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Malpractice suit can proceed against real estate lawyers.

Byline: Pat Murphy

The owners of a commercial property in Watertown could sue their former attorneys for malpractice after they failed to identify a title defect dating to 1998 that temporarily disrupted a partition action commenced in 2013, a Superior Court judge has ruled.<br />The defendants in the case are Saul Ewing and one of the Boston firm's attorneys, Peter S. Brooks; and Lourie & Cutler and two of that Boston firm's lawyers, Jean M. Kolling and Leslie Crane Slavin.<br />The defendants argued that the plaintiffs' September 2017 complaint was time-barred because their claims accrued no later than September 2013, when the Saul Ewing defendants filed the petition for partition based on the defective deed.<br />But Judge Kenneth W. Salinger, sitting in the Business Litigation Session, found no basis for granting a motion to dismiss or judgment on the pleadings based on the expiration of the three-year statute of limitations.<br />"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," Salinger wrote. "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."<br />The judge further rejected the defendants' argument that one of the plaintiffs had at least constructive knowledge of the title defect based on his conveyance of the property to a trust prior to the 1998 transaction.<br />The seven-page decision is Valchuis, et al. v. Saul Ewing, LLP, et al., Lawyers Weekly No. 09-038-18. The full text of the ruling can be found here.<br />Jury issues?<br />David R. Suny represents the plaintiffs, David and Carol Valchuis. The Boston attorney said he was confident his clients would prevail on the statute of limitations issue given that the case is still in its early stages.<br />"The statute would not have run until [David Valchuis] became aware of the potential for appreciable harm, which wasn't until September 2015, which was well within the statute of limitations," Suny said.<br />Suny declined to speculate on how the issue of superseding cause would play out as the case progresses.<br />"There's pretty clear liability here," Suny said. "How that ultimately gets apportioned between the two law firms is probably up to the fact-finder."<br />Boston attorney Christopher R. Blazejewski represents the Saul Ewing defendants. He declined to comment. The Lourie & Cutler defendants are represented by George C. Rockas of Boston, who did not respond to a request for comment prior to deadline.<br />But Susan E. Cohen, a professional liability litigator in Boston, said the case exemplifies how difficult it is to satisfy the Rule 12 dismissal standard in a malpractice case.<br />"The underlying malpractice claim has numerous defects, which were difficult to present on an early motion to dismiss," Cohen said. "Even strong defenses like these are generally more effectively presented on summary judgment on a better record."<br />Cohen said she could foresee the plaintiffs losing their case at a later stage in the proceedings on both the statute of limitations issue and an inability to prove compensable damages.<br />"It's a closer call as to whether or not plaintiffs should be held to have actual knowledge of the true property ownership on documents that they themselves previously signed," she added.<br />Boston's Steven J. Bolotin said the key to the ruling was that the claims against Lourie & Cutler and Saul Ewing related to independent rather than concurrent events.<br />Lourie & Cutler ultimately may have the better argument that any mistake on its part was superseded by Saul Ewing's alleged mistake, Bolotin said.<br />"But the fact that you're looking at two different transactions means that someone could look at this and conclude that Lourie & Cutler made a mistake and Saul Ewing didn't," he said.<br />Bolotin added that he expects the case to come down to what the standard of care required of the firms in terms of a title search for the separate matters they handled.<br />[divider]<br />"The underlying malpractice claim has numerous defects, which were difficult to present on an early motion to dismiss. Even strong defenses like these are generally more effectively presented on summary judgment on a better record."<br /> Susan E. Cohen, Boston<br />[divider]<br />Partition misfire<br />The plaintiffs retained Lourie & Cutler in 1998 to assist in conveying the Watertown property into a nominee trust. To that end, the firm prepared a deed to transfer the property from David Valchuis and his brother, Michael Vale, to the Clarendon Street Nominee Trust.<br />The plaintiffs alleged that they assumed the deed was effective, making the nominee trust the owner of the property. In fact, the record title holder of the property at the time of conveyance was the Clarendon Street Realty Trust, of which David Valchuis and his brother were trustees.<br />In 2013, the plaintiffs retained Saul Ewing to partition ownership of the property. Saul Ewing prepared and filed a petition for partition referencing the deed into the nominee trust. At the conclusion of a lengthy partition proceeding, the plaintiffs successfully bid for the property at an auction sale. Their winning bid was $1.575 million.<br />However, the court in the partition proceeding subsequently nullified the auction sale when it was discovered that the 1998 deed was void and, therefore, the nominee trust never held title to the property. The court ordered a second auction sale based on a petition for partition brought by the true title holder. The plaintiffs were the winning bidders in the second auction, paying $2.01 million to acquire the property.<br />The plaintiffs filed their malpractice action on Sept. 7, 2017. They alleged that the Lourie & Cutler defendants were negligent in failing to conduct a title search in 1998 that would have revealed that David Valchuis and Vale did not own and, thus, could not convey the property. They alleged Saul Ewing was negligent for failing to conduct a title search, which would have revealed that the nominee trust did not have title and could not seek partition.<br />[divider]<br />"The fact that you're looking at two different transactions means that someone could look at this and conclude that Lourie & Cutler made a mistake and Saul Ewing didn't."<br /> Steven J. Bolotin, Boston<br />[divider]<br />Timely claims<br />Both sets of defendants argued that the plaintiffs' legal malpractice claims were barred by G.L.c. 260, 4's three-year statute of limitations, albeit for different reasons.<br />Whereas the plaintiffs' contended that their claims accrued no earlier than 2015 when a title search in conjunction with the first auction revealed the defective title, the Lourie & Cutler defendants argued that the claims against them accrued in April 1998 when Vale and David Valchuis signed the deed conveying the property to the nominee trust.<br />The defendants argued that, because in 1985 Valchuis and Vale had signed a deed transferring the property to themselves as trustees of the realty trust, they knew or should have known that the realty trust was the actual owner of the property at the time they executed the 1998 deed.<br />Salinger found that argument unavailing.<br />"Although a person who signs a legal document 'is ordinarily bound by its terms' even if they never read it, that does not create any legal presumption that Mr. Valchuis actually knew what the deed said," the judge wrote. "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."<br />In denying the Lourie & Cutler defendants' motion for judgment on the pleadings, Salinger observed he was required to make every reasonable factual inference in favor of the plaintiffs.<br />Given the procedural posture of the case, the judge concluded he was required to infer that the plaintiffs did not in fact realize in 1998 that they no longer held legal title to the property.<br />The judge further rejected an argument raised by all the defendants that the malpractice claims accrued no later than September 2013 because the plaintiffs suffered injury at the time Saul Ewing filed the petition for partition based on the defective deed.<br />"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,'" Salinger wrote. "The same rule applies here."<br />The judge explained that, "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."<br />Salinger rejected the alternative argument that the limitations period started to run in December 2013. According to the defendants, new counsel retained by the plaintiffs should have discovered the title defect at that time, meaning the plaintiffs could be charged with having constructive notice of the alleged negligence.<br />"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," Salinger wrote.<br />The defendants further argued any potential liability was cut off by superseding causes, in particular the failure of both successor counsel and the partition commissioner to discover the title defect before the first auction.<br />In addition, the Lourie & Cutler defendants contended that the alleged negligence of the Saul Ewing defendants in the partition action constituted a superseding cause cutting off their liability.<br />But Salinger determined that such issues could not be decided on a motion to dismiss or a motion for judgment on the pleadings.<br />"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," Salinger wrote.<br />Valchuis, et al. v. Saul Ewing, LLP<br />THE ISSUE: Could the owners of a Watertown commercial property sue their former attorneys for malpractice for failing to identify a title defect dating to 1998 that temporarily derailed a partition action commenced in 2013?<br />DECISION: Yes (Superior Court/BLS)<br />LAWYERS: David R. Suny of McCormack Suny, Boston (plaintiffs)<br />Christopher R. Blazejewski and Sara Jane Shanahan, of Sherin & Lodgen, Boston (Saul Ewing defendants)<br />George C. Rockas of Wilson, Elser, Moskowitz, Edelman & Dicke, Boston (Lourie & Cutler defendants)

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Title Annotation:Massachusetts
Author:Murphy, Pat
Publication:Massachusetts Lawyers Weekly
Date:May 10, 2018
Words:1806
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