## Facts

- In 2006, Kirk David Marsh, Kirk Russel Marsh, and Marsh Investment Group, LLP agreed to buy roughly 150 residential rental properties in Meridian and Quitman, Mississippi (including two mobile home parks) for about $4.9 million from Alden M. “Bubber” Wallace III and related Wallace entities.
- Before the sale, plaintiffs reviewed income materials (including “Trailing 12” income summaries) and alleged they were told the properties historically generated higher monthly rental income than what plaintiffs later collected after closing.
- After the transaction closed, plaintiffs claimed the properties’ actual rental performance fell materially below what they expected based on the pre-closing income information.
- Richard O’Dom participated in the deal’s marketing and communications. Plaintiffs contended O’Dom functioned as a real-estate broker in the transaction even though he did not hold a Mississippi broker’s license.
- John Howell, a longtime lawyer for Wallace, served as the closing attorney. Wallace owed Howell money, and Wallace arranged for Howell to be repaid out of the sale proceeds.
- At Wallace’s suggestion, Marsh asked Howell to handle Marsh’s side of the closing. Howell disclosed that he would be paid from Wallace’s proceeds, but Howell did not explain that the repayment arrangement created a conflict of interest, and Howell and Marsh did not clearly define Howell’s role or the scope of his duties in the transaction.
- Howell (and the Howell Law Firm) prepared closing documents and title certificates. Plaintiffs later asserted the title work and closing work were inaccurate and left them exposed to outstanding obligations and encumbrances, including obligations associated with promissory notes involving Harold Wright and the estate of Nell Wallace.
- The case proceeded to a bench trial over multiple days in early 2009.

## Issues

1. Whether plaintiffs proved fraud, negligent misrepresentation, or civil conspiracy based on alleged misstatements or nondisclosures about the properties’ historical rental income and related conditions.
2. Whether O’Dom incurred civil liability under Mississippi’s real-estate licensing statutes for acting as a broker without a license, and whether plaintiffs qualified for any private statutory remedy.
3. Whether Howell and the Howell Law Firm owed plaintiffs fiduciary and professional duties in the closing, and if so, whether Howell’s conflict of interest and alleged title/closing errors constituted breach of fiduciary duty and legal malpractice causing recoverable damages.

## Decision

- The court entered judgment for Wallace and the other non-attorney defendants on plaintiffs’ fraud, negligent misrepresentation, and civil conspiracy claims.
- The court rejected plaintiffs’ claim against O’Dom based on Mississippi’s real-estate-broker licensing statutes, concluding plaintiffs did not prove the statutory elements required for civil recovery.
- The court found Howell and the Howell Law Firm liable to plaintiffs for breach of fiduciary duty and negligence arising from Howell’s conflict of interest and deficient closing/title work.
- The court awarded damages against Howell (including amounts tied to losses from the closing/title errors and related attorneys’ fees).

## Legal Principles

- Fraud under Mississippi law requires proof by clear and convincing evidence; a post-closing drop in income, without proof that the pre-closing figures were false and supplied with the required mental state, does not establish fraud.
- Negligent misrepresentation requires false information supplied in the course of business, reasonable reliance, and a duty connected to the challenged statement; absent a duty to speak, nondisclosure alone is not enough.
- Civil conspiracy is not an independent tort; it depends on an underlying actionable wrong. If the underlying fraud or misrepresentation claim fails, the conspiracy claim fails.
- Mississippi’s real-estate licensing statutes impose liability only if the statutory definition of broker activity is met, including acting for compensation (such as a fee or commission), and statutory limits may restrict who can obtain a civil remedy.
- A closing attorney who undertakes to represent a buyer in a transaction owes fiduciary duties of loyalty and candor. Disclosure that the attorney expects payment from an opposing party’s proceeds may be insufficient if the attorney does not also explain the conflict and obtain informed consent.
- An attorney providing title and closing services must exercise reasonable care consistent with the professional standard; inaccurate title certifications and closing mistakes that proximately cause loss support malpractice damages, including foreseeable consequential costs.

## Conclusion

Marsh and his related entities did not prove that Wallace, O’Dom, or others committed fraud, negligent misrepresentation, or conspiracy in connection with the rental-income information used to evaluate the deal, and the court also denied relief under the unlicensed-broker theory against O’Dom. However, the court held the closing attorney, Howell, and his firm liable because Howell’s repayment arrangement with the seller created a conflict that was not adequately explained to the buyer, and because errors in the title/closing work caused plaintiffs to incur losses, resulting in a damages award against Howell.


Marsh v. Wallace, 666 F. Supp. 2d 651 (2009)