No. 38	                        June 16, 2016	715

              IN THE SUPREME COURT OF THE
                    STATE OF OREGON

                     John HARKNESS
                   and Sherri Harkness,
                   Petitioners on Review,
                             v.
                    Jack R. PLATTEN,
                   Respondent on Review.
          (CC C092970CV; CA A147439; SC S063222)

    On review from the Court of Appeals.*
    Argued and submitted March 4, 2016.
   Emil R. Berg, Boise, Idaho, argued the cause and filed
the brief for petitioners on review. With him on the brief was
Leonard D. DuBoff, The Duboff Law Group, Portland.
   James M. Callahan, Callahan & Shears, P.C., Portland,
argued the cause and filed the brief for respondent on review.
  Scott A. Shorr, Stoll Stoll Berne Lokting & Shlachter
PC, Portland, filed the brief for amicus curiae Oregon Trial
Lawyers Association.
  Before Balmer, Chief Justice, Kistler, Walters, Landau,
Baldwin, Brewer, Justices, and DeVore, Justice pro tempore.**
    BALDWIN, J.
   The decision of the Court of Appeals is reversed. The
judgment of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.




______________
	**  Appeal from Washington County Circuit Court, Charles D. Bailey, Judge.
270 Or App 260, 348 P3d 1145 (2015)
	   **  Nakamoto, J., did not participate in the consideration or decision of this
case.
716	                                                  Harkness v. Platten

     Case Summary: A loan officer employed successively by two mortgage compa-
nies defrauded plaintiffs by means of an investment and loan scheme. Plaintiffs
filed suit against the loan officer and the mortgage companies and, with the
advice of defendant—their attorney—settled the case. Plaintiffs then filed this
legal malpractice and negligent misrepresentation action against defendant,
alleging, among other things, that, but for defendant’s legal malpractice or neg-
ligent misrepresentation, they would have gone to trial in the underlying action
against the loan officer and mortgage companies, prevailed, and been awarded
more than the amount that they had received in the settlement. Defendant moved
for a directed verdict on the ground that plaintiffs could not have prevailed in
the underlying action because they failed to present sufficient evidence of the
loan officer’s apparent authority to act on behalf of the mortgage companies. The
trial court granted the directed verdict, and the Court of Appeals affirmed. Held:
The plaintiffs presented sufficient evidence for a reasonable factfinder to infer
that the loan officer had apparent authority to bind the mortgage companies to
the loan transactions arranged by the loan officer between plaintiffs and third
parties.
    The decision of the Court of Appeals is reversed. The judgment of the cir-
cuit court is reversed, and the case is remanded to the circuit court for further
proceedings.
Cite as 359 Or 715 (2016)	717

	          BALDWIN, J.
	        This is a legal malpractice and negligent misrep-
resentation case where we review a trial court judgment
directing a verdict in favor of Platten (defendant). In an
earlier lawsuit, defendant had represented the Harknesses
(plaintiffs) against Kantor, a loan officer, and her succes-
sive employers, Sunset Mortgage (Sunset) and Directors
Mortgage, Inc. (Directors), as the result of a fraudulent
investment and loan scheme directed at plaintiffs by Kantor.
That case did not settle to plaintiffs’ satisfaction, and plain-
tiffs sought to recover their remaining loss from defendant.
In this case, the trial court granted defendant’s motion for a
directed verdict based on the conclusion that plaintiffs’ lia-
bility theories of apparent authority and respondeat superior
asserted against Sunset and Directors were not supported
by sufficient evidence in the record and could not have led
to a result more favorable than the settlement. Plaintiffs
appealed the trial court ruling, and the Court of Appeals
affirmed. Harkness v. Platten, 270 Or App 260, 348 P3d 1145
(2015). For the reasons explained below, we reverse the deci-
sions of the trial court and the Court of Appeals.
	      The facts as stated by the Court of Appeals, which
we adopt, are as follows:1
    	 “Plaintiffs * * * were interested in using the equity in
    their home to invest when [Mr. Harkness] saw a homemade
    flyer for various businesses at work. The flyer included a
    photocopy of Kantor’s business card that indicated Kantor
    was a loan officer with Sunset. After [Mr. Harkness] spoke
    with a coworker who had worked with Kantor to purchase
    an apartment complex, plaintiffs set up and attended a
    meeting with Kantor at her Sunset office. Kantor proposed
    that plaintiffs borrow money from Sunset, using the equity
    in their house as collateral, and then she would invest those
    proceeds in short-term, high-interest loans to developers
    and building contractors (hard-money loans). She told
    plaintiffs that those hard-money loans would be secured

	1
       In its review of the grant of defendant’s motion for a directed verdict, the
Court of Appeals properly viewed the evidence and all reasonable inferences in
the light most favorable to plaintiffs. Trees v. Ordonez, 354 Or 197, 200, 311 P3d
848 (2013). We omit part of the factual statement relating to plaintiffs’ allega-
tions of malpractice, because those facts are not relevant to our review.
718	                                         Harkness v. Platten

  by first or second liens on real property with ‘lots’ of equity.
  Kantor explained that she and Sunset would get paid from
  the commission on plaintiffs’ conventional loan on their
  house and from the conventional construction loans that
  Sunset would do for the builders.
  	 “After meeting with Kantor at Sunset again, plain-
  tiffs agreed to the proposal, took out a conventional loan
  from Sunset, and turned over the loan proceeds to Kantor.
  Kantor did use those proceeds to make hard-money loans
  to several people and prepared certain documentation on
  Sunset letterhead. For the first of those loans, which was
  not funded from the Sunset loan proceeds turned over to
  Kantor, [Mrs. Harkness] gave Kantor a cashier’s check
  made out to Sunset. [Mrs. Harkness] always met with
  Kantor at her Sunset office to learn about additional hard-
  money loan opportunities and to receive copies of notes for
  the loans Kantor made, which were always closed outside of
  plaintiffs’ presence.
  	 “Kantor later went to work as a loan officer at Directors.
  Plaintiffs continued their same investment relationship
  with Kantor at Directors and met with her at her Directors’
  office in the same manner as when Kantor was at Sunset.
  Plaintiffs also took out an additional loan from Directors,
  using their rental house as collateral, the proceeds of which
  were paid directly to Kantor to make hard-money loans to
  people Kantor found. Kantor’s assistant at Directors was
  knowledgeable about all of plaintiffs’ hard-money loans and
  would assist plaintiffs with information on those matters.
  	 “Plaintiffs did not get loan payments directly from bor-
  rowers and did not know how borrowers made payments,
  but Kantor arranged deposits into plaintiffs’ bank account
  to service plaintiffs’ personal loans. [Mrs. Harkness] tes-
  tified that certain notes directed payments to be made at
  addresses that corresponded to Sunset’s or Directors’ office
  address. Plaintiffs did not receive the proceeds from some
  of the note payoffs; instead, when a note was paid off or
  came due but not paid off, Kantor would recommend that
  plaintiffs immediately invest payoffs into new loans or roll
  over unpaid loans into a new loan to the same borrower,
  which plaintiffs would then do.
  	 “[Mrs. Harkness] testified that she would not have
  dealt with Kantor if she were not working through Sunset.
  She also testified that she would not have continued
Cite as 359 Or 715 (2016)	719

 working with Kantor if Kantor had not been at Directors.
 [Mrs. Harkness] believed that Kantor was a representative
 of Sunset, and then Directors, and was acting within the
 scope of her employment in all her dealings with plaintiffs.
 However, it was undisputed that Kantor, in fact, was not
 performing duties for which she was hired as a loan officer
 with regard to the investment scheme and hard-money loan
 arrangements—that type of transaction was not part of the
 business of either Sunset or Directors—and neither Sunset
 nor Directors received any fees or commissions from the
 hard-money loans. There also was no evidence that the con-
 trol persons at Sunset or Directors were aware of Kantor’s
 arrangement with plaintiffs.
 	 “After about two years of investing with Kantor, plain-
 tiffs were contacted by an attorney for one of the borrow-
 ers on a hard-money loan financed by plaintiffs. Kantor
 told [Mrs. Harkness] that she just had forgotten to record
 a lien, so [Mrs. Harkness] accompanied Kantor to record
 the lien. The borrower then sued plaintiffs. At the end of
 that lawsuit, plaintiffs learned that Kantor had forged
 the documents for at least that loan, and, for other loans,
 Kantor had not recorded any liens, or had recorded a lien
 in third position behind a lien Kantor had placed in favor
 of Directors on the property. Kantor also had been running
 all the money through her personal accounts. At the conclu-
 sion of that lawsuit, plaintiffs held notes to five outstanding
 loans, including the one deemed a forgery by the court, that
 totaled approximately $980,000, and at least one of the bor-
 rowers had already filed bankruptcy.
 	 “Plaintiffs then retained attorney Flaherty to represent
 them in a suit against Kantor, Sunset, and Directors (the
 underlying action). Sometime after filing the underlying
 action, Flaherty contacted defendant to be a securities law
 expert in the case, but, instead, defendant fully associated
 with Flaherty as co-counsel in the case to assist with secu-
 rities law issues. * * *
 	   “* * * * *
 	 “At the end of [a] two-day mediation, the parties set-
 tled the underlying action for $600,000. Plaintiffs testified
 that that amount could not make them whole because it
 would leave them with significant amounts owing on their
 residential mortgage. Plaintiffs’ expert in the malpractice
 case testified that, on the date of the settlement, the total
720	                                         Harkness v. Platten

   amount owing to plaintiffs on the five outstanding loans was
   $998,149. Plaintiffs believed at the time of the settlement
   that their total damages were approximately $1.15 million.
   Plaintiffs initially were prepared to reject a $600,000 set-
   tlement and go to trial because they were led to believe by
   their attorneys that they had a strong case. After learning
   about their exposure to attorney fees and that Flaherty
   and defendant were not prepared for trial, and relying on
   defendant’s assurance that they could get money from bor-
   rowers, plaintiffs decided to settle for $600,000.
   	 “After the settlement, plaintiffs contacted defendant to
   pursue the big borrower. Defendant declined to take the
   case and told plaintiffs that ‘you’d be better off to take your
   money and take it to Vegas and put it in a slot machine.’
   Plaintiffs would not have accepted the settlement if defen-
   dant had not told them that there were ways to collect from
   the borrowers. Plaintiffs hired another attorney to sue that
   borrower, but the borrower filed bankruptcy.
   	 “Plaintiffs then brought a legal malpractice case against
   Flaherty, which was dismissed for reasons not disclosed in
   the record. Following that dismissal, plaintiffs brought this
   legal malpractice and negligent misrepresentation case
   against defendant.”
Harkness, 270 Or App at 262-67 (footnotes omitted).
	        To prevail on their legal malpractice and negli-
gent misrepresentation claims against defendant, plaintiffs
needed to prove a “case within a case”—that is, they were
required to show, among other things, that, but for defen-
dant’s legal malpractice or negligent misrepresentation,
they would have gone to trial in the underlying action, pre-
vailed, and been awarded more than the amount that they
had received in the settlement. See Chocktoot v. Smith, 280
Or 567, 570-71, 571 P2d 1255 (1977) (explaining case-within-
a-case methodology). Plaintiffs’ underlying action involved
both contract and noncontract claims. For their case within
a case on their contract claims, plaintiffs proceeded on a
theory that Kantor had apparent authority from Sunset
and Directors to bind those companies to the oral contract
that was the basis for Kantor’s investment scheme with
plaintiffs—loaning funds to plaintiffs based on the equity in
their different properties and then facilitating the lending
of those funds to other borrowers for plaintiffs’ investment
Cite as 359 Or 715 (2016)	721

purposes. For their case within a case on their noncontract
claims, plaintiffs pursued a respondeat superior theory that
Sunset and Directors were vicariously liable as her employ-
ers for Kantor’s actions, because Kantor had appeared to
be acting within the scope of her employment.2 Plaintiffs’
apparent authority and respondeat superior theories were
ultimately based on the same argument and evidence—i.e.,
that Sunset and Directors had clothed Kantor with apparent
authority to engage in the investment scheme with plain-
tiffs on behalf of the companies as part of her employment
as a loan officer.
	        At the close of plaintiffs’ case, defendant moved
for a directed verdict on several grounds, including that
plaintiffs could not have prevailed in the underlying action
against Sunset and Directors. The trial court agreed, con-
cluding that plaintiffs had failed to present any evidence of
actual or apparent authority and, therefore, that they had
not presented any evidence that would have allowed them
to prevail at trial against Sunset or Directors. Based on
that conclusion, the trial court granted a directed verdict to
defendant.
	        On appeal, plaintiffs argued that they had pre-
sented sufficient evidence for a factfinder to draw an infer-
ence of apparent authority with respect to their contract
claims and to draw an inference of respondeat superior
with respect to their noncontract claims. Plaintiffs prin-
cipally relied on this court’s decision in Badger v. Paulson
Investment Co., Inc., 311 Or 14, 803 P2d 1178 (1991), in which
this court held that, even though sales representatives of an
investment company had actual authority to sell investors
only approved securities, the representatives had apparent
authority to sell unregistered securities.
	       The Court of Appeals affirmed the trial court’s rul-
ing that plaintiffs had not presented sufficient evidence of
apparent authority to survive defendant’s directed-verdict
motion: “Plaintiffs presented no evidence that Kantor had

	2
       Plaintiffs’ noncontract claims were for negligence, conversion, fraud, viola-
tion of state mortgage brokerage laws, breach of fiduciary duty for any account-
ing, rescission, slander of title, and violation of state security laws. Harkness, 270
Or App at 268.
722	                                     Harkness v. Platten

the apparent authority to give investment advice on behalf of
either company, engage in the proposed investment scheme,
or, for the contract claim, bind Sunset or Directors to the
oral terms of that scheme.” Harkness, 270 Or App at 272.
In reaching that conclusion, the court disregarded the evi-
dence related to Kantor arranging for plaintiffs to take out
a conventional loan from Sunset and Directors and to those
companies receiving a commission on those loans, “because
those acts were within Kantor’s actual authority as a loan
officer for Sunset and Directors and are not evidence that
Kantor had apparent authority to do more than just that.”
Id. The court then considered the remaining evidence and
concluded that “[i]t was not objectively reasonable for plain-
tiffs to believe that that type of investment scheme [in which
Kantor had engaged] was part of Kantor’s job as a ‘loan offi-
cer,’ nor did Sunset or Directors provide any information to
plaintiffs, whether directly or indirectly, that such a scheme
or financial advice was part of Kantor’s job.” Id. at 273. The
court also concluded that “[p]laintiffs’ reliance on Badger to
make their case is misplaced.” Id.

	       We allowed review to determine whether the Court
of Appeals properly applied this court’s case law on apparent
authority. More specifically, we allowed review to determine
whether the Court of Appeals was correct that, in assessing
whether a reasonable factfinder could infer that Kantor had
apparent authority, the court was required to disregard all
evidence relating to acts that were within Kantor’s actual
authority as a loan officer for Sunset and Directors. Id. at
272.

	        On review, plaintiffs argue that the Court of Appeals’
reasoning “was based on both an unduly circumscribed view
of the evidence in this case and an unduly circumscribed
interpretation” of this court’s decision in Badger. For his
part, defendant argues that the Court of Appeals was cor-
rect in its view that the evidence in support of plaintiffs’
theories of apparent authority and respondeat superior was
insufficient. In particular, defendant argues that “there was
insufficient evidence that Sunset and Directors had said or
done anything to create the appearance that Kantor was
authorized to act on their behalf as a financial advisor and
Cite as 359 Or 715 (2016)	723

propose, and then carry out, an investment scheme involv-
ing the placement of private loans.”
	        We begin with a brief discussion of Oregon law relat-
ing to the doctrine of apparent authority. This court recently
summarized the legal principles applicable to a determina-
tion of when “a putative principal can be held responsible for
the acts of another on an apparent agency theory” in Eads v.
Borman, 351 Or 729, 277 P3d 503 (2012):
   	 “Classically, an agency relationship ‘results from the
   manifestation of consent by one person to another that the
   other shall act on behalf and subject to his control, and con-
   sent by the other so to act.’ Vaughn v. First Transit, Inc.,
   346 Or 128, 135, 206 P3d 181 (2009) (emphasis in Vaughn
   omitted) * * *. The agency relationship can arise either from
   actual consent (express or implied) or from the appearance
   of such consent. See generally Taylor v. Ramsay-Gerding
   Construction Co., 345 Or 403, 410, 196 P3d 532 (2008) (so
   discussing). In either circumstance, the principal is bound
   by or otherwise responsible for the actual or apparent
   agent’s acts only if the acts are within the scope of what
   the agent is actually or apparently authorized to do. Id.; see
   also Beeson v. Hegsted, 199 Or 325, 330, 261 P2d 381 (1953)
   (one cannot hold principal liable for an act that does not
   fall within the scope of agent’s real or apparent authority).
   	 “* * * Under this court’s settled cases, ‘[a]pparent author-
   ity to do any particular act can be created only by some con-
   duct of the principal which, when reasonably interpreted,
   causes a third party to believe that the principal consents
   to have the apparent agent act for him on that matter.’
   Jones v. Nunley, 274 Or 591, 595, 547 P2d 616 (1976). There
   accordingly are two keys to the analysis: (1) the principal’s
   representations; and (2) a third party’s reasonable reliance
   on those representations.”
Id. at 735-37 (internal quotation marks omitted).	
	        This court also observed in Eads that the test in
Oregon to determine when a principal is bound by an actor
under an apparent authority theory is consistent with the
rule stated in the Restatement (Third) of Agency section 2.03
(2006):
   “ ‘Apparent authority is the power held by an agent or
   other actor to affect a principal’s legal relations with third
724	                                                 Harkness v. Platten

    parties when a third party reasonably believes the actor
    has authority to act on behalf of the principal and that
    belief is traceable to the principal’s manifestations.’ ”
351 Or at 737 n 5 (quoting Restatement (Third) § 2.03). That
test is applicable both “to determine when a principal is
bound by actors who appear to be agents but are not, as well
as actors who act beyond the scope of their actual authority.”
Id. (citing Restatement (Third) § 2.03 comment a).
	        Regarding the first element of the apparent author-
ity test—a putative principal’s representation that an agent
is authorized to act on its behalf—an agent’s actions, stand-
ing alone, will not give rise to apparent authority. Id. at
737 (citing Taylor, 345 Or at 410). Instead, the principal
“must take some affirmative step in creating the appear-
ance of authority, one that the principal either intended to
cause or ‘should realize’ likely would cause a third party
to believe that the putative agent has authority to act on
the principal’s behalf.” Id. (ultimately quoting Restatement
(Second) of Agency § 27 comment a (1958)). The principal’s
words, conduct, or other representation need not be made
directly to or witnessed directly by the third party for the
principal to be liable under a theory of apparent authority;
rather, the representation of authority need only be trace-
able to the principal. Id.; see Taylor, 345 Or at 411 (indirect
information attributed to principal’s conduct “can be used
to support apparent agency, as long as that information
can be traced back to the principal”); see also Restatement
(Third) § 1.03 comment b (although “the presence of actual
authority depends upon whether the principal has made a
manifestation to the agent,” by contrast, “a manifestation
sufficient to establish apparent authority may, but need not
necessarily be, directed toward an identified person as its
audience”).3

	3
      The Restatement (Third) describes a “manifestation” of authority by a
putative principal in similarly broad terms. Section 1.03 notes that “[a] person
manifests assent or intention through written or spoken words or other conduct,”
and the commentary to section 1.03 explains that “[a] manifestation is conduct
by a person, observable by others, that expresses meaning. It is a broader con-
cept than communication.” Id. § 1.03 comment b; see State v. Sines, 359 Or 41,
55-56, ___ P3d ___ (2016) (citing section 1.03 and observing that “in determining
whether agency exists, the emphasis is on ‘manifestations’ that can be assessed
objectively”).
Cite as 359 Or 715 (2016)	725

	        Further, when a principal cloaks an agent with
actual authority to perform certain tasks, that actual author-
ity may create the appearance of authority to perform other,
related tasks. Taylor, 345 Or at 411; see Badger, 311 Or at
26 (sales representatives’ actual authority to sell approved
securities lent weight to sales representatives’ apparent
authority to sell unregistered securities). Additionally, when
a principal appoints an agent to a position that carries “gen-
erally recognized duties,” a principal may create apparent
authority to perform those duties. Badger, 311 Or at 24-25
n 9 (quoting Restatement (Second) § 27 comment a).
	        Regarding the second element of the apparent
authority test—the third party’s reasonable reliance—the
third party must in fact rely on the principal’s representa-
tion in dealing with the apparent agent, and that reliance
must be objectively reasonable. Eads, 351 Or at 737 (citing
Jones, 274 Or at 595-96; Badger, 311 Or at 26). In assess-
ing the reasonableness of the third part’s reliance, a court
must consider what is customary and usual for certain posi-
tions or within certain professions. Eads, 351 Or at 737 n 5
(“Apparent authority also includes concepts of ‘usual author-
ity’ and ‘customary authority’ in determining whether ‘a
substantial basis for a third party’s belief’ exists that the
person with whom the third party dealt was acting as an
agent for a principal in a particular circumstance.”) (quot-
ing Restatement (Third) § 2.03 comment b).

	The Restatement (Third) commentary further explains that “an organization
manifests its assent to be bound by the acts of individuals through the observable
connections between the individual and the organization. An organization man-
ifests assent to an individual by appointing that person to a position defined by
the organization.” Id. § 1.03 comment c. Moreover, the commentary emphasizes
that the significance of manifestations by a putative principal must be under-
stood in context:
     	   “A manifestation does not occur in a vacuum, and the meaning that may
     reasonably be inferred from it will reflect the context in which the manifesta-
     tion is made. Assent and intention may be expressed explicitly, but often they
     are inferred from surrounding facts and circumstances. For example, if an
     organization hires a person as its purchasing manager, the organization’s act
     expresses assent that the person undertake the manager’s role as defined by
     the organization.”
Id. at comment e; see Peoples Heritage Sav. Bank v. Pease, 2002 ME 82, ¶¶ 20-21,
797 A2d 1270, 1276 (Me 2002) (genuine issue of material fact whether mortgag-
ee’s employee acted within apparent authority in negotiating terms with mort-
gagors to pay off loans).
726	                                                  Harkness v. Platten

	        We now turn to the Court of Appeals’ analysis of
whether a factfinder could reasonably infer that Kantor
had apparent authority to bind Sunset and Directors to the
loan transactions between plaintiffs and third parties. As
noted, the court focused almost entirely on the nature of the
“investment scheme”4 perpetrated by Kantor as precluding
a factfinder from drawing an inference of apparent author-
ity, because “[i]t was not objectively reasonable for plaintiffs
to believe that that type of investment scheme was part of
Kantor’s job as a ‘loan officer[.]’ ” Harkness, 270 Or App at
273. However, in so narrowing its inquiry, the court disre-
garded, as irrelevant, the evidence concerning the actual
authority with which Sunset and Directors had cloaked
Kantor. Having disregarded that evidence, the court readily
distinguished Badger, a case in which this court concluded
that—under the circumstances presented—sales repre-
sentatives with actual authority to sell approved securities
were apparent agents with authority to sell unregistered
securities.
	        Because both parties rely on Badger—and the
Court of Appeals found Badger inapposite—we discuss it
in some detail. Badger was a civil case for damages aris-
ing from the sale of unregistered securities to investors by
representatives of an investment company. The investment
company (Paulson) had taken over the investment accounts
from a prior company (Slanker) and had informed custom-
ers that it had taken over the Slanker accounts. 311 Or at
17. Paulson’s sales representatives, Lambo and Kennedy,
who had previously worked for Slanker, then made sales
presentations to those investors, and other investors, at
Paulson’s office and solicited sales of unregistered secu-
rities using Paulson’s letterhead. The unregistered secu-
rities “proved to be valueless.” Id. The investors brought
claims against Paulson, Lambo, and Kennedy for securi-
ties fraud under ORS 59.115 and for common-law fraud.
A jury entered a verdict against Paulson for damages on
	4
       Although the court referred to Kantor’s fraudulent scheme as an “invest-
ment scheme,” we note that that scheme could just as accurately be referred to as
a “loan scheme,” or an “investment and loan scheme.” Kantor advised plaintiffs
that they could use the equity in their home to obtain “loans” from Sunset and
Directors that could be “invested” by plaintiffs by making secure “loans” to devel-
opers and contractors.
Cite as 359 Or 715 (2016)	727

all claims based on a finding that the representatives had
apparent authority to bind Paulson to the sales. The trial
court set aside the verdict for the investors against Paulson
on the securities claims and a verdict against Paulson for
punitive damages on the common-law claim. Id. at 18. The
Court of Appeals reversed the trial court’s judgment not-
withstanding the verdict and reinstated those verdicts. Id.
at 18-19.
	        On review, this court concluded that common-law
agency principles may be invoked “to impose liability as
a seller against a principal for an agent’s violation” of the
statutory requirements of ORS 59.115(1) and that “the evi-
dence of an apparent agency relationship between Paulson
and Kennedy and Lambo [was] sufficient to impose lia-
bility on Paulson” under that statute. Id. at 19. The court
quoted from Wiggins v. Barrett & Associates, Inc., 295 Or
679, 687, 669 P2d 1132 (1983), and cited the commentary
to the Restatement (Second) section 27 for the principle that
apparent authority may arise when an agent does not have
actual or implied authority to act for a principal in a mat-
ter, but “the principal has clothed the agent with apparent
authority to act for the principal in that particular. In other
words, the principal permits the agent to appear to have the
authority to bind the principal.” Badger, 311 Or at 24 & n 9
(internal quotation marks omitted).
	       In reviewing whether the evidence was sufficient
to support a finding that Kennedy and Lambo were “acting
within the apparent authority of Paulson,” this court dis-
cussed the fact that Kennedy and Lambo “were employed
by Paulson as registered representatives” and that Paulson
made it known to its customers that Kennedy was associ-
ated with Paulson:
   “When Kennedy went to work for Paulson, it sent its cus-
   tomers letters announcing Kennedy’s association with
   Paulson. A second letter was sent a short time later to
   announce the assignment of Kennedy to several ongoing
   customer accounts. With these announcements, Paulson,
   who did not inform its customers of any limitations on
   Kennedy’s authority to act for Paulson, conferred on
   Kennedy the authority to represent Paulson in securities
   sales and investment transactions.
728	                                         Harkness v. Platten

   	   “* * * * *
   “There is evidence that Paulson provided information
   intended to cause third persons to believe that Kennedy
   and Lambo were authorized to act for it in matters per-
   taining to the sale of securities, including meeting with
   customers, making sales presentations, sending mailings
   and handling paperwork. Although Paulson may have
   forbade its sales representatives to present or sell nonap-
   proved securities, liability based on the agency principle of
   apparent authority may be imposed even though the princi-
   pal expressly forbade the conduct in question. See McClure
   v. E.A. Blackshere Company, 231 F Supp 678, 685 (D Md
   1964).
   	 “There is also evidence that from the information
   provided to them by Paulson, the plaintiffs reasonably
   believed that Kennedy and Lambo were authorized to act
   for Paulson concerning the securities sold by Kennedy and
   Lambo to the plaintiffs. The investors testified to their reli-
   ance on this apparent authority.”
Badger, 311 Or at 25-26. This court concluded that the
evidence was sufficient “to support the jury’s verdict that
Kennedy and Lambo conducted the illegal sales with the
apparent authority of Paulson.” Id. at 26.
	       In this case, the Court of Appeals concluded that
Badger did not aid plaintiffs. The court noted that, in
Badger, the sales representatives had sold both authorized
and unauthorized securities in the same manner and that
the investment company had informed customers that the
sales representatives were authorized to sell securities.
Harkness, 270 Or App at 274. The court then contrasted
those facts with this case, in which “neither Sunset nor
Directors provided any information to plaintiffs from which
they could reasonably conclude that Kantor was authorized
by them to act as a financial advisor to, or engage in invest-
ment schemes with, its mortgage customers.” Id.
	       We conclude, however, that the Court of Appeals
made two missteps in determining that Sunset and Directors
had made no manifestations from which plaintiffs could rea-
sonably have concluded that Kantor was authorized to per-
form the acts constituting the fraudulent scheme. First, the
court disregarded evidence concerning the actual authority
Cite as 359 Or 715 (2016)	729

with which Sunset and Directors clothed Kantor. Second,
the court does not appear to have considered evidence in the
record relating to the usual or customary authority of a loan
officer for a mortgage company.
	        As to the first misstep, this court’s case law makes
clear that the appearance of authority may, at least in part,
be based on conduct relating to an agent’s actual authority.
Taylor, 345 Or at 411 (“[W]hen a principal clothes an agent
with actual authority to perform certain tasks, the principal
might create apparent authority to perform other, related
tasks.”); Badger, 311 Or at 26 (sales representatives had
apparent authority to sell unregistered securities when they
had actual authority to sell approved securities). That is so
because, as noted, the rationale for the doctrine of apparent
authority is that a principal must be held accountable for
the results of reasonable third-party beliefs about an actor’s
authority to act as an agent based on manifestations that
are traceable to the principal. One such manifestation is the
actual authority with which the principal has cloaked an
agent. Indeed, much of the commentary to section 1.03 and
section 2.03 of the Restatement (Third) contemplates situ-
ations where an actor for a putative principal is an agent
for the principal for other purposes. See, e.g., Restatement
(Third) § 2.03 comment d (“[A] third party should assess
what is observed of the agent in light of the agent’s position
as a fiduciary with a duty to use authority on behalf of the
principal.”). Thus, evidence of an agent’s actual authority to
perform certain tasks is relevant to determining whether
the agent was apparently authorized to perform other,
related tasks, and the Court of Appeals erred in disregard-
ing that evidence in this case.
	       As to the second misstep, the Court of Appeals does
not appear to have considered the evidence in the record
concerning the role of a loan officer for a mortgage com-
pany in the local industry. That evidence included excerpts
from a deposition of Todd Johnson, Sunset’s president, in
which Johnson indicated that Sunset was a “mortgage
finance provider” and a “mortgage broker” that used its
own money and the money of others to make real estate
loans and that Kantor was employed on a commission basis
as a loan officer to originate loans. Johnson also testified
730	                                      Harkness v. Platten

that there could be “a time that a hard money loan would
be a benefit” as part of his “creative approach” to making
loans, that a good loan officer could tell clients to utilize the
equity in their real property to make money, and that his
loan officers were encouraged to go out and find business.
As we stated in Eads, apparent authority “includes concepts
of ‘usual authority’ and ‘customary authority’ in determin-
ing whether ‘a substantial basis for a third party’s belief’
exists that the person with whom the third party dealt was
acting as an agent for a principal in a particular circum-
stance.” 351 Or at 738 n 5 (citing Restatement (Third) § 2.03
comment b); see also Taylor, 345 Or at 413 (reasonable reli-
ance on apparent authority where owner’s general contrac-
tor testified that it was customary to obtain warranties in
writing). Accordingly, evidence relating to Kantor’s usual or
customary role as a loan officer was relevant to the determi-
nation whether plaintiffs reasonably believed that Kantor
had apparent authority, and that evidence should not have
been disregarded by the Court of Appeals.

	        We now turn to the sufficiency of the evidence for
a factfinder to infer that Kantor had apparent authority to
bind Sunset and Directors to the loan transactions arranged
by Kantor between plaintiffs and third parties. We review
the grant of a directed verdict against a party in the light
most favorable to that party—here, the plaintiffs—and we
draw all inferences from the evidence in plaintiffs’ favor.
Trees, 354 Or at 200.

	        The record in this case includes evidence that
Kantor was employed successively by two mortgage compa-
nies, Sunset and Directors, as a “loan officer” during a period
of time when Kantor defrauded plaintiffs by use of an invest-
ment or loan scheme. The scheme consisted of Kantor advis-
ing plaintiffs to take out conventional loans from Sunset and
Directors using the equity in their home as collateral and
using the proceeds to make hard-money loans to contrac-
tors and developers as arranged by Kantor. Unbeknownst
to plaintiffs, and contrary to Kantor’s representations, those
loans by plaintiffs were not secured, and Kantor retained
some of the proceeds from those loans for her own benefit.
Kantor used Sunset and Directors offices, letterhead, and
Cite as 359 Or 715 (2016)	731

staff in the presence of plaintiffs during this period of time.
Neither mortgage company informed plaintiffs of any lim-
itations on Kantor’s authority as a “loan officer” to act for
those companies in matters pertaining to loans or financial
investment. As noted, Sunset’s president, Johnson, testified
that Sunset was a “mortgage finance provider” and a “mort-
gage broker” and that Kantor was employed on a commis-
sion basis as a loan officer to originate loans. Johnson also
testified that a good loan officer could tell clients to utilize
the equity in their real property to make money and that his
loan officers were encouraged to go out and find business.
Finally, Mrs. Harkness testified that she would not have
entered into the loan transactions if Kantor had not been
working with Sunset and Directors and that she believed
that Kantor had been acting within the scope of her employ-
ment in all of her dealings with plaintiffs.
	         Viewing that evidence in the light most favorable
to plaintiffs, we conclude that a reasonable factfinder could
infer that Sunset and Directors manifested their assent to be
bound by the acts of Kantor through the observable connec-
tions between Kantor and those organizations. Restatement
(Third) § 1.03 comment c. As we have explained, a factfinder
in this case could consider all of the relevant conduct of
Sunset and Directors in the context of those organizations
having hired Kantor as a “loan officer,” given Kantor actual
authority to perform the tasks of a loan officer, and placed
her in their offices without notice to customers of any lim-
itation on her authority or fiduciary duties as a loan offi-
cer. Under those circumstances, a factfinder could infer that
Sunset and Directors manifested their assent to be bound
to the loan transactions between plaintiffs and third parties
arranged by Kantor. Taylor, 345 Or at 410-11; Badger, 311
Or at 24-25; Restatement (Third) § 2.03.5
	5
       Defendant’s argument that Sunset and Directors did nothing to create the
appearance of authority for Kantor to act “as a financial advisor and propose, and
then carry out, an investment scheme involving the placement of private loans”
misses the mark. Plaintiffs do not seek to hold Sunset and Directors liable under
an apparent authority theory for Kantor’s financial advice. Rather, plaintiffs
seek to bind Sunset and Directors to the loan transactions arranged by Kantor.
The evidence that we have recited provides a basis for a factfinder to draw an
inference that Kantor—as a “loan officer” hired by Sunset and Directors—was
authorized to facilitate the receipt of loans to plaintiffs from those companies and
to arrange for plaintiffs to make loans to third parties.
732	                                     Harkness v. Platten

	         We further conclude that a reasonable factfinder
could infer from the evidence that it was reasonable for plain-
tiffs to believe that Kantor was authorized—as a loan offi-
cer for Sunset and Directors—to engage in the investment
and loan scheme on behalf of those companies. In particular,
a factfinder could infer that plaintiffs reasonably believed
that Kantor’s actions were part of her usual or customary
authority as a loan officer hired by Sunset and Directors to
make and arrange loans on behalf of the mortgage compa-
nies. See Eads, 351 Or at 738 n 5 (concepts of “usual author-
ity” and “customary authority” help inform determination
whether third party’s reliance was reasonable).
	         Additionally, we find the Restatement (Third) com-
mentary instructive on the question of the reasonableness
of plaintiffs’ belief. Comment d to section 2.03 notes that,
where “a third party knows that the actor in question is
an agent and knows the identity of the principal, the third
party should assess what is observed of the agent in light of
the agent’s position as a fiduciary with a duty to use author-
ity on behalf of the principal.” Restatement (Third) § 2.03 at
comment d. With respect to particular transactions, such
as the loan transactions in this case, a third party should
consider whether it appears to be reasonably related to the
principal’s known business. Id. “Absent circumstances that
should raise questions in the mind of a reasonable third
party, as a general matter there is no requirement that
the third party inquire into the scope of an agent’s author-
ity.” Id. Here, plaintiffs knew that Kantor was an agent of
Sunset and Directors and observed Kantor in light of her
position as a fiduciary with a duty to use authority on behalf
of Sunset and Directors. Under the circumstances described
above, plaintiffs could reasonably have believed that all the
loans were reasonably related to Sunset’s and Directors’
business, and that Kantor was acting within her fiduciary
duty as a “loan officer.”
	       Finally, we consider plaintiffs’ argument that
the trial court erred in granting defendant’s motion for a
directed verdict on plaintiffs’ noncontract claims under
a theory of respondeat superior. The Court of Appeals did
not reach plaintiffs’ argument that the trial court failed to
determine the vicarious liability of Sunset and Directors on
Cite as 359 Or 715 (2016)	733

those claims, because, in its view, plaintiffs did “not raise or
develop any legal arguments as to how [the] evidence meets
the respondeat superior elements.” Harkness, 270 Or App at 271
n 6. We disagree. In their brief on appeal, plaintiffs argued,
   	 “The trial court in this case conflated the concept of
   respondeat superior liability for tort claims with the concept
   of apparent authority that applied to the breach of contract
   claims in the Kantor lawsuit, although the Harnesses’ trial
   counsel pointed out the difference. As a practical matter,
   however, it only makes a potential difference with respect to
   the second element for respondeat superior liability—that
   the employee must have been motivated, at least partially,
   by a purpose to serve the employer—which is not part of
   the test for apparent authority. The evidence for the first
   and third elements—that the conduct must have occurred
   substantially within the time and space limits authorized
   by the employment, and the act must have been of a kind
   that the employee was hired to perform—is the same as the
   evidence for Kantor’s apparent authority discussed above
   with respect to the breach of contract claim.
   	 “The evidence for the second element of respondeat supe-
   rior liability is, however, present in the fact that Kantor
   persuaded the Harknesses to obtain the funds which she
   would then purportedly lend to other borrowers by taking
   out loans from Sunset and Directors, using their equities
   in first their residence and then a rental house that they
   owned as collateral. A jury could find that these loans to
   the Harknesses, which Kantor arranged in her capacity
   as a loan officer with first Sunset and then Directors, had
   a partial purpose to benefit, and did benefit, those two
   employers.
   	 “Because of these flaws in the trial court’s analysis, it
   never addressed the substance of the Harknesses[’] other
   claims alleged against Kantor, Sunset, and Directors in the
   Kantor lawsuit. The evidence summarized in the Summary
   of Facts, above, established most, if not all of those claims
   as they were alleged in the Second Amended Complaint in
   that case.”
(Record citations omitted.)
	       We conclude that plaintiffs sufficiently developed
their argument on appeal that the trial court failed to
determine the vicarious liability of Sunset and Directors
734	                                       Harkness v. Platten

on plaintiffs’ noncontract claims, and we therefore reach
that argument. Again, on review of the grant of defendant’s
motion for a directed verdict, we view the evidence and draw
all reasonable inferences in plaintiffs’ favor. Trees, 354 Or
at 200. Based on the evidence we have discussed in rela-
tion to plaintiffs’ theory of apparent authority, we also con-
clude that a factfinder could infer that the requirements for
holding an employer vicariously liable under the doctrine of
respondeat superior are met in this case.
	        This court has summarized those requirements as
follows:
   	 “Under the doctrine of respondeat superior, an employer
   is liable for an employee’s torts when the employee acts
   within the scope of employment. Negligence or other tor-
   tious conduct by the employer is not required. * * *
   	 “Three requirements must be met to conclude that
   an employee was acting within the scope of employment.
   These requirements traditionally have been stated as:
   (1) whether the act occurred substantially within the
   time and space limits authorized by the employment;
   (2) whether the employee was motivated, at least partially,
   by a purpose to serve the employer; and (3) whether the act
   is of a kind which the employee was hired to perform.”
Chesterman v. Barmon, 305 Or 439, 442, 753 P2d 404 (1988)
(citation omitted).
	        In this case, based on the same evidence that plain-
tiffs presented regarding apparent authority, a reasonable
factfinder could infer that the above three requirements
have been met:
   (1)  Kantor’s acts occurred substantially within the time
        and space limits authorized by the employment;
   (2)  Kantor’s conduct as a “loan officer” in loaning funds
        to plaintiffs based on the equity in their different
        properties and then facilitating the lending of those
        funds to other borrowers for plaintiffs’ investment
        purposes was motivated, at least in part, by a pur-
        pose to serve her employers, and
   (3)  Kantor’s conduct described above was a kind that
        Kantor was hired to perform as a “loan officer.” In
Cite as 359 Or 715 (2016)	735

        particular, and as previously described, there was
        evidence that Sunset was a “mortgage finance pro-
        vider” and a “mortgage broker” and that Kantor
        was employed on a commission basis as a loan offi-
        cer to originate loans. Sunset’s president, Johnson,
        also testified that a good loan officer at Sunset could
        tell clients to utilize the equity in their real property
        to make money.
Thus, the trial court erred in allowing defendant’s motion
for directed verdict on plaintiffs’ theory of respondeat supe-
rior. See Stanfield, 284 Or 651, 655, 588 P2d 1271 (1978)
(“question of whether or not an employee has acted within
the scope of his employment at any given time is normally a
question for the jury, except in cases where only one reason-
able conclusion can be drawn from the facts”).
	       We conclude, then, that the trial court erred in
allowing defendant’s motion for a directed verdict and
that the Court of Appeals erred in affirming that decision.
Accordingly, we remand to the trial court for further pro-
ceedings consistent with this opinion.
	       The decision of the Court of Appeals is reversed.
The judgment of the circuit court is reversed, and the case
is remanded to the circuit court for further proceedings.
