Mazel v. Las Cruces Abstract & Title Co. (In re Lamey), 14-13729 ta7

In re: BRYAN A. LAMEY, Debtor.

EDWARD MAZEL, chapter 7 trustee,and UNITED REAL ESTATE LAS CRUCES, LLC, Plaintiffs, v. LAS CRUCES ABSTRACT AND TITLE COMPANY,

FIDELITY NATIONAL TITLE INSURANCE COMPANY,

and TCNM, LLC, Defendants.

No. 14-13729 ta7

Adv. No. 18-01057-t

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

October 23, 2020

OPINION

Before the Court is Las Cruces Abstract and Title Company ("LCAT") and Fidelity National Title Company's joint motion for summary judgment on the professional negligence claim brought by United Real Estate Las Cruces, LLC ("URELC").¹ LCAT and Fidelity argue that they are entitled to judgment because the claim is based on an alleged duty to disclose a certain fact, while the undisputed evidence is that URELC was well aware of the fact. They also arguethat the alleged negligence did not damage URELC. The Court, having reviewed the briefs, evidence, and relevant law, finds that the joint motion is well taken and should be granted.

A. Facts

The facts relevant to the motion are set forth in the Court's Omnibus Findings of Fact, entered March 20, 2020, doc. 159. The facts are incorporated by reference. Capitalized terms not defined in this opinion have the meanings ascribed to them in the omnibus findings.

Additionally, Lamey admitted in his deposition that "a combination of the 'three of us'" (i.e. Lamey, Maese Sr. and Maese Jr.) handled URELC's responsibilities for closing the LANB loan transaction. URELC did not dispute this fact.

B. Summary Judgment Standards

Summary judgment is appropriate where "there is no genuine dispute as to any material fact" thereby entitling the moving party to judgment as a matter of law. Fed. R. Civ. P. 56(a). "A dispute is genuine when the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and a fact is material when it "might affect the outcome of the suit under the governing substantive law." Bird v. W. Valley City, 832 F.3d 1188, 1199 (10th Cir. 2016) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)) (with alterations). In ruling on a motion for summary judgment, the Court is required to "view the facts and draw reasonable inferences in the light most favorable to the party opposing the . . . motion." Scott v. Harris, 550 U.S. 372, 378 (2007) (internal quotations omitted).

At the summary judgment stage, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. However, "there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merelycolorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (citations omitted).

C. Negligence

Plaintiffs' complaint includes a claim of professional negligence against LCAT. Plaintiffs have moved to amend the complaint to add a claim of "negligence." The Court has yet to rule on the motion. Nevertheless, the Court will consider both professional and ordinary negligence.

Every professional has a duty to her client to provide professional services that are reasonable under the circumstances, as established by prevailing professional standards. See, e.g., Lester v. Hall, 970 P.2d 590 (N.M. 1998); Henning v. Parsons, 623 P.2d 574, 576 (N.M. App. 1980). The standard of conduct in a professional negligence case "is measured by the duty to apply the knowledge, care, and skill of reasonably well-qualified professionals practicing under similar circumstances." Adobe Masters, Inc. v. Downey, 118 N.M. 547, 548 (S. Ct. 1994). In some professional negligence cases, expert testimony is required to establish the standard of care; not so where the "particular acts were breaches of duty within a layman's common knowledge." Id. at 135.

Generally, a plaintiff must prove the following elements to prevail on a claim for professional malpractice based on negligence: "(1) the employment of the defendant [professional]; (2) the defendant [professional's] neglect of a reasonable duty; and (3) the negligence resulted in and was the proximate cause of loss to the plaintiff." Hyden v. Law Firm of McCormick, Forbes, Caraway & Tabor, 1993-NMCA-008, ¶ 9, 115 N.M. 159, 848 P.2d 1086. Professional malpractice based upon breach of duty concerns violations of a standard of conduct. See Spencer v. Barber, 2013-NMSC-010, ¶ 17, 299 P.3d 388.

Buke, LLC v. Cross Country Auto Sales, LLC, 331 P.3d 942, 954 (N.M. App. 2014).

The elements of an ordinary negligence claim are similar: "(1) defendant's duty to the plaintiff, (2) breach of that duty, typically based on a reasonable standard of care, (3) injury to the plaintiff, and (4) the breach of duty as cause of the injury." Zamora v. St. Vincent Hosp., 335 P.3d1243, 1249 (N.M. 2014), citing Herrera v. Quality Pontiac, 134 N.M. 43, 47-48 (S. Ct. 2003). Like professional negligence, the cause has to be proximate. See Herrera, 134 N.M. at 47-48.

URELC's negligence claim is based on the allegations that LCAT failed to disclose that the KZRV mortgage had not been released at closing and that URELC suffered damages as a result.² URELC does not rely on expert testimony to establish the standard of care applicable to closing agents in performing their duties. It argues, instead, that LCAT's failure of disclosure fell below the standard of ordinary care owed to URELC. See NMRA Civ. UJI 13-1603 (Ordinary Care) ("Ordinary care" means the degree of care that "a reasonably prudent person would use in" conducting his or her own affairs. "What constitutes 'ordinary care' varies with the nature of what is being done.").

D. The Duty of Disclosure

Where the nature of the relationship between the parties gives rise to a duty to disclose material facts, the failure to do so may constitute an actionable breach.³ See, e.g., Robertson v. Carmel Builders Real Estate, 92 P.3d 653, 663 (N.M. App. 2003); R.A. Peck, Inc. v. Liberty Fed. Sav. Bank, 766 P.2d 928, 932 (N.M. App. 1988); Provencio v. Wenrich, 261 P.3d 1089, 1095 (N.M. 2011); Allsup's Convenience Stores, Inc. v. N. River Ins. Co., 976 P.2d 1, 14 (N.M. 1998); Delgado v. Costello, 580 P.2d 500, 503 (N.M. App. 1978). A closing agent may have a duty of disclosure to its clients. See Cano v. Lovato 734 P.2d 762, 775 (N.M. App. 1986).

The duty of disclosure, however, only applies to facts the plaintiff did not know. See, e.g., Bills v. Hannah, Inc., 230 Mont. 250, 253 (S. Ct. 1988) ("A realtor has an affirmative duty to disclose all material facts to the seller. However, a realtor has no duty to disclose what the seller already knows.") (citation omitted); Mallory v. Watt, 100 Idaho 119, 122-23 (1979) (same); see also Restatement (Second) of Torts § 551 cmt. m. (defendant's knowledge of the fact negates any duty to disclose). Cano is not to the contrary because in that case the clients had no knowledge of the information withheld by the closing agent. 734 P.2d at 775.

Here, URELC knew the KZRV mortgage was not going to be released at closing.⁴ LCAT therefore did not have a duty to disclose that fact to URELC. Without a duty of disclosure, therecannot have been a breach and URELC's negligence claim, whether couched in terms of professional or ordinary negligence, fails.

E. Proximately Caused Damages

An essential element of a negligence claim is damages proximately caused by the defendant's negligent act. See, e.g., Paez v. Burlington N.S.F. Ry., 362 P.3d 116, 122 (N.M. App. 2015) ("Absent the element of proximate cause, a claim for negligence fails regardless of the presence of the remaining elements of the cause of action."). Proximate cause is

that which, in a natural or continuous sequence, produces the injury and without which the injury would not have occurred. . . . [It] encompasses whether and to what extent the defendant's conduct foreseeably and substantially caused the specific injury[.]

Id. at 121 (internal quotations omitted). Foreseeability is an integral requirement in a finding of proximate cause. Herrera, 134 N.M. at 48 ("Integral to both [duty and proximate cause] is a question of foreseeability") (quoting Calkins v. Cox Estates, 110 N.M. 59, 61 (S. Ct. 1990)). Although proximate cause generally is a fact issue, Paez, 362 P.3d at 121, "proximate cause becomes an issue of law 'when the facts are undisputed and the reasonable inferences from those facts are plain and consistent[.]'" Id., quoting Lujan v. N.M. Dep't of Transp., 341 P. 3d 1, 10 (N.M. App. 2015). In such cases it is within the Court's purview to declare, as a matter of law, that the plaintiff's injuries were not proximately caused by the defendant's conduct. Paez, 362 P.3d at 121-22.

URELC presents several theories in support of its damages claim. They are set forth in the following italicized bullet points and addressed in turn.

• Had LCAT not violated its duty to get a release of the KZRV Mortgage and subsequently failed to disclose that the KZRV Mortgage had not been released, neither Lamey nor URELC would have authorized the closing, the loan from LANB would never have been secured, and the investments in URELC would never have been made.

First, LCAT had no duty to get a release of the KZRV mortgage, nor was any such duty alleged in the complaint. Second, the alleged failure to disclose that the mortgage would not be released at closing did not proximately cause any of URELC's claimed damages. True, URELC lost money in its business operations. It also is true that URELC would not have lost money if it had never operated. However, the only causal link between LCAT's alleged disclosure failure and URELC's business failure, if any, is "but for" causation, not proximate causation. This has been discussed in some detail in another opinion. See In re Lamey, 2020 WL 5534527, *5 (Bankr. D.N.M.). "But for" causation does not support a negligence claim. It was wholly unforeseeable that LCAT's alleged...