NO. 94-060
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
IDA M. MILLS,
Plaintiff and Appellant,
TOM MATHER, d/b/a TOM MATHER &
ASSOCIATES CO., DARLENE THOMAS,
FIRST MONTANA TITLE COMPANY OF
GREAT FALLS,
Defendants,
and
J. BRIAN TIERNEY,
Defendant and Respondent.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Joel G. Roth, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Keith Tokerud, John McCarty, Scott & Tokerud, Great
Falls, Montana
For Respondent:
L. Neil Axtell, Axtell & Briggs, Spokane, Washington
Submitted on Briefs: December 1, 1994
Decided: March 7, 1995
Filed:
Justice Fred. J. Weber delivered the Opinion of the Court.
This is an appeal by Ida M. Mills (Mills) from an order of the
Eighth Judicial District Court, Cascade County, granting summary
judgment to defendant J. Brian Tierney (Tierney). The court
granted summary judgment to Tierney on Mills' claim that he
negligently represented her interests concerning a real estate
transaction involving a contract for deed. Mills lost over $30,000
when the escrow agent embezzled money intended to pay off the
contract. We reverse and remand.
The sole question on appeal is whether the District Court
erred in granting defendant Tierney's motion for summary judgment.
The extensive deposition testimony of Mills and other
witnesses in this case establishes the following factual
background, which is undisputed unless otherwise noted throughout
this opinion. Mills was a practical nurse in Great Falls, Montana,
until 1980 when she retired and sold her home on a contract for
deed. An escrow account with Guaranty Escrow was established and
the purchaser began making payments of $305.90 per month to
Guaranty Escrow. Mills planned to live on these payments and her
Social Security income.
Mills purchased a home in Sheridan, Montana. Her testimony
indicates that her former husband, with whom she had reconciled,
cashed in his retirement benefits to make a down payment of $20,000
on the Sheridan home. Mills arranged for Guaranty Escrow to make
payments directly to the Bank of Sheridan to cover the monthly
mortgage payments of $304.17 on the Sheridan property.
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E. Robert Brown (Brown) owned Guaranty Escrow. Mills
testified that she contacted him as early as 1984 when payments she
depended on to cover mortgage payments on the Sheridan home were
late and she was forced to use her limited Social Security income
to cover the mortgage payments. Mills testified that she tried to
get information from Brown on more than one occasion and Brown
either refused to talk with Mills or he "stonewalledtl her.
Although Mills did not keep records, she claimed that she was
shorted two payments in 1984 and as many as four payments per year
after 1984. This information in unverifiable because most of
Brown's records were shredded or otherwise destroyed.
Mills also contacted the purchasers and determined that they
had been making monthly payments to Guaranty Escrow. Mills
testified that she became convinced that Brown was a "crook."
However, she did not seek legal assistance to recover the payments
she had not received; she testified that she could not afford an
attorney. Instead, Mills turned the Sheridan property back to the
bank, thinking that she had no other recourse because the house
payments, if not paid from escrow, took nearly all of her monthly
Social Security check. Mills testified that she checked herself in
at Warm Springs State Hospital and spent five weeks in treatment
there after losing the house in Sheridan.
Attorney Tierney practiced law in Butte and also two days each
week in Whitehall. In 1986, Mills was living in Whitehall and
contacted Tierney about her problems with the late and missing
payments from Guaranty Escrow which were now to be sent to Mills'
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account at a Whitehall credit union. Mills testified that she had
tried again unsuccessfully to get the problem straightened out with
Brown at Guaranty Escrow.
Mills testified that she fell and injured herself outside her
apartment on the day she was to meet with Tierney, and postponed
her appointment until she was out of the hospital. Tierney
represented her in a personal injury claim for that fall as well as
the matter of the late payments from Guaranty Escrow.
Mills told Tierney about her problem with the late and missing
payments. She testified that she told Tierney that she did not
trust Brown and that she thought he was the root of the problem.
She also told Tierney that she did not understand why Donald Ayers
was now living in the house and making the payments and she asked
Tierney to check this for her also. Tierney accepted a retainer of
$100 and agreed to investigate the problems Mills was having with
the escrow payments.
Tierney wrote to Guaranty Escrow, asking for a copy of escrow
documents to explain transfers of the property to subsequent
owners. He also asked for copies of the current insurance policy
on the home, copies of receipts for tax statements for 1985 and
ledger copies of payments made by Donald Ayers. He did not
specifically ask for--nor did he receive in response to the letter-
-copies of records to indicate whether Guaranty Escrow was making
monthly payments to Mills. When he received a copy of Guaranty
Escrow's records showing all payments had been made by Donald Ayers
and Dianne Ayers Mielke (Mielke) to Guaranty Escrow, Tierney
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explained to Mills that she must be wrong about missing payments.
Although he did not further investigate the matter of the late
and/or missing payments, he did handle a transfer of the contract
from Jack May to Ayers and Mielke.
Still concerned about the late and missing payments, Mills
testified that she went to Great Falls in 1987 and met with Donald
Ayers. Ayers showed her his records indicating that he was making
the monthly payments to Guaranty Escrow. Mills testified that she
then contacted Brown in person and Brown again stonewalled her.
Even more convinced that Brown was crooked, she testified that she
told Tierney again of her fear that Brown was dishonest and that he
would steal her money unless something was done to prevent it.
Mills testified that she was not pursuing a claim for previously
missed payments and, at that point, wanted only to prevent Brown
from taking any more of her money.
Tierney testified that he arranged for the transfer of the
property from Jack May to Ayers and Mielke and collected a fee from
Donald Ayers to complete the transfer. He testified that he then
suggested to Mills that she try to get the contract paid off early.
Tierney talked to Mielke concerning an early payoff of the contract
and learned that she was trying to sell the house; Tierney and
Mielke discussed the possibility of Mills' accepting a discounted
principal payment in return for early payoff of the contract.
Mielke asked Tierney to see whether Mills would accept a $5,000
reduction of principal, which at that time was approximately
$36,000.
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Mills agreed to the discount. Mielke testified that she asked
for written confirmation of the discount at the direction of her
realtor. In response to this request, Tierney wrote a letter dated
October 23, 1987 verifying that Mills had agreed to discount the
principal by $5,000 in exchange for an early payoff. Tierney's
letter also indicated that he would prepare the necessary release
for Mills' signature at the time of a sale to authorize the escrow
agent to release instruments of title to Mielke upon payment of the
discounted principal amount. The deposition testimony of numerous
witnesses provides that, over the next two months, Tierney was in
contact numerous times with Mielke, with the realtor representing
Mielke and with an agent of the title company handling the closing
of the sale. Mills testified that she instructed Tierney to make
sure that she got her money from the payoff of the contract for
deed and to make sure that Brown did not get her money. Tierney
did not inform any of the parties he had dealt with who were
involved in the sale--Mielke, the realtor, or the title company--
that Mills was concerned about Brown taking her money.
Prior to closing the sale, Mielke assigned her interest in the
discount by typing the following on the bottom of Tierney's letter
and having her signature notarized:
With regards to the above payoff authorization made by
Ida Mills, I, the undersigned, hereby transfer said
discount to George Krauss, purchaser of property at 1300
5th Avenue N.W.
Closing was completed on January 19, 1988, with First Montana Title
Company handling the disbursements; upon payment of the principal
amount of $35,091.96, Guaranty Escrow gave the title instruments to
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the title company. No mention of the discount was made on any of
the closing instruments. According to the testimony of the
realtor, the title company representative and Mielke, this was done
at the instruction of the mortgage company providing an EI&A
guaranteed loan to the purchaser for the full selling price.
On the day following closing, the purchaser, George Krauss,
took the copy of Tierney's letter authorizing the discount to
Guaranty Escrow. Without contacting Tierney or Mills, Brown paid
$5,000 to Krauss. The closing was completed without Mills'
knowledge and no payment was made to Mills for any of the remaining
proceeds of the payoff.
Mills testified that she contacted Tierney when she did not
receive the payoff following the sale. Tierney testified that he
contacted Mielke immediately and Mielke informed him that the
closing had been completed on January 19, 1988. Mielke also told
him there were rumors going around in Great Falls about Brown
stealing money from escrow accounts. Tierney testified that he
subsequently learned that the FBI had shut down Brown's office and
Brown had been arrested and charged with felony theft.
Brown was prosecuted and later imprisoned for crimes arising
from his handling of escrow accounts. Mills' money was never
recovered from Brown. Mills testified that, following the loss of
her money, she suffered a "nervous breakdown" and was hospitalized
twice for that condition.
Did the District Court err in srantins defendant Tiernev's
motion for summary iudsment?
Our standard of review of an order by a district court
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granting summary judgment is the same as that used by the district
court under Rule 56(c), M.R.Civ.P. Morton v. M-W-M, Inc. (1994),
263 Mont. 245, 249, 868 P.2d 576, 578. Summary judgment is proper
when there is no genuine issue of material fact and the moving
party is entitled to judgment as a matter of law. Rule 56(c),
M.R.Civ.P. It is never a substitute for a trial on the merits.
Morton, 868 P.2d at 578-79.
Ordinarily, issues of negligence are questions of fact not
readily susceptible to summary adjudication. Brohman v. State
(1988), 230 Mont. 198, 201, 749 P.2d 67, 69. However, questions of
fact may be determined as a matter of law in certain cases where
reasonable minds could reach but one conclusion as to causation.
Brohman, 749 P.2d at 70. It is well established that in an action
based in negligence, summary judgment favoring a defendant is
proper only if the plaintiff fails to establish an element material
to his negligence claim. See, e.q., Bickler v. Racquet Club
Heights Assoc. (19931, 258 Mont. 19, 23, 850 P.2d 967, 970; and
Dillard v. Doe (1992), 251 Mont. 379, 382, 824 P.2d 1016, 1019.
In order to establish a cause of action for attorney
malpractice, a professional negligence action, there must be a
showing that the attorney owed his client a duty of care, that
there was a breach of this duty by a failure to use reasonable care
and skill, and that the breach was the proximate cause of the
client's injury resulting in damages. Kane v. Miller (1993), 258
Mont. 182, 107, 852 P.2d 130, 133, citinq Merzlak v. Purcell
(1992), 252 Mont. 527, 830 P.2d 1278.
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The District Court concluded that Tierney had no duty to
monitor the activities of the realtor, title company and escrow
company and that Tierney did not breach the standard of care
required of attorneys handling assignments of contracts for the
purchase of property and real estate closings in the state of
Montana. The court further determined that the actions of the
realtor, title company and escrow company are superseding
intervening actions which are the sole proximate cause of Mills'
damages. This is not a typical case of an attorney handling an
assignment of a contract and a closing of the sale of real estate,
however. In this case, Tierney's client was not a party to the
closing and she had expressed her concerns that the escrow agent be
left out of the transaction.
From our review of the affidavits, depositions and pleadings
composing the record in this case, we conclude there is a key
question of fact regarding the extent of Tierney's representation
of Mills in this matter and whether Tierney breached the requisite
standard of care. Further, there are questions of fact concerning
proximate causation.
Mills testified that she repeatedly advised Tierney of her
concerns that Brown was a "crook" who had stolen her money in the
past and that she was concerned that he might steal money from the
early payoff of the contract in the event of a sale by Mielke. She
testified that he told her that could not happen. Tierney
testified that he regarded Mills as "paranoid." He conceded that
he had no medical basis for that conclusion and did not tell Mills
9
about his assessment of her mental state.
Tierney testified that he merely agreed to contact Guaranty
Escrow to determine if payments were being made to it by the
purchaser and that Guaranty Escrow provided him with ledger
documentation indicating that the payments had been made to
Guaranty Escrow. The documentation provided by Guaranty Escrow in
response to Tierney's request did not contain actual proof that the
payments had in fact been made to Mills or that Brown had not
stolen any of her money as Mills claimed. Tierney apparently
assumed that she had no basis for her concerns and failed to act as
if they were legitimate.
In a summary judgment action, plaintiffs are entitled to all
reasonable inferences which may be drawn from the offered proof and
which indicate any issue of fact which would defeat the summary
judgment motion. Lorash v. Epstein (1989), 236 Mont. 21, 24, 767
P.2d 1335, 1337. Inferences can be made in favor of Mills from the
record indicating that Tierney did not take Mills' suspicions about
Brown seriously and, further, that he did nothing to assuage Mills'
concerns.
Moreover, there are numerous indications in the record to
support the inference that Tierney's representation of Mills in the
matter of the contract for deed extended further than Tierney would
have the Court believe. Mills testified that she hired him to
investigate why her escrow payments were missing and late, that she
specifically told him about her concerns about Brown's dishonesty
and that she specifically instructed him to make sure that Brown
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did not get her money when the sale from Mielke to Krauss took
place. In addition to negotiating the discount with Mills, Tierney
talked to Mielke and her realtor numerous times prior to the sale
and also talked to Jo Roberts, a closing agent for First Montana
Title Company, prior to the sale. Tierney's letter to Mielke
confirming the discount states that he would prepare the necessary
releases and obtain Mills' signature to forward to the escrow
company. These facts raise an inference that Tierney undertook
representation of Mills' interest up to and including the closing
and, therefore, had a duty to make sure Mills received her money.
There was no written retainer agreement on this matter, but Tierney
accepted a $100 retainer and a subsequent payment of $150 from
Mills. Tierney further testified in his deposition that he was
doing much of his representation in the real estate matter as a
favor to Mills after representing her in the personal injury
action.
Although Tierney's expert testified that Tierney had no duty
to monitor the transaction to ensure Mills received her money from
the early payoff of the contract for deed, Mills' expert testified
that the attorney-client relationship existing between Tierney and
Mills involved overseeing the resale of Mills' former residence and
collection of proceeds on the contract for deed under which Mills
originally sold her residence. He also stated in his affidavit
that from his review of all the pertinent documents in the record,
Mills had instructed Tierney to make certain that payment was not
received by Guaranty Escrow Services, but he failed to carry out
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those instructions.
Mills' expert further stated his assessment from reviewing the
record that it was apparent that Mills relied entirely upon Tierney
to handle the transaction. He opined that the standard of care
applicable to transactions of this type required Tierney to make
inquiry on behalf of Mills as to the record of payments received by
and made by Guaranty Escrow, to clearly instruct the realtor and
title company not to make payment directly to Guaranty Escrow, to
undertake action in accord with the instructions and wishes of the
client, to obtain full and complete information about the reasons
for the discount, and to at least require that any checks be made
payable jointly. Tierney's expert stated that there was no duty;
however, his opinion was based on an incomplete knowledge of the
facts. He did not review the depositions of Mills, Tierney or
Mielke. We conclude there is no basis for summary judgment on the
elements of duty and breach in this case.
Tierney's brief on appeal concentrates argument on the issue
of proximate causation. Proximate cause is analyzed in terms of
foreseeability. United States Fidelity & Guar. Co. v. Camp (1992),
253 Mont. 64, 69, 831 P.2d 586, 589. Although normally a question
for the jury to decide, in certain cases foreseeability may be
determined as a matter of law for purposes of summary judgment.
Such cases involve factual circumstances where it is clear that the
plaintiff cannot prove by a preponderance of the evidence that the
defendant proximately caused the injury in question. m, 831
P.2d at 590, citing Kiger v. State Dept. of Institutions (1990),
12
245 Mont. 457, 462, 802 P.2d 1248, 1251.
Tierney contends that if the Great Falls realtors, bankers and
title companies could not foresee that Brown might embezzle
fiduciary funds, he should not be required to foresee that Brown
would steal Mills' money because he practices law so far from Great
Falls. He contends that the District Court correctly determined
that the acts of the Great Falls realtors, escrow company and title
company were superseding and intervening actions which were the
sole proximate cause of Mills' damages.
Mills contends that Tierney failed to adequately investigate
her concerns about Brown initially and then compounded this error
by ignoring her instruction to keep Brown from getting her money at
the time of closing the sale between Mielke and Krauss. She
further contends that he did not tell her he was not going to
follow her instructions or that he considered she was mixed up or
"paranoid." She states that he left her with the belief that he
would take care of her interests and would follow her instructions
and then "dropped the ball." Thus, according to Mills, she did not
see the need to obtain another attorney or to try to handle the
transaction herself.
On the question of proximate causation, Mills contends that
Tierney could foresee, if Mills' concerns about Brown were in fact
correct, that Brown might steal her money if steps were not taken
to prevent that. She contends there is an issue of material fact
as to whether Tierney did an adequate job of monitoring the
progress of the sale and protecting her interests because it was
13
foreseeable to Tierney that Mills would be injured if he ignored
her instructions. She contends that Brown would not have been able
to get her money if Tierney had made the other defendants in this
action aware of her concerns and had instructed them to act
differently to safeguard her interests.
Most negligence actions contemplate some action on the part of
a defendant which is the actual and proximate cause of the
plaintiff's damages. However, failure to act can form the basis
for a claim of negligence as well. Comment e to § 302B of the
Restatement (Second) of Torts (1965) is applicable to the
circumstances present in this case and states the following:
There are . . situations in which the actor, as a
reasonable man, is required to anticipate and guard
against the intentional, or even criminal, misconduct of
others. In general, these situations arise where the
actor is under a special responsibility toward the one
who suffers the harm, which includes the duty to protect
him against such intentional misconduct . . . The
following are examples of such situations. . .
A. Where, by contract or otherwise, the actor has
undertaken a duty to protect the other against such
misconduct. Normally such a duty arises out of a
contract between the parties, in which such protection is
an express or an implied term of the agreement.
Mills' assertions that her injury was foreseeable by Tierney and
that "but for" his inaction, she would not have lost her money are
material fact issues.
We conclude that the issues raised by Mills are not the sort
which may be determined as a matter of law for purposes of summary
judgment. She has raised genuine issues of material fact which are
not speculative and conclusory and Tierney has not demonstrated
that the acts of the other defendants are superseding intervening
14
acts which relieve him of liability as a matter of law.
We hold the District Court erred in granting Tierney's motion
for summary judgment.
Reversed and remanded.
We Concur:
/
.~ i d, ' ~ZziP~
;/ C ief Justice
15