Court of Appeals of Missouri, Western District, Third Division
FROM THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI THE
HONORABLE PATRICK W. CAMPBELL, JUDGE
Before: Anthony Rex Gabbert, Presiding Judge, Victor C.
Howard, Judge and Cynthia L. Martin, Judge
C. HOWARD, JUDGE
Torbett appeals the Jackson County Circuit Court's denial
of his motion to compel arbitration and dismiss him for lack
of personal jurisdiction. He raises three points on appeal
complaining that he should be able to enforce the arbitration
agreement as a non-signatory because of equitable estoppel
and agency theory. The judgment is reversed and remanded.
March 14, 2016, Robert and Linda Bull (the Bulls) filed a
Second Amended Petition in a lawsuit against the Real Estate
Store USA (TRES) and Mark Torbett (the founder of the Real
Estate Store). The Bulls alleged one count of fraud, one
count of negligent misrepresentation, and one count of
violating the Missouri Merchandising Practices Act. They
alleged the following factual situation:
Bulls live in California. Robert Bull was referred to Torbett
and TRES following his attendance at a wealth management
seminar. Torbett and TRES are located in Utah.
told Robert Bull that real estate was a safe investment,
generating a return on investment through the payment of
rents by tenants occupying the properties. Torbett told
Robert Bull that TRES was a "one stop shop" where
he could locate and purchase residential real estate for
investment. Torbett told Robert Bull that TRES would assist
the Bulls with all aspects of learning the business of owning
residential real estate. Torbett told Robert Bull that TRES
would identify and sell the Bulls property that was currently
generating revenue with a reliable tenant. Torbett encouraged
Robert Bull to consider him a consultant who would educate
the Bulls and assist the Bulls in being successful in the
residential real estate industry.
referred the Bulls to Horizon Trust Company (Horizon) to
establish a self-directed IRA to purchase property from TRES.
Based on Torbett's recommendation, the Bulls deposited
funds with Horizon. Horizon is located in Albuquerque, New
reliance on Torbett's statements, the Bulls agreed to
purchase residential properties located in Jackson County,
Missouri. The properties were identified by Torbett from
TRES's inventory. Torbett represented the properties were
in good condition with good, reliable tenants. Torbett
represented the properties were fully insured and further
stated premiums for the first year's insurance were
pre-paid and all policies were transferrable to the Bulls.
represented that TRES had acquired insurance from AON, a
viable insurance carrier covering rental revenues from the
properties for the first year. If the tenant did not pay, the
Bulls need only submit a claim to the insurance carrier to
cover the unpaid rent. The rental insurance premium was
pre-paid and coverage was transferrable to the Bulls. Torbett
represented the homes were occupied by AON qualified tenants.
sale price of the properties was determined by Torbett and
TRES. When Robert Bull inquired regarding the value of the
properties, Torbett advised the price was not material.
Instead, the Bulls need only concern themselves with the cash
flow the property would generate. Torbett also said the
properties were priced by Torbett and TRES for purchase by
the Bulls at their fair market value. Torbett provided spread
sheets that represented historical performance of properties,
including rents received and expenses paid.
Horizon, the Bulls purchased two properties in Jackson
County, Missouri. Torbett said the Bulls' purchase of the
properties was a prudent investment even though the Bulls
were out of town investors. Torbett represented that the
Bulls' ownership of the properties would yield monthly
income and involve little to no day to day involvement. The
Bulls engaged Prime Realty to manage the properties upon the
enthusiastic recommendation of Torbett.
purchase of the properties, the Bulls soon learned the
condition of the properties was not as represented by Torbett
and TRES. The properties were occupied by non-paying tenants.
The Bulls incurred substantial costs to evict the non-paying
tenants who also caused substantial damage to the properties.
Bulls incurred substantial costs to make repairs to the
properties to attract new tenants so the properties could
generate revenue. While attempting to attract new tenants,
the Bulls learned from Prime Realty that the properties would
not lease at the rates Torbett and TRES represented the
properties were capable of earning. Prime Realty encouraged
the Bulls to lower the monthly rental rates to attract new
Bulls' initial claims for rental income coverage were
denied by AON because the tenants in the properties at the
time of the Bulls' purchase were not qualified. Torbett
and TRES had failed to perform adequate background checks on
the tenants or misrepresented the results of background
checks of the tenants when applying for coverage from AON.
The Bulls' insurance claims for property damage were also
denied because the insurance coverage acquired by Torbett and
TRES does not cover damage by tenants.
Bulls discovered the purchase price paid to acquire each
property was substantially higher than fair market value.
They learned that the first property purchased from TRES on
July 30, 2013, for $60, 694 was apparently purchased by
Torbett and TRES from Coral Properties on July 24, 2013 for
$38, 000. The second property purchased from TRES on July 25,
2013 for $60, 694 was apparently purchased by Torbett and
TRES from Coral Properties on July 24, 2013 for $40, 000.
Wheeler, the principal of Prime Realty, is also the principal
of Coral Properties. Review of eviction records shows from
February 1, 2014 through March 2016, Prime Realty has filed
nine other eviction cases in addition to those for the Bulls
naming parties holding property through Horizon. The Bulls
alleged that Torbett, TRES, and Prime Realty "appear to
be working together to sell overpriced residential real
estate to out-of-town investors at higher than market values.
With elevated sale revenues enjoyed by [Torbett and TRES] and
long term management fees going to Prime Realty."
and TRES filed their Answer on March 23, 2016. They denied
liability and requested that the trial court dismiss the
petition or enter judgment in their favor. Torbett and TRES
filed a motion to compel arbitration on April 22, 2016. The
motion to compel alleged that all of the Bulls' disputes
and claims related to the purchase of two parcels of real
estate and are thereby subject to the mandatory arbitration
clause contained in the Real Estate Purchase Contracts
[REPCs]. The arbitration clause at issue stated:
Arbitration. The Parties agree that any dispute or claim
relating to this Real Estate Purchase Contract shall be
submitted to binding arbitration under the Real Estate
Industry Arbitration Rules of the American Arbitration
Association. The parties agree that the costs if such
proceedings shall be reimbursed to the prevailing party,
including reasonable attorneys' fees and ...