Centanni v. AK Roy, Inc.
258 So.2d 219, 1972 La. App. LEXIS 5641 (1972)
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Rule of Law:
An agent who fails to disclose the identity of their principal at the time a contract is executed becomes personally liable on the contract. Furthermore, an agent who contracts to sell immovable property without written authority from the principal is considered to have acted as a principal and is personally bound by the agreement.
Facts:
- On March 30, 1967, Dr. Lee R. Centanni signed a written agreement to purchase a lot from A. K. Roy, Inc. for $8,500 and made an $850 deposit.
- J. F. Roy, the president of A. K. Roy, Inc., signed the agreement, which contained an ambiguous signature line with unselected options for '(Agent for Client)' or '(Owner)'.
- The day after the agreement was signed, J. F. Roy forwarded documents to the notary revealing for the first time that the property's actual owner was a separate entity named Jeff, Inc.
- J. F. Roy was the president of both A. K. Roy, Inc. (the real estate agency) and Jeff, Inc. (the property owner).
- A. K. Roy, Inc. admitted it did not have a written contract from Jeff, Inc. authorizing it to sell the property.
- The seller failed to appear at the scheduled closing on April 25, 1967, because an outstanding mortgage on the property prevented the delivery of a merchantable title.
- After the closing failed, Centanni's $850 deposit was returned, but he demanded an additional $850 as a penalty for non-performance as stipulated in the purchase agreement.
- Jeff, Inc. later sold the same property under a new agreement arranged in September 1967.
Procedural Posture:
- Dr. Lee R. Centanni sued A. K. Roy, Inc. in the First Parish Court for Jefferson Parish, a trial court, seeking return of double his deposit.
- Centanni later amended his petition to add J. Folse Roy personally as a defendant.
- The trial court rendered judgment in favor of the defendants, dismissing Centanni's suit.
- Centanni, as plaintiff-appellant, appealed the trial court's adverse judgment to the Court of Appeal of Louisiana, Fourth Circuit.
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Issue:
Does a real estate agency become personally liable for a seller's breach of a purchase agreement when it fails to disclose the principal's identity at the time the contract is signed and lacks written authority to sell the property?
Opinions:
Majority - Chasez, Judge
Yes. A real estate agency that fails to disclose the identity of its principal at the time of contracting becomes personally liable for the seller's breach. The court reasoned that an agent must disclose their principal before or at the time the contract is formed to avoid personal liability; disclosing the principal the day after was too late. The ambiguity in the contract's signature line was construed against A. K. Roy, Inc. as the drafter. Additionally, under Louisiana law, an agency agreement to sell immovable property must be in writing. Since A. K. Roy, Inc. had no written authority from Jeff, Inc., it was deemed to have acted as a principal by operation of law. Finally, the seller's failure to appear at the closing constituted a breach, and a formal demand for performance by Centanni was not required because the seller's inability to provide a clear title rendered such a demand a 'vain and useless gesture.'
Analysis:
This case reinforces the strict requirement for agents, particularly in real estate, to disclose their principal's identity at the moment of contract formation to avoid personal liability. It serves as a significant precedent in Louisiana agency law, confirming that subsequent disclosure, even if made promptly, does not retroactively shield the agent from liability that has already attached. The decision also underscores the critical importance of the statutory requirement for written mandates in real estate transactions, clarifying that an agent acting without such authority is treated as a principal. This holding places a heavy burden on real estate professionals to ensure contractual clarity and proper authorization to protect themselves from liability for a principal's default.
