Summary
concluding that a beneficiary of an estate who is in privity with the fiduciary of the estate may sue in legal practice the attorney who, subsequent to the decedent's death, provided legal services for the fiduciary
Summary of this case from Lutz v. BalchOpinion
No. 88-923
Submitted April 26, 1989 —
Decided August 2, 1989.
Attorneys at law — Malpractice — Beneficiary whose interest in an estate is vested is in privity with the fiduciary of the estate — Attorney for fiduciary liable to vested beneficiaries for malpractice, when.
O.Jur 3d Malpractice § 12.
A beneficiary whose interest in an estate is vested is in privity with the fiduciary of the estate, and where such privity exists the attorney for the fiduciary is not immune from liability to the vested beneficiary for damages arising from the attorney's negligent performance. ( Scholler v. Scholler, 10 Ohio St.3d 98, 10 OBR 426, 462 N.E.2d 158, followed; Simon v. Zipperstein, 32 Ohio St.3d 74, 512 N.E.2d 636, distinguished.)
APPEAL from the Court of Appeals for Montgomery County, No. 10615.
This case concerns the administration of the estate of Una V. Simmons. Simmons died testate. In Item II of her will, she devised a life estate in a parcel of real property "* * * to my husband, James O. Simmons, absolutely and in fee simple, with a remainder to * * * [others] absolutely and in fee simple." Una Simmons also named her husband, James O. Simmons, as executor of the estate.
Simmons, in his capacity as executor, retained Albert J. Wagner of Hyatt Legal Services to assist in the administration of the estate. Subsequently, Wagner (and Hyatt Legal Services) caused a certificate of transfer to be recorded which transferred the devised real estate to Simmons in fee simple.
Four of the remaindermen mentioned in Una Simmons' will were Una's nephews and niece. These four, Roy S. Elam, William T. Elam, Nicholas C. Elam and Diana L. Roseboom, appellants herein, objected to the transfer of the real estate to Simmons in fee simple.
In furtherance of their objections, appellants retained, in 1985, attorney J. Gordon Rudd to protect appellants' rights as remaindermen. Rudd contacted Wagner seeking the recording of a corrected certificate of transfer. Wagner declined, as he no longer worked for Hyatt Legal Services and no longer represented Simmons. In deposition testimony, Rudd asserted that he eventually negotiated a settlement with Simmons' successor attorney whereby a certificate of transfer would be recorded granting Simmons a life estate in the real property and, in addition, the agreement gave Simmons an option to purchase the remainder interests of the appellants.
Subsequently, Rudd, on appellants' behalf, initiated correspondence with Hyatt Legal Services in an attempt to collect from Hyatt damages arising from Hyatt's alleged negligent handling of the Simmons estate. Correspondence from Hyatt acknowledged that Hyatt had failed to properly prepare and record the certificate of transfer. Hyatt's only response, however, to Rudd's claim for damages was to send Rudd a check for the amount the estate had paid to Hyatt for representing the fiduciary and the estate.
There is no explanation, nor is it clear, why Hyatt assumed it had any authority to send Rudd a check for the fee Hyatt had received for representing the estate of Una Simmons — especially since Hyatt's check was made payable to the estate.
Appellants ultimately brought suit against Hyatt and Wagner, seeking damages for Hyatt's and Wagner's negligence in transferring the decedent's real estate to James O. Simmons in fee simple, while ignoring the interests of the remaindermen. Following discovery, appellants and appellees filed motions for summary judgment. The trial judge granted appellees' motion.
The court held that appellees represented Simmons in his capacity as executor. The court further held that no privity existed between Simmons, as executor, and appellants, devisees under the will. Citing Scholler v. Scholler (1984), 10 Ohio St.3d 98, 10 OBR 426, 462 N.E.2d 158, the court stated that this lack of privity meant that appellees were not responsible to appellants for their (appellees') actions.
The trial court also noted that, even if it was assumed that both Simmons and appellees had committed a tort against appellants, appellants still could not recover from appellees. The court held that Simmons and appellees were in pari delicto. Therefore, settlement with one tortfeasor operated as a settlement with the other tortfeasor. Accordingly, the court held that appellants' negotiated settlement with Simmons also served as a settlement with appellees.
On appeal, the court of appeals noted that the privity requirement had been reaffirmed in Simon v. Zipperstein (1987), 32 Ohio St.3d 74, 512 N.E.2d 636, and affirmed the judgment of the trial court.
This cause is now before this court upon the allowance of a motion to certify the record.
Cox Chappars and Timothy S. Chappars, for appellants.
John D. Smith and Leslie S. Landen, for appellees.
The issue before this court is whether appellants, as remaindermen, may maintain a cause of action against appellees. We agree with the trial court that the holding in Scholler, supra, controls. Paragraph one of the syllabus in Scholler states:
"An attorney is immune from liability to third persons arising from his performance as an attorney in good faith on behalf of, and with the knowledge of his client, unless such third person is in privity with the client or the attorney acts maliciously."
Our holding differs from that of the trial court, however, because we find that the remaindermen were in privity with the executor of the estate. Accordingly, appellees, as attorneys for the executor, are not immune from liability to appellants.
It is the duty of a fiduciary of an estate to serve as representative of the entire estate. Such fiduciary, in the administration of an estate, owes a duty to beneficiaries to act in a manner which protects the beneficiaries' interests. We believe that this duty places the beneficiaries in privity with the executor.
The principle that a fiduciary of an estate owes a duty to the estate's beneficiaries is shared by other jurisdictions. The court in In re Estate of Larson (1985), 103 Wn.2d 517, 520-521, 694 P.2d 1051, 1054, stated:
"* * * In probate, the attorney-client relationship exists between the attorney and the personal representative of the estate. * * * The personal representative stands in a fiduciary relationship to those beneficially interested in the estate. He is obligated to exercise the utmost good faith and diligence in administering the estate in the best interests of the heirs. * * *" (Citations omitted.) (Emphasis added.)
See, also, Estate of Bosico (1980), 488 Pa. 274, 412 A.2d 505; In re Estate of Corbin (Fla.App. 1980), 391 So.2d 731; Robbins v. Natl. Bank of Georgia (1978), 241 Ga. 538, 246 S.E.2d 660; Dickerson v. Union Natl. Bank of Little Rock (1980), 268 Ark. 292, 595 S.W.2d 677.
At first blush, today's holding would seem to contradict this court's holding in Simon v. Zipperstein, supra. This court stated in Zipperstein that no attorney malpractice action was maintainable because "* * * privity was lacking since appellee, as a potential beneficiary of his father's estate, had no vested interest in the estate. * * *" (Emphasis added.) Id. at 77, 512 N.E.2d at 638. In the case before us, however, there is no doubt that the remaindermen's interests were vested. A beneficiary whose interest in an estate is vested is in privity with the fiduciary of the estate, and where such privity exists the attorney for the fiduciary is not immune from liability to the vested beneficiary for damages arising from the attorney's negligent performance.
We note without comment that, while the holding in Zipperstein, supra, was based largely on the fact that the person in question was only a potential beneficiary, a review of the facts seems to indicate that the person's interest was vested.
Finally, appellees also assert that the settlement purportedly reached between Simmons and appellants operated as an accord and satisfaction, thereby relieving appellees of any potential liability. Indeed, the trial court held that the purported settlement released appellees from liability.
However, the record before this court contains no evidence of any such settlement, save for a limited number of references to a settlement made by attorney Rudd in his deposition testimony. With such a scant record pertaining to settlement, we decline to decide whether any settlement between appellants and Simmons would effect a release of appellees' liability.
For the foregoing reasons, we reverse the judgment of the court of appeals and remand the cause to the trial court for further proceedings not inconsistent with this opinion.
Judgment reversed and cause remanded.
MOYER, C.J., SWEENEY, HOLMES, WRIGHT and RESNICK, JJ., concur.
H. BROWN, J., concurs in judgment.
I concur in the judgment reached by the majority, but for the reasons set forth in my dissent in Simon v. Zipperstein (1987), 32 Ohio St.3d 74, 77, 512 N.E.2d 636, 639. I do not believe that the concept of privity should be used for making decisions in tort law. Rather, the analysis should be made on the basis of "duty" and "foreseeability."