Copenhaver v. Rogers

• Decision Date: 22 September 1989
• Docket Number: No. 880807,880807
• Citation: 384 S.E.2d 593,238 Va. 361
• Parties: Preston Sheffey COPENHAVER, III, et al. v. Frank W. ROGERS, Jr., et al. Record
• Court: Virginia Supreme Court

Page 593

384 S.E.2d 593

238 Va. 361

Preston Sheffey COPENHAVER, III, et al. v. Frank W. ROGERS, Jr., et al.

Record No. 880807.

Supreme Court of Virginia.

Sept. 22, 1989.

Thomas E. Albro (Christine Thomson; Smith, Taggart, Gibson & Albro, Charlottesville, on briefs), for appellants.

Waller H. Horsley (Joseph M. Spivey, III; Peter W. Hull; Hunton & Williams, Richmond, on brief), for appellees.

Present: All the Justices.

THOMAS, Justice.

The dispositive issue in this appeal is whether the appellants, plaintiffs below--Preston Sheffey Copenhaver, III, David Cooper Copenhaver, and John K.H. Copenhaver, suing by his next friend, Preston Sheffey Copenhaver, III (hereinafter collectively referred to as the Copenhavers)--made sufficient allegations of legal malpractice against their grandparents' lawyers to survive challenge by demurrer. The trial court held that the Copenhavers' claims were demurrable. We agree.

Because the case is before us on demurrer, we accept as true all well-pled facts and reasonable inferences arising therefrom as set forth in the Copenhavers' motion for judgment. Hop-In Food Stores v. Serv-N-Save, Inc., 237 Va. 206, 207-08, 375 S.E.2d 753, 754 (1989). On or about November 10, 1982, Wythe M. Hull, Jr., and his wife, Lucile S. Hull, the Copenhavers' grandparents, employed Frank W. Rogers, Jr., and his law firm, Woods, Rogers & Hazlegrove (hereinafter collectively referred to as Rogers) to "effectuate an estate plan" for the Hulls. More specifically, Rogers was retained to prepare and draft wills for the Hulls, evaluate the Hulls' assets, and take steps to minimize any "transfer taxes."

Rogers prepared separate wills for the Hulls which they executed on January 6, 1983. Lucile Hull died on November 9, 1984. Her will was admitted to probate on November 15, 1984. ITEM IV(A)(1) of Mrs. Hull's will provided as follows: "I devise and bequeath the Residuary Share as follows: (1) Seventy-five percent (75%) of my Residuary Share in trust for the benefit of my daughters, ELLEN H. KEEVER and MARTHA H. COPENHAVER, in equal shares or in trust as hereinafter provided for their surviving issue per stirpes." An identical provision was contained in Mr. Hull's will. Neither provision contained trust terms. Rogers did not realize this omission until after Mrs. Hull's death. To remedy the omission in Mr. Hull's will, Rogers prepared a codicil, executed November 15, 1984, which supplied the missing trust terms.

With regard to Mrs. Hull's will, Rogers, by letter dated November 21, 1984, advised her daughters, Ellen H. Keever and Martha H. Copenhaver, that, in the law firm's opinion, the trust terms which applied to a separate trust described in ITEM IV(A)(2) of their mother's will would apply to the trust described in Item IV(A)(1). Rogers further advised that it would file a petition on behalf of Dominion Trust Company as executor and trustee under Mrs. Hull's will asking the court to adopt its interpretation of the will and to uphold the trust. However, the petition, as filed, asked the trial court to declare the trust void on the ground that it contained no trust terms. As part of the proceedings to declare the trust void, Rogers prepared answers to be used by Mrs. Hull's beneficiaries, which included the Copenhavers.

The trial court granted the relief sought by Dominion, ruling as follows:

[T]he trust attempted by the language of subparagraph (1) of paragraph (A) of ITEM IV fails for lack of conditions and terms, as a result of which failure seventy-five percent of the Residuary Share passes outright in equal shares to the two beneficiaries named therein, namely Ellen H. Keever and Martha H. Copenhaver.

Because the trust failed, the Copenhavers lost their remainder interest in the one half of the residuary share that had been intended for their mother, Martha.

The Copenhavers sued Rogers complaining of their lost remainder interest. In addition, they complained that Rogers failed to advise Mrs. Hull to make an outright distribution of her entire estate to her grandchildren in order to avoid any generation-skipping transfer tax. They also complained that Rogers gave negligent advice to Mrs. Hull concerning the creation of a marital trust, which caused her to pay maximum estate taxes, reduced the funds available for ultimate distribution to the Copenhavers, and delayed the Copenhavers' enjoyment of the assets in the marital trust until after their grandfather's death.

Mr. Hull, the Copenhavers' grandfather, died on January 31, 1987. He had executed an entirely new will on January 31, 1985, which replaced the January 6, 1983 will and its November 15, 1984 codicil. On May 7, 1986, Mr. Hull also executed a codicil to his new will. Thus, at his death, the January 1985 will and its May 1986 codicil were in effect. The Copenhavers alleged in their motion for judgment that their grandfather received negligent tax advice which resulted in a $1,600,000 increase in the portion of his estate subject to generation-skipping transfer taxes. According to the Copenhavers, Rogers gave other negligent tax advice which resulted in damages to them in the amount of $600,000.

The Copenhavers also complained about the delivery of a $250,000 check to Hollins College as provided for in Mrs. Hull's will. They contended that they were damaged in the amount of $125,000 by this act. In short, the Copenhavers claimed total damages from their grandparents' lawyers in the amount of $3,475,000.

Rogers demurred to the motion for judgment on four grounds:

1. failure to allege that Rogers performed legal services for the Copenhavers;

2. failure to allege that the Copenhavers were in privity with Rogers;

3. failure to allege that the Copenhavers suffered injury to persons or property; and

4. failure to state a claim upon which relief could be granted.

In their brief in opposition to the demurrer, the Copenhavers stated that privity had nothing whatever to do with their case. They conceded that their claim is solely for economic loss and not for personal injury or property damage. They wrote that "privity is irrelevant in that they [were] third party beneficiaries of the wills and estate plans of their grandparents." In short, the Copenhavers represented to the trial court on brief that they were not proceeding in tort, but were proceeding solely in contract on a third-party beneficiary theory.

Given the statements and representations of the Copenhavers, the trial court would have been well within its authority to have declared the tort issue abandoned. But it did not. It ruled on that issue along with the third-party beneficiary issue. Regarding the tort issue, the trial court wrote "that the common law requirement of privity was applicable and was a prerequisite to a finding that the defendant law firm owed a duty to the plaintiffs." The trial court concluded that the Copenhavers had "no claim in tort for the negligent performance of legal services for the grandparents."

On appeal, the Copenhavers have focused virtually all of their attention on the third-party beneficiary issue. ¹ But because they appealed the trial court's overall ruling, we will first dispose of the privity issue.

We hold that the trial court was correct in ruling that the Copenhavers have no cause of action in tort against Rogers, absent privity. This is not a case involving personal injury or property damage, areas in which the common-law privity rules have been modified by statute. See, e.g., Code §§ 8.01-223 and 8.2-318. Instead, this is a case involving a claim solely for economic losses. It is settled in the Commonwealth that no cause of action exists in such cases absent privity of contract. See Sensenbrenner v. Rust, Orling & Neale, 236 Va. 419, 425, 374 S.E.2d 55, 58 (1988); Blake Construction Co. v. Alley, 233 Va. 31, 36, 353 S.E.2d 724, 727 (1987). To the extent that the Copenhavers attempted to assert claims in tort against Rogers, those claims were properly rejected on demurrer.

The trial court also concluded that the Copenhavers failed in their efforts to assert third-party beneficiary claims against Rogers. The trial court wrote that it did "not find that a cause of action exists on the basis of a third-party beneficiary theory under the facts of this case." The trial court explained further, "that for a recovery under any third-party beneficiary claim, it must be alleged and shown that the plaintiffs were clearly intended as beneficiaries of the principal contract." The trial court then elaborated on what it meant by "clearly intended as beneficiaries," pointing out that the Copenhavers were members of an "open class without designated members" and that "under the circumstances of this case" such identification "did not provide the certainty required."

The Copenhavers respond to the trial court's ruling by contending that they "were members of a sufficiently definite class of intended beneficiaries under their grandparents' wills to maintain an action for damages." They also contend that they are entitled to rely upon Code § 55-22, the third-party beneficiary statute, in asserting their claim although that statutory provision refers to an "instrument" and the contract on which they rely is oral.

In the view we take of the case, we assume without deciding that Code § 55-22 applies to oral contracts. Further, although the Copenhavers chose to focus their attention on whether they "were members of a sufficiently definite class," we need not reach that issue to decide this case. This is so because the Copenhavers left unanswered that portion of the trial court's ruling which stated that the Copenhavers failed to allege that they "were ... beneficiaries of the principal contract." (Emphasis added.)

In order to proceed on the third-party beneficiary contract theory, the party claiming the benefit must show that the parties to a contract "clearly and definitely intended" to confer a benefit upon him. Allen v. Lindstrom, 237 Va. 489,...