Town Center v. Premier Mortg. Funding, 94,917.

• Decision Date: 22 December 2006
• Docket Number: No. 94,917.,94,917.
• Citation: 148 P.3d 565
• Parties: TOWN CENTER SHOPPING CENTER, LLC, Appellee, v. PREMIER MORTGAGE FUNDING, INC., Appellant.
• Court: Kansas Court of Appeals

148 P.3d 565

TOWN CENTER SHOPPING CENTER, LLC, Appellee, v. PREMIER MORTGAGE FUNDING, INC., Appellant.

No. 94,917.

Court of Appeals of Kansas.

December 22, 2006.

COPYRIGHT MATERIAL OMITTED

J. Michael Kennalley, of Martin & Churchill, Chartered, of Wichita, for appellant.

James R. Gilhousen, of Crockett & Gilhousen, of Wichita, for appellee.

Before GREEN, P.J., GREENE and BUSER, JJ.

GREEN, J.

Town Center Shopping Center, LLC (Town Center), brought an action to recover rent, taxes, insurance, and common-area maintenance expenses from Premier Mortgage Funding, Inc. (Premier). Nancy Bayer, an employee of Premier, signed a lease on Premier's behalf in violation of her employment agreement. The district court determined that Premier was liable for all rent and costs, including attorney fees, under the lease. Premier appeals the judgment, arguing that there was not clear and convincing evidence to support the district court's finding that apparent authority existed to bind Premier to the lease signed by Bayer. Premier contends that the district court also erroneously determined that Premier had ratified the lease by not repudiating it. Finally, Premier challenges the district court's award of attorney fees and further maintains that the findings of fact and conclusions of law adopted by the district court were not supported by substantial competent evidence. Finding no reversible error, we affirm.

Town Center is the owner of a shopping center located at 230 and 238 West Greenway, Derby, Kansas. Town Center and Vutec Corporation acted together as landlord when leasing the property. Vutec Corporation, however, was never included as a party to this case.

Premier is a mortgage broker with more than 550 branches throughout the United States. When establishing a new branch, Premier never leases the property itself. Rather, it subleases space from an existing tenant that then becomes the branch manager. This is done to preserve the economic well-being of the company. In particular, Premier could not feasibly maintain all the base leases itself. The subleases are cancellable by either party with a 5-day notice.

On August 13, 2003, Town Center leased 1,596 square feet of the shopping center located at 238 West Greenway to a third party, Empire Lending Company, LLC (Empire Lending) (Lease 1). The term of the lease was August 11, 2003, to October 31, 2005. The intended use of the premises was for residential mortgage brokerage services. Empire Lending could not assign or sublet without the prior written consent of Town Center.

On March 22, 2004, Bayer, a branch manager at Premier, executed an Office Lease Contract leasing the premises at 238 West Greenway from Empire Financial & Mortgage Co., LLC (Empire Financial) to Premier (Lease 2). Bayer testified that she intended to sublease the office space to Premier. The relationship between Empire Lending and Empire Financial is unclear, a contention shared by Town Center, Premier, and Bayer. Apparently Empire Financial acted as an agent of Empire Lending in executing Lease 2. Nevertheless, each company is an independent entity with independent ownership. The parties further dispute whether Lease 2 was properly executed by Empire Financial on behalf of Empire Lending and whether it was proper for Premier to rely on the sublease. Premier believed Empire Lending and Empire Financial were related entities. TaWanna Kestler, an employee of Premier, testified that this assumption was based on the fact that Bayer had previously worked for Empire Lending and owned a 10% interest in Empire Financial. Because Premier believed that these companies were related, Premier assumed Lease 2 was a valid sublease between itself and Empire Lending.

Under Lease 2, either Premier or Empire Financial could cancel the sublease with a 5-day notice to the other party. Empire Financial and Premier executed the sublease in violation of the provision of Lease 1 prohibiting assignment or sublease without the permission of Town Center. Paul Stone, Town Center's leasing agent and property manager, testified that Town Center neither knew of any discussions to sublet the property, nor consented to the arrangement made. Kestler testified that Premier did not obtain permission to sublease the premises and did not inquire whether consent was necessary because Empire, not Premier, was bound by the terms of Lease 1. On March 22, before executing Lease 2, Premier had entered into a branch manager employment agreement with Bayer. The agreement stated that Bayer was "explicitly forbidden to negotiate with or enter into any lender agreement or any other contract of any kind ... without the prior approval of the President of [Premier]." According to the employment agreement, the president of Premier executed Lease 2 several days later.

The parties disagree as to the fate of Lease 2. Although her testimony was somewhat unclear, someone from Premier's corporate office told Bayer that the lease needed to be in Premier's name instead of Empire's name. According to her directions from Premier, Bayer had the lease rewritten in Premier's name (Lease 3). Yet, Kestler testified that Premier was unaware of Lease 3 and believed Premier was subleasing the property under Lease 2 in accordance with typical company practices.

On April 15, 2004, Bayer signed Lease 3 with Town Center on behalf of Premier. The lease described 3,716 square feet of the shopping center located at both 230 and 238 West Greenway. The term of the lease was April 1, 2004, to May 31, 2007, and included the 1,596 square feet previously leased to Empire Lending in Lease 1. The parties also dispute the fate of Lease 1 between Town Center and Empire Lending. Town Center maintains that Lease 3 superseded the earlier lease with Empire Lending and that it terminated Lease 1 because Empire had "fallen behind" on rent. In contrast, Premier points out that "[Town Center] did not offer any evidence that the lease had been terminated." Premier's argument is based on the existence of Leases 1 and 2 as justification for remaining on Town Center's property.

Shortly after signing Lease 3, Bayer returned it to Town Center, along with a letter addressed "To Whom It May Concern," signed by Jerry Cugno, Premier's director of corporate development. The letter stated that Premier had a branch office located at 238 West Greenway in good standing and that Bayer was the branch manager. The letter did not explicitly state that Bayer had authority to act on Premier's behalf or sign the lease. Bayer testified that such letters are typically furnished to mortgage lenders to show that the branch is in good standing and the lenders can fund loans. Kestler testified that these letters are meant to inform only third-party lenders, not landlords, that Bayer could do business on behalf of Premier. Both parties concede that the letter did not provide Bayer with actual authority to sign the lease on Premier's behalf. At no point did Stone or anyone else from Town Center call Premier to verify that Bayer had authority to sign the lease. On April 23, 2004, Town Center executed Lease 3.

Bayer testified that she then sent the executed lease to Premier's Florida office. The president of Premier never signed or approved Lease 3, which was contrary to the employment agreement between Premier and Bayer. Kestler testified that Premier was not aware of Lease 3 until commencement of this lawsuit.

Premier terminated its business on Town Center's premises on January 27, 2005, and vacated the premises during February 2005. Until commencement of this lawsuit, Kestler testified that Premier was unaware of the existence of Lease 3 with Town Center. On March 8, 2005, Town Center sued for possession of the premises and for $5,998.10 in rent, taxes, insurance, and common-area maintenance expenses. The district court conducted a bench trial on May 24, 2005. Town Center amended its petition to include damages through May 1, 2005, for a total amount of $13,493.18. The district court adopted Town Center's proposed findings of fact and conclusions of law. The district court ordered Premier to pay $13,493.18 in damages and attorney fees according to the terms of Lease 3.

Is there clear and satisfactory evidence to support the district court's finding that apparent authority existed to bind Premier to the lease signed by Bayer?

In its first point, Premier argues that Town Center failed to present clear and satisfactory evidence that Premier induced Town Center to believe Bayer had authority to bind Premier under the lease. In its opinion, there was no evidence that Premier "clothed" Bayer with authority to sign the lease and Town Center's reliance on the letter of good standing was unfounded. Accordingly, Premier contends that the district court erroneously concluded that Bayer acted with apparent agency authority to bind Premier under the lease.

What constitutes an agency and whether there is any competent evidence that reasonably tends to prove the agency relationship is a question of law over which this court has unlimited review. Moreover, where the relationship of principal and agent is in issue, the party relying on an alleged agency relationship has the burden of establishing its existence by clear and satisfactory evidence. Whether an agency exists is a question for the finder of fact. CIT Financial Services, Inc. v. Gott, 5 Kan.App.2d 224, 229-30, 615 P.2d 774, rev. denied 228 Kan. 806 (1980). "The province of an appellate court is to determine if the record reveals evidence on which a finding of agency could be based, not to decide whether, under proper instructions relating to the law of principal and agent, it existed as a matter of fact." Traylor v. Wachter, 3 Kan.App.2d 536, Syl. ¶ 2, 598 P.2d 1061 (1979), aff'd in part, rev'd in part 227 Kan. 221, 607 P.2d 1094 (1980).

Because both parties admit that Bayer did not have actual authority to bind Premier under the lease, the question is...