876 F2d 897 United Home Loans Inc Steinberg
876 F.2d 897
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
In re UNITED HOME LOANS, INC., Debtor.
Robert STEINBERG; Plaintiff-Appellee,
Doris J. Ricci, Executrix of the Estate of W.J. Pratto, Appellant,
Janice R. HAYNES; Chicago Title Agency of Kitsap County, Appellees.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 3, 1989.
Decided June 6, 1989.
Before KOELSCH, ALARCON and DAVID R. THOMPSON, Circuit Judges.
This case arises out of bankruptcy court proceedings involving United Home Loans, Inc. ("United"). Prior to United's bankruptcy filing, appellees Janice R. Haynes ("Haynes") and Chicago Title Agency ("Chicago Title") tendered to United, and United accepted, final payoff amounts owed on two promissory notes. W.J. and Chanze E. Pratto ("Prattos") were the payees on one of the notes.1 The Prattos' note was for $30,000.2 United failed to remit the payoff proceeds to the Prattos and did not deliver the original note or furnish a reconveyance of the Prattos' deed of trust to Haynes or Chicago Title.
The bankruptcy trustee brought an interpleader action. The bankruptcy court determined that United was the agent of the Prattos when it received the money to pay off the note; and that Haynes was entitled to the return of the original note and a reconveyance of the deed of trust. The district court agreed and entered judgment in favor of Haynes and Chicago Title. The Prattos appeal. We affirm.
In July 1981 Haynes borrowed $30,000 from the Prattos through United. The promissory note and deed of trust for the Prattos loan were printed on United forms. The note directed Haynes to make principal and interest payments to the Prattos at the business address of United. United recorded the deed of trust for the benefit of the Prattos and retained possession of the original promissory note and deed of trust.
From July 1981 until the final payoff in June 1985, Haynes made forty-six monthly payments on the note. Each payment was made out to United and delivered to United's address. United received the payments, deposited them to its account, and remitted the proceeds to the Prattos. The Prattos never signed any escrow or collection instructions and did not execute any pre-signed request for reconveyance.
In April 1985, Haynes refinanced the Prattos loan through Colonial Mortgage Services Corp. Chicago Title acted as escrow agent in that transaction, and after making conventional inquiries to United sent the final payoff proceeds for the Prattos' note to United on June 14, 1985. United cashed the payoff check, which was made payable to United, but retained the check proceeds and did not reconvey the deed of trust or surrender the original promissory note to Haynes or Chicago Title.
STANDARD OF REVIEW
Findings of fact by the bankruptcy court and the district court are reviewed for clear error, and conclusions of law are reviewed de novo. In re Acequia, 787 F.2d 1352, 1357 (9th Cir.1986). Questions of agency generally are questions of fact. Mitchell v. Union Pacific Railroad Co., 242 F.2d 598, 603 (9th Cir.1957).
When the facts are undisputed, we review them de novo because we are in as good a position as the district court to draw conclusions from undisputed facts. Acequia, 787 F.2d at 1357; see also Graves v. P.J. Taggares Co., 616 P.2d 1223, 1226-27 (Wash.1980) (where only one reasonable inference may be drawn from undisputed facts, review is de novo); J & J Food Centers, Inc. v. Selig, 456 P.2d 691, 694 (Wash.1969) (same); Busk v. Hoard, 396 P.2d 171, 175 (Wash.1964) (en banc) (where facts undisputed, the "inexorable force of ... combined facts" created agency as matter of law and review was de novo).
The parties presented affidavits to the district court which did not conflict. The district court resolved the case on the basis of these affidavits. Because there are no disputed facts, we review the district court's judgment de novo.
In a transaction involving an assignee, the law is well settled in Washington. When one pays off a note he should demand production of the note or risk having to again pay the assignee. Rodgers v. Seattle-First Nat'l Bank, 697 P.2d 1009, 1011 (Wash.App.1985). Washington law recognizes an exception to this rule, however, when an assignee has created an agency relationship through a course of dealing with a third party which the obligor relies upon in making payment. Id. at 1012. In such a situation the assignee is estopped from demanding payment anew from the obligor or denying him satisfaction of the mortgage. Id. at 1012. The facts of the present case are analogous. If the Prattos created an agency relationship with United, then, depending on the apparent scope of that agency, Haynes and Chicago Title could rely on it in paying off the Prattos' note.
A. Agency Relationship
"Before the sins of an agent can be visited upon his principal, the agency must be first established." Matsumura v. Eilert, 444 P.2d 806, 807 (Wash.1968). Under Washington law, an agency relationship is created, either expressly or by implication, "when one party acts at the instance of and, in some material degree, under the direction and control of another." Hewson Construction, Inc. v. Reintree Corp., 685 P.2d 1062, 1064 (Wash.1984) (en banc) (citing Matsumura, 444 P.2d 806). Consent and control are the essential elements of the relationship. Northwestern Nat'l Ins. Co. v. Federal Intermediate Credit Bank of Spokane, 839 F.2d 1366, 1368 (9th Cir.1988); Moss v. Vadman, 463 P.2d 159, 164 (Wash.1969) (en banc). The burden of establishing agency rests on the party asserting it. Hewson, 685 P.2d at 1064; Moss, 463 P.2d at 164; Lamb v. General Associates, Inc., 374 P.2d 677 (Wash.1962).
An agency relationship does not depend on an express understanding, but may arise out of the conduct of the parties.
It does not exist unless the facts, either expressly or by inference, establish that one person is acting at the instance of and in some material degree under the direction and control of the other. It arises from manisfestations that one party consents that another shall act on his behalf and subject to his control, and corresponding manifestations of consent by another party to act on behalf of and subject to the control of the other.
Matsumura, 444 P.2d at 810 (citing Restatement (Second) Agency Sec. 1 (1958). Whether an agency exists depends on the peculiar facts and circumstances of each case. Busk v. Hoard, 396 P.2d 171, 173 (Wash.1964) (en banc).
We conclude that an agency relationship existed between the Prattos and United based on the following facts: (1) the Prattos created the arrangement by which Haynes would make payments to United on the promissory note secured by the deed of trust; (2) the Prattos deposited the original promissory note and deed of trust with United for collection, thereby giving possession of these documents to United; (3) the Prattos knew for forty-six months that Haynes was making payments on the note to United, notwithstanding the fact that the promissory note stated all payments were to be made payable to the Prattos at United's address; and (4) the Prattos knew that United deposited the payments in its bank account and then remitted the amount of the payments to the Prattos. See Busk v. Hoard, 396 P.2d at 173 (agency for collection existed between lender and mortgage broker where broker collected mortgage payments, kept records of principal and interest, made remittances, checked the title of properties prior to making investments, procured title insurance and retained possession of original loan documents).
B. Scope of Authority
The Prattos assert that even if an agency relationship with United existed, that relationship extended only to the collection of interest on the note (the forty-six payments were in amounts equal to interest as it accrued monthly on the note) and United was not authorized to collect principal payments or the payoff amount. The Prattos contend that their failure to pre-sign a request for reconveyance located on the back of the original deed of trust or to sign a separate request for reconveyance, or to execute any escrow instructions, and the appearance of their names on the promissory note and deed of trust, put Chicago Title on notice that United had no authority to accept the payoff from Chicago Title or to reconvey the deed of trust.3
The authority of an agent may be implied from the acts of the principal and from an established course of conduct. Lumber Mart Co. v. Buchanan, 419 P.2d 1002, 1005 (Wash.1966). The scope of authority is determined by the scope of consent, and apparent authority may be found where the principal has held out or acted in a way indicating the agent is its agent in fact. Northwestern Nat'l Ins., 839 F.2d at 1368 (citing J & J Food Centers v. Selig, 456 P.2d 691, 694 (Wash.1969)).
A principal is bound by the agent's acts when
[H]e has placed the agent in such position that persons of ordinary prudence, reasonably conversant with business usages and customs, are thereby led to believe and assume that the agent is possessed of certain authority, and to deal with him in reliance upon such assumption.
Lumber Mart, 419 P.2d at 1005. (citation omitted).
By depositing the original note and deed of trust with United, by authorizing United to accept payments on the note, and by having acquiesced in a course of dealing by which Haynes was permitted to make forty-six payments on the note payable to United, the Prattos placed United in a position that Haynes and Chicago Title were led to believe and assume that United had authority to accept the final payoff and issue the reconveyance. Moreover, the manager of Chicago Title's escrow department testified without contradiction that it is industry practice for a mortgage broker such as United to retain original loan documents, accept payments for the original lender, accept payoff of the principal balance of the loan, and remain in a position to immediately cancel the note and reconvey the deed of trust when the note is paid off. Chicago Title's reliance on United's apparent authority was consistent with this industry practice.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
W.J. Pratto died shortly after this action was filed. The Prattos are represented by Doris J. Ricci, their daughter and executrix of the estate of W.J. Pratto
The other note was for $20,000. It was payable to parties other than the Prattos, and is not involved in this appeal
The Prattos had one prior dealing with United. In that transaction they executed escrow instructions prior to the payoff of the loan. They argue this course of dealing is evidence they did not authorize United to accept the final payment on Haynes' loan because they did not execute similar documents for this loan. On the other hand, Haynes and Chicago Title argue the escrow instructions in the previous transaction are evidence of continuing express authority for United to act as the Prattos' agent on all transactions between the two parties. The bankruptcy court and the district court rejected these arguments, and we do also