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New Century Financial Services, Inc. v. Dennegar

394 N.J. Super. 595, 928 A.2d 48 (App. Div. 2007)

AGENCY — A principal is accountable for the conduct of its agent acting within the scope of its authority even though the conduct may be unauthorized and the principal received no benefit from it.

A credit card company issued a credit card in the name of an individual and thereafter sent monthly statements to his home. Almost $15,000 was due and owing at the time the debt was assigned to a collection company. The individual or debtor asserted that he had no knowledge of the account but that he lived with a man who took care of him and that the other man managed the household’s financial affairs. The debtor admitted that his roommate handled all the mail, and also wrote and signed the debtor’s checks in the debtor’s name. In an action by the credit card company to recover on the debt, the lower court, in finding for the creditor, determined on these facts that the debtor had either expressly applied for the card, or had given his roommate authority over his finances including to apply for and use the card, as the roommate was authorized to manage the household’s financial affairs.

On appeal, the Appellate Division considered whether the debtor was properly held liable for a credit card debt despite his contention that he never applied for or used the credit card. The Appellate Division stated that a principal is accountable for the conduct of its agent acting within the scope of its authority even though the conduct may be unauthorized and the principal receives no benefit from it. The Court stated that even when an agent has deceived the principal as well as the victim, since the principal placed the agent in the position where it had the power to perpetuate the wrong, the principal rather than the innocent third party should bear the loss. The Court affirmed the lower court ruling, stating that the debtor should bear the loss from any improper use by the debtor’s agent in the utilization of the credit card and not the creditor.


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