Posts Tagged ‘legal malpractice’

Disappointed Heirs Not Permitted to Make Claim Against Dad’s Lawyers

JANUARY 25, 2016 VOLUME 23 NUMBER 4

Like a lot of Americans, Fred Brown (though that’s not his real name) had a complicated family life. He had been married twice, and had two daughters — Martha and Sally — from his first marriage. He was still married to Barbara, and she had two children from her first marriage (Patty and Richard). Fred needed to do estate planning, and he did — he hired a Colorado law firm to prepare his will.

The will his lawyer wrote for him followed his wishes: it left the condominium he and Barbara lived in to Barbara, and a $10,000 bequest to each of the four children (both his and Barbara’s). Everything left over after that would go into two trusts for Barbara’s benefit; on her death, the trusts would be equally divided among the four children.

Fred died in 2003, and Barbara hired her husband’s lawyers to handle the probate. Fred’s daughters Martha and Sally asked about their inheritances, and the law firm told them that they would each receive their $10,000 and that they would share the money in the trusts on Barbara’s death. The lawyers also told Martha and Sally that they represented Barbara, not the whole family, and that if Martha and Sally had any questions about the probate they should get their own legal advice.

Barbara properly established the trusts called for in Fred’s will; they totaled just under $1 million in value. She also hired the same lawyers to prepare her will, which left her condo to her daughter Patty and the rest of her estate to Patty, Martha and Sally.

When Barbara died in 2009, Martha and Sally were upset that they did not receive an equal share of the condominium once owned by their father. They complained that Patty had ended up with about 70% of Barbara’s assets, while they each received only about 15% (it apparently did not bother them that Richard did not receive anything from his mother’s estate). They acknowledged that they would still share the remainder in the trust established under Fred’s will, but objected that Patty would get about $3.2 million in total inheritances from Fred and Barbara, while they would only receive a little under $1 million each.

Martha and Sally sued the law firm that had prepared Fred’s estate plan, alleging that the lawyers had committed malpractice by not ensuring that Fred’s wishes were carried out. They also complained that the lawyers had failed to disclose all the information about the property ownership they had needed to protect their alleged right to receive a share of Barbara’s inheritance on her death.

After a series of motions, the trial court dismissed Martha and Sally’s lawsuit. The judge ruled that even if they could prove that a mistake had been made, Fred’s lawyer did not owe Martha and Sally any duty giving rise to a claim. The Colorado Court of Appeals affirmed the dismissal, and the state Supreme Court agreed to review the entire matter.

The Colorado Supreme Court upheld the dismissal of Martha and Sally’s claim. Colorado strictly applies the doctrine of “privity” to prevent lawsuits against lawyers by non-clients in most circumstances, and these facts did not persuade the state’s high court to modify its rules. Besides, as the Supreme Court Justices noted, it looks like Fred got exactly what he wanted: his home went to his wife, $10,000 went to each child on his death, and the rest of his estate stayed in trusts that got divided into four equal shares on his widow’s later death. Baker v. Wood, Ris & Hames, Professional Corporation, January 19, 2016.

Would a similar case be dismissed in Arizona, as it was in Colorado? The answer is uncertain. Arizona does not have cases expressly upholding, modifying or rejecting the “privity” doctrine. A growing body of law across the country indicates a general move toward higher liability for attorneys, but it is not clear whether that trend will likely come to Arizona.

Should Fred’s lawyers have been liable to Martha and Sally? Not if they followed Fred’s wishes, regardless of how unhappy his daughters might have been. The difficulty in such a case would be to establish with clarity what Fred wanted. Did he clearly contemplate what might happen between his own death and the death of Barbara six years later — and of course Fred did not know with certainty that he would die first, much less how long Barbara might survive him.

This is one of the challenges we face when counseling clients about estate planning. Married couples may be able to imagine what might happen after the death of the first spouse to die, but neither spouse is likely to have contemplated what their survivor’s life might look like six, or ten, or twenty years after the death of the first spouse. It’s impressive, actually, that Fred and Barbara got as much right as they did — many widows in Barbara’s situation might begin to modify the disposition of their assets more quickly than the six years Barbara left things (more or less) as they were.

Lawyer Has Responsibility to Monitor Conservatorship Administration

OCTOBER 27, 2014 VOLUME 21 NUMBER 39

Guardianship (of the person) and conservatorship (of the estate) cases pose special problems for lawyers. Usually, a lawyer involved in such a case will have responsibilities to several different persons. To name three obvious choices, the lawyer will have duties to: the guardian or conservator the lawyer represents; the ward or protected person subject to the proceedings; and the court itself. State law varies as to how the responsibilities are divided, and what the lawyer’s duty actually is — especially when the guardian / conservator misbehaves. But there is little doubt that there is significant responsibility for the lawyer to oversee the actual administration of the guardianship or conservatorship.

A recent California Court of Appeals case describes the dilemma facing lawyers in conservatorship cases. When Deborah Delmonico (not her real name) became ill, her son Daniel hired Alameda County attorney Monica Dell’Osso to help him get control of her assets. Deborah had already signed a revocable living trust (naming Daniel as successor trustee), and most of her assets were titled to that trust. Ms. Dell’Osso filed a petition to get Daniel appointed as conservator of both the estate and person of Deborah (in California, conservatorship of the person is equivalent to what we in Arizona would call guardianship of the person). No court action was required with regard to the trust; Daniel just took over managing trust assets.

In an apparent attempt to save costs and simplify administration, Ms. Dell’Osso asked the court to waive any requirement of a bond for the conservatorship of the estate. She argued that there were no assets outside the trust, and that the trust did not require court supervision (or bonding). The court agreed, and Daniel was appointed conservator of his mother’s person and estate, without any requirement of bond.

As it turned out there were assets outside the trust — extensive real estate holdings and several  Individual Retirement Accounts, at least. The total value of assets in Deborah’s name individually exceeded $1 million. According to the later complaint filed with the conservatorship court, Ms. Dell’Osso not only knew about those assets, but her office helped Daniel to collect them and administer them. She never told the probate judge about the extensive individual holdings, and so they were never court-controlled or subjected to a bonding requirement.

Eventually, Daniel simply took a million dollars worth of assets from his mother’s conservatorship estate. Once the probate court learned of his misappropriation he was removed, and a professional fiduciary was appointed to take over Deborah’s estate.

The professional fiduciary filed a lawsuit against Daniel for conversion of his mother’s property and for elder abuse. She also sued Ms. Dell’Osso for legal malpractice, arguing that she had a responsibility to Deborah and the court to inform them of the assets outside the trust, and to oversee Daniel’s administration as conservator.

Ms. Dell’Osso moved for dismissal of the complaint, making these two arguments (in addition to others not relevant here):

  1. Since she represented Daniel, she argued that the successor conservator could not sue her for malpractice — only her actual client (Daniel) would have a cause of action against her.
  2. Even if the new conservator could sue her, they would stand in Daniel’s shoes — and because Daniel had himself misbehaved, he could not have brought an action against her. Hence, the malpractice lawsuit would fail.

The trial judge agreed, and dismissed the lawsuit against Ms. Dell’Osso. The California Court of Appeals reversed that decision and sent the case back for a trial on the merits.

First, the appellate court ruled that a successor conservator can sue the prior conservator’s attorney for malpractice — at least under California law (the answer may differ in other jurisdictions). This is different from the circumstance where a family member, or intended beneficiary of a trust or estate plan (to cite two common examples) is attempting to sue the attorney for malpractice in representation of the original client.

In this case, according to the court, the successor conservator essentially stands in the original client’s shoes, and can bring the malpractice lawsuit. In fact, the court takes this analogy one step further and notes that the attorney’s confidential communications with the prior conservator will not be privileged as to the successor conservator — the professional fiduciary in this case holds the privilege, and can ask Ms. Dell’Osso about her conversations and correspondence with Daniel.

Second, the appellate court strikes down any argument that the professional fiduciary is restricted by her predecessor’s bad actions. While the court agrees that (under California law, at least) Daniel would not be able to sue for malpractice because of his own misbehavior, that restriction does not extend to his successor. In this sense she does not stand in the prior conservator’s shoes.

Two observations by the Court of Appeals seem particularly apt. One is that “an individual who is a fiduciary wears two distinct and separate hats — one as a fiduciary and one as an individual….” This complicates the relationship between a fiduciary and his or her lawyer, since the lawyer is often wearing (to continue the analogy) as many as four hats: one as attorney for the fiduciary individually, another as attorney for the fiduciary as fiduciary, a third as a protector of the interests of the subject of the proceedings, and a final hat as representative of the court and legal system.

On a very practical level, the court decision notes that any other outcome would make a successor conservator’s job impossible. “[W]hy would any competent individual agree to take over as a successor fiduciary if he or she were tarred with and shackled by the malfeasance of a prior fiduciary?” asks the court. The opinion’s answer: the successor fiduciary is not so restrained. Stine v. Dell’Osso, October 17, 2014.

Would the Stine case be decided the same way in Arizona? Probably, though there is a recent change in the law that makes it less than completely clear. Arizona’s Court of Appeals decided the landmark case of Fickett v. Superior Court in 1976, which clearly would have created a potential liability for the attorney for a conservator. Recent changes in Arizona statutes muddy the question somewhat, but probably not enough to prevent the imposition of liability in facts like these.

Disinherited Sister Has No Claim Against Brother’s Lawyer

AUGUST 9, 1999 VOLUME 7, NUMBER 6

Walter Heine never married and never had children. His closest relative was his sister, Alma Francis. In 1987, after Mr. Heine suffered a stroke, the Minnesota courts appointed a conservator to handle his money. Before his stroke, Mr. Heine had never gotten around to making out a will. Beginning four years after the conservator was appointed, he changed that.

Mr. Heine first met Linda Resick when she waited on him at a delicatessen he frequented. In 1991, Ms. Resick referred Mr. Heine to a lawyer she knew, and shortly thereafter he signed the first of three wills he would execute before his death.

That first will left all of Mr. Heine’s estate to his church. The second will left $20,000 to Ms. Resick and the balance to the church. The third and final will left everything to Ms. Resick. When Mr. Heine died the last will was filed for probate.

If Mr. Heine had never signed a will, his sister Alma Francis would have received his entire estate. Reasoning that he had a conservator at the time, and therefore he was incompetent, Ms. Francis challenged the wills.

After negotiations between the two women, they agreed that Ms. Resick (the waitress) should receive $80,000 of Mr. Heine’s estate, with the balance going to Ms. Francis. Once that matter, was settled, Ms. Francis made a claim against the lawyer who drafted the three wills, LaMar Piper.

Ms. Francis argued that Mr. Piper should have been able to see that Mr. Heine was incompetent, particularly in light of the fact that a conservator had been appointed. It was malpractice, she argued, for Mr. Piper to prepare a will for her brother when he was so clearly incompetent. She sought to recover the $80,000 she had agreed to pay to Ms. Resick from the lawyer.

Mr. Piper argued that Ms. Francis was not his client, and he owed no duty to protect her from any damages he might cause even if he had committed malpractice. The client was Walter Heine, and Mr. Heine had not been injured by the legal representation, regardless of how his surviving sister saw the issue. Mr. Piper asked that the lawsuit be dismissed, and the trial judge did just that. Ms. Francis then appealed.

The Minnesota Court of Appeals agreed that Mr. Piper owed no duty to Ms. Francis. She might be able to bring an action, ruled the justices, if she could show that Mr. Heine intended to benefit her and that Mr. Piper’s actions somehow frustrated that intent; in this instance the opposite was clearly the case, since the evidence indicated Mr. Heine knew the wills would prevent his sister from receiving any portion of the estate. Francis v. Piper, August 3, 1999.

Mr. Heine’s case raises two interesting questions:

1. Can a person write a will, even if a guardian or conservator has been appointed? The answer is a very strong “maybe.” The specifics of each case will determine the capacity of the ward to write a will, but most states make it clear that having a guardian or conservator does not prevent one from writing a valid will. Arizona has specifically agreed with that principle.

2. Can a disinherited relative sue the lawyer for preparing an allegedly invalid will? In most states, no. The requirement that the disinherited person be the “intended beneficiary” of the legal representation will be very hard to overcome. Arizona law is unsettled on this point.

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