The opinion of the court was delivered by: BECHTLE
Plaintiff commenced this diversity action against Dr. James R. Leonard and Jefferson Medical College ("Jefferson") to recover damages due to an alleged breach of contract, wherein plaintiff was to join the staff of Jefferson at the associate professor level. The case proceeded to trial and the jury found Jefferson in breach of contract and awarded damages in the sum of $21,500. Presently before the Court are Jefferson's motions for judgment notwithstanding the verdict or, in the alternative, for a new trial.
Viewing the facts in the light most favorable to plaintiff, the following facts were adduced at trial. In the fall of 1971, plaintiff, a citizen of the State of Colorado, received a telephone communication from Dr. James R. Leonard, Chairperson of the Department of Otolaryngology at Jefferson, regarding plaintiff's availability to join the staff of Jefferson in that department. Plaintiff expressed general interest in the position and, by subsequent letter, made arrangements to visit the Jefferson facilities in Philadelphia on December 18-21, 1971. He was to meet personally with Dr. Leonard. The visit subsequently took place, during which time plaintiff and Dr. Leonard discussed the particulars of the position, the salary range, academic title, and general hiring and promotional policies at Jefferson.
On December 29, 1971, Dr. Leonard wrote plaintiff and offered him the position of Chief of Audiology and Assistant Director of the Hearing and Speech Center, at the rank of assistant professor. The starting salary was to be $18,000 per year. Plaintiff, in his reply letter of January 6, 1972, expressed disappointment with Dr. Leonard's offer and stated that he desired not only to begin as the Chief of Audiology, but also as the Director of the Hearing and Speech Center and at the associate professor level. Dr. Leonard then offered plaintiff, in a letter dated January 13, 1972, the same position and starting salary as stated in the December 29 offer, but at the higher rank of associate professor, and the opportunity to become the Director of the Hearing and Speech Center at a later time if plaintiff's interim performance was satisfactory. On January 18, 1972, plaintiff accepted Dr. Leonard's latest offer and proceeded to make arrangements to move to Philadelphia, which included the sale of his house and termination of his employment in Colorado. By letter dated January 31, 1972, Dr. Leonard rescinded his offer for the reasons that the majority of the staff of the Hearing and Speech Center opposed plaintiff's joining the staff under the terms contained in the January 13, 1972, letter, and that the rank and promotion steps contained in that letter would find little support at the level of the office of the Dean of the Medical School.
In ruling upon a motion for judgment notwithstanding the verdict, the trial court, without considering the credibility of the witnesses, is compelled to view the evidence and all reasonable inferences therefrom in the light most favorable to the verdict winner. Thomas v. E. J. Korvette, Inc., 476 F.2d 471, 475 (3d Cir. 1973). Nevertheless, if upon review of the record it can be said as a matter of law that the verdict is not supported by legally sufficient evidence, a court may grant a judgment notwithstanding the verdict. Urti v. Transport Commercial Corporation, 479 F.2d 766, 768 (5th Cir. 1973); Neville Chemical Company v. Union Carbide Corporation, 422 F.2d 1205, 1210 (3d Cir.), cert. denied, 400 U.S. 826, 27 L. Ed. 2d 55, 91 S. Ct. 51 (1970).
In support of its motion for judgment notwithstanding the verdict, Jefferson contends that this Court erred in not granting its motion for a directed verdict at the conclusion of the evidence, because plaintiff knew that Dr. Leonard did not possess final hiring authority at the time he received Dr. Leonard's final offer included in his January 13, 1972, letter. After a careful review of the entire record in this case, the Court is constrained to agree with Jefferson's assessment of the evidence and must, therefore, grant the motion for judgment notwithstanding the verdict.
There is no question that Dr. Leonard did not have express or implied authority to enter into binding employment contracts on behalf of Jefferson, and plaintiff did not attempt to prove his case on the basis of such authority. Plaintiff did, however, contend and attempt to prove throughout the trial that Dr. Leonard had apparent authority to enter into binding employment contracts., Under Pennsylvania law,
apparent authority is defined as the:
[Power] to bind a principal which the principal has not actually granted but which he leads persons with whom his agent deals to believe that he has granted. Persons with whom the agent deals can reasonably believe that the agent has the power to bind his principal if, for instance, the principal knowingly permits the agent to exercise such power or if the principal holds the agent out as possessing such power. Revere Press, Inc. v. Blumberg, 431 Pa. 370, 246 A.2d 407, 410 (1968).
See Tanner Co., Inc. v. WIOO, Inc., 528 F.2d 262, slip op. at 5 (3d Cir. No. 72-125, November 26, 1975); Reading Company v. Dredge Delaware Valley, 468 F.2d 1161, 1163 (3d Cir. 1972); Jennings v. Pittsburgh Mercantile Company, 414 Pa. 641, 202 A.2d 51, 54 (1964); Simon v. H. K. Porter Company, 407 Pa. 359, 180 A.2d 227, 229-230 (1962); Restatement (Second) of Agency §§ 8, 27 (1958). However, Pennsylvania law also provides that a principal who has invested an agent with apparent authority is only bound to third persons who have "relied thereon in good faith," Tanner Co., Inc. v. WIOO, Inc., supra 528 F.2d at 268; Schenker v. Indemnity Ins. Co. Of North America, 340 Pa. 81, 16 A.2d 304, 306 (1940); Edwards v. Heralds Of Liberty, 263 Pa. 548, 107 A. 324, 325 (1919),
or to third persons who have no notice of limitations upon an agent's authority. Sabino v. Junio, 441 Pa. 222, 272 A.2d 508, 510 (1971). See Shipley v. Ohio National Life Insurance Co., 296 F.2d 728, 729 (3d Cir. 1961).
In Tanner Co., Inc. v. WIOO, Inc., supra slip op. at 8-9, the plaintiff entered into contracts with the general manager of a radio station to produce radio jingles and promotions. In holding that the plaintiff properly relied upon the apparent authority of the general manager, the court pointed to the fact that all of the contracts signed by the plaintiff and general manager contained a statement that the "[station] official signing this agreement certifies that he has the authority to make the agreement." Thus, the plaintiff relied upon the general manager's apparent authority in good faith because he had no knowledge of any limitations upon that authority. To the contrary, plaintiff in this case had both oral and written notice of limitations upon Dr. Leonard's hiring authority. As stated by the Pennsylvania Supreme Court in Schenker v. Indemnity Ins. Co. Of North America, supra, 340 Pa. 81, 16 A.2d at 306:
While it is true that a principal may not hold his agent out in the character of one having general authority and bind third persons who have relied thereon in good faith by secret limitations and restrictions upon the agent's authority which are inconsistent with the character bestowed, it is equally well settled that a principal may confer on his agent as much or as little authority as he sees fit, imposing thereon such limitations as he thinks desirable, and that such limitations, even in the case of the so-called general agent, will be . . . binding and conclusive upon third persons who know of them. . . . (Emphasis added.)
Therefore, this Court holds that plaintiff had knowledge that further steps of approval were required beyond Dr. Leonard's actions and that, in light of this knowledge, plaintiff could not have relied in good faith upon the apparent authority of Dr. ...