Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Meara v. Hewitt, 455 Pa. 132; 314 A.2d 263 (1974)

PA Underlying Mortgage Transaction

Student Contributor: Natalie Resto

Facts: The client had executed a mortgage on a real estate he owned to a corporation, which was wholly owned by his attorney. The mortgage was given in exchange for stock representing 25 percent interest in the corporation. The client then died and the attorney was appointed executor of his estate pursuant to the client’s will. That year the corporation through the attorney assigned the mortgage to the Hewitts for a consideration of $100. A couple of years later the mortgagee corporation became insolvent. The estate brought an action against the attorney arguing that the attorney took advantage of the attorney-client relationship when he allowed him to enter into a mortgage in favor of a corporation of which the attorney was the sole owner. The lower court found that the attorney and the client did have a confidential relationship but that there was no abuse of that relationship. The estate appealed.

Issue: Who has the burden of showing whether the attorney-client relationship has been abused?

Ruling: The attorney has the burden to prove that he did not abuse the relationship, that he fully disclosed the facts of the transaction to his client, and that the transaction is fair and conscionable. The court remanded to see whether the attorney met his burden.

Lesson: The standard of conduct that must prevail between an attorney and client when it involves business transactions is that:

“[N]o shadow of anything like deception or unfair dealing upon the  part of any attorney can be countenanced…Owing to confidence bestowed upon him, the attorney is presumed to be able to strongly influence his client; hence the law often declares transactions between them void which between other persons would be objectionable.”

Id. at 135 (quoted Kribbs v. Jackson, 387 Pa. 611, 129 A.2d 490 (1957)).

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Garten v. Shearman & Sterling LLP, 859 N.Y.S.2d 80 (N.Y. App. Div. 1st Dep't 2008)

Student Contributor: Melissa Goldberg

NY: Underlying Commercial  Real Estate Transaction

The Facts: Plaintiff stated a cause of action for legal malpractice by alleging that "but for" Defendant's failure to prepare and procure documents necessary to provide him with a first-priority security interest, he would have been able to recover the amounts owed to him by the defaulting borrower. The agreement between Plaintiff and Defendant mentioned the  "Documentation relating to Security Agreement".  Defendant's closing documents checklist included "[e]vidence that all other action that the Lender may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement has been taken (including, without limitation, UCC-3 termination statements)."

Issue:
1) Did the Defendant commit legal malpractice by failing to prepare and procure documents that would be necessary to provide Plaintiff with a first priority security interest?

Ruling:
1) The documentary evidence did not establish a defense because Defendant was obligated not only to prepare the loan documents, but also to protect Plaintiff's expectation that the agreement that he would hold a senior security interest was effective.
• Neither the borrower's failure to repay the loan nor the senior creditors' eventual failure to act honorably and adhere to the understanding that their liens were to be junior to Plaintiff's relieves Defendant of potential liability for its negligence.
• The Plaintiff is not responsible for his own loss simply because he executed the documents that Defendant prepared for him.

Lesson: Generally, the actions of other parties do not relieve a Defendant’s liability for its own legal malpractice. A lawyer has a duty to protect his client’s interests, first and foremost. 

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Antonis v. Liberati 821 A.2d 666 (Pa. Cmwlth. 2003)

Student Contributor: Evan Kusnitz

PA Underlying Mortgage Transaction

Facts: Plaintiff hired Attorney to prepare a mortgage and note as a security on a loan to Borrower. Attorney delivered the documents to the Recorder of Deeds. Plaintiff called Attorney several times to ask if the mortgage was recorded correctly, and Attorney repeatedly assured him that it was. However, due to a clerical error, the mortgage was in fact not recorded correctly. As a result, Borrower was able to sell the land subject to the mortgage without disclosing the existence of the mortgage, and without paying anything to Plaintiff. Plaintiff successfully sued Attorney. On appeal, Attorney argued that the trial court erred by not requiring expert testimony to show that he had a duty to Plaintiff to ensure that the mortgage was recorded correctly. Attorney also argued that Borrower’s fraud was an intervening cause of Attorney’s harm.

Issue:

1. Is expert testimony required to show that an attorney has a duty to a client to ensure that a mortgage is recorded correctly?
2. Is a borrower’s fraud––selling mortgaged land without disclosing the incorrectly recorded mortgage––an intervening cause of any harm caused by an attorney’s failure to ensure the mortgage was correctly recorded?

Ruling: In affirming the decision of the trial court, the appellate court ruled:

1. Expert evidence . . . is not required when the issue of negligence is clear enough to be concluded as a matter of law.

Since it is the responsibility of the mortgagee to ensure that the mortgage has been properly recorded, that duty undoubtedly falls upon his attorney, who represents him in the matter.

2. A borrower’s fraud is not an intervening cause of the harm caused by an attorney who failed to ensure that a mortgage was correctly recorded. If the attorney did not breach his duty to his client, the fraud could have never happened.

Lesson:

1. A mortgagee’s attorney has a duty to ensure that the mortgage is recorded correctly.

2. When an attorney’s negligence is obvious, expert evidence may not be required.

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