LUCAS II v. HAMM (1961)

This is an appeal from a judgment of dismissal entered after an order sustaining without leave to amend defendant L. S. Hamm's demurrer to plaintiffs' second amended complaint.

The appellants are beneficiaries under the last will of Eugene H. Emmick, deceased. Respondent L. S. Hamm is a practicing lawyer in San Francisco, and has been engaged in his profession for more than 40 years last past. The complaint, which is phrased in three counts, seeks to recover damages from respondent and others for malpractice and breach of contract in the drawing of the will, and negligence in certain proceedings in connection with the handling of the estate.

The first cause of action speaks in negligence and alleges that appellants and others are beneficiaries under the will of Eugene H. Emmick, and that respondent, as attorney for Emmick for approximately 30 years and thoroughly familiar with his estate and his expressed desire and direction that appellants receive by testamentary instruments specified portions of his estate, prepared the said will; that paragraph Eighth of the will set up a residual testamentary trust of which the appellants were beneficiaries, and subdivision (c) thereof stated: ‘This 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 the probation of this will. * * *’ The complaint then goes on to allege that this provision was invalid by virtue of the following Civil Code sections: 715.1 (restraints upon alienation), 715.2 (rule against perpetuities), and 716 (suspension of the power of alienation); that the respondent was negligent in so drawing the will and that by reason thereof an attack was made thereon, which involved the said residual trust; that respondent advised appellants that the said provision of paragraph Eighth was invalid for the reasons aforementioned, and that appellants, who were designated beneficiaries thereunder, would be deprived of the entire inheritance to which they would have been entitled but for this invalid provision, and that unless they compromised the matter with the blood relatives of the decedent they would receive nothing under the will and codicils of Emmick; that he advised a settlement whereby appellants would accept an inheritance of $75,000 less in amount than that to which they would otherwise have been entitled; that guided by said advice and recommendation appellants did so settle the matter, to their damage, in the said sum.

The second cause of action is based upon the theory of the third party beneficiary contract entered into between Emmick and respondent Hamm for the benefit of the appellants. It incorporates all of the allegations of the first cause of action and then alleges that decedent entered into an oral contract with respondent Hamm whereby respondent agreed to and did prepare the will and codicils thereto wherein Emmick was testator and appellants were designated as beneficiaries of the residual trust therein created; that the respondent was duly compensated therefor, but that in carrying out the said contractual employment respondent negligently performed his duties in that he included an invalid provision in the will which rendered the residual trust null and void, and prevented the carrying out of the testator's expressed intent and direction to respondent that appellants receive by way of said trust a specified portion of his estate, and that by reason of respondent's breach of the contract appellants were damaged in the sum of $75,000, for which they seek judgment.

The third cause of action again incorporates all of the allegations of the first cause of action and then continues to recite that subsequent to the admission to probate of the will and the codicils thereto of decedent, certain persons instituted a will contest and that thereafter the contestants and respondent arrived at a settlement of the said contest, wherein the parties agreed that upon the payment of $10,000 the contest would be dismissed and appropriate releases given by said contestants, the settlement to be subject to the approval of the probate court; that in carrying out the settlement respondent and others were again negligent in that they caused to be executed releases which did not protect the interests of the estate and those interested therein in that they did not preclude said contestants from making another attack upon the estate and the interests of the named beneficiaries therein, with the result that said contestants did challenge the validity of the testamentary instruments; that said proposed releases were submitted before execution to other counsel for their comment, who advised respondent and others of the lack of protection afforded thereby to the estate and the persons interested therein, and proposed certain phraseology that should be included in said releases to properly guard the interests of the estate and those interested therein, but that said advice and suggestion was completely ignored by respondent and others, and that said probate court, without being advised of the failure in the terms of said proposed releases, approved the settlement as presented by respondent and others; and that by reason of said negligence appellants suffered an additional monetary loss of $15,000, for which damages they ask recovery.

Respondent L. S. Hamm interposed a demurrer, both general and special, to said second amended complaint. On this appeal, respondent has argued his position solely upon the basis of his general demurrer, hence the only question involved is whether the appellants have stated facts sufficient to constitute a cause of action.

The appellants frankly state that they rely solely upon the case of Biakanja v. Irving, 1958, 49 Cal.2d 647, 651, 320 P.2d 16, 65 A.L.R.2d 1358, which they contend overrules the authority of Buckley v. Gray, 1895, 110 Cal. 339, 42 P. 900, 31 L.R.A. 862, or, as the appellants succinctly state it—unless Biakanja overrules Buckley, the complaint does not state a cause of action.

Basically the respondent's position, except for his contention that in view of the subject matter involved he could not be held negligent, is that Buckley has not been overruled by Biakanja, and the judgment must be affirmed.

Buckley v. Gray, supra, laid down the rule that legatees of a will could not sue an attorney for negligence in the preparation of the will which caused injury to them, since there was no privity between the attorney and the legatees, and hence no duty existed on the part of the attorney toward the legatees; and further, that the legatees possessed no rights as third party beneficiaries to maintain an action for damages resulting from a breach of the contract between the attorney and the client who employed him to draw the will because in the contemplation of section 1559, Civil Code, the contract was not one made expressly for their benefit.

It is apparent that if the Buckley case is still the law, appellants are without remedy.

However, in Biakanja v. Irving, supra, where a notary public had negligently drawn a will, with the result that the legatee, who was to receive all of the testator's estate, got only one-eighth thereof, the Supreme Court held that the beneficiary could recover from the notary for damage sustained by reason of the invalidity of the will due to the notary's negligence, even though there was no privity of contract between them.

In the closing paragraph of the opinion, the court states: ‘We have concluded that plaintiff should be allowed recovery despite the absence of privity, and the cases of Buckley v. Gray, 110 Cal. 339, 42 P. 900, 31 L.R.A. 862, and Mickel v. Murphy, 147 Cal.App.2d 718, 305 P.2d 993, are disapproved insofar as they are in conflict with this decision.’ [49 Cal.2d 647, 320 P.2d 19] While the Supreme Court uses the word ‘disapproved,’ one of the connotations of that word is ‘reject,’ and that this language constitutes an overruling has been declared in Johnson v. Holmes Tuttle Lincoln-Merc., 1958, 160 Cal.App.2d 290, 300, 325 P.2d 193, and hailed as a rejection of the old common law rule that privity of contract must exist in order for negligent performance of a contractual duty to give rise to liability for damage to an intangible economic interest. United States for Use and Benefit of Los Angeles Testing Laboratory v. Rogers & Rogers, D.C.1958, 161 F.Supp. 132, 135.

We are of the opinion that under the doctrine of the Biakanja case, the applicability of Buckley v. Gray to the appellants' causes of action no longer exists, for as we review the history of privity and the assault made upon it in the interval between Buckley v. Gray of 1895 and Biakanja v. Irving of 1958, we observe that the rule expressed in the Buckley case was that of the general doctrine prevalent at that time, which had prevailed since 1842 and its pronouncement in the case of Winterbottom v. Wright, 152 Eng.Rep. 402, wherein it was asserted that a contracting party was not liable to a party not in privity for negligent performance of a contractual duty. This doctrine, as time went on, was rejected in the area of manufacturers' and suppliers' liability (see MacPherson v. Buick Motor Co., 1916, 217 N.Y. 382, 111 N.E. 1050, L.R.A.1916F, 696; Kalash v. Los Angeles Ladder Co., 1934, 1 Cal.2d 229, 231, 34 P.2d 481. The divergence no doubt is attributable to the probability that physical injury or property damage would result to third persons from negligence in the manufacture and supply of goods. On the other hand, where harm to intangible interests is the usual result of negligent performance of services, the doctrine maintained its strength. The breakthrough came in the case of Glanzer v. Shepard, 1922, 233 N.Y. 236, 135 N.E. 275, 23 A.L.R. 1425, wherein recovery was allowed for financial loss incurred by a third party due to negligence in the preparation of a certificate by a public weigher. The holding of the Glanzer case was restricted somewhat by Ultramares Corp. v. Touche, 1931, 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139, wherein third parties who had relied on negligently prepared accounting statements were denied recovery on the ground that this would create a potentially unlimited liability to a potentially unlimited class of persons. This in highlight was the status of the privity doctrine until our Supreme Court rendered its decision in the Biakanja case. In that case it stated, commencing at page 650 of 49 Cal.2d, at page 19 of 320 P.2d:

‘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 suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm. Cf. Prosser, Torts [2d ed. 1955], §§ 36, 88, 107, pp. 168, 172, 544–545, 747; 2 Harper and James, Torts [1956], § 18.6, p. 1052.’

And (in direct application to our state of alleged facts):

‘Here, the ‘end and aim’ of the transaction was to provide for the passing of Maroevich's estate to plaintiff. See Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275, 23 A.L.R. 1425. Defendant must have been aware from the terms of the will itself that, if faulty solemnization caused the will to be invalid, plaintiff would suffer the very loss which occurred. As Maroevich died without revoking his will, plaintiff, but for defendant's negligence, would have received all of the Maroevich estate, and the fact that she received only one-eighth of the estate was directly caused by defendant's conduct.'

We have given consideration to that portion of the opinion which refers to the fact that the notary engaged in the unauthorized practice of the law, a violation of section 6126 of the Business and Professions Code, and by its terms a misdemeanor, and the respondent's argument that the determinative factor in the Biakanja case was the unauthorized practice of law by the notary.

We believe, as did the court in the case of McDonald v. Foster Memorial Hospital, 1959, 170 Cal.App.2d 85, 95, 338 P.2d 607, 612, that the reference to the notary's unauthorized practice of the law ‘appears to be dictum, incidental to the result reached.’

It is sufficient for our purposes that in our opinion the Supreme Court established that lack of privity of contract will no longer bar a suit by a designated beneficiary of a will to recover for loss occasioned by an attorney's negligence in drawing the instrument. Rejection of the privity doctrine in this type of case is particularly justified because no other person can recover for the loss caused by the attorney's negligence.

Respondent earnestly contends that even if the lack of privity does not bar suit against him, nevertheless no actionable negligence was pleaded. The argument as we understand it is that the law with respect to the rules against perpetuities and the suspension of the power of alienation is so difficult that the ordinary lawyer who errs in their applicability cannot be charged with negligence. We agree the subject is difficult, but the law today has its specialties, and even as the general practitioner in medicine must seek the aid of the specialist in his profession, so the general practitioner in law, when faced with a problem beyond his capabilities, must turn to the expert in his profession to the end that his client is properly served. Further, this argument is pointless here, for in the Estate of Campbell, 1938, 28 Cal.App.2d 102, 106, 82 P.2d 22, a similar provision was held to violate the rules against perpetuities and suspension of the power of alienation. All that the respondent Hamm had to do in the present case was to examine the decisions of the courts of his own state and he would have had the answer to the problem he now says is confused and uncertain.

The rule of liability applicable here is that an attorney is liable for a want of sufficient skill, prudence and diligence as lawyers of ordinary skill and practice commonly possess and exercise. Gambert v. Hart, 1872, 44 Cal. 542, 552; Estate of Kruger, 1900, 130 Cal. 621, 626, 63 P. 31; Moser v. Western Harness Racing Ass'n, 1948, 89 Cal.App.2d 1, 7, 200 P.2d 79

Inclusion of such a provision in the will certainly presents a question as to the possession of the usual degree of skill and learning, and the use of that care, skill and diligence common to lawyers in practice in the community. The first count of the complaint alleges the inclusion of such a provision in the will which was void, and the respondent's advice which led appellants to settle for much less than they would have collectively received had a valid clause been used. Such allegations suffice to state a cause of action in negligence against the respondent.

The second count of the complaint alleges that the appellants were beneficiaries of the testator's contract with the respondent attorney for the drafting of the will, that the attorney breached his contract to their injury, and as third party beneficiaries they seek recovery for the damage thus caused.

Civil Code, § 1559, declares that a contract made expressly for the benefit of a third person may be enforced by him. As we have noted, the court in the Buckley case, supra, 110 Cal. at page 347, 42 P. at page 902, held that a contract for drafting a will is not expressly made for the benefit of the legatees, in a legal sense, for the purpose of maintaining a suit under said Civil Code section; that it was of that class of cases where the benefit to the third person was merely incidental and conferred no right of action on the third person. Wilson v. Shea, 1916, 29 Cal.App. 788, 790, 157 P. 543. However, in Johnson v. Holmes Tuttle Lincoln-Merc., supra (hearing denied by the Supreme Court), it was held that persons injured in an automobile accident were third party beneficiaries of a contract between a purchaser of a car and the dealer who agreed to insure the purchaser of the car, reliance being had upon the Biakanja case overruling Buckley, as it related to the question of third party beneficiaries. The respondent argues that such a construction of Biakanja is not correct because it did not involve a breach of contract question. We call attention to the language of that decision, 49 Cal.2d at page 650, 320 P.2d at page 19, that the ‘end and aim’ of an agreement to draft a will is to pass the testator's estate to the legatee. When this language is considered with respect to the determination of whether a party is a third party beneficiary of a contract made expressly for his benefit, it is hard to conceive of Biakanja not disposing of the Buckley rule as it affects the rights of a legatee as a third party beneficiary. The question as to whether or not a person will be held to be a third party beneficiary of a contract is one of intent. Smith v. Anglo-California Trust Co., 1928, 205 Cal. 496, 502, 271 P. 898; Fruitvale Canning Co. v. Cotton, 1953, 115 Cal.App.2d 622, 625, 252 P.2d 953. Our case presents a factor absent in Buckley, for here the appellants have pleaded that the testator's ‘primary and expressed intention’ was to transmit a specific portion of his estate to them. This presents a factual question as to whether the legatees were express beneficiaries of the agreement to draft the will. So far as pleading the requisites for a breach of contract, the second count is sufficient.

The third count of the complaint alleges injury because certain releases were incomplete, improperly drawn, and not in conformity with good legal practice. Respondent's objection, in addition to that made to the first cause of action, and of which we have heretofore disposed, is that appellants do not state a cause of action because there is no allegation that the respondent could have obtained a different type of release. The objection is without merit, for it is established that a cause of action may be stated by alleging negligence in general terms without detailing the specific manner in which the injury occurred. Guilliams v. Hollywood Hospital, 1941, 18 Cal.2d 97, 101, 114 P.2d 1. If the respondent feels there is any merit in such a contention, it is a matter to be taken care of by defensive pleading, for he is the party in possession of the facts with regard thereto.

The complaint having properly stated the necessary facts to constitute a cause of action as to each of the counts therein contained, the judgment of dismissal heretofore entered must be reversed.

The judgment is reversed, and the cause remanded with directions to overrule the demurrer and to allow defendant to answer.

SHOEMAKER, Justice.

KAUFMAN, P. J., and DRAPER, J., concur.