Court Opinion

ID: 9724577
Source: CourtListenerOpinion
Date Created: 2023-08-26 11:03:02.465732+00
Date Added: 2024-06-11T18:25:02.672404
License: Public Domain

FLEMING, J
I concur in the opinion but find an additional basis for defendant’s liability, viz., his negligence in allowing his client to be defrauded and swindled out of her property.
Under the purported sale of plaintiff’s real property for $60,000, the purchaser put up nothing and used the seller’s own property as security to borrow $30,000, out of which he paid $10,000 to the seller and pocketed the balance of $20,000 for his own use. When the transaction is stripped of its documentary window dressing, it becomes readily apparent that plaintiff was relieved of assets of a value of $20,000. Such a transaction amounts to elementary fraud, for protection against which persons employ lawyers to provide them with advice and counsel. If a lawyer fails to provide advice and counsel of sufficient quality to enable his client to protect herself against such an obvious swindle, he may be held liable for the ensuing loss.
The foregoing covers the bare-faced swindle. The more genteel, dressed-*1003up version concocted by the buyer and his agents was only slightly less rapacious. Under this version the buyer agreed to put up $10,000, and the seller agreed to subordinate the unpaid balance of the purchase price, $50,000, to a $275,000 construction loan. Even if it should turn out that the lien ahead of plaintiff represented moneys actually expended in improving the property, plaintiff’s security would remain wholly vulnerable to a complete wipe-out if any mild deflation in real estate values occurred, for her security interest would have been subordinated to 82 percent of the total amount put into the venture, and the entire loan of $275,000 would have to be repaid before she could realize anything on her security. Under such a deal plaintiff would be saddled with the primary risk of speculative loss and wholly excluded from any hope of speculative gain. These terms are so one-sided and so unfair as to be only slightly less fraudulent than the bald fraud which actually took place. (Cf. Handy v. Gordon, 65 Cal.2d 578 [55 Cal.Rptr. 769, 422 P.2d 329, 26 A.L.R.3d 848].) Here again, a lawyer who has been employed to represent the interests of the seller is required to provide advice and counsel which will enable his client to protect herself against such imposition, and if he does not adequately do this he may become liable for losses suffered by his client as a result of his negligence.
Needless to say, these considerations have special application to the case at bench, where the client was an 80-year-old, semi-literate widow of limited means and limited business experience. In representing such clients lawyers are required to exercise extra caution, for these clients are not equipped to protect themselves.
A petition for a rehearing was denied March 2, 1971, and appellant’s petition for a hearing by the Supreme Court was denied April 29, 1971. Peters, J., was of the opinion that the petition should be granted.