Indiana real estate appraiser found to have no duty to care

The Indiana Court of Appeals upheld a trial court's finding of summary judgment on the issue of whether a real estate appraiser owed a duty to a property seller.  Here, BSA Construction, LLC entered into a contract to sell a residential home to a buyer.  The buyer obtained financing for the home purchase from a bank that was contingent on an appraisal of the property.  Per the contract, the purchase price of the property was to be $60,000; but the real estate appraiser only appraised the property at $50,000.  Consequently, the bank financing the transaction denied the loan due to the appraised price of the property being less than the amount of the loan.

BSA thereafter sued the appraiser arguing that he owned it a duty of care.  The basis of BSA’s claim was that it was a third-party beneficiary to the bank’s lending agreement with the purchaser and, therefore, the appraiser owed it a duty of care.  The trial court and COA disagreed, finding that the appraiser instead only owed a duty of care to the bank that hired him to perform the appraisal, not BSA, a third-party.

BSA Construction, LLC v. Jimmie Johnson, (Ind. App. 2016).

Chicago man files claim after car plunges off Indiana bridge that was under construction.

In March 2015 a man and his wife drove off a demolished Northwest Indiana bridge.  The man survived the crash but was severely injured.  His wife unfortunately perished.  The man has recently filed a lawsuit in Lake County alleging that the Indiana Department of Transportation ("IDOT") and contractors failed to provide adequate warning signs and barriers before the demolished bridge. The man claims he was following GPS directions and did not appreciate that the road was closed and the bridge was gone.

Statute of Repose Bars $1 Million Dollar Legal Malpractice Claim

In Damor America v. Henry Gonzalez, 2016 IL App. (1st) 143685-U (1st Dist. 2016), the First District Appellate Court of Illinois held that the Plaintiff brought its legal malpractice action late against their former attorneys and, therefore, the claim was barred.  In the underlying case, Plaintiff retained the Defendants to bring an action against a shipping company that had damaged $1.3 million worth of Plaintiff’s pharmaceutical goods.  However, Defendants botched the case due to failing to review the relevant shipping agreement terms.

Defendants filed the Plaintiff’s claim in the wrong jurisdiction and it became untimely as a result.  The shipping agreement stated that claims had to be filed within one year of the loss of cargo in England’s High Court of Justice.  The loss occurred in February 2005 and, the Defendants filed the claim in February 2006 in federal court in New York City.

After filing, the shipping company raised this issue as an affirmative defense.  In 2006, the claim was settled for $20,000 in part because of the affirmative defense and, additionally, because the Defendants advised the Plaintiff that $20,000 was the shipping company’s insurance policy limit.  But, instead, after Plaintiff’s subsequent review of the shipping agreement, it found that the shipment was covered for $1,205,000.

After learning about these provisions in the shipping agreement, Plaintiff sued their former attorneys in April 2014.  Plaintiff alleged in its legal malpractice suit that it would have never settled the underlying case if it had known about the potential $1.2 million in coverage and other relevant provisions in the shipping agreement.  However, Defendants argued that Plaintiff failed to timely file the claim and, therefore, the claim was barred by the two-year and six-year statutes of limitations and repose.  In rebuttal, the Plaintiff alleged that the statutes were not applicable because the Defendants had fraudulently concealed their legal malpractice by failing to provide Plaintiff its file (by stating it was destroyed) and, attempting to mislead the Plaintiff by providing mischaracterizations of facts.  However, the court ultimately concluded that the legal malpractice claim was filed untimely and, the Plaintiff’s claim did not meet the standards of fraudulent concealment.

Alex Passo and the Patterson Law Firm frequently handle legal malpractice actions.  If you have a potential claim you may contact me at: 312-750-1820 or apasso@pattersonlawfirm.com.

Legal Malpractice Judgment Could Not Be Discharged in Bankruptcy

In Jahrling v. Estate of Stanley Cora, the Seventh Circuit Court of Appeals affirmed that a judgment entered against an attorney in a previous legal malpractice case could not be discharged in his subsequent bankruptcy proceeding.  In the underlying case, the attorney represented an individual who only spoke polish in the sale of his home.  The attorney did not speak polish; therefore, there was a significant language barrier between the two during the transaction.

The home was valued at $106,000, but it only sold for $35,000.  The buyer subsequently flipped the house for $145,000.  The individual may have sold the house under value because he believed the purchase agreement included a clause that allowed him to live in an upstairs room of the home for the rest of his life.  However, the contract the attorney provided him contained no such provision.

The individual thereafter sued his attorney for legal malpractice and a judgment was entered against him.  Then, the attorney filed for bankruptcy and listed the judgment as a debt that he sought to discharge. 

The bankruptcy court, and later, the Seventh Circuit, found that the judgment could not be discharged due to the attorney’s defalcation of duties.  Under the U.S. Bankruptcy code, defalcation is an exception to discharge of a debt.  Defalcation occurs when the debtor with knowledge acts in a reckless manner in respect to their fiduciary responsibilities.  Here, the courts found that the attorney recklessly breached his standard of care by representing an individual who did not speak the same language and, relied upon only opposing counsel to act as an interpreter.

Oppression in Illinois Closely Held Businesses

Occasionally, majority interest holders of a company will use their authority to make unilateral oppressive decisions to the detriment of the company and the minority owners.  Fortunately, it was understood that majority owners can leave minority owners in a closely held entity extremely vulnerable, and legal mechanisms were put into place to protect the minority interest holders’ interests.  If majority interest holders act in a manner that is considered arbitrary, overbearing, or heavy-handed then Illinois statutes exist which provide the minority interest holders relief from the majority interest holders' conduct.

• For Corporations – The Illinois Business Corporation Act, 805 ILCS 5/12.56
• For LLCs – Illinois Limited Liability Partnership Act, 805 ILCS 180/35-1(4)
• For Partnerships – Uniform Partnership Act, 805 ILCS 206/801(5)

What is an Injunction?

Businesses often consult with attorneys on when and how an injunction is appropriately sought.   An injunction is a legal remedy granted by a court that prohibits an individual or entity from engaging in certain harmful conduct. In the context of business, injunctions are a powerful tool that can prevent a business from being damaged while a legal matter is pending before the court on its full merits. The injunction’s effect and purpose is to keep the status quo until a trial will occur.

For a recent excellent example, the rooftop owners near Wrigley Field filed an action seeking an injunction against the beloved Chicago Cubs. The purpose of the injunction was to halt construction on Wrigley Field, including the addition of scoreboards that would impede rooftop views into the stadium. The basis of the rooftop owners’ legal argument was premised upon a breach of a contract entered into by the collective rooftop owners and the Cubs. However, the rooftop owners would have been irreparably harmed if construction on the Field began while the breach of contract lawsuit sat in the courts for years until the matter was ready for trial.

In Illinois, to obtain an injunction the petitioner must demonstrate that: (1) there is an ascertainable legal claim; (2) there is a likelihood the petitioner will be successful in bringing their claim; (3) the petitioner will be irreparably harmed if an injunction is not granted before a trial on the merits can occur; and (4) there is no adequate remedy at law – meaning, there is no legal or equitable remedy at law which will make the petitioner whole after a trial.

Situations Where An Injunction Should Be Considered:

• Sale or Destruction of Property
• Misappropriation of Intellectual Property
• Breaches of Non-Competes
• A Shareholder Who Desires to Prevent Waste of Corporate Assets