Fabian v. Lindsay

Decision Date29 October 2014
Docket NumberNo. 27460.,27460.
Citation410 S.C. 475,765 S.E.2d 132
PartiesErika FABIAN, Appellant, v. Ross M. LINDSAY, III and Lindsay and Lindsay, LLC, Respondents. Appellate Case No. 2012–213726.
CourtSouth Carolina Supreme Court

James Matthew Dillon, of Mt. Pleasant; and Thomas A. Pendarvis and Catherine Brown Kerney, both of Pendarvis Law Offices, of Beaufort, for Appellant.

Curtis W. Dowling and Matthew Gregory Gerrald, both of Barnes Alford Stork & Johnson, of Columbia, for Respondents.

David A. Merline, Jr., of Merline & Meacham, PA, of Greenville, for Amicus Curiae, The Greenville Estate Planning Study Group.

Opinion

Justice BEATTY.

Erika Fabian (Appellant) brought this action for legal malpractice and breach of contract by a third-party beneficiary, alleging attorney Ross M. Lindsay, III and his law firm Lindsay & Lindsay (collectively, Respondents) made a drafting error in preparing a trust instrument for her late uncle and, as a result, she was effectively disinherited. Appellant appeals from a circuit court order dismissing her action under Rule 12(b)(6), SCRCP for failure to state a claim and contends South Carolina should recognize a cause of action, in tort and in contract, by a third-party beneficiary of a will or estate planning document against a lawyer whose drafting error defeats or diminishes the client's intent. We agree, and we reverse and remand for further proceedings.

I. FACTS
A. The Trust Agreement

The facts, in the light most favorable to Appellant, are as follows. On May 25, 1990, Appellant's uncle, Dr. Denis Fabian, executed a trust agreement that was drafted by Respondents. Dr. Fabian was then around 80 years old and his wife, Marilyn Fabian, whom he had married in 1973, was about twenty years younger. Dr. Fabian made his wife the life beneficiary of the trust.

Mrs. Fabian had two adult daughters from a prior marriage. Dr. Fabian then had one living brother, Eli Fabian, who was in his 70s and not in good health. Dr. Fabian also had two nieces, Miriam Fabian, who was Eli's daughter, and Appellant, who was the daughter of Dr. Fabian's predeceased brother, Zoltan Fabian. Dr. Fabian was aware of Appellant's loss of both her father and her mother at an early age.

Dr. Fabian died on February 5, 2000, and his brother Eli died a few weeks later. Thus, Eli survived Dr. Fabian, but not Mrs. Fabian, who held the life interest in the trust. At Dr. Fabian's death, the trust was valued at approximately $13 million.

Appellant had been told by Dr. Fabian and his wife that she was being provided for in Dr. Fabian's estate plan. She alleges that at the time of Dr. Fabian's death, everyone involved in the matter was under the impression that, when Mrs. Fabian passed, one-half of Dr. Fabian's estate was going to Appellant and Miriam, with the other half to be distributed to Mrs. Fabian's two children.

After Dr. Fabian's death, however, Respondents mailed a letter and two pages from the trust agreement to Appellant and informed her that she would not be receiving anything from Dr. Fabian's trust upon Mrs. Fabian's future death because the share that would have been distributed to her would, instead, be distributed to Eli's estate. Since Appellant's cousin Miriam was Eli's only heir, Miriam would now stand to be the beneficiary of both her share and Appellant's share. The distribution provision at issue in the trust agreement drafted by Respondents reads as follows:

Upon or after the death of the survivor of my said spouse and me, my Trustee shall divide this Trust as then constituted into two (2) separate shares so as to provide One (1) share for the children of Marilyn K. Fabian and One (1) share for my brother, Eli Fabian. If either of my wife's children predceases (sic) her, the predeceased child's share shall be distributed to his or her issue per stirpes. If my said brother, Eli Fabian, predeceases me, then one half of his share shall be distributed to his daughter, Miriam Fabian, or her issue per stirpes, and the other half of his share shall be distributed to my niece, Erica (sic) Fabian [Appellant], or her issue per stirpes.

(Emphasis added.) Appellant maintains the first sentence makes it abundantly clear that the division and distribution of the trust corpus is to occur only after the death of both Dr. Fabian and his wife. In addition, Respondents knew that Dr. Fabian wanted Eli's share of the trust to pass to the two named nieces if Eli was not alive at the time of distribution to receive his share. However, the use of the word “me” in the last sentence has effectively defeated her uncle's intentions by inadvertently disinheriting her. She contends this drafting error has resulted in an “unexpected windfall” to one cousin (Miriam), who has now received an unintended double share, and the “devastating” disinheritance of the other cousin (Appellant).

B. Reformation Action

In response to this situation, Appellant filed an action for reformation of the trust agreement. Two of the three trustees, Mrs. Fabian, who held the life interest, and Walter Pikul, Dr. Fabian's long-time business advisor, agreed with Appellant that the trust document contained a drafting error that thwarted Dr. Fabian's intent, and they concurred in Appellant's request for reformation on the basis the error made the trust ambiguous. In contrast, Appellant's cousin Miriam, who stood to reap the windfall of receiving a double share, strenuously opposed reformation, as did the drafting attorney, respondent Ross M. Lindsay, III, who maintained the trust document was unambiguous and did not need correction.

After years of escalating litigation expenses, Appellant accepted a settlement paid for by the trust. The trust was not reformed, but the parties stipulated that Appellant was not releasing any claim she had against Respondents in their capacity as Dr. Fabian's estate planning attorneys who had drafted the instrument and counseled Dr. Fabian on the creation of the trust.

C. Action for Professional Negligence & Breach of Contract

Appellant filed the current action against Respondents as the drafters of the trust agreement in which she claims to hold an intended beneficial interest. She asserted a tort claim for professional negligence (attorney malpractice) and a claim for breach of contract on behalf of a third-party beneficiary. Respondents promptly moved to dismiss Appellant's claims under Rule 12(b)(6), SCRCP for failure to state a cause of action.

The circuit court granted the motion to dismiss, finding Appellant could not assert a claim for legal malpractice because South Carolina law recognizes no duty in the absence of an attorney-client relationship. In addition, the court stated no South Carolina court had ever recognized a breach of contract action by an intended beneficiary of estate planning documents, stating: “To the contrary, the Supreme Court has characterized such a cause of action as merely one of a variety of theories which fall under the umbrella of ‘legal malpractice,’ which requires privity.”1 The court concluded Respondents were “immune from liability” to Appellant under any theory for their alleged error in drafting the trust document. Appellant appealed, and this Court certified the appeal from the Court of Appeals pursuant to Rule 204(b), SCACR. We thereafter granted a motion by the Greenville Estate Planning Study Group to file an amicus curiae brief in support of Respondents.

II. STANDARD OF REVIEW

A defendant may move to dismiss the plaintiff's complaint for “failure to state facts sufficient to constitute a cause of action” pursuant to Rule 12(b)(6), SCRCP. “A ruling on a motion to dismiss pursuant to Rule 12(b)(6) must be based solely on the factual allegations set forth in the complaint, and the court must consider all well-pled allegations as true.” Disabato v. S.C. Ass'n of Sch. Adm'rs, 404 S.C. 433, 441, 746 S.E.2d 329, 333 (2013) ; see also Turner v. Daniels, 404 S.C. 430, 431 n. 1, 746 S.E.2d 40, 41 n. 1 (2013) (noting under the standard of review applicable to Rule 12(b)(6) motions, we construe all of the facts in the appellant's well-pled complaint in the light most favorable to the appellant and presume those facts to be true). “If the facts alleged and inferences reasonably deducible therefrom, viewed in the light most favorable to the plaintiff, would entitle the plaintiff to relief on any theory, dismissal under Rule 12(b)(6) is improper.” Carnival Corp. v. Historic Ansonborough Neighborhood Ass'n, 407 S.C. 67, 74–75, 753 S.E.2d 846, 850 (2014).

When reviewing the dismissal of an action pursuant to Rule 12(b)(6), SCRCP, the appellate court applies the same standard applied by the trial court. Doe v. Marion, 373 S.C. 390, 395, 645 S.E.2d 245, 247 (2007). This Court is free to decide questions of law, such as whether South Carolina recognizes a certain cause of action, with no particular deference to the trial court. Moriarty v. Garden Sanctuary Church of God, 341 S.C. 320, 327, 534 S.E.2d 672, 675 (2000).

III. LAW/ANALYSIS
A. Privity Under Existing Law

In dismissing Appellant's claims, the circuit court essentially found Appellant was not in privity with Respondents and therefore failed to establish a viable cause of action. ‘Privity’ denotes [a] mutual or successive relationship to the same rights of property.” Thompson v. Hudgens, 161 S.C. 450, 462, 159 S.E. 807, 812 (1931) (citation omitted); see also Black's Law Dictionary 1394 (10th ed.2014) (defining “privity” as [t]he connection or relationship between two parties, each having a legally recognized interest in the same subject matter (such as a transaction, proceeding, or piece of property); mutuality of interests”). South Carolina courts have equated privity with standing. See Maners v. Lexington Cnty. Sav. & Loan Ass'n, 275 S.C. 31, 33–34, 267 S.E.2d 422, 423 (1980) (affirming the trial judge's determination that appellant had no standing to allege [her claim] because she was not in privity with respondent).

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