Moore v. Anderson Zeigler

• Decision Date: 20 June 2003
• Docket Number: No. A099643.,A099643.
• Citation: 109 Cal.App.4th 1287,135 Cal.Rptr.2d 888
• Court: California Court of Appeals Court of Appeals
• Parties: Cheryl T. MOORE et al. Plaintiffs and Appellants, v. ANDERSON ZEIGLER DISHAROON GALLAGHER & GRAY, P.C, et al. Defendants and Respondents.

135 Cal.Rptr.2d 888

109 Cal.App.4th 1287

Cheryl T. MOORE et al. Plaintiffs and Appellants, v. ANDERSON ZEIGLER DISHAROON GALLAGHER & GRAY, P.C, et al. Defendants and Respondents.

No. A099643.

Court of Appeal, First District, Division 2.

June 20, 2003.

Michael L. Boli, Alameda, for Appellants.

Michael D. Senneff, Bonnie A. Freeman, Santa Rosa, Senneff Freeman & Bluestone LLP, for Respondents.

KLINE, P.J.

In an issue of first impression in this state, we consider whether an attorney has a duty to beneficiaries under a will to evaluate and ascertain the testamentary capacity of a client seeking to amend the will or to make a new will and whether the attorney also has a duty to beneficiaries to preserve evidence of that evaluation. We shall conclude the attorney owes the beneficiaries no such duties.

Facts and Procedural History

Appellants Jeffrey K. Smith, Mark V. Smith, Scott Smith and Maureen Smith-Geoghegan appeal from the judgment dismissing their action for legal malpractice against respondents attorney Rob Disharoon and the law firm of Anderson Zeigler Disharoon Gallagher & Gray, P.C. (Anderson Zeigler), following the court's sustaining of a demurrer without leave to amend. Appellants had sued respondents for malpractice in connection with respondents' preparation of amendments to the estate plan of appellants' father, Clyde P. Smith (Clyde).¹ The crux of appellants' malpractice claim was that Clyde lacked testamentary capacity in June 2000 when he executed the amendments to his estate plan, that respondents should have known that Clyde's testamentary capacity was "questionable," and that respondents acted negligently in failing to "assure, confirm and document" that Clyde had capacity and was competent to execute his will and trust amendments. Appellants alleged they were injured in that they received less under the terms of their settlement of ensuing trust litigation than they would have received under the trust before the June 2000 amendments and in the absence of trust litigation expenses and fees.

"Because this appeal is from a pretrial ruling sustaining demurrers without leave to amend, our recitation of the facts assumes the truth of all facts properly pleaded by the plaintiff-appellant (Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 814 [107 Cal. Rptr.2d 369, 23 P.3d 601]; Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 579 [94 Cal.Rptr.2d 3, 995 P.2d 139]; Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58]), and likewise accepts as true all facts that may be implied or inferred from those she expressly alleges. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403 .)" (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 269, 130 Cal. Rptr.2d 601.)

The first amended complaint alleged as follows: appellants are five of the nine adult children of decedent Clyde P. Smith. Respondents represented Clyde. They prepared and amended estate plan documents for him, including amendments to a trust agreement called the Clyde P. Smith 1985 Trust. Under the terms of the amendment prepared by attorney Disharoon and executed by Clyde in September 1999, upon the death of the trustor (Clyde), certain assets of the trust were to be distributed to two marital trusts and to a trust for Clyde's grandchildren. The residue was to be distributed to eight of Clyde's nine adult children (including appellants). The amendment provided that the ninth child, Michael D. Smith, was not a beneficiary of the trust.

The September 1999 amendment provided that upon Clyde's death, all of his shares of the common stock of Argonaut Constructors (Argonaut), a successful construction company,² should be distributed to the marital trusts, with directions that the trustees sell Argonaut shares "at a price and on terms the Trustees determine to be reasonable." The 1999 amendment provided that the marital trusts were to be managed for the benefit of Clyde's widow Audrey during her life, and that upon her death, after payment of estate taxes and a specific distribution of $100,000 to Saint Rose Parish, the remainder of the marital trusts were to be distributed to eight of Clyde's nine adult children, but that the ninth child, Michael D. Smith, was to receive nothing. The complaint alleged that Michael had already received substantial benefits and advantages from Clyde in that Argonaut had employed and promoted Michael and Michael had received substantial financial compensation and benefit from his employment.

The complaint further alleged that Disharoon had prepared the September 1999 amendments and knew that Clyde intended that Michael not receive anything under the trust amendments and that Clyde intended to benefit his eight other children with equal shares in the remainder of the trust.

Clyde became terminally ill. By June 2000, Clyde was "extremely sick, debilitated, and confused. Clyde had undergone chemotherapy and was under the influence of powerful medications, including pain medication. Clyde had to be hospitalized. By June 2000, Clyde lacked the capacity to know or understand his estate plan. He did not recollect nor understand the nature of his property or trust dispositions, nor recall his relation to his family members and children."

Disharoon was aware that Clyde was terminally ill and extremely weak. Nevertheless, in June 2000, Disharoon prepared new estate planning documents whereby the estate plan was fundamentally changed. These documents included: "Amendment in its Entirety to the Clyde Smith 1985 Trust," "Trustee Appointment under the Clyde Smith Retirement Plan" (appointing Clyde's sons Michael and Greg as trustees), and a new will. The new documents provided that all of Clyde's common shares of Argonaut would be distributed to Michael D. Smith outright for no payment or consideration. Clyde executed these documents on June 21, 2000. The complaint alleged that, when Clyde did so, he lacked testamentary capacity, was not competent and did not truly know or understand his appointments and property disposition. Clyde died on June 23, 2000.

A dispute arose among the children as to which trust amendment should govern the disposition of Clyde's property. Appellants retained counsel, as did Greg and Michael Smith in their capacity as trustees and defendants in the trust litigation. Expenses of the litigation were substantial and continuing and trust assets were being diminished by Greg's trustee fees and by attorney fees. After extensive discovery, the parties to the trust litigation reached a settlement. No determination was made of Clyde's capacity. The terms of the settlement allocated to appellants a portion of what they would have received under the trust as amended in September 1999, before the June 23, 2000 amendments.

Following settlement of the trust litigation, on June 20, 2001, appellants sued respondents Disharoon and Anderson Zeigler for malpractice. They filed a first amended complaint on January 25, 2002. In addition to the foregoing, the first amended complaint alleged that a competent estate planning attorney in the circumstances should have recognized that Clyde's testamentary capacity was "questionable because of Clyde's weakened and confused condition and medical treatment. A competent attorney in such circumstances should exercise reasonable care to confirm his client's capacity, competence, and intentions regarding the client's property dispositions, and should document such confirmation. Attorney Disharoon negligently failed to do so in June 2000, and thereby breached the duty of care to effectuate his client's intent to benefit his eight children with the proceeds of the sale of the Argonaut shares." The first amended complaint also alleged that "a competent attorney would have recognized that litigation between the children was likely, unless the attorney took reasonable steps to investigate, confirm and document the client's capacity, competence, and testamentary intent."

Respondents demurred to the first amended complaint on the grounds that, as a matter of law, an attorney owes no duty of care to nonclients to determine whether the testator client possesses testamentary capacity. As a separate ground for demurrer, respondents asserted that the settlement of the will contest in the probate proceeding barred appellants from asserting the malpractice action under principles of estoppel and waiver.

At the hearing on the demurrer, the court and appellants agreed that the question of duty was one of law and that there was no factual amendment appellants could make to the complaint to establish that element if it were not already present. In an order filed June 12, 2002, the trial court granted the demurrer without leave to amend on the first ground presented, ruling: "The demurrer is sustained since this Court concludes as a matter of law that Defendants did not owe potential heirs any duty to determine the competency of Defendant's client to execute trust documents. Although there is no California case directly on point, this Court relies on the reasoning of Radovich v. Locke-Paddon [(1995)] 35 Cal.App.4th 946 and out of state authority which has dealt directly with this issue, such as Logotheti v. Gordon [ (1993) ] 414 Mass. 308 . Since it does not appear from the papers, and no reasons produced at the hearing, that the complaint can be amended to state a cause of action, this demurrer is sustained without leave to amend."

On June 12, 2002, judgment was entered dismissing the action. This timely appeal followed.

DISCUSSION

A. Standard of review

"In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the...