Stinson v. Brand

• Decision Date: 28 September 1987
• Citation: 738 S.W.2d 186
• Parties: John T. STINSON and wife, Mamie Stinson, Plaintiffs/Appellees, v. David L. BRAND and G. Reece Gibson, Defendants/Appellants. 738 S.W.2d 186 .
• Court: Tennessee Supreme Court

Page 186

738 S.W.2d 186

John T. STINSON and wife, Mamie Stinson, Plaintiffs/Appellees, v. David L. BRAND and G. Reece Gibson, Defendants/Appellants.

738 S.W.2d 186

Supreme Court of Tennessee,

at Knoxville.

.

Sept. 28, 1987.

George W. Morton, Jr., Janet L. Mayfield, Knoxville, for defendants/appellants.

Stephenson Todd, Todd & Dossett, P.C., Kingsport, for plaintiffs/appellees.

OPINION

HARBISON, Chief Justice.

This is a suit for damages against a firm of attorneys practicing in a small town. The claim is based upon the alleged negligence of the attorneys, or a secretary in their office and acting under their supervision, in the preparation of two deeds and a deed of trust. The plaintiffs, appellees here, did not directly retain the attorneys to represent them, and they paid nothing to the attorneys for their services.

The trial judge directed a verdict for the attorneys, appellants here, upon the ground that they were not liable for negligence to non-clients. The Court of Appeals reversed and remanded the case for a new trial, finding that a jury issue was presented as to whether appellants were liable to appellees for the negligent supplying of information pursuant to Restatement (Second) of Torts 2d, Sec. 552 (1977).

We affirm the decision of the Court of Appeals. Under the circumstances a jury issue was presented as to whether the attorneys were negligent in the preparation of the instruments and in the handling of the transaction. An issue may well be presented under Section 552, but a trier of fact could also find that the attorneys so far undertook to represent the interests of the sellers as to permit a direct action for negligence in doing so or in not more fully advising them.

There were some disputed issues of fact and some facts from which differing inferences might be drawn. The following statement of the facts is based upon the most favorable view of the record toward the plaintiffs, in view of the fact that there was a directed verdict for the defendants-appellants.

The plaintiffs, John T. Stinson and wife, Mamie Stinson, owned two houses and lots situated a few hundred yards from the site of their own residence. They had acquired these properties many years earlier and owned them free of encumbrances, except for a small amount of taxes.

Plaintiffs were about seventy years old in February and March 1980 when the transactions involved here took place. They had limited educations and business experience. They had acquired deeds to their own residence and to the two properties involved in the litigation, which they had duly recorded. They were not, however, sophisticated or experienced in real estate transactions.

On February 19, 1980 one Clyde D. Manis, a real estate broker in the community, called upon the Stinsons and offered them sixteen thousand dollars for the two houses and lots involved in this case. Plaintiffs had never met or dealt with him before. On that date they signed a written contract to sell the two properties to Avery L. Manis, brother of Clyde D. Manis, for the sum of sixteen thousand dollars, one thousand of which was paid in cash upon the signing of the contract. The remainder was to be evidenced by a note with interest at ten percent, payable in six months. The note was to be secured by a deed of trust. The instrument was signed in the name of Avery L. Manis, as purchaser, and witnessed "Manis Brothers, Inc., by Clyde D. Manis."

Mr. Stinson died while the present litigation was pending and before giving any evidence, by deposition or otherwise. Mrs. Stinson testified that her husband had retired shortly before the transactions involved in this case and had a stroke shortly thereafter.

Neither of the Manis brothers testified in the action. Apparently Clyde Manis took the written contract to the offices of the defendants/appellants and requested an appropriate title search and the necessary legal instruments called for in the contract. He gave the contract to Mrs. Phyllis Broome, secretary to appellant Gibson. Gibson and appellant Brand were partners, but Brand had no direct involvement in or knowledge of the transactions giving rise to this suit.

Mrs. Broome made some handwritten notations on the contract, apparently reflecting instructions given to her by Clyde Manis or his brother. These called for a title search and for two separate deeds. They also contained the terms to be inserted in the note and contained the notation "leave deeds open."

Testifying concerning the transaction some five years later, Mrs. Broome had no independent recollection of the matter. She apparently gave Mr. Gibson some information from which he conducted a title search in the county seat, reporting no encumbrances except some unpaid taxes.

In accordance with her apparent instructions, Mrs. Broome prepared separate deeds for the two residential lots, to be executed by appellees, leaving the name of the grantee in each deed blank. Apparently this was done at the request of Clyde Manis, who was known by the sellers to be purchasing the property for his own account or that of his real estate firm. ¹

Mrs. Broome also prepared a note and deed of trust. The maker of the note was typed "MANIS BROTHERS, INC." It was signed by Clyde D. Manis and was made payable six months after date, the due date being September 10, 1980.

The deed of trust conveyed the property from Manis Brothers, Inc., to appellant G. Reece Gibson, Trustee. It was made and executed in the same manner as the note. In the acknowledgment Clyde D. Manis was stated to be the vice-president of the corporate grantor.

All of the instruments were dated March 10, 1980 and were executed on that date. Mrs. Stinson testified that Clyde Manis came to the residence of the sellers and took them in his automobile to the offices of appellants where all of the instruments were executed in the presence of Mrs. Broome. She was a Notary Public and duly acknowledged the execution of the two deeds (with the grantees' names in blank) and of the deed of trust. No closing statement was prepared. The sellers gave their check to Mrs. Broome for some unpaid taxes, and apparently these were paid to the county trustee by appellants or one of their employees. ²

Mrs. Stinson testified that the deed of trust and note were delivered to her and her husband without any instructions. They did not record the deed of trust. They took the documents to their home and kept them in a safe place. She testified that there was expense involved in recording and that she and her husband saw no need to incur this expense in the absence of some instructions that the instrument should be recorded.

Mrs. Broome testified that she did not recall whether she gave any instructions to appellees regarding the recording of the deed of trust. She said that her instructions from her employers, appellants here, were to advise persons receiving deeds of trust such as this from their office to record them. Taken most favorably to appellees, the record would support a finding that no such instructions were given in this case.

Manis Brothers, Inc. did not pay the note in accordance with its terms. They did, however, sell the two houses and lots later in the year. One of the lots was purchased by Terry Morelock, an employee at a local Baptist church. He purchased one of the tracts for $24,900, and his name apparently was filled in as the grantee on the original deed executed in blank by Mr. and Mrs. Stinson on March 10, 1980. Mr. Morelock executed a deed of trust to secure a note for $23,650 on July 11, 1980, having borrowed the funds from a savings and loan institution. The deed of trust was recorded the same date, and the previously incomplete deed from the Stinsons was completed and recorded at the same time. Mr. Morelock moved into the property shortly after the closing. Although he was a single man, he said that it would have been obvious to anyone in the neighborhood that the residence was occupied from and after July 1980.

The deed of trust securing Mr. Morelock's indebtedness showed on its face that it was prepared by Attorney Thomas A. Peters. Neither Mr. Peters nor any representative of the lending institution testified at the trial of this case.

Under date of November 10, 1980, the deed from appellees Stinson to the other house and lot was recorded, the grantee being shown as Jeffery L. Necessary and wife, Connie E. Necessary. The deed, of course, bore date and acknowledgment of March 10, 1980. The deed reflected a purchase price of eleven thousand six hundred dollars. No witness testified concerning the closing of this transaction.

Under date of November 28, 1980, Mr. Manis paid two thousand dollars in cash to the Stinsons; and two days later, on November 30, 1980, he paid them an additional fifteen hundred dollars. Mrs. Stinson noted these payments on the face of the original deed of trust. It will be recalled that the note to the Stinsons for fifteen thousand dollars was due and payable in full on September 10, 1980.

Mrs. Stinson testified that after these payments were made some neighbors or other unidentified persons advised her that she should record the deed of trust; and she ultimately did so on February 24, 1981, long after the recording of the deeds to Mr. Morelock and to Mr. and Mrs. Necessary above referred to.

Mr. Manis paid nothing else to the Stinsons, and he later went into bankruptcy. On July 8, 1982 the trustee in bankruptcy paid $663.11 to...