Starr v. Mooslin

Elena Starr (plaintiff) was a semiliterate octogenarian who owned a piece of real property (the lot) in Los Angeles. Starr sought to sell the lot and engaged Carl Mooslin (defendant), her long-time personal attorney, to help her. Mooslin negotiated a sale to Robert Fisher, a developer, through Fisher’s broker, Lucius Foster. Fisher and Foster offered terms in which the purchase price of the lot was $60,000, subject to a complicated escrow structure. The terms provided that Fisher pay Starr $10,000 in cash and issue her a promissory note of $50,000 secured by the lot itself. The terms also required that Starr agree to subordinate the promissory note to construction loans of up to $275,000 to improve the lot. Mooslin did not negotiate additional terms necessary to protect Starr’s financial interest, such as a term ensuring that Starr’s promissory note could be subordinated only to debt incurred to improve the lot. Mooslin relied on the assumption that escrow industry customs would prevent the escrow agents from effectuating predatory terms, and Mooslin did not perform legal research about whether the negotiated terms adequately protected Starr. Under the arrangement, Fisher was able to borrow $30,000 from unrelated creditors in exchange for a promissory note secured by the lot and with priority over Starr’s $50,000 note. Fisher then defaulted on his payments to the unrelated creditors who, because their debts had priority over Starr’s, foreclosed on the lot. Even after retaining another lawyer and negotiating with the foreclosure purchasers, Starr was able to realize only a fraction of the originally envisioned $60,000 return on the sale. Starr sued Mooslin for legal malpractice. At trial, it was uncontested that Fisher and Foster complied with the negotiated terms and that any competent seller’s lawyer who had apprised himself of the relevant law would have insisted on terms that would have protected Starr’s interest. The jury awarded Starr $42,000 in damages, and Mooslin appealed.