649 F. App'x 209
3rd Cir.2016Background
- VIP, a Virginia LLC formed to buy a minor-league baseball team, obtained a $3.25M loan from Eaglebank on April 17, 2013; the loan documents were signed by VIP EVP/CFO Harry Stokes and Eaglebank filed a financing statement the same day.
- VIP’s Board of Managers had passed a Borrowing Resolution authorizing Stokes to “borrow . . . such sum or sums of money as in [his] judgment should be borrowed, without limitation.”
- VIP’s counsel provided Eaglebank an opinion letter stating Stokes had authority to execute the loan documents; VIP used the loan proceeds for operating expenses.
- Five months later, Robert Van Hoecke made a $504,000 loan to VIP and perfected a security interest; after VIP’s failed purchase and default, Eaglebank sought to recover a $1.25M deposit previously held by BR as collateral for its loan.
- Van Hoecke intervened, claiming his later-perfected lien was senior because Stokes lacked authority to bind VIP for the Eaglebank loan (arguing board/member approval limits and a $750,000 purported cap).
- The district court granted summary judgment for Eaglebank, finding Stokes had actual authority; the Third Circuit affirms on alternative grounds that Stokes had at least apparent authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Stokes had authority to bind VIP for the Eaglebank loan | Eaglebank: Stokes had actual authority based on Board resolution and counsel opinion; even if not, apparent authority or ratification | Van Hoecke: Operating Agreement limited borrowing (Board/Members approval and $750K cap); Eaglebank should have known limits | Court: Even if actual authority is close, Stokes had at least apparent authority; summary judgment for Eaglebank affirmed |
| Whether a subsequently perfected junior lienholder may invalidate an earlier perfected security interest because the borrower’s agent exceeded authority | Eaglebank: Third parties cannot reasonably void a perfected security interest; the contract was valid/ratified | Van Hoecke: Officer exceeded authority so earlier lien invalid as to third parties | Court: Did not decide fully whether third parties can void; noted voidable (not void) nature of ultra vires/unauthorized acts and affirmed on apparent authority grounds |
| Whether the Borrowing Resolution’s $750,000 figure limited Stokes’s authority | Eaglebank: Resolution expressly authorized borrowing "without limitation"; $750K notation was for lender's use only | Van Hoecke: The $750K reference shows a cap on authority | Court: Resolution unambiguously authorized unlimited borrowing; $750K figure not a limit |
| Whether Eaglebank had notice of any limitation in VIP’s Operating Agreement that would defeat apparent authority | Eaglebank: Relied on Board resolution and counsel opinion; Operating Agreement ambiguous | Van Hoecke: Eaglebank had copy of 2011 Operating Agreement showing member approval needed | Court: No evidence Eaglebank knew or reasonably should have known of limits; reliance on resolution and opinion letter was reasonable |
Key Cases Cited
- Faush v. Tuesday Morning, Inc., 808 F.3d 208 (3d Cir.) (standard of review on summary judgment)
- Nicini v. Morra, 212 F.3d 798 (3d Cir.) (we may affirm on any ground supported by the record)
- Revere Press, Inc. v. Blumberg, 246 A.2d 407 (Pa. 1968) (definition and principles of apparent authority)
- Rednor & Kline, Inc. v. Dep’t of Highways, 196 A.2d 355 (Pa.) (authority may be presumed from officer’s position)
- Michelson v. Duncan, 407 A.2d 211 (Del. 1979) (distinguishing voidable vs. void acts by corporate agents)