The result of the court's decision was that the bankruptcy court refused relief from the stay in debtor's bankruptcy on the grounds that mortgagee had committed to forbear.
The case provides a valuable comparison to earlier cases reported here that had determined that attornies lack apparent authority to commit their clients to significant agreements. See, e.g. Shafer v. Barrier Island Station, Inc., 946 F.2d 1075 (4th Cir. 1991) (attorney's signature on settlement agreement involving land transfer does not bind client despite extensive negotiations conducted by attorney alone); Diversified Development & Investment, Inc. v. Heil, 889 P.2d 1212 (N.M. 1995) (attorney lacks apparent authority to commit client to extension of option period, but may have authority to "pass on" client's position after having received if from client).
Although it may seem signficant here that the mortgagee's President implicitly had authorized the attorney to negotiate the agreement through his participation, it should be noted that the agreement stated expressly: "this is an agreement in principle and is subject to agreement in terms of final settlement documents;" and that the debtor insisted that the agreement contain the language "signed contingent upon bank providing confidentiality of terms of judgments and Bill Stephens [the mortgagee's President] signing." Apparently the debtor did not have great confidence in the apparent authority of the mortgagee's attorney or the finality of the agreement.
Comment: Apparently customs differ from place to place as to the acceptance of the attorney's commitment in a real estate deal as binding upon the client. There may be no way out of the dilemma in terms of a general rule, because special facts are likely to control the issue in most cases. Suffice it to say that a party to a significant agreement affecting real estate only rarely should feel confident that a final deal has been reached on the sole basis of the agreement, and even the signature, of the attorney negotiator.
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