Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, May 19, 1990 TAG: 9005190342
SECTION: VIRGINIA PAGE: A-3 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
The verdict ended a weeklong civil trial in Roanoke Circuit Court Cranwell that pitted Cranwell, an influential member of the House of Delegates, against a Los Angeles insurance company.
Pioneer Title Insurance Co. succeeded in proving to the jury that Cranwell failed to report liens - the first warning signs that his client's home construction business was failing - to a bank that had lent the developer $2.5 million.
The complicated breach-of-contract case goes back to 1974, when Cranwell was the attorney for James E. Long, a self-made millionaire who once estimated his business was worth $20 million before he lost everything and went bankrupt.
Shortly before he hit hard times, Long obtained a $2.5 million loan from a New York mortgage bank, Sackman and Gilliland, to finance construction of an apartment complex in Roanoke County.
As Long's attorney, Cranwell later conducted title searches on the project's deed and found mechanics' liens, or claims that Long owed money for building materials or equipment.
But Cranwell failed to report the liens to the bank and Pioneer as required by a contract, testimony showed.
When Long later went into bankruptcy, Pioneer was forced to pay off $283,992.86 in liens - the amount Cranwell's firm now must pay the insurance company.
Pioneer attorney Denis Englisby argued that Cranwell's failure to report the liens kept the bank from learning of the "dangerous situation" of Long's financial standing in 1974.
"Our contract with Mr. Cranwell says that if he even smells something like this, he's supposed to tell us," Englisby said.
"We trusted this law firm as our attorneys and they didn't do what they were supposed to do," he told the jury.
But Cranwell and his Richmond attorney, William Smithers, contended that the bank knew of Long's financial problems, and that Pioneer was not obligated to pay the liens.
"What we've really got here is a slick New York bank that took advantage of the situation and a lazy California insurance company that got its ears pinned back and paid money it didn't have to pay," Smithers told the jury in his closing arguments.
That promoted Englisby to admit that the "slick" bank and its "sloppy" insurance company had, in fact, made one mistake:
"We hired the firm of Pedigo, Cranwell and Flora to protect our interests," he said. "That was wrong. We know better now."
Since the 16-year-old legal dispute began, John Pedigo has died. Attorney Barry Flora also was named in the lawsuit, although most of the allegations focused on actions by Cranwell.
In testimony at the beginning of the five-day trial, Cranwell admitted that he had, in fact, found two liens that had been filed in 1974. Cranwell admitted that he did not report the liens to the bank, but instead settled them himself with money taken from an escrow account.
"We took care of the problem," he testified.
Cranwell testified that he considered the liens, for about $1,500 each, something he could settle without notifying the bank - but in a manner that would be acceptable to it.
But after finding the liens, Cranwell wrote letters to the New York bank that said there were no liens on the property, and requested that the bank send the next monthly installment of the $2.5 million loan.
Richard Yerger, vice president and divisional manager for Pioneer, testified Wednesday that had the company known of the liens, it would have reviewed Long's finances to determine if the loan was still in good standing.
The bank paid $884,000 on the loan before eventually foreclosing on the project.
Although admitting that they found relatively small liens, Cranwell and members of his law firm said they had no knowledge of a debt Long owed to Moore's Building Supplies that totaled more than $400,000.
A lien later was filed by Moore's for about $290,000.
The jury deliberated for more than five hours before reaching a verdict about 7:15 p.m. Friday. Cranwell declined to comment as he left the courtroom.
Although there is the possibility of an appeal, the verdict at least temporarily ends a hotly contested legal dispute that has lasted almost as long as Cranwell's tenure in the House.
After hearing several days of testimony in a 1985 trial, a substitute judge in Roanoke Circuit Court granted a request to dismiss the suit after Pioneer's evidence had been presented.
But in 1988, the Virginia Supreme Court ruled that the issues raised should have been decided by a jury. It sent the case back for a new trial.
by CNB