Heard: April 4, 2017.
action commenced in the Superior Court Department on
August 31, 2010. The case was heard by Frances A.
review by the Appeals Court, the Supreme Judicial Court
granted leave to obtain further appellate review.
E. Cohen for the defendant.
E. Feener (Danielle F. Wehrli also present) for the
Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd,
jury-waived trial, a Superior Court judge determined that the
defendant, Attorney Steven A. Ross, was negligent for his
part in financing a real estate loan to the plaintiff, Joseph
Fergus. The judge found that the defendant had conferred
apparent authority on an individual, Bernard Laverty, Jr., to
act as his agent for the loan. In the course of arranging the
loan, unbeknownst to the defendant, Laverty asked the
plaintiff to use a portion of the loan from the defendant to
make a secured "side loan" to Laverty. The
plaintiff agreed. Ultimately, however, the side loan was
unsecured and Laverty defaulted. Relying on the rule that
imputes the knowledge of an agent to the principal, the judge
found that the defendant was negligent for failing to inform
the plaintiff prior to the closing that the side loan was not
secured. We now reverse, concluding that the facts found by
the trial judge failed to establish that Laverty had the
apparent authority to bind the defendant with respect to the
judge made the following factual findings, which the parties
do not dispute on appeal.
plaintiff, a regular purchaser and seller of real estate,
needed between $75, 000 and $100, 000 to complete renovations
of a property in the Dorchester section of Boston. Unable to
acquire conventional financing for the project, he inquired
about private financing through a mortgage broker, who
referred the plaintiff to Laverty.
had an existing relationship with the defendant, who operated
a private lending operation through his law firm. Laverty had
received five or six loans from the defendant and had
previously referred potential borrowers to the defendant.
Laverty informed the defendant of the plaintiff's desire
for a loan. Although the defendant had paid Laverty referral
fees on other occasions, he did not do so for the
the plaintiff and Laverty met, Laverty implored the plaintiff
to seek more money than he needed for the renovations, so
that the plaintiff could make a side loan to Laverty. Laverty
needed $120, 000 to close on a residential property in
Marshfield. Laverty offered to provide the plaintiff "a
deed-in-lieu" of a mortgage to secure the side loan. The
plaintiff agreed. Notwithstanding his ultimate failure to do
so, Laverty intended to provide the deed-in-lieu and to repay
the $120, 000.
to the closing, the plaintiff had no direct contact with the
defendant. Rather, all discussions with the defendant and the
law firm regarding the loan were conducted by Laverty,
outside of the plaintiff's presence. Although the
defendant insulated himself from any direct contact with the
plaintiff, the parties arranged, through Laverty, for the
defendant's wife to inspect the Dorchester ...