Trimboli v. . Kinkel
123 N.E. 205, 226 N.Y. 147, 5 A.L.R. 1385 (1919)
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Rule of Law:
An attorney is negligent for failing to apply settled rules of law when conducting a title search. The attorney has an affirmative duty to gather evidence to cure any discovered defects, such as by proving adverse possession, before advising a client that title is marketable.
Facts:
- In 1906, the plaintiffs hired the defendant, an attorney, to conduct a title search for a property they intended to purchase.
- The defendant's title search revealed that in 1863, an executor with a power of sale had invalidly exchanged an interest in the property instead of selling it for money.
- Despite this clear defect, the defendant advised the plaintiffs that the title was good and marketable.
- The defendant did not inform the plaintiffs of the flaw, nor did he attempt to gather evidence of adverse possession that might have cured the defect.
- Relying on the defendant's advice, the plaintiffs purchased the property.
- In 1910, the plaintiffs entered into a contract to resell the property.
- The prospective purchaser rejected the title specifically because of the invalid 1863 executor's exchange.
- When the title was rejected, the defendant, still representing the plaintiffs, made no claim of adverse possession and continued to insist the record title was sufficient.
Procedural Posture:
- The plaintiffs (clients) sued the defendant (attorney) in a state trial court for damages resulting from his professional negligence.
- The trial judge dismissed the complaint on the merits, finding the attorney was not negligent because the title defect was curable by evidence of adverse possession.
- The plaintiffs appealed the dismissal to the Appellate Division, an intermediate appellate court.
- The Appellate Division reversed the trial court's judgment, held that the defendant was negligent, and ordered a new trial.
- The defendant appealed the Appellate Division's order to the Court of Appeals, the highest court in New York.
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Issue:
Is an attorney who fails to identify a clear defect in a property's record title, based on a well-settled rule of law, liable for the foreseeable damages a client incurs when a subsequent resale of the property fails due to that defect?
Opinions:
Majority - Cardozo, J.
Yes. An attorney is liable for negligence when failing to apply settled rules of law, and the resulting damages include foreseeable expenses lost by the client due to the unmarketable title. The rule that a power to sell property does not grant the power to exchange it is a settled principle that any conveyancer should know. The defendant knew the facts from his search and was therefore chargeable with knowledge of their legal significance. His failure to recognize this invalid deed constituted negligence. Furthermore, the defendant had a duty not just to identify the flaw, but to take steps to cure it by gathering evidence of adverse possession before the plaintiffs accepted the title. Because the defendant's negligence directly caused the plaintiffs to enter into a 'fruitless contract of resale,' he is liable for the foreseeable damages, including the broker's commissions and the purchaser's title examination costs.
Analysis:
This case establishes a significant standard for attorney liability in real estate transactions, clarifying that an attorney's duty extends beyond mere identification of title defects. The court imposes an affirmative duty on the attorney to take reasonable steps to cure a defect, such as by collecting evidence of adverse possession, before certifying a title as marketable. The decision also defines the scope of recoverable damages in such legal malpractice claims, limiting them to direct and foreseeable losses proximately caused by the negligence, like wasted transaction costs, while excluding more speculative damages like lost profits from a failed resale. This ruling reinforces the principle that an attorney's advice must be based on a title that is not only defensible but also readily transferable.
