pp. 213- 215, 227-228, 255-260.
52. Barry also testified that he was not authorized to make decisions regarding the lease or sale of the Property. He asserted that it was standard practice in their past lease dealings for information to be communicated from Piccione to Barry who would then pass it along to prospective tenants or buyers, but it was not standard for him to have decision-making authority on behalf of his clients. Barry stated that he did not understand the phrase "work through Barry" as Piccione giving him authorization to make decisions binding Piccione. I credit Barry's testimony as to what he understood his authority to be and find that Piccione did not give Barry explicit authorization to make decisions on his behalf. Tr. 99-100, 127-129, 139, 142-143, 156- 157.
53. Cefalo testified that he was always directed to pass information to Barry, but he knew that Piccione was the decision maker "on every issue related to the terms of this deal." He stated that he understood that Barry could not speak for Piccione since Barry was just a real estate broker in the transaction. Tr. pp. 166-167, 172-174, 188.
54. McDonald testified that he took the comments Piccione made to "work through Barry" as meaning that Barry was acting on behalf of Piccione's interests and conveying information coming directly from Piccione. McDonald couldn't recall whether Piccione ever directly telling him that Barry was authorized to accept offers to purchase or otherwise bind Two Electronics to the sell the Property. He stated that it was his understanding that he would talk to Cefalo, who would pass information to Barry, who would pass the information to Piccione and that this relationship was the standard method of dealing in this sort of transaction. McDonald attested that he always understood Piccione to be the decision maker about whether and under what terms Two Electronics would sell the Property. Tr. pp. 30-31, 33-35, 43-44, 95-96.
55. Based on the documentary evidence in the record and testimony given, I find that Piccione's actions and conduct could not have reasonably led McDonald and Cefalo to believe that Piccione had given Barry authority to bind Two Electronics to sell the Property. Both McDonald and Cefalo testified that they always understood Piccione as being the decision maker. The direction from Piccione to "work through Barry" is insufficient by itself to demonstrate that McDonald could have reasonably interpreted Barry as having authorization to act on behalf of Piccione.
Contracts for the sale of land, whether by oral promise or written agreement, are enforceable only if they are supported by a writing that includes the agreement's essential terms and is signed by the party against whom enforcement is soughtin this case, Two Electronics. G. L. c. 259, § 1, Fourth ("No action shall be brought ... [u]pon a contract for the sale of lands, tenements, hereditaments or of any interest in or concerning them ... [u]nless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized."). The signature of a duly authorized agent, rather than the party to be charged, is sufficient to be binding. Slover v. Carpenter, 24 LCR 1 , 4 (2016), citing A.B.C. Auto Parts, Inc. v. Moran, 359 Mass. 327 , 329 (1971).
In my April 14, 2016 Memorandum and Order Denying Two Electronics' Special Motion to Dismiss, which is incorporated by reference here, I determined, and still find, that a text message may constitute a writing under the Statute of Frauds and that the February 3rd text message from Barry to Cefalo, read in the context of exchanges between the parties and the referenced Final LOI and signed by Barry, contained sufficient terms to constitute a binding counteroffer from Two Electronics to SJH, which SJH accepted by delivery of the executed Final LOI. St. John's Holdings, LLC, 24 LCR at 195. For the purposes of the Special Motion to Dismiss only, the parties stipulated that Barry was a duly authorized agent acting on behalf of Two Electronics, a prerequisite to his text message constituting a binding written commitment of Two Electronics. The issue of whether Barry had actual or apparent authority to bind Two Electronics was not decided in the Memorandum and Order; it is a factual and legal question that was the sole issue at trial. I now decide that question.
I. Actual Authority
Authority is "the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal's manifestations of consent to him." Haufler v. Zotos, 446 Mass. 489 , 497-498 (2006), quoting Restatement (Second) of Agency § 7 (1958) (Restatement (Second)). In general, actual authority is an agent's power to affect the principal's relations with third parties as manifested by the principal to the agent. Barrow v. Dartmouth House Nursing Home, Inc., 86 Mass. App. Ct. 128 , 132 n. 8 (2014); Restatement (Third) of Agency § 3.01 (Restatement (Third)). The agent's actual authority is grounded in the principal's actions towards the agent, through words or conduct, and the agent's reasonable understanding of the principal's manifestations. Kirkpatrick v. Boston Mut. Life Ins. Co., 393 Mass. 640 , 645 (1985); Theos & Sons, Inc. v. Mack Trucks, Inc., 431 Mass. 736 , 743 (2000); Restatement (Third) § 2.01. When an agent acts with actual authority, the agent has the power to affect the principal's legal relations with third parties to the extent to which the principal granted actual authority. Theos & Sons, Inc., 431 Mass. at 743.
Actual authority can be express or implied. Express actual authority occurs when a principal communicates to its agent explicitly the extent of the agent's authority and the specific acts it wishes the agent to perform on its behalf. Id.; Restatement (Third) § 2.01. Implied actual authority is given by a principal through its words or conduct towards an agent. This type of actual authority can be of a particular type customarily possessed or can be reasonably inferred based on past dealings between the principal and agent. Theos & Sons, Inc., 431 Mass. at 743 n. 13, citing T.D. Downing Co. v. Shawmut Corp., 245 Mass. 106 , 113 (1923). "Interactions between principal and agent do not occur in a vacuum." Restatement (Third) § 2.02, comment e. Delegation of actual authority to an agent may also arise from course of conduct showing that the principal has repeatedly acquiesced in and adopted acts of the same kind. The agent must also consider all subsequent manifestations or developments that may alter the principal's initial wishes. It is the principal's manifestations (however indirect) to the agent, not the principal's unexpressed will, mental state, or unknown wishes, that form the agent's actual authority. See Restatement (Third) § 2.01, comment c. "Lack of actual authority is established by showing either that the agent did not believe, or could not reasonably have believed, that the principal's grant of actual authority encompassed the act in question. This standard requires that the agent's belief be reasonable, an objective standard, and that the agent actually hold the belief, a subjective standard." Restatement (Third) § 2.02, comment e.
It is SJH's contention that Barry, a real estate broker, had actual authority to bind Piccione to the sale of the Property in the February 3rd text message referencing the Final LOI. In the context of a real estate transaction, the Supreme Judicial Court (SJC) has held that "[a] real estate agent or broker is not an agent of general powers. As a rule he has no authority to bind his principal beyond the terms of the specific authority conferred upon him by the agreement for employment." Harrigan v. Dodge, 216 Mass. 461 , 463 (1914), citing Coddington v. Goddard, 16 Gray 436 , 445 (1860) and Stollenwerck v. Thacher, 115 Mass. 224 , 227 (1873). As the SJC in Harrigan stated:
The relation between a landowner and the real estate agent or broker naturally imports a single transaction for a definite and strictly limited purpose, with circumscribed instructions within which conduct must be rigorously confined. No hardship is wrought either upon the broker or those with whom he deals by adherence to this rule. The very nature of the employment is such that a third party has an implied notice that he is dealing with a special agent of restricted authority, and hence he must ascertain at his peril the bounds of that authority.
216 Mass. at 464; see also Vallis v. Rimer, 335 Mass. 528 , 532 (1957) ("A real estate broker is normally not a general agent, but is usually a special agent of restricted authority, and a personal dealing with such a broker has implied notice of this limited authority and must ascertain at his peril what the bounds of that authority are."); Weisman v. Saetz, 11 Mass. App. Ct. 440 , 441 (1981) (holding that signature of seller's real estate agent on offer did not bind seller to sell; the listing agreement between seller and agent only conferred authority to act as a "runner" or "go between" with limited authority to carry offers to seller). Absent any further manifestation of authority by Piccione, the only actual authority that Barry held was to broker a deal between Two Electronics and SJH, not to bind Two Electronics to that deal. [Note 1]
The only means by which Barry could have had actual authority beyond that of a traditional real estate broker is if Piccione, as the principal of Two Electronics, had expressly or impliedly given him that authority. While SJH argues that Piccione expressly granted Barry the authority to serve as the conduit for Piccione's directions and positions to McDonald so that he spoke for Piccione, I find otherwise. At no time did Piccione explicitly direct Barry to accept, reject, or even negotiate offers from SJH on his behalf, as manager of Two Electronics. There was no written agreement between Barry and Piccione as to the scope of Barry's authority. Two Electronics and Barry did not even have a written listing agreement under which Barry was authorized to market the Property for sale. Tr. pp. 214, 254. There were no text messages or emails between Barry and Piccione expressing or indicating that Piccione had somehow broadened the authority that is typically given to real estate brokers. Though Barry had brokered prior lease deals with tenants on behalf of Two Electronics, both Piccione and Barry testified that Piccione had never given Barry authority to do anything other than pass information back and forth between the principals. The testimony from Barry and Piccione regarding Barry's role is entirely consistent with the accepted industry practice of real estate brokers dealing in such transactions, and I credit it. Tr. pp. 99-100, 127-129, 156-157, 213-215.
The only evidence of possible implicit actual authority given by Piccione to Barry was Piccione's comment to McDonald and Cefalo to "work through Barry." For purposes of establishing actual authority, particularly in the real estate context, this is insufficient to constitute an unequivocal expansion of Barry's typical authority as a real estate broker. Barry testified that it was standard practice in their past lease dealings for information to be communicated from Piccione through Barry, but it was not standard for Barry to have decision-making authority on behalf of Piccione and Barry did not understand the phrase "work through Barry" to be giving such authorization. Tr. 99-100, 128, 139, 142-143. These words alone are not sufficient to constitute a manifestation by Piccione that Barry could reasonably rely on as evidence of actual authority to make a binding counteroffer on behalf of Two Electronics. Compare with Haufler, 446 Mass. at 497-498 (landowners testified that they gave attorney "full authority" to negotiate and "make appropriate binding agreements on their behalf to obtain title to [property]"); Bridge Enterprises, Inc. v. Futurity Thread Co., 2 Mass. App. Ct. 243 , 247-248 (1974) (landlord's answer to bill of complaint that its sales manager had no authority to execute lease without approval of president of the corporation was admission that president had power to appoint sales manager as agent to exercise president's power to negotiate lease without approval from board of directors). All the other communications between Barry and Piccione indicates that Piccione had not given Barry any additional authority above that of a real estate broker generally.
The text messages between Piccione and Barry on February 3rd support that Barry had no authority to bind Piccione and Two Electronics. Prior to the infamous 2:12 PM text message sent from Barry to Cefalo, which SJH claims was the binding counteroffer, Piccione sent a text message to Barry at 2:00 PM stating that he would review the offer once it was signed by SJH and then respond. This message makes clear that Piccione did not give permission to Barry to accept the offer and in fact did not even consider it to be an offer until it was signed by the buyer. Though SJH speculated that there may have been a telephone conversation between Piccione and Barry prior to Barry sending the 2:12 PM text message, where Piccione told Barry that the terms of the Final LOI were acceptable and authorized him to accept on his behalf, I have found that no such call was made.
I find that Barry did not have actual authority to bind Two Electronics to the terms of the Final LOI and his text message was merely a misinterpretation of the prior message sent to him by Piccione. SJH has not shown that Barry had express or implicit actual authority from Piccione to accept the terms in the Final LOI on behalf Two Electronics or to make a binding counteroffer of the Final LOI. Barry did not have the subjective belief that he was authorized, and even if he did, that belief would not have been reasonable under the objective standard. Aside from the vague and inadequate phrase "work through Barry," SJH has failed to identify any specific words or conduct by which Piccione's consent to have Barry accept an offer was either expressly manifested or implied. Since no actual authority was ever given to Barry, the nature of the relationship between Barry and Piccione, as that of a typical real estate broker and their client, remained unchanged.
II. Apparent Authority
SJH asserts that if Barry did not have actual authority to act on behalf of Piccione, his actions still bind Two Electronics to the terms in the Final LOI by the apparent authority given to Barry by Two Electronics. "The test for apparent authority is how the person dealing with the agent reasonably interprets the agent's authority." Varney Bros. Sand & Gravel, Inc. v. Champagne, 46 Mass. App. Ct. 54 , 59-60 (1998), quoting Greenstein v. Flatley, 19 Mass. App. Ct. 351 , 355 (1985). "Apparent authority, is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.'" Theos & Sons, Inc., 431 Mass. at 745, quoting Restatement (Second) § 27. Like actual authority, apparent authority arises only by the words or conduct of the principal, and not those of the agent. Licata v. GGNSC Malden Dexter LLC, 466 Mass. 793 , 801 (2014).
Apparent authority is determined by how the actions of the principal cause a third party to believe that the agent has authority to act on behalf of the principal, rather than by communications between the principal and agent. See Hudson v. Mass. Prop. Ins. Underwriting Ass'n, 386 Mass. 450 , 457 (1982); Kanavos v. Hancock Bank & Trust Co., 14 Mass. App. Ct. 326 , 331 (1982) (question of apparent authority turns on "how, in the circumstances, a third person . . . would reasonably interpret [the agent's] authority in light of the manifestations of his principal"); Restatement (Second) § 8. It results when the principal's consent to an agent's action is communicated not to the agent, but to a third party dealing with the agent, who then reasonably believes that the principal consented to an act committed by the principal's agent on its behalf. See Kansallis Fin. Ltd. v. Fern, 421 Mass. 659 , 665 (1996); Restatement (Second) § 8, comment c; § 27.
SJH argues that Barry had apparent authority to make a binding counteroffer of the terms of the Final LOI on behalf of Two Electronics based on the statements and actions of Piccione. As evidence of apparent authority here, SJH uses the fact that Piccione and McDonald rarely communicated directly to each other during the course of the negotiations leading up to February 3, 2016, but instead worked through their respective real estate brokers, Barry and Cefalo. In total, three face-to-face meetings took place once negotiations were underway. The first occurred in December 2015 at a restaurant, the second on January 18, 2016 at a Starbucks, and the third on January 25, 2016 at a Dunkin' Donuts. At the conclusion of each of these meetings, Piccione directed Cefalo and McDonald to "work through Barry," or words to that effect, concerning the real estate transaction. It is based on these few interactions that SJH maintains McDonald was reasonable in his belief that Barry had authority to make a binding counteroffer of the terms of the Final LOI on behalf of Piccione when he directed Cefalo to deliver the signed Final LOI with the deposit check to his office.
SJH's reliance on these few communications, however, falls short of what is required to establish apparent authority. Piccione's comment to "work through Barry" is logical in light of their past dealings and the fact that real estate brokers generally have limited authority and simply act as a "go between" to deliver messages to their clients. In order to establish a different kind of broker-client relationship, Piccione would have needed to do or say much more than merely "work through Barry." McDonald testified that he could not recall Piccione ever telling him that Barry was authorized to accept offers to purchase the Property or otherwise bind Two Electronics to a sale of the Property. McDonald and Cefalo both attested that they always understood Piccione to be the decision maker about the terms under which Two Electronics would sell the Property. Tr. pp. 34, 43-44, 95-96, 172; Exh. 20.
The context of the parties' ongoing relationship during the negotiations makes clear that Piccione's statement to "work through Barry" could not have led McDonald to reasonably believe that Barry had the ultimate authority to bind Two Electronics. McDonald was the one who requested in-person meetings with Piccione to discuss the terms of the purchase of the Property because he was unhappy with the inefficient communications going through the real estate brokers. Tr. pp. 47-48, 171-172. In the two meetings at the Starbucks and Dunkin' Donuts, McDonald was able to have discussions directly with Piccione regarding the terms of a draft LOI, while the real estate agents participated much less. After the meetings, Cefalo followed up with Barry about those revised terms and summarized his conversation with Barry in an email to McDonald on January 25, 2016, stating that "[Barry] thought the new terms seemed reasonable. But of course [Barry] could not speak for Matt [Piccione]." Exh. 20. Requesting these meetings in order to talk with Piccione rather than go through Cefalo and Barry, coupled with the email acknowledging that Barry could not speak for Piccione, indicates that McDonald did not believe Barry had the authority to bind Two Electronics and any acceptance of an offer would have to come directly from Piccione.
Moreover, McDonald testified that on prior occasions, after the First and Second LOIs were sent, he believed that they "had a deal" for the sale of the Property based on Cefalo conveying to McDonald things Barry was communicating to Cefalo from Piccione. Although McDonald was under the impression they had a deal, he subsequently learned that Piccione had not agreed to all the terms in the LOIs and requested revisions. Cefalo testified that he believed that Barry was not on the same page as Piccione with regard to the sale of the Property based on his perception that Piccione was changing his mind and kept "moving the goal post." Tr. pp. 184-187. In an email sent to Philbin, one of McDonald's partners, at 6:06 PM on February 1, 2016, Cefalo stated: "Seller not willing to assist in a deal that from what I can see is the best deal he will ever have on this property. None of us get it, including the sellers broker (not to be published)." Exh. 21. The "sellers broker" he was referring to was Barry, and "none of us get it" referred to Barry, McDonald, and himself. Tr. pp. 186-188. Cefalo and McDonald cannot be heard to say they reasonably believed Piccione had given Barry authority to act as his agent when they were saying to each other that Barry was not on the same page with Piccione and could not speak for his purported principal. Compare with Fergus v. Ross, 89 Mass. App. Ct. 528 , 532-533 (2016) (finding ample evidence that individual was agent of private lender on side loan based on private lender's deliberate insulation from direct contact with borrower, acquiescence to individual's activities, and entrusting individual to carry out many steps necessary to the successful completion of the side loan); Kanavos, 14 Mass. App. Ct. at 333 (finding vice president had apparent authority on behalf of bank where corporate officer had broad, general executive responsibilities that gave the public the presumption that large bank should be bound to engagements made on its behalf). Given this understanding by both McDonald and Cefalo, it was unreasonable for McDonald to believe that the broker-client relationship between Piccione and Barry had somehow morphed into something more at the time Barry responded regarding the Final LOI in the 2:12 PM February 3rd text message. Accordingly, SJH has not met its burden of establishing that McDonald reasonably understood Barry to be acting on Two Electronics' behalf given Piccione's words and conduct throughout the course of these negotiations. Any such belief on McDonald's part was unreasonable considering the surrounding events leading up to the February 3rd text message that SJH now attempts to rely on as creating a binding contract. Barry did not have the apparent authority to bind Two Electronics to the terms of the Final LOI or to make a binding counteroffer of the Final LOI.
Since Barry lacked such actual or apparent authority, his response and signature in the February 3rd text message did not constitute a binding counteroffer. Further, because the Final LOI sent by Cefalo to Barry did not include a signature from a representative of SJH, the Final LOI also did not constitute an initial offer. Piccione did not consider the Final LOI to be a valid offer given his past dealings and statements during the negotiations that to be a valid offer it would need to be signed. Not until SJH subsequently executed the Final LOI and delivered the deposit later on February 3, 2016, did it constitute an offer, which Piccione declined within two days, informing McDonald that Two Electronics would not sell the Property to SJH since it had already accepted another offer. See Linkage Corp. v. Trustees of Boston University, 425 Mass. 1 , 18 (1997) (where the agent acts outside the scope of authority, principal may still be bound if the principal acquiesces in the unauthorized actions or fails to promptly disavow the agent's actions); Boice-Perrine Co. v. Kelley, 243 Mass. 327 , 330-331 (1923) ("It is the instant duty of a principal, upon ascertaining facts, at once to disaffirm an act done in his name by an agent . . . in excess or misuse of the authority given.").
"There is little fairness in saddling the principal with liability for acts that a reasonable third party would not have supposed were taken on the principal's behalf." Kansallis Fin. Ltd., 421 Mass. at 665; Restatement (Second) § 8, comment c. The evidence demonstrates that the text message, while a writing, was not signed by Two Electronics or its agent, the person to be charged, and therefore failed to satisfy the Statute of Frauds. See G. L. c. 259, § 1, Fourth. There is no binding enforceable contract between SJH and Two Electronics for the sale of the Property, and therefore no grounds for specific performance.
For the foregoing reasons, judgment shall enter in favor of Two Electronics dismissing SJH's complaint with prejudice.
[Note 1] The cases cited by SJH to suggest that Barry had full authority are not apposite. In each of those cases, the relationship was not that of a broker to a client, but rather that of a more traditional agent and principal. See Bridge Enterprises, Inc. v. Futurity Thread Co., 2 Mass. App. Ct. 243 (1974) (agency relationship between landlord and sales manager); Kirkpatrick v. Boston Mut. Life Ins. Co., 393 Mass. 640 (1985) (agency relationship between insurance company employer and employee); Kanavos v. Hancock Bank & Trust Co., 14 Mass. App. Ct. 326 (1982) (agency relationship between bank and bank's corporate officer); Haufler v. Zotos, 446 Mass. 489 (2006) (agency relationship between property owner and attorney).