Glover v. Southard , 18 Brief Times Rptr. 1827 ( 1994 )

Opinion by

Judge HUME.

Plaintiffs, Lavern and Athlyn Glover, appeal the trial court’s judgment dismissing with prejudice their complaint against defendant, William Southard, for failure to state a claim. We affirm.

Defendant, an attorney employed by a Greeley bank, drafted a trust agreement by which a settlor designated a non-profit corporation as sole residual beneficiary to the trust corpus which included most of settlor’s property. The agreement named the bank as trustee.

Two months later, defendant drafted a codicil to the settlor’s previously executed will to add a bequest of a sum of money to plaintiffs.

Five months after the trust’s creation, the settlor told a bank trust officer that she wished to leave her entire estate to plaintiffs. The trust officer contacted defendant who, without discussing the proposed change with the settlor, drafted an amendment to the trust agreement. The revision provided that all of the trust assets should be distributed to plaintiffs upon settlor’s death. Defendant did not revise the settlor’s will to make it consistent with the terms of the trust.

After the settlor’s death, in settlement of a dispute about the validity of the trust, plaintiffs relinquished their rights under the trust instrument in exchange for a cash settlement. They then initiated a malpractice action against defendant for his failure to amend the settlor’s will to conform to the amended trust.

Acting pursuant to defendant’s C.R.C.P. 12(b)(5) motion, the trial court ruled that plaintiffs lacked standing to assert a claim against defendant and, accordingly, dismissed the malpractice action.

Plaintiffs contend that third parties do have standing to bring an independent action for attorney malpractice if, as here, they are the intended beneficiaries of a negligently drafted testamentary instrument. We disagree.

In passing upon a motion to dismiss a complaint, a court may consider only matters stated therein and must not go beyond the confines of the pleading. In reviewing the action of a trial court in dismissing for failure to state a claim, an appellate court is in the same position as the trial court. McDonald v. Lakewood Country Club, 170 Colo. 355, 461 P.2d 437 (1969).

Material allegations of the complaint are deemed admitted. The motion should be granted only if it appears that plaintiff would not be entitled to relief under the facts pleaded. Davidson v. Dill, 180 Colo. 123, 503 P.2d 157 (1972).

An attorney must act in his Ghent’s best interest and is not hable to a third party absent conduct that is fraudulent or malicious. Hill v. Boatright, 890 P.2d 180 (Colo. App.1994). See Klancke v. Smith, 829 P.2d 464 (Colo.App.1991) (attorney for spouse in wrongful death action owed no duty to decedent’s children); Schmidt v. Frankewich, 819 P.2d 1074 (Colo.App.1991) (absent fraud or malicious conduct, attorney for corporation not hable to shareholders or guarantors of corporation); McGee v. Hyatt Legal Services, Inc., 813 P.2d 754 (Colo.App.1990) (law firm representing a mother in a custody action had no duty to child); In re Estate of Brooks, 42 Colo.App. 333, 596 P.2d 1220 (1979) (attorney for trustee not hable to aheged beneficiary for alleged breach of trust).

The rule that an attorney’s habihty to third parties is strictly limited rests upon three pubhe pohcy bases: the protection of the attorney’s duty of loyalty to and effective advocacy for his or her client; the nature of the potential for adversarial relationships between the attorney and third parties; and the attorney’s potential for unhmited habihty if his duty of care is extended to third parties. Schmidt v. Frankewich, supra.

This court has ruled that a third party may assert a claim for neghgent misrepresentation against a professional engineer who supplied false information to a prospective home buyer, Wolther v. Schaarschmidt, 738 P.2d 25 (Colo.App.1986), and it has also broadened the scope of attorney malpractice habihty as well, extending it to non-client third parties under a few narrow exceptions.

A division of this court reversed the dismissal of an investor’s claim for neghgent misrepresentation against an attorney who misstated material facts in an opinion letter issued to potential investors knowing they would hkely rely upon them. Central Bank Denver v. Mehaffy, Rider, Windholz & Wilson, 865 P.2d 862 (Colo.App.1993). Another division of this court concluded that a bankruptcy trustee stated a claim for restitution of fees improperly obtained by attorneys for a debtor’s adversary. Berger v. Dixon & Snow, P.C., 868 P.2d 1149 (Colo.App.1994).

However, in an appeal challenging a dismissal of another malpractice claim against defendant under the instruments involved here, a division of this court refused to extend a duty of care in favor of a non-profit corporation whose interest under the trust was eliminated in favor of plaintiffs. In that case, the plaintiff corporation could not allege that inconsistencies between the settlor’s will and the trust instrument reflected an unequivocal intent to benefit it at settlor’s death. Instead, the last instrument executed by the settlor facially evinced a contrary intent. This court refused to impose a duty upon the attorney in favor of the corporation to question or challenge the settlor’s testamentary capacity at the time she amended the trust eliminating the corporation as a beneficiary. See Shriners v. Southard, 892 P.2d 417 (Colo.App.1994).

A.

Plaintiffs urge that we follow foreign authorities such as those referenced in Annot., 61 A.L.R.4th 615 (1988) that impose a duty of care upon lawyers in favor of beneficiaries named in testamentary instruments that they draft. We decline to do so.

Whether a legal duty is owed a plaintiff as well as the scope of such duty are questions of law which the court must decide. Perreira v. State, 768 P.2d 1198 (Colo.1989). The court’s conclusion as to the existence of duty is an expression of the sum total of those considerations of policy which lead the law to say the plaintiff is or is not entitled to protection. University of Denver v. Whit-lock, 744 P.2d 54 (Colo.1987).

Although the court may consider a variety of relevant factors in reaching its decision, the question becomes one of fairness under a contemporary standard: would a reasonable person recognize and agree that a duty of care exists? Perreira, supra.

We conclude that, under the operative facts pleaded in this case, an attorney’s duty of care should not be extended to third parties. Hence, plaintiffs failed to state a claim under a tort theory of recovery.

B.

Additionally, third-party contract principles do not automatically extend an attorney’s liability to the beneficiaries of a testamentary document.

A person not party to an express contract may bring an action on such contract if the parties to the agreement intended to benefit the third party, provided that such benefit is direct and not merely incidental. Jefferson County School District v. Shorey, 826 P.2d 830 (Colo.1992). The intent to benefit must be apparent from the agreement terms, the surrounding circumstances, or both. E.B. Roberts Construction Co. v. Concrete Contractors, Inc., 704 P.2d 859 (Colo. 1985).

Although some jurisdictions have concluded that a third party may have a cause of action as an intended third-party beneficiary of the contract between the testator and the attorney to draft a will, the drafter’s liability is premised on a finding that the attorney failed to carry out the testator’s intent, thus causing a reduction in or loss of an intended beneficiary’s interest. Ventura County Society for the Prevention of Cruelty to Children & Animals, Inc. v. Holloway, 40 Cal.App.3d 897, 115 Cal.Rptr. 464 (1974). See also De-Maris v. Asti, 426 So.2d 1153 (Fla.App.1983).

Thus, a testamentary beneficiary has no cause of action for breach of contract against the testator’s attorney for alleged negligence in drafting a valid testamentary instrument so long as the document accurately reflects the testator’s intent. See Schreiner v. Scoville, 410 N.W.2d 679 (Iowa 1987); Kirgan v. Parks, 60 Md.App. 1, 478 A.2d 713 (1984).

If the language is plain and unambiguous, extrinsic evidence is inadmissible to show testator’s intent was other than that disclosed in the instrument. Kirgan v. Parks, supra.

Here, the codicil to settlor’s will includes a specific devise to plaintiffs and designates another entity as residual beneficiary. The trust agreement names plaintiffs as beneficiaries of the residual trust assets.

And, although the will and trust instruments treat the disposition of residuary assets differently, neither document identifies a common scheme or plan in regard to any of the named beneficiaries, including plaintiffs. In addition, both the will and trust agreement contain gifts to numerous beneficiaries, all of whom possess interests which potentially conflict with those of the settlor and among the named beneficiaries. Nor do plaintiffs assert that they relied on the devises contained within the documents, or that defendant knew or should have known of any such reliance. Moreover, here, by accepting money in lieu of attempting to enforce the terms of the instrument, the plaintiffs elected not to litigate to conclusion the validity of the trust or the issue whether it expressed the settlor’s intent.

We conclude, as a matter of policy, that it is in the public’s best interest to protect attorneys from potentially unlimited liability to third parties whose interests may interfere with the attorney’s ability to fulfill the duties of undivided loyalty and advocacy owed to his or her client. See Schmidt v. Frankewich, supra; Montano v. Land Title Guarantee Co., 778 P.2d 328 (Colo.App.1989). Thus, in drafting testamentary instruments at the behest of a client, an attorney should not be burdened with potential liability to possible beneficiaries of such instruments.

Hence, under the circumstances of this case, plaintiffs failed to state a claim against defendant under either tort or contract principles, and thus, the trial court properly entered judgment of dismissal with prejudice.

The judgment is affirmed.

PLANK, J., concurs. CASEBOLT, J., dissents.