Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-1_11-cv-00036/USCOURTS-almd-1_11-cv-00036-4/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1332 Diversity-Personal Injury

---

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION

PEOPLESSOUTH BANK, a )

Georgia Banking )

Corporation, )

)

Plaintiff, )

) CIVIL ACTION NO.

v. ) 1:11cv36-MHT

) (WO) 

FARMER & MALONE, P.A., )

an Alabama Legal )

Professional Association, )

)

Defendant. )

OPINION

Plaintiff PeoplesSouth Bank (“PSB”) charges defendant

Farmer & Malone, P.A., a law firm, with legal malpractice

under the Alabama Legal Services Liability Act (“ALSLA”),

1975 Ala. Code § 6-5-571 et seq. The bank contends that

the law firm provided an inaccurate title opinion on a

piece of land used as collateral. In addition to

contesting the merits, the law firm submits that the

bank’s claim is barred by the statute of limitations.

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1. This consolidated action was tried simultaneously

with PeoplesSouth Bank v. North, Civ. No. 1:11cv176-MHT.

The North case, however, was tried before a jury and

settled mid-trial.

2

This court has jurisdiction pursuant to 28 U.S.C. § 1332

(diversity of citizenship).

Based on the evidence presented at a bench trial, the

court finds that the bank’s claim is barred by the

statute of limitations.1

I. FINDINGS OF FACT

This litigation arises from a land deal gone south.

In late spring 2007, Judd Lisenby and Nicole Lisenby

sought a loan from PSB to pay off debt related to their

farming operations. To secure a $ 858,402.25 loan, Judd

Lisenby offered as collateral an approximately 550-acre

tract of land owned by his father. According to an

appraisal conducted in March 2007, the property was

valued at $ 1,230,750.

Despite the land’s value, PSB insisted that the loan

have a guarantor in addition to making the land

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collateral. A friend of Judd Lisenby, Charles North,

agreed to be a guarantor. With that condition met, the

bank agreed to the loan.

During the loan-negotiation process, PSB hired the

law firm of Farmer & Malone to conduct a title search of

the property. The bank and the law firm were repeat

players. The president of the bank’s local branch,

Dianne Thomas, had frequently worked with attorney James

Farmer. Over the course of several years, Thomas and

Farmer developed an amicable professional relationship

and each considered the other a friend.

As a matter of routine, banks insist on a title

search to determine whether a deed is valid and whether

a property has any encumbrances or liens against it.

Because these records are not always online, a title

search requires traveling to a county courthouse and

delving through numerous records. A title search is

essential in calculating a property’s value.

Case 1:11-cv-00036-MHT-CSC Document 140 Filed 07/02/12 Page 3 of 20
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Like many lawyers in the Wiregrass Area of Alabama,

Farmer’s law firm uses independent abstractors to perform

title searches. For this land deal, Farmer hired Cindy

Barnes to conduct the title search.

During her investigation, Barnes uncovered evidence

of an old timber lease on the property. A timber lease

permits a logging company to cut down trees and,

therefore, reduces a property’s value. Barnes placed a

handwritten note in her report stating that there was a

timber lease assigned from Judd Lisenby’s father to a

logging company in 1961. Barnes further notes that the

lease was assigned to other logging companies in 1962 and

1976. Barnes concludes by stating: “See if Lease is

still open (If so I will get copies). Something was done

in 2004 ... which states lease is in Plum Creek

Timberland.” Barnes Report (PSB Exhibit 42) at Barnes

025. Barnes included this handwritten note in her final,

typed report to attorney Farmer. However, the first page

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of Barnes’s reports--which contains a summary of her

findings--makes no mention of a timber lease.

Unfortunately for everyone involved, Barnes’s

handwritten note about the timber lease was never

received by attorney Farmer. Barnes sent 23 pages by fax

to his office. A fax transmittal report indicates that

only 22 pages were received. The court credits Farmer’s

testimony that the missing page was Barnes’s handwritten

note about the timber lease.

On June 6, 2007, Farmer provided Thomas and the bank

a preliminary title opinion without any reference to a

timber lease on the property. Based on the preliminary

title opinion, the bank issued the Lisenbys a loan--with

North as the guarantor--on June 11, 2007. Shortly

thereafter, on June 14, 2007, the law firm issued a final

title opinion similarly omitting the timber lease. Both

title opinions take the form of letters from attorney

Farmer. They state, in pertinent part, that: “I have

examined the public records in the Offices of the Judge

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2. When PSB accepted a deed-in-lieu of foreclosure

for the property in May 2012, the land was valued at

$ 370,000.

6

of Probate and Revenue Commissioner of Dale County,

Alabama, from this date and going back for a period of

thirty-five (35) years.” Preliminary Title Opinion

(Joint Exhibit 10) at 1.

 Two years later, in June 2009, the Lisenbys defaulted

on their loan and filed for bankruptcy. Their bankruptcy

triggered the guaranty agreement, and PSB demanded the

balance of the loan from North. Pursuant to the guaranty

agreement, North was entitled to have the 550-acre

property sold at foreclosure (or credited to his account

by a deed-in-lieu of foreclosure) before the bank could

recover any remaining balance. Because the 2007

appraisal of the property valued it significantly higher

than the loan’s principal, North believed that the

guaranty agreement could be paid off by selling the land.

The discovery of the timber lease, however, significantly

reduced the property’s value.2

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The Lisenbys’ attorney brought the timber lease to

the Farmer & Malone’s attention on September 15, 2009,

when he faxed a copy to attorney Farmer. The timber

lease was assigned in 1961, outside of the title

opinion’s 35-year coverage. Nonetheless, Farmer

immediately contacted Barnes and Thomas. 

Farmer learned from Barnes that she had intended to

include the handwritten note about the timber lease in

the faxed report. Farmer and Barnes quickly confirmed

that only 22 pages had been sent. Barnes recorded this

conclusion with a handwritten notation on the top of the

missing page.

It is undisputed that Farmer called Thomas on

September 15, 2009, to inform her of the timber lease’s

existence. Farmer also faxed Thomas a copy of the timber

lease. When Thomas asked why the title opinion had

missed the timber lease, Farmer replied that his opinion

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3. Thomas also testified that, at some point in

August 2009, North approached her and informed her of the

timber lease. Thomas stated that she did not believe

North because he contradicted Farmer’s title opinion.

Judd Lisenby testified that he informed Thomas of the

timber lease while negotiating the loan agreement in

2007. Lisenby claimed that Thomas dismissed the

importance of the timber lease because the property was

the collateral.

For purposes of resolving this case on a statute-oflimitations ground, the court finds it sufficient that

Farmer put Thomas on notice of the timber lease’s

existence on September 15, 2009. As such, the court need

not decide the exact moment that Thomas was informed of

the timber lease.

4. Farmer neglected to memorialize this notice of

(continued...)

8

extended back only 35 years and that the timber lease had

been recorded well before that.3

There was conflicting testimony as to what was stated

during the conversation about Farmer’s role in the title

opinion’s mistake. Farmer testified that he informed

Thomas that he had a conflict and asked if she still

wanted him to represent the bank. He contended that she

replied in the affirmative and he continued to represent

the bank.4

 He further testified that she had been

Case 1:11-cv-00036-MHT-CSC Document 140 Filed 07/02/12 Page 8 of 20
(...continued)

conflict in writing.

5. PSB further complains that Farmer failed to

affirmatively disclose that it had a malpractice claim

against his firm. 

9

involved in a similar legal malpractice claim in the past

and that she should have been aware that the “conflict”

comment indicated that the bank had a legal claim against

the law firm. Thomas’s testimony paints a different

picture: she contends that Farmer did not inform her of

any conflict.5

 Based on the testimony, the court credits

Farmer’s account of the September 15, 2009, conversation.

Farmer informed Thomas of a conflict, and she reasonably

should have known that PSB had a malpractice claim

against the law firm.

On January 14, 2010, North’s attorney sent Farmer a

letter detailing the reasons why the timber lease should

have been uncovered. The letter points to various tax

receipts and amendments to the deed that were made within

the 35-year period of the title opinion. Farmer did not

immediately forward this letter to the bank.

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In June 2010, PSB retained new counsel, Joseph Adams,

to handle the Lisenby case and the Farmer & Malone

malpractice claim. On June 24 and 25, 2010, Adams

charged the bank for 4.9 hours of work on legal-services

liability. Adams Billing Form (Farmer & Malone Exhibit

5) at 1. At trial, Adams testified that his research was

checking into whether a malpractice claim was lurking in

the shadows. He averred that he did not conclude that

the bank had a malpractice claim against Farmer & Malone

until he received a copy of North’s attorney’s letter in

September 2010, when attorney Farmer finally turned over

his case file. 

The bank filed its complaint against the law firm on

January 14, 2011.

II. CONCLUSIONS OF LAW

PSB brings a claim of legal malpractice against the

law firm for failing to discover the timber lease.

Because this court hears this case pursuant to diversity

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jurisdiction, the bank’s legal-malpractice claim is

governed by Alabama law. Before this court can consider

the merits, it must first address the law firm’s

contention that this case is barred by the statute of

limitations.

Section 6-5-574(a) of the ALSLA states, in relevant

part, that: 

“All legal service liability actions

against a legal service provider must be

commenced within two years after the act

or omission or failure giving rise to

the claim, and not afterwards; provided,

that if the cause of action is not

discovered and could not reasonably have

been discovered within such period, then

the action may be commenced within six

months from the date of such discovery

or the date of discovery of facts which

would reasonably lead to such discovery,

whichever is earlier; provided, further,

that in no event may the action be

commenced more than four years after

such act or omission or failure.”

1975 Ala. Code § 6-5-574(a). The ALSLA also provides that

certain enumerated provisions concerning “the computation

of statutory periods of limitation” apply. Id. § 6-5-

574(b). One of these provisions, § 6-2-3, reads: 

Case 1:11-cv-00036-MHT-CSC Document 140 Filed 07/02/12 Page 11 of 20
6 The ALSLA’s four-year maximum cap for bringing

suit is not implicated in this litigation.

12

“In actions seeking relief on the ground

of fraud where the statute has created

a bar, the claim must not be considered

as having accrued until the discovery by

the aggrieved party of the fact

constituting the fraud, after which he

must have two years within which to

prosecute his action.”

1975 Ala. Code § 6-2-3.

Stated simply, legal-malpractice claims have a twoyear statute of limitations. However, if the cause of

action was not immediately discovered, the plaintiff

normally has six additional months to bring suit, but if

fraud concealed the claim, the plaintiff has an

additional two years to file a complaint. Alabama law

places an absolute bar on actions brought after four

years. See Coilplus-Alabama, Inc. v. Vann, 53 So. 3d

898, 904 (Ala. 2010) (summarizing the statutory scheme).6

The Supreme Court of Alabama has explained that

ALSLA’s two-year statute of limitations begins to run at

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7. The court notes that Sirote & Permutt relies on

the “damages” rule for determining the accrual of a

statute of limitations. Sirote & Permutt, 776 So. 2d at

44-45 & n.5. The Supreme Court of Alabama has recently

shifted away from this doctrine and adopted an

“occurrence” rule: a claim accrues when the act or

omission giving rise to liability occurs. Denbo v.

DeBray, 968 So. 2d 983, 989 (Ala. 2006). In this case,

the choice between the “damages” and “occurrence” rules

is of no consequence. Under the occurrence rule, the

claim accrued when Farmer & Malone issued its preliminary

title opinion: June 6, 2007, only five days before the

“damages” rule date. 

13

the time PSB relied on the faulty title opinion. See

Sirote & Permutt, P.C. v. Bennett, 776 So. 2d 40, 45

(Ala. 2000) (holding that malpractice suit against lawyer

for faulty title opinion accrues on the “date that the

plaintiffs first suffered legal damage for which they

would have been entitled to bring an action for

damages”); see also Kachler v. Taylor, 849 F. Supp. 1503,

1511-12 (M.D. Ala. 1994) (Thompson, C.J.). PSB’s claim

regarding the faulty title opinion accrued on June 11,

2007, when it relied on the preliminary title opinion and

closed the loan with the Lisenbys. Because this suit was

filed in January 2011, the claim is untimely.7

 

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To the extent that PSB seeks shelter under

§ 6-5-574(a)’s six-month discovery rule, the court

concludes that the bank was on notice of a claim against

the law firm by at least June 24, 2010. By that time,

the bank had retained another attorney who started

researching ALSLA claims. It strains credulity to

believe that PSB--a sophisticated, multi-state banking

corporation--could be ignorant of a malpractice claim by

that point. Since this suit was filed in January 2011,

the bank cannot rely on the six-month discovery provision

for tolling the statute of limitations.

PSB’s central claim is that attorney Farmer

fraudulently concealed certain facts and, therefore, it

is entitled to the two-year statute of limitations

extension upon discovery of the fraud. Because the court

concludes that the bank was on notice of a malpractice

claim when Farmer informed Thomas of the conflict of

interest on September 15, 2009, the two-year statute of

limitations would make this case timely. 

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At trial, the court requested that PSB’s counsel

clarify her contentions for why the bank is entitled to

the two-year tolling of the statute of limitations. The

bank responded with four reasons why § 6-2-3's additional

two years apply. The court addresses each in turn,

keeping in mind that a plaintiff must satisfy the

“reasonable reliance” standard to trigger § 6-2-3's

tolling provision. Denbo, 968 So. 2d at 991.

First, PSB submits that the title opinion’s 35-year

coverage statement is fraudulent. The bank believes

that, because parts of the title opinion reference a deed

from 1947, the standard of care requires that the title

opinion cover from that period forward. Transcript at

97. The bank ignores the plain language of the title

opinion, which expressly states that it encompasses “from

this date and going back for a period of thirty-five (35)

years.” Preliminary Title Opinion (Joint Exhibit 10) at

1. Moreover, when the court asked Thomas whether she

cared about the temporal coverage of the title opinion or

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whether there were any encumbrances (such as a timber

lease), she unequivocally replied that she was only

looking for the latter. Transcript at 132-33. Given the

title opinion’s express temporal limitation and Thomas’s

testimony, PSB cannot reasonably rely on a belief that

the investigation covered a 46- or even 60-year period.

In any event, that Farmer went back further than 35 years

is hardly a basis to complain. 

Second, PSB believes that attorney Farmer’s statement

in September 2009 that his title opinion covered only 35

years was a fraud. Id. at 95-96. This claim fails for

the same reasons as the prior argument. 

Third, PSB believes that the following statement is

fraudulent: “I have examined the public records in the

Offices of the Judge of Probate and Revenue Commissioner

of Dale County.” Preliminary Title Opinion (Joint Exhibit

10) at 1. According to the bank, Farmer improperly

implied that he had personally gone to the relevant

public records offices when, in fact, he used an

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17

independent abstractor to conduct title searches.

Transcript at 96. As an initial matter, the court is

skeptical that Farmer’s invocation of standard principles

of agency can be construed as fraudulent. But in any

event, Thomas’s testimony forecloses the bank’s argument.

At trial, the following exchange occurred:

The Court: “Would it have made a

difference whether [Farmer] had had

someone else to do that work as long as

he signed of on it?”

Thomas: Well, no, because he-–I mean,

you know, he is the one that gave me the

title opinion. Jim [Farmer] is the one

that I dealt with. Jim is the one I

depended on. And the-–you know, he had

a partner. I didn’t-–I mean, I didn’t-

–we never talked about Cindy Barnes.”

The Court: “I mean, is that something

that as a bank you were concerned about?

Whether he used someone else to actually

go to the courthouses and check on

these?”

Thomas: “As long as Jim Farmer gave me

a title opinion, my confidence, my

trust, and I knew that he was giving me

a title opinion that was right.”

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18

Id. at 175-76. Thus, it is apparent that the bank did

not rely on a belief that Farmer had gone to the

courthouses to conduct the title search.

Finally, PSB submits that attorney Farmer had a duty

to disclose that there was a potential malpractice claim

against him, not merely that there was a conflict of

interest. Transcript at 96. Much of this argument

hinges on the bank’s belief that Farmer did not mention

a conflict of interest during his conversation with

Thomas on September 15, 2009. In light of its finding

that Farmer did inform Thomas about a conflict, the court

concludes that the bank should have been aware that it

had a potential malpractice claim against the law firm as

of September 15, 2009. Farmer told Thomas that a

conflict of interest existed and inquired as to whether

his continued representation of the bank was desired. He

also testified that he had worked with Thomas on a

similar case involving legal malpractice and that she had

access to in-house counsel. In light of these

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8. The court notes that were it to reach the merits,

it has considerable doubt concerning Farmer & Malone’s

primary argument: that the firm is insulated from

liability for errors committed by its independent

abstractor, Cindy Barnes. The title opinion is authored

by the law firm, not an undisclosed abstractor.

19

considerations, the bank could not reasonably rely on

Farmer’s failure to state affirmatively that a potential

malpractice claim could be brought.

PSB has failed to provide any reason for why

§ 6-2-3's two-year extension of the statute of

limitations should apply to this litigation. The court

concludes that the bank should have discovered its

malpractice claim on September 15, 2009, and brought suit

within six months. Because this action was filed in

January 2011, it is barred by ALSLA’s statute of

limitations.8

* * *

In sum, the court finds that PSB’s claim against

Farmer & Malone is barred by the statute of limitations.

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An appropriate judgment will be entered.

DONE, this the 2nd day of July, 2012.

 /s/ Myron H. Thompson 

UNITED STATES DISTRICT JUDGE

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