Spence v. Wingate

• Decision Date: 17 November 2011
• Docket Number: No. 27055.,27055.
• Citation: 716 S.E.2d 920,395 S.C. 148
• Court: South Carolina Supreme Court
• Parties: Deborah W. SPENCE, Individually, and on Behalf of the Estate of Floyd D. Spence, Respondent,v.Kenneth B. WINGATE; Sweeny, Wingate & Barrow, P.A.; and Robert P. Wilkins, Jr., Defendants,of whom Kenneth B. Wingate and Sweeny, Wingate & Barrow, P.A. are Petitioners.

395 S.C. 148

716 S.E.2d 920

Deborah W. SPENCE, Individually, and on Behalf of the Estate of Floyd D. Spence, Respondent,

v.Kenneth B. WINGATE; Sweeny, Wingate & Barrow, P.A.; and Robert P. Wilkins, Jr., Defendants,of whom Kenneth B. Wingate and Sweeny, Wingate & Barrow, P.A. are Petitioners.

No. 27055.

Supreme Court of South Carolina.

Heard May 3, 2011.Decided Oct. 17, 2011.Rehearing Denied Nov. 17, 2011.

Pope D. Johnson, III, of Johnson & Barnett, L.L.P., of Columbia, for Petitioners.A. Camden Lewis, of Lewis & Babcock, L.L.P., of Columbia, for Respondent.Acting Chief Justice BEATTY.

In this action, Deborah W. Spence (“Mrs. Spence”) alleges attorney Kenneth Wingate and his law firm (“Wingate”) ¹ breached a fiduciary duty to her as a former client regarding the handling of her late husband's congressional life insurance policy. The circuit court granted partial summary judgment to Wingate, finding as a matter of law that Wingate did not owe any fiduciary duties in this regard. The Court of Appeals reversed and remanded the matter for trial, holding summary judgment was inappropriate because a genuine issue of material fact existed as to what, if any, fiduciary duties were owed by Wingate to Mrs. Spence and whether those duties were breached. Spence v. Wingate, 385 S.C. 316, 684 S.E.2d 188 (Ct.App.2009) ( Spence III ). This Court granted Wingate's petition for a writ of certiorari. We affirm as modified.

I. FACTUAL/PROCEDURAL BACKGROUND

This case has a complex history and has been before the appellate courts on three prior occasions. The current dispute concerns the handling of a $500,000 Federal Group Life Insurance Policy held by Congressman Floyd D. Spence ² (“Mr. Spence”), Mrs. Spence's late husband. The facts, viewed in the light most favorable to Mrs. Spence as required by our standard of review, are as follows.

Mr. Spence was a member of United States House of Representatives, and he held a life insurance policy of $500,000 as a member of Congress. On October 12, 1988, Mr. Spence executed a Designation of Beneficiary form that named Mrs. Spence and his four sons from a prior marriage as the beneficiaries of the congressional life insurance policy, with all five to receive equal shares of the proceeds.

On March 15, 1990, Mr. Spence executed a codicil to a 1987 will he had made before his marriage. In the codicil Mr. Spence bequeathed to Mrs. Spence all of his interest and shares of stock in Spence Plantation, Inc., as well as 22 acres of real estate that was subject to a development agreement. The property was located at Lake Murray, South Carolina. According to Mrs. Spence, in 1994 her husband also named her the sole beneficiary of all federal and congressional benefits, including the life insurance policy.³

In August 2001, Mr. Spence was hospitalized in Mississippi. He suffered a subdural hematoma while in the hospital and thereafter underwent surgery. On or about August 9, 2001, Mrs. Spence was informed that her husband had suffered brain damage from the subdural hematoma, was in a coma, and was not expected to survive.

Mrs. Spence sought legal counsel and on August 13, 2001, Wingate undertook representation of Mrs. Spence with regards to the assets of her husband, her inheritance rights, and her rights in his estate. Wingate advised Mrs. Spence that she was entitled to nothing from her husband's estate and that she was barred from receiving an elective share by a prenuptial agreement.⁴ During the course of this representation, Mrs. Spence consulted with Wingate about her husband's life insurance policy and “informed Wingate that [her] husband had named [her] as beneficiary.”

To resolve any disputes about the effect of the 1987 will and 1990 codicil and her elective share rights, Wingate advised Mrs. Spence to enter into an agreement with the four adult sons of Mr. Spence to create a trust for her benefit. The trust was to provide Mrs. Spence with a lifetime income stream, and it was to be created and funded from one-third of the value of Mr. Spence's probate estate applying a pecuniary formula. Wingate negotiated the agreement concerning the division of Mr. Spence's probate estate, and the parties formally entered into an “Agreement Among Successors to Floyd Davidson Spence, Sr.” on or around August 15, 2001.

Mr. Spence died on August 16, 2001. Sometime between August 23, 2001 and the first week of September 2001, Wingate and attorney Robert P. Wilkins, Jr. ⁵ visited Mrs. Spence and informed her that Wingate had agreed to represent the estate. Wingate also advised her that she no longer needed an attorney. Wingate never informed Mrs. Spence of any potential conflict of interest that he had in representing the estate, nor did he seek her consent to, or a waiver of, any conflict of interest.

Mrs. Spence thereafter came to believe that the amount she received under the agreement negotiated by Wingate was much less than what she was entitled to under the will and codicil or if she had opted for an elective share as provided by South Carolina law. Mrs. Spence met with Wingate, Wilkins, Mr. Spence's four sons, and others in a family meeting. The estate and the life insurance policy were discussed by the parties. According to Mrs. Spence, “Wingate suggested that the boys receive the insurance in what he termed an effort for me to make the boys ‘whole again.’ ” However, Mrs. Spence objected to the insurance proceeds being divided five ways, in contravention of what she stated were her husband's wishes.

Mrs. Spence called Ken Wingate after the meeting and asked him to put his hat back on as her attorney and he refused. Mrs. Spence stated Wingate never advised her that she needed to take any action to protect her rights with regard to the insurance benefits or that she needed to hire a different lawyer to represent her regarding the insurance benefits.⁶

Mrs. Spence thereafter brought a lawsuit to set aside the agreement creating the trust. Wingate withdrew as counsel for the estate in August 2002, around the time of the lawsuit. The agreement was eventually set aside.

Mrs. Spence, individually and on behalf of her late husband's estate, filed the current action against Wingate.⁷ She alleged several causes of action; however, the focus here concerns her claim for breach of fiduciary duty. Mrs. Spence alleged Wingate failed to disclose any potential conflict of interest created by him representing her and then the estate, and that he failed to either obtain her waiver of this conflict or to protect her interests, breaching his fiduciary duty.⁸ Mrs. Spence further alleged Wingate failed to protect her interests regarding the proceeds of the $500,000 life insurance policy, for which she was the sole beneficiary. Mrs. Spence asserted Wingate owed her a fiduciary duty because Wingate had served as her lawyer and he had discussed the insurance policy issue with her during the course of this representation.

Wingate moved for partial summary judgment requesting a ruling that he was not liable to Mrs. Spence (individually or on behalf of the estate) in connection with the congressional life insurance policy. Wingate asserted the life insurance policy was paid based upon a contract, it was a non-probate asset, and the manner in which it was paid was not controlled by the personal representative of the estate or by himself. Additionally, any claims related to the manner in which the benefits were to be paid belonged to any potential beneficiaries of the policy, not the estate.⁹

At the summary judgment hearing, Wingate further argued no duty was owed to Mrs. Spence individually because at the time the dispute arose concerning the insurance he was acting solely as attorney for the estate and, thus, section 62–1–109 of the South Carolina Code prevented any duty from being owed to Mrs. Spence as a beneficiary of the estate. In contrast, Mrs. Spence asserted that when a former client comes to a lawyer and asks for legal advice on an issue related to the former representation, the lawyer has a fiduciary duty to that client. Thus, Wingate breached his fiduciary duty to her by failing to either take action to properly advise her in the matter of the insurance policy or to advise her that she needed to consult a different attorney to protect her interests. She noted that Wingate opened a file purporting to represent the estate on August 15, 2001, merely two days after he undertook to represent her, and that his representation of her and then the estate's interests created a conflict of interest that she was not advised of and did not approve.

The circuit court granted partial summary judgment in favor of Wingate and found that, “[b]y statute, [Wingate] owed no duty or obligation to [Mrs. Spence] in connection with the congressional life insurance policy or the manner in which it was paid.” The circuit court relied upon section 62–1–109 of the South Carolina Code and found Wingate owed no fiduciary duty to Mrs. Spence as a mere beneficiary of the estate.

Mrs. Spence appealed, arguing a genuine issue of material fact existed regarding whether Wingate breached a fiduciary duty owed to her arising from his earlier representation of her in a related matter. The Court of Appeals reversed the grant of summary judgment to Wingate and remanded the matter for trial in Spence III.¹⁰

Citing Hotz v. Minyard, 304 S.C. 225, 403 S.E.2d 634 (1991) and Rule 1.9(a), RPC, Rule 407, SCACR, the Court of Appeals explained: “Duties to a former client on a related matter are separate and distinct from any duties arising from Wingate's representation of the estate; therefore, the circuit court erred in finding section 62–1–109 of the South Carolina Code [ ] absolved Wingate of any duty he owed to [Mrs. Spence].” Spence III, 385 S.C. at 320, 684 S.E.2d at 191. The Court of Appeals concluded a factual issue exists regarding what if any fiduciary duties were owed to Mrs. Spence, and whether these duties were breached. Id. at 319...