Title Ins. Co. of Minnesota v. Smith, Debnam, Hibbert and Pahl

• Decision Date: 01 August 1995
• Docket Number: No. COA94-777,COA94-777
• Citation: 119 N.C.App. 608,459 S.E.2d 801
• Parties: TITLE INSURANCE COMPANY OF MINNESOTA, Plaintiff, v. SMITH, DEBNAM, HIBBERT AND PAHL, a North Carolina General Partnership, and W. Thurston Debnam, Jr., Fred J. Smith, Jr., Carl W. Hibbert, Jr., J. Larkin Pahl, John W. Narron and Bettie Kelley Sousa, General Partners, Defendants.
• Court: North Carolina Court of Appeals

Page 801

459 S.E.2d 801

119 N.C.App. 608

TITLE INSURANCE COMPANY OF MINNESOTA, Plaintiff, v. SMITH, DEBNAM, HIBBERT AND PAHL, a North Carolina General Partnership, and W. Thurston Debnam, Jr., Fred J. Smith Jr., Carl W. Hibbert, Jr., J. Larkin Pahl, John W. Narron and Bettie Kelley Sousa, General Partners, Defendants.

No. COA94-777.

Court of Appeals of North Carolina.

Aug. 1, 1995.

Perry, Patrick, Farmer & Michaux, P.A., by Roy H. Michaux, Jr. and John H. Carmichael, Charlotte, for plaintiff-appellee.

Crews & Klein, P.C. by Paul I. Klein, Charlotte, for defendants-appellants.

LEWIS, Judge.

This appeal arises out of plaintiff's action for legal malpractice. The jury returned a verdict of $60,000 for plaintiff. The trial court then entered judgment notwithstanding the verdict in the amount of $171,860.35 for plaintiff. From the judgment, defendants appeal.

On 5 October 1988 plaintiff issued a title insurance policy, effective as of 17 August 1988, to First Federal Savings and Loan Association of Raleigh (hereinafter "First Federal"). The policy insured that a First Federal deed of trust, dated 17 August 1988 and securing a loan to Regency Residential, Inc. (hereinafter "Regency"), was a first lien on four tracts of land on Millbrook Road in Raleigh. Plaintiff issued the title insurance policy based on defendant Debnam's certifying that all of the requirements in plaintiff's commitment for title insurance had been met. The requirements included the cancellation of all superior deeds of trust on the property. In fact, two superior deeds of trust, one to Fred and Carolyn Deer (hereinafter "the Deers") and one to First Wachovia Mortgage Company (hereinafter "Wachovia"), were not cancelled. Thus, as to the portion of the property covered by the Deer and Wachovia deeds of trust, First Federal's lien was not superior.

The property described in the Deer and Wachovia deeds of trust was previously owned by the Deers and was sold by them to Regency. At the time of the sale, there was a deed of trust on the property to Wachovia. The Deers agreed to finance the sale and take as security for the debt a deed of trust on the property. The note to the Deers was referred to at trial as a "wraparound loan." That is, it included within its total the balance owed on the Wachovia note.

In December 1990, First Federal was taken over by the Resolution Trust Corporation (hereinafter "RTC") pursuant to a purchase and assumption agreement. In response to a claim on the title insurance policy by First Federal, plaintiff paid, in April 1991, $164,109.96 to the Deers and $7,341.79 to Wachovia. The Wachovia deed of trust was then cancelled. The Deers assigned their rights under their deed of trust to plaintiff, and the Deer deed of trust was not cancelled. Plaintiff instituted this action against defendants for Debnam's negligent certification of title and sought as part of this action a judicial determination that it was, in fact, liable to its insured under the policy. After the close of evidence, the court so ruled, and while the jury was in deliberation, plaintiff cancelled the Deer deed of trust. The jury returned a verdict for plaintiff in the amount of $60,000. The trial court then granted judgment notwithstanding the verdict for plaintiff in the amount of $171,860.35.

I.

Defendants' first contention on appeal is that plaintiff had no damages at the time it filed suit, and therefore its claim was not actionable. Defendants point to the fact that plaintiff received an assignment of rights under the Deer deed of trust in exchange for the payment made to the Deers. Thus, until the Deer deed of trust was cancelled, plaintiff had suffered no damages. Defendants moved for a directed verdict based on this argument, and the court denied the motion. We agree that plaintiff suffered no actual damages until it cancelled the deed of trust, which it did while the jury deliberated. However, we do not agree that defendants were entitled to a directed verdict.

In North Carolina, a plaintiff may recover nominal damages in a negligence action. The Asheville School v. D.V. Ward Constr., Inc., 78 N.C.App. 594, 599, 337 S.E.2d 659, 662 (1985), disc. review denied, 316 N.C. 385, 342 S.E.2d 890 (1986). Nominal damages are recoverable where some legal right has been invaded but no actual loss or substantial injury has been sustained. Potts v. Howser, 274 N.C. 49, 61, 161 S.E.2d 737, 747 (1968). Nominal damages are awarded in recognition of the right and of the technical injury resulting from its violation. Id. The idea of the redress of grievances in court by an orderly process has been favored in our law from the beginning. Especially in a case involving the negligence of a professional person, the redress of the wrong may be no more than the showing, in court, that the attorney did not do his job. Even where the plaintiff has no evidence of actual damages, if he is entitled to nominal damages, it is error to grant a directed verdict for the defendant on the basis of the plaintiff's lack of damages. See Robbins v. C.W. Myers Trading Post, Inc., 251 N.C. 663, 666, 111 S.E.2d 884, 886-87 (1960) (holding denial of nonsuit proper even though plaintiff in breach of contract action had produced no competent evidence of damages, since plaintiff was entitled to nominal damages for breach of contract). Further, proof of actual damage may extend to facts that occur and grow out of the injury, even up to the day of the verdict. Jewell v. Price, 264 N.C. 459, 461-62, 142 S.E.2d 1, 3 (1965).

In this case, we believe that the evidence before the court at the time of defendants' motion for directed verdict entitled plaintiff to nominal damages. Plaintiff's legal right to a correct certification of title (see section II.) was denied by Debnam's negligence. The resulting technical injury to plaintiff's rights entitled plaintiff to nominal damages. Thus, the trial court properly denied defendants' motion for directed verdict.

The trial court did subsequently err, however, in entering judgment notwithstanding the verdict for plaintiff. After the jury rendered its verdict, the court concluded that plaintiff was entitled to judgment as a matter of law in accordance with plaintiff's earlier motion for directed verdict. Because plaintiff had not yet cancelled the deed of trust when it moved for directed verdict, plaintiff had not proved that it had suffered actual damages. A directed verdict for plaintiff awarding it actual damages at that point would have been improper. Accordingly, judgment notwithstanding the verdict would likewise be improper, as a motion for JNOV is essentially a renewal of the motion for directed verdict. See Henderson v. Traditional Log Homes, Inc., 70 N.C.App. 303, 306, 319 S.E.2d 290, 292, disc. review denied, 312 N.C. 622, 323 S.E.2d 923 (1984). However, the trial court also granted a conditional new trial on the issue of damages alone, in the event that this Court reversed or vacated its JNOV. Because we conclude that JNOV was error, we reverse the judgment as to damages and remand for a new trial on the issue of damages in accordance with the trial court's conditional grant of a new trial. Further, because proof of actual damage may extend to facts that occur and grow out of the injury, even up to the day of the verdict, Jewell, 264 N.C. at 461-62, 142 S.E.2d at 3, in the case at hand, even though the jury had begun its deliberations, the case could have been resumed and evidence of plaintiff's actual damage could have been presented to the jury. Likewise, such evidence may be presented at retrial.

The dissent concludes the trial court should have granted a directed verdict for defendants at the close of the evidence because plaintiff had not yet suffered actual damages. We would but point out the harsh result which such a ruling would have in this case. Judgment entered on a directed verdict is a final judgment on the merits and operates with full res judicata effect. Taylor v. Tri-County Elec. Membership Corp., 17 N.C.App. 143, 145, 193 S.E.2d 402, 404 (1972). Thus, if directed verdict had been granted for defendants, plaintiff would be forever barred from bringing an action notwithstanding it has now suffered substantial actual damages.

II.

Defendants' next contention is that they cannot be held liable to plaintiff because Debnam, who was Regency's attorney, had no duty to plaintiff regarding the certification of title. Defendants argue that the trial court therefore erred in not granting their motion for directed verdict on this ground. Defendants cite Chicago Title Insurance Co. v. Holt, 36 N.C.App. 284, 244 S.E.2d 177 (1978), in support of their position. That case held that claims for attorney malpractice "may properly be brought only by those who are in privity of contract with such attorneys by virtue of a contract providing for their employment." Id. at 288, 244 S.E.2d at 180. In Chicago Title, a non-client general contractor sued an attorney for the attorney's alleged negligent certification of title. This Court upheld the dismissal of the plaintiff's complaint on the ground that the plaintiff was not in privity of contract with the attorney. Id.

However, in United Leasing Corp. v. Miller, 45 N.C.App. 400, 406, 263 S.E.2d 313, 317, disc. review denied, 300 N.C. 374, 267 S.E.2d 685 (1980), this Court stated:

In the line of cases since our decision in [Chicago Title ], we have re-examined the rule prohibiting recovery in tort by a third person not in privity of contract with a professional person for negligence in the performance of his employment contract with his client, even though such negligence was the proximate cause of a foreseeable injury to the third person.

In Miller, this Court held that a non-client could sue an attorney for negligently certifying title to property. Id. at 407, 263 S.E.2d at 318. In the case at hand, there is substantial evidence in the record that Debnam furnished the title...