Greycas, Inc. v. Proud

826 F.2d 1560 (1987)

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Nature of the Case

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Facts

D practices law. D's brother-in-law, Wayne Crawford, a lawyer, owned a large farm. The farm fell on hard times, and Crawford was in dire financial straits. Most of his farm machinery was pledged to lenders. Crawford approached P seeking a large loan that he offered to secure with the farm machinery. P obtained several appraisals but did not investigate Crawford's financial position or discover that he had pledged the collateral to other lenders, who had perfected their liens in the collateral. P agreed to lend Crawford $1,367,966.50, which was less than the appraised value of the machinery. Crawford was required to submit a letter to P, from counsel whom he would retain, assuring P that there were no prior liens on the machinery that was to secure the loan. Crawford asked D to prepare the letter, and he did so and mailed it to P. The loan closed, and Crawford defaulted on the loan and committed suicide. P learned that most of the farm machinery had previously been pledged to other lenders. P has been able to recover only a small part of the loan. P sued D for the deficiency. The letter typed on the stationery of D's firm and addressed to P identifies D as Crawford's lawyer and states that 'in such capacity, I have been asked to render my opinion in connection with' the proposed loan to Crawford. It also states that 'this opinion is being delivered in accordance with the requirements of the Loan Agreement' and that I have conducted a U.C.C., tax, and judgment search with respect to the Company [i.e., Crawford's farm] as of March 19, 1981, and except as hereinafter noted all units listed on the attached Exhibit A ('Equipment') are free and clear of all liens or encumbrances other than Lender's perfected security interest therein which was recorded March 19, 1981, at the Office of the Recorder of Deeds of Fayette County, Illinois. D never conducted a search for prior liens on the machinery. Crawford gave him the list and told him there were no liens other than the one that Crawford had just filed for P. P sued D for negligent misrepresentation. D claimed he owed no duty to P. The court ruled for P and D appealed.