Tedesco v. Gentry Development, Inc.
1989 WL 22433, 540 So. 2d 960 (1989)
Sections
Rule of Law:
A contract to sell immovable property executed by an agent is unenforceable unless the agent has express written authority from the principal; the doctrine of apparent authority cannot override this requirement unless the third party has detrimentally changed their position in reliance on the representation (agency by estoppel).
Facts:
- Gentry Development, Inc. owned a subdivided tract of land and intended to reserve Lot 2 for the construction of a branch bank.
- James Winford, the president of Gentry, signed listing agreements with a real estate agency for several lots, including Lot 2, despite the board's intent to keep that specific lot.
- Winford subsequently renewed these listing agreements without specific authorization from the Gentry board of directors.
- Plaintiffs (Tedesco) submitted a written offer to purchase Lot 2 for $50,700.
- Winford signed the acceptance of the offer in his capacity as president of Gentry Development.
- The Gentry board subsequently informed the plaintiffs that Winford was not authorized to sell Lot 2 and refused to convey the property.
Procedural Posture:
- Tedesco filed a suit for specific performance against Gentry in the state district court.
- The district court ruled in favor of Tedesco, ordering specific performance based on a finding of apparent authority.
- Gentry appealed the decision to the Louisiana Court of Appeal.
- The Court of Appeal reversed the district court's judgment, holding that apparent authority does not apply to real estate transactions.
- Tedesco petitioned the Supreme Court of Louisiana for a writ of certiorari to review the appellate court's decision.
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Issue:
Is an executory contract for the sale of immovable property enforceable against a corporate principal based on the apparent authority of its president when the president lacked express written authority to execute the sale?
Opinions:
Majority - Justice Lemmon
No, the contract is unenforceable because the sale of immovable property requires the agent to have express written authority. The court reasoned that Louisiana statutory law (Civil Code) strictly mandates that authority to sell real estate be in writing. Consequently, testimonial proof or mere 'apparent authority' (manifestations by the principal that the agent is authorized) is insufficient to bind a principal to a real estate contract absent that written grant. The court distinguished between 'apparent authority' and 'agency by estoppel,' noting that while apparent authority generally does not require a change in position, estoppel does. In the specific context of real estate, the strict writing requirement can only be overcome by 'agency by estoppel,' which requires the plaintiff to prove they suffered a detrimental change in position (such as financial loss) in reliance on the agent. Since Tedesco merely signed an executory contract and suffered no actual loss before the repudiation, estoppel did not apply.
Analysis:
This decision reinforces the sanctity of the writing requirement (Statute of Frauds) in real estate transactions within Louisiana, prioritizing statutory mandates over general agency principles. By ruling that standard apparent authority cannot cure a lack of written authorization for land sales, the court places the burden of due diligence on buyers to verify an agent's written credentials. However, the court creates a critical safety valve by acknowledging 'agency by estoppel.' This implies that while a contract might be technically void for lack of written authority, a principal cannot escape liability if their negligence caused a third party actual financial harm, effectively distinguishing between enforcing a 'bargain' (not allowed) and preventing specific loss (allowed).
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