LinkedIn Twitter Facebook Share this page RSS

Blogs

Missouri Law BlogLegal updates, news, and commentary from the attorneys of Baker Sterchi Cowden & Rice LLC

The Buck Stops Here: When Agents May Become Liable for the Wrongful Acts of their Principal.

October 17, 2019 | Brandy Simpson and Andreea Sharkey

Missouri courts have long held that when an agent for another makes a contract with a third party without disclosing the agency, the individual will be bound by the contract and the third party may hold the agent or the undisclosed principal responsible at his election. On September 24, 2019, the Missouri Court of Appeals, Western District, in Alpha Petroleum Company vs. Hani Daifallah, et al. applied this principle, and held that agents who did not properly disclose the agency relationship when entering into a business relationship with a third party were personally liable for the ensuing transactions.

The case involved the lease of a convenience store with gasoline services, between Plaintiff Alpha Petroleum’s sister company, A.J. Partnership, and the Defendants. Under the lease agreement, Defendants were required to purchase gasoline products from Alpha Petroleum. In the regular course of the dealing between the parties, Alpha Petroleum would ship the fuel to the convenience store location and subsequently invoice the Defendants. After Alpha Petroleum advised the Defendants that it was terminating the lease of the convenience store, the parties agreed to a six month extension to allow Defendants additional time to vacate the premises. Before the premises were vacated, Defendants received two more fuel deliveries, both of which went unpaid. Alpha Petroleum sued, seeking damages for nonpayment on account and unjust enrichment. Defendants contended that a separate entity, Zik Moe, Inc., a corporation owned in part by Defendant Mohammed Daifallah, operated the convenience store and was therefore liable for any debt owed to Alpha Petroleum. The trial court entered a judgment against Defendants, jointly and severally, for the entirety of the unpaid balances.

On appeal, Defendants argued that (1) there was no substantial evidence in the record to support the trial court’s conclusion that Defendants were personally liable for the debt owed by Zik Moe, and (2) the trial court misapplied the law by piercing the corporate veil to find Defendant’s personally liable for the debt owed to Alpha Petroleum. The Court of Appeals affirmed the ruling below. It noted that to prevail on a substantial evidence challenge, a defendant must demonstrate that there was no evidence in the record tending to prove a fact necessary to sustain the trial court’s judgment as a matter of law. But here, the trial court record contained evidence that the Defendants failed to disclose they were purported agents of a corporation during the five years they had done business with Alpha Petroleum, which was sufficient for the trial court to conclude that Defendants were personally liable for the unpaid invoiced, based on their failure to disclose an alleged agency relationship. Having upheld the judgment in favor of the Plaintiff on the first point, the Court of Appeals concluded it did not need to consider whether the trial court properly found Defendants personally liable for the debt Alpha Petroleum by piercing Zik Moe’s corporate veil.

The ruling reinforces the need for agents to be fastidious in disclosing the agency relationship, and in ensuring that the existence and identity of the principal are known, in order to avoid potential personal liability for future misdeeds of their principal.

Alpha Petroleum Company vs. Hani Daifallah, et al. (Missouri Court of Appeals, Western District, WD82222 and WD82230)


Related Services: Appellate and Commercial
Attorneys: Brandy Simpson and Andreea Sharkey

Subscribe
About Missouri Law Blog

The BSCR Missouri Law Blog examines significant developments, trends and changes in Missouri law on a broad range of topics of interest to Missouri practitioners and attorneys and businesses with disputes subject to Missouri law. Learn more about the editor, David Eisenberg.

DISCLAIMER

The Missouri Law Blog is made available by Baker Sterchi Cowden & Rice LLC for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. Your use of this blog site alone creates no attorney client relationship between you and the firm.

CONFIDENTIAL INFORMATION

Do not include confidential information in comments or other feedback or messages related to the Missouri Law Blog, as these are neither confidential nor secure methods of communicating with attorneys. The Missouri Law Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

 
×

For Important Legal Updates and Resources on the Coronavirus Click Here.