## Facts

- Donald H. Wright sought refinancing for an apartment complex through SCI Financial Corporation (SCI).
- SCI’s proposal included a specific prepayment-penalty provision; Wright accepted the proposal.
- Bruce M. Pennamped, counsel for SCI, drafted loan documents and sent them to Wright’s attorney, Richard Brown, for review.
- Wright and Brown reviewed the drafts and approved their form and substance.
- The day before closing, Pennamped spoke with Brown but did not disclose that the funding bank had requested changes to the prepayment-penalty provision; Brown said he would not attend the closing.
- That afternoon, Pennamped revised the prepayment-penalty provision at the bank’s request.
- Pennamped communicated with SCI’s vice president, Ray Krebs, and told Krebs to inform Wright of the change.
- Wright and Brown were not informed of the revision before closing, and Wright signed the documents containing the revised provision.
- Wright later discovered the change when paying off the loan, resulting in a prepayment penalty about $92,000 higher than under the earlier draft.
- Wright sued Pennamped and Pennamped’s law firm for fraud and constructive fraud based on nondisclosure of the revision.

## Issues

1. Whether a drafting attorney for one party has a limited duty to disclose to the opposing party (or opposing counsel) non-privileged, substantive changes to contract terms the opposing party is expected to sign.
2. Whether the designated evidence created genuine issues of material fact on fraud and constructive fraud arising from the failure to disclose the prepayment-penalty revision before execution.
3. Whether disputed facts existed as to whether the drafting attorney attempted to satisfy any disclosure obligation through an alleged agent and whether an agency relationship existed for that limited purpose.

## Decision

- The Court of Appeals of Indiana reversed the trial court’s summary judgment for Pennamped and his firm and remanded.
- The court held that Wright designated evidence sufficient to create genuine issues of material fact on fraud and constructive fraud, including whether a duty to disclose existed and was breached.
- The court also held that questions concerning any attempted delegation of disclosure to Krebs and the existence/scope of any agency relationship were factual issues unsuitable for summary judgment.
- On rehearing, the court denied rehearing and clarified that any required disclosure was limited to changes to a proposed contract the opposing party is expected to sign, and that such information is not privileged.

## Legal Principles

- A drafting attorney may have a limited duty to ensure disclosure of non-privileged, substantive changes to proposed contract terms when the opposing party previously reviewed an earlier draft and is expected to sign the revised document.
- Failure to disclose such changes can support fraud or constructive fraud claims when evidence permits findings of duty, breach by nondisclosure, reliance, and damages.
- Intent to deceive is rarely resolved on summary judgment when the record permits competing inferences from the circumstances surrounding nondisclosure and execution.
- The existence and scope of an agency relationship, including whether a disclosure task was accepted and carried out, is generally a question of fact.
- Requiring disclosure of objective contract-term changes does not compel disclosure of privileged communications or conflict with an attorney’s duty of confidentiality and loyalty to the client.

## Conclusion

The appellate court held that summary judgment was improper because the record permitted a fact-finder to determine whether lender’s counsel had a limited duty to disclose a last-minute, non-privileged change to a key loan term and whether nondisclosure (including any attempted delegation to a third party) supported fraud or constructive fraud liability.


Wright v. Pennamped, 657 N.E.2d 1223 (Ind. Ct. App. 1995)