Fabian v. Lindsay
410 S.C. 475, 2014 S.C. LEXIS 470, 765 S.E.2d 132 (2014)
Rule of Law:
South Carolina now recognizes causes of action in tort (professional negligence) and contract (third-party beneficiary) by an intended beneficiary of an existing will or estate planning document against an attorney whose drafting error defeats or diminishes the client’s intent, provided the beneficiary is named in the document or identified by status.
Facts:
- On May 25, 1990, Dr. Denis Fabian executed a trust agreement that was drafted by attorneys Ross M. Lindsay, III and his law firm, Lindsay & Lindsay.
- The trust agreement designated Dr. Fabian's wife, Marilyn Fabian, as the life beneficiary of the trust.
- Dr. Fabian intended for his nieces, Erika Fabian and Miriam Fabian, to receive half of his estate upon his wife's death, along with Mrs. Fabian's two children.
- Dr. Fabian died on February 5, 2000, survived by his brother Eli Fabian, who then died a few weeks later.
- A specific clause in the trust agreement stated that if Eli Fabian predeceased Dr. Fabian, his share would be split between Miriam Fabian and Erika Fabian; however, because Eli survived Dr. Fabian, his share passed to his estate, effectively disinheriting Erika Fabian.
- Erika Fabian attempted to reform the trust agreement in court, but after years of litigation and opposition from Miriam Fabian and the drafting attorney, she accepted a settlement that preserved her claim against the attorneys.
Procedural Posture:
- Erika Fabian filed an action in circuit court against Ross M. Lindsay, III and Lindsay & Lindsay, asserting claims for professional negligence (attorney malpractice) and breach of contract as a third-party beneficiary.
- The attorneys moved to dismiss Erika Fabian's complaint under Rule 12(b)(6), SCRCP, for failure to state a cause of action.
- The circuit court granted the motion to dismiss, finding no duty owed to Erika Fabian due to lack of privity and no recognized breach of contract action for intended beneficiaries of estate planning documents.
- Erika Fabian appealed the circuit court's dismissal, and the South Carolina Supreme Court certified the appeal from the Court of Appeals.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does South Carolina recognize a cause of action, in tort and in contract, by a third-party beneficiary of a will or estate planning document against a lawyer whose drafting error defeats or diminishes the client’s intent, thereby relaxing the traditional privity requirement for legal malpractice claims?
Opinions:
Majority - Justice Beatty
Yes, South Carolina now recognizes causes of action in both tort and contract by a third-party beneficiary of an existing will or estate planning document against a lawyer whose drafting error defeats or diminishes the client’s intent. The Court noted the traditional privity requirement in legal malpractice but emphasized that strict privity would improperly immunize estate planning attorneys from liability for their professional negligence when the client is deceased. For tort claims, the Court adopted the California 'balancing of factors' test from Lucas v. Hamm, weighing factors such as the intent to affect the plaintiff, foreseeability of harm, certainty of injury, closeness of connection between conduct and injury, policy of preventing future harm, and the burden on the profession. For contract claims, the Court adopted the third-party beneficiary theory, finding that the main purpose of a contract for drafting a will or estate document is to accomplish the future transfer of the estate to the beneficiaries, and thus they should have a right of action. The Court explicitly rejected the 'Florida-Iowa Rule' which bars extrinsic evidence, deeming it often essential to prove drafting errors. Recovery under either cause of action is limited to persons who are named in the estate planning document or otherwise identified by their status in the instrument.
Concurring - Justice Kittredge
Yes, Justice Kittredge concurs with the majority opinion regarding the recognition of a cause of action. However, he also agrees with Justice Pleicones that the applicable burden of proof for such claims should be the clear and convincing standard.
Concurring in part and dissenting in part - Justice Pleicones
Yes, Justice Pleicones agrees that public policy considerations dictate a relaxation of strict privity to recognize a legal malpractice claim against an attorney who drafts an estate planning document, and that the duty should extend to beneficiaries named in the instrument or identified by status. However, he respectfully differs from the majority by asserting that this cause of action should properly sound only in tort (professional negligence), not in contract, citing precedent that professional negligence actions sound in tort. He also argues that the burden of proof for such claims should be 'clear and convincing evidence' due to the nature of proving intent after death. Finally, Justice Pleicones disagrees with the majority's decision to apply the holding to cases pending on appeal as of the date of the opinion, advocating instead for prospective application, while still allowing the Appellant in this specific case to pursue her claim to finality.
Analysis:
This case significantly alters South Carolina's legal landscape concerning attorney liability in estate planning, moving away from the traditional strict privity rule. By allowing intended beneficiaries to bring claims for legal malpractice, the Court provides a crucial avenue for accountability for drafting errors that would otherwise go unpunished after the client's death. This alignment with the majority of other states protects testator intent and ensures greater care by estate planning attorneys. The decision to allow extrinsic evidence is also critical, acknowledging the difficulty of proving intent solely from a defective document. While expanding attorney liability, the limitation to named or identified beneficiaries provides a clear boundary for potential claims.
