Mark Twain Kansas City Bank v. Jackson, Brouillette, Pohl & Kirley, P.C.
| Decision Date | 03 October 1995 |
| Docket Number | No. WD,WD |
| Citation | 912 S.W.2d 536 |
| Court | Missouri Court of Appeals |
| Parties | MARK TWAIN KANSAS CITY BANK, Appellant, v. JACKSON, BROUILLETTE, POHL & KIRLEY, P.C., and John R. Weisenfels, Respondents, Chicago Title Insurance Co., Defendant. 49899. |
Phyllis G. Leach, James F. Duncan, Watson & Marshall, L.C., Kansas City, for appellant.
William I. Rutherford, David R. Buchanan, T. Michael Ward, Brown & James, P.C., St. Louis, for respondents.
Before ULRICH, P.J., and LOWENSTEIN and BRECKENRIDGE, JJ.
Mark Twain Kansas City Bank (Mark Twain Bank) appeals the summary judgment entered in favor of the law firm of Jackson, Brouillette, Pohl & Kirley, P.C., and attorney John R. Weisenfels (Jackson Law Firm) in a negligent misrepresentation action.
The summary judgment is affirmed.
The Jackson Law Firm represented 10770 El Monte Associates, a Kansas general partnership, in a transaction to buy certain real property. The seller of the property was the Kroh Foundation, a charitable trust, whose sole trustee was the Johnson County Bank, Johnson County Kansas. Mark Twain Bank agreed to finance the transaction. Kroh Brothers Development Company, a Missouri corporation and a general partner of El Monte Associates, acted as guarantor for the loan.
During the loan negotiations, Mark Twain Bank asked El Monte Associates to provide an opinion letter and title coverage. Attorney John R. Weisenfels of the Jackson Law Firm prepared the requested opinion letter dated April 2, 1986. The opinion letter represented that El Monte Associates was a duly organized Kansas general partnership that had authority to borrow the purchase money and to execute the promissory note and security agreements. The opinion letter further stated that the El Monte security documents constituted valid, binding, and enforceable obligations and that those documents had been duly executed and delivered. The last sentence of the last paragraph of the opinion letter disclaimed liability:
This opinion is valid as of the date hereof, but we take no responsibilities to any information or opinions contained herein.
The sum of $753,280 was loaned to El Monte Associates by Mark Twain Bank to purchase the real property, and the money was placed in escrow. El Monte Associates bought title insurance from the Chicago Title Insurance Company. Chicago Title conducted the closing on April 2, 1986, and also acted as escrow agent. On behalf of the Kroh Foundation, Jack Kroh signed the deed conveying the trust's property to El Monte Associates. The remainder of the loan proceeds after paying-off existing liens, recording fees and title insurance fees totaled $595,370.87. The escrow agent paid the remainder to the Kroh Brothers Redevelopment Corporation and not to the Kroh Foundation. El Monte Associates executed and delivered to Mark Twain Bank a promissory note and a mortgage for $753,280 purportedly incumbering the property as security for the loan.
Litigation commenced after El Monte Associates failed to repay Mark Twain Bank. 1 Mark Twain petitioned to quiet title to the property in the District Court of Johnson County, Kansas. The Kansas Supreme Court eventually determined that Mark Twain Bank had no mortgage interest in the El Monte Associates property because Jack Kroh lacked authority to execute the deed as trustee for the Kroh Foundation and because the Johnson County Bank lacked authority to ratify Jack Kroh's act. Mark Twain Kansas City Bank v. Kroh Bros. Dev. Co., 250 Kan. 754, 863 P.2d 355 (1992). As a result of the Kansas Supreme Court's decision, Chicago Title paid Mark Twain Bank $753,280.
While the Kansas quiet title action was pending, Mark Twain Bank brought the negligent misrepresentation action that is the subject of this appeal. In its petition captioned "Petition For Damages For Professional Malpractice," Mark Twain Bank alleged that the Jackson Law Firm had incorrectly represented in the opinion letter that the El Monte promissory note and mortgage were valid, binding, and enforceable obligations. The petition further alleged that the Jackson Law Firm was negligent in issuing the opinion letter without determining whether El Monte owned or had the right to mortgage the property bought from the Kroh Foundation. The petition finally asserted that Mark Twain Bank had relied on the opinion letter in making the loan, and had suffered economic loss as a result.
Summary judgment was entered in favor of the Jackson Law Firm, and the third party claim against Chicago Title was dismissed without prejudice. In granting summary judgment, the trial court determined that the disclaimer in the opinion letter precluded Mark Twain Bank from proving the reliance element of its negligent misrepresentation action. 2
On appeal Mark Twain Bank asserts that the summary judgment was erroneous because genuine factual issues remain concerning its reliance on the opinion letter. Nevertheless, this case presents the threshold issue of whether a non-client can maintain an action for negligent misrepresentation against an attorney.
No Missouri appellate decision deals with a negligent misrepresentation action brought by a non-client against an attorney. Historically, privity created the legal duty underlying attorney negligence suits. In absence of privity, an attorney could be liable to non-clients for professional acts only in exceptional cases involving intentional torts, such as fraud or collusion. Rose v. Summers, Compton, Wells & Hamburg, P.C., 887 S.W.2d 683, 686 (Mo.App.1994); Kennedy v. Kennedy, 819 S.W.2d 406, 410 (Mo.App.1991). Traditionally, in an action for professional negligence against an attorney, the existence of an attorney-client relationship is a necessary element. Rose, 887 S.W.2d at 686. Recently, the Missouri Supreme Court broke with the long-standing tradition and now allows non-clients to sue attorneys for negligence in narrowly defined circumstances.
In Donahue v. Shughart, Thomson & Kilroy, P.C., 900 S.W.2d 624, 628-29 (Mo. banc 1995), the Court fashioned a six-part balancing test for determining whether an attorney owes a duty to a non-client. 3 Id. at 629. The Donahue test determines the question of whether the attorney owed a duty to a non-client by weighing the six factors. Id. The first factor requires that the client specifically intended the purpose of the attorney's services was to benefit the plaintiff. Id. Consequently, a non-client's maintenance of a negligence action against an attorney depends on pleading and proving as a matter of ultimate fact that an attorney-client relationship existed in which the attorney-defendant performed services specifically intended by the client to benefit the non-client plaintiff. Id., at 628-29.
Here, none of the traditional theories recognized by Missouri courts before Donahue allow Mark Twain Bank as a non-client to maintain its action against the Jackson Law Firm. Mark Twain Bank's petition for professional malpractice contains no averment of an attorney-client relationship between it and the Jackson Law Firm. 4 Mark Twain Bank's negligent misrepresentation action, which is grounded in negligence, makes no averment of fraud, collusion or malicious acts and does not fall within the exception allowing non-clients to sue attorneys for intentional torts. Thus, Mark Twain Bank asserts a cause of action only if its petition for negligent misrepresentation is within the exception allowing a non-client to sue attorneys.
Under the Donahue test, the client's purpose and specific intent to benefit a non-client through the attorney-client relationship is crucial. In Donahue, the client directed his attorney to arrange post-death gifts to two beneficiaries. When the transfers failed, the beneficiaries sued the attorney. Id. In contrast here, El Monte Associates engaged the Jackson Law Firm to represent it in the purchase of real property. Mark Twain Bank was the lender in the transaction, and not an intended beneficiary of the transaction or of the attorney-client relationship. The loan from Mark Twain Bank was incidental to the transaction and not the intended purpose of the transaction. Therefore, arguably, the crucial first factor of the Donahue test--El Monte Associates' purpose and specific intent to benefit Mark Twain Bank through the attorney-client relationship with the Jackson Law Firm is missing. Thus, one may argue that the Jackson Law Firm's client intended to benefit Mark Twain Bank through the attorney-client relationship it enjoyed with the Jackson Law Firm by providing the bank legal representations from its attorneys upon which the bank could rely, a prerequisite to the bank's extending a loan to the client.
Missouri courts have allowed third-parties and non-clients to maintain negligent representation actions against other non-attorney professionals 5, and other jurisdictions have permitted non-clients to sue attorneys for negligent misrepresentation 6. Whether the Donahue test encompassing attorney liability for negligence to non-clients on a limited basis is applicable to the scenario of this case need not be resolved. Even if Donahue were applied here, the trial courts summary judgment would have been appropriate for the following reasons.
If Mark Twain Bank pleaded a cause of action under Donahue, it could not have proven the reliance element of its negligent misrepresentation action. To prevail on a negligent misrepresentation claim, the plaintiff must establish its justifiable reliance on the misrepresentation. See Baublit v. Barr & Riddle Eng'g Co., 768 S.W.2d 233, 236-37 (Mo.App.1989).
In its Point I, Mark Twain Bank insists that genuine factual issues remain concerning its reliance on...
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