Wednesday, August 5, 2009
Page 11
THE LEGAL COMMUNITY
Trusts and Estates
Court Opines on Role of Counsel in Baker Manock & Jensen v. Superior Court
By MARSHAL A. OLDMAN
In the matter of Baker, Manock & Jensen v. Superior Court (Salwasser) 09 S.O.S. 4477, the Fifth District Court of Appeal focused on the potentially conflicting roles of counsel representing clients in different capacities.
The petitioning law firm represented Lillian Salwasser for the purpose of drawing her will and trust. The will named two of her sons, George and Gary, as her executors, named her husband, Walter, as a beneficiary of some of her assets, and directed that the balance pass to her trust. George and Gary were named as trustees of the trust and were also its beneficiaries along with members of their families. Nothing was provided for her two other sons, Denis and Marvin. The petitioning law firm also represented George as a co-executor while Gary was represented by other counsel.
After Lillian’s demise, Walter died and Denis became his executor under the terms of his will. Thereafter, Denis also died and Marvin was appointed as administrator of Walter’s estate. Thereafter, disputes arose over the ownership of various assets that were held in the joint names of Lillian and Walter concerning the meaning of the clauses in the will benefitting Walter. Prior to filing petitions to determine these claims, George and Gary and also Marvin filed petitions to construe whether the filing of such petitions would violate the no-contest clause in Lillian’s will.
George, using the petitioning law firm, filed objections to Marvin’s petition in his capacity as a beneficiary. In response, Marvin filed a motion to disqualify George’s attorneys on the grounds that representing the same client in his capacity as an executor and as a beneficiary was a conflict of interest and that said representation was a breach of the duty of loyalty to Lillian Salwasser. The trial court granted the motion and disqualified counsel from representing George in the dispute over the no-contest-clause litigation. A timely writ was brought by George’s law firm which was ultimately granted by the Court of Appeal.
Duties of Care, Loyalty
In its ruling, the Court of Appeal found that the trial court had exercised its discretion based on an error of law and that its opinion was not entitled to deference under the abuse of discretion standard of review. According to the Court of Appeal, the trial court found that since the attorneys had prepared the will of the decedent in question that it owed a duty of care to the beneficiaries. Additionally, the trial court found that as attorney for executor, the law firm was not permitted to become involved in a dispute between the beneficiaries. The trial court found that a duty of loyalty also existed and that the law firm’s participation in the dispute created an acute conflict of interest. As authority, the trial court relied on the Estate of Effron (1981) 117 CalApp3d 915.
In reviewing the trial court’s reasoning, the Court of Appeal initially disposed of the argument that the drafting attorney owed a duty of care to the beneficiaries based on an attorney-client relationship. The Court said that no such relationship in fact existed and that the attorney’s duty of care was to avoid drafting problems that might defeat or diminish the testator’s intentions for the beneficiaries. While this may create a potential liability for negligence, such liability falls far short of the attorney-client relationship.
The opinion spent more time analyzing the potential conflicts of an attorney representing an executor in a dispute in his capacity as a beneficiary. The Court distinguished Effron, by focusing on that opinion. It characterized the matter as one where an executor was sued by beneficiaries because it refused to negotiate the statutory fee with its own attorney. The decision stated that a beneficiary could not create a conflict that would disqualify counsel simply by attacking the attorney’s client, the executor. The case in dicta then discussed that an attorney for an executor should not become involved in disputes involving beneficiaries. In the opinion in the subject case, the Court distinguished Effron, supra, by stating that the executor’s attorney should not become involved in disputes where his representative client as a beneficiary is claiming against the estate. Since part of the dispute in this matter involved the claim of the husband’s estate that it was entitled to assets claimed by Lillian’s estate, the attorney’s representation of the executor in the beneficiary dispute created no actual conflict of interest. In fact, the successful representation of Lillian’s estate against such a claim would prevent it from being diminished by Walter’s survivorship over various accounts.
The Court noted that one of Marvin’s proposed petitions dealt with interpretation of Lillian’s will as it benefitted Walter. The Court suggested that the granting of the petition would neither diminish nor enhance the estate and did not involve the executor protecting the estate. However, the Court also stated that the executor has a duty to assist the court by helping to determine the proper beneficiaries of the estate and has the right to advocate. The opinion suggested that it was proper for counsel to represent the executor in advocating the interpretation of an instrument in accordance with the wishes of the testator.
Ruling Appears Justified
In this instance, the ruling appears justified by the circumstances. The testator did not wish for Marvin to receive anything under her testamentary instruments and the only source of any distribution to him would be through the interests left to Walter as surviving spouse. Whether dealing with the joint accounts or the interpretation of what was intended by the community property provisions in Lillian’s will, the litigation was essentially the same set of claims. If the question of conflict of interest were defined too sharply, an executor or his counsel may be conflicted out of litigation simply by the artful pleading of a litigant.
However, having said that, counsel needs to be careful of the number of roles he may be filling in a particular estate. In this instance, the same attorney has drafted the estate plan for the decedent, taken part in the administration of her estate, and is now representing the executor as a litigant and a beneficiary. If extrinsic evidence is required to interpret the will, the drafting attorney may be witness to the testator’s intent and be required to testify. If his testimony is harmful to the case of his client, or even if it may be more effectively presented if he is not advocate in the action, the attorney will need to consider the potential harm to his client by filling the dual roles of witness and advocate.
Additionally, the roles of an attorney for a fiduciary and an attorney for a beneficiary are very different. As counsel for the personal representative of an estate, the attorney is required to advocate on behalf of the estate concerning any claims that may enhance or diminish it. Such an attorney may also be required to advocate a position on heirship, distribution and interpretation that affects the beneficiaries in different ways. If he is advocating for the executor, who is also a beneficiary affected by such claims, his credibility may be severely affected by the perception that he is using his position as attorney for the estate to enhance his client’s rights in the estate. Once again, the executor may be greatly benefitted by having separate counsel to advocate for him in such a circumstance.
Moeller v. Superior Court
A more interesting possibility concerns the possible application of Moeller v. Superior Court (1997) 16 Cal4th 1124 in decedent estates. In that matter, the files of the attorney for the trustee were deemed part of the property of the trust and were transferable to the successor trustee. The court opined that separate litigation counsel hired to protect the trustee might be covered by the attorney-client privilege provided that such an attorney were paid separately by the trustee. Moeller, has not been applied outside of the trust context. However, the similarities between trust and decedent estate administration are sufficient to anticipate that a court may apply the same ruling in an estate action. In that event, it may be difficult to protect the files of an attorney who has represented his client in the dual roles of personal representative and beneficiary. If separate counsel represent the client with dual capacities, keeping the beneficiary matters separate from the client’s fiduciary interests will be substantially easier.
In any event, counsel will need to advise their clients carefully before engaging in representation in more than one capacity in the same matter. Consideration will need to be given to the attorney’s role as a possible witness and to the perceptions of the same attorney representing the same client in different roles. Ultimately, counsel will need to be in a position to protect the attorney-client relationship, preserve confidentiality, and avoid actual conflicts.
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