Heard: October 4, 2018.
action commenced in the Superior Court Department on December
case was heard by Joshua I. Wall, J., and a motion for
reconsideration was considered by him.
M. Ross for the defendant.
Charles J. Domestico (Vincent M. Domestico also present) for
Present: Milkey, Desmond, & Wendlandt, JJ.
2014, EAB Elevator, Inc. (EAB Elevator), and Barnes
International, LLC (Barnes International), defaulted on two
loans they had received from plaintiff People's United
Bank (bank). Seeking to collect on the loans, the bank
brought this action against EAB Elevator, Barnes
International, their principal, Andrew Barnes, and B&B
Fire Protection, Inc. (B&B or company). What remains of
the case is the bank's collection action against B&B
based on that entity's having executed a guaranty of the
loans. B&B's defense was that it never
properly authorized the guaranty. Following a two-day bench
trial, a Superior Court judge ruled in the bank's favor
after concluding that regardless of whether the guaranty
initially had been executed with authority, B&B
effectively had ratified it through its actions and inaction.
For substantially the same reasons expressed by the judge in
his thoughtful memorandum of decision, we affirm.
B&B's relationship with EAB Elevator and Barnes
formed in 2012 by Andrew Barnes and Daniel Berry, was a
business that designed and installed fire sprinkler systems.
Barnes and Berry had a family connection in that Berry was
married to Barnes's first cousin. The two men had
distinct roles at B&B. Barnes, who held a fifty-one
percent ownership share, served as B&B's president
and ran the business side of the enterprise. Berry, who owned
the remaining forty-nine percent, ran the operations side,
that is, he was the one who performed, or at least oversaw,
the actual design, installation, and maintenance of the
sprinkler systems. Although Berry nominally served as a
B&B director and its treasurer and secretary, he was
content to leave business decisions to Barnes. At no point
did the company observe any corporate formalities; for
example, there never were any board meetings or resolutions.
Rather, B&B was run in practice as a partnership, with
Barnes as the one in charge.
Elevator was in the business of installing and maintaining
elevator systems, and Barnes International was an affiliated
company. Unlike B&B, both of these other entities were
wholly owned by Barnes. However, their operations were
intertwined with those of B&B, which allowed all three
companies to take advantage of various mutual benefits, such
as joint marketing opportunities. The three firms shared
office space, equipment, and personnel, and B&B was
marketed "as a Barnes International Company." Their
finances were also enmeshed, with B&B directly receiving
some of the monies lent to EAB Elevator, and B&B in turn
making regular payments to Barnes International in the form
of monthly management fees. At least initially, Berry was
content with this arrangement.
The May 2013 loan.
of 2013, the bank agreed to loan EAB Elevator $100, 000 in
the form of a credit line. B&B executed a guaranty of that
loan (the May 2013 loan). Berry was aware of the guaranty at
the time and either affirmatively blessed it or at least made
The falling out.
Thanksgiving of 2013, Berry had grown disaffected with
Barnes's management of B&B. As he explained at trial,
he had begun to believe that Barnes was skimming money from
B&B for his own benefit. The two men had a falling out,
and by mid-December, Berry either quit or was fired.
Nevertheless, Berry retained his ownership interest in
B&B and nominally remained a director and officer
The December 2013 loans.
Christmas Eve of 2013 (that is, after Berry had left the
company as an employee), the bank executed two agreements to
lend money to EAB Elevator and Barnes International. These
loans (the December 2013 loans) are the subject of the
current collection action. One loan, for $65, 000, was to
refinance an existing loan from a different bank. The other,
for $200, 000, had two components. One paid off the existing
$100, 000 indebtedness on the May 2013 loan to EAB Elevator
(thus effectively serving as a refinancing of that debt). The
other established an additional $100, 000 line of credit that
could be drawn from over time. B&B executed a separate
corporate guaranty on these loans, and thereby nominally
agreed to obligate itself on them. The guaranty was signed by
B&B's general counsel, purportedly pursuant to a
power of attorney executed by Barnes (who, at the time, was
in Florida). Meanwhile, Berry, who continued to hold a
forty-nine percent share of B&B, was not informed about
the December 2013 loans, much ...