One Nat. Bank v. Antonellis

• Decision Date: 12 December 1995
• Docket Number: No. 95-1559,95-1559
• Parties: , 64 USLW 2707 ONE NATIONAL BANK, Plaintiff-Appellant, v. Joseph M. ANTONELLIS, Defendant-Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 606

80 F.3d 606

64 USLW 2647, 64 USLW 2707

ONE NATIONAL BANK, Plaintiff-Appellant, v. Joseph M. ANTONELLIS, Defendant-Appellee.

No. 95-1559.

United States Court of Appeals, First Circuit.

Heard Dec. 12, 1995.

Decided April 3, 1996.

Appeal from the United States District Court for the District of Massachusetts, Hon. Nancy J. Gertner, U.S. District Judge.

Dale R. Harger, with whom Mountain, Dearborn & Whiting and Howard J. Potash, Worcester, MA, were on brief for appellant.

George A. Berman, with whom Cynthia C. Smith, Susan S. Riedel and Posternak, Blankstein & Lund, Boston, were on brief for appellee.

Before TORRUELLA, Chief Judge, CYR, Circuit Judge, and SKINNER, ^* Senior District Judge.

TORRUELLA, Chief Judge.

In this legal malpractice action, appellant-plaintiff One National Bank ("ONB" or "One National") appeals the district court's entry of summary judgment for appellee-defendant Joseph M. Antonellis ("Antonellis"). Two principal issues are raised on appeal: first, whether a nonclient can maintain an action against an attorney when that attorney negligently certifies to a mortgagee that the title is good, and the mortgagee then assigns the title certificate, mortgage, and all associated documents to the nonclient in good faith; and second, whether the mortgagee's assignee can maintain an action for negligent title certification pursuant to the Massachusetts title certification statute, Mass.Gen.L. ch. 93, § 70. For the reasons stated herein, we affirm.

BACKGROUND

In late 1987, Milford Savings Bank ("Milford") lent $100,000 to Thomas J. Milani and Thomas Chamberlin, individually and as trustees of T & T Realty Trust, and to Jaqueline Wojnowski and Cathy A. Milani, individually. A mortgage on property in Bellingham, Massachusetts served as security (the "first Milani mortgage"). A few months later, in April of 1988, Thomas J. and Cathy A. Milani (together, the "Milanis") executed another mortgage on the same property, also to Milford, to secure a $150,000 loan (the "second Milani mortgage"). Milford was represented in the 1988 transaction by appellee Antonellis, an attorney.

Some months later, on August 10, 1988, ¹ Antonellis issued a certification of title, which certified that the mortgagors held title to the property "free from all encumbrances, and the mortgagee [held] a good and sufficient record first mortgage to the property." ² No mention was made of the first Milani mortgage. The certification also included a disclaimer, which stated: "THIS CERTIFICATE IS NOT TO BE USED FOR TITLE INSURANCE PURPOSES WITHOUT THE EXPRESS WRITTEN PERMISSION OF JOSEPH M. ANTONELLIS, ESQUIRE."

                While Antonellis was preparing the title certificate, according to his deposition, a Milford bank official called him around the time the second Milani mortgage was executed.   The official informed Antonellis of the first Milani mortgage, and stated that it would be subordinated to the April 1988 second Milani mortgage.   However, it appears that Milford never subordinated the mortgage
                

In the meantime, ONB purchased a package of eighty-five adjustable rate one-year first mortgages from Milford on August 2, 1988, including the second Milani mortgage. ONB did not hire an attorney to check these mortgages' certifications of title. Subsequently, Milford was declared insolvent in early July of 1990, and the Milanis defaulted on both their mortgages. The Federal Deposit Insurance Corporation ("FDIC") took over Milford and was appointed its receiver. The FDIC repudiated the agreement between Milford and ONB.

Faced with this situation, One National sued Antonellis, the FDIC, and the Milanis. The district court granted summary judgment to defendants Antonellis and FDIC. One National dismissed its action against the Milanis, and here appeals the summary judgment only as to appellee Antonellis.

DISCUSSION

After reciting the standard of review, we address each issue in turn.

A. Standard of Review

This court reviews a district court's grant of summary judgment de novo. See, e.g., Rhode Island Depositors Economic Protection Corp. v. Hayes, 64 F.3d 22, 25 (1st Cir.1995). "When presented with a motion for summary judgment, courts should 'pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required.' " Rivera-Cotto v. Rivera, 38 F.3d 611, 613 (1st Cir.1994) (quoting Wynne v. Tufts Univ. Sch. of Medicine, 976 F.2d 791, 794 (1st Cir.1992), cert. denied, 507 U.S. 1030, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993)). Summary judgment is therefore appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material if it "carries with it the potential to affect the outcome of the suit under the applicable law." Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir.1993). We review the record in the light most favorable to the nonmovant, indulging all reasonable inferences in that party's favor. See, e.g., Flanders & Medeiros, Inc. v. Bogosian, 65 F.3d 198, 201 (1st Cir.1995); Rhode Island Depositors Economic Protection Corp., 64 F.3d at 25. Here, because the parties do not dispute any facts that could affect the suit's outcome, our analysis confines itself to whether Antonellis is entitled to judgment as a matter of law.

B. Applicable Law

Both parties share the view that Massachusetts law applies. Accordingly, we will apply that state's law, since "[w]here the parties agree what substantive law controls in a diversity case, we can--and ordinarily should--accept such a concession." Moores v. Greenberg, 834 F.2d 1105, 1107 n. 2 (1st Cir.1987); see Sheinkopf v. Stone, 927 F.2d 1259, 1264 (1st Cir.1991) (accepting the parties' contention that Massachusetts law applied to allegation of implied attorney-client relationship).

C. The Negligence Claim

One National claims Antonellis is liable to it for his failure to record the first Milani mortgage on the title certificate. See Republic Oil Corp. v. Danziger, 9 Mass.App.Ct. 858, 400 N.E.2d 1315, 1317 (1980) (finding attorney negligent for failure to disclose the existence of a perfected security interest in a certification of title). Because there was no attorney-client relationship between the parties, any duty Antonellis owed ONB must be based on Massachusetts' theory of foreseeable reliance, which states that a lawyer may

                be liable to a non-client. 3  As discussed below, we find that Antonellis did not owe One National a duty of care under the foreseeable reliance exception.   Therefore, we will not address the parties' dispute as to whether Antonellis was in fact negligent.   See, e.g., Lamare v. Basbanes, 418 Mass. 274, 636 N.E.2d 218, 219-20 (1994) (affirming summary judgment in favor of attorney where attorney had no duty to third party nonclient);  Logotheti v. Gordon, 414 Mass. 308, 607 N.E.2d 1015, 1018 (1993) (finding that negligence claim failed where attorney had no duty of care to third party nonclient)
                

1. The Foreseeable Reliance Exception

In order to sustain a claim of legal malpractice, ONB must show that Antonellis owed One National a duty of care. See Spinner v. Nutt, 417 Mass. 549, 631 N.E.2d 542, 544 (1994); DaRoza v. Arter, 416 Mass. 377, 622 N.E.2d 604, 608 (1993). The issue of whether such a duty exists is a question of law. Id. at 381, 622 N.E.2d 604. The general rule is that "an attorney's liability for negligence arises out of a duty owed to a client." Norman v. Brown, Todd & Heyburn, 693 F.Supp. 1259, 1265 (D.Mass.1988). Massachusetts case law has crafted an exception to this general proposition based on foreseeable reliance, however, so that "an attorney is not 'absolutely insulated from liability to nonclients.' " Spinner, 631 N.E.2d at 544 (quoting Page v. Frazier, 388 Mass. 55, 445 N.E.2d 148, 154 (1983)).

As defined in the case law, the foreseeable reliance exception demands that two requirements be met. First, a duty is only owed to nonclients "who the attorney knows will rely on the services rendered." Robertson v. Gaston Snow & Ely Bartlett, 404 Mass. 515, 536 N.E.2d 344, 350, cert. denied, 493 U.S. 894, 110 S.Ct. 242, 107 L.Ed.2d 192 (1989); see Spinner, 631 N.E.2d at 544; DaRoza, 622 N.E.2d at 608. It is not enough that a plaintiff claims actual reliance: "[i]t must be shown that the attorney should reasonably foresee that the nonclient will rely upon him for legal services." Id. at 608 n. 7. Second, "the court will not impose a duty of reasonable care on an attorney if such an independent duty would potentially conflict with the duty the attorney owes to his or her client." Lamare, 636 N.E.2d at 219; see Robertson, 536 N.E.2d at 350; Kirkland Constr. Co. v. James, 39 Mass.App.Ct. 559, 658 N.E.2d 699, 701 (1995). Here, the district court found there was "some question" as to the first, foreseeable reliance prong of the test, but that there was "no question" that there were potentially conflicting duties. (District Court Memorandum and Decision, p. 15). Reviewing the issue de novo, we agree with the court below that there was a potential conflict between Antonellis' duty to Milford and his alleged duty to One National, so that ONB cannot meet the test's second requirement. Accordingly, we need not determine whether Antonellis should reasonably have foreseen ONB's reliance on the title certificate.

2. Potential Conflict

The conflict requirement of the reasonably foreseeable test does not demand that an actual conflict arise. Rather, Massachusetts and federal case law has consistently found that a potential conflict between an attorney's duty to his or her client and the alleged duty to the nonclient is sufficient to defeat the nonclient's malpractice claim. "[I]t is the potential for conflict that prevents the imposition of a duty...." Spinn...