Stone v. Chicago Title Ins. Co. of Maryland

• Decision Date: 01 September 1992
• Docket Number: No. 121,121
• Citation: 624 A.2d 496,330 Md. 329
• Parties: Marc B. STONE v. CHICAGO TITLE INSURANCE COMPANY OF MARYLAND et al. ,
• Court: Maryland Court of Appeals

Page 329

330 Md. 329

624 A.2d 496

Marc B. STONE v. CHICAGO TITLE INSURANCE COMPANY OF MARYLAND et al.

No. 121, Sept. Term, 1992.

Court of Appeals of Maryland.

May 12, 1993.

Steven C. Kahn (Pearlstein, Essex & Kahn, P.C., both on brief), Beltsville, for appellant.

Alvin I. Frederick (James E. Dickerman, Eccleston and Wolf, all on brief), Baltimore, and Russel A. Arlotta (Richard A. Kramer, Kramer & Gorney, Chtd., all on brief), Oxon Hill, for appellee.

Argued before ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI, ROBERT M. BELL and CHARLES E. ORTH, Jr., Judge of Court of Appeals (retired, specially assigned), JJ.

KARWACKI, Judge.

I.

In September of 1989, Marc Stone, the appellant, purchased a home in Washington, D.C. for $285,000. James E. Savitz and his law firm, Gimmel, Weiman, Savitz and Kronthal, P.A., were employed by Stone to handle the settlement of that purchase, including the examination of the title of the property for marketability, document preparation, the release of any liens encumbering the property, and obtaining a title insurance policy. At settlement on September 15, 1989, a title insurance policy was issued by Chicago Title Insurance Company of Maryland. In June, 1990, Stone applied to Maryland National Bank for a home equity loan in the amount of $50,000 to purchase "stock puts" to protect his financial position in the stock market in response to anticipated margin calls on certain stocks he had purchased on credit. The loan was to be secured by a second mortgage on his home. The loan was provisionally approved on July 2, however, in mid-July, the bank notified Stone that a deed of trust which encumbered his seller's title had not been released of record. Between July 18 and August 2, Stone and representatives of Maryland National Bank and its title company made numerous attempts to contact Savitz or someone else at his law firm to get the deed of trust which was recorded against his home released. Meanwhile, on August 1, 1990, Stone's broker called his margin account loans with an August 9, 1990 pay-off date. Without the home equity loan funds, Stone was forced to sell stock at a substantial loss to meet his broker's demand.

In addition to these facts, in his amended complaint, Stone alleged that Savitz was not reached until early August when he proceeded to clear up the matter. The release of the outstanding lien was recorded on August 6, 1990. The loan funds from Maryland National were released on August 15, 1990. Stone alleges that as a result of Savitz's failure to record a release of the outstanding lien, he was unable to close on the home equity loan in a timely fashion and, as a result, was forced to sell stock at a substantial loss to raise the money to meet the margin call. There was no allegation in the amended complaint that either Savitz, his firm, or Chicago Title had knowledge at any time that Stone was speculating on credit in the stock market and that the Maryland National home equity loan was the only source of funds available to him in case of financial emergency.

Stone filed suit in the Circuit Court for Montgomery County against the appellees, alleging negligence and breach of contract by Savitz and his firm and breach of contract by Chicago Title. The appellees moved to dismiss the amended complaint for failure to state claims upon which relief could be granted. Savitz and his firm asserted that the damages claimed for breach of contract were unforeseeable at the time they entered the contract with Stone; as to the damages claimed for their negligence, they contended that the damages were speculative and unforeseeable inasmuch as a causal nexus could not be demonstrated between their negligence and the injury suffered by Stone. Chicago Title similarly argued that the damages claimed by Stone for breach of contract were unforeseeable by the parties at the time the contract was entered. The motions were heard by Judge J. James McKenna who dismissed with prejudice the amended complaint as to all defendants following a hearing on July 1, 1992. Stone appealed to the Court of Special Appeals. Prior to arguments before the intermediate appellate court, we issued our writ of certiorari. 329 Md. 22, 616 A.2d 1286.

II.

This appeal reaches us on a dismissal of the appellant's amended complaint for failure to state a claim upon which relief could be granted pursuant to Maryland Rule 2-322. In reviewing that judgment, we assume the truth of all relevant and material facts well pleaded and all inferences which can be reasonably drawn from those facts. Figueiredo-Torres v. Nickel, 321 Md. 642, 647, 584 A.2d 69, 72 (1991); Sharrow v. State Farm Mut. Auto. Ins. Co., 306 Md. 754, 768, 511 A.2d 492, 499-500 (1986); Flaherty v. Weinberg, 303 Md. 116, 135-36, 492 A.2d 618, 628 (1985); Tadjer v. Montgomery County, 300 Md. 539, 542, 479 A.2d 1321, 1322 (1984); Hoffman v. Key Fed. Sav. & Loan, 286 Md. 28, 33-34, 416 A.2d 1265, 1268 (1979); Arnold v. Carafides, 282 Md. 375, 382, 384 A.2d 729, 733 (1978); Krieger v. J.E. Greiner Co., 282 Md. 50, 52, 382 A.2d 1069, 1071 (1978); Zion Evangelical Lutheran Church v. State Highway Admin., 276 Md. 630, 632, 350 A.2d 125, 126 (1976); Schwartz v. Merchants Mort. Co., 272 Md. 305, 307-308, 322 A.2d 544, 546 (1974); Desser v. Woods, 266 Md. 696, 698-99, 296 A.2d 586, 588 (1972).

III.

A.

The first question presented is whether Savitz's failure to timely record the release of the deed of trust which encumbered the home which Stone purchased, leading to the delay in settlement of Stone's subsequent loan, was a proximate cause of Stone's loss. Put another way, was the possibility of Stone's stock market losses in August of 1990 foreseeable to Savitz in September of 1989 so that he should have known at that time that negligent handling of the settlement could proximately result in those losses nearly a year later.

Stone argues that his right to recover lies in tort. This Court has never expressly held that a malpractice claim arising from the contractual relationship between attorney and client lies exclusively in contract or in tort. This Court first considered the liability arising from an attorney-client relationship in Cochrane v. Little, 71 Md. 323, 18 A. 698 (1889) where we said:

"It is now well settled by many decisions of courts of high authority, both of England and of this country, that every client employing an attorney has a right to the exercise, on the part of the attorney, of ordinary care and diligence in the execution of the business intrusted to him, and to a fair average degree of professional skill and knowledge; and if the attorney has not as much of these qualities as he ought to possess, and which, by holding himself out for employment he impliedly represents himself as possessing, or if, having them, he has neglected to employ them, the law makes him responsible for the loss or damage which has accrued to his client from their deficiency or failure of application."

Id. at 331-32, 18 A. at 700-01.

In Watson v. Calvert Bldg. Assn., 91 Md. 25, 45 A. 879 (1900), we stated:

"An attorney at law is liable to his client for the possession of a reasonable degree of skill in his profession as well as for the exercise of a like degree of diligence in the conduct of the transaction about which he is employed. If he fails in either respect he will be responsible to his client for the loss which the latter may sustain therefrom. This responsibility of the attorney, although ordinarily enforced by an action of case for negligence in the discharge of his professional duties, in reality rests upon his employment by the client and is contractual in nature. Before the attorney can be made liable, it must appear that the loss for which he is sought to be held arose from his failure or neglect to discharge some duty which was fairly within the purview of his employment."

Id. at 33, 45 A.2d at 881.

In Kendall v. Rogers, 181 Md. 606, 31 A.2d 312 (1943), this Court quoted Maryland Casualty Co. v. Price, 231 F. 397, 401 (4th Cir.1916) for the proposition:

" 'In a suit against an attorney for negligence, the plaintiff must prove three things in order to recover: (1) The attorney's employment; (2) his neglect of a reasonable duty; and (3) that such negligence resulted in and was the proximate cause of loss to the client'."

Id. at 611-12, 31 A.2d at 315.

Applying the standard to non-lawyer title abstracters in Corcoran v. Abstract & Title Co., 217 Md. 633, 143 A.2d 808 (1958), we said:

"One who undertakes to examine a title for compensation is bound to exercise a reasonable degree of skill and diligence in the conduct of the transaction. This liability, 'although ordinarily enforced by an action of case for negligence in the discharge of his professional duties, in reality rests upon his employment by the client and is contractual in its nature.' It is generally recognized that damages are recoverable on the theory of a breach of contract, and the legal situation is not changed by the fact that the contractual act bargained for is negligently performed. Since the liability is contractual, it may be limited in its scope by apt clear language brought home to the employer."

Id. at 637, 143 A.2d at 810 (citations omitted).

In Reamer v. Kessler, 233 Md. 311, 196 A.2d 896 (1964), we held in a case involving a lender's attempted recovery from a negligent title attorney:

"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."

Id. at 315, 196 A.2d at 899. The Reamer Court in a footnote concluded:

"We are inclined to think that in this case the damages would be the same whether the liability of the appellant were rested upon the assumption above stated or upon a tort or a...