Assignment:
Tom decided to build a home. In order to obtain financing, he contacted City Mortgage Co. At a meeting with Alex Martinez on City Mortgage's behalf, Tom signed a temporary loan agreement with Strass Bank on January 1, 2001. Martinez assured Tom that he did not need to make payments on the loan until his house is built and permanent financing was secured. Because Tom did not make payments on Strass Bank's loan, City Mortgage declined to make the permanent loan. Meanwhile, Martinez left City Mortgage Co to work for another company.
On May 2001, Tom moved into his new house. He tried to contact Martinez at City Mortgage but was told that he was unavailabe and would get back to him. Four weeks later, Martinez came to Tom's house and had him sign documents that he believed were to secure a permanent loan. but that were actually an application with Martinez' s new employer.
Strass Bank filed a lawsuit in the state court against Tom for failing to pay on its loan. Tom paid Strass Bank, obtained permanent financing through another source and filed a suit against City Mortgage to recover the cost.
Question 1. Who should have told Tom that Martinez was no longer working at City Mortgage?
Question 2. Could City Mortgage be liable to Tom on this basis?
Question 3. Assuming you have the role of the "Defendant" (City Mortgage), how can you defend yourself against Tom?