Cleckner v. Dale

• Decision Date: 13 August 1986
• Docket Number: No. 85-219-II,85-219-II
• Parties: Paul E. CLECKNER and wife, Beverly Cleckner, Plaintiffs/Appellants, v. Lucien DALE, Defendant/Appellee.
• Court: Tennessee Court of Appeals

Page 535

719 S.W.2d 535

Paul E. CLECKNER and wife, Beverly Cleckner, Plaintiffs/Appellants, v. Lucien DALE, Defendant/Appellee.

No. 85-219-II

Court of Appeals of Tennessee Middle Section, at Nashville.

Aug. 13, 1986.

Rehearing Denied Aug. 29, 1986.

Application for Permission to Appeal

Denied by Supreme Court

Nov. 3, 1986.

Joe M. Haynes, Haynes & Associates, Goodlettsville, for plaintiffs/appellants.

William C. Moody, Moody & Moody, Nashville, for defendant/appellee.

OPINION

KOCH, Judge.

This is a legal malpractice action against an attorney retained to represent the buyers in a real estate transaction. His clients filed this action in the Circuit Court for Davidson County after they were required to pay additional funds to obtain the release of a bank's attachments on the property. They alleged that their lawyer failed to inform them of the existence of these attachments and failed to conduct the closing in a proper manner. The jury determined that the lawyer had been negligent but that his negligence did not cause his clients' losses.

The clients have perfected this appeal. In addition to their assertion that the jury's verdict is contrary to the weight of the evidence, they contend that the trial court erroneously excluded expert proof concerning the standard of care of lawyers representing clients in real estate transactions. They also insist that the trial court's comments and instructions to the jury erroneously characterized the duty of a closing attorney. We have determined that this judgment should be reversed.

I.

In early 1979 Lester Cramer offered to sell Paul Cleckner, his uncle, two parcels of real property located in Hendersonville. Cramer needed the funds to continue to operate his financially troubled health spa. Cleckner knew his nephew was having financial problems and agreed to buy the property because he thought it was a good investment.

Neither Cleckner nor Cramer was represented by a real estate agent. However, Cleckner and his wife retained Lucien Dale, a Nashville attorney, to represent them in this transaction. Dale had represented both Cleckner and Cramer on separate occasions in the past. In fact, at the time the Cleckners retained Dale to represent them, Dale was also consulting with Cramer about filing a bankruptcy petition. Dale's services to the Cleckners were to include (1) the preparation of a contract of sale, (2) the preparation of the deeds, and (3) the oversight of the closing between the parties.

After they agreed upon the basic components of the transaction, Cleckner instructed Cramer to meet with Dale to outline their agreement and to obtain a contract for the sale of real estate. Cleckner followed this up with a telephone call to Dale to make sure that the contract contained the provisions he was insisting upon. As a result of these conversations, Dale drafted a contract for the sale of real estate dated March 29, 1979.

This contract was embodied in a standard title company form. In essence, it provided that the Cleckners would acquire the two parcels of Hendersonville property by paying the Cramers $9,500 and then by assuming the existing mortgages on the property. The contract required the Cleckners to pay the Cramers $3,500 as earnest money. It also required the Cramers to provide the Cleckners "as of the date of the deed" with "a title policy in the usual form."

Cramer brought the contract Dale had prepared back to Cleckner. Cleckner had a telephone conversation with Dale on April 4, 1979 after the contract had been executed concerning the payment of the earnest money. ¹ Cleckner informed Dale that he had not paid the earnest money to Cramer because the mortgagees had not yet agreed to the assumption of the existing mortgage loans. Dale informed him that both mortgage companies had approved these assumptions with no increase in their interest rate. In answer to Cleckner's question about whether he should pay the earnest money to Cramer, Dale replied "I think it would be safe on the contract." Cleckner paid Cramer the $3,500 earnest money on April 5, 1979 relying upon Dale's advice.

Dale received a telephone call on April 5, 1979 from an attorney representing a bank that had loaned money to Cramer informing him that the bank had attached the two parcels of property Cramer had agreed to sell to the Cleckners. The bank took this action on March 28, 1979, the day before Dale had prepared the contract between Cramer and Cleckner, because it had been informed that Cramer was planning to sell the property.

Dale attempted without success to reach Cleckner by telephone to alert him to the bank's action. On April 6, 1979, he wrote Cleckner a letter advising him not to pay Cramer the earnest money because "Commerce Union Bank has sued out an attachment against all his property in Sumner County." The letter concludes by stating "I will try to get back in touch with you in a day or two." Even though Dale had Cleckner's correct office address in his file, he mailed this letter to a home address where Cleckner had not lived for six months. The address also contained an incorrect zip code. It took ten days to deliver this letter.

Contrary to his statement in the April 6, 1979 letter, Dale made no other effort to contact Cleckner about this matter. The next conversation between the two men occurred on April 11, 1979 when Cleckner, Cramer and Dale met in Dale's office to close this transaction.

The closing was prolonged because the three men had a wide-ranging discussion about Cramer's financial condition. As a result of this conversation, Cleckner became aware for the first time that Cramer owed money to the Commerce Union Bank. He was also informed that this loan was secured by another piece of property and that Cramer had adequate collateral to satisfy the bank. He continued to be unaware that the bank had already attached the property he was buying because he had not yet received Dale's misaddressed letter.

Dale concedes that he did not tell Cleckner about the telephone call he had received from the bank's lawyer or the bank's attachment of the property at the closing. He also concedes that he did not mention his April 6, 1979 letter. Later, he attempted to justify his failure to do so by stating that he had "assumed" Cleckner had received the letter and that he had also assumed "these kin folks wanted to go ahead" with the sale.

Dale presided over the closing of the transaction. Cleckner paid over to Cramer the additional purchase price that was due, and Cramer tendered two executed warranty deeds conveying the property to the Cleckners. These standard form deeds had been prepared by Dale prior to the time he had learned of the bank's attachments. He had neglected to change them to reflect the information he had received prior to the closing. Thus, each deed provided that the Cramers warranted that the property was "unencumbered, unless otherwise herein set out." The only encumbrances listed on the deeds were the first mortgages on each piece of property. There is no evidence that Dale informed Cleckner that this warranty was incorrect.

The closing was deficient in two other respects. First, the Cramers did not provide the Cleckners with the title insurance policy required by the contract of sale. Although the parties are vague about why no policy or commitment letter was exchanged Dale testified later that he had decided "that it would be to no avail to secure a title policy with 10 or 15 exceptions upon it which could not be omitted or removed." He thought that foregoing the insurance would save Cleckner and Cramer the cost of the title insurance premium if they decided to proceed with the sale. There is no evidence that Dale explained this decision to his client at the closing.

The second anomaly in the closing relates to the status of the title to the property following the transaction. Apparently the parties had a lengthy discussion about whether this transaction would be voidable if Cramer filed a bankruptcy petition. Dale advised Cleckner and Cramer that the sale would not be set aside because it was an arms-length transaction in which the property was sold at fair market value and because the proceeds of the sale were going to be used in Cramer's business. Cleckner testified that Dale informed him that

he couldn't get me a title at this time. And he told me--we were talking about the bankruptcy and this was the key factor that Mr. Cramer probably would commit bankruptcy but felt like we were safe and would eventually get it [title to the property] whenever they looked at it six months to a year, whatever it was.

Cleckner finally received Dale's April 6, 1979 letter on April 16, 1979, five days after the closing. This was when he first became aware that the property had been attached. On April 19, 1979 he received a letter from the bank's attorney also informing him that the property had been attached. He consulted with Dale about these developments and, with the assistance of another lawyer, was eventually able to obtain a release of the attachments by paying the bank an additional ten thousand dollars.

II. The Use of Expert Testimony in Legal Malpractice Cases

The Cleckners sought to introduce expert testimony concerning the proper standard of care for lawyers representing clients in a real estate closing and whether Dale's conduct in this case met that standard. The trial court prevented them from doing so apparently because of its view that a lawyer is not "in control" when providing a client legal advice and because it intended to provide detailed instructions to the jury concerning a lawyer's standard of care. ² We have concluded that the trial court erred both as a matter of fact and as a matter of law. In addition to his responsibility to advise the Cleckners, Dale was also in complete control of the process used to finalize the real estate transaction at issue. Proof in the form of expert opinion is admissible on matters within an...