Denegar Liability
Published on Aug 02, 2020
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PRESENTATION OUTLINE
Denegar Liability
Tyler Sintay
Introduction
The case under review is that of New Century Financial Services, Inc., v. Lee B. Dennegar.
Background.
- Dennegar lived with Knutson from 1999 to 2000.
- Moved into a new home that same year.
- Dennegar was the primary source of income.
- He owned the home and covered expenses.
- Fisher (n.d.).
Defendant, Lee Dennegar, lived with an individual by the name of Mark Knutson, from 1999 to 2000, and subsequently moved into a new home with him that same year. According to the case, Dennegar was the primary source income, as he owned the home and covered the mortgage, alongside additional living expenses.
Fisher (n.d.).
Fisher (n.d.).
Photo by Giammarco Boscaro
The Financial Relationship.
- Dennegar suffered a nervous breakdown.
- He allowed Knutson to manage their household financial affairs.
- Knutson opened a new AT&T credit card under Dennegar's name, without the consent or knowledge of Dennegar.
- $14,752.93 in debt.
- Knutson passed away and left Dennegar with the liability.
Shortly after, however, Dennegar claims to have suffered a nervous breakdown, which landed him in the hospital for quite some time.
During this time, Dennegar allowed Knutson to manage their household financial affairs, including administering bill payments, writing checks, and even signing the checks in Dennegar's name.
During this time, Knutson opened a new AT&T credit card under Dennegar's name, without the consent or knowledge of Dennegar. As you may suspect, the balance went delinquent and landed Dennegar in $14,752.93 worth of debt.
Not so long after the credit card debt began to build up, Knutson passed away, leaving the liability for paying back the debt in the hands of Dennegar.
Fisher (n.d.).
During this time, Dennegar allowed Knutson to manage their household financial affairs, including administering bill payments, writing checks, and even signing the checks in Dennegar's name.
During this time, Knutson opened a new AT&T credit card under Dennegar's name, without the consent or knowledge of Dennegar. As you may suspect, the balance went delinquent and landed Dennegar in $14,752.93 worth of debt.
Not so long after the credit card debt began to build up, Knutson passed away, leaving the liability for paying back the debt in the hands of Dennegar.
Fisher (n.d.).
Photo by Carlos Muza
The Court's Opinion.
- The court believes that Dennegar delegated the responsibility to Knutson to handle the household financial affairs, and that is indeed liable to pay back the debt.
The court believes that Dennegar delegated the responsibility to Knutson to handle the household financial affairs, and that is indeed liable to pay back the debt.
Discussion on Principal and Agency.
- The Agent works to further the interests of the Principal.
- The Agent is delegated authorities.
- General or Special Agent and Servant.
- Knutson was a General Agent.
Under traditional agency theory, an Agent is an individual who works to further the interests of another individual (i.e., the Principal). In many cases, expected to complete specific tasks and delegated specified authorities to complete those tasks. (Mayer et al., 2017) (Payne and Petrenko, 2019).
There can be General or Special Agents and Servants.
A general agent, "… Possesses the authority to carry out a broad range of transactions in the name and on behalf of the Principal." (Mayer et al., 2017, 38.1).
A Special Agent is one who will "… act only in a specifically designated instance or in a specifically designated set of transactions." (38.1).
A Servant is "an agent employed by a master [employer] to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master." (38.1). However, this term is outdated and no longer used in most scenarios.
In the case of Dennegar, Knutson possessed the authority to carry out a broad range of transactions. There were no apparent limitations or specific designations of duty. Given this information, it appears that Knutson acted as a General Agent.
There can be General or Special Agents and Servants.
A general agent, "… Possesses the authority to carry out a broad range of transactions in the name and on behalf of the Principal." (Mayer et al., 2017, 38.1).
A Special Agent is one who will "… act only in a specifically designated instance or in a specifically designated set of transactions." (38.1).
A Servant is "an agent employed by a master [employer] to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master." (38.1). However, this term is outdated and no longer used in most scenarios.
In the case of Dennegar, Knutson possessed the authority to carry out a broad range of transactions. There were no apparent limitations or specific designations of duty. Given this information, it appears that Knutson acted as a General Agent.
Apparent and Implied Authority.
- Actual vs. Apparent Authority.
- Specific authorities can be 'implied'.
- This type of relationship also involves a layer of 'assumptions'.
Actual authority is the authority given by the Principal to the Agent, but that defines a specific scope of authority (i.e., there are likely to be limitations). Apparent authority, on the other hand, does not involve a specific scope or well-defined set of delegations. Instead, it "… intentionally or inadvertently causes third persons to believe the Agent… possess [certain authorities]." (Conant, 1968, p. 681). This 'appearance of authority' is the result of some actual authorities delegated to the Agent in the past.
According to Mayer et al. (2017), "… the law permits authority to be "implied" by the relationship of the parties, the nature and customs of the business, the circumstances surrounding the act in question, the wording of the agency contract, and the knowledge that the Agent has of facts relevant to the assignment." (39.1).
This type of relationship is also based upon assumptions - more specifically, an agent may assume that they have a continuing authority to act on the Principal's behalf. Under the same context, a third party - let us say the Plaintiff - could also assume that the Agent has said authority due to the Principal's rights granted to them. (Moulton and McLennan, 2004).
According to Mayer et al. (2017), "… the law permits authority to be "implied" by the relationship of the parties, the nature and customs of the business, the circumstances surrounding the act in question, the wording of the agency contract, and the knowledge that the Agent has of facts relevant to the assignment." (39.1).
This type of relationship is also based upon assumptions - more specifically, an agent may assume that they have a continuing authority to act on the Principal's behalf. Under the same context, a third party - let us say the Plaintiff - could also assume that the Agent has said authority due to the Principal's rights granted to them. (Moulton and McLennan, 2004).
What might constitute liability under Implied Authority?
Photo by tomislavmedak
Liability under Implied Authority.
- Verbal permissions were granted to Knutson.
- Denngar did not specify any limitations to authority.
- Dennegar may be liable under Implied Authority.
As we discussed previously, verbal permission was given to Knutson to handle the financial affairs. Dennegar, to some extent, due to his nervous breakdown, was relying on Knutson to handle the responsibilities.
In doing so, Dennegar mostly delegated the authority of managing financial affairs to Knutson but did not detail any specific limitations. Writing checks and paying bills are examples of some of the actual delegations. Nevertheless, said actual delegations could also result in the appearance of additional delegations that fall under the umbrella of 'managing financial affairs' (such as signing checks on Dennegar's behalf). Therefore, opening a new credit account can indeed be considered implied authority under the Dennegar-Knuston agency relationship.
Given this information, Dennegar would be held liable under the Implied Authority.
In doing so, Dennegar mostly delegated the authority of managing financial affairs to Knutson but did not detail any specific limitations. Writing checks and paying bills are examples of some of the actual delegations. Nevertheless, said actual delegations could also result in the appearance of additional delegations that fall under the umbrella of 'managing financial affairs' (such as signing checks on Dennegar's behalf). Therefore, opening a new credit account can indeed be considered implied authority under the Dennegar-Knuston agency relationship.
Given this information, Dennegar would be held liable under the Implied Authority.
Imputed Knowledge.
- "... legally charges the Principal with information obtained by the Agent within the scope of the Agent's service for the Principal." (Scordato, 2004, p. 131-132).
Under agency relationships similar to Dennegar and Knutson's, an element of inherited responsibility exists, known as the Imputed Knowledge Rule.
According to Scordato (2004), Imputed Knowledge, "… legally charges the Principal with information obtained by the Agent within the scope of the Agent's service for the Principal. The law will treat the Principal as having actually received the information in question, even if it is clear from the facts of the case that the Agent failed to transmit the information to the Principal, and therefore clear that the Principal never actually possessed it." (p. 131 - 132).
In this case, Knutson failed to transmit the credit card statements to Dennegar. Even if Knutson purposely omitted this information to hide the debt, he was technically 'managing the household financials' and 'controlling the mail' - two vital pieces of information that Dennegar never objected to.
"Receipt of the notice by the authorized agent results in the legal receipt by the principal …" (Scordato, 2004, p.132).
Knutson was acting within the scope of his services for Dennegar.
Given this information, Dennegar is also technically liable under the Imputed Knowledge Rule.
According to Scordato (2004), Imputed Knowledge, "… legally charges the Principal with information obtained by the Agent within the scope of the Agent's service for the Principal. The law will treat the Principal as having actually received the information in question, even if it is clear from the facts of the case that the Agent failed to transmit the information to the Principal, and therefore clear that the Principal never actually possessed it." (p. 131 - 132).
In this case, Knutson failed to transmit the credit card statements to Dennegar. Even if Knutson purposely omitted this information to hide the debt, he was technically 'managing the household financials' and 'controlling the mail' - two vital pieces of information that Dennegar never objected to.
"Receipt of the notice by the authorized agent results in the legal receipt by the principal …" (Scordato, 2004, p.132).
Knutson was acting within the scope of his services for Dennegar.
Given this information, Dennegar is also technically liable under the Imputed Knowledge Rule.
Imputed Knowledge (Cont.).
- Dennegar does not meet the exceptions for the Imputed Knowledge Rule.
- The Principal is liable for information possessed by the Agent.
- The Agent did not act adversely.
Additionally, Dennegar does not meet the exceptions for the Imputed Knowledge Rule.
One is the exception is that "… a principal will not be imputed with knowledge possessed by an agent when the Agent obtained the information from a third party to which the Agent owes a duty of confidentiality." (Scordato, 2004, p.132). The credit was issued under the name of Lee Dennegar, and not Knutson himself. So, the expectations for confidentiality regarding Knutson's personal financial information would not apply.
The other exception is when the agent "… has acted adversely to the principal during the transaction in question." (p. 133-134). There was no evidence that Knutson acted adversely in the interests of the Principal; he was merely negligent in paying back the credit card bills due to joint expenses.
One is the exception is that "… a principal will not be imputed with knowledge possessed by an agent when the Agent obtained the information from a third party to which the Agent owes a duty of confidentiality." (Scordato, 2004, p.132). The credit was issued under the name of Lee Dennegar, and not Knutson himself. So, the expectations for confidentiality regarding Knutson's personal financial information would not apply.
The other exception is when the agent "… has acted adversely to the principal during the transaction in question." (p. 133-134). There was no evidence that Knutson acted adversely in the interests of the Principal; he was merely negligent in paying back the credit card bills due to joint expenses.
Conclusion and Opinion.
- Dennegar provided Knutson with Implied Authority and is liable to pay back the credit card debt.
References:
- Conant, M. (1968). The Objective Theory of Agency: Apparent Authority and the Estoppel of Apparent Owenrship. Neb. L. Rev., 47, 678. FISHER, J.A.D. (n.d.). NEW CENTURY FINANCIAL SERVICES INC v. DENNEGAR. Retrieved from http://caselaw.findlaw.com/nj-superior-court-appellate-division/1263011.htm... Mayer, D., Warner, D., Siedel, G., Lieberman, J., K. (2017, March). Business Law and the Legal Environment, v. 2.0. Flat World knowledge.
- Conant, M. (1968). The Objective Theory of Agency: Apparent Authority and the Estoppel of Apparent Owenrship. Neb. L. Rev., 47, 678.
- FISHER, J.A.D. (n.d.). NEW CENTURY FINANCIAL SERVICES INC v. DENNEGAR. Retrieved from http://caselaw.findlaw.com/nj-superior-court-appellate-division/1263011.htm...
References:
Conant, M. (1968). The Objective Theory of Agency: Apparent Authority and the Estoppel of Apparent Owenrship. Neb. L. Rev., 47, 678.
FISHER, J.A.D. (n.d.). NEW CENTURY FINANCIAL SERVICES INC v. DENNEGAR. Retrieved from http://caselaw.findlaw.com/nj-superior-court-appellate-division/1263011.htm...
Mayer, D., Warner, D., Siedel, G., Lieberman, J., K. (2017, March). Business Law and the Legal Environment, v. 2.0. Flat World knowledge.
Moulton, A., & McLennan, R. (2004). Questions concerning agents. The Canadian Appraiser, 48(3), 38. Retrieved from https://search.proquest.com/docview/208354049?accountid=33575
Payne, G., & Petrenko, O. (2019, April 26). Agency Theory in Business and Management Research. Oxford Research Encyclopedia of Business and Management. Retrieved 2 Aug. 2020, from https://oxfordre.com/business/view/10.1093/acrefore/9780190224851.001.0001/....
Scordato, M. R. (2004). Evidentiary Surrogacy and Risk Allocation: Understanding Imputed Knowledge and Notice in Modern Agency Law. Fordham Journal of Corporate & Financial Law, 10(1), 129–166.
Conant, M. (1968). The Objective Theory of Agency: Apparent Authority and the Estoppel of Apparent Owenrship. Neb. L. Rev., 47, 678.
FISHER, J.A.D. (n.d.). NEW CENTURY FINANCIAL SERVICES INC v. DENNEGAR. Retrieved from http://caselaw.findlaw.com/nj-superior-court-appellate-division/1263011.htm...
Mayer, D., Warner, D., Siedel, G., Lieberman, J., K. (2017, March). Business Law and the Legal Environment, v. 2.0. Flat World knowledge.
Moulton, A., & McLennan, R. (2004). Questions concerning agents. The Canadian Appraiser, 48(3), 38. Retrieved from https://search.proquest.com/docview/208354049?accountid=33575
Payne, G., & Petrenko, O. (2019, April 26). Agency Theory in Business and Management Research. Oxford Research Encyclopedia of Business and Management. Retrieved 2 Aug. 2020, from https://oxfordre.com/business/view/10.1093/acrefore/9780190224851.001.0001/....
Scordato, M. R. (2004). Evidentiary Surrogacy and Risk Allocation: Understanding Imputed Knowledge and Notice in Modern Agency Law. Fordham Journal of Corporate & Financial Law, 10(1), 129–166.
References (Cont.).
- Mayer, D., Warner, D., Siedel, G., Lieberman, J., K. (2017, March). Business Law and the Legal Environment, v. 2.0. Flat World knowledge.
- Moulton, A., & McLennan, R. (2004). Questions concerning agents. The Canadian Appraiser, 48(3), 38. Retrieved from https://search.proquest.com/docview/208354049?accountid=33575
References (Cont.).
- Payne, G., & Petrenko, O. (2019, April 26). Agency Theory in Business and Management Research. Oxford Research Encyclopedia of Business and Management. Retrieved 2 Aug. 2020, from https://oxfordre.com/business/view/10.1093/acrefore/9780190224851.001.0001/....
- Scordato, M. R. (2004). Evidentiary Surrogacy and Risk Allocation: Understanding Imputed Knowledge and Notice in Modern Agency Law. Fordham Journal of Corporate & Financial Law, 10(1), 129–166.
