This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
IN COURT OF APPEALS
Reversed
Hennepin County District Court
File No. 9710455
David J. McGee, Thomsen & Nybeck, P.A., Suite 600, 3300 Edinborough Way, Edina, MN 55435 (for appellants)
Jack Neveaux, Oberhauser & Neveaux, P.A., 1421 East Wayzata Boulevard, Wayzata, MN 55391 (for respondents)
Considered and decided by Shumaker, Presiding Judge, Crippen, Judge, and Klaphake, Judge.
CRIPPEN, Judge
This case arose from a determination that the parties contracted for a reduction in the purchase price of a land parcel, subsequent to a closing, to cover the cost of a city hook-up assessment associated with a building permit for the property. Because the contract theory depends on an erroneous conclusion that the attorney who had represented the sellers had authority to permit the price reduction, we reverse the trial court judgment.
In May 1992, appellants John and Barbara Bacich agreed to sell an undeveloped parcel of land in the city of Minnetonka to respondents Jerry and Lynnette Uzzell. At closing, respondents delivered a promissory note for $31,000, secured by a mortgage, in exchange for delivery of a warranty deed. Respondents were to make regular payments, followed by a balloon payment in June 1993.
After the closing, respondents applied for a building permit and learned that they would be required to pay $3,287.23 for a water lateral hook-up charge. Although the charge was levied or imposed several years prior to the sale, it was not assessed or due to be paid until a building permit application occurred.[1] In March 1993, seven months after the hook-up charge was assessed, respondents obtained new financing. Responding to a request of respondents’ title insurer, on the day respondents’ refinancing loan was closed, a mortgage pay-off statement was signed by Mark Anfinson, the attorney who had prepared appellants’ sale documents in 1992. The pay-off statement reduced the amount due to appellants by $3,520.[2] Anfinson explained at trial that the title insurer mistakenly represented that the $3,287.23 reduction was for a “special assessment.”
The trial court denied appellants’ claim for recovery of the unpaid part of their $31,000 note. Finding that Anfinson had apparent, if not actual, authority to act as appellants’ agent to sign the payoff statement, the trial court concluded that appellants were contractually bound to the change from the original sale price.
The analysis of issues in the case is materially affected by an undisputed trial conclusion. The original purchase agreement specified that appellants were responsible for “special assessments.” The trial court concluded, based on undisputed testimony at trial, that the hook-up charge was not a special assessment. The finding is ironic because it appears that everyone involved in the closing of respondents’ financing arrangement may have erroneously treated the charge as a special assessment.
Respondents’ assertions about the authority of attorney Anfinson rest considerably on the mistaken notion that the question regards only the authority of Anfinson to act for appellants at the closing, action that would entail only the calculation and receipt of a pay-off of respondents’ note. In fact, the central question in the case is whether Anfinson was placed in a position of authority to alter appellants’ sale agreement, providing for a reduction of the sales price that was not indicated in documents signed by appellant.[3]
Agency is defined as the fiduciary relationship arising from the “manifestation of consent by one person to another,” that the other person shall “act on his behalf and subject to his control, and consent by the other so to act.” A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285, 290 (Minn. 1981) (citing Jurek v. Thompson, 308 Minn. 191, 197, 241 N.W.2d 788, 791 (1976)) (citing Restatement (Second) of Agency § 1 (1958)). The existence of an agency relationship is ultimately a legal determination, dependent on the factual relationship of the parties. PMH Properties v. Nichols, 263 N.W.2d 799, 802-03 (Minn. 1978). Whether an agency relationship exists is a question of fact. Church of the Nativity of Our Lord v. WatPro, 491 N.W.2d 1, 6 (Minn. 1992). The party claiming existence of the agency has the initial burden of proof. Plate v. St. Mary’s Help of Christian Church, 520 N.W.2d 17, 20 (Minn. App. 1994), review denied (Minn. Oct. 14, 1994); White v. Boucher, 322 N.W.2d 560, 566 (Minn. 1982).[4] There is no agency, as a matter of law, without persuasive evidence to establish the elements of an agency relationship. Jurek, 308 Minn. at 200-01, 241 N.W.2d at 793.
There is no evidence that appellants held out attorney Anfinson as having any authority to renegotiate terms of the sale at the time respondents refinanced their mortgage. And the trial court’s finding that sellers admitted at trial that the attorney represented them at the time of the refinancing is clearly erroneous. Appellants specifically denied ever authorizing Anfinson to sign the mortgage payoff statement.
Evidence that appellants had indicated at the initial closing that respondents could contact Anfinson if they had any questions about the sale does not suggest that appellants were permitting him to renegotiate the terms of the contract. See A. Gay Jenson Farms, 309 N.W.2d at 290-91 (noting the three requirements of an agency relationship as consent to the agency, action by agent on behalf of principal, and exercise of control by principal over agent). Anfinson’s letter to buyers at the time of refinancing, indicating that he was the sellers’ attorney, is insufficient to show that appellants placed him in a position of authority to alter the sale contract.
Respondents’ reliance on McGee v. Breezy Point Estates, 283 Minn. 10, 166 N.W.2d 81 (1969), is misplaced. In McGee, the principal placed an agent in charge of protracted negotiations, and all subsequent contacts, correspondence and phone calls with the third party were made by the agent, with copies of documents provided to the principal. The McGee court found the agent had apparent, if not actual authority where the principal knew or should have known the agent was conducting negotiations on its behalf. Id. at 21-22, 166 N.W.2d at 89. There is no evidence in this case that appellants directed Anfinson to represent them at respondents’ refinancing, much less to negotiate a price reduction in the original purchase agreement. There is also no evidence that respondents otherwise advised appellants that they disputed the purchase price or that there was any potential for new or continuing negotiations.
The trial court also concluded that attorney Anfinson possessed apparent authority under a theory of ratification. Appellants accepted and cashed two checks from respondents following the refinancing and did not repudiate the deduction of $3,287.23 for two months. A principal may be bound by the actions of its agent, “when one, having full knowledge of all the material facts, confirms, approves, or sanctions, by affirmative act or acquiescence, the originally unauthorized act of another.” Anderson v. First Nat’l Bank of Pine City, 303 Minn. 408, 410, 228 N.W.2d 257, 259 (1975) (citations omitted). Here, appellants did not commit a “knowing act” of ratification. Respondents’ payments on their note were not conditioned on acceptance of a reduction in the purchase price. In fact, the final balloon payment on the original note was not yet due when the refinancing occurred and the checks were cashed. Moreover, it is not clear when sellers actually received a copy of the mortgage pay-off statement, and the pay-off statement merely indicated a deduction for “special assessments,” a notation that is misleading. The circumstances contrast markedly from those in Knaus Truck Lines v. Donaldson, 235 Minn. 453, 51 N.W.2d 99 (1952), cited by the trial court, where the principal accepted the benefits of a contract with full knowledge that this performance would only occur on a condition that would be costly to him. Id. at 456-57, 51 N.W.2d at 101-02; see also Lyman Lumber Co. v. Three Rivers Co., 400 N.W.2d 811, 814 (Minn. App. 1987) (finding no ratification where principals were unaware their account was being charged for purchases by co-worker, even though principals knew co-worker was using name of their former corporation); Hefner v. Estate of Ingvoldson, 346 N.W.2d 204, 207 (Minn. App. 1984) (finding ratification where principal frequently used proceeds of bank account containing deposits made by agent without authority).
Because we determine that attorney Anfinson did not have authority to enter into a contract for reduction of the payment due from respondents, we also do not reach appellants’ argument that there was no consideration for their alleged agreement to reduce respondents’ note obligation. For the same reason, we have no occasion to otherwise examine the question of whether the mortgage pay-off statement constituted a lawful contract on the amount due on appellants’ note.
Reversed.
[1] It is unclear from the record when the city originally decided to impose the charge. At trial, the city engineer testified that the charge was in existence prior to 1979, when this land parcel was created as one of five subdivisions of a larger piece of land.
[2] Buyers eventually paid sellers the total amount due on the original note less $3,287.23, the amount of the hook-up charge.
[3] Although the parties dispute at length whether appellants’ obligation to pay special assessments was extinguished by merger into its subsequent warranty deed, this dispute is not dispositive. Given the undisputed trial court conclusion on the scope of special assessments, neither the purchase agreement nor the deed specified that appellants were liable to pay the hook-up charge.
[4] There are no circumstances in this case that call for a presumption of authority that may arise when a principal invites customer contacts in a fashion whereby the customer makes contact with an alleged agent. See Sauber v. Northland Ins. Co., 251 Minn. 237, 244, 87 N.W.2d 591, 597 (1958).