Lucas v. Hamm

Brief Fact Summary. An attorney drafted a will for the deceased.  A distribution in the form of residue from a trust was supposed to be left to certain family members.  Due to a drafting error by the attorney the provision creating the trust was unenforceable.

Synopsis of Rule of Law. "Since … the main purpose of the testator in making his agreement with the attorney [to draft a will] is to benefit the persons named in his will and this intent can be effectuated, in the event of a breach by the attorney, only by giving the beneficiaries a right of action, we should recognize, as a matter of policy, that they are entitled to recover as third-party beneficiaries."

Facts. The Plaintiffs, Lucas and others (the "Plaintiffs"), are some of the beneficiaries under the will of Eugene H. Emmick ("Mr. Emmick").  The Plaintiff brought suit against the Defendant, L.S. Ham (the "Defendant"), who was engaged by Mr. Emmick to prepare his will and certain codocils.  Under the will prepared by the Defendant, the Plaintiff was to receive 15% of the residue of a trust to be established.  The Defendant in attempting to establish the trust was negligent, and used phrases that violated the "Civil Code relating to restraints on alienation and the rule against perpetuities."  The will and codicils were admitted to probate and shortly thereafter the Defendant wrote to the Plaintiffs and informed them that their distributions were invalid.  Instead of receiving the 15% residue of the trust, the Plaintiffs would have to enter into a settlement with Mr. Emmick's blood relatives and receive $75,000 less than they would have if the Defendant properly drafted the provision of the will.  The Plaintiffs brought suit against the Defendant as third party beneficiaries of the contract made between the Defendant and Mr. Emmick to prepare the Mr. Emmick's will.  The Defendant demurred and the lower court sustained the demurrer.

Issue. Under a third party beneficiary theory, do the beneficiaries of a will have a valid suit against the attorney drafter of the will?

Held. Yes, the court concludes that "intended beneficiaries of a will who lose their testamentary rights because of failure of the attorney who drew the will to properly fulfill his obligations under his contract with the testator may recover as third-party beneficiaries."
•    The court first voices its opposition to [Buckley v. Gray, 110 Cal. 339, 42 P. 900, 31 L.R.A. 862], which held (i) that because of a lack of privity between a beneficiary and the drafter of the will there could be no recovery and (ii) there also is no recovery for a beneficiary based on a third party beneficiary theory.  The court observed "[o]bviously the main purpose of a contract for the drafting of a will is to accomplish the future transfer of the estate of the testator to the beneficiaries named in the will, and therefore it seems improper to hold, as was done in Buckley, that the testator intended only "remotely" to benefit those persons."  Performance in third party beneficiary contracts does not necessarily have to be directly to the beneficiary.  Additionally, only individuals who are "incidentally or remotely" benefited by the contract are excluded.  Further, the court concludes that a "specific manifestation by the promisor of an intent to benefit the third person" is not necessary. 
•    The court somewhat qualifies its decision.  It observes that attorneys are not liable for every mistake they make.  Specifically, "he is not, in the absence of an express agreement, an insurer of the soundness of his opinions or of the validity of an instrument that he is engaged to draft; and he is not liable for being in error as to a question of law on which reasonable doubt may be entertained by well-informed lawyers."  Thus, the court concludes "[i]n view of the fact that few, if any, areas of the law have been fraught with more confusion or concealed more traps for the unwary draftsman than the rules relating to perpetuities and restraints on alienation, it would not be proper, where it is alleged that defendant drafted a will in such manner that a trust was invalid because it violated the rules relating to perpetuities and restraints on alienation, to hold that defendant failed to use such skill, prudence and diligence as lawyers of ordinary skill and capacity commonly exercise."

Discussion. This case offers a very interesting look at the third party beneficiary doctrine and how it applies to attorneys.  Specifically those attorneys practicing in the field of trusts and estates.