What You Need to Know

• Distinction Between Apparent Authority vs. Actual Authority – The Court clarified that apparent authority focuses on whether a third party reasonably believed an agent had authority based on the principal's actions, while actual authority focuses on whether the agent reasonably believed they were authorized to act based on the principal's manifestations to them.
• Apparent Authority Failed Due to Lack of Knowledge – The appellate court found insufficient evidence for apparent authority because the buyer (Plaintiff) did not even know the actual property owner (the Defendant) existed until after signing the contract - he believed the Defendant’s daughter (Huijin) owned the property outright.
• Actual Authority May Still Apply – Despite rejecting apparent authority, the Court found sufficient facts to potentially support actual authority, including evidence that the Defendant had delegated property management to his family members while living in China and that father-daughter communications about the property likely occurred.
• Case Remanded for Proper Legal Analysis – Since the lower court based its decision on the wrong legal doctrine (apparent authority instead of actual authority), the Appellate Division sent the case back for additional briefing and findings under the correct legal framework, demonstrating the importance of applying the right legal theory even when the outcome might be similar.

Introduction

In Moshe Sugar v. Zhi Shan Wang, et al., A-4068-23, 2025 N.J. Super. Unpub. LEXIS 1261 (App. Div. July 10, 2025), the New Jersey Appellate Division considered the issue of an agent’s authority to bind its principal in the context of a dispute over the enforcement of a real estate contract. In doing so, the Court compared the distinct doctrines of apparent authority and actual authority, and found that while the former did not apply, the latter could.

Background

Defendant Zhi Shan Wang (“Zhi”) resided primarily in China but purchased the subject property (the “Property”) in Jersey City in 2017 as an investment. Zhi returned to China shortly after completing the purchase. Zhi’s wife and daughter (Huijin) lived in the United States. Plaintiff Moshe Sugar (“Plaintiff”) is a real estate developer who conducts business in Jersey City. Plaintiff was contacted by his broker concerning Property.

In January of 2021, Plaintiff and Huijin executed a sales contract conveying the Property for the sales price of $403,000. Both parties were represented by counsel. The parties signed the contract and Plaintiff sent the required deposit, and the property sale proceeded to attorney review.

Prior to closing, Huijin demanded that Plaintiff pay more money to execute the sale. Plaintiff refused to do so and asserted that, if the deal was not completed, he would seek reimbursement for an estimated $45,000 he expended in fees and permits. Huijin refused and expressed that her father wanted more money to approve sale of the Property. An in-person meeting at Plaintiff’s broker’s office did not resolve the dispute and the property sale failed to close. At said meeting, Huijin rebuffed Plaintiff’s threat that he would pursue a court filing and stated that her father lived in China.

Plaintiff filed a complaint against Zhi seeking specific performance and damages. The court ultimately conducted a three-day bench trial where the court found that it “never encountered a more hostile witness than” Zhi. The court also made various findings of adverse credibility as to Zhi, including that he contradicted himself regarding delegation of managing duties for the Property and that it “defied belief” that Zhi could speak to his daughter several times a week and never discuss the only piece of property he owned in the United States. Regarding Huijin, who was absent from the trial, the court found that such absence raised an adverse inference that her testimony would have been deleterious to her defense. The court ultimately granted Plaintiff’s request for specific performance based on a finding of apparent authority since it was not unreasonable for Plaintiff to rely on Huijin’s authority based on her conduct during negotiations relating to the sale of the Property. The court then denied Zhi’s motion for reconsideration. Zhi appealed.

Decision

In considering Zhi’s appeal, the Appellate Division began by contrasting the doctrines of apparent authority and actual authority. Apparent authority focuses on the reasonable expectations of those who deal with the agent and whether the principal’s actions misled a third party into believing a relationship of authority exists. In other words, the key point is whether the third party’s reasonable belief of the agent’s authority can be traced to the principal’s manifestations. On the other hand, actual authority occurs when the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent to act.

Based on those principles, the Court found that there was insufficient evidence that Huijin acted with apparent authority as Plaintiff did not know that Zhi existed or owned the Property until the sales contract was signed. Rather, Plaintiff believed that Huijin owned the Property.

However, the Court found that there were sufficient facts to support a finding of actual authority as the lower court found (i) that Zhi had tasked his wife and Huijin with managing affairs related to the Property while he was in China; (ii) it defied belief that Zhi and Huijin never discussed the Property during numerous weekly calls; and (iii) Huijin twice referenced her father’s involvement in the sale of the Property.

That said, since the lower court’s legal findings were primarily based on a finding of apparent authority, the Appellate Division declined to exercise original jurisdiction as to the actual authority issue and remanded the case to the lower court for additional briefing and factual findings.

Takeaway

This case serves as a useful reminder of the distinctions between apparent authority and actual authority. While the former focuses on the principal’s actions, the latter focuses on the agent’s action. In this case, where the agent acted and purported to sell the subject property as a property owner, the Court nevertheless found that the would-be buyer could be entitled to some sort of relief, albeit not pursuant to the specific doctrine that the lower court focused on.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Matthews Florez at mflorez@riker.com or Shelley Wu at swu@riker.com.