Donahue v. Shughart, Thomson & Kilroy, P.C.

• Decision Date: 20 June 1995
• Docket Number: No. 77714,77714
• Citation: 900 S.W.2d 624
• Court: Missouri Supreme Court
• Parties: Mary DONAHUE and Sundy McClung, Appellants, v. SHUGHART, THOMSON & KILROY, P.C., et al., Respondents.

Page 624

900 S.W.2d 624

Mary DONAHUE and Sundy McClung, Appellants, v. SHUGHART, THOMSON & KILROY, P.C., et al., Respondents.

No. 77714.

Supreme Court of Missouri En Banc.

June 20, 1995.

Gregg Lombardi, Arthur A. Benson, II, Kansas City, for appellants.

Spencer J. Brown, Daniel E. Hamann, Kansas City, for respondents.

Randy W. James, Overland Park, for amicus curiae Mo. Ass'n of Trial Attys.

HOLSTEIN, Judge.

Mary Donahue and Sundy McClung appeal a dismissal of their legal malpractice claim. In their petition they assert that because of the defendant attorneys' malpractice, an attempted testamentary transfer failed. Among other grounds for relief, they claim to have standing to bring this action even though they were not the clients of the attorneys involved. Following opinion by the Missouri Court of Appeals, Western District, this Court granted transfer. Rule 83.03. The order of dismissal is affirmed in part, reversed in part and the cause remanded.

In reviewing the sufficiency of the petition, this Court determines if the facts pleaded and inferences reasonably drawn therefrom state any ground for relief. Martin v. City of Washington, 848 S.W.2d 487, 489 (Mo. banc 1993). Facts averred are treated as true and are construed liberally in favor of the plaintiff. Id. This Court determines if such averments invoke principles of substantive law. Hagely v. Bd. of Educ., 841 S.W.2d 663, 665 (Mo. banc 1992). The facts set forth below, extracted from the amended petition, are recited with these principles in mind.

FACTS

Defendant J. Harlan Stamper is an attorney and shareholder of the defendant law firm Shughart, Thomson & Kilroy, P.C. (law firm). Gerald E. Stockton died in November 1988. For many years prior to his death, Mr. Stamper had been an attorney to Mr. Stockton. In 1979, Mr. Stockton established a living trust naming himself as trustee. The beneficiaries of the trust included persons other than Mary Donahue and Sundy McClung.

In May 1988, Stockton explained to Stamper that he was entering the hospital for surgery. He sent Stamper $150,000.00 in checks on the trust account made payable to Mary Donahue and Sundy McClung. Stamper was directed to see to it that Donahue and McClung received the proceeds of the checks on the trust account when Stockton died. Stockton also directed Stamper to prepare a deed to his home transferring a fifty percent interest in the home to Donahue, effective on Stockton's death. Donahue and McClung were the sole intended beneficiaries of these transfers.

In September 1988, Stockton gave Stamper another check drawn on the trust in the amount of $100,000.00 payable to "Mary Donahue, G.E. Stockton, J,T,W,R,O, S, [sic] J. Harlan Stamper, Trustee." Mr. Stamper understood that Stockton wanted Mary Donahue to receive the proceeds of this check upon his death. On October 26, 1988, Stamper was informed that Stockton's death was imminent. Stamper then sought advice from others in his law firm on how to make the checks and deed effective. He and other law firm attorneys attempted to take action to effectuate Stockton's wishes, including the recording of the deed. Stockton died November 5, 1988. The steps taken to effectuate the transfers were brought into question by declaratory judgment action, which resulted in an opinion by the Missouri court of appeals holding the transfers were invalid. ¹

The plaintiffs filed an amended petition asserting two theories of legal malpractice, one of breach of fiduciary duty and one of breach of contract as third party beneficiaries. The first legal malpractice theory is that Stamper and the law firm were acting as attorneys for Donahue and McClung and acted negligently in that representation. The second legal malpractice theory alleges that Stamper and the law firm violated their professional duties to Stockton and the trust. All counts of the amended petition were dismissed.

I.

The four elements of a legal malpractice action are: "(1) that an attorney-client relationship existed; (2) that defendant acted negligently or in breach of contract; (3) that such acts were the proximate cause of the plaintiffs' damages; (4) that but for defendant's conduct the plaintiffs would have been successful in prosecution of their [underlying] claim." Boatright v. Shaw, 804 S.W.2d 795, 796 (Mo.App.1990). In count I of their amended petition, plaintiffs allege that in late September or early October 1988, Donahue, on behalf of herself and McClung, then a minor, met with Stamper to seek legal advice regarding negotiation of the checks and recording of the deed. They further allege that while acting as their attorney, Stamper incorrectly advised them that there was no need to negotiate the checks at that time. The plaintiffs allege that at a subsequent meeting on October 27, 1988, Stamper and other attorneys with the law firm incorrectly advised them that if plaintiffs followed their instructions, the negotiation of the May checks, the second Donahue check, and the transfer of fifty percent interest in Stockton's home would all be effective and binding. It is further alleged that because Stamper and others with the law firm failed to perform any research between the meeting in late September 1988 and October 26, 1988, the transfers were ineffective. ²

Accepting the facts pleaded as true and giving those facts the benefit of all reasonable inferences, they state that plaintiffs had an attorney-client relationship with Stamper and the law firm at the time of the late September 1988 meeting, that Stamper and others in the law firm acted negligently, that Stamper's conduct was the proximate cause of the plaintiffs' damages and that but for such conduct, the transfers would have been valid. It is true that lawyers frequently make statements or express opinions to persons engaged in transactions with their clients without intending to assume a duty as attorney to such persons, and reliance alone upon the advice or conduct of a lawyer does not create an attorney-client relationship. Ronald E. Mallen and Jeffrey M. Smith, Legal Malpractice § 8.2, at 96 (3rd ed. Supp.1993). Also, representation of Donahue in unrelated matters is insufficient to establish that Stamper represented her in regard to the Stockton transfers. See Ginsberg v. Chastain, 501 So.2d 27, 29 (Fla.Dist.Ct.App.1986). Nevertheless, if Donahue and McClung are able to prove that they sought and received legal advice and assistance and that Stamper intended to undertake to give such advice and assistance on their behalf in the matter of the Stockton transfers, the attorney-client relationship might be found to exist. See State v. Longo, 789 S.W.2d 812, 815 (Mo.App.1990). For purposes of a motion to dismiss, the averment of an attorney-client relationship is sufficient.

II.

The more complicated question is whether the intended beneficiaries, in this There are cases in Missouri indicating that circumstances may exist where an attorney will be held liable to third parties for the attorney's unprofessional conduct. For example, there are exceptional cases involving fraud, collusion, or malicious or tortious acts by the attorney that might justify liability to third parties. Kennedy v. Kennedy, 819 S.W.2d 406, 410 (Mo.App.1991); Rose, 887 S.W.2d at 686. But to date, no Missouri case has held that intended beneficiaries of a will have a cause of action against the attorney when the intended beneficiary is damaged as a result of attorney negligence. Williams v. Bryan, Cave, McPheeters, McRoberts, 774 S.W.2d 847, 849 (Mo.App.1989).

case, Donahue and McClung, have standing to bring a legal malpractice action against Stamper and the law firm because the lawyers failed to effectuate a transfer in accordance with the wishes of their client, Stockton. This theory is asserted in counts II, V, VIII, and XI. As previously noted, one required element of a legal malpractice action is that an attorney-client relationship existed between the plaintiff and defendant. Rose v. Summers, Compton, Wells & Hamburg, 887 S.W.2d 683, 686 (Mo.App.1994). Plaintiffs contend that, although they are not clients of defendants, they have met such requirement by pleading that they were the intended beneficiaries of the client's action and that such fact, accompanied by other recognized elements of a legal malpractice claim, suffice to establish the element of attorney-client relationship.

In comparable circumstances, this Court held that an indemnitor of a surety could sustain, in the absence of privity of contract, an action against an architect-defendant who allegedly failed to exercise ordinary care in certifying the amount of material furnished and labor performed. Westerhold v. Carroll, 419 S.W.2d 73, 76 (Mo.1967). The appellants here argue that the Westerhold reasoning should apply to legal malpractice actions.

In Westerhold, the Court applied a case-by-case balancing of factors test established by Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16, 19 (bank 1958), to determine whether as a matter of policy a defendant would be held liable to a third person not in privity under a surety contract. Westerhold, 419 S.W.2d at 81. Those factors are:

[T]he extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to [the plaintiff], the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm.

Id. This Court concluded that all the factors were satisfied except the one involving "moral blame" and allowed the plaintiff to maintain the action.

Courts of other states have considered whether an attorney can be held liable for negligence to a person other than the client. Generally, the analysis begins with the historical rule requiring privity of contract to maintain an action for professional negligence. Ronald E. Mallen and...