Oregon Case Law Update: When Can an Agent’s Actions Bind the Principal?
From the desk of John Kreutzer: If an agent has apparent authority to act on behalf of a principal, the principal can be bound to the agent’s actions, even if the agent’s actions exceeded his or her actual authority. But what are the limits to such apparent authority?
Claims Pointer: In this case arising out of a fraudulent investment scheme, the Oregon Supreme Court held that there was sufficient evidence to support the allegation that a loan officer acted with apparent authority of a mortgage company and the question should have been submitted to the jury. The case provides a review of agency law and insight into the Oregon approach to apparent authority, an important consideration in some employment law cases.
Harkness v. Platten, 359 Or 715 (June 16, 2016)
Joanne Kantor (“Kantor”), a loan officer with Sunset Mortgage (“Sunset”), proposed that John and Sherri Harkness (“the Harknesses”) use the equity in their house as collateral to borrow money from Sunset, which Kantor would then invest in short-term, high-interest loans to developers and building contractors (so-called hard-money loans). Kantor told the Harknesses that the loans would be secured by liens on real property with “lots” of equity. Under this plan, Kantor and Sunset would get paid from commission on the Harknesses’ conventional loan on their house and from conventional construction loans Sunset would issue the builders. The Harknesses agreed and turned over the proceeds of a conventional loan they received from Sunset to Kantor. Later, Kantor went to work as a loan officer for Directors Mortgage, Inc. (“Directors”), and the Harknesses continued their same investment relationship with her.
After about two years, an attorney for one of the borrowers contacted the Harknesses with some concerns. Kantor claimed that she forgot to record a lien on the loan in question, so Mrs. Harkness...