Ferguson v. Cramer

¹⁰¹ DAVIS, Judge. By order dated July 8, 1996, the Circuit Court for Anne Arundel County granted the motion to dismiss filed pursuant to Md. Rule 2-322{b) by appellees Steven J. Cramer, Esq., Thomas G. Bodie, Esq., John J. Nagle, III, Esq., Thomas J. Dolina, Esq., Power & Mosner, P.A., and Bodie, Nagle, Dolina, Smith & Hobbs, P.A. The court’s order dismissed the complaint brought by appellants Kimberly Ann Ferguson, Carolyn Dawn Warner, Cheryl Rene Isensee, and Dennis William Eckes against appellees for legal malpractice. Appellants noted a timely appeal on August 7, 1996, and present the following questions for our review, which we summarize and restate below: I. Do the beneficiaries of an estate have standing to sue the personal representative’s attorney? 1 II. Did the trial court err when it dismissed appellant’s complaint based on its conclusion that appellants do not have standing to sue appellees for legal malpractice?

FACTS The instant case comes to us from the trial court’s grant of a motion to dismiss and, as such, the relevant facts are those facts alleged in appellants’ complaint and any exhibits attached thereto. The complaint alleges that appellants are all heirs of the estate of Dennis Webster Eckes (decedent or Mr. Eckes) who died on April 15, 1991. In accordance with the terms of the will, Paula Eckes (Ms. Eckes) was designated as personal representative of decedent’s estate. On April 24, 1991, Ms. Eckes “employed” appellee Steven Cramer “to represent her in handling and administering the estate” of Mr. Eckes.

The parties entered into a Client Representation Agreement (Agreement) naming appellee Cramer as the attor ¹⁰² ney and Ms. Eckes as “the client.” 2 The Agreement is attached to the complaint as an exhibit. The parties entered the Agreement “for the purpose of representation and all appropriate legal action by the law firm for handling estate [sic] of Dennis Eckes.” The fee was to be set by the court, and Ms. Eckes agreed to “pay all reasonable and necessary costs arising during the handling of this claim.” Appellants’ complaint also alleges that they, “as the only heirs of the Estate of Dennis Webster Eckes, were specifically intended to be the beneficiaries of Cramer’s service as attorney for the estate of [decedent].” Appellants allege that appellee Cramer had a duty to Ms. Eckes, as personal representative of the estate, to assist her in carrying out her duties, and a duty “to exercise that degree of care and diligence in pursing the administration of the Estate of Dennis Webster Eckes as used by attorneys engaged in the practice of law.” According to appellants’ complaint, when appellee Cramer failed adequately to advise Ms. Eckes on her duties to obtain and file estate inventories, appraisals, and accountings, he “breached the duty owed to [appellants] as beneficiaries of the Estate and has caused [appellants] to suffer long term economic loss as well as economic loss to the Estate.” Appellants also contend in their complaint that appellee Cramer was negligent in providing legal representation to Ms. Eckes with regard to the estate’s claims against Edgewater Publishing (Edgewater) and Dr. James Beckett, two separate parties that decedent had agreements with relating to the publication of his books and sports memorabilia. Appellants alleged that the mishandling of these estate assets resulted in economic loss to the estate. Moreover, appellants complain that appellee Cramer’s negligence caused them to suffer emo ¹⁰³ tional trauma and requested judgment, jointly and severally, against appellees in the amount of $3,000,000, plus costs of the suit.

Appellants filed exceptions to the first accounting and called on their “own counsel” to handle matters with regard to Edgewater. Additional information set forth in the parties’ briefs indicate that Ms. Eckes was the ex-wife of decedent and the mother of appellants. Ms. Eckes was not a beneficiary of the estate. On appeal, appellants also contend that certain facts can be inferred from the complaint.

One such inference is that Ms. Eckes “hired appellee Cramer with an actual intent and purpose to directly benefit her children.” Appellants also argue that it can be inferred from the well-pled facts that no conflict of interest existed among appellants and Ms. Eckes. Appellants further assert on appeal that an inference can be drawn from the allegations in the complaint that they were appellee Cramer’s clients. They allege, they say, that when they became concerned that appellee Cramer was receiving trademark payments and copyright royalties from Edgewater, he assured them that no agreements had been made on their behalf and forwarded appellants a proposed letter he addressed to Edgewater demanding further negotiations relative to the payments. Appellants also refer to the allegation that they requested appellee Cramer to obtain any written agreements executed between the parties.

Finally, appellants argue on appeal that appellee Cramer was negligent because “he failed to draw any distinction relative to who his clients were.” DISCUSSION In reviewing the trial court’s grant of appellees’ motion to dismiss, we assume the truth of all relevant and material wellpled facts, as well as all the inferences that could reasonably be drawn from those facts, in the light most favorable to appellant. Bennett Heating & Air Conditioning v. Nations-Bank, 103 Md.App. 749, 757 , 654 A.2d 949 (1995), aff'd in part and rev’d in part, on other grounds, Bennett Heating & Air Conditioning v. NationsBank, 342 Md. 169 , 674 A.2d 534 ¹⁰⁴ (1996). Thus, our function is to determine whether dismissal was proper as a matter of law—that is, if the pleaded facts fail to state a cause of action. Davis v. DiPino, 387 Md. 642, 648 , 655 A.2d 401 (1995).

The Court, however, need not consider conclusory charges which have no factual support. Berman v. Karvounis, 308 Md. 259, 265 , 518 A.2d 726 (1987). The issue presented on this appeal is whether beneficiaries of an estate have standing to sue the personal representative’s attorney for legal malpractice. This is an issue of first impression in Maryland.

Before reaching our conclusion, we review the history of Maryland law governing an attorney’s liability to third parties, and explore the treatment of this issue by other jurisdictions. Since 1940, the Court of Appeals has recognized the strict privity rule that an attorney is not liable, in an action arising out of his professional duties, to any one other than his client in the absence of fraud or collusion. Wlodarek v. Thrift, 178 Md. 453 , 13 A.2d 774 (1940). In Kendall v. Rogers, 181 Md. 606 , 31 A.2d 312 (1943), the Court explained that, in order to hold an attorney liable for negligence or legal malpractice, an attorney-client relationship must exist between the parties.

Id. at 613 , 31 A.2d 312 . Thus, in order to state a cause of action for negligence or legal malpractice against an attorney, a plaintiff must allege three elements: (1) the attorney’s employment, (2) his neglect of a reasonable duty, and (3) that such negligence resulted in and was the proximate cause of loss to the client. Id. at 611 , 31 A.2d 312 ; Cavacos v. Sarwar, 313 Md. 248, 253 , 545 A.2d 46 (1988); Flaherty v. Weinberg, 303 Md. 116, 128 , 492 A.2d 618 (1985). Maryland continued to follow this strict privity rule until 1972, when a limited exception was adopted in Prescott v. Coppage, 266 Md. 562 , 296 A.2d 150 (1972).

Prescott involved a dispute between Coppage, the receiver of a deposit insurance company, and Medley, the receiver of a savings and loan association. Id. at 574 , 296 A.2d 150 . The association owed the insurance company money. Id.

Medley was appointed receiver by an order of the court and was required among ¹⁰⁵ other things to ta,ke possession of the association’s assets and property and hold or dispose of them under the court’s order. Id. Coppage sued Prescott, a court-appointed special counsel to Medley, alleging that his erroneous advice led Medley to pay sums from his receivership to the association’s depositors rather than to Coppage, who enjoyed a higher priority status. Id.

The Court held that Coppage had standing to sue as a third-party beneficiary under the facts and circumstances of the case. Id. The Court reasoned that the order of appointment of Medley as receiver “makes clear that all creditors of [the association] were third-party beneficiaries. The order of appointment of Prescott by necessary implication bound him to those creditor beneficiaries.” Id.

In Clagett v. Dacy, 47 Md.App. 23 , 420 A.2d 1285 (1980), we examined the Court’s analysis in Prescott and explained that [although the case has a most unusual factual setting, it does seem to suggest a modest relaxation of the strict privity requirement to the extent of allowing a true third party beneficiary to sue an attorney as he could sue any other defaulting or tortious party to a contract made for his benefit. Id. at 27, 420 A.2d 1285 . We further clarified that the exception to the strict privity rule afforded to third-party beneficiaries is “a limited one with special utility.” Id. at 28 , 420 A.2d 1285 . The exception is most often applied in actions based on drafting errors in wills, “errors that, by their very nature, will likely have a long or delayed effect and will most probably impact upon persons other than the attorney’s immediate employer.” Id.

The nonclient must show that he or she was specifically intended to be the beneficiary of the attorney’s undertaking, which “will take more than general eonclusory allegations.” Id. at 29 , 420 A.2d 1285 . In Clagett , the third parties were high bidders at a foreclosure sale. Id. at 23 , 420 A.2d 1285 . The attorneys, however, failed to conduct the sale properly, and it was set aside.

Id. at 24 , 420 A.2d 1285 . The debtor redeemed the property by discharging his loan, and the bidders sued the attorneys ¹⁰⁶ alleging they owed them a duty, to use care and diligence in conducting the sale properly. Id. We affirmed the trial court’s dismissal of appellants’ complaint because they did not sufficiently allege proper standing to sue the appellee attorneys.

Id. at 30-31 , 420 A.2d 1285 . We explained “that an attorney could not lawfully represent both the mortgagee and the bidder in the transaction; and it will not be lightly presumed or inferred that appellees did so.” Id. at 30 , 420 A.2d 1285 . The next appellate decision in Maryland that discussed the third-party beneficiary exception in the attorney malpractice context was Kirgan v. Parks, 60 Md.App. 1 , 478 A.2d 713 (1984). In Kirgan , we said that whether a testamentary beneficiary has standing to sue the attorney who drafted the' testator’s will is “a definite maybe.” Id. at 3 , 478 A.2d 713 .

The Court, however, rejected the action because it found the will was valid, the intent expressed in the will was carried out, and there was no concession of error by the attorney. Id. at 12 , 478 A.2d 713 . Most recently, in Flaherty v. Weinberg, 303 Md. 116 , 492 A.2d 618 (1985), the Court restated that, as a general rule, Maryland adheres to the strict privity rule in attorney malpractice cases. Id. at 130 , 492 A.2d 618 .

The sole exception to this rule is the third-party beneficiary theory. Id. “[T]o establish a duty owed by the attorney to the nonclient the latter must allege and prove that the intent of the client to benefit the nonclient was a direct purpose of the transaction or relationship ... the test of third party recovery is whether the intent to benefit actually existed, not whether there could have been an intent to benefit the third party.” Id. at 130-31 , 492 A.2d 618 . In other words, the Court noted, “an incidental benefit does not suffice to impose a duty upon the attorney.” Id. at 131 n. 6, 492 A.2d 618 (quoting R. Mallen & V. Levit, Legal Malpractice § 80, at 157 (2d ed.1981)). Flaherty involved a dispute between the purchasers of a home, the Flahertys, and First Federal Savings and Loan Association (First Federal) who approved the Flahertys’ loan. ¹⁰⁷ Id. at 132 , 492 A.2d 618 .

First Federal secured the services of the law firm of Weinberg, Michel and Sterns (Weinberg) to represent it at the settlement of the purchase of the property. The Flahertys did not hire separate counsel. Id. At settlement, Weinberg assured the Flahertys that they were purchasing the property as described in the contract of sale.

Id. Later, the Flahertys learned that this statement was inaccurate and brought an action against Weinberg for professional malpractice. Id. at 133 , 492 A.2d 618 . The Court, in reviewing the trial court’s grant of Weinberg’s motion to dismiss, stated that the Flahertys’ complaint alleged sufficient facts to survive the motion, and reversed the trial court’s dismissal.

Id. at 137-39 , 492 A.2d 618 . The Flahertys’ complaint alleged that “the hiring of [Weinberg] was intended to benefit the lender as well as the purchasers in that both had identical interests in the property. The plaintiffs were intended either expressly or impliedly, to benefit from the defendant attorneys’ undertaking in this matter.” Id. at 138-39 , 492 A.2d 618 . In Layman v. Layman, 84 Md.App. 183 , 578 A.2d 314 (1990), appellants were the beneficiaries of a will and appellee was the attorney who drafted the testator’s will.

Id. at 184 , 578 A.2d