Albright v. Burns

Rule of Law:

An attorney owes a fiduciary duty and a duty of care to persons, even if not formal clients, who the attorney knows or should know rely on them in their professional capacity, especially when aware of a potential conflict of interest regarding the use of another's assets by an agent, and failure to meet this minimum standard of competence can constitute legal malpractice.

Facts:

• Emil E. Bruch (Bruch) experienced deteriorating health and multiple hospitalizations from November 1978 until his death on December 29, 1980.
• In December 1978, while hospitalized with a fractured clavicle, Bruch executed a general power of attorney in favor of his nephew, John F. Burns (Burns).
• Burns desired to sell Bruch's 1,100 shares of A.T. & T. stock to use the proceeds for his own business ventures.
• Burns discussed this intention with Bruch, who expressed concern about needing the money for his own care, but reluctantly consented in March 1979 after Burns assured him he would care for him and repay the money in 30 to 60 days.
• Burns consulted attorney Harvey R. Poe (Poe), who had represented Burns in other matters, regarding the stock sale and loan.
• Poe recognized a potential conflict in Burns using the power of attorney to sell stock and lend the proceeds to himself, and advised Burns against such action, but Burns insisted on proceeding.
• Burns obtained the stock certificates from Bruch's safe deposit box and sold the stock, instructing the broker to make the check payable to Bruch and send it to Poe.
• Poe received the check, both he and Burns endorsed it, and Poe deposited it into his trust account; Poe then prepared a 6% interest promissory note which Burns executed without pledging any collateral, and Poe disbursed the funds for Burns' purposes within two days without notifying Bruch.

Procedural Posture:

• Plaintiffs Anita M. Albright (coexecutrix of Etta Mae Burns's estate) and Henry Farer (substituted administrator of Emil E. Bruch's estate) brought suit against John F. Burns and Harvey R. Poe in a trial court (implied from the record) for fraud, conversion, breach of fiduciary duty, and negligence.
• Albright had previously raised exceptions to Burns's accounting as executor and Poe's attorney fees for Bruch's estate, leading to their removal as executor and attorney, respectively, by the Probate Part.
• Plaintiffs moved for partial summary judgment against Poe in the trial court, which was denied because the judge found a factual issue regarding Poe's deviation from the standard of care.
• During the course of the trial, plaintiffs dropped the allegations of fraud against Poe.
• At the close of plaintiffs' case, defendant Burns consented to a judgment against him in the amount of $89,139.72.
• The trial court dismissed all remaining claims against both defendants (Burns and Poe) for lack of proof.
• Plaintiffs-appellants appealed the denial of their motion for partial summary judgment and the granting of defendants-respondents' motions for judgment at the conclusion of plaintiffs' case to the Superior Court of New Jersey, Appellate Division.