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Jackson v. Lurski

ESX-C-235-08 (N.J. Super. Law Div. 2011) (Unpublished)

ATTORNEYS — Where an attorney, although not acting for a party, prepares documents signed by the party to effectuate a closing and is fully aware of the unconscionable nature of the transaction, the attorney may owe a duty to that person even though that person is not deemed to be the client of the attorney.

A homeowner defaulted on her mortgage and faced foreclosure. She was advised to sell her home to a buyer, who would then permit her to remain in occupancy and give her an option to repurchase her home. A closing took place. The purchase price was $190,000. The payoff to the homeowner’s lender was $141,383.94. The homeowner received no proceeds from the sale. The HUD-1 Uniform Settlement Statement was prepared by a settlement agent, an attorney. It showed that more than $41,000 had been disbursed by the agent for “other liabilities.” This, in fact, had been disbursed to the agent, the buyer, and the individual who proposed the transaction to the homeowner. In addition to the HUD-1, the agent prepared the deed, the affidavit of title, and other closing documents. He also acted as disbursement agent for the proceeds and as escrow agent for the buyer’s mortgage lender.

The homeowner sued the agent for legal malpractice, for misappropriation, conversion of the settlement proceeds, and for damages emanating from this misappropriation. She moved for summary judgment on the issue of liability. The agent opposed the motion, contending that he represented only the buyer, and that he acted as the settlement agent for the transaction. In his deposition, the agent acknowledged numerous errors in the HUD-1. For instance, the buyer signed her affidavit of title wherein she stated she would reside at the property even though the homeowner was to remain in occupancy. Additionally, the agent listed a lower realty transfer fee than required, incorrectly asserting the seller’s age as older based on an affidavit he had her sign under oath.

The court noted that the lack of an attorney-client relationship does not foreclose an action for legal malpractice under certain circumstances. Under appropriate circumstances, an attorney may owe duties to a person who is not deemed to be the client of the offending attorney. The court held that, in this instance, the agent, an attorney, owed a duty of care to the homeowner. The agent prepared the documents signed by the homeowner to effectuate the closing. He was fully aware of the unconscionable transaction, wherein all of the homeowner’s equity in her home was disbursed, by him, to himself and others. The court concluded that the agent had breached his duty of care to the homeowner, and this proximately caused damage to her.

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