Takeaway
In short, this case rejects privity as a bar to suits by intended will beneficiaries, but it also confirms that attorneys are liable only for departures from ordinary professional competence—not for reasonable mistakes in a notoriously uncertain area of law.
Eugene H. Emmick retained attorney L. S. Hamm to draft his will and codicils. The instruments created a residual trust intended to benefit the plaintiffs, who were to receive 15 percent of the residue. The trust was to end five years after the probate court distributed the property to the trustee. Plaintiffs alleged that this language violated California rules against perpetuities and restraints on alienation, making the trust invalid.
After Emmick's death, the will was admitted to probate. Hamm, who had drafted the instruments and represented the executors, advised plaintiffs that the residual trust was invalid. Plaintiffs then settled with Emmick's blood relatives and alleged that they received $75,000 less than they would have taken under a validly drafted will.
Plaintiffs also alleged that Hamm negligently prepared releases in settling a separate will contest based on lack of testamentary capacity. They claimed the releases should have barred the contestants from later challenging the residual trust, and that the contestants' later participation in the trust dispute cost plaintiffs an additional $15,000. The trial court sustained Hamm's general demurrer to the second amended complaint without leave to amend and dismissed the action. Plaintiffs appealed.
Issue #1
Whether intended beneficiaries may sue the attorney who drafted a will in tort despite lacking contractual privity with the attorney.
Holding
Yes. Lack of privity does not bar intended beneficiaries from bringing a negligence action against the will's drafting attorney.
Reasoning
The Court overruled Buckley v. Gray, which had denied recovery to a disappointed will beneficiary solely because the beneficiary lacked privity with the drafting attorney. Buckley's strict privity rule had been displaced by Biakanja v. Irving, which held that liability to a nonclient turns on policy rather than on privity alone.
Applying the Biakanja factors, the Court concluded that the transaction was intended to affect the plaintiffs because a central purpose of drafting Emmick's will was to transfer property to them. Harm from an invalid bequest was foreseeable, plaintiffs' loss became certain when Emmick died without changing the will, and the alleged drafting error was closely connected to that loss.
The policy of preventing future harm also favored recognizing a duty. If intended beneficiaries could not recover for negligent drafting, neither they nor the deceased client would have an effective remedy for a loss caused by the lawyer's error. Extending potential liability to intended beneficiaries would not impose an undue burden on the legal profession, particularly because the alternative would place the loss on innocent beneficiaries.
Issue #2
Whether intended beneficiaries of a will may sue the drafting attorney as third-party beneficiaries of the attorney-client contract.
Holding
Yes. Intended beneficiaries may enforce the contract as third-party beneficiaries when the attorney's failure to perform deprives them of the testamentary benefits the client intended them to receive.
Reasoning
The main purpose of a contract to draft a will is to accomplish the client's intended transfer of property at death. Because the client enters that agreement specifically to benefit the persons named in the will, those persons are not merely remote or incidental beneficiaries, as Buckley had incorrectly held.
The Court reasoned that this intent can be made effective after the testator's death only by allowing the intended beneficiaries to sue when the attorney breaches the drafting agreement. Performance need not be rendered directly to a third party for that person to qualify as a beneficiary of the contract.
Civil Code section 1559, which permits enforcement by a person for whose benefit a contract is made, did not require an express statement by the attorney that the beneficiaries were to benefit. It was enough that the attorney understood the testator's intent to benefit the persons named in the will. The Court disapproved contrary language suggesting that the promisor must clearly manifest a separate intent to secure a benefit for the third party.
Issue #3
Whether the alleged perpetuities and restraint-on-alienation error stated a claim that Hamm breached his professional duty or contractual obligations in drafting the will.
Holding
No. Even assuming the trust provision was invalid, the alleged error did not show that Hamm failed to exercise the skill, prudence, and diligence of an ordinarily competent attorney.
Reasoning
An attorney impliedly undertakes to use the skill, prudence, and diligence commonly exercised by lawyers of ordinary skill and capacity. But an attorney is not an insurer of every legal opinion or drafted instrument and is not liable for an error on a legal question about which well-informed lawyers could reasonably disagree.
The law governing perpetuities and restraints on alienation was exceptionally technical, confused, and prone to error. The Court emphasized that courts, lawyers, and scholars had long recognized this area as filled with traps even for experienced practitioners.
The alleged defect depended on a highly remote possibility: that the probate distribution order would be delayed beyond a life in being plus sixteen years, after accounting for the will's additional five-year trust term. Because an ordinarily competent lawyer might reasonably fail to anticipate that unlikely problem, the allegations could not establish negligence or breach of contract.
The Court therefore did not need to decide whether the trust was actually invalid under the perpetuities rules. Plaintiffs could not state a viable claim on the alleged drafting error, so the trial court properly denied further leave to amend the first two counts.
Issue #4
Whether plaintiffs stated a negligence claim based on Hamm's preparation of releases settling a separate will contest.
Holding
No. The complaint did not allege facts showing that Hamm could have obtained broader releases barring the contestants' later challenge to the trust provision.
Reasoning
The releases arose from a settlement of a will contest alleging lack of testamentary capacity. The complaint conceded that the releases adequately barred further litigation of that particular contest, but it claimed Hamm should also have secured a waiver of every other possible claim against the estate, including a later attack on the trust's validity.
Nothing in the complaint alleged that the contestants were willing to give that broader waiver for the agreed $10,000 settlement payment. It was reasonable to infer that the payment settled only the capacity contest and that the contestants would have demanded additional consideration before surrendering unrelated rights to challenge the will.
At most, Hamm had a duty to request broader releases, and the complaint did not allege that he failed to do so. Plaintiffs did not claim they could amend to allege that broader releases were obtainable. The trial court therefore properly sustained the demurrer without leave to amend on the third count as well.