CHANG v. LEDERMAN









Filed 3/16/09






CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

MYUNG CHANG, Plaintiff and Appellant, v. GREGORY LEDERMAN, Defendant and Respondent.

B199813 (Los Angeles County Super. Ct. No. BC349105)

STORY CONTINUE FROM PART I….

b. Subsequent case law refining the duty of lawyers to intended beneficiaries
The Biakanja and Lucas principles, which originated in cases involving the negligent drafting or execution of wills, were extended to permit a suit by trust beneficiaries in Bucquet v. Livingston (1976) 57 Cal.App.3d 914. In Bucquet the beneficiaries of an inter vivos trust alleged the lawyer for the trustors (a husband and wife) had negligently included a general power of appointment in the trust, creating significant, unintended tax consequences that, following one of the trustors’ death, reduced the share of the trust ultimately received by the beneficiaries. (Id. at pp. 917, 920.) The Court of Appeal observed there was no rational basis for distinguishing a trust instrument and a will for purposes of recognizing the drafting lawyer’s duty of care to intended beneficiaries (id. at p. 922) and held the creation of the trust involved “was directly intended to affect the beneficiaries and the avoidance of federal estate tax and state inheritance tax was directly related to the amounts that [the husband] intended the beneficiaries to receive after [the wife’s] death.” (Id. at p. 923.)
In Garcia v. Borelli (1982) 129 Cal.App.3d 24 the beneficiaries (residual legatees) of a will alleged the lawyer for the testator, who was the father of one of the beneficiaries and the grandfather of the others, failed to adequately advise the testator to ensure that property, held only for convenience in joint tenancy with his second wife, would in fact be treated as community property following his death. Although the will itself declared the interests to be community property, the dispute between the second wife and the residual beneficiaries led to a settlement in the probate proceedings and then to the beneficiaries’ suit against the lawyer for the amount they surrendered because of the uncertainty regarding the form of title. The court held, “It is settled that intended beneficiaries of a will who lose their testamentary rights because of failure of the attorney who drew the will to properly fulfill his obligations under his contract with the testator may recover damages . . . on a tort liability for breach of duty owed directly to the beneficiaries.” (Id. at p. 32.)
A more recent appellate decision, Osornio, supra, 124 Cal.App.4th 304, recognized the right of an intended beneficiary, who was the care custodian of the testator, a dependent adult, to pursue a legal malpractice action against the attorney who drafted the testator’s will naming her as executor and sole beneficiary. The plaintiff had alleged the lawyer was negligent in failing to advise the testator that his intended beneficiary was a presumptively disqualified donee under Probate Code section 21350, subdivision (a)(6), and in failing to take appropriate measures to ensure the testator’s wishes were carried out by referring her to counsel to obtain a certificate of independent review under Probate Code section 21351, subdivision (b). (Osornio, at pp. 312-313, 329.) After a comprehensive review of California decisions considering legal malpractice claims by nonclients and balancing the Biakanja/Lucas factors, the Court of Appeal held, “The case before us is similar to other cases in which courts have imposed a duty of care upon attorneys where beneficiaries are deprived of intended transfers of property as a result of failed wills or trusts.” (Id. at p. 332.) With respect to the potential burden on the profession, the court explained, “Imposing liability in this instance would not compromise the attorney’s duty of undivided loyalty to the testator. The attorney’s duty here was to take appropriate action to carry out the testator’s wishes—that were expressed and formalized in her signed will—that her intended beneficiary, Osornio, inherit her entire estate.” (Id. at p. 336.)
In finding a duty of care to the intended beneficiary in Osornio, supra, 124 Cal.App.4th 304, our colleagues in the Sixth District distinguished their earlier decision in Radovich v. Locke-Paddon (1995) 35 Cal.App.4th 946 (Radovich), which it described as involving “the malpractice claim of a potential beneficiary identified in an unsigned will.” (Osornio, at p. 324, italics in original.) In Radovich the plaintiff had been named as an income beneficiary under a charitable remainder trust in a will drafted by the testator’s attorney. (Radovich, at p. 952.) The attorney delivered the draft will to the testator, who died approximately two months later without having signed it. (Ibid.) The plaintiff alleged the lawyer was negligent in failing to have his client properly execute the will prior to his death. (Id. at p. 953.) The Radovich court held the lawyer owed no duty of care to the potential beneficiary under these circumstances, reasoning that “imposition of liability in a case such as this could improperly compromise an attorney’s primary duty of undivided loyalty to his or her client, the decedent.” (Id. at p. 965; see Osornio, at p. 325.) The court further explained, “[W]e see both practical and policy reasons for requiring more evidence of commitment than is furnished by a direction to prepare a will containing specified provisions. From a practical standpoint, common experience teaches that potential testators may change their minds more than once after the first meeting. . . .^[[1]] From a policy standpoint, we must be sensitive to the potential for misunderstanding and the difficulties of proof inherent in the fact that disputes such as these will not arise until the decedent—the only person who can say what he or she intended—has died. Thus we must as a policy matter insist on the clearest manifestation of commitment the circumstances will permit.” (Radovich, at p. 964.)
The Osornio court emphasized this difference between the failed bequest in the case before it and the frustration of the potential beneficiary’s expectations in Radovich: “In that instance, there was no plain expression of the testator’s intention to benefit the plaintiff . . . . In contrast, here we have a clear expression of [the testator’s] intention that Osornio be her sole beneficiary under the signed 2001 Will.” (Osornio, supra, 124 Cal.App.4th at p. 336.) That is, to hold an attorney owed a duty of care not only to his or her testator client but also to an intended beneficiary, the testator’s intent must be “expressed and formalized in [a] signed will.” (Ibid.)
Similarly, the court in Ventura County Humane Society v. Holloway (1974) 40 Cal.App.3d 897, 903, concluded the absence of a formalized expression of the testator’s intent precluded recognition of a duty of care to a potential beneficiary: “[A]n attorney may be held liable to the testamentary beneficiaries only if the [Biakanja/Lucas] test is fully met, that is, if due to the attorney’s professional negligence the testamentary intent expressed in the will is frustrated and the beneficiaries clearly designated by the testator lose their legacy as a direct result of such negligence.” (Italics omitted.) In that case a lawyer had drafted a will, using information provided by the testator, with a substantial bequest to a nonexistent animal rights organization (“Society for the Prevention of Cruelty to Animals (Local or National)”. The court held the lawyer owned no duty to a class of potential beneficiaries (charities, including the Ventura County Humane Society) to establish the “true intention” of the testator, finding the allegation that the lawyer had negligently drafted the will using ambiguous and ineffectual language failed to allege “the crucial elements upon which [the lawyer’s] duty may be predicated.” (Id. at p. 906.) “[W]hen, as in the case at bench, the testamentary intent has been implemented, no good reason exists why the attorney should be held accountable for using certain words suggested or selected by the testator which later prove to be ambiguous. In addition, the task of proving whether claimed ambiguity was the result of negligence of the drafting attorney or whether it was the deliberate choice of the testator, would impose an insurmountable burden on the parties, since in such a case the trier of fact would be required to decide this crucial issue without the benefit of the testimony of the most important witness, the testator himself.” (Id. at p. 905; see Boranian v. Clark (2004) 123 Cal.App.4th 1012, 1019-1020 [“a lawyer who is persuaded of his client’s intent to dispose of her property in a certain manner, and who drafts the will accordingly, fulfills his duty of loyalty to his client and is not required to urge the testator to consider an alternative plan in order to forestall a claim by someone thereby excluded from the will (or included in the will but deprived of a specific asset bequeathed to someone else)”]; Moore, supra, 109 Cal.App.4th at p. 1302 [lawyer does not have duty to beneficiaries under a will to evaluate and ascertain the testamentary capacity of a client seeking to amend his or her will or to make a new will]; see also Hiemstra v. Huston (1970) 12 Cal.App.3d 1043 [son claimed properly executed will did not express his father’s true testamentary intentions; lawyer owed no duty to son to ascertain testator’s true intent].)
3. The Trial Court Properly Sustained the Demurrers to the Professional Negligence and Breach of Fiduciary Duty Claims Without Leave To Amend Because Lederman Owed No Duty of Care to Chang As the Potential Beneficiary of a Greater Share of His Client’s Trust Estate
As discussed in the preceding section, California decisions recognize an enforceable duty of care in cases involving a negligently drafted or executed testamentary instrument when the plaintiff was an expressly named beneficiary of an express bequest—in the words of the Lucas Court, a duty of care “to the beneficiaries injured by a negligently drawn will.” (Lucas, supra, 56 Cal.2d at p. 589.) In each of those cases the wills or trusts did not fail because of any defect in the expression of the testator’s intent, but because of some failure either in other language of the instrument or in the circumstances of its execution. (See, e.g., Biakanja, supra, 49 Cal.2d 647 [will failed because of improper attestation]; Lucas, at pp. 587, 592 [bequest arguably failed because it violated rule against perpetuities ]; Heyer v. Flaig, supra, 70 Cal.2d 223 [bequest failed because attorney did not provide for effect of testator’s later marriage]; Garcia v. Borelli, supra, 129 Cal.App.3d 24 [bequest failed because testator’s declaration in will regarding nature of his property was insufficient]; Bucquet v. Livingston, supra, 57 Cal.App.3d 914 [marital deduction technique failed]; Osornio, supra,124 Cal.App.4th 304 [bequest challenged because there was no certificate of independent review as to the caregiver-beneficiary].)
Conversely, when the claim—as here—is that a will or trust, although properly executed and free of other legal defects, did not accurately express the testator’s intent, no duty or liability to the nonclient potential beneficiary has been recognized. That is, where there is a question about whether the third-party beneficiary was, in fact, the decedent’s intended beneficiary—where intent is placed in issue—the lawyer will not be held accountable to the potential beneficiary. (Boranian v. Clark, supra, 123 Cal.App.4th at pp. 1012, 1017; see id. at pp. 1018 [“liability to a third party will not be imposed where there is a substantial question about whether the third party was in fact the decedent’s intended beneficiary”], 1019-1021 [no duty owed to potential beneficiary to determine testator’s testamentary capacity]; Moore, supra, 109 Cal.App.4th at pp. 1298-1307 [same]; Radovich, supra, 35 Cal.App.4th at pp. 955-966 [no duty owed to named beneficiary to get will finalized and signed].)
To be sure, accepting as true the factual allegations of the second amended complaint, as we must, at least four of the six Biakanja/Lucas factors point toward extending Lederman’s duty of care to include Chang.[2] Thus, Chang has alleged, following their marriage in August 2004, Schumert advised Lederman of his desire to leave his entire estate to Chang and instructed Lederman to prepare a further amendment to the Raphael Schumert 2004 Revocable Trust to that end—indicating both the transaction at this point was intended to directly affect Chang (the first factor) and it was plainly foreseeable Lederman’s failure to exercise due care in carrying out Schumert’s instructions would harm Chang (the second factor). Chang has also alleged she suffered injury as a result of Schumert’s negligence (the third factor); and from the allegations in her complaint there appear to be no intervening circumstances that might have broken the causal connection between Lederman’s conduct and Chang’s damage (the fourth factor). The policy of preventing future harm, the fifth factor, is less clear, given the absence of an express bequest of the entire estate to Chang; but accepting her allegations, imposing a duty of care enforceable by the prospective beneficiary under these circumstances would arguably encourage a higher quality of legal practice by counsel representing testators, settlors and other clients making donative transfers.
The difficulty, of course, is that any disappointed potential beneficiary—even a total stranger to the testator—could make factual allegations similar in most respects to those in the second amended complaint; and, without requiring an explicit manifestation of the testator’s intentions, the existence of a duty—a legal question— would always turn on the resolution of disputed facts and could never be decided as a matter of law. If a complaint alleges the decedent intended to benefit the plaintiff and the lawyers responsible for the decedent’s estate plan were aware of that intent, no more would be required to survive a demurrer.
For this reason, we conclude, as have the other appellate courts to consider a similar issue, the sixth factor—whether extension of liability would “impose an undue burden on the profession” (Lucas, supra, 56 Cal.2d at p. 589)—mandates rejection of the argument that estate planners owe a duty of care to unnamed potential beneficiaries. (See Boranian v. Clark, supra, 123 Cal.App.4th at pp. 1012, 1017; Moore, supra, 109 Cal.App.4th at pp. 1298-1307; Radovich, supra, 35 Cal.App.4th at pp. 955-966.) Without a finite, objective limit on the identity of individuals to whom they owe a duty of care, the burden on lawyers preparing wills and trusts would be intolerable.
Chang purports not to disagree with this analysis limiting a lawyer’s duty of care to nonclients in these situations to expressly named beneficiaries of express bequests, but asserts she was, in fact, such an expressly named beneficiary because she was identified as the recipient of a $15,000 gift in the executed amended trust. As a result of her status as a named intended beneficiary, Chang contends Lederman owed her a duty of care not only with respect to the $15,000 gift itself but also as to Schumert’s proposed revision of his estate plan to bequeath to her his entire estate located in the United States.[3] Chang’s argument fundamentally misapprehends the limited exception to the strict privity requirement for legal malpractice cases created in Lucas and applied in subsequent appellate decisions.
As discussed, in Lucas, supra, 56 Cal.2d at page 589 the Supreme Court recognized only the potential liability of a lawyer to “beneficiaries of wills negligently drawn by attorneys,” concluding that “the extension [his] liability to beneficiaries injured by a negligently drawn will does not place an undue burden on the profession.” (Ibid.) That is, Lucas did not recognize a general duty of care enforceable either by all potential third-party beneficiaries or, as Chang suggests, by intended beneficiaries once expressly named in a will, but rather a limited duty, enforceable by the intended beneficiary, to exercise ordinary care and skill to properly effectuate a bequest expressly set forth in the testamentary document. As the Court explained in Heyer v. Flaig, supra, 70 Cal.2d at page 229, “[a]lthough the duty accrues directly in favor of the intended testamentary beneficiary, the scope of the duty is determined by reference to the attorney-client context.” That duty is simply “to act with due care as to the interests of the intended beneficiary” as reflected in a failed or challenged will or trust. (Ibid.; accord, Ventura County Humane Society v. Holloway, supra, 40 Cal.App.3d at p. 903 [attorney’s duty to testamentary beneficiaries limited to competently implementing testamentary intent expressed in will].)
The limited nature of the duty of care owed to intended beneficiaries expressly named in a testamentary document was explained in Moore, supra, 109 Cal.App.4th 1287, which involved a legal malpractice action filed by five adult children against the attorney who had prepared and then amended their deceased father’s estate planning documents. The estate plan as it existed by virtue of 1999 amendments prepared by the attorney, in accordance with the father’s wishes, made sizeable gifts to eight of his children (including the five plaintiffs) but did not include any bequest to the ninth child, Michael. The father became terminally ill by June 2000 and, according to the complaint for malpractice, lacked the capacity to know or understand his estate plan. Nevertheless, the attorney prepared new estate planning documents that fundamentally changed the plan and made a substantial gift to Michael. The father died shortly after executing the amendments to his trusts and a new will. (Moore, at pp. 1291-1292.) Litigation ensued, followed by a settlement pursuant to which the children other than Michael were awarded only a portion of what they would have received under the plan as it had existed in September 1999. In their malpractice action the plaintiffs alleged the lawyer had breached his duty of care to effectuate his client’s intent to benefit the eight children who were the express beneficiaries of the September 1999 estate planning documents by failing to determine their father’s testamentary competence at the time the June 2000 revisions were made and executed. (Id. at pp. 1291-1292.)
After reviewing Lucas, Heyer and related appellate cases, the Moore court held the testator’s attorney owned no such duty to the beneficiaries named in the existing estate plan: “[A]n attorney preparing a will for a testator owes no duty to the beneficiary of the will or to the beneficiary under a previous will to ascertain and document the testamentary capacity of the client.” (Moore, supra, 109 Cal.App.4th at p. 1298.) Recognizing such a duty to the named beneficiaries, the court explained, would subject attorneys to “conflicting duties to different sets of beneficiaries” and place the testator’s attorney in the position of “potential liability to either the beneficiaries disinherited if the attorney prepares the will or to the potential beneficiaries of the new will . . . .” (Id. at p. 1299.) Yet that is precisely the result Chang argues for here—creating a general duty of care to intended beneficiaries, once named in a testamentary document, notwithstanding the impossible conflicting duties that would have been created between Chang and Schumert’s son Roy, who was expressly named as the primary beneficiary in the amended Raphael Schumert 2004 Revocable Trust. (See also Boranian v. Clark, supra, 123 Cal.App.4th at p. 1019 [“while out of an agreement to provide legal services to the testator, a duty also arises to act with due care with regard to the interests of the intended beneficiary, the scope of duty owed to the beneficiary is determined by reference to the attorney-client relationship”].)
Accordingly, we conclude a testator’s attorney owes no duty to a person in the position of Chang, an expressly named beneficiary who attempts to assert a legal malpractice claim not on the ground her actual bequest (here, the $15,000 gift) was improperly perfected but based on an allegation the testator intended to revise his or her estate plan to increase that bequest and would have done so but for the attorney’s negligence. Expanding the attorney’s duty of care to include actual beneficiaries who could have been, but were not, named in a revised estate plan, just like including third parties who could have been, but were not, named in a bequest, would expose attorneys to impossible duties and limitless liability because the interests of such potential beneficiaries are always in conflict. (See Moore, supra, 109 Cal.App.4th at p. 1299.) Moreover, the results in such lawsuits, if allowed, would inevitably be speculative because the claim necessarily will not arise until the testator or settlor, the only person who can say what he or she intended or explain why a previously announced intention was subsequently modified, has died. (Radovich, supra, 35 Cal.App.4th at p. 964; Ventura County Humane Society v. Holloway, supra, 40 Cal.App.3d at p. 905.)
Because Chang’s allegation she was the intended beneficiary of the entirety of Schumert’s estate is not based on an express bequest in an executed will or trust, Schumert owed her no duty of care. Her claims for both legal malpractice and breach of fiduciary duty fail as a matter of law.
4. The Trial Court Properly Sustained the Demurrer to the Claim for Intentional Infliction of Emotional Distress Without Leave To Amend
“The elements of a prima facie case of intentional infliction of emotional distress consist of: (1) extreme and outrageous conduct by the defendant with the intent to cause, or reckless disregard for the probability of causing, emotional distress; (2) suffering of severe or extreme emotional distress by the plaintiff; and (3) the plaintiff’s emotional distress is actually and proximately the result of defendant’s outrageous conduct.” (Conley v. Roman Catholic Archbishop (2000) 85 Cal.App.4th 1126, 1133; see Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 155, fn. 7.) Extreme and outrageous conduct is conduct that is “‘so extreme as to exceed all bounds of that usually tolerated in a civilized community’” (Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 1001) and must be “‘of a nature which is especially calculated to cause, and does cause, mental distress.’” (Cole, at p. 155, fn. 7.) “‘“[I]t is for the court to determine, in the first instance, whether the defendant’s conduct may reasonably be regarded as so extreme and outrageous as to permit recovery.”’” (Fowler v. Varian Associates, Inc. (1987) 196 Cal.App.3d 34, 44.)
Chang had never been Lederman’s client, and Lederman had no duty to provide legal advice to her simply because she was Schumert’s widow. (Hall v. Superior Court (2003) 108 Cal.App.4th 706, 713-714 [lawyer representing wife in wrongful death action arising from daughter’s death owed no duty to husband, who had never met with him, to discuss his legal rights; distinguishing Meighan v. Shore (1995) 34 Cal.App.4th 1025[4] as limited to situations in which both spouses consult with lawyer regarding their rights and there is no potential conflict of interest between them].) In light of these facts, none of the conduct alleged in the second amended complaint can reasonably be regarded as extreme or outrageous. The letter Lederman sent directing Chang to move from the Sherman Oaks residence, in his capacity as counsel for Hadar, the successor trustee, in connection with the administration of the Raphael Schumert 2004 Revocable Trust, was faithful to the express terms of the trust. Although Chang may have had some right to continued possession of the residence as Schumert’s surviving spouse under the homestead provisions of the Probate Code (see fn. 3, above), Lederman had no duty to advise her of those rights.
In addition, as the trial court held in sustaining the demurrer to this cause of action as alleged in the first amended complaint, Lederman’s letter to Chang directing her to leave the Sherman Oaks residence is absolutely protected under the litigation privilege codified in Civil Code section 47, subdivision (b), because it was sent to further the objectives of the probate proceedings initiated by Hadar. “The privilege ‘applies to any publication required or permitted by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is involved.’” (Jacob B. v. County of Shasta (2007) 40 Cal.4th 948, 955.) “‘[C]ommuncations with “some relation” to judicial proceedings’ are ‘absolutely immune from tort liability’ by the litigation privilege. [Citation.] It is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.” (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057; see Steiner v. Eikerling (1986) 181 Cal.App.3d 639, 642-643 [litigation privilege applies to communicative acts in connection with probate proceedings].) Lederman’s letter, the factual foundation for Chang’s claim for intentional infliction of emotion distress, fits squarely within this privilege. (See Silberg v. Anderson (1990) 50 Cal.3d 205, 212 [litigation privilege applies to tort liability based on theory of intentional infliction of emotional distress]; see generally Jacob B., at p. 956.)
DISPOSITION
The judgment is affirmed. Lederman is to recover his costs on appeal.
CERTIFIED FOR PUBLICATION


PERLUSS, P. J.

We concur:



WOODS, J. ZELON, J.



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