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Fergus v. Ross

Supreme Judicial Court of Massachusetts, Suffolk

August 2, 2017

JOSEPH FERGUS
v.
STEVEN A. ROSS.

          Heard: April 4, 2017.

         Civil action commenced in the Superior Court Department on August 31, 2010. The case was heard by Frances A. Mclntyre, J.

         After review by the Appeals Court, the Supreme Judicial Court granted leave to obtain further appellate review.

          Arnold E. Cohen for the defendant.

          Gordon E. Feener (Danielle F. Wehrli also present) for the plaintiff. [1]

          Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

          LOWY, J.

         In a jury-waived trial, a Superior Court judge determined that the defendant, Attorney Steven A. Ross, was negligent for his part in financing a real estate loan to the plaintiff, Joseph Fergus. The judge found that the defendant had conferred apparent authority on an individual, Bernard Laverty, Jr., to act as his agent for the loan. In the course of arranging the loan, unbeknownst to the defendant, Laverty asked the plaintiff to use a portion of the loan from the defendant to make a secured "side loan" to Laverty. The plaintiff agreed. Ultimately, however, the side loan was unsecured and Laverty defaulted. Relying on the rule that imputes the knowledge of an agent to the principal, the judge found that the defendant was negligent for failing to inform the plaintiff prior to the closing that the side loan was not secured. We now reverse, concluding that the facts found by the trial judge failed to establish that Laverty had the apparent authority to bind the defendant with respect to the side loan.

         Background.

         The judge made the following factual findings, which the parties do not dispute on appeal.

         The plaintiff, a regular purchaser and seller of real estate, needed between $75, 000 and $100, 000 to complete renovations of a property in the Dorchester section of Boston. Unable to acquire conventional financing for the project, he inquired about private financing through a mortgage broker, who referred the plaintiff to Laverty.

         Laverty had an existing relationship with the defendant, who operated a private lending operation through his law firm. Laverty had received five or six loans from the defendant and had previously referred potential borrowers to the defendant. Laverty informed the defendant of the plaintiff's desire for a loan. Although the defendant had paid Laverty referral fees on other occasions, he did not do so for the plaintiff's loan.

         When the plaintiff and Laverty met, Laverty implored the plaintiff to seek more money than he needed for the renovations, so that the plaintiff could make a side loan to Laverty. Laverty needed $120, 000 to close on a residential property in Marshfield. Laverty offered to provide the plaintiff "a deed-in-lieu" of a mortgage to secure the side loan. The plaintiff agreed. Notwithstanding his ultimate failure to do so, Laverty intended to provide the deed-in-lieu and to repay the $120, 000.

         Prior to the closing, the plaintiff had no direct contact with the defendant. Rather, all discussions with the defendant and the law firm regarding the loan were conducted by Laverty, outside of the plaintiff's presence. Although the defendant insulated himself from any direct contact with the plaintiff, the parties arranged, through Laverty, for the defendant's wife to inspect the Dorchester ...


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