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Harkness v. Platten

Court of Appeals of Oregon

April 8, 2015

John HARKNESS and Sherri Harkness, Plaintiffs-Appellants,
Jack R. PLATTEN, Defendant-Respondent

Argued and Submitted March 1, 2013.

Page 1146

Washington County Circuit Court. C092970CV. D. Charles Bailey, Jr, Judge.

Emil R. Berg argued the cause for appellants. With him on the briefs were Leonard D. Duboff, and The DuBoff Law Group, LLC.

James C. Tait argued the cause for respondent. With him on the brief was Tait & Associates, P. C.

Before Armstrong, Presiding Judge, and Nakamoto, Judge, and Egan, Judge.


Page 1147

[270 Or.App. 262] ARMSTRONG, P. J.

In this legal malpractice and negligent misrepresentation action, plaintiffs appeal a judgment directing a verdict in favor of defendant. In the underlying case, defendant was one of the attorneys representing plaintiffs against Joanne Kantor and her successive employers Sunset Mortgage Company (Sunset) and Directors Mortgage, Inc. (Directors). The underlying action arose out of the misconduct of Kantor in inducing plaintiffs to borrow money from Sunset and Directors and then give that money to Kantor to invest in private, hard-money loans that were supposed to have been secured. Shortly before trial in the underlying action, plaintiffs agreed to settle the entire matter for $600,000, an amount significantly less than their damages.

In bringing this action against defendant, plaintiffs asserted that, but for defendant's legal malpractice and negligent misrepresentation during the settlement negotiations, they would have proceeded to trial and obtained a more favorable result against Sunset and Directors than the settlement amount. After plaintiffs put on their case in chief, the trial court granted defendant a directed verdict based on its conclusion that plaintiffs had not presented evidence that Kantor had apparent authority from either Sunset or Directors to engage in the hard-money loan investment scheme with plaintiffs and that, without that showing, plaintiffs would not have prevailed at trial against Sunset or Directors in the underlying action. We conclude that the trial court did not err and affirm.

In reviewing the grant of defendant's motion for a directed verdict, " we view the evidence and all reasonable inferences in the light most favorable to the plaintiff." Patton v. Mutual of Enumclaw Ins. Co., 238 Or.App. 101, 124, 242 P.3d 624 (2010), rev den, 349 Or. 654, 249 P.3d 542 (2011). " A directed verdict for the defendant on a negligence claim is proper only if there is no evidence from which the jury could have found the facts necessary to establish the elements of the claim." Id. Based on that view of the evidence, the relevant facts are as follows.

Plaintiffs--John and Sherri Harkness--were interested in using the equity in their home to invest when John [270 Or.App. 263] saw a homemade flyer for various businesses at work. The flyer included a photocopy of Kantor's business card that indicated Kantor was a loan officer with Sunset. After John spoke with a coworker who had worked with Kantor to purchase an apartment complex, plaintiffs set up and attended a meeting with Kantor at her Sunset office. Kantor proposed that plaintiffs borrow money from Sunset, using the equity in their house as collateral, and then she would invest those proceeds in short-term, high-interest loans to developers and building contractors (hard-money loans). She told plaintiffs that those hard-money loans would be secured by first or second liens on real property with " lots" of equity. Kantor explained that she and Sunset would get paid from the commission on plaintiffs' conventional loan on their house

Page 1148

and from the conventional construction loans that Sunset would do for the builders.

After meeting with Kantor at Sunset again, plaintiffs agreed to the proposal, took out a conventional loan from Sunset, and turned over the loan proceeds to Kantor. Kantor did use those proceeds to make hard-money loans to several people and prepared certain documentation on Sunset letterhead. For the first of those loans, which was not funded from the Sunset loan proceeds turned over to Kantor, Sherri gave Kantor a cashier's check made out to Sunset. Sherri always met with Kantor at her Sunset office to learn about additional hard-money loan opportunities and to receive copies of notes for the loans Kantor made, which were always closed outside of plaintiffs' presence. Kantor later went to work as a loan officer at Directors. Plaintiffs continued their same investment relationship with Kantor at Directors and met with her at her Directors' office in the same manner as when Kantor was at Sunset. Plaintiffs also took out an additional loan from Directors, using their rental house as collateral, the proceeds of which were paid directly to Kantor to make hard-money loans to people Kantor found. Kantor's assistant at Directors was knowledgeable about all of plaintiffs' hard-money loans and would assist plaintiffs with information on those matters.

Plaintiffs did not get loan payments directly from borrowers and did not know how borrowers made payments, [270 Or.App. 264] but Kantor arranged deposits into plaintiffs' bank account to service plaintiffs' personal loans. Sherri testified that certain notes directed payments to be made at addresses that corresponded to Sunset's or Directors' office address. Plaintiffs did not receive the proceeds from some of the note payoffs; instead, when a note was paid off or came due but not paid off, Kantor would recommend that plaintiffs ...

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