Stanley L. and Carolyn M. Watkins Trust v. Lacosta

• Decision Date: 08 June 2004
• Docket Number: No. 02-567.,02-567.
• Citation: 92 P.3d 620,321 Mont. 432,2004 MT 144
• Parties: THE STANLEY L. AND CAROLYN M. WATKINS TRUST; STEVEN B. WILLIAMSON, individually and as Personal Representative of THE ESTATE OF STANLEY L. WATKINS, Deceased, Plaintiffs and Appellants, v. SUSAN M. LACOSTA, ESQ., and HEDMAN, HILEMAN & LACOSTA, Attorneys at Law, Defendants and Respondents.
• Court: Montana Supreme Court

2004 MT 144

321 Mont. 432

92 P.3d 620

THE STANLEY L. AND CAROLYN M. WATKINS TRUST; STEVEN B. WILLIAMSON, individually and as Personal Representative of THE ESTATE OF STANLEY L. WATKINS, Deceased, Plaintiffs and Appellants, v. SUSAN M. LACOSTA, ESQ., and HEDMAN, HILEMAN & LACOSTA, Attorneys at Law, Defendants and Respondents.

No. 02-567.

Supreme Court of Montana.

Submitted on Briefs: January 16, 2003.

Decided: June 8, 2004.

For Appellants: Kenneth R. Dyrud, Church, Harris, Johnson & Williams, P.C., Missoula, Montana.

For Respondents: George D. Goodrich, William Evan Jones, Garlington, Lohn & Robinson, PLLP, Missoula, Montana.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶1 The Stanley L. and Carolyn M. Watkins Trust, and Steven B. Williamson, individually and as Personal Representative of the Estate of Stanley L. Watkins, deceased (collectively, "Appellants"), brought a legal malpractice action in the District Court for the Eleventh Judicial District, Flathead County, to recover damages allegedly sustained as a result of attorney Susan Lacosta's negligence in drafting the Trust documents and Stanley's will. The District Court granted Respondent's motion for summary judgment concluding that Appellant's action was time-barred under the three-year statute of limitations for legal malpractice actions and that the doctrines of res judicata, equitable estoppel and judicial estoppel barred Appellants' claim. We reverse and remand for further proceedings consistent with this Opinion.

¶2 We address the following issues on appeal:

¶3 1. Whether Appellants have standing to bring a legal malpractice action against Respondents.

¶4 2. Whether the doctrines of res judicata, collateral estoppel, equitable estoppel and judicial estoppel bar Appellants' claims against Respondents.

¶5 3. Whether Appellants' claims against Respondents are barred by the three-year statute of limitations for legal malpractice.

Factual and Procedural Background

¶6 Steve Williamson and his stepfather, Stanley Watkins, each owned interests in a trucking operation they had built together. In late 1991 or early 1992, Stanley's wife, Carolyn, retained Susan Lacosta, an attorney whose emphasis was in estate and tax planning, to draft an estate plan for Stanley and Carolyn along with partnership and shareholder agreements related to the trucking operation. At Stanley's and Carolyn's request, Lacosta included in the Trust agreement a direct bequest of Stanley's interest in the trucking operation to Steve upon the death of the survivor of Stanley and Carolyn.

¶7 In January 1992, Stanley and Carolyn signed their wills and a Trust agreement entitled "The Stanley L. and Carolyn M. Watkins Revocable Trust Agreement" (the Trust). At the same time, they each signed an assignment of virtually all of their property to the Trust, over which they both were Trustees. Stanley suffered from a heart condition and he was legally blind. Because of Stanley's ill health, Lacosta never met with him, nor did she discuss the estate plan with him. Instead, Lacosta sent the wills and Trust documents home with Carolyn and, contrary to the attestations appearing in the wills, they were signed outside of the presence of the purported witnesses (including Lacosta) and outside of the presence of a notary public.

¶8 Stanley died on April 7, 1992, and his will, prepared only a few months earlier, was admitted to probate. Although Stanley's 1992 will was admitted to probate with Lacosta's knowledge, Lacosta did not disclose to Carolyn or to the court that the will had been improperly executed because it was not signed in the presence of witnesses as required by § 72-2-522, MCA. Lacosta also did not disclose to Carolyn that when Stanley died, the Trust became irrevocable.

¶9 Upon Stanley's death, Carolyn became the sole Trustee under the Trust. For the next three years, Carolyn, as Trustee, facilitated the administration of the Trust and Stanley's estate.

¶10 In early January 1995, Steve met with John Hagman, an insurance agent, to discuss Steve's own life insurance and estate planning needs. They reviewed the Trust agreement, but because neither of them were able to decipher what the Trust agreement meant or accomplished, they met with Lacosta on January 13, 1995, to clarify the disposition of the trucking operation stock through the Trust. Lacosta told them that the Trust was revocable and that Carolyn could do whatever she wanted with the assets. However, a few months later, Lacosta informed Carolyn that the Trust was a Qualified Terminable Interest Property (QTIP) trust and that Carolyn could not revoke the provisions of the Trust that left Stanley's interest in the trucking operation to Steve.

¶11 In August 1995, Carolyn, Lacosta, Steve and the other Watkins' children attended a meeting for the specific purpose of discussing the Trust and other related financial matters. At the meeting, Lacosta summarized the Trust, but at no time did she or anyone else give any indication that there were questions about the validity of the Trust or Stanley's will.

¶12 Sometime prior to this meeting, Carolyn had contacted Neil McKay, an estate and tax planning attorney, to inquire about the Trust. McKay testified in his deposition that the Trust would be very difficult for the average layperson to understand. In fact, he testified that even as an estate and tax planning expert, he had to spend many hours reading the Trust agreement before he could understand it.

¶13 In December 1995, McKay wrote to Steve and the other Trust beneficiaries on Carolyn's behalf, disclosing that there were defects in the estate plan. He sought their agreement to declare void an attempted transfer to the Trust. Thereafter, Carolyn attempted to invalidate Stanley's 1992 will and the Trust. This resulted in acrimonious and protracted litigation between Carolyn and the Trust beneficiaries. In those cases (hereafter collectively referred to as the "Beneficiary Suits"), the District Court found Carolyn's claims to be time barred.

¶14 Carolyn died on February 23, 1997. On April 3, 1997, Appellants brought this legal malpractice action to recover damages allegedly caused by Lacosta. Appellants alleged that Lacosta committed malpractice in connection with the estate plan enabling an attack on the Trust and Stanley's will thereby damaging each of them. Because Lacosta's alleged malpractice created conflicting expectations among the survivors, the Estate of Carolyn M. Watkins brought a separate malpractice action wherein Carolyn's estate asserted that in addition to the problems regarding the witnessing of Stanley's will, Lacosta failed to draft the Trust according to Stanley's and Carolyn's wishes. Estate of Carolyn Watkins v. Hedman, Hileman & Lacosta, 2004 MT 143, ___ Mont. ___, ___ P.3d ___.

¶15 In the instant case, Respondents moved for summary judgment. The District Court granted Respondents' motion concluding that the statute of limitations on Lacosta's alleged malpractice began to run by the time Stanley's will was admitted to probate in April 1992, and that this action is therefore untimely. The court further held that Appellants did not have standing because they were not clients of Lacosta and that the action was barred by res judicata, equitable estoppel and judicial estoppel. Thereafter, Appellants filed a Motion for Relief from Judgment that was not ruled upon. Appellants also filed a Motion to Alter or Amend that was denied. From this judgment and these orders, Appellants appeal.

Standard of Review

¶16 Summary judgment is proper only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. Our standard in reviewing a district court's summary judgment ruling is de novo. Johnson v. Barrett, 1999 MT 176, ¶ 9, 295 Mont. 254,

¶ 9, 983 P.2d 925, ¶ 9 (citing Stutzman v. Safeco Ins. Co. of America (1997), 284 Mont. 372, 376, 945 P.2d 32, 34). We use the same Rule 56, M.R.Civ.P., criteria applied by the district court. Johnson, ¶ 9. Moreover, all reasonable inferences which may be drawn from the offered proof must be drawn in favor of the party opposing summary judgment. Johnson, ¶ 8 (citing Schmidt v. Washington Contractors Group, 1998 MT 194, ¶ 7, 290 Mont. 276, ¶ 7, 964 P.2d 34, ¶ 7).

Issue 1.

¶17 Whether Appellants have standing to bring a legal malpractice action against Respondents.

¶18 Appellants contend that the District Court's orders should be reversed and remanded because the court's rationale on this issue is unclear. In their motion for summary judgment, Respondents did not raise any issues as to Appellants' standing to bring this action. Rather, the standing issue was raised by the District Court at the close of the hearing on the motion for summary judgment, based on an inquiry to Respondents' counsel regarding the existence of a fiduciary relationship between Lacosta and Appellants.

¶19 With regard to the Estate of Stanley L. Watkins (the Estate), Lacosta admits that Stanley was a client. Because the Estate stands in the shoes of the decedent, it is considered to be in privity with the attorney, and the personal representative has standing to prosecute a malpractice claim. Espinosa v. Sparber, Shevin, Shapo, Rosen & Heilbronner (Fla. 1993), 612 So.2d 1378, 1380.

¶20 A fact issue exists as to whether the Trust is a client or a nonclient beneficiary. The Trust may be considered a client based upon the legal services provided by Lacosta to the Trust and its Trustees, services which involved Trust assets and transactions. Because Lacosta did not raise the issue of standing in her motion for summary judgment, she presented no facts as to whether the Trust was or was not a client. And, in its order, the District Court failed to cite to any cases and made no conclusions as to whether a duty exists to nonclients, or the extent of that duty if it does exist. However,

[t]he courts agree that the

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