One National v. Antonellis ( 1996 )

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 95-1559
ONE NATIONAL BANK,
Plaintiff - Appellant,
v.
JOSEPH M. ANTONELLIS,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nancy J. Gertner, U.S. District Judge]
Before
Torruella, Chief Judge,
Cyr, Circuit Judge,
and Skinner,* Senior District Judge.
Dale R. Harger, with whom Mountain, Dearborn & Whiting and
Howard J. Potash were on brief for appellant.
George A. Berman, with whom Cynthia C. Smith, Susan S.
Riedel and Posternak, Blankstein & Lund were on brief for
appellee.
April 3, 1996
* Of the District of Massachusetts, sitting by designation.
TORRUELLA, Chief Judge. In this legal malpractice
TORRUELLA, Chief Judge.
action, appellant-plaintiff One National Bank ("ONB" or "One
National") appeals the district court's entry of summary judgment
for appellee-defendant Joseph M. Antonellis ("Antonellis"). Two
principal issues are raised on appeal: first, whether a
nonclient can maintain an action against an attorney when that
attorney negligently certifies to a mortgagee that the title is
good, and the mortgagee then assigns the title certificate,
mortgage, and all associated documents to the nonclient in good
faith; and second, whether the mortgagee's assignee can maintain
an action for negligent title certification pursuant to the
Massachusetts title certification statute, Mass. Gen. L. ch. 93,
70. For the reasons stated herein, we affirm.
BACKGROUND
BACKGROUND
In late 1987, Milford Savings Bank ("Milford") lent
$100,000 to Thomas J. Milani and Thomas Chamberlin, individually
and as trustees of T & T Realty Trust, and to Jaqueline Wojnowski
and Cathy A. Milani, individually. A mortgage on property in
Bellingham, Massachusetts served as security (the "first Milani
mortgage"). A few months later, in April of 1988, Thomas J. and
Cathy A. Milani (together, the "Milanis") executed another
mortgage on the same property, also to Milford, to secure a
$150,000 loan (the "second Milani mortgage"). Milford was
represented in the 1988 transaction by appellee Antonellis, an
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attorney.
Some months later, on August 10, 1988,1 Antonellis
issued a certification of title, which certified that the
mortgagors held title to the property "free from all
encumbrances, and the mortgagee [held] a good and sufficient
record first mortgage to the property."2 No mention was made of
the first Milani mortgage. The certification also included a
disclaimer, which stated: "THIS CERTIFICATE IS NOT TO BE USED
FOR TITLE INSURANCE PURPOSES WITHOUT THE EXPRESS WRITTEN
PERMISSION OF JOSEPH M. ANTONELLIS, ESQUIRE." While Antonellis
was preparing the title certificate, according to his deposition,
a Milford bank official called him around the time the second
Milani mortgage was executed. The official informed Antonellis
of the first Milani mortgage, and stated that it would be
subordinated to the April 1988 second Milani mortgage. However,
it appears that Milford never subordinated the mortgage.
In the meantime, ONB purchased a package of eighty-five
adjustable rate one-year first mortgages from Milford on August
2, 1988, including the second Milani mortgage. ONB did not hire
an attorney to check these mortgages' certifications of title.
1 The district court noted that Antonellis claimed that it took
several months to prepare the formal certificate because he was
too busy.
2 Antonellis' certification is made up of two documents: a form
entitled "Certification of Title," dated May 3, 1988, and a
second form entitled "Attorney's Certification of Title to
Mortgagee and Mortgagor[s]," dated August 10, 1988. The former
document was attached to the latter and incorporated by
reference.
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Subsequently, Milford was declared insolvent in early July of
1990, and the Milanis defaulted on both their mortgages. The
Federal Deposit Insurance Corporation ("FDIC") took over Milford
and was appointed its receiver. The FDIC repudiated the
agreement between Milford and ONB.
Faced with this situation, One National sued
Antonellis, the FDIC, and the Milanis. The district court
granted summary judgment to defendants Antonellis and FDIC. One
National dismissed its action against the Milanis, and here
appeals the summary judgment only as to appellee Antonellis.
DISCUSSION
DISCUSSION
After reciting the standard of review, we address each
issue in turn.
A. Standard of Review
A. Standard of Review
This court reviews a district court's grant of summary
judgment de novo. See, e.g., Rhode Island Depositors Economic
Protection Corp. v. Hayes, 64 F.3d 22, 25 (1st Cir. 1995). "When
presented with a motion for summary judgment, courts should
'pierce the boilerplate of the pleadings and assay the parties'
proof in order to determine whether trial is actually required.'"
Rivera-Cotto v. Rivera, 38 F.3d 611, 613 (1st Cir. 1994) (quoting
Wynne v. Tufts Univ. Sch. of Medicine, 976 F.2d 791, 794 (1st
Cir. 1992), cert. denied, 507 U.S. 1030 (1993)). Summary
judgment is therefore appropriate "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
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any material fact and that the moving party is entitled to a
judgment as a matter of law." Fed. R. Civ. P. 56(c). A fact is
material if it "carries with it the potential to affect the
outcome of the suit under the applicable law." Nereida-Gonz lez
v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir. 1993). We review
the record in the light most favorable to the nonmovant,
indulging all reasonable inferences in that party's favor. See,
e.g., Flanders & Medeiros, Inc. v. Bogosian, 65 F.3d 198, 201
(1st Cir. 1995); Rhode Island Depositors Economic Protection
Corp., 64 F.3d at 25. Here, because the parties do not dispute
any facts that could affect the suit's outcome, our analysis
confines itself to whether Antonellis is entitled to judgment as
a matter of law.
B. Applicable Law
B. Applicable Law
Both parties share the view that Massachusetts law
applies. Accordingly, we will apply that state's law, since
"[w]here the parties agree what substantive law controls in a
diversity case, we can -- and ordinarily should -- accept such a
concession." Moores v. Greenberg, 834 F.2d 1105, 1107 n.2 (1st
Cir. 1987); see Sheinkopf v. Stone, 927 F.2d 1259, 1264 (1st Cir.
1991) (accepting the parties' contention that Massachusetts law
applied to allegation of implied attorney-client relationship).
C. The Negligence Claim
C. The Negligence Claim
One National claims Antonellis is liable to it for his
failure to record the first Milani mortgage on the title
certificate. See Republic Oil Corp. v. Danziger, 400 N.E.2d
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1315, 1317 (Mass. App. Ct. 1980) (finding attorney negligent for
failure to disclose the existence of a perfected security
interest in a certification of title). Because there was no
attorney-client relationship between the parties, any duty
Antonellis owed ONB must be based on Massachusetts' theory of
foreseeable reliance, which states that a lawyer may be liable to
a non-client.3 As discussed below, we find that Antonellis did
not owe One National a duty of care under the foreseeable
reliance exception. Therefore, we will not address the parties'
dispute as to whether Antonellis was in fact negligent. See,
e.g., Lamare v. Brisbanes, 636 N.E.2d 218, 219-20 (Mass. 1994)
(affirming summary judgment in favor of attorney where attorney
had no duty to third party nonclient); Logotheti v. Gordon, 607
N.E.2d 1015, 1018 (Mass. 1993) (finding that negligence claim
failed where attorney had no duty of care to third party
nonclient).
1. The Foreseeable Reliance Exception
1. The Foreseeable Reliance Exception
In order to sustain a claim of legal malpractice, ONB
must show that Antonellis owed One National a duty of care. See
Spinner v. Nutt, 631 N.E.2d 542, 544 (Mass. 1994); DaRoza v.
Arter, 622 N.E.2d 604, 608 (Mass. 1993). The issue of whether
such a duty exists is a question of law. Id. at 381. The
3 The parties do not argue on appeal that there was either an
express or implied attorney-client relationship. See Sheinkopf,
927 F.2d at 1265-66; Falherty v. Baybank Merrimack Valley, N.A.,
808 F. Supp. 55, 60 (D. Mass. 1992); DeVaux v. American Home Ins.
Co., 444 N.E.2d 355, 357 (Mass. 1983). Accordingly, we focus
solely on whether Antonellis' liability extends to ONB under
Massachusetts' theory of liabilitybased on foreseeable reliance.
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general rule is that "an attorney's liability for negligence
arises out of a duty owed to a client." Norman v. Brown, Todd &
Heyburn, 693 F. Supp. 1259, 1265 (D. Mass. 1988). Massachusetts
case law has crafted an exception to this general proposition
based on foreseeable reliance, however, so that "an attorney is
not 'absolutely insulated from liability to nonclients.'"
Spinner, 631 N.E.2d at 544 (quoting Page v. Frazier, 445 N.E.2d
148, 154 (Mass. 1983)).
As defined in the case law, the foreseeable reliance
exception demands that two requirements be met. First, a duty is
only owed to nonclients "who the attorney knows will rely on the
services rendered." Robertson v. Gaston Snow & Ely Bartlett, 536
N.E.2d 334, 350 (Mass.), cert. denied, 493 U.S. 894 (1989); see
Spinner, 631 N.E.2d at 544; DaRoza, 622 N.E.2d at 608. It is not
enough that a plaintiff claims actual reliance: "[i]t must be
shown that the attorney should reasonably foresee that the
nonclient will rely upon him for legal services." Id. at 608
n.7. Second, "the court will not impose a duty of reasonable
care on an attorney if such an independent duty would potentially
conflict with the duty the attorney owes to his or her client."
Lamare, 636 N.E.2d at 219; see Robertson, 536 N.E.2d at 350;
Kirkland Constr. Co. v. James, 658 N.E.2d 699, 701 (Mass. App.
Ct. 1995). Here, the district court found there was "some
question" as to the first, foreseeable reliance prong of the
test, but that there was "no question" that there were
potentially conflicting duties. (District Court Memorandum and
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Decision, p. 15). Reviewing the issue de novo, we agree with the
court below that there was a potential conflict between
Antonellis' duty to Milford and his alleged duty to One National,
so that ONB cannot meet the test's second requirement.
Accordingly, we need not determine whether Antonellis should
reasonably have foreseen ONB's reliance on the title certificate.
2. Potential Conflict
2. Potential Conflict
The conflict requirement of the reasonably foreseeable
test does not demand that an actual conflict arise. Rather,
Massachusetts and federal case law has consistently found that a
potential conflict between an attorney's duty to his or her
client and the alleged duty to the nonclient is sufficient to
defeat the nonclient's malpractice claim. "[I]t is the potential
for conflict that prevents the imposition of a duty . . . ."
Spinner, 631 N.E.2d at 545; see Schlecht v. Smith, No. 92-30099-
MAP, 1994 WL 621594 at * 5 (D. Mass. 1994); Page, 445 N.E.2d at
153; see, e.g., DaRoza, 622 N.E.2d at 608 (employee's interest in
worker's compensation suit could have differed from client
insurer's). Thus, any potential conflicts between Antonellis'
duty to Milford and his alleged duty to ONB will defeat One
National's claim.
Before addressing the potential conflicts, we note that
the facts in the present case differ in several material ways
from the Massachusetts cases we have found that address the
foreseeable reliance exception. In those cases, only one
transaction is generally at issue, the potential third party
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nonclient's identity is known from the start of the transaction,
and often, the nonclient and client are in an adversary position.
See, e.g., Page, 445 N.E.2d at 149-50; Kirkland, 658 N.E.2d at
699-700. Here, there were two independent transactions: the
certificate of title prepared for the first transaction -- the
second Milani mortgage -- was relied on in the second -- the
sale of that mortgage. Also, the third party nonclient's
identity was not known until after the legal service was
rendered, and the nonclient is attempting to stand in the shoes
of the client as mortgagor in the first transaction, not in its
adverse position as buyer in the second. In short, we find
ourselves facing the dilemma of having to apply the fact-
dependant Massachusetts foreseeable reliance test to factors that
have not yet come before the state courts.
One National argues that in this context there was no
conflict between Antonellis' duty to Milford and the duty he
allegedly owed ONB. It asserts that the duty on which it rests
its claim is the same duty Antonellis owed Milford: the duty to
search properly and to report accurately the state of the title
with respect to the 1988 mortgage. It argues that two duties
cannot be in conflict with each other if they are identical.
Unlike in Page, ONB argues, where the attorney faced a potential
conflict between duties to the mortgagee client and mortgagor
nonclient because they may have had different concerns about the
state of the title, Page, 445 N.E.2d at 153, both ONB and Milford
simply wanted an accurate certificate of title. That is true, as
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far as it goes.
However, One National misconstrues the scope of the
duty to the client that Massachusetts courts have focused on.
"[A]n isolated instance identity of interests" between ONB and
Milford does not suffice to impose duty on Antonellis. Spinner,
631 N.E.2d at 545. "Although the particular activity in question
may not be adverse, and may actually be beneficial, the
appropriate inquiry concerns the purpose of the entire legal
representation." 1 Ronald E. Mallen & Jeffrey M. Smith, Legal
Malpractice 7.11, at 387 (3d ed. 1989). Antonellis owed
Milford not only an obligation to report on the title, but also a
concurrent duty of confidentiality. The Massachusetts and
federal courts that have applied the foreseeable reliance
exception have repeatedly drawn on the importance of the duty of
confidentiality in finding the potential for a conflict, so that
"an attorney's duty to third parties is circumscribed and limited
by the law and the disciplinary rules governing attorney
conduct." Schlecht, 1994 WL 621594 at * 5; see, e.g., Austin v.
Bradley, Barry & Tarlow, P.C., 836 F. Supp. 36, 38 (D. Mass.
1993); Logotheti, 607 N.E.2d at 1018; Spinner, 631 N.E.2d at 545;
see also Mallen & Smith, supra, at 7.11 at 388 ("The policy
considerations against implying a duty are strongest where doing
so would detract from the attorney's ethical obligations to the
client.").
In Logotheti and Spinner the Supreme Judicial Court
framed the attorney's duty of confidentiality in terms of the
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Massachusetts disciplinary rules' requirement "that an attorney
preserve the secrets and confidences gained in the course of
representing a client." Spinner, 631 N.E.2d at 545; see S.J.C.
Rule 3:07, Canon 4, DR 4-101 ("Preservation of Confidences and
Secrets of a Client"); S.J.C. Rule 3:07, Canon 7, DR 7-101
("Representing a Client Zealously"); see also Schlecht, 1994 WL
621594 at * 5 ("To impose on a borrower/mortgagor's attorney a
duty to the lender/mortgagee can create situations antithetical
to the disciplinary rules which govern attorney conduct.");
Logotheti, 607 N.E.2d at 1018; Harris v. Magri, 656 N.E.2d 585,
586 n.4 (Mass. App. Ct. 1995). Other cases posit the obligation
of confidentiality in more general terms. See Austin, 836 F.
Supp. at 38 (citing to attorney's "concurrent obligation of
confidentiality" to his client).
Here, contrary to ONB's claim, there is a clear
potential conflict rooted in Antonellis' duty of confidentiality.
Milford knew that there was a first mortgage that had not been
reported. Given this, if we place a duty to ONB on Antonellis'
shoulders, we put on him the obligation to inform it of his
error. That mistake was made in the first transaction, a
transaction to which One National was not a party. Antonellis'
purported duty to ONB therefore arose only in the second
transaction, where that bank actually was a party. Cf.
Hendrickson v. Sears, 310 N.E.2d 131, 135-36 (Mass. 1974)
(holding that cause of action for negligent certification of
title accrues upon discovery). Ostensibly, having already
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produced the certificate, his duty would be to check whether
Milford subordinated the debt, remind it of his error, and if
Milford did not rectify it, to do so himself by informing ONB.
Clearly, at that point a conflict in the duty of confidentiality
would arise: if his client decided not to pass on the
information and Antonellis did so in its stead, he would breach
his duty of confidentiality. See S.J.C. Rule 3:07, Canon 4, DR
4-101(B) (stating that "a lawyer shall not knowingly . . .
[r]eveal a confidence or secret of his client."). If he did not
pass on the information, he would breach his duty to ONB. We
refuse to place him in that position. Therefore, we find that
the potential for conflicts in Antonellis' duty to Milford and to
ONB bars liability in this case.4 Cf. Austin, 836 F. Supp. at
4 The court below relied on a different basis in finding that
there was a clear potential for conflict in this case. It found
that ONB and Milford were in the adverse positions of buyer and
seller in August 1988. Since the courts have found that reliance
on an adverse party's legal counsel in a business transaction is
unreasonable as a matter of law, see Schlecht, 1994 WL 621594 at
* 7; Robertson, 536 N.E.2d at 350 n.6; Page, 445 N.E.2d at 154-
55, the court found that there was a potential for conflict. It
found that Antonellis would be under different pressures if he
were representing both Milford and ONB than if he represented ONB
alone. The court also commented on One National's failure to use
its own counsel in the sales transaction.
One National contests that Antonellis was not representing a
party adverse to it, because he did not represent Milford in the
ONB-Milford sales transaction, but only in the second Milani
mortgage. When he rendered the title certificate at issue,
Milford and ONB were not yet adverse parties.
Because we find that One National fails the potential
conflicts prong of the foreseeable reliance exception on other
grounds, we do not address here whether the district court was
correct in finding that ONB sought to rely on the legal counsel
of an adverse party.
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38 (refusing to infer a duty to disclose a client's insolvency to
nonclient investors where duty would directly conflict with
concurrent obligation of confidentiality to client).
ONB contests that potential conflicts would only arise
if Antonellis had represented Milford as the seller of the
mortgages in the second transaction, and if Milford and
Antonellis had intended to deceive ONB. We disagree. Neither of
these additional facts are necessary for potential conflicts to
arise. First, ONB is relying on the work Antonellis did for the
first transaction -- whether we consider ONB as Milford's
replacement in the first transaction or as a party adverse to
Milford in the second is irrelevant to this analysis. Second, as
the district court noted, there is no allegation that Milford and
Antonellis colluded to deceive ONB. There are many reasons why
Milford could fail to inform ONB of the faulty title. Indeed,
even if it did tell ONB about the problem, Antonellis could still
face a conflict in his duty of confidentiality if Milford made
any misrepresentations about the circumstances under which the
error was made, i.e. that it too knew of the omission of the
first Milani mortgage. Thus we do not accept ONB's contention
that there was no potential conflict.
3. Kirkland Construction Co. v. James
3. Kirkland Construction Co. v. James
One National points to Kirkland Construction Co. v.
James, 658 N.E.2d 699 (Mass. App. Ct. 1995), the Appeals Court of
Massachusetts' most recent decision addressing the foreseeable
reliance exception to the no duty rule, as support for its
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position. There, the court faced a challenge to a lower court's
grant of a 12(b)(6) motion under the Massachusetts Rules of Civil
Procedure. Kirkland, a contractor, was asked to renovate a
retail space for an office supply firm. He sought and received a
letter from the firm's attorney, defendant James, assuring that
his client could pay for the work. However, after Kirkland had
performed under the contract, the office supply firm failed to
pay. Kirkland sued James and the partners of his law firm for
negligence, and the lower court granted the defendants' 12(b)(6)
motion. Id. at 699-700. The court reversed, finding that
Kirkland was entitled to seek relief from the attorneys under a
theory of foreseeable reliance. Id. at 701.
An examination of the factors the court weighed in
Kirkland in comparison with the facts of the instant case reveals
that the circumstances here are sufficiently different from those
in Kirkland that we should affirm the court below. In its
analysis, the Kirkland Court focused on who was intended to
benefit from the letter: "an independent duty will be more
readily found where, as here, the service is intended to benefit
the client as well as the third party." Id. (citing the
Restatement (Second) of Torts 552(2)(a) (1977)). Examining the
letter, which was addressed to Kirkland, the court noted that it
contained unqualified representations and that the typical
hedging phrases were absent. Id. at 702; cf. Jurgens v. Abraham,
616 F. Supp. 1381, 1386 (D. Mass. 1985) (holding that nonclient
stated a claim where attorney told him he attached a sum of money
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for nonclient's benefit). That is not true here: the
certificate of title was not addressed to ONB, the
representations were made in boilerplate language with standard
exceptions listed, and there was an express disclaimer, in
capital letters, on one of the two pages.
The Kirkland court also listed a series of allegations
in the plaintiff's complaint that, if proven, would be "the stuff
of liability." 658 N.E.2d at 701. First, both Kirkland and ONB
allege that the representations were false. The fact that both
plaintiffs make the same allegation, however, is somewhat of a
red herring, because if there were no false representations,
there would be no basis for suit. Second, Kirkland alleged that
the letter stated that the office supply firm had made
arrangements to ensure payment, and that the attorneys'
"objective was to induce Kirkland to enter into a contract." Id.
We cannot say that Antonellis' objective was to induce ONB into a
contract, since ONB was not a party to the transaction for which
the certificate of title was performed.5 Third, the Kirkland
complaint maintained that the attorneys "knew and intended that
Kirkland would rely on the representations," and that the
reliance was reasonable. Id. Again, ONB was not a party. Even
if we infer that Antonellis should have suspected that the
5 Nor can ONB argue that the purpose of Antonellis' work was to
induce the Milanis into the mortgage, because by law it is
unreasonable for a mortgagee to rely on mortgagor's counsel, as
mortgagee and mortgagor are adverse parties. See Schlecht, 1994
WL 621594 at * 5; Lamare, 636 N.E.2d at 218; Beecy v.
Pucciarelli, 441 N.E.2d 1035, 1040 (Mass. 1982).
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mortgage would be sold, however, the ties between the attorney
and nonclient here are nowhere near as close as those in
Kirkland, where the letter at issue was addressed to the
plaintiff nonclient and expressly addressed its concerns.
Finally, Kirkland alleged that it was seeking information, not
legal advice, from the lawyers about their client. Id. Whether
Antonellis' certificate of title is a legal opinion proves
irrelevant, however, since the Kirkland court also stated that
"the likelihood of liability would not be greater" if the letter
were an opinion letter. Id. at 702 n.7.
In the light of the potential conflict between
Antonellis' duty to his client and his alleged duty to One
National, and the differences between the factors that led to the
court's reversal in Kirkland and the facts of the instant case,
we find upon de novo review that as a matter of law One
National's legal malpractice claim fails the foreseeable reliance
test. As a consequence, we need not determine whether ONB can
meet the foreseeability requirement. See DaRoza, 622 N.E.2d at
609.
D. Assignability of Certificate of Title
D. Assignability of Certificate of Title
One National contends that it acquired the right to
proceed against Antonellis through assignment of the
certificate.6 Specifically, it states that because Milford
6 In fact, it proves difficult to determine the intended scope
of ONB's assignment argument. Before the court below, it
contended that as assignee of the mortgage it "had all the rights
of Milford Savings Bank once the mortgage was assigned and duly
recorded . . . which would include all rights against the
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entered into a contract with Antonellis for the issuance of the
title certificate and then assigned the fruits of the contract to
ONB, ONB has the right to proceed against Antonellis. The crux
of the issue, it claims, is whether the certificate was
transferrable by Milford to ONB. Essentially, ONB asks that we
allow it to step into Milford's shoes as a client merely because
it was assigned the certificate that was the product of the
attorney-client relationship. Noting that the disclaimer barred
reliance by a title insurer, not assignment, it argues that
although the transferability of a certificate of title has
apparently not been addressed by the Massachusetts courts, they
would hold the assignment valid. ONB makes its argument by
analogy to the law's general favor towards assignability of
contracts and contract rights, and the fact that Massachusetts
allows assignments of many types of claims, including contract
damages. See Mass. Gen. L. ch. 106 2-210(2). It also makes an
analogy to other jurisdictions' acceptance of assignments of
certifying attorney Antonellis." (Appdx. at 50). It did not
specify which rights it referred to. In its brief to this court,
ONB argued that the "gist" of the tort of legal malpractice is
the lawyer's breach of contract, and that ONB acquired a legal
malpractice claim with the certificate, stating that "if
Milford's assignment to ONB is treated as an assignment of a
malpractice claim, the Supreme Judicial Court would hold the
assignment valid." (Brief of Appellant at 27). Of course, since
ONB did not raise below a claim that a legal malpractice claim
was assigned, they cannot do so here. See Ondine Shipping Corp.
v. United States, 24 F.3d 353, 355 (1st Cir. 1994); Clauson v.
Smith, 823 F.2d 660, 666 (1st Cir. 1987) (collecting cases).
However, in its reply brief ONB states that it was not arguing
that the action involved an assignment of a malpractice claim,
but rather the "real issue" was whether the certificate was
transferable. Since we deem that this "real issue" was included
within the scope of its argument below, we address their claim.
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legal malpractice claims. See, e.g., Oppel v. Empire Mutual Ins.
Co., 517 F. Supp. 1305, 1306-07 (S.D.N.Y. 1981); Thurston v.
Continential Casualty Co., 567 A.2d 922, 923 (Me. 1989).
One National recognizes that others might object to
selling the product of legal services as inconsistent with the
personal and fiduciary character of the attorney-client
relationship. See Dunne v. Cunningham, 125 N.E. 560, 561 (Mass.
1920) (commenting on the "highly fiduciary" relationship between
attorney and client). Without citing any direct authority in its
support, ONB contends that the assignment illustrates the
"inherently weak nature" of the relationship where the attorney
merely plays a standardized role of reporting the state of the
public records. See Fall River Savings Bank v. Callahan, 463
N.E.2d 555, 561 (Mass. App. Ct. 1984) (noting the standardized
nature of passing on a title); 1 Mallen & Smith, supra, at 25.8
(setting out the process and describing potential liabilities).
Thus, since the purpose of the relationship is not to give advice
or counselling but to produce a formal certificate, ONB
maintains, the transfer would not jeopardize any public policy
favoring the attorney-client relationship.
The district court addressed ONB's assignment
contention within the context of its discussion of Mass. Gen. L.
ch. 93, 70. It rejected One National's position that an
assignee should have the same fiduciary relationship with the
assignor's attorney as the assignor, the original mortgagee,
enjoyed, on two bases. We address the first, which draws on the
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language of section 70, in our discussion of that section, infra.
The district court's second basis for rejecting ONB's position
was that ONB's argument does not arise out of the common law
governing the unique attorney-client relationship -- a personal
relationship, voluntarily assumed, which is governed by
disciplinary rules. Under de novo review, we also find that the
attorney-client relationship between Antonellis and Milford plays
a crucial role in determining whether the certificate was
transferable.
Massachusetts case law offers little specific guidance
on this issue, but we find that an analysis of their treatment of
the attorney-client relationship in the context of claims for
negligent certification of title proves illustrative. First, as
was noted above, the nature of the attorney-client relationship,
including the obligation of confidentiality and application of
the disciplinary rules, has consistently been cited by the
Massachusetts courts within this context. See, e.g., Spinner,
631 N.E.2d at 545. This indicates that the courts do not see the
attorney-client relationship in this context as inherently weak,
as ONB suggests. Significantly, in Hendrickson v. Sears, which
involved a suit by the purchasers of real estate against the
attorney they hired for the title search, the Court noted the
differences between legal and medical malpractice actions in its
analysis, 310 N.E.2d at 134, and commented that
[t]he client is not an expert; he cannot
be expected to recognize professional
negligence if he sees it, and he should
not be expected to watch over the
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professional or to retain a second
professional to do so. The relation of
attorney and client is highly fiduciary
in its nature.
Id. at 135. Nowhere does the Court's language suggest that the
fiduciary relationship of an attorney and client is diminished
because the services the attorney rendered were highly
standardized. Similarly, in Schlecht v. Smith, the district
court addressed the attorney's failure to record the mortgage, at
his client's request, within the context of the disciplinary
rules. Schlecht, 1994 WL 621594 at * 5. Again, nothing suggests
that the rules' force is somehow diminished.
Second, in Fall River Savings Bank v. Callahan, the
Appeals Court of Massachusetts noted the standardized nature of
title searches. 463 N.E.2d at 561 ("There may be no definite
rules which prescribe a right or wrong way to conduct a
deposition but certain rules have evolved for passing on a
title."). The court found that fact significant in deciding that
a court may use commentaries to establish the standard of care in
the land conveyance context, since that is an area of law
practice "which lends itself particularly to formulation through
decisional law and commentary as to what are appropriate
procedures." Id. But even as it recognized the standardization
of this area, the Court treated the attorney-client relationship
as it would in any other context, as carrying with it all the
attendant duties and responsibilities. Id.This approach makes intuitive sense. Even though the
practices for searching title are standardized, the disciplinary
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rules apply as they would in any attorney-client relationship,
and the attorney is subject to liability for malpractice. The
duties attendant to the fiduciary relationship between the
attorney and client are in full force. See Dunne, 125 N.E. at
561 (noting that the principles relating to an attorney's
fiduciary duties "are recognized as binding in all their
amplitude."). Thus the unspecified public policy concerns that
ONB tells us would not be jeopardized -- presumably, protecting
the attorney's ability to function effectively, client
confidentiality, the integrity of the bench and bar, and the
ethical administration of justice, see Berman v. Coakley, 137
N.E. 667, 670-71 (Mass. 1923) ("Public policy hardly can touch
matters of more general concern than the maintenance of an
untarnished standard of conduct by the attorney at law toward his
client."); 1 Mallen & Smith, supra, at 11.5, 11.12, 12.4, 13.2
-- are still implicated.
In sum, since the case law clearly indicates that the
Massachusetts courts do not consider the fiduciary nature of the
attorney-client relationship to be attenuated in this certificate
of title context, and in the absence of further guidance from the
Massachusetts courts, we refuse to allow a third party, of whom
the attorney does not know, to assume the rights of a client
through assignment. We therefore find that One National did not
acquire the right to proceed against Antonellis through
assignment of the certificate of title.
E. General Law Chapter 93, Section 70
E. General Law Chapter 93, Section 70
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One National's final argument is that Antonellis is
liable under Mass. Gen. L. ch. 93, 70. Under that section, an
attorney rendering a certificate of title for a mortgagee may be
subject to liability to the mortgagor as well:
The liability of any attorney
rendering such certification shall be
limited to the amount of the
consideration shown on the deed with
respect to the mortgagor, and shall be
limited to the original principal amount
secured by the mortgage with respect to
the mortgagee. Said certification shall
be effective for the benefit of the
mortgagor so long as said mortgagor has
title to the mortgaged premises, and
shall be effective for the benefit of the
mortgagee so long as the original debt
secured by the mortgage remains unpaid.
Mass. Gen. L. ch. 93, 70. The loan or credit secured by the
purchase money first mortgage must be on real estate with between
one and four dwellings, to be occupied by the mortgagor. Id.ONB argues that because it holds the mortgage it falls
within the scope of "mortgagee" as used in section 70, and that
Antonellis is thus liable to it. Noting that section 70 operates
in a manner analogous to a statute of limitations in that it
provides that the title certification will remain in effect so
long as the original debt is unpaid, ONB argues it would be
unreasonable to argue that the attorney's liability disappears
when a mortgage is sold, no matter whether or not the original
debt is unpaid. Further, ONB notes that the sale of a mortgage
neither enlarges the attorney's liability, as it is limited by
the statute, nor changes the nature of the liability. As ONB
states, one bank is simply substituted for another: all else
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remains constant. Thus the attorney remains liable on the
certificate until the mortgage debt is paid.
Upon de novo review, we agree with the district court
that, while One National's argument makes intuitive sense, it
eventually fails. First, like the court below, we find that the
plain language of the statute does not support ONB's position.
It is a basic tenet of statutory interpretation that where the
plain language of a statute is clear, it governs. See United
States v. Rutherford, 442 U.S. 544, 551 (1979) ("If a legislative
purpose is expressed in 'plain and unambiguous language, . . .
the . . . duty of the courts is to give it effect according to
its terms'" (quoting United States v. Lexington Mill & Elevator
Co., 232 U.S. 399, 409 (1914)). ONB correctly points out that
here, the statute's text does not state that the attorney's
liability to the mortgagee terminates when the mortgage is
transferred. However, we refuse to read the opposite inference -
- that the liability is not extinguished upon transferral -- into
the statute when it is not warranted by the plain language of the
text. The language of section 70 focuses on mortgagees, not, as
One National would have us believe, on their assignees. See
Falmouth Ob/Gyn Assoc. Inc. v. Abisla, 629 N.E.2d 291, 293 (Mass.
1994), ("A term employed in a statute should be afforded its
customary meaning, taking into account the legislation's purpose
and history."); Page, 445 N.E.2d at 152 (refusing to extend
70's application to mortgagors purchasing unimproved land in
the absence of suggestions or implications in the clear language
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of the statute).
"Exceptions to clearly delineated statutes will be
implied only where essential to prevent 'absurd results' or
consequences obviously at variance with the policy of the
enactment as a whole." Rutherford, 442 U.S. at 552. Clearly, no
such exception arises here. Constraining the application of
section 70 to mortgagees' assignees does not create "absurd
results." As the court below noted, Chapter 93 as a whole
addresses "the regulation of trade and enterprises in order to
prevent unfair practices against consumers." (District Court
Memorandum and Decision, p. 8). Our reading of the statute is
not "obviously at variance" with that policy, even if this
reading does not extend the policy to assignees of mortgagees.
Second, like the court in Page, we note that the
legislature, in its amendments to section 70, has not expanded
the class of mortgagors it protects to encompass assignees. See
Page, 445 N.E.2d at 152. As the district court stated, had the
legislature desired to extend the provisions of section 70, it
could have done so. Instead, only purchase money first
mortgages, of dwellings of up to four families, occupied by the
mortgagor, fall within the section. Clearly, the legislature did
not intend for section 70 to provide that a commercial bank,
which neither paid for the attorney's services nor had any
contact with the attorney, be entitled to the protection of the
section merely because it was assigned the mortgage. In the face
of the plain language of the statute, and in the absence of
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legislative action to the contrary, we reject One National's
argument that Antonellis is liable to it under section 70.
CONCLUSION
CONCLUSION
In this case, as in all cases involving an allegation
that an attorney failed in a duty to a nonclient, there is a
tension between two concerns. On one hand, we do not want to
extend liability so widely that an attorney faces "'liability in
an indeterminate amount for an indeterminate time to an
indeterminate class.'" Craig v. Everett M. Brooks Co., 222
N.E.2d 752, 755 (Mass. 1967) (quoting Ultramares Corp. v. Touche,
Niven & Co., 174 N.E. 441, 444 (1931)). On the other hand, we do
not want to reward an attorney's carelessness. See Spinner, 631
N.E.2d at 545 (noting policy considerations against sheltering
attorney's negligence from suit in will-drafting context). In
finding that Antonellis' liability does not extend to One
National, we are cognizant that on the surface we seem to be
protecting him from suit for his negligence. However, we note
that ordinarily, ONB would have recourse against Milford for the
faulty title, and Milford in turn could bring a negligence claim
against Antonellis, as its lawyer. See id. (noting that trust
beneficiaries could sue the trustees, and the trustees in turn
could bring an action against their attorneys, but beneficiaries
could not directly sue trustees' attorneys). Because Milford
failed, ONB has lost that option. ONB, essentially, took a risk
in deciding not to get its own title insurance for the
transaction. It was a calculated risk, and it required a
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complicated chain of events -- Antonellis' negligence, the
Milanis' default, Milford's failure, and the FDIC's repudiation
of the claim -- to make that risk fail to pay off. We refuse to
spot ONB's choice to take that risk with the safety net of a
negligence claim against Antonellis. Cf. Page, 445 N.E.2d at
154-55 ("Where, as here, a nonclient takes the chance that the
client's interests are in harmony with his own, and does so in
the face of an express warning that the interests may differ, his
claim of foreseeable reliance cannot be rescued simply because,
in retrospect, the interests are shown not to have differed.").
For the foregoing reasons, the order of the district
court granting summary judgment in favor of Antonellis is
affirmed.
affirmed.
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