Olfe v. Gordon

• Decision Date: 08 January 1980
• Docket Number: No. 77-020,77-020
• Citation: 286 N.W.2d 573,93 Wis.2d 173
• Parties: Frieda OLFE, Plaintiff-Appellant, v. Robert N. GORDON and St. Paul Fire & Marine Insurance Company, Defendants- Respondents.
• Court: Wisconsin Supreme Court

Page 573

286 N.W.2d 573

93 Wis.2d 173

Frieda OLFE, Plaintiff-Appellant, v. Robert N. GORDON and St. Paul Fire & Marine Insurance Company, Defendants- Respondents.

No. 77-020.

Supreme Court of Wisconsin.

Submitted on Briefs Nov. 7, 1979.

Decided Jan. 8, 1980.

Edward J. Simarski and Simarski, Goodrich & Stack, Milwaukee, for plaintiff-appellant.

Joseph A. Bradley and Law Offices of Richard J. Palmersheim, Milwaukee, for defendants-respondents.

CALLOW, Justice.

This is an appeal by plaintiff-appellant Frieda Olfe (Olfe) from a judgment entered after the trial court granted the motion by defendants-respondents Attorney Robert N. Gordon (Gordon) and St. Paul Fire & Marine Insurance Company to dismiss on the ground of insufficiency of the evidence, pursuant to sec. 805.14(3), Stats. The action is based on a claim of negligence on the part of Gordon in a transaction involving the sale of land by Olfe, then Gordon's client. The trial court ruled at the close of Olfe's case that there was insufficient evidence to establish a prima facie case against the respondents and that a lack of expert testimony relating to the standard of care required of attorneys in similar circumstances precluded the jury from passing on the alleged negligence of Gordon. We reverse.

Early in 1971 Olfe, a widow about sixty-two years of age, was approached by Elmer J. Demman (Demman) who proposed buying Olfe's three-family house and the land upon which it was situated for the purpose of constructing an office building. A verbal agreement was reached between Olfe and Demman in which Demman was to purchase the property for $87,000. Olfe, after meeting with Demman and his attorney, decided she needed an attorney. Olfe consulted Gordon, telling him that she wanted a first mortgage. Olfe testified that when she left the office Gordon "was going to go ahead with getting the documents ready to sign for a first mortgage." On two subsequent occasions, Olfe testified she had contact with Gordon during which she was told that work was proceeding on obtaining a first mortgage for her.

On September 15, 1971, Olfe, Gordon, Demman, and Attorney C. J. Schloemer met with Demman's attorney at his office. Gordon told Olfe he brought Schloemer, his law partner, to the meeting because Schloemer "was well versed" in real estate matters. The first offer Demman's attorney presented to Schloemer was unacceptable, and a second offer to purchase was prepared and presented to Schloemer who reviewed the document and handed it to Gordon. Gordon looked at the document and asked Olfe to sign it. Prior to signing the offer to purchase, Olfe asked: " 'This isn't a second mortgage, is it?' " Gordon gave no answer and Schloemer said: "It is second only to cost of construction." Olfe signed the offer to purchase. She testified she understood Schloemer's remark to mean "that a second mortgage was only on the new building that was going to go up and that the land and the home on it was still under first mortgage." Olfe testified she did not read the document because "I'm not very good at legal terms and that is the reason I hired an attorney to represent me to read it and to see that I was signing for a first mortgage."

Olfe received about $22,500 of the purchase price on November 4, 1971, the date of the closing. The balance of about $64,500 was to be paid in two equal installments during the two succeeding years. No subsequent payments were ever made to Olfe prior to a foreclosure proceeding which was commenced by Continental Savings and Loan, the holder of the first mortgage. It was at this time that Olfe discovered she had only a second mortgage on the entire property. A judgment of foreclosure was entered. Schloemer later negotiated on Olfe's behalf a sale of her second mortgage interest to Continental Savings and Loan for $37,500.

Olfe commenced this action against Gordon and his professional liability insurer to recover the difference between the unpaid principal balance on the mortgage note and the amount which she had received from Continental Savings and Loan. Her complaint alleged she hired Gordon to protect and represent her interest and that "she wanted a first mortgage on said premises if the said purchaser was unable to pay the entire sum of the sale price at the closing." The complaint alleged that Gordon was negligent and careless in that

"a. He failed to require and specifically note in the offer to purchase executed by plaintiff and Demann (sic) that plaintiff's security interest in the event of Demann's inability to pay the entire purchase price at closing, would be a first mortgage as plaintiff advised defendant she wanted;

"b. He failed to draft or required to be drafted a mortgage for plaintiff to be signed by Demann that would be senior and prior to any mortgage that Demann intended to and then did obtain on said premises of sale that were executed simultaneoudly (sic) with the mortgage executed to plaintiff, and negligently and carelessly permitted with full knowledge on his part, a mortgage executed by Demann to plaintiff which was second or junior to the mortgage Demann executed simultaneously to a lending institution.

"c. He failed to properly, fully and adequately advise plaintiff of the risks and hazards inherent in the situation of plaintiff accepting a mortgage from Demann that was juniour (sic) to the mortgage of a lending institution in the circumstances existing in the period from September to November 4, 1971 during which time defendant was the attorney for plaintiff.

"d. He failed to specifically advise plaintiff prior to said sale date of Nov. 4, 1971 and on said sale date that the mortgage executed by Demman and to be executed by Demman was junior to to (sic) the mortgage executed by Demman to a lender."

Olfe's appeal presents two issues:

(1) Is expert testimony required to establish the standard of care on the part of an attorney in a malpractice action; and if so, is such testimony required to establish negligence on the part of Gordon?

(2) Does the record contain sufficient credible evidence, when taken in the light most favorable to Olfe, to warrant sending the case to the jury?

This court stated the rule on a lawyer's liability in Gustavson v. O'Brien, 87 Wis.2d 193, 199, 274 N.W.2d 627, 630 (1979):

" '. . . "an attorney must be held to undertake to use a reasonable degree of care and skill, and to possess to a reasonable extent the knowledge requisite to a proper performance of the duties of his profession, and, if injury results to the client as a proximate consequence of the lack of such knowledge or skill, or from the failure to exercise it, the client may recover damages to the extent of the injury sustained; . . ." ' "

quoting, Malone v. Gerth, 100 Wis. 166, 173, 75 N.W. 972 (1898). However, the question of whether expert testimony is required to establish the standard of care required of attorneys in legal malpractice actions has not been decided by this court. Addressing this issue, other jurisdictions have adopted the same standard with respect to the need for expert testimony in legal malpractice cases that they have adopted in medical malpractice cases; that expert testimony is generally necessary except where the matters in issue fall within the area of common knowledge and lay comprehension. See, e. g., Olson v. North, 276 Ill.App. 457, 475 (1934); Central Cab Co. v. Clarke, 259 Md. 542, 270 A.2d 662, 667 (1970); Hill v. Okay Construction Company, Inc., 312 Minn. 324, 252 N.W.2d 107, 116 (1977); Sanders v. Smith, 83 N.M. 706, 496 P.2d 1102, 1104 (App., 1972); Hansen v. Wightman, 14 Wash.App. 78, 538 P.2d 1238 (1975); Annot., 17 A.L.R.3d 1442 (1968).

In medical malpractice actions, Wisconsin law generally requires the plaintiff to introduce expert testimony as to the standard of care and the defendant's departure from it. "Without such testimony the jury has no standard which enables it to determine whether the defendant failed to exercise the degree of care and skill required of him." Froh v. Milwaukee Medical Clinic, S. C., 85 Wis.2d 308, 317, 270 N.W.2d 83, 87 (Ct.App., 1978); Francois v. Mokrohisky, 67 Wis.2d 196, 204, 226 N.W.2d 470 (1975). However, such expert testimony is not necessary when the matters to be proven are within the area of common knowledge and lay comprehension. "This court has long distinguished between matters of common knowledge and those needing expert testimony to explain and has held that expert testimony should be adduced concerning matters involving special knowledge or skill or experience on subjects which are not within the realm of the ordinary experience of mankind, and which require special learning, study, or experience." Cramer v. Theda Clark Memorial Hospital, 45 Wis.2d 147, 150, 172 N.W.2d 427, 429 (1969).

This court has acknowledged the similarity between medical and legal malpractice actions. In Denzer v. Rouse, 48 Wis.2d 528, 180 N.W.2d 521 (1970), this court held that, as in medical malpractice cases, the statute of limitations in attorney malpractice cases runs from the date of the alleged negligent act and resultant injury. Id. at 531-32, 180 N.W.2d 521. See also: Boehm v. Wheeler, 65 Wis.2d 668, 223 N.W.2d 536 (1974). Regarding the issue presented on appeal, we conclude that the standard with respect to the need for expert testimony is substantially the same in both types of actions. As stated by the Minnesota Supreme Court in Hill v. Okay Construction Company, Inc.:

"Expert testimony should be generally required to establish the standard of care applicable to an attorney whose conduct is alleged to have been negligent and further to establish that his conduct deviated from that standard. That general rule should be subject to the exception that such expert testimony is not necessary in cases where the conduct complained of can be evaluated adequately by a jury in the absence of expert testimony." 252 N.W.2d at 116.

Thus expert testimony is not...