Opinion ID: 3038699
Heading Depth: 3
Heading Rank: 2

Heading: The Rendell Letter

Text: Defendants contend the Rendell Letter was not a binding contract because it lacked the approval of the City Law Department and Finance Department as required by the Philadelphia Home Rule Charter. See 351 Pa. Code § 4.4- 400(c);7 351 Pa. Code § 6.6-104.8 Plaintiffs presented no 7 Contracts and Bonds. The [City Law] Department shall prepare or approve all contracts, bonds and other instruments in writing in which the City is concerned, and shall approve all surety bonds required to be given for the protection of the City. It shall keep a proper registry of all such contracts, bonds and instruments. 351 Pa. Code § 4.4-400(c). 8 Contracts. Before any contract shall be effective, the [City] Director of Finance shall approve it as 19 evidence that the City Law Department or Finance Department prepared or approved the Rendell Letter. Nonetheless, plaintiffs contend defendants bore the burden and failed to put forth evidence to show the letter was not approved in accordance with the Philadelphia Home Rule Charter. Plaintiffs are incorrect. Under Pennsylvania law, the party asserting the validity of a contract bears the burden of proof. Linn v. Employers Reins. Corp., 153 A.2d 483, 485 (Pa. 1959); Hazleton Area Sch. Dist. v. Krasnoff, 672 A.2d 858, 862 (Pa. Commw. Ct. 1996). At issue is whether Mayor Rendell had actual or apparent authority to contract for the city, absent the approval of the City Law and Finance Departments. The Philadelphia Home Rule Charter provides: “the [City Law] Department shall prepare or approve all contracts . . . .” 351 Pa. Code § 4.4-400(c). Furthermore, “[b]efore any contract shall be effective, the [City] Director of Finance shall approve it as to the availability of appropriated funds.” 351 Pa. Code § 6.6-104. Under Pennsylvania decisional law, government officials cannot bind to the availability of appropriated funds. He shall designate on every such contract, the appropriation under which it is made and shall give it a number in the order of its date. He shall, in the order in which each contract is numbered, charge the appropriation out of which expenditures thereunder will be made. 351 Pa. Code § 6.6-104. 20 the government without the necessary statutory approval. See City of Scranton v. Heffler, Radetich & Saitta, LLP, 871 A.2d 875, 880 (Pa. Commw. Ct. 2005) (“‘Where a municipality must execute a contract in a particular manner under legislative pronouncement, failure to comply with the pronouncement renders the contract unenforceable.’” (quoting Alco Parking Corp. v. Public Parking Auth. of Pittsburgh, 706 A.2d 343, 348 (Pa. Super. Ct. 1998))); Pittsburgh Baseball, Inc. v. Stadium Auth. of Pittsburgh, 630 A.2d 505, 508–09 (Pa. Commw. Ct. 1993) (finding an oral contract with a city mayor was not binding on the city); see also Innes v. Sch. Dist. of Nanticoke, 20 A.2d 225, 227 (Pa. 1941) (“‘Persons contracting with a governmental agency must, at their peril, know the extent of the power of its officers making the contract.’” (quoting Charleroi Lumber Co. v. Sch. Dist. of Bentleyville, 6 A.2d 88, 92 (Pa. 1939))). In Scranton, the Commonwealth Court considered whether the City of Scranton could be liable for the mayor’s written promise to pay plaintiff to audit medical claims paid by the city’s insurance carrier. After plaintiff submitted invoices for several months of auditing services, the city refused to pay. Finding the statutory requirements for execution of municipal contracts mandatory, the court held there was no legally binding contract. Scranton, 871 A.2d at 880. The City of Scranton’s Administrative Code provided “all contracts must be reviewed and approved by the City Solicitor and signed by the Mayor and the Controller or their designated substitutes and attested to by 21 the City Clerk.” Id. Because these requirements had not been met, the court found no valid contract. Id. Similarly in Pittsburgh Baseball, Inc., plaintiff was attempting to enforce an alleged oral promise by the mayor of the City of Pittsburgh to contribute $25 million towards the purchase and operation of the Pittsburgh Pirates baseball franchise. The Commonwealth Court held the alleged oral contract with the mayor was not binding on the city where the relevant city code required all contracts with the city to be in writing and to be signed by the mayor and appropriate department head and where the Philadelphia Home Rule Charter required that all contracts involving city affairs be authorized by resolution of the city council. Pittsburgh Baseball, Inc., 630 A.2d at 508–09. Construing the plain language of the statute, the Philadelphia Home Rule Charter, and Pennsylvania decisional law, we find the Rendell letter lacked actual authority to bind the city. Even if lacking actual authority, the District Court held the mayor had apparent authority to bind the city: “[It] may well be [that the mayor lacked actual authority], but he certainly had apparent authority . . . .” Chainey, 2005 WL 3263042, at . To establish apparent authority, a third party must demonstrate that he reasonably relied on his agent’s alleged appearance of authority. Revere Press, Inc. v. Blumberg, 246 A.2d 407, 410 (Pa. 1968). Citing William B. Tanner Co., Inc. v. WIOO, Inc., 528 F.2d 262, 268 (3d Cir. 1975), plaintiffs assert they reasonably believed the mayor, as the city’s chief executive, had 22 the power to contractually bind the city. In Tanner, an agent of a radio station who held himself out as a general manager entered into contracts on behalf of the radio station. We held that a reasonable person might believe the radio station gave the agent authority. Id. at 266–67. But that case did not involve apparent authority where a statute, ordinance, or in this case, a statute and a city home rule charter dictated the approval necessary to bind the city. Where a statute gives public notice of the required procedures for governmental contract approval, Pennsylvania courts have held there is no apparent authority for contracting government agents who are not authorized by the statute. See Berkheimer Associates v. Norco Motors, 842 A.2d 966, 970–71 (Pa. Commw. Ct. 2004); Krasnoff, 672 A.2d at 862. In Norco, the Commonwealth Court refused to enforce a settlement agreement between a local tax collector and a taxpayer over township and school district delinquent taxes because it was not approved by a majority vote of the school board, as required by the Public School Code for contracts exceeding $100. The taxpayer contended the tax collector had apparent authority to settle, citing case law holding that a lawyer may sometimes have apparent authority to settle a case on behalf of the client even absent express authority. Norco, 842 A.2d at 969–70. In rejecting this argument, the court found, “the cases relied on by Norco and the trial court do not involve a school district where a statute puts all persons dealing with it on notice that contracts over $100.00 require approval of the school board.” Id. at 970. 23 Similarly in Krasnoff, the Commonwealth Court rejected the argument that school board members had apparent authority to contract absent approval by a majority vote of the school board. In Krasnoff, an architect contracted with the school district to perform renovations. After meeting with individual school board members, the architect provided services beyond the scope of his original contract. The Commonwealth Court determined the Public School Code required approval by an affirmative vote of the school board to create a binding contract for the additional services.9 Krasnoff, 672 A.2d at 862 (citing Matevish v. Sch. Dist. of Ramey, 74 A.2d 797 (Pa. Super. Ct. 1950)). Consistent with these cases, the Rendell Letter cannot constitute a binding contract as the mayor lacked both actual and apparent authority under the Philadelphia Home Rule Charter to enter into such a contract. See 351 Pa. Code § 4.4-400(c); 351 Pa. Code § 6.6-104. 9 Moreover, the discussion of equitable estoppel in Scranton counsels against finding apparent authority. The Scranton court considered whether equitable estoppel bound the city, and concluded that entering into a contract without the express approval of the solicitor was unreasonable as a matter of law, given the requirements of the Scranton Administrative Code. Scranton, 871 A.2d at 882. The unreasonableness was particularly manifest considering that the plaintiff relied upon statements from a “member[] of the outgoing administration in its waning months.” Id. at 881. 24 Alternatively, plaintiffs contend defendants ratified the Rendell Letter. “It is well settled that a municipal corporation may ratify contracts which are within its corporate powers and made by its officers without authority, or in excess of their authority.” Eckert v. Pierotti, 553 A.2d 114, 118 (Pa. Commw. Ct. 1989). A “municipality may waive an irregularity of a municipal contract and ratify that contract.” Scranton, 871 A.2d at 881 (citing Eckert, 553 A.2d at 118). Ratification may consist of affirmative action by the proper officials or by other action or inaction that amounts to approval of the contract under the circumstances. Id. But where a previously unauthorized contract is retroactively ratified by post-contract approval, such post-contract ratification must be approved by “everyone whose approval was [previously] required under applicable law.” Id.; see also Pittsburgh Baseball, Inc., 630 A.2d at 509 (finding no ratification); cf. Eckert, 553 A.2d at 118 (holding ratification existed based upon formal post-contract approval of the contract at issue). In Scranton, where the court found the alleged contract lacked the required approval of the city solicitor, among others, the court also held that there was no post-contract ratification because the evidence “reveal[ed no] approval of the City Solicitor” between the time of the contract and the alleged ratification. Scranton, 871 A.2d at 881. Similarly here, plaintiffs presented no evidence of post-contract approval from either the City Law Department or Finance Department, so they cannot establish ratification.