Larner-Diener Realty Co. v. Fredman

• Court: Missouri Supreme Court
• Writing for the Court: We have mentioned the evidence tending to show plaintiffs had not advised defendants that plaintiffs were the real purchasers of the Granite City hotel and the evidence tending to show plaintiffs' reference to their nominee, Alton, as the 'purchaser'
• Citation: Larner-Diener Realty Co. v. Fredman, 266 S.W.2d 689 (Mo. 1954)
• Decision Date: 08 March 1954
• Docket Number: No. 1,No. 43856,LARNER-DIENER,43856,1
• Parties: REALTY CO. et al. v. FREDMAN et al

Page 689

266 S.W.2d 689

LARNER-DIENER REALTY CO. et al. v. FREDMAN et al.

No. 43856.

Supreme Court of Missouri, Division No. 1.

March 8, 1954.

Motions for Rehearing or to Modify Opinion Denied April 12, 1954.

Albert E. Hausman, Dubinsky & Duggan, Carl M. Dubinsky, St. Louis, James T. Blair, Jr., Jefferson City, for appellants.

Lon Hocker, Jr., St. Louis, for respondents. Jones, Hocker, Gladney & Grand, Lowenhaupt, Waite, Chasnoff & Stolar, St. Louis, of counsel.

VAN OSDOL, Commissioner.

Action for specific performance of a contract to sell real and personal property, a hotel ('Hotel Steven') and personal property used in the operation thereof at Granite City, Illinois. Defendants, vendors in the contract, filed answer, and a counterclaim for $16,175 actual and $60,000 punitive damages, alleging that plaintiffs were defendants' agents and entered into the contract by their straw party, one Mamie Alton, and failed to disclose that they, plaintiffs, were the real purchasers. The trial court entered a decree of specific performance, ordered defendants to account for rents and profits, and dismissed their counterclaim. Defendants have appealed.

(Mamie Alton also instituted an action against defendants for the specific performance of the contract of sale, and for an accounting. It was stipulated that the Alton case was to be tried and considered in conjunction with the instant case. Upon the entry of an interlocutory decree and order for an accounting in favor of plaintiffs in the instant case, the petition in the Alton case was ordered dismissed effective upon the entry of final judgment in the instant case. Plaintiff Alton did not appeal.)

At the outset we must make disposition of respondents' motion to dismiss the appeal which is based upon asserted failures to comply with 42 V.A.M.S. Supreme Court rule 1.08. We have examined and considered respondents' argument and authorities cited in support of the motion, and appellants' suggestions in opposition thereto. We believe the asserted faults of appellants' brief are not such as would justify the dismissal of the instant appeal. The motion is overruled.

Herein upon appeal defendants-appellants contend the trial chancellor erred in finding in favor of plaintiffs. Defendants-appellants urge that the evidence shows plaintiffs were defendants' agents and the contract of sale was entered into with one Mamie Alton, who was plaintiffs' nominee or straw party, as purchaser; and, by means of their nominee, plaintiffs, defendants' agents, were the secret but actual purchasers and through devious transactions were to make a secret profit upon the consummation of the sale contemplated by the contract between defendants and Alton. Plaintiffs-respondents, on the other hand, contend they were not defendants' agents and had not undertaken to act as defendants' agents in the transaction. They say they, as principals through their straw party, entered into the contract with defendants to purchase the property for themselves; that defendants knew Alton was plaintiffs' straw party; and that defendants were only interested in receiving a 'net' of $80,000 for their property and had advised plaintiffs that they, defendants, were not concerned with 'what profit' plaintiffs could make in the transaction.

The creation of the relation of principal and agent rests in the intention of the parties which may be express or implied, and need not be a conscious intention, but may be determined from the facts and circumstances of the particular case. 2 C.J.S., Agency, Sec. 17, pages 1041-1042. 'The rule is universal that an agent authorized to sell property for another cannot himself be the purchaser, unless he discloses fully to his principle that he is the purchaser, revealing everything within his knowledge relating to the transaction.' Benson v. Watkins, 313 Mo. 426, 285 S.W 407, 408. See also Utlaut v. Glick Real Estate Co., Mo.Sup., 246 S.W.2d 760, and authorities therein cited; Curotto v. Hammack, 362 Mo. 457, 241 S.W.2d 897, 26 A.L.R.2d 1302; Jewell Realty Co. v. Dierks, 322 Mo. 1064, 18 S.W.2d 1043.

In this case, an action in equity, it is our duty to try the case anew, to weigh the evidence and to reach our own conclusions. The evidence introduced in the trial of the cause is complicated and involved. Consequently, it is necessary to make an extensive statement of the facts and to carefully examine the testimony, particularly the testimony touching upon the issue of plaintiffs' agential relationship, this issue being the crucial and decisive one in our opinion.

There was evidence introduced tending to show that plaintiff Larner-Diener Realty Company, a corporation, sometimes hereinafter referred to as 'Larner-Diener,' conducts a real estate business in St. Louis; Louis Diener is president, and Martin Larner is secretary-treasurer. Plaintiff Nat Gordon is a real estate-broker who has been associated with plaintiff Larner-Diener for seven or eight years. Mamie Alton has (admittedly) acted as plaintiffs' nominee in many real estate transactions. She had no substantial financial standing, and has permitted plaintiffs to use her name as their straw party for comparatively small fees. She is a distant relative of Martin Larner. In the contract involved herein, Mamie Alton's name appears as the purchaser. In executing the contract, her name was signed by plaintiff Nat Gordon.

In making a futher examination of the evidence, it would seem useful to now state the effect of the contract involved in the instant action, and the effect of other contracts which were entered into by plaintiffs through their nominee, Alton, in anticipation of the consummation of the contract involved in the instant action.

August 3, 1948, Mamie Alton, acting as plaintiffs' straw party, entered into a contract of exchange with Irving and Ruth Hartmann whereby Alton agreed to convey to the Hartmanns the Hotel Steven in Granite City and the personalty used in the operation of the hotel, all subject to a lease, and subject to a (first) lien of a deed of trust securing the payment of $30,000 and to a (second) lien of a deed of trust securing the payment of $20,000. As consideration for the conveyance and transfer of the hotel property as stipulated, the Hartmanns were to execute a (third) deed of trust securing the payment of $15,500 to Alton; and the Hartmanns were to convey to Alton a tract of real estate known as the 'Olive Street' property, subject to liens aggregating $16,125, and a tract of real estate known as the 'Washington Avenue' property, subject to a lien of $6,000. The contract was signed by the Hartmanns, and by Mamie Alton 'as owner under contract.' The contract stipulated December 1, 1948, as the date the transaction should be consummated. Actually it was not until August 13, 1948, that defendants Sam and Jessie Fredman entered into the written contract (involved in this action) whereby they undertook to sell the Hotel Steven to Mamie Alton for $80,000, represented by $5,000 earnest money and $25,000 to be paid on the closing date, December 1, 1948, the purchaser Alton assuming and agreeing to pay the obligations aggregating $50,000 secured by the then existing first and second liens (mentioned supra) on the hotel property.

Theretofore, as early as July 26, 1948, the Hartmanns by contract of sale had recognized the exercise of an option of their lessee, one Walter, to purchase the Washington Avenue property. The contract between the Hartmanns and Walter was approved by Mamie Alton, as 'owner under contract.' On November 10, 1948, a contract was entered into whereby 'Mamie Alton owner under contract' undertook to sell the Olive Street property to the Karen Realty Company.

According to the testimony of Martin Larner, secretary-treasurer of plaintiff Larner-Diener as stated, the value of the 'equities' in the Washington Avenue and Olive Street properties was approximately $31,000.

Thus it may be observed that plaintiffs' straw party by her contract of August 13, 1948, the contract involved in the instant action, agreed to pay defendants $80,000 (by $30,000 in cash and by the assumption of $50,000 in encumbrances) for the Granite City hotel. She was to receive (for the hotel) from the Hartmanns, by her exchange contract of August 3d, the approximate equivalent of $96,500 (the 'equities' of the Washington Avenue and Olive Street properties, approximately $31,000 in value, the Hartmanns' assumption of the $50,000 encumbrances on the hotel and the stipulated execution of a (third) lien on the hotel securing $15,500). It is also observed that whatever profit might have been made by plaintiffs in these transactions (upon a consummation of the contract involved in this action) through their straw party, Alton, was in substantial part a 'paper' profit, that is, the gain to plaintiffs of approximately $16,500 was substantially represented by the note of the Hartmanns to Alton for $15,500 secured by the third lien on the Granite City hotel property.

Turning now to the evidence relevant to the issue of agency----

Martin Larner and defendant Sam Fredman had been 'country club' friends for some years, and, on or about June 1, 1948, an initial conversation was had at the country club between Larner and Fredman, and a later conversation took place at a drugstore in Granite City, relating to defendants' Granite City hotel property. Inasmuch as these conversations have an important bearing upon the question of the 'agency' of plaintiffs, we here set out in question and answer form a part of the testimony of defendant Sam Fredman, by deposition, introduced into evidence by plaintiffs as part of their case-in-chief,

'Q. Well, how did this transaction first arise? A. Well, Martin Larner approached me (about June 1, 1948) and asked me about the hotel in Granite City. He asked me whether I wanted to sell it. And I said yes, I would sell it. So the says, 'I have got a buyer for it.' I says, 'All right'. So he...