Great Plains Federal Sav. and Loan Ass'n v. Dabney

Decision Date26 January 1993
Docket NumberNo. 69930,69930
Citation1993 OK 4,846 P.2d 1088
PartiesGREAT PLAINS FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. B. Wayne DABNEY, an individual and Van Dyck, Hays, Dabney, Pullins, Rivas & Kingsolver, P.C., a Professional Corporation, Appellees.
CourtOklahoma Supreme Court

Certiorari to the Court of Appeals, Division 3 Appeal from the District Court of Custer County; Charles L. Goodwin, Trial Judge.

Appellant brought an action against appellees, attorney and law firm, in tort for malpractice and for breach of a contract between the parties or, alternatively, on a contract between appellees and another whereby appellant claimed third-party beneficiary status. The contract was alleged to pertain to rendering a title opinion on a piece of property and searching certain records in the Grady County Clerk's Office. Appellees filed a motion to dismiss relying on the bar of the two year limitation period for torts found at 12 O.S. 1981, § 95 (Third). In response to the motion appellant waived its tort claim and elected to proceed in contract. It argued the contract claim was not barred having been brought within the three year limitation period found at 12 O.S.1981, § 95 (Second) for oral contracts. The trial court sustained the motion apparently concluding the action had to be brought in tort. The Court of Appeals affirmed. Held: Taking, as we must, all well-pleaded facts contained in the petition as true, appellant stated a claim based in contract and it was improper at the pleading stage to dismiss the case as barred by the two year limitation period found at § 95 (Third).

CERTIORARI PREVIOUSLY GRANTED; COURT OF APPEALS OPINION VACATED; TRIAL COURT REVERSED AND CASE REMANDED.

A. Daniel Woska, Kendall W. Tresler, Jeffrey A. Glendening, Janet G. Chesley, Naifeh & Woska, Oklahoma City, for appellant.

Charles F. Alden, III, Julie Trout Lombardi, Holloway, Dobson, Hudson & Bachman, Oklahoma City, for appellees.

LAVENDER, Vice Chief Justice.

On August 13, 1987 appellant, Great Plains Federal Savings and Loan Association (appellant), sued appellees, an attorney and a law firm (appellees), in tort for legal malpractice and for breach of an oral contract between the parties or, alternatively, a contract between appellees and another whereby appellant claimed third-party beneficiary status. Certain documents were attached to the petition, including a written title opinion from appellees to appellant dated August 14, 1984, a follow-up opinion dated September 24, 1984 and a letter from appellees to appellant dated July 24, 1986 indicating a mortgage of record when the earlier title opinions were rendered was only recently discovered by appellees. Appellees moved to dismiss pursuant to 12 O.S.Supp.1984, § 2012(B)(6). They argued the petition failed to state a claim upon which relief could be granted because it showed on its face the action was barred by the two year limitation period found at 12 O.S.1981, § 95 (Third). 1 Appellant responded arguing the action was controlled by the three year limitation period found at 12 O.S.1981, § 95 (Second) for suits for breach of oral contracts. Appellant expressly waived any theory of liability based in tort and elected to proceed in contract. It stated in the response, "[t]hus, Plaintiff is electing to waive its cause of action in tort and to proceed upon a breach of contract." The trial court, obviously convinced the matter could only proceed in tort for legal malpractice, granted the motion to dismiss. Appellant appealed and the Court of Appeals affirmed. 2 We previously granted certiorari.

As pertinent for our decision the petition and the documents attached to it allege the following: 3 An individual, John Hudson sought a $375,000.00 loan from appellant. Hudson furnished financial statements to appellant which listed a 344.2 acre farm having a value of $757,240.00 as an asset. The statements indicated a loan against the farm with another financial institution having a balance of $120,000,00. In order to determine the advisability of the loan appellant either entered into a contract with appellees to examine the abstract of title to the property and certain documents in the Grady County Clerk's Office or, alternatively, appellant was specifically intended to be a third-party beneficiary of a contract between Hudson and appellees to do so.

On August 14, 1984 appellees, by B. Wayne Dabney, sent a title opinion/letter to Bill Davis of appellant, which said it was being sent at Davis' request, an abstract of title certified to October 1, 1975 had been examined, as well as certain instruments recorded in the Grady County Clerk's Office. The letter also detailed the debt to the other financial institution. The last sentence of the letter provides in pertinent part, "[t]his opinion is ... for loan purposes only and is written for the use and benefit of the bank only." On August 16, 1984 appellant, in reliance upon the letter, loaned Hudson $375,000.00 secured by a real estate mortgage. On September 24, 1984 Dabney sent a follow-up title opinion/letter to Davis opining the mortgage to appellant "appears to be a valid and existing second mortgage lien upon the ... property." (emphasis in original) Appellant's loan to Hudson was due and payable, along with certain interest, on February 14 As we view the allegations and the reasonable inferences to be drawn from them, appellant alleged not only that appellees were engaged to perform a title opinion relying on an abstract of title certified by an independent abstracting company, but they were engaged either by appellant itself or, alternatively, by Hudson, with appellant being a specifically intended third-party beneficiary, to search the records of the County Clerk from the period of the abstract of title noted in the August 14th title opinion/letter (i.e. October 1, 1975) to the date of the August 14th letter in 1984. In essence, part of appellees' responsibilities under the purported oral contract was to act like an abstractor to search the records. Although not expressly alleged in the petition or documents attached thereto we believe the reasonable inference flowing from the petition and documents is appellees were alleged to have agreed to furnish a correct statement of those documents affecting the title for loan purposes from October 1, 1975 (the certification date of the abstract reviewed) to the date of the title opinion in August 1984. 4

                1985.  Hudson defaulted.  On July 24, 1986 Dabney sent a further letter to Davis in care of an attorney advising an existing mortgage to a third financial institution was discovered which had been filed and recorded in the records of the County Clerk of Grady County on March 10, 1982 and telling Davis, "[i]t appears that this mortgage is prior to your mortgage on the property."   Appellant sued for the principal loan amount, interest, costs and attorney fees
                

We have held when an abstracting company breaches an oral agreement to diligently search real estate records, provide an abstract of title and a certificate thereof, the cause of action is one founded on the breach of an oral contract and is governed by the three year limitation period. Close v. Coates, 187 Okla. 315, 102 P.2d 613 (1940); Freeman v. Wilson, 105 Okla. 87, 231 P. 869 (1924); Garland v. Zebold, 98 Okla. 6, 223 P. 682 (1924). The cause of action accrues on the delivery date of the certificate of title. Close v. Coates, supra. We can hold no differently merely because a lawyer or law firm are alleged to have entered into a similar type of oral contract. Accordingly, the earliest point the three year limitation period would begin to run would be August 14, 1984, the date of the initial title opinion. 5

Appellees argue the instant case should be controlled by Funnell v. Jones, 737 P.2d 105 (Okla.1985), cert. denied, 484 U.S. 853, 108 S.Ct. 158, 98 L.Ed.2d 113 (1987), a case where we applied the two year tort limitation period to a legal malpractice case. Appellees' reliance on Funnell is misplaced. The opinion in Funnell gives no indication a separate contract theory was alleged there or that the plaintiffs there attempted to rely on the three year limitation period for oral contracts. Thus, our statement in Funnell to the effect an action for malpractice, whether legal or medical, though based on a contract of employment, is an action in tort, must be taken in the context it was made, to wit: determining whether the two year limitation for torts was tolled based on allegations of fraudulent concealment on the part of defendant attorneys and that no acts alleged against defendants occurred within the two years immediately We have held a party may bring a claim based in both tort and contract against a professional and that such action may arise from the same set of facts. Flint Ridge Development Company, Inc. v. Benham-Blair and Affiliates, Inc., 775 P.2d 797, 799-801 (Okla.1989) (architectural, engineering and construction supervision services). In essence, the holding of Flint Ridge is, if the alleged contract of employment merely incorporates by reference or by implication a general standard of skill or care which a defendant would be bound independent of the contract a tort case is presented governed by the tort limitation period. Id. at 799-801. However, where the parties have spelled out the performance promised by defendant and defendant commits to the performance without reference to and irrespective of any general standard, a contract theory would be viable, regardless of any negligence on the part of a professional defendant. Id. As pertinent here, the specific promise alleged or reasonably inferred from the petition and documents attached thereto was to search the records of the County Clerk for an approximate nine (9) year period and report those records on file affecting the title for loan purposes. Simply, if this was the promised obligation a contractual theory of liability is...

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