Lucas v. Hamm

• Citation: 56 Cal.2d 583,15 Cal.Rptr. 821,364 P.2d 685
• Court: United States State Supreme Court (California)
• Decision Date: 05 September 1961
• Parties: , 364 P.2d 685 Robert LUCAS et al., Plaintiffs and Appellants, v. L. S. HAMM, Defendant and Respondent. S. F. 20269.

Page 821

15 Cal.Rptr. 821

56 Cal.2d 583, 364 P.2d 685

Robert LUCAS et al., Plaintiffs and Appellants, v. L. S. HAMM, Defendant and Respondent.

S. F. 20269.

Supreme Court of California, In Bank.

Sept. 5, 1961.

Rehearing Denied Oct. 4, 1961.

Reginald G. Hearn, San Francisco, for plaintiffs and appellants.

Philip H. Angell, Scott Elder, Robert M. Adams, Jr., Angell, Adams, Gochnauer & Elder and B. E. Kragen, San Francisco, for defendant and respondent.

GIBSON, Chief Justice.

Plaintiffs, who are some of the beneficiaries under the will of Eugene H. Emmick, deceased, brought this action for damages against defendant L. S. Hamm, an attorney at law who had been engaged by the testator to prepare the will. They have appealed from a judgment of dismissal entered after an order sustaining a general demurrer to the second amended complaint without leave to amend.

The allegations of the first and second causes of action are summarized as follows: Defendant agreed with the testator, for a consideration, to prepare a will and condicils thereto for him by which plaintiffs were to be designated as beneficiaries of a trust provided for by paragraph Eighth of the will and were to receive 15% of the residue as specified in that paragraph. Defendant, in violation of instructions and in breach of his contract, negligently prepared testamentary instruments containing phraseology that was invalid by virtue of section 715.2 and former sections 715.1 and 716 of the Civil Code relating to restraints on alienation and the rule against perpetuities. ¹ Paragraph Eighth of these instruments 'transmitted' the residual estate in trust and provided that the 'trust shall cease and terminate at 12 o'clock noon on a day five years after the date upon which the order distributing the trust property to the trustee is made by the Court having jurisdiction over thr probation of this will.' After the death of the testator the instruments were admitted to probate. Subsequently defendant, as draftsman of the instruments and as counsel of record for the executors, advised plaintiffs in writing that the residual trust provision was invalid and that plaintiffs would be deprived of the entire amount to which they would have been entitled if the provision had been valid unless they made a settlement with the blood relatives of the testator under which plaintiffs would receive a lesser amount than that provided for them by the testator. As the direct and proximate result of the negligence of defendant and his breach of contract in preparing the testamentary instruments and the written advice referred to above, plaintiffs were compelled to enter into a settlement under which they received a share of the estate amounting to $75,000 less than the sum which they would have received pursuant to testamentary instruments drafted in accordance with the directions of the testator.

(The third cause of action will be discussed separarately because it concerns matters not involved in the first two counts.)

It was held in Buckley v. Gray, 110 Cal. 339, 42 P. 900, 31 L.R.A. 862, that an attorney who made a mistake in drafting a will was not liable for negligence or breach of contract to a person named in the will who was deprived of benefits as a result of the error. The court stated that an attorney is liable to his client alone with respect to actions based on negligence in the conduct of his professional duties, and it was reasoned that there could be no recovery for mere negligence where there was no privity by contract or otherwise between the defendant and the person injured. 110 Cal. at pages 342-343, 42 P. 900. The court further concluded that there could be no recovery on the theory of a contract for the benefit of a third person, because the contract with the attorney was not expressly for the plaintiff's benefit and the testatrix only remotely intended the plaintiff to be benefited as a result of the contract. 110 Cal. at pages 346-347, 42 P. 900. For the reasons hereinafter stated the case is overruled.

The reasoning underlying the denial of tort liability in the Buckley case, i. e., the stringent privity test, was rejected in Biakanja v. Irving, 49 Cal.2d 647, 648-650, 320 P.2d 16, 65 A.L.R.2d 1358, where we held that a notary public who, although not authorized to practice law, prepared a will but negligently failed to direct proper attestation was liable in tort to an intended beneficiary who was damaged because of the invalidity of the instrument. It was pointed out that since 1895, when Buckley was decided, the rule that in the absence of privity there was no liability for negligence committed in the performance of a contract had been greatly liberalized. 49 Cal.2d at page 649, 320 P.2d 16. In restating the rule it was said that the determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury, and the policy of preventing future harm. 49 Cal.2d at page 650, 320 P.2d 16. The same general principle must be applied in determining whether a beneficiary is entitled to bring an action for negligence in the drafting of a will when the instrument is drafted by an attorney rather than by a person not authorized to practice law.

Many of the factors which led to the conclusion that the notary public involved in Biakanja was liable are equally applicable here. As in Biakanja, one of the main purposes which the transaction between defendant and the testator intended to accomplish was to provide for the transfer of property to plaintiffs; the damage to plaintiffs in the event of invalidity of the bequest was clearly foreseeable; it became certain, upon the death of the testator without change of the will, that plaintiffs would have received the intended benefits but for the asserted negligence of defendant; and if persons such as plaintiffs are not permitted to recover for the loss resulting from negligence of the draftsman, no one would be able to do so, and the policy of prevent future harm would be impaired.

Since defendant was authorized to practice the profession of an attorney, we must consider an additional factor not present in Biakanja, namely, whether the recognition of liability to beneficiaries of wills negligently drawn by attorneys would impose an undue burden on the profession. Although in some situations liability could be large and unpredictable in amount, this is also true of an attorney's liability to his client. We are of the view that the extension of his liability to beneficiaries injured by a negligently drawn will does not place an undue burden on the profession, particularly when we take into consideration that a contrary conclusion would cause the innocent beneficiary to bear the loss. The fact that the notary public involved in Biakanja was guilty of unauthorized practice of the law was only a minor factor in determining that he was liable, and the absence of the factor in the present case does not justify reaching a different result.

It follows that the lack of privity between plaintiffs and defendant does not preclude plaintiffs from maintaining an action in tort against defendant.

Neither do we agree with the holding in Buckley that beneficiaries damaged by an error in the drafting of a will cannot recover from the draftsman on the theory that they are third-party beneficiaries of the contract between him and the testator. ² Obviously the main purpose of a contract for the drafting of a will is to accomplish the future transfer of the estate of the testator to the beneficiaries named in the will, and therefore it seems improper to hold, as was done in Buckley, that the testator intended only 'remotely' to benefit those persons. It is true that under a contract for the benefit of a third person performance is usually to be rendered directly to the beneficiary, but this is not necessarily the case. (See Rest., Contracts, § 133, com. d; 2 Williston on Contracts (3rd ed.1959) 829.) For example, where a life insurance policy lapsed because a bank failed to perform its agreement to pay the premiums out of the insured's bank account, it was held that after the insured's death the beneficiaries could recover against the bank as third-party beneficiaries. Walker Bank & Trust Co. v. First Security Corp., 9 Utah 2d 215, 341 P.2d 944, 945 et seq. Persons who had agreed to procure liability insurance for the protection of the promisees but did not do so were also held liable to injured persons who would have been covered by the insurance, the courts stating that all persons who might be injured were third-party beneficiaries of the contracts to procure insurance. Johnson v. Holmes Tuttle Lincoln-Merc., Inc., 160 Cal.App.2d 290, 296 et seq., 325 P.2d 193; James Stewart & Co. v. Law, 149 Tex. 392, 233 S.W.2d 558, 561-562, 22 A.L.R.2d 639. Since, in a situation like those presented here and in the Buckley case, the main purpose of the testator in making his agreement with the attorney is to benefit the persons named in his will and this intent can be effectuated, in the event of a breach by the attorney, only by giving the beneficiaries a right of action, we should recognize, as a matter of policy, that they are entitled to recover as third-party beneficiaries. See 2 Williston on Contracts (3rd ed. 1959) pp. 843-844; 4 Corbin on Contracts (1951) pp. 8, 20.

Section 1559 of the Civil Code, which provides for enforcement by a third person of a contract made 'expressly' for his benefit, does not preclude this result. The effect of the section is to exclude enforcement by persons who are only incidentally or remotely benefited. See Hartman Ranch Co. v....