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Balames v. Ginn

Supreme Court of Nebraska

April 17, 2015


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Appeal from the District Court for Douglas County: JAMES T. GLEASON, Judge.

Mark C. Laughlin and Patrick S. Cooper, of Fraser Stryker, P.C., L.L.O., for appellants.

Steven E. Achelpohl, of Gross & Welch, P.C., L.L.O., Lawrence J. Acker, of Lawrence J. Acker, P.C., and Jay Ferguson for appellee.



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[290 Neb. 683] Connolly, J.


The appellee, Thomas Balames, filed this legal malpractice action against Robert Ginn and Brashear LLP, formerly known as Brashear and Ginn (collectively Ginn), the firm where Ginn practiced when the alleged malpractice occurred. Balames brings this action for himself and three other individuals for whom he serves as attorney in fact (collectively [290 Neb. 684] Balames). Balames claimed that Ginn negligently failed to obtain signatures on a guaranty for a loan that Balames made to a third party and failed to inform Balames of the missing signatures. When the third party defaulted, Balames could not obtain a judgment against the individuals who were the intended guarantors for the full amount of the third party's obligation. The jury returned a general verdict for Ginn, but the court granted Balames a new trial.

Ginn assigns multiple errors to the district court's rulings, but we decide this appeal primarily on one issue: whether the court erred in granting Balames a new trial. We conclude that it did. We therefore vacate the court's order that sustained Balames' motion for a new trial and remand the cause with instructions for the court to reinstate the judgment for Ginn.

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Transaction Documents to Restructure Debt Owed to Balames

In 2003, a large hog farm operation called Bell Farms defaulted on a $3-million loan from Balames. In 2004, Balames agreed to restructure the debt with a new entity called Banopu, LLC, which is an acronym for " Balames Note Purchase." Two members of Banopu were the general partners of Bell Farms. Ginn was Balames' attorney for this transaction and worked with the attorney for Banopu and the guarantors to draft the closing documents.

The first document was a purchase agreement in which Banopu agreed to (1) " purchase" the loan that Balames made to " Sun Prairie" --an entity related to Bell Farms--for $3 million; (2) assign its right to payments from Sun Prairie to Balames for 4 years; (3) execute a promissory note to Balames for the purchase price; and (4) make payments to Balames as set out in a payment schedule. Members of Banopu who were identified as " guarantors" promised to guarantee payment of the purchase price. Balames promised to deliver the original loan documents--including promissory notes and guaranties--to Banopu on the effective date. That date was whenever a separate financial transaction closed, and the purchase agreement was contingent upon that event.

[290 Neb. 685] Under the purchase provision, the interest rate for the purchase price was the prime rate plus 4 percent. But under a separate " default interest" provision, the interest rate increased to the prime rate plus 13.25 percent if Banopu or Sun Prairie defaulted on their payments.

The second document was the promissory note. It stated that the note was secured by the guaranties of Banopu's members. The transaction contemplated that Banopu's 11 members would sign a separate guaranty, promising to pay Balames the amount due under the note if Banopu failed to cure any default in payments. Like the purchase agreement, the note included a provision for a higher interest rate if Banopu defaulted on payments.

North Dakota Litigation

In 2007, Banopu defaulted on the loan. The record shows that only one Banopu member had signed the separate guaranty. In 2008, Balames sued Banopu and its members in a North Dakota court to collect the money and interest that Banopu owed on the loan. After a trial, that court determined that Banopu's members intended to guarantee the purchase price of $3 million plus regular interest. But because all the intended guarantors did not sign the separate guaranty, the court determined that Banopu's members were not liable for the higher interest rate imposed on Banopu if it defaulted on the payments. It determined that Banopu was liable for $3,946,092.92, which included interest at the rate of prime plus 13 percent. But it ruled that Banopu's members were liable for only $3,349,865.48 at the statutory interest rate of 7 percent.

Parties' Pleadings

Balames alleged that Ginn was negligent for failing to (1) draft a complete guaranty to secure the purchase price and the promissory note; (2) circulate and secure the guaranties; (3) notify Balames of Ginn's failure to secure the guaranties; and (4) assist Balames to collect the balance of the note, interest, and attorney fees. For damages, he sought the difference between the $3,946,092.92 judgment [290 Neb. 686] he obtained against Banopu at the higher interest rate and the amounts he collected from Banopu and its members. He also sought $337,051.14 in attorney fees for his attempted enforcement of the guaranty, for

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total damages in the amount of $1,315,598.46.

Ginn denied all allegations of negligence and alleged that Balames had failed to state a cause of action. Additionally, Ginn alleged that Balames' claim was barred by the statute of limitations, equitable estoppel, laches, failure to mitigate damages, the doctrine of unclean hands, and the negligence or contributory negligence of Balames or other individuals.

Evidence at Trial

In 2000, Balames formed a business called Accelerated Assets (Accelerated), an investment company specializing in purchasing or " lending against" debt portfolios. To make the loan to Bell Farms, he and his business associates borrowed money from their bank and personally guaranteed the loan. When they restructured Sun Prairie's debt with Banopu, they determined that Banopu's members were capable of repaying the debt if it defaulted.

Balames said that Ginn was responsible for circulating the transaction documents for signatures and that he believed this effort was ongoing in February or March of 2004. Ginn never told Balames that any intended guarantor had balked.

Ginn agreed that he had a duty to ensure the signatures were properly affixed to the closing documents and that he had not delegated this responsibility. Ginn said that he had anticipated being able to review the documents after the circulation for signatures was completed. He knew that obtaining the Banopu members' personal guaranties was crucial to Balames. But Banopu's members were reluctant to sign the guaranty until they had possession of the original loan documents. Ginn said Balames knew about their resistance and Ginn's efforts to obtain their signatures. Ginn explained that the Banopu transaction was a smaller part of a much larger reconfiguration of Sun Prairie's debt. He said a larger and separate transaction had to close before Ginn could get signed copies for the Banopu transaction. He said there was [290 Neb. 687] no scheduled closing date for the Banopu transaction because he could not control when the Banopu members would finally sign the documents.

The larger transaction was scheduled to close on July 6, 2004. Ginn said that on June 30, just before he went on vacation, he sent the documents for the larger transaction, with Balames' signature, to an attorney for the guarantors and to Balames. Ginn said Balames expressed no sense of urgency about closing the Banopu transaction when Ginn left for vacation. But after the larger transaction closed on July 6, Ginn received e-mails and telephone calls from Balames that he had to close the Banopu transaction immediately because the bank was pressuring him. Balames agreed his bank was pressuring him to obtain the loan documents.

The record shows that on July 7, 2004, Balames e-mailed Ginn while he was on vacation and asked him to " overnight today -- if at all possible -- a complete set of executed banopu loan documents" to his bank. Balames provided the address of the banker to whom he wanted the documents sent: " if you could confirm via email that when they go, i would appreciate it very much." Balames e-mailed again: " are you going to have them tomorrow??? i need to get them to the bank as quickly as humanly possible...any ideas???" Ginn then forwarded Balames' original e-mail with the banker's address to an attorney for the guarantors with the following message: " I have talked to [Balames] and he absolutely needs you to overnight the originals to his bank per the e-mail forwarded herewith. Please send copies to me." Afterward, Ginn reported to Balames that the documents " are being overnighted to me and, upon receipt, I will

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copy and send on per your instructions." About an hour later, Ginn e-mailed Balames again: " I will have the originals sent directly to the bank, if you wish, with copies to me. My fear is there will be something wrong/missing/etc that we won't have the opportunity to catch and fix first."

On July 9, 2004, the opposing attorney sent Ginn an e-mail that referred to an attachment: " See attached completely executed Purchase Agreement. The original note and a copy of the Purchase Agreement with Banopu's signature has been [290 Neb. 688] delivered to Balames' bank today. They need the guarantors' signatures yet for the Purchase Agreement. Please forward them on to [Balames'] bank." The opposing attorney sent this e-mail to Balames also.

On July 12, 2004, Balames sent Ginn another e-mail: " [T]his is what i have received from [the opposing attorney] and have subsequently forwarded to the bank. is this everything???" Ginn responded on July 13: " I am on vacation with the worst dial-up internet access imaginable and I can't open documents. [I have] confirmed that the purchase agreement was sent to you and that the note and guaranty were sent directly to the bank. Can you confirm this with the bank?"

Balames said that when Ginn wrote he would forward the copies to the bank and keep a copy, he believed that Ginn would review the documents to make sure they were properly executed. He could not recall Ginn's reporting that he did not receive the documents. Balames said Ginn never told him to go to the bank and inspect the documents for signatures or to ensure that the bank received them. Balames could not recall having any telephone calls with Ginn while Ginn was on vacation or asking the bank to postpone the closing until Ginn returned from vacation.

On cross-examination, however, Balames said that he called the bank to confirm that the documents had arrived. He could not recall the conversation but remembered receiving a confirmation that the documents were there. He could not recall telling Ginn that he confirmed the bank's receipt of the documents. When asked if he would dispute Ginn's testimony that he had done ...

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