Opinion
1784CV02862BLS2
04-25-2018
David VALCHUIS, et al. v. SAUL EWING, LLP, et al.
File Date: April 26, 2018
MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTIONS TO DISMISS OR FOR JUDGMENT ON THE PLEADINGS
Kenneth W. Salinger, Justice Superior Court
Plaintiffs assert claims for legal malpractice against two different sets of defendants. They allege that their prior lawyers were negligent in failing to discover that a 1998 deed was defective because the individuals purporting to convey the property no longer held legal title.
The Saul Ewing Defendants (Saul Ewing, LLP, and Peter S. Brooks) have moved to dismiss this action under Mass.R.Civ.P. 12(b)(6). The Lourie & Cutler Defendants (Lourie & Cutler, PC, Jean M. Kolling, and Leslie Crane Slavin) have filed an answer, but now move for judgment on the pleadings under rule 12(c).
The Court concludes that Defendants are not entitled to dismissal of this action on the grounds that Plaintiffs’ claims are time barred, or that Plaintiffs’ alleged harms were caused by unforeseeable and superseding events that cut off any liability of Defendants, or that Plaintiffs have failed to allege that they suffered any compensable injury as a result of Defendants’ alleged negligence. The Court will therefore DENY the motion to dismiss and the motion for judgment on the pleadings.
1. Factual Allegations
Plaintiffs allege the following facts in their first amended complaint.
1.1. Alleged Malpractice by Lourie & Cutler Defendants
The Valchuises retained the Lourie & Cutler Defendants in 1998 to help convey certain commercial property in Watertown, Massachusetts, into a nominee trust. These defendants prepared a deed that purported to transfer this Property from David Valchuis and Michael Valchuis (now known as Michael Vale) to the Clarendon Street Nominee Trust (the "Nominee Trust"). Mr. Valchuis and Mr. Vale both executed the deed.
Plaintiffs assumed that this deed was effective, and that from then on CSNT owned the Property.
In fact, however, the deed was not effective because at the time it was recorded Mr. Valchuis and Mr. Vale were not the record title holders of the Property. The actual owner was the Clarendon Street Realty Trust.
Plaintiffs allege that the Lourie & Cutler Defendants were negligent in failing to conduct a title search, which would have revealed that Mr. Valchuis and Mr. Vale did not own and therefore could not convey the Property. One can reasonably infer-and therefore under rule 12(b)(6) and rule 12(c) the Court must infer-that Plaintiffs did not know that they no longer held title to the Property. If they were already aware of that fact then the allegation in the complaint that a proper title search "would have revealed" that Valchuis and Vale "were not the lawful record title owners of the property" would make no sense.
1.2. Alleged Malpractice by Saul Ewing Defendants
The Valchuises retained the Saul Ewing Defendants in 2013 to help them partition ownership of the Property. These defendants prepared and filed a petition for partition that referenced the deed into the CSNT as to source of record title to the property.
After a lengthy partition proceeding, Plaintiffs were the successful bidders for the Property, with a winning bid of $1.575 million.
Thereafter, the court nullified the auction sale when it learned that the 1998 deed was void and therefore CSNT did not hold record title to the Property. The court refused to affirm the petition. It instead ordered that the Property go through a new auction based on a petition for partition brought by a proper party. Plaintiffs were again the successful bidders in the second proceeding, but this time they had to pay $2.010 million to acquire the Property.
Plaintiffs allege that the Saul Ewing Defendants were negligent in failing to conduct a title search, which would have revealed that CSNT did not own and therefore could not seek partition of the Property.
1.3. Alleged Damages
Plaintiffs allege that they suffered two distinct kinds of economic damage as a result of Defendants’ alleged negligence. First, they contend that they had to pay substantial additional fees and costs to counsel, and to the Commissioner of the partition proceeding, to fix the problems created by Defendants’ alleged negligence. Second, they contend that they had to pay an additional $515,000 to acquire the Property at the second auction, which they would not have had to pay if the first auction had not been vacated.
2. Legal Standards
The pending motions to dismiss this action under Rule 12(b)(6) or for judgment on the pleadings under Rule 12(c) are governed by the same legal standards. See Boston Med. Ctr. Corp. v. Secretary of the Exec. Office of Health and Human Svcs., 463 Mass. 447, 450 (2012); Welch v. Sudbury Youth Soccer Ass’n, Inc., 453 Mass. 352, 353-54 (2009).
To survive either motion, the complaint must allege facts that, if true, would "plausibly suggest[ ] ... an entitlement to relief." Lopez v. Commonwealth, 463 Mass. 696, 701 (2012), quoting Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). In deciding these motions, the Court must assume that the factual allegations in the complaint are true and must draw "every reasonable inference in favor of the plaintiff" from those allegations. Rafferty v. Merck & Co., Inc., 479 Mass. 141, 147 (2018). In so doing, however, it must "look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief." Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).
3. Analysis
3.1. Statute of Limitations
Plaintiffs filed this lawsuit on September 7, 2017. Their legal malpractice claims are subject to a three-year statute of limitations. See G.L.c. 260, § 4 (establishing limitations period for "[a]ctions of contract or tort for malpractice, error or mistake against attorneys"). This means that Plaintiffs’ claims are time-barred unless they accrued after September 7, 2014.
Legal malpractice claims accrue and the limitations period begins to run once a client knows or should have known that they had "sustained appreciable harm as a result of the lawyer’s conduct." Lyons v. Nutt, 436 Mass. 244, 247 (2002), quoting Williams v. Ely, 423 Mass. 467, 473 (1996). Even if a client "knew immediately of the alleged negligence of the defendant attorneys," the limitations period would still not start to run so long as it was not "clear that the alleged negligence had caused or would cause ... any appreciable harm." Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, P.C., 394 Mass. 265, 267-68 (1985).
Plaintiffs allege in their complaint that they "did not know, or have reason to know, of any of the Defendants’ negligent actions until after January 2015." They make no express allegation as to when they realized they had suffered some "appreciable harm" as a result of any act or omission by Defendants, however.
Defendants make three different arguments as to why this action is nonetheless time barred. The Court is not convinced that any of them support dismissing the action.
First, the Lourie & Cutler Defendants argue that the claims against them accrued in April 1998 when Mr. Valchuis and Mr. Vale signed a deed conveying the Property at issue in this case. These Defendants argue that: (i) in 1985 Mr. Valchuis and Mr. Vale signed a deed transferring the Property to themselves as trustees of the Clarendon Street Realty Trust; (ii) since they signed that deed, they are charged with knowledge that the Clarendon Street Realty Trust became the owner of the Property in 1985; and (iii) Valchuis therefore knew or should have known that he and Vale no longer owned the Property at the time they executed the 1998 deed purporting to transfer the Property to the Clarendon Street Nominee Trust.
This argument is unavailing at this stage of the case. Although a person who signs a legal document "is ordinarily bound by its terms" even if they never read it, see Markell v. Sidney, 9 Mass.App.Ct. 412, 440 (1980), that does not create any legal presumption that Mr. Valchuis actually knew what the deed said. A person may be bound by the legal effect of a deed even if in fact they never read the deed and instead relied entirely on their lawyer and sign a deed based on the lawyer’s say-so. As explained above, in deciding the motion for judgment on the pleadings the Court must make every reasonable factual inference in favor of the Plaintiffs, and therefore in the current procedural posture of the case it must infer that Plaintiffs did not in fact realize in 1998 that they no longer held legal title to the Property.
Second, all Defendants argue that the claims accrued no later than September 2013, on the theory that Plaintiffs suffered injury as soon as the Saul Ewing Defendants filed a petition for partition based on a defective deed. This argument fails as well.
A malpractice claim against a lawyer who negligently certifies title to real estate "does not accrue until the misrepresentation is discovered or should reasonably have been discovered, whichever first occurs." Hendrickson v. Sears, 365 Mass. 83, 83-84 (1974). The same rule applies here.
Defendants have made no showing that Plaintiffs knew or should have known that there was a title defect and that they had been injured as of September 2013. To the contrary, the filings in the petition proceeding indicate that the title defect was not identified until August 2015, shortly after the first auction of the Property, when Plaintiffs’ counsel learned and notified the Partition Commissioner that a title search had revealed the defect in title. Thus, based on the pleadings and documentation submitted by the Defendants, it appears that the limitations period did not start to run until August 2015, which means that this action is timely.
By submitting and relying upon materials from the case file in the Land Court petition proceeding, Defendants are implicitly asking the Court to take judicial notice of those materials. The Court may and does take judicial notice of the pleadings, docket, and other records of this related case. Cf., Reliance Ins. Co. v. City of Boston, 71 Mass.App.Ct. 550, 555 (2008) (records of related court proceedings are subject to judicial notice and may be considered in deciding motion to dismiss).
Third, Defendants argue in the alternative that the limitations period started to run in December 2013, on the theory that Plaintiffs’ new counsel should have discovered the title defect at that time and therefore Plaintiffs themselves should be charged with having constructive notice of the alleged negligence by that time.
Whether Plaintiffs’ new lawyer had a duty to conduct a title search as of December 2013, rather than relying upon the work of the Saul Ewing Defendants in preparing the petition for partition, is a question of fact that cannot be resolved at this stage of the case. The standard of care owed by lawyers is a duty to do as good a job as an average qualified lawyer in the same field would do in similar circumstances. "Expert testimony is generally necessary to establish that an attorney failed to meet the standard of care owed in the particular circumstances." Kiribati Seafood Co., LLC v. Dechert, LLP, 478 Mass. 111, 117 (2017), quoting Global NAPs, Inc., v. Awiszus, 457 Mass. 489, 500 (2010). The Court cannot assume that the average qualified lawyer taking over a partition proceeding would commission a new title search rather than rely upon the work of the prior counsel.
3.2. Superseding Causation
The Saul Ewing Defendants argue that the claims against them must be dismissed because Plaintiffs’ claimed damages were brought about by a series of unforeseeable, superseding causes: the failure of successor counsel to discover the title defect before the first auction, the independent failure of the Partition Commissioner to discover the title defect, and the Vales’ failure to cooperate and help cure the defect. The Laurie & Cutler Defendants join in those arguments, and for good measure add that the alleged negligence by the Saul Ewing Defendants is a further superseding cause that cuts off their liability.
The Court cannot resolve these issues on a motion to dismiss or a motion for judgment on the pleadings. In a legal malpractice case, where an intervening cause "is reasonably foreseeable and the attorney could have taken reasonable steps to prevent or mitigate the anticipated harm, the intervening cause is a ‘concurring cause’ that leaves the causal link between the defendant’s negligence and the plaintiff’s harm unbroken," not a "superseding cause" that would destroy that causal connection. Kiribati Seafood, 478 Mass. at 121. Whether an intervening cause was reasonably foreseeable, in which case it would not cutoff an earlier tortfeasor’s liability, is a question of fact that cannot be resolved at the pleading stage. See Copithorne v. Framingham Union Hosp., 401 Mass. 860, 865 (1988).
3.3. Damages
Finally, Defendants argue that they cannot be held responsible for Plaintiffs’ choice to bid more for the Property at the second auction, and thus that Plaintiffs have failed to allege any facts plausible suggesting that they suffered any compensable injury as a result of Defendants’ alleged negligence. The Court disagrees with both parts of this argument.
First, if Plaintiffs can show that it was reasonably foreseeable, at the time of Defendants’ negligence, that Plaintiffs may choose to bid on the Property, then Plaintiffs may be able to recover the extra money they were forced to pay during the second auction as damages. The foreseeability of injury cannot be resolved on a motion to dismiss, at least not given the facts alleged in this case. Second, Plaintiffs have also alleged that they incurred substantial additional attorneys fees and other transaction costs as a result of Defendants’ negligence. That would be recoverable as damages even if the higher purchase price were not.
ORDER
The motion by Defendants Saul Ewing, LLP and Peter S. Brooks to dismiss the claims against them is DENIED. The related motion by Defendants Laurie & Cutler, P.C., Jean M. Kolling, and Leslie Crane Slavin for judgment on the pleadings in their favor is also DENIED.