In re Estate of Baum, 105,338.

• Decision Date: 29 June 2012
• Docket Number: No. 105,338.,105,338.
• Citation: 279 P.3d 147
• Parties: In the Matter of the ESTATE OF Jack Voyl BAUM, Deceased.
• Court: Kansas Court of Appeals

279 P.3d 147

In the Matter of the ESTATE OF Jack Voyl BAUM, Deceased.

No. 105,338.

Court of Appeals of Kansas.

June 29, 2012.

Appeal from Sedgwick District Court; Richard T. Ballinger, Judge.
Mark G, Ayesh and Ray E. Simmons, of Ayesh Law Offices, of Wichita, for appellant/cross-appellee Estate of Jack Voyl Baum.

Ted E. Knopp, of Ted E. Knopp, Chartered, of Wichita, for appellee/cross-appellant Larry's Trailer Sales & Service, LLC.

Before STANDRIDGE, P.J., McANANY and ATCHESON, JJ.

MEMORANDUM OPINION
PER CURIAM.

Larry's Trailer Sales & Service, LLC (Larry's), filed a claim against the Estate of Jack Voyl Baum, deceased (the Estate), in the amount of $46,658.06, alleging that Baum personally owed Larry's for services rendered during his operation of OK Transfer & Storage, a sole proprietorship. The Estate denied liability, alleging that the services were rendered to OK Transfer & Storage, Inc., a now defunct corporation. The Estate further claimed that even if the Estate had been liable, Larry's claims were barred by the statute of limitations. Following an evidentiary hearing, the district court found tht the Estate was liable for the services rendered by Larry's and that the statute of limitations had been tolled by payments made on Baum's account. The court ultimately granted judgment in favor of Larry's in the amount of $26,144.90, holding that Larry's was not entitled to the entire amount requested because it failed to present evidence that interest was contemplated by the parties' agreement. The Estate appeals the district court's judgment in favor of Larry's, while Larry's cross-appeals the district court's denial of its request for interest.

Facts

Baum operated a sole proprietorship under the name of OK Transfer & Storage, Let Us Move It. In the late 1950's, Baum entered into an oral agreement to obtain goods and services from Larry's. In 1975, Baum formed the corporation OK Transfer & Storage, Inc. Although payments made to Larry's after the incorporation were made by corporate check in the name of OK Transfer & Storage, Inc., the name and title on the account—OK Transfer & Storage—remained unchanged.

Beginning in 2005, the corporation fell behind in making payments to Larry's. In 2007, Larry's began requiring the corporation to pay for services at the time they were rendered. By the end of 2007, the account still had a balance of nearly $46,000, which included finance charges. In 2008, Larry's received notification that OK Transfer & Storage, Inc., was liquidating its assets and that it was not able to pay the monies owed to Larry's.

On February 16, 2009, Baum died testate, and his will was admitted to probate. On August 10, 2009, Larry's filed a petition for allowance and classification of demand against Baum's estate, alleging that it was due a net balance of $43,985.74, which included an 18% interest charge. Larry's later amended the balance due to $45,658.06. In response, the Estate sought to dismiss Larry's demand, claiming that because Larry's failed to answer the Estate's requests for admissions issued during discovery, they were deemed admitted and extinguished Larry's claim because they established that there was no account in Baum's name and that Baum never personally guaranteed any indebtedness of OK Transfer & Storage, Inc.

At an evidentiary hearing, the district court heard argument and testimony from both parties and ultimately granted judgment in favor of Larry's. The court found that Baum's failure to notify Larry's in 1975 that Baum no longer was operating as a sole proprietorship, but as a representative of OK Transfer & Storage, Inc., meant the open account remained that of Baum's doing business as OK Transfer & Storage, which in turn meant the Estate was liable for the debt. With that said, the court denied Larry's request for interest on the debt because Larry's failed to show that interest was contemplated by the parties' agreement. In the end, the court concluded that Larry's was entitled to $26,144.90, plus costs of the action.

Analysis

The Estate presents two points of error on appeal. First, the Estate argues the district court erred in finding Baum personally liable for the debt owed to Larry's on the OK Transfer & Storage account. Second, the Estate argues that even if Baum had been liable, the district court erred in failing to find that Larry's claims were barred by the statute of limitations. Larry's cross-appeals from the district court's decision finding Larry's was not entitled to interest on the debt. We address each of the issues presented in turn.

1. Personal Liability

In its first point of error, the Estate argues the facts upon which the district court relied in concluding Baum was personally liable for the debt owed to Larry's on the OK Transfer & Storage account are not supported by substantial competent evidence in the record. More specifically, the Estate asserts the district court blatantly ignored two key pieces of evidence introduced at trial. The Estate contends this evidence undermines the court's factual findings to the extent that a reasonable person would no longer accept the court's findings as supported by substantial competent evidence. The evidence to which the Estate refers is (1) Larry's admission prior to trial that it did not have an account bearing Baum's name and (2) Larry's long-standing knowledge that Baum was acting as a representative for the corporation and not as a sole proprietor.

A. Admission

The Estate served several requests for admission on Larry's during the discovery phase of this litigation, including a request to admit that “Larry's Trailer Sales & Services, LLC does not have an account in the personal name of the decedent, Jack Voyl Baum.” Based on Larry's failure to respond or otherwise object to this statement, the Estate asserts that Larry's has admitted the truth of this statement pursuant to K.S.A. 60–236 and that the district court's factual findings directly conflict with this admission. But we find the issue of whether Larry's admitted the truth of this statement is immaterial to the court's factual findings. This is because there is no dispute that the account at issue here was in the name of OK Transfer & Storage and not Baum's personal name. Thus, even if Larry's was deemed to have admitted this fact, it does nothing to contradict Larry's argument that Baum was individually responsible for services rendered on the OK Transfer & Storage account.

B. Larry's receipt of corporate checks

Although conceding that Baum never expressly notified Larry's that it was dealing with a corporate entity and not with Baum as a sole proprietor, the Estate argues that payment to Larry's by corporate check over the course of several decades was sufficient to provide Larry's with actual knowledge of this fact, which effectively relieves Baum of any liability on the contract.

We begin our analysis with a brief review of the agency law that is relevant to the issue presented. An agent who fails to disclose the existence of the agency or the identity of the principal is personally liable in his or her contractual dealings with third parties. The underlying rationale is that “a third-party creditor, who has agreed to look to the individual for payment rather than some unknown and undisclosed principal, is entitled to rely on the personal liability of the individual to whom credit was extended.” Hill & Company, Inc. v. O'Malley, 15 Kan.App.2d 709, 715, 817 P.2d 660 (1991). Consistent with this rationale, the agent bears the entire burden of making this disclosure and the third party with whom the agent deals has no duty to inquire whether the agent is acting for another or to discover the existence of the agency or the identity of the principal. Thus, it is not sufficient to relieve the agent from liability on the contract that the third party has knowledge of facts and circumstances which would, if reasonably followed by inquiry, disclose the identity of the principal. With that said, if the third party with whom the agent contracts on behalf of an undisclosed principal has actual knowledge of the agency and the identity of the principal, the agent will be relieved from liability on the contract, whether the agent himself or herself makes disclosure or the third party acquires the knowledge from some other source. Lentz Plumbing Co. v. Fee, 235 Kan. 266, 270–71, 679 P.2d 736 (1984).

“Whether or not the fact of the agency and the name of the principal were disclosed or known to the third party so as to protect the agency from personal liability on the transaction is essentially a question of fact which depends upon the circumstances surrounding a particular transaction.” Lentz Plumbing Co., 235 Kan. at 271. Consequently, our standard of review is whether the findings of fact are supported by substantial competent evidence and sufficient to support the district court's conclusions of law. Substantial competent evidence is such legal and relevant evidence as a reasonable person might regard as sufficient to support a conclusion. Hodges v. Johnson, 288 Kan. 56, 65, 199 P.3d 1251 (2009). An appellate court has unlimited review of conclusions of law. American Special Risk Management Corp. v. Cahow, 286 Kan. 1134, 1141, 192 P.3d 614 (2008).

The district court made its legal conclusion that Baum was personally liable for the debt owed to Larry's on the OK Transfer & Storage account based on the following findings of fact:

• Baum entered into an oral agreement with Larry's for goods and services on an open account;

• The oral agreement was made in the 1950's and continued up to and including all times relevant to this matter;

• Baum caused a corporation OK Transfer & Storage, Inc., to be formed in or around 1975;

• No notice was provided by Baum or the corporation to Larry's that Baum was no longer acting as a proprietor and was instead acting in a representative capacity for the corporation;

• The corporation made no credit applications to its...