Cengage Advantage Books: Foundations of the Legal Environment of Business 3rd Edition by Marianne Jennings

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Cove Management v. AFLAC, Inc. 986 N.E.2d 1206 (Ill. App. 2013)
Ducking Out of a Lease
Facts
AFLAC (defendant) is engaged in the business of underwriting and selling insurance policies in the health care field. On September 22, 2004, Darren Galgano (also a defendant) signed an "Associate's Agreement" with AFLAC, which engaged Galgano to solicit applications for insurance policies offered for sale by AFLAC. The agreement also states that Galgano is an independent contractor, without the authority to bind AFLAC for Galgano's "debts, faults, or actions." The agreement specifically states that Galgano is prohibited from entering into contracts or incurring debt on behalf of AFLAC.
On September 5, 2005, Galgano signed a "District Sales Coordinator's Agreement," which incorporated the terms of the "Associate's Agreement" and specifically withheld authority from Galgano to "rent any office space or telephone, open any bank account, or make any expenditure, obligation or commitment for any purpose in the name of AFLAC without specific written authorization from the president, a vice president, or secretary of AFLAC." On August 6, 2007, Galgano signed a "Regional Sales Coordinator's Agreement," which incorporated the "District Sales Coordinator's Agreement" and once again withheld authority from Galgano to rent office space, incur debt, or enter into a contract on AFLAC's behalf without express written authorization of the president, a vice president, or a secretary of AFLAC.
On September 4, 2009, Galgano leased retail property located in Crestwood, Illinois, from Cove Management (plaintiff). The first page of the lease listed Cove as the lessor, listed "AFLAC" as the tenant, and listed Galgano as the guarantor. The lease provided that the permitted use of the space was "insurance services." On the signature page, Galgano signed his own name under "lessee" and "guarantor." He did not indicate on the signature page that he was signing on behalf of AFLAC.
After Cove was not paid rent and the property in Crestwood was abandoned, Cove filed suit for breach of the lease agreement against both AFLAC and Galgano. The trial court granted AFLAC summary judgment on the grounds that Galgano had no authority to bind it to a lease. Cove appealed.
Judicial Opinion
GORDON, Justice
AFLAC claimed that Galgano was an independent contractor who had no authority to bind AFLAC to any lease agreement. In order to determine whether Galgano was an independent contractor or an agent of AFLAC, we must first determine Galgano's authority.
"An agent's authority may be either actual or apparent, and actual authority may be either express or implied." Express authority is actual authority granted explicitly by the principal to the agent, while implied authority is actual authority proven circumstantially by evidence of the agent's position. Apparent authority, by contrast, is authority imposed by equity.
The doctrine of apparent authority is rooted in the doctrine of equitable estoppel. Where a principal has created the appearance of authority in an agent, and another party has reasonably and detrimentally relied upon the agent's authority, the principal cannot deny it.
If there is no showing of reasonable and detrimental reliance upon the agent's authority, there can be no apparent authority.
The majority of evidence that plaintiff shows is evidence that came into existence after the signing of the lease. The business cards that Galgano gave to plaintiff showed a Chicago address with the word "AFLAC" in large letters, with phone numbers in Chicago's Loop, Chicago Ridge, and South Holland. The cards listed Galgano's email address using the domain " us.aflac.com" and " aflac.com," and designated Galgano as a "Regional Sales Coordinator" and "An Independent Associate Representing Aflac." The cards showed the name AFLAC in blue with the duck symbol on the "L" of "AFLAC." When using the Internet to look for AFLAC, plaintiff alleges that it found aflac.com listed at its Midlothian address. However, even though the sheet showing this Internet information was attached as an exhibit to plaintiff's complaint, its creation occurred after the lease was signed; thus, plaintiff could not have relied on it to its detriment. Likewise, we cannot consider the evidence (1) that when the office was set up, the parking sign had the AFLAC symbol and duck, (2) that AFLAC's stylized blue materials were in the office, inside and out, and (3) that AFLAC was listed on the directory of the building, because they all occurred after the lease was signed and thus there was not any reliance by plaintiff on that information when entering into the lease. Without any showing of a reasonable and detrimental reliance by plaintiff, there cannot be recovery for apparent authority.
The record in the instant case does not show that plaintiff made any effort to determine whether Galgano was an independent contractor or an agent of AFLAC acting within the scope of his authority. Instead, plaintiff apparently relied exclusively on the statements and representations of Galgano that he had the authority to bind AFLAC to the lease on the premises.
Plaintiff's arguments that AFLAC must have known of Galgano's conduct are not the issue in this case. Since there is no showing of reasonable and detrimental reliance upon Galgano's authority, we cannot find that Galgano was acting under apparent authority. In addition, plaintiff failed to make a reasonable inquiry as they were under a duty to make.
Plaintiff next argues that the trial court improperly dismissed its count for ratification of the lease. "Ratification occurs when the principal learns of an unauthorized transaction, then retains the benefits of the transaction or takes a position inconsistent with nonaffirmation." "Ratification may be inferred from surrounding circumstances, including long-term acquiescence, after notice, to the benefits of an allegedly unauthorized transaction."
Plaintiff argues that AFLAC neither objected to Galgano's actions nor made any effort to convey an objection to plaintiff. However, Lynn Fry's unchallenged affidavits explicitly state that AFLAC had no knowledge that Galgano "had signed a lease for the premises" until plaintiff filed its lawsuit. Therefore, AFLAC could not have had "full knowledge" of Galgano's actions. [A] s a result, [plaintiff] cannot prove that AFLAC ratified the lease.
Finally, plaintiff argues that the trial court improperly dismissed its count for unjust enrichment. Quantum meruit is used as an equitable remedy to provide restitution for unjust enrichment.
AFLAC had no knowledge of the lease until plaintiff filed its lawsuit. Without knowledge of the lease, AFLAC could not accept the services provided, and as a result, plaintiff can prove no set of facts to show that it is entitled to quantum meruit recovery.
The trial court properly granted defendant AFLAC's motion to dismiss.
Case Questions
1. Why does the court find that there is no apparent authority?
2. Why does the court conclude that there was no ratification?
3. Why does the court conclude that Cove is not entitled to quantum meruit recovery?