A bank customer asked the branch manager to request authorization to increase the amount of his loan from $30,000 to $40,000. The branch manager made the request but his superiors refused to allow the increase. They also instructed him to reduce the amount of the loan by $5,000 within three weeks. The branch manager then informed the customer that a second customer (a mortgage company) might lend him $30,000 for 90 days at 2%/month. The customer gave the branch manager authority to approach the mortgage company and give it any information on him they required. The branch manager talked to the mortgage company and told it the customer’s story, including the fact that he had reached the limit of his credit with the bank. He did not report the bank’s rejection of the application for an increase, nor the requirement that his bank loan be reduced by $5,000. The mortgage company agreed to make the loan to the customer, and the funds were deposited to the customer’s account at the bank, wiping out his large overdraft and reducing his loan from $30,000 to $19,000. Fifteen months later the customer was put into receivership by the bank. The mortgage company was not repaid and sued the branch manager and the bank for negligence.
Should the mortgage company’s action succeed? Show your legal analysis.
