Schreiner v. Scoville

Citation410 N.W.2d 679
PartiesMartin SCHREINER, Appellant, v. Robert J. SCOVILLE, Appellee. 86 521.
Decision Date19 August 1987
CourtUnited States State Supreme Court of Iowa

J. Michael Dull of Dull, Murphy & Dull, LeMars, for appellant.

David M. Woodke of Gross, Welch, Vinardi, Kauffman & Day, P.C., Omaha, Neb., for appellee.

Considered by REYNOLDSON, C.J., and HARRIS, LARSON, LAVORATO, and NEUMAN, JJ.

REYNOLDSON, Chief Justice.

Martin Schreiner, a named beneficiary in Mary Eickholt's will and accompanying codicil, filed this action against lawyer Robert Scoville, alleging his negligence caused Eickholt's testamentary intent as expressed in those instruments to be frustrated and a bequest to Schreiner to fail. District court granted Scoville's motion to dismiss for failure to state a claim on which any relief could be granted, concluding Scoville owed Schreiner no duty of due care under the circumstances alleged. See Iowa R.Civ.P. 104(b). We reverse and remand for further proceedings.

With the case in this posture we review Schreiner's petition in its most favorable light, resolving all doubts and ambiguities in his favor. Weber v. Madison, 251 N.W.2d 523, 525 (Iowa 1977). We will affirm only if Schreiner has failed to state a claim upon which any relief could be granted under any state of supporting facts that could be established. Murphy v. First Nat. Bank of Chicago, 228 N.W.2d 372, 375 (Iowa 1975). With these principles before us, we set out the allegations of the dismissed petition.

December 3, 1980, Scoville prepared and witnessed Mary Eickholt's will. Paragraph one of this instrument devised to Martin Schreiner one-half of her interest in a certain piece of real estate located in Plymouth County, Iowa. Eickholt also left Schreiner a one-half interest in the residue of her estate.

Seven months later, June 23, 1981, Scoville prepared and witnessed a codicil to Eickholt's will. In the codicil Eickholt expressly reaffirmed her intention to leave Schreiner one-half of her interest in the Plymouth County real estate. Eickholt, however, removed Schreiner as a beneficiary of her residuary estate, leaving this residue to four nephews.

Within a month, on July 22, 1981, Scoville brought an action for partition by sale of the real estate in which Schreiner was to receive an interest. This petition arose out of Scoville's ongoing representation of Eickholt, commencing in December 1980, in the estate of Frank Ruba, from whom Eickholt derived her interest in the land. In March 1982, the property was sold at partition sale. 1 Following the sale, Eickholt received cash in proportion to her interest in the property.

Eickholt died in December 1982. Her will and codicil were then admitted into probate.

Schreiner subsequently filed a petition to construe Eickholt's will and codicil. Specifically, Schreiner requested the court determine who should receive the proceeds from the predeath sale of the property devised to him. District court found Eickholt's devise to Schreiner had adeemed when her interest in the property was transformed from an interest in real property into an interest in personal property. Because Eickholt made no express bequest of this personal property, the money generated by the sale passed to Eickholt's four nephews through the residuary clause contained in the codicil to her will.

Schreiner alleges that as part of the process leading to that decision, Scoville appeared and testified that at the time the codicil was drafted Eickholt intended Schreiner to receive one-half of her interest in the real estate later sold at partition, and that he did not explain to Eickholt the significance of ademption. The petition further alleges the codicil contained no provision to distribute the proceeds from the sale of Eickholt's farm to the intended beneficiaries of the farm.

Because Schreiner's testamentary interest in the property adeemed at partition and because the residue of Eickholt's estate passed to individuals other than Schreiner, the latter received nothing from Eickholt's estate. On appeal, the court of appeals affirmed district court's judgment. In re Eickholt, 365 N.W.2d 44 (Iowa App.1985).

December 6, 1985, Schreiner filed the present action against Scoville. Schreiner asserted Scoville was negligent in failing to properly advise Eickholt. Schreiner claimed alternately that Scoville negligently failed to draft Eickholt's testamentary instruments in a way that protected and fulfilled her true testamentary intent. Schreiner contended Scoville's negligence proximately caused his loss of an interest in the proceeds of the property as well as other damage.

In dismissing Schreiner's petition for failure to state a claim on which relief could be granted, district court focused primarily on the fact no attorney-client relationship or other special relationship existed between Scoville and Schreiner.

Schreiner's challenge to district court's judgment presents two interrelated questions. First, can a lawyer under any circumstances be liable to a disappointed nonclient beneficiary? Second, if liability may be imposed in some situations, has Schreiner alleged sufficient facts to fall within this general category and avoid dismissal for failure to state a claim? We answer both questions in the affirmative; we reverse district court and remand for further proceedings.

I. Generally, absent special circumstances such as fraud or collusion, an attorney is liable for professional malpractice only to a client. Brody v. Ruby, 267 N.W.2d 902, 906 (Iowa 1978). This privity requirement flows from the Supreme Court case of National Savings Bank v. Ward, 100 U.S. (10 Otto) 195, 200, 203, 25 L.Ed. 621, 623, 624 (1880), and is premised upon two basic concerns. First, absent a requirement of privity, parties to a contract for legal services could easily lose control over their agreement. Second, imposing a duty to the general public upon lawyers would expose lawyers to a virtually unlimited potential for liability. Brody, 267 N.W.2d at 906.

Recently several states have reaffirmed their approval of the privity requirement. See, e.g., Lilyhorn v. Dier, 214 Neb. 728, 730, 335 N.W.2d 554, 555 (1983); Rossi v. Boehner, 116 A.D.2d 636, 637, 498 N.Y.S.2d 318, 319 (N.Y.App.Div.1986); Berry v. Dodson, Nunley & Taylor, P.C., 717 S.W.2d 716, 718 19 (Tex.App.1986), vacated on other grounds, 729 S.W.2d 690 (Tex.1987). The trend in recent years, however, has been to allow some relaxation of the privity standard in severely limited situations.

This trend is particularly evident in cases involving claims against lawyers accused of preparing testamentary instruments that are invalid or in some other way frustrate the stated testamentary intent of the deceased. See, e.g., Lucas v. Hamm, 56 Cal.2d 583, 364 P.2d 685, 15 Cal.Rptr. 821 (1961), cert. denied, 368 U.S. 987, 82 S.Ct. 603, 7 L.Ed.2d 525 (1962); Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958).

In such cases, intended beneficiaries harmed by the lawyer's negligence have been allowed to maintain a cause of action against a drafting lawyer even though no attorney-client relationship (i.e., privity) existed between them. See, e.g., Stowe v. Smith, 184 Conn. 194, 196 200, 441 A.2d 81, 82 84 (1981); Needham v. Hamilton, 459 A.2d 1060, 1062 63 (D.C.1983); Ogle v. Fuiten, 102 Ill.2d 356, 360 64, 80 Ill.Dec. 772, 774 75, 466 N.E.2d 224, 226 27 (1984); Guy v. Liederbach, 501 Pa. 47, 58 63, 459 A.2d 744, 750 53 (1983); Persche v. Jones, 387 N.W.2d 32, 35 36 (S.D.1986); Auric v. Continental Casualty Co., 111 Wis.2d 507, 509, 331 N.W.2d 325, 327 (1983).

Courts recognizing such claims often have been willing to recognize a cause of action when the testamentary instruments themselves are rendered invalid in whole or in part as a direct result of attorney error. Significant in this regard is this observation by the California Supreme Court in Lucas:

[O]ne 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 preventing future harm would be impaired.

Lucas, 56 Cal.2d at 589, 364 P.2d at 688, 15 Cal.Rptr. at 824. See also Heyer v. Flaig, 70 Cal.2d 223, 228 29, 449 P.2d 161, 164 65, 74 Cal.Rptr. 225, 228 29 (1969); Licata v. Spector, 26 Conn.Supp. 378, 379 80, 225 A.2d 28, 29 30 (1966); Persche, 387 N.W.2d at 36 n. 1; Auric, 111 Wis.2d at 513 14, 331 N.W.2d at 328 29.

The inquiry frequently focuses on who should be allowed to prosecute a cause of action against a lawyer. Because no privity exists, courts extending lawyer liability to nonclient-third parties generally have limited a lawyer's liability to the direct, intended, and specifically identifiable beneficiaries of the testator's testamentary disposition. See, e.g., Needham, 459 A.2d at 1062 63; Marker v. Greenberg, 313 N.W.2d 4, 5 (Minn.1981); Guy, 501 Pa. at 62 63, 459 A.2d at 752 53.

This limitation, which focuses on and seeks to protect the express intent of the testator, severely limits the number of individuals or entities to which a lawyer is potentially liable and poses no substantial threat to the professional relationship between the testator and the lawyer. Needham, 459 A.2d at 1062 63. At the same time, however, because the testator's estate generally will have little incentive to challenge the lawyer's action, Heyer, 70 Cal.2d at 228, 449 P.2d at 164 65, 74 Cal.Rptr. at 228 29, the potential for liability likely motivates the lawyer to draft and execute testamentary instruments with great care, Auric, 111...

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