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Malpractice? Unethical?

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Warped

Member
What is the name of your state? VA

Last year I sold two properties to a developer. At the last minute the developer asked me to carry $65k of the debt for a term of 30 days in return for $3000 more than the agreed upon sale price. I was hesitant but agreed on the condition that they give me a legal document stating that if the principal wasn't paid at the end of 30 days, they would pay a $500 per day penalty. They agreed both verbally and by having their lawyer produce the document. I didn't have an attorney of my own examine the document. I did have the closing company that I used examine it and they said that it should hold up in a court of law. I know that was a stupid decision on my part. Since retaining an attorney and giving him all of the paperwork and the specifics of the case I've learned that the $500 per day penalty is not legally enforceable. My attorney doesn't specialize in that area of law so he is of no help in that situation.

My questions are...

1: Did their lawyer, in producing a document that he knew was legally unenforceable breach ethics or commit malpractice?

2: If so, what recourse do I have? His malpractice insurance? Errors and omissions insurance?

Thank you for any help or advice that you can offer in this!
 
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las365

Senior Member
Did their lawyer, in producing a document that he knew was legally unenforceable breach ethics or commit malpractice?
No. He was not representing you and had no duty to you at all. If he was a participant in some sort of fraud, that would be different, but what you describe does not rise to that level, in my opinion.

If so, what recourse do I have? His malpractice insurance? Errors and omissions insurance?
I do not believe that you have any recourse against the other party's attorney for your failure to secure your own lawyer to represent you in the transaction.
 

seniorjudge

Senior Member
It won't help you any, but if you want to you may file a complaint with your state bar's disciplinary committee.

But I can't see where you have suffered any damages. Did you?
 

Warped

Member
It won't help you any, but if you want to you may file a complaint with your state bar's disciplinary committee.

But I can't see where you have suffered any damages. Did you?

First I would like to state that I'm not trying to win a lawsuit lottery. The company that bought the two properties from me was forced into bankruptcy last summer. The damages are the $500/day penalty that isn't legally enforceable because their attorney, though I agree that he had no duty to me, wrote a legal placebo. :( Thank you both for your advice. I was hoping for better news.
 

You Are Guilty

Senior Member
What is the reason you believe the penalty is unenforceable? Usurious? Weird state law? (If it was written as a liquidated damages clause, I don't see why there's a problem).
 

Ronin

Member
The company that bought the two properties from me was forced into bankruptcy last summer. .

Even if a $500/day fee is enforceable, collecting on this may be a problem... Small companies often go into bankruptcy leveraged to the hilt with very little liquid assets. Then you have to get a place in line with the other creditors for the scraps.
 

Warped

Member
What is the reason you believe the penalty is unenforceable? Usurious? Weird state law? (If it was written as a liquidated damages clause, I don't see why there's a problem).

The RE attorney that I retained said that the $500/day penalty is unenforceable because it is unreasonable. He did say that the court *might* consider $100/day enforceable. What I was getting at is that I know the debtors don't have the money to pay it but I was wondering if the lawyer who authored the document is/should be liable for some part of it for writing an unenforceable document. At any rate, I don't have the funds available to go after the debtor or his lawyer (if it is possible to do so) for this. :(
 

You Are Guilty

Senior Member
Problem 1: Until an appellate court holds that the $500/day fine is "unreasonable", it is neither unreasonable nor unenforceable ("uncollectable" is an entirely separate matter).

Problem 2: Even if the fee is somehow judicially held unreasonable (I don't see how - parties are free to contract as they want; there is no requirement that both sides do so "reasonably"), the attorney didn't have any duty to you - he wasn't your attorney. At best, that leaves filing some sort of ethics complaint, which, for the reasons above, will likely go nowhere.

Problem 3: Your issue is more about collection than liquidated damages anyway. You can try doing some googling to see if attempting to handle it yourself is something you'd be comfortable with. Some people are quite proficient at it without a lawyer's assistance.
 

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