The Statewide Title Newsletter and Legal Memorandum

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Issue  5  Article  10
Published:  12/1/1995

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Malpractice Case
Ed Urban

Cornelius v. Helms, N.C. App. , 461 S.E. 2d 338 (1995), should be noted. In that case the purchase contract required $40,000.00 in cash at closing and an $88,600.00 subordinate note and deed of trust "subordinate to 75% Loan-to-Value Construction Loan." The purchaser requested the defendant attorney to close the sale and a lot acquisition and construction loan from First Union. First Union’s loan instructions required it to have a first lien and that the attorney report subordinate liens. The defendant attorney drafted a purchase money note and deed of trust for the plaintiff-seller from the purchaser. That document stated that it was subject to a deed of trust to be executed by the purchaser to First Union; this was contrary to what the plaintiff-seller had agreed to (see above). When First Union foreclosed, it wiped out the purchase money deed of trust securing the seller. The plaintiff-seller sued the defendant attorney and prevailed. The court held that an attorney-client relationship existed between the defendant attorney and the plaintiff-seller (the relationship can be implied and is not dependent upon a formal contract or fee); that the attorney was negligent in failing to properly apply the land draw check toward the purchase of the lot in accordance with First Union’s closing instructions and failing to ask the plaintiff or First Union how the conflict between the plaintiff’s contract and First Union’s instructions could be reconciled; and that the plaintiff suffered an $88,600.00 loss.

This case involved an excellent law firm and illustrates the difficulties caused by demands for quick service. Careful communication is the key to avoiding claims.

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