Colony of Wellfleet, Inc. v. Harris
883 N.E.2d 1235, 2008 Mass. App. LEXIS 384, 71 Mass. App. Ct. 522 (2008)
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Rule of Law:
A principal can be bound by an agent's unauthorized real estate transaction if the principal later ratifies the act by failing to repudiate it and accepting its benefits. A claim to void such a transaction may also be barred by the doctrine of laches if there is an unreasonable and prejudicial delay in bringing the claim.
Facts:
- In 1972, The Colony of Wellfleet, Inc. (the Colony) authorized its attorney, Charles Frazier, to sell certain lots for a period of five years, with this authority expiring on September 30, 1977.
- In the summer of 1978, Edith Keyes Harris inquired with Eleanor Stefani, who controlled the Colony, about purchasing a cottage on lot 49. Stefani informed Harris that no property could be sold due to an ongoing lawsuit.
- Shortly thereafter, Harris approached Frazier, who told her lot 49 was for sale for $40,000.
- On August 18, 1978, the Colony and Harris signed a purchase agreement for lot 49, and the property was conveyed by a deed dated October 7, 1978, over a year after Frazier's authority had expired.
- Stefani learned of the sale shortly after it occurred, and the proceeds were used to pay the Colony's operating expenses.
- In 1983, a dispute over the ownership of lot 49 arose between the Colony and Harris. Stefani consulted her attorney but took no legal action to challenge the sale.
Procedural Posture:
- The Colony of Wellfleet, Inc. filed a petition in the Massachusetts Land Court.
- The petition sought to expunge a 1978 deed that transferred title of lot 49 to Edith Keyes Harris.
- The Land Court judge found that the agent who executed the deed, Frazier, lacked corporate authority to do so, making the original transfer invalid.
- Despite finding the deed invalid, the Land Court judge denied the Colony's petition to expunge it.
- The judge ruled that the Colony had ratified the deed as of 1983 and, alternatively, that its claim was barred by the doctrine of laches.
- The Colony of Wellfleet, Inc. (appellant) appealed the Land Court's judgment to the Appeals Court of Massachusetts.
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Issue:
Does a corporation's failure to promptly repudiate an unauthorized sale of its real property, coupled with a 23-year delay in filing suit, bar its claim to expunge the resulting deed under the doctrines of ratification and laches?
Opinions:
Majority - Cypher, J.
No. A corporation's claim to expunge a deed from an unauthorized sale is barred by the doctrines of ratification and laches when it fails to promptly repudiate the transaction and waits an unreasonable length of time before filing suit. The court found that although the agent, Frazier, lacked actual authority to execute the 1978 deed because his five-year authorization had expired, the Colony's subsequent actions validated the sale. The Colony ratified the transaction first in 1978, when its then-principals failed to repudiate the sale and the corporation accepted and used the proceeds to pay operating costs. It ratified the sale again by 1983, when Eleanor Stefani, despite having knowledge of the sale's questionable nature, failed to take any action to disavow it after consulting with her attorneys. The court further held that the Colony's claim was barred by laches due to the 23-year delay in bringing the suit, which was unreasonable and caused prejudice to Harris's estate because key witnesses, including Harris and Frazier, had died before trial.
Analysis:
This decision illustrates that even in the context of registered land, where title is meant to be certain, equitable doctrines like ratification and laches can cure an initially defective transfer. It establishes that a principal's inaction, especially when coupled with the acceptance of benefits, can serve as an implied ratification of an agent's unauthorized act. The ruling serves as a strong precedent for barring stale claims related to real property, emphasizing that a party with knowledge of a potential wrong must act diligently and cannot delay asserting its rights to the prejudice of others. This reinforces the principle that a party cannot 'purposefully shut his eyes to means of information' and later claim ignorance to excuse an unreasonable delay.
