Eyberg v. Shah

• Decision Date: 05 July 1989
• Docket Number: No. 15913,15913
• Citation: 773 S.W.2d 887
• Parties: James B. EYBERG and Sheila Eyberg, and Roger Cape and Virginia Cape, Plaintiffs-Appellants, v. Himat SHAH and Bhabana Shah, Defendants, and Jefferson Savings & Loan Association, Intervenor-Respondent.
• Court: Missouri Court of Appeals

Page 887

773 S.W.2d 887

James B. EYBERG and Sheila Eyberg, and Roger Cape and Virginia Cape, Plaintiffs-Appellants, v. Himat SHAH and Bhabana Shah, Defendants and Jefferson Savings & Loan Association, Intervenor-Respondent.

No. 15913.

Missouri Court of Appeals,

Southern District,

Division Two.

July 5, 1989.

James A. Broshot, Mazzei and Broshot, Steelville, for plaintiffs-appellants.

John T. Bruere, St. Charles, for defendants Himat & Bhabana Shah.

John Z. Williams, Williams, Robinson, Turley, Crump & White, Rolla, for Jefferson Sav. & Loan.

FLANIGAN, Presiding Judge.

This action, involving multiple claims and multiple parties, arises from the sale of approximately 47 acres of real estate ("the land") in Pulaski County. The sellers were James B. Eyberg and Sheila Eyberg, his wife, and Roger Cape and Virginia Cape, his wife, plaintiffs below. The buyers were Himat Shah and Bhabana Shah, his wife, defendants below. The deed was delivered by sellers to buyers on September 4, 1986. The sale price was $900,000.

In connection with the sale, the buyers borrowed $600,000 from Jefferson Savings & Loan Association ("Jefferson") and gave Jefferson a note secured by a deed of trust on the land. The buyers later defaulted in the payment of the note and the trustee, at the request of Jefferson, foreclosed under the deed of trust. The foreclosure culminated in a sale on July 30, 1987, at which time Jefferson, as the successful bidder, received a trustee's deed to the land for a bid price of $400,000.

On March 6, 1987, plaintiffs brought this action against defendant Shah and his wife. The petition sought a decree annulling the deed of September 4, 1986, or, alternatively, awarding actual and punitive damages based on certain alleged fraudulent representations and other misconduct on the part of Shah.

On May 7, 1987, Jefferson filed a motion to intervene and the trial court sustained the motion. Jefferson filed a "Petition for Declaratory Judgment" seeking a declaration that the deed of trust and the trustee's deed to Jefferson were valid.

Plaintiffs-sellers filed an answer to Jefferson's petition. The answer did not contain a counterclaim. The answer did plead that defendant Himat Shah (hereinafter "Shah"), at all times mentioned in plaintiffs' petition and in Jefferson's intervening petition, was acting as agent for Jefferson and that Jefferson had ratified all the actions and statements of defendant Shah. The answer also pleaded that Shah had fraudulently induced the delivery of the deed from plaintiffs to Shah by making certain false representations. The answer further alleged that as part of the purchase price of the land plaintiffs were to receive a promissory note in the amount of $150,000 and second deed of trust executed by defendants-buyers in favor of plaintiffs, and that said note and second deed of trust were to be prepared by Jefferson but that Jefferson failed to do so.

A separate nonjury trial was held on Jefferson's petition for declaratory judgment and the answer thereto filed by plaintiffs. Apparently Shah and his wife did not file an answer to Jefferson's petition. Jefferson and plaintiffs appeared and offered evidence at that hearing. Shah did not appear. On May 24, 1988, the trial court made findings of fact and conclusions of law and entered a judgment finding the issues in favor of Jefferson on its intervening petition. On August 22, 1988, the trial court, pursuant to Rule 74.01(b), ¹ entered an amended judgment. Plaintiffs timely appealed from the amended judgment.

Plaintiffs challenge the amended judgment on its merits and on procedural grounds. Plaintiffs' challenge to the merits will be considered first.

Plaintiffs' first point is that the trial court erred in granting Jefferson declaratory relief by upholding the validity of Jefferson's deed of trust and the trustee's deed because "[the trial court's] finding that Shah was not the agent of Jefferson is not supported by competent and substantial evidence." This contention requires a review of the evidence in light of certain familiar principles of the law of agency.

The existence and scope of an agency need not be established by direct and positive evidence but may be inferred from facts and circumstances in evidence. State v. Bland, 355 Mo. 17, 194 S.W.2d 42, 46 (1946); Jefferson-Gravois Bank v. Cunningham, 674 S.W.2d 561, 563 (Mo.App.1984). Plaintiffs, as the parties who pleaded in their answer to Jefferson's intervening petition that an agency existed between Shah and Jefferson, had the burden of proof on that issue. Henry v. Cervantes-Diversified & Associates, 700 S.W.2d 89, 92 (Mo.App.1985); Springfield Television, Inc. v. Gary, 628 S.W.2d 398, 402 (Mo.App.1982); Molasky Enterprises, Inc. v. Carps, Inc., 615 S.W.2d 83, 89 (Mo.App.1981); Dierks & Sons Lumber Company v. Morris, 404 S.W.2d 229, 232 (Mo.App.1966). If there is conflicting evidence on the existence of an agency, the issue is one of fact for the trial court. Molasky Enterprises, Inc. v. Carps, Inc., supra, at 89. An agency will not be inferred merely because a third person assumed it existed. Shelby v. Slepekis, 687 S.W.2d 231, 235 (Mo.App.1985); Stenger v. Great Southern Sav. & Loan Ass'n, 677 S.W.2d 376, 385 (Mo.App.1984); Springfield Television, Inc. v. Gary, supra, at 402; Dierks & Sons Lumber Co. v. Morris, supra, at 232.

An apparent agency may be created where the conduct of the principal is such that an appearance of agency is created. When the principal's acts or conduct lead the public to believe that the agent possesses authority to act in the name of the principal, the principal is bound by the acts within the scope of the agent's apparent authority as to persons who have reasonable grounds to believe that the agent has such authority and in good faith deal with the agent. Shelby v. Slepekis, supra, at 235. To find apparent agency the appearance of authority must have been created by the principal. Shelby v. Slepekis, supra, at 235; Jefferson-Gravois Bank v. Cunningham, supra, at 563; Springfield Television, Inc. v. Gary, supra, at 402-403; Motor Transp. v. Orval Davis Tire Co., Inc., 585 S.W.2d 195, 202 (Mo.App.1979); Dierks & Sons Lumber Co. v. Morris, supra, at 232.

Once shown, apparent authority is equivalent to express authority. Cameron Mut. Ins. Co. of Missouri v. Bouse, 635 S.W.2d 488, 491 (Mo.App.1982). An agency by estoppel or an apparent agency must be based on facts existing at the time of the transaction and not upon facts arising later. Dierks & Sons Lumber Co. v. Morris, supra, at 232. The person dealing with a supposed agent has a duty to ascertain for himself the fact and scope of agency. Springfield Television, Inc. v. Gary, supra, at 403.

Although testimony of an agent is competent to establish his agency, Wickes Lumber Co. v. Richmond Const., 690 S.W.2d 488, 490 (Mo.App.1985); Cameron Mut. Ins. Co. of Missouri v. Bouse, supra, at 491; Motor Transp. v. Orval Davis Tire Co., Inc., supra, at 202, an extrajudicial statement by the alleged agent cannot establish the fact or scope of agency. J.R. Watkins Co. v. Lankford, 363 Mo. 1046, 256 S.W.2d 788, 792 (1953); State v. Bland, 355 Mo. 17, 194 S.W.2d 42, 45 (1946); Springfield Television, Inc. v. Gary, supra, at 402; Motor Transp. v. Orval Davis Tire Co., Inc., supra, at 202.

On July 22, 1986, plaintiffs, as sellers, entered into a written contract with Shah and his wife, as buyers, for the sale of the land for $900,000. According to plaintiffs' petition, the purchase price was to be paid in the following manner: (a) approximately $500,000 was to discharge the liens of two outstanding deeds of trust; (b) approximately $250,000 was to be paid in cash on day of closing; (c) the balance of $150,000 was to be evidenced by a note and second deed of trust executed in favor of plaintiffs by Shah and his wife.

In obtaining a $600,000 loan from Jefferson, Shah and his wife signed a written application for the loan. The document recited: "This is not a loan commitment and is subject to board approval." According to dates appearing on the document, the document was approved by Jefferson's board on August 27, 1986, and was signed by Shah and his wife on August 29, 1986. The loan committee report was dated September 2, 1986.

On September 4, 1986, Jefferson issued its check, payable to Pulaski County Abstract & Title Company (hereinafter "Pulaski"), representing the net proceeds of its loan to Shah and his wife. The check was in the amount of $589,760.25, which was the balance of the loan of $600,000 after deductions had been made for an "origination fee," a credit report fee, title insurance premium, and the fee for recording Jefferson's deed of trust.

The closing was held on September 4, 1986, at Pulaski's office in Waynesville. William Morgan, who is an attorney and also Pulaski's manager, "handled" the closing. Present at the closing were plaintiffs James Eyberg and Roger Cape, defendant Shah, and Morgan.

Morgan testified that a "day or two" before the closing Clyde Meyer, an officer of Jefferson, telephoned Morgan and informed him that Jefferson was making the $600,000 loan and would send a check for the net proceeds of the loan for Morgan to disburse on September 4. Prior to the closing, the wives of Eyberg and Cape had signed the deed.

Shah brought to the closing the following items: (a) Jefferson's check in the amount of $589,760.25 payable to Pulaski; (b) the deed of trust which had been signed by Shah and his wife; (c) a document dated September 4, 1986, entitled "Recording Instructions," from Jefferson to Pulaski. It instructed Pulaski to record the deed of trust and to send Jefferson a settlement statement describing the closing.

The note which Shah and his wife had executed in favor of Jefferson in connection with the loan had been retained by Jefferson and was not produced at the closing. Morgan testified that his settlement statement reflected that $150,000 of the purchase...