Daily Development for
Thursday, March 30, 2000
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu BROKERS;
MORTGAGE BROKERS; FRAUD: Mortgage broker is vicariously liable to lender for
fraudulent representations concerning a loan that its employee presents to that
lender, even if supervisors of mortgage broker were unaware of mortgage
broker's activities.
Inter Mountain Mortgage,
Inc. v. Sulimen, 2000 Cal. App. LEXIS 192 (Cal. App. March 16, 2000)
Baskaron was a licensed
real estate broker who worked as a loan representative for American Frontier.
Baskaron developed a loan package for a borrower named Brown, and submitted it
to the owners of American Frontier for approval. They rejected the loan.
Baskaron then submitted
the same loan package to Inter Mountain, using the American Frontier loan
application and holding himself out as a representative of American Frontier.
The court's statement of facts does not indicate whether American Frontier
typically did business with Inter Mountain or whether American Frontier
received any benefit from placing the Brown loan with Inter Mountain.
The allegations in the
case were that the property appraisal submitted in connection with the Brown
loan was fraudulent, stating a value of $800,000 for a property worth $480,000.
Further, it was alleged that Mrs. Brown was not aware of the loan and had not
consented to it and that her signature was forged in several parts of the
process. Inter Mountain funded the loan, and, later, when the true facts were
discovered, sued American Frontier for damages.
American Frontier alleged
that Baskaron was not serving as its agent in dealing with Inter Mountain and
that he was acting outside of the scope of his employment. The court gives us
few facts as to the facts put forth to support of American Frontier's claims,
but they were sufficient to convince the trial court, which granted summary judgment
for American Frontier.
On appeal: held: reversed.
The simple facts that Baskaron was employed as a loan representative and held
himself out as functioning as an American Frontier representative in presenting
the loan to Inter Mountain are sufficient to raise a jury issue of whether
there is liability in respondeat superior.
The court noted that it is
not necessary that a party be an agent of his employer to render the employer
liable for his fraudulent acts, but that in any event there was a triable issue
of fact both on agency and on scope of employment.
"Under
the doctrine of respondeat superior, 'an employer is vicariously liable for the
torts of its employees committed within the scope of the employment." . .
. An employee's actions need not benefit the employer . . .. And "an
employee's willful, malicious and even criminal torts may fall within the scope
of his or her employment for purposes of respondeat superior, even though the
employer has not authorized the employee to commit crimes or intentional
torts.' 'The employer is liable not because the employer has control over the
employee or is in some way at fault, but because the employer's enterprise
creates inevitable risks as a part of doing business. Under this theory, an
employer is liable for 'the risks inherent in or created by the enterprise.'
Conduct
committed within the scope of employment for purposes of respondeat superior
liability requires 'a nexus between the employee's tort and the employment to
ensure that liability is properly placed upon the employer.' 'The nexus
required for respondeat superior liability--that the tort be engendered by or arise
from the work--is to be distinguished from 'but for' causation. That the
employment brought tortfeasor and victim together in time and place is not
enough. . . . The incident leading to injury must be an 'outgrowth' of the
employment; the risk of tortious injury must be '"inherent in the working
environment"' or '"typical of or broadly incidental to the enterprise
[the employer] has undertaken.' The employee's tortious conduct must also be 'a
generally foreseeable consequence of the activity.' In this usage, . . . foreseeability
'merely means that in the context of the particular enterprise an employee's
conduct is not so unusual or startling that it would seem unfair to include the
loss resulting from it among other costs of the employer's business.'"
(Numerous citations omitted)
Comment: Based upon when
we know from the appeals court, it is really hard to tell why the trial court
granted summary judgment. Perhaps the argument was that since the employer had
specifically refused to fund the loan, it was clear that the employee was
totally outside the scope of employment in moving ahead to present the loan to
other funders.
But if the mortgage broker
had a relationship with Inter Mountain, and had funded loans through it in the
past, acting through its loan representatives, as one would assume to be the
case if Inter Mountain took this loan, then it would appear that, agency or
not, the employee was within the scope of his employment here in the sense that
the tort was "typical of or broadly incidental to the enterprise the
employer has undertaken."
Do other states have
narrower rules in this area? If not, we're likely to see more cases like this.
Readers are urged to respond, comment, and argue with the daily
development or the editor's comments about it.
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org
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