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Past Employee incurs business debt now in collection for Mortgage LLC no longer in business
Bellevue, WA
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Posted about 1 year ago in Debt Collection
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I was a partner in a Washington State Mortgage LLC that closed down earlier this year due to slow sales. The LLC was actually owed by two separate Corporations that were used for tax purposes. One of our past independent contractors who worked for the LLC used an outside vendor six times for their appraisal services. The vendor was paid for all but two of these services and have recently turned this to a Washington State collection agency. We have given all the contact information that we have for this past employee to them, which, I assume they are getting nowhere as they are now contacting me for payment. The vendor states that since the employee worked for the LLC at the time of services being rendored and since the employee ordered the services under the LLC's name, that we are liable, even though the vendor has been made aware of the LLC's closure and no personal guarantees were given. What legal grounds does the vendor and collection agency have at this point? Since I was the designated broker at the time the debts were incurred, is there any recourse against me personally as I am liable for my loan officers actions according to the Mortgage Broker Practices act?
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Answers (1)
Michael Barwood Gottlieb
This attorney is licensed in Washington and 1 other state.
Posted about 1 year ago.
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The LLC is probably liable for the appraisals because they were ordered in the name of the LLC by an employee of the LLC. The employee had what is called "apparent authority" to act as an agent of the LLC to incur the debt. However, without a personal guaranty, it would be difficult for the appraiser to pierce the LLC into the two member-corporations, and then piece one of those corporations to its sole shareholder (you), which I assume is the structure from your question. The appraiser could pierce the entities as I described, but it would be expensive and difficult. You are responsible for acts of your loan officers under the Mortgage Broker Practices Act, but incurring debts with third parties does not necessarily fall under this act. However, if the LLC collected appraisal fees from borrowers but did not hold the fees in trust (as required by the Act), then you may be personally responsible for the fees and subject to criminal sanction. The collection agency shouldn't be able to go after you personally for the debt unless they sue you first. If they sue you, you'll have a chance to defend and see their claims and can do an analysis at that point, if you don't settle the matter beforehand.
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