Belt v. Oppenheimer, Blend, Harrison & Tate, Inc.,
192 S.W.3d 780
(Tex. 2006).
Other Estate Planning Matters
Malpractice
Executors sued Attorneys who prepared Testator’s will asserting that
Attorneys provided negligent advice and drafting services. Executors
believed that Testator’s estate incurred over $1.5 million in
unnecessary federal estate taxes because of the malpractice. Both the
trial and appellate courts agreed that Executors had no standing to
pursue the claim because of lack of privity. Belt v. Oppenheimer, Blend,
Harrison & Tate, Inc., 141 S.W.3d 706 (Tex. App.—San Antonio 2004). The
appellate court explained that privity was mandated by Barcelo v.
Elliott, 923 S.W.2d 575 (Tex. 1996), and thus the court had no choice
but to affirm the trial court’s grant of a summary judgment in favor of
Attorneys. The Supreme Court of Texas reversed and held that “there is
no legal bar preventing an estate’s personal representative from
maintaining a legal malpractice claim on behalf of the estate against
the decedent’s estate planners.” The court did not express an opinion as
to whether Attorney’s conduct actually amounted to malpractice.
Below are some of the key points made by the court:
- Barcelo remains good law. The court did not
overturn Barcelo. The court explained that an attorney owes no duty
to a non-client, such as a will beneficiary or an intended will
beneficiary, even if the individual is damaged by the attorney’s
malpractice. The court reiterated the policy considerations
supporting Barcelo:
[T]he threat of suits by disappointed heirs after a client’s death
could create conflicts during the estate-planning process and divide
the attorney’s loyalty between the client and potential
beneficiaries, generally compromising the quality of the attorney’s
representation. * * * [S]uits brought by bickering beneficiaries
would necessarily require extrinsic evidence to prove how a decedent
intended to distribute the estate, creating a “host of
difficulties.” * * * [B]arring a cause of action for estate-planning
malpractice by beneficiaries would help ensure that estate planners
“zealously represent[ed]” their clients.
- Policies are different regarding suits by personal
representatives. The policy considerations discussed above
do not apply to suits by personal representatives. The court
explained that unlike cases “when disappointed heirs seek to dispute
the size of their bequest or their omission from an estate plan,”
these policy considerations do not apply “when an estate’s personal
representative seeks to recover damages incurred by the estate
itself.” The court also pointed out that “while the interests of the
decedent and a potential beneficiary may conflict, a decedent’s
interests should mirror those of his estate.” The court wrapped up
its opinion by concluding that “[l]imiting estate-planning
malpractice suits to those brought by either the client or the
client’s personal representative strikes the appropriate balance
between providing accountability for attorney negligence and
protecting the sanctity of the attorney-client relationship.”
- Possible “recasting” is possible. The court
recognized the problem which may arise because beneficiaries often
are appointed as the estate’s personal representative. The court’s
holding creates “an opportunity for some disappointed beneficiaries
to recast a malpractice claim for their own ‘lost’ inheritance,
which would be barred by Barcelo, as a claim brought on behalf of
the estate.” The court minimized this possibility by stating that
“[t]he temptation to bring such claims will likely be tempered,
however, by the fact that a personal representative who mismanages
the performance of his or her duties may be removed from the
position.” The court also pointed out that any recovery goes to the
estate, not the beneficiary, unless recovery flows through to the
beneficiary under the terms of the will.
- The decedent’s personal representative has capacity and
standing. The court explained that it is well-accepted law
that a decedent’s personal representative has the capacity to bring
a survival action on behalf of the decedent’s estate. The court then
had to address an issue of first impression in Texas, that is, does
a legal malpractice claim in the estate-planning context survive a
deceased client. The court explained that the common law allowed
causes of action for acts affecting property rights to survive and
that estate-planning negligence that results in “the improper
depletion of a client’s estate involves injury to the decedent’s
property.” Thus, the court held that “legal malpractice claims
alleging pure economic loss survive in favor of a deceased client’s
estate.” Consequently, Executors had standing to bring the
malpractice claim.
- Malpractice claim accrues during the decedent’s
lifetime. The court explained that the alleged malpractice
occurred during the testator’s lifetime even though the alleged
damage (increased estate tax liability) did not occur until after
the decedent’s death. Thus, the court disapproved a contrary holding
in the lower court case of Estate of Arlitt v. Patterson, 995 S.W.2d
713, 720 (Tex. App.—San Antonio 1999, pet. denied). The court
pointed out that the testator could have brought the claim himself
if he had discovered the malpractice prior to his death and
recovered his attorney’s fees and the costs incurred to restructure
his estate plan.
- Discovery rule applies running of statute of
limitations. In a footnote, the court addressed the issue
of when the statute of limitations begins to run. The court stated
that
while an injury occurred during the decedent’s lifetime for purposes
of determining survival, the statute of limitations for such a
malpractice action does not begin to run until the claimant
“discovers or should have discovered through the exercise of
reasonable care and diligence the facts establishing the elements of
[the] cause of action.” * * * In this case, the “claimant” may be
either the decedent or the personal representative of the decedent’s
estate.
Moral: Estate planners are now subject to potential malpractice
actions brought by the personal representative of their client’s estate.
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