Law for Business 10th Edition by James Barnes,Terry Dworkin,Eric Richards

تمرين 2

Clarence and Georgia Feller created the Clarence B. Feller and Georgia R. Feller Revocable Living Trust. The trust instrument named the Fellers as primary trustees. Clarence Feller died in 1994, leaving Georgia Feller as the sole primary trustee. She then executed a power of attorney, appointing Ronald Scott Kelly as her attorney in fact. In 1999, Kelly obtained a loan for $400,000 from Houck, executing a promissory note that named the trust as maker and pledging trust property as security. The purpose of that loan was to provide interim financing for Kelly's personal residence. Shortly thereafter, Kelly obtained another loan from Houck for $165,000 by extending a promissory note that also named the trust as maker. The purpose of that loan was to finance Kelly's development of two properties for resale. Kelly eventually defaulted on both loans, and Houck brought an action against the trust to foreclose on the trust property that Kelly had pledged as collateral and for payment on the notes, including interest, costs, and attorney's fees. The trust denied liability, claiming that Kelly had no authority to bind it to the transactions. Is the trust liable on the loans? Explain.