The Supreme Court of the State of Oregon reversed the Court of Appeals' decision and the circuit court's judgment in the interpleader action initiated by American Bankers Insurance Company, regarding claims against a bond posted by licensed mortgage broker Mortgage One, Inc. Robert and Sandra Graf loaned $100,000 to Karl and Linda Keener through Mortgage One, which was required by law to secure a $50,000 bond. Following the Keeners' default and the Grafs' allegations of misrepresentation by Mortgage One, multiple claimants sought recovery against the bond. The circuit court previously ruled that the Grafs could not claim against the bond, as they were not within the protected class intended by the legislature. However, the Supreme Court determined that the facts were undisputed and reversed the lower courts’ decisions, remanding the case for further proceedings. The Grafs asserted a claim for the entire bond amount, citing losses of approximately $200,000 due to alleged misrepresentations.
Executive Reporting Services, Inc. and Precision Appraisals filed claims against a bond after providing services to Mortgage One without payment. The Grafs, who cross-claimed to block others from accessing the bond proceeds, sought summary judgment asserting they were the sole valid claimants. Both parties moved for summary judgment, but the trial court ruled in favor of Executive Reporting and Precision Appraisals, determining they were proper claimants, while the Grafs were not. Upon appeal, the Court of Appeals partially affirmed and partially reversed the trial court's decision.
The court analyzed Oregon's Mortgage Lender Law, specifically ORS 59.925(2), which allows actions against mortgage brokers by any person suffering a monetary loss in a mortgage transaction. The court found the statute did not clearly define who could claim against the bond. Investigating the legislative history revealed that the bonding requirement was intended to protect consumers—typically borrowers—who prepaid for services that were not delivered. Consequently, the court concluded that the Grafs, as private lenders, were outside the intended class of claimants. It also determined that Executive Reporting and Precision Appraisals were merely unpaid creditors and, like the Grafs, were not protected by the bonding requirement.
The Court of Appeals affirmed the denial of the Grafs' summary judgment motion but reversed the grant of summary judgment to Executive Reporting and Precision Appraisals. The Grafs sought further review to clarify who may claim against a mortgage broker's bond, requiring an interpretation of relevant statutes governing mortgage broker liability and bonding obligations. The inquiry began with the principles from PGE v. Bureau of Labor and Industries, focusing on the text and context of ORS 59.925, which states that any person with a right of action against a mortgage broker may also claim against the bond required under ORS 59.850, detailing the bond's monetary requirements based on the broker's offices in the state.
Mortgage One obtained a $50,000 surety bond due to the number of offices it operated. Under ORS 59.925(6), individuals with a right of action against a mortgage banker or mortgage broker are defined by ORS 59.925(1) to (3). A "mortgage banker transaction" or "mortgage broker transaction" requires licensing under ORS 59.840 to 59.980. Liability arises if a mortgage banker or broker causes an ascertainable loss of money or property due to violating these statutes or through misrepresentation, as outlined in ORS 59.925(2). Specifically, those suffering a loss in a residential mortgage transaction—defined as one creating a security interest in residential property—can sue for damages. Misrepresentation in such transactions holds the mortgage banker or broker liable for any resultant losses. Thus, if a mortgage broker misrepresents information in a residential mortgage transaction, they are liable to any party suffering a loss from that misrepresentation.
The analysis of ORS 59.925 confirms the legislature's intent to grant individuals who loan money in residential mortgage transactions the right to take action against mortgage bankers or brokers. Although the passive voice in ORS 59.925(2) obscures the identification of the parties entitled to this right, the definitions within the statute clarify legislative intent. The Grafs allege they incurred a loss due to a mortgage broker's misrepresentations, which aligns with ORS 59.925(2)(b) as it involves a transaction that created a security interest in residential property. Consequently, the Grafs possess a right of action against Mortgage One under ORS 59.925(3) and also have a right to recover under the bond per ORS 59.925(6). The trial court's ruling and the Court of Appeals' decision are deemed erroneous; thus, both are reversed, and the case is remanded for further proceedings. Approximately 20 other businesses with claims against Mortgage One were noted, but only Executive Reporting and Precision Appraisals pursued appeals. The ruling specifically addresses the Grafs' case, without commenting on the merits of their allegations regarding misrepresentation.
