Heard Date January 21, 2016.
action commenced in the Superior Court Department on August
case was heard by Frances A. Mclntyre, J.
E. Cohen for the defendant.
E. Feener for the plaintiff.
Present: Green, Wolohojian, & Henry, JJ.
consider here a principal's liability to a third party
for the conduct and representations of his agent in the
context of a private lending transaction. Following a bench
trial, a judge of the Superior Court concluded that Steven A.
Ross, individually, was bound by promises Bernard Laverty,
Jr., made to Joseph Fergus because Laverty was Ross's
agent and acted within the scope of his apparent authority.
Judgment accordingly entered against Ross, individually. The
central issue on appeal is whether the judge erred in
concluding Laverty had apparent authority to bind Ross to act
as closing agent on a side loan about which Ross did not have
actual knowledge. We affirm.
summarize the judge's findings, which we must accept
unless clearly erroneous. See Weiler v.
PortfolioScope, Inc., 469 Mass. 75, 81 (2014).
"A finding is 'clearly erroneous' when although
there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction
that a mistake has been committed." J.A. Sullivan
Corp. v. Commonwealth, 397 Mass. 789,
792 (1986), quoting from United States v.
United States Gypsum Co., 333 U.S. 364, 395 (1948).
Where there are two permissible views of the evidence, a
judge's finding adopting one view is not clearly
erroneous. See Pehoviak v. Deutsche
Bank Natl. Trust Co., 85 Mass.App.Ct. 56, 65
a middle-aged man with an eighth grade education, is a public
insurance adjuster also in the business of rebuilding damaged
residential properties he comes across in his insurance work.
Fergus is savvy and smart, but he is not sophisticated about
financial matters or perfecting security interests. He had
previously bought and sold several residential properties,
financing them through conventional lenders. Before the facts
giving rise to this case, Fergus had never dealt with a
summer of 2007, Fergus required between $75, 000 and $100,
000 for the cosmetic work needed to complete the
rehabilitation of a burned-out property on Ruthven Street in
the Dorchester section of Boston. Fergus could not obtain
conventional financing on the property and so he contacted
his cousin, Catherine Gibbons, a mortgage broker, to ask for
her help. Gibbons recommended Bernard Laverty, Jr., who had
connections to several "hard money"
lenders. One of those connections was
Attorney Steven A. Ross, who ran a private lending practice
at Gilmartin, Magence and Ross, LLC (GMR). Laverty would
bring Ross potential borrowers and if Ross "liked"
them, he would make the loan and pay Laverty a referral fee.
This arrangement began before the transaction at issue in
this case and continued thereafter. In addition, Laverty had
himself borrowed money from Ross on five or six occasions in
same time, Laverty happened to need money to close on a
property in Marshfield for which he had signed a purchase and
sale agreement. Therefore, he pressured Fergus to give him a
side loan of $120, 000 out of the proceeds of any loan from
Ross. To "protect" Fergus, Laverty offered to
give him a "deed-in-lieu" on the Marshfield
property. Fergus's notion of the meaning of a
deed-in-lieu was vague, but he understood that if Laverty did
not repay the side loan, he would be able to sell the
Marshfield house. In Fergus's mind, he would be protected
"either way." On this basis, Laverty persuaded
Fergus to borrow from Ross more money than he (Fergus)
needed. The side loan was to be for one month.
brought Fergus's need for a "hard money" loan
to Ross's attention and, thereafter, there was no direct
communication between Fergus and Ross. Instead, all
discussions with Ross were conducted by Laverty, outside of
Fergus's presence. Laverty was the sole conduit of
information to and from Ross and, according to Fergus,
Laverty "set everything up." Laverty met with
Fergus to discuss the loan terms, arranged (and was present
for) the inspection of the Ruthven Street property by
Ross's wife, delivered the commitment letter to Fergus,
obtained Fergus's signature, and returned it to Ross.
noted above, Ross's wife (who had been told that Fergus
needed the loan to complete renovations) inspected the
Ruthven Street property for Ross. Based on that inspection,
Ross knew or should have known that Fergus needed a loan of
only $75, 000 to $100, 000 to complete the renovations.
Nonetheless, Ross set the amount of the loan at $260, 000 --
more than twice what Fergus needed. Fergus never requested a
$260, 000 loan; in fact, he never requested any specific
amount. The amount set by Ross was not a random figure. It
represented not only the $75, 000 to $100, 000 that Fergus
needed, but also the $120, 000 for Laverty's side loan,
and the costs (which included prepaid interest, origination
fees, appraisal fee, and legal fee) associated with the loan
itself -- all of which came out of the loan proceeds at the
time of closing. Those facts, together with Ross's
knowledge that Laverty was not receiving his customary
referral fee, that Laverty could not be expected to expend
time and energy without compensation, and that Laverty
frequently borrowed money, permitted the judge to find (as
she did) that Ross could have easily deduced that Laverty was
to receive a side loan from the proceeds of the loan to
paperwork for the loan was prepared by Ross. Among other
things, Ross prepared and signed a commitment letter dated
September 7, 2007, containing the terms of the loan. Laverty
delivered that letter to Fergus on September 10, 2007, the
day before the closing. Fergus signed the letter and gave it
to Laverty to return to Ross. On the same day, Fergus
handwrote, and signed, a letter to Ross, which Laverty
represented he would deliver to Ross together with the signed
commitment letter.That letter reads:
"To Steve Ross.
"Bernard Laverty is getting $120, 000 from the closing
on Ruthven ...