## Facts

- Providence College, a private nonprofit college, hired A.R. Construction, Inc. and Westminster Construction, Inc. (family-owned) for an asbestos abatement project.
- The contractors obtained loans from Crossland Savings Bank because they lacked capital.
- Crossland required a written guaranty from Providence College covering the contractors’ obligations to the bank, including future obligations, up to $621,000.
- Joseph Byron, Providence College’s Vice President for Business Affairs, signed the bank’s guaranty form after being approached by Bernard Renzi, the contractors’ principal officer.
- Crossland knew Byron’s title but did not investigate whether he had authority to execute a guaranty for the college.
- There was no evidence Providence College had previously guaranteed a contractor’s bank debt, and the guaranty was atypical for a nonprofit educational institution.
- Crossland later entered FDIC conservatorship; the FDIC sought to enforce the guaranty as successor to the bank.

## Issues

1. Whether Providence College, through its own manifestations, created apparent authority for its Vice President for Business Affairs to execute a broad guaranty of a contractor’s bank debt.
2. Whether Crossland reasonably relied on Byron’s title and conduct, given the unusual nature of the guaranty for a private nonprofit college.

## Decision

- The Second Circuit reversed the judgment against Providence College.
- The court held Byron lacked apparent authority to bind the college to the $621,000 guaranty.
- The court concluded Crossland’s reliance on Byron’s title alone was not reasonable in an extraordinary, non-routine transaction and that the bank failed to make required inquiries into authority.

## Legal Principles

- Apparent authority must be based on manifestations by the principal, not on the agent’s assertions or status alone.
- A third party’s reliance must be reasonable; where a transaction is unusual for the type of principal involved, the third party has a duty to inquire into the agent’s actual authority.
- An officer title (including “Vice President for Business Affairs”) does not, by itself, imply authority to undertake large, atypical guaranties of third-party debts absent supporting indicia of authorization.

## Conclusion

Because Providence College did not hold Byron out as having authority to guarantee contractors’ bank obligations and the bank unreasonably relied on his title in an atypical transaction without further inquiry, the guaranty was unenforceable against the college, and the judgment for the FDIC was reversed.


FDIC v. Providence Coll., 115 F.3d 136 (2d Cir. 1997)