Jefferson-Gravois Bank v. Cunningham

• Decision Date: 22 May 1984
• Docket Number: No. 47303,JEFFERSON-GRAVOIS,47303
• Citation: 674 S.W.2d 561
• Parties: BANK, Plaintiff-Respondent, v. E.J. CUNNINGHAM, Jr., Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 561

674 S.W.2d 561

JEFFERSON-GRAVOIS BANK, Plaintiff-Respondent, v.E.J. CUNNINGHAM, Jr., Defendant-Appellant.

No. 47303.

Missouri Court of Appeals,

Eastern District,

Division Three.

May 22, 1984.

Motion for Rehearing and/or Transfer

to Supreme Court Denied July 12, 1984.

Application to Transfer Denied

Sept. 11, 1984.

Thomas Lay Burroughs, St. Louis, for defendant-appellant.

Burton H. Shostak, St. Louis, for plaintiff-respondent.

KAROHL, Presiding Judge.

DefendantE.J. Cunningham appeals from a judgment entered against him and in favor of plaintiff-respondentJefferson-Gravois Bank(bank) on a jury verdict for $41,823.88.The action was based on a promissory demand note in the amount of $25,000.00 plus interest given by defendant to plaintiff in return for a loan.¹We reverse and remand for a new trial.

Defendant raised an affirmative defense contending that Richard M. Ross induced him to enter into the loan transaction with the bank by fraudulent misrepresentations, that Ross was plaintiff's agent, and that therefore the note was voidable.The defendant testified that Ross, whom defendant had known for many years, asked him to become a partner in a tax shelter arrangement.Ross assured defendant that plaintiff would lend defendant the necessary $25,000.00.When defendant was reluctant to join without further information about the partnership, Ross told him the money was needed immediately, but assured him that if after defendant received the partnership papers he decided not to invest, he would have no further obligation under the loan.After defendant received the partnership papers he elected not to join and notified Ross, but Ross did nothing, and the bank demanded payment from defendant on the note.

Defendant testified further that throughout the transaction he never went into the bank and never dealt personally with anyone at the bank.Ross brought both the note and the cashier loan proceeds check to defendant's office at the same time on December 6, 1978, and the transaction was completed there.Defendant presented evidence that it was not the normal practice of the bank to furnish both a proceeds check and unsigned note to a prospective borrower at the same time, and that the loan documents, especially the proceeds check and unsigned note, are internal bank documents which only agents of the bank normally possess.

If the agreement between the bank and Cunningham was brought about by the bank's misrepresentations, the entire transaction could be set aside.Ellis v. Farmer, 287 S.W.2d 840, 851(Mo.1956).A crucial link in defendant's case was to prove that any misrepresentations Ross made should be imputed to the bank because Ross was the bank's agent.

Defendant's decisive contention of error is that the trial court improperly excluded as immaterial and irrelevant evidence of a prior transaction involving him, the bank, and Ross.Defendant offered the evidence to support his agency theory.Defendant made an offer of proof that in October, 1977, Ross had arranged another loan for him through the bank.Ross suggested the loan, made all contacts with the bank, and defendant received the proceeds, received statements from the bank, and paid off the loan without entering the bank or talking to anyone at the bank.

Agency need not be directly proven, it may be inferred from facts and circumstances in the case including prior habits or dealings of a similar nature between the parties.Walker v. Multi-Wood Products, Inc., 581 S.W.2d 617, 619(Mo.App.1979).Defendant was attempting to prove that Ross had implied or apparent authority rather than express authority.Implied agency is a principal-agent relationship created by the parties without any express oral or written agreement.Centennial State Bank v. S.E.K. Construction Co., Inc., 518 S.W.2d 143, 148(Mo.App.1974).Agency may be implied where a purported agent acts as though he or she has authority and the alleged principal with knowledge of such acts acquiesces.Jordan v. Robert Half Personnel Agencies of Kansas City, Inc., 615 S.W.2d 574, 582(Mo.App.1981).Prior transactions or evidence of a course of conduct involving the purported agent and principal, such as the evidence sought to be introduced here, is probative of the existence of implied agency.Dudley v. Dumont, 526 S.W.2d 839, 844-45(Mo.App.1975).

The evidence was also relevant and material to the question of whether in the alternative, Ross had apparent authority.Ross had apparent authority if the bank created such an appearance of things that it caused Cunningham reasonably and prudently to believe Ross had the power to act on the bank's behalf.Trail v. Industrial Commission of Missouri, 540 S.W.2d 179, 181(Mo.App.1976).The bank, by allowing Ross to carry out this prior similar loan transaction, could have helped to create such an appearance.

[W]here [the principal's] habits and course of dealing have been such as to reasonably warrant the presumption that such other was his agent authorized to act in that capacity, whether it be in a single transaction or in a series of transactions, his authority to such other to act for him in that capacity will be conclusively presumed, so far as it may be necessary to protect the rights of third persons who have relied thereon in good faith and in the exercise of reasonable prudence ...

Bennett v. Potashnick, 214 Mo.App. 507, 257 S.W. 836, 838(1924), quotingMechem on Agency§ 84.(emphasis added).

The trial court prejudicially erred in denying defendant an opportunity to present evidence of a prior similar transaction.The evidence was relevant to proving agency, a crucial aspect of defendant's affirmative defense.

The other alleged errors raised by defendant may reoccur on retrial, and we therefore discuss them.

Defendant contends that the trial court erred in allowing plaintiff to argue to the jury that a negative inference could be drawn against defendant from the fact that Ross was not present at the trial.It is reversible error to argue a negative inference from failure to call a witness where the witness is equally available to both parties.Leehy v. Supreme Express & Transfer Co., 646 S.W.2d 786, 790(Mo. banc 1983).

In order to determine equal availability we must first determine whether both parties knew the identity and whereabouts of the...