Reamer v. Kessler

• Decision Date: 23 January 1964
• Docket Number: No. 57,57
• Citation: Reamer v. Kessler, 233 Md. 311, 196 A.2d 896 (Md. 1964)
• Parties: Irving S. REAMER v. Irvin R. KESSLER and Jacob Jachman, et al., Trustees.
• Court: Maryland Court of Appeals

Page 311

233 Md. 311

196 A.2d 896

Irving S. REAMER v. Irvin R. KESSLER and Jacob Jachman, et al., Trustees.

No. 57.

Court of Appeals of Maryland.

Jan. 23, 1964.

Douglas R. Due, Baltimore (Leon H. A. Pierson and B. Conway Taylor, Jr., Baltimore, on the brief), for appellant.

Thomas A. Garland and Charles C. W. Atwater, Baltimore (Mylander & Atwater, and Walter C. Mylander, Jr. Baltimore, on the brief), for appellees.

Before BRUNE, C. J., and HAMMOND, PRESCOTT, HORNEY and SYBERT, JJ.

BRUNE, Chief Judge.

The mortgagees under two separate chattel mortgages brought suits against the defendant, an attorney, to recover damages resulting from his negligence in certifying that the respective corporate mortgagors under these instruments had good title to the construction equipment purportedly covered by their respective mortgages. These cases were consolidated for trial and were tried before the court without a jury. Judgment was entered for the plaintiff or plaintiffs in each case, and the defendant appeals only as to certain items included in these judgments. He does not appeal from the finding of negligence or from liability therefor; but he does challenge the inclusion in the amount of the judgments of (a) the amount of usurious bonuses, and (b) 'interest on the unpaid loans prior to trial, under the facts of this case.'

One Edward Wuensche (some of whose activities previously came before this court in United Rental Equipment Co., Inc. v. Potts & Callahan, 231 Md. 552, 191 A.2d 570) employed the defendant-appellant as his attorney to organize two Maryland corporations and to seek loans for them to be secured by construction equipment which Wuensche was to transfer to them. In each instance the lenders, the plaintiffs below and appellees here, obtained a certificate from the defendant attorney that the borrowing corporations had good title to the construction equipment covered by the respective chattel mortgages executed and delivered to them by the respective borrowing corporations as security for the loan. The appellant apparently relied upon what his client, Wuensche, told him and did not make such investigation as he might have made, which would have disclosed that these corporations did not acquire good title to the mortgaged equipment (with the exception of one item subject to the Kessler mortgage which was sold on foreclosure), since Wuensche, who purported to transfer the several pieces of equipment to his corporations, did not have title thereto, and that the equipment was in fact owned by third persons. The appellant was not aware of this (nor were the appellees) when the loans were effected. Some months later, when the appellant was seeking to make arrangements to refinance these loans, he discovered the mortgagors' lack of title to the equipment and advised all interested parties, including the appellees, of what he had learned.

The agreed statement of facts shows that the appellant contacted a mortgage brokerage organization and through it arranged two loans, one for each of the corporations which the appellant had organized for Wuensche. One was a loan from Jachman and Rombro, trustees (Jachman), to Druid Hill Holding Company, Inc. in the face amount of $10,500, repayable over a period of six months, with interest at the legal rate. The other loan was from one Kessler to Hillside Construction Company, Inc. in the amount of $15,000, repayable in four months, with interest at the legal rate. The lender or lenders in each instance received out of the proceeds of the loan a bonus of 10% of the face amount thereof, that is, of $1,050 to Jachman and of $1,500 to Kessler. The appellant was paid a fee for his services directly by the borrower in connection with the Jachman loan and received a fee of $500 out of the proceeds of the Kessler loan. After the payment of mortgage brokerage commissions, appraisal fees and settlement costs (and the appellant's fee under the second loan) the respective corporate borrowers received the net amounts of $7,500 and $11,500.

The judgment in each case is based upon the full face amount of the loan and includes interest accruing after the date thereof and prior to the trial. In the Jachman case such interest is calculated from the date of the loan, which was January 12, 1961. In the Kessler case, interest from January 24, 1961, the date of the loan, to September 29, 1961, was paid out of the proceeds of a partial recovery effected by Kessler on the latter date through the foreclosure above mentioned as to one piece of equipment, and interest on the remaining unpaid balance of the face amount of the loan was allowed to the date of the trial, which was October 28, 1962. Each judgment, of course, also carries interest from its date and costs of suit.

The appellant objects to the inclusion of the bonuses in the judgments against him and to the allowance of any interest prior to the date of trial. His first contention rests upon the grounds that each bonus (a) represents usurious interest and (b) does not represent a loss to the mortgagees, since these amounts were not actually loaned. His second contention is based upon the arguments that interest is discretionary and that it would be unjust, in view of the fact that he was duped by his client (as were the appellees), to allow any interest prior to the date of trial, and that it is particularly unjust to allow interest on the amounts of the bonuses, which were never in fact advaced to the borrowers. The appellees contend that the only issue in the case is the measure of damages, that '[t]he measure of damages in this case is the principal amount of the mortgages, with interest thereon, to the extent of the value of the security,' that the value of the security exceeded this amount in each case, and that each of the judgments is correct.

Since the issue of liability is not contested on this appeal, only the amount of liability being in dispute, the basis upon which liability is founded is important only insofar as it may bear upon the measure of damages. The agreed statement of facts show that, as a part of each loan transaction, the lenders required that the appellant certify merchantable title to the respective pieces of equipment to be in the respective corporate borrowers, and that the appellant did so certify in writing at the times of the respective closings. The trial court was of the opinion that liability might be upheld on one or more of three bases, but relied primarily upon a relationship of employment having been established as between the appellant and the lenders, under which the appellant was to examine and certify title to the lenders. We think that the above facts warrant this finding, which is not contested on this appeal; and we shall proceed on the assumption upon which the parties appear to agree, that the measure of damages is to be governed by the rules applicable to actions against attorneys or other abstracters of title by persons who have employed them to examine and certify titles. ¹

In this State it has been held that the obligation of an attorney or abstracter examining and certifying title is contractual in nature, though it has been recognized in two cases that it has ordinarily been enforced by an action on the case alleging negligence in the discharge of the professional duty of an attorney. See Watson v. Calvert Building and Loan Assn., 91 Md. 25, at 33, 45 A. 879, at 881; Wlodarek v. Thrift, 178 Md. 453, at 468, 13 A.2d 774, at 781; and Corcoran v. Abstract & Title Co. of Md., Inc., 217 Md. 633, at 637, 143 A.2d 808, at 810 (involving an abstract company, not an attorney, but quoting from Watson). See also Kendall v. Rogers, 181 Md. 606, 31 A.2d 312, where the attorney for the purchasers of a farm was held not liable to the seller for telling the latter, in good faith but erroneously, that he had an obligation under a covenant of special warranty to clear up a defect in title, and the seller acted in reliance on that statement. This statement was made long after the sale had been made. The case was decided on demurrer, and the facts alleged were held insufficient to show or warrant an inference that the attorney, who was clearly acting as attorney for the purchasers, was also acting as attorney for the sellers.

The finding in the present case that the appellant was employed by the lenders to examine and certify title to the machinery for them distinguishes this case from Kendall v. Rogers, just cited, and also makes inapplicable the limitation stated in Wlodarek v. Thrift, supra, 178 Md. at 468, 13 A.2d at 781, that 'the liability of * * * attorneys [employed] to examine and pass upon a title to land is...