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Motorsport Mktg. v. Wiedmaier, Inc. - 195 S.W.3d 492 (Mo. Ct. App. 2006)

Rule:

To establish the apparent authority of a purported agent, a party must show that: (1) the principal manifested his consent to the exercise of such authority or knowingly permitted the agent to assume the exercise of such authority; (2) the person relying on this exercise of authority knew of the facts and, acting in good faith, had reason to believe, and actually believed, the agent possessed such authority; and (3) the person relying on the appearance of authority changed his position and will be injured or suffer loss if the transaction executed by the agent does not bind the principal. 

Facts:

A corporation owned and operated a truck stop. The shareholder and her husband were the only stockholders of the corporation. Their son worked for the corporation as a fuel truck operator. He never owned an interest in the corporation. The shareholder signed a credit application on behalf of the corporation and had her son fax the document to the distributor, a marketer and wholesale distributor of racing collectibles and memorabilia. The son altered the credit application to reflect himself as an owner. All of the distributor's dealings with the corporation were based upon the statements and representations of the son, and the corporation and its two shareholders had no contact with the distributor and were totally ignorant and unaware of the son's dealings with the distributor. Following the son's orders, it shipped its merchandise to various addresses. Eventually, the distributor filed suit against the corporation and the shareholders to recover monies due on open account and on personal and corporate guaranty. The circuit court ruled in favor of the distributor. The corporation and shareholder appealed arguing that having the son fax the document to the distributor was was not sufficient to invest him with apparent authority. 

Issue:

Did the trial court err in finding that the son was acting as the apparent agent of the corporation?

Answer:

No

Conclusion:

The court agreed with the distributor that having the son fax the document to the distributor was sufficient to invest the son with apparent authority to act as the corporation's agent. The faxed credit application was a direct communication from the corporation and the shareholder, through the son, to the distributor, that caused the distributor to believe that the son had authority to act for the corporation. The distributor relied on the son's exercise of authority, and acting in good faith, had reason to and actually believed that the son had authority to act. The distributor changed its position and would be injured or suffer loss if the corporation was not bound by the transactions executed by the son. Thus, the court concluded that the trial court did not err in entering judgment in favor of the distributor and against the corporation and the shareholder.

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