IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)
September 6, 2011
ANITA AUGELLO,*FN1 AS EXECUTOR, ETC., ET AL., PLAINTIFFS AND APPELLANTS,
JOHN PALLEY ET AL., DEFENDANTS AND RESPONDENTS.
(Super. Ct. No. 34200800026322CUNPGDS)
The opinion of the court was delivered by: Mauro ,j.
Augello v. Palley
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
In their second amended complaint, plaintiffs Anita Augello, Flora McFarlane and Elena Macaluso (daughters of decedent Mary Sandroni) sued defendants John Palley and the law firm Johnson, Fort, Meissner, Joseph and Palley, asserting legal malpractice in the drafting of an agreement among estate beneficiaries for reallocation of estate assets. The trial court sustained defendants' demurrer without leave to amend on grounds that the second amended complaint included sham allegations inconsistent with allegations in the first amended complaint, and that defendants did not owe a duty to plaintiffs as individuals because they did not have an attorney-client relationship with them.
Plaintiffs contend on appeal that (1) Augello, in her capacity as executor, had a fiduciary duty to the estate beneficiaries to sue defendants on behalf of all plaintiffs, and (2) plaintiffs are within the class of third parties to which defendants owed a duty, even absent an express attorney-client relationship.
Accepting the well-pleaded allegations of the applicable complaints, we conclude that Augello retained defendants in her capacity as executor to probate decedent's will, with only incidental benefit to the beneficiaries. Augello cannot establish damage to her as executor or to the estate, and defendants did not have a duty to plaintiffs as individuals.
We will affirm the judgment.
We assume the truth of the well-pleaded factual allegations in the applicable complaints. (Fogarty v. City of Chico (2007) 148 Cal.App.4th 537, 540 (Fogarty).) In the original complaint, Augello sued as an individual and as executor of the estate of Mary Sandroni; MacFarlane and Macaluso sued as individuals. Plaintiffs alleged they had all retained defendants in 2003 for representation in the probate of their mother's estate. They alleged that defendants owed them a duty to ensure that each plaintiff received her full share of the estate, but that defendants mishandled the distribution of the assets of the estate by failing to properly memorialize a waiver of certain estate assets by other non-plaintiff beneficiaries, resulting in the plaintiffs not receiving the larger share of the estate to which they were entitled. Plaintiffs discovered the malpractice in 2007.
Defendants filed a demurrer to the original complaint. The trial court took judicial notice of filings in the probate proceeding indicating that only Augello, in her capacity as executor, had retained the defendants, and that Augello did not incur any damages in that capacity. The trial court sustained the demurrer but gave plaintiffs leave to amend.
In the first amended complaint, Augello once again sued as an individual and as executor, and MacFarlane and Macaluso again sued as individuals. Plaintiffs now alleged, however, that Augello, as executor, retained defendants to represent "her" in the probate of the estate, entrusting defendants to ensure that each plaintiff received her full share of the estate. In addition to the general allegation that defendants mishandled the distribution of the estate, plaintiffs now alleged more particularly that defendants were "to finalize and memorialize an agreement" under which the non-plaintiff beneficiaries would receive a distribution of "estate assets from the liquidation of stock and other personal property" as to which plaintiffs would forego their interests; plaintiffs would receive their distribution from "the sale of certain real estate assets held in partnership between the Estate and third parties" as to which the non-plaintiff beneficiaries would forego their interests. However, defendants obtained waivers from the non-plaintiff beneficiaries that "were not sufficiently specific" and allowed the non-plaintiff beneficiaries to deny any agreement to forego their interest in the real property on its sale, forcing the plaintiffs to share the proceeds with them. Plaintiffs alleged that Augello had authority to seek damages "on behalf of the estate and the beneficiaries thereof." Plaintiffs asserted damages as a result of the negligence of the defendants.
In ruling on the demurrer to the first amended complaint, the trial court determined that an attorney for an estate does not owe a duty to beneficiaries absent an express retainer with them or conduct that frustrated the intent of the testator. Plaintiffs did not allege that they retained defendants in their individual capacities to prepare the distribution agreement, and the resulting distribution was not inconsistent with the testator's intent. Thus, with regard to Augello acting in her capacity as executor, the trial court determined that she once again failed to allege any facts establishing damages in her representative capacity or to the estate. The trial court sustained the demurrer with leave to amend for the plaintiffs as individuals, but without leave to amend for Augello in her capacity as executor.
Plaintiffs then filed their second amended complaint, suing only as individuals. Plaintiffs again alleged that Augello as executor had retained defendants to represent her in the probate of the estate. The second amended complaint alleged that at Augello's request, defendants undertook to prepare documents to effectuate the distribution agreement that plaintiffs had reached with the other beneficiaries. But the complaint then asserted that in making her request, Augello acted in her individual capacity as opposed to that of executor, because the agreement among the beneficiaries was outside the scope of her duties as executor. Plaintiffs once again alleged that inadequacies in the documents allowed the other beneficiaries to disavow their promise to relinquish any claim to the proceeds from the sale of the real property, to the detriment of the plaintiffs.
Defendants demurred to the second amended complaint. In ruling on the demurrer, the trial court found that the plaintiffs had failed to explain the change in their allegations. The trial court noted that in the first amended complaint, plaintiffs alleged Augello had retained defendants in her representative capacity as executor, but in the second amended complaint, plaintiffs alleged that Augello retained defendants as an individual. In their written opposition to the demurrer and in oral argument, plaintiffs admitted that they did not enter into a separate agreement as individuals with defendants. Nonetheless, plaintiffs argued that defendants owed them a duty as beneficiaries of the estate based on case law such as Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja). The trial court held that Biakanja was distinguishable because it involved a situation where a notary failed to implement the testator's stated intent in drafting the will. The trial court concluded that in this case, unlike in Biakanja, there are no allegations that defendants did not implement the testator's intentions. The trial court sustained the demurrer as to all plaintiffs without leave to amend.*fn2
STANDARD OF REVIEW
Our review of a trial court's ruling on a demurrer is de novo. (Fogarty, supra, 148 Cal.App.4th at p. 542.)
Plaintiffs contend that Augello had a fiduciary duty to sue defendants on behalf of the beneficiaries for the benefit of the estate. (Prob. Code, §§ 9600, 9820.) They cite Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523 (Borissoff) as authorizing Augello's cause of action against the defendants.
Defendants counter that plaintiffs forfeited this argument because they did not raise it in opposition to the demurrer to the second amended complaint. However, as noted above, Augello did not sue as executor in the second amended complaint. Nonetheless, she did assert this contention in opposition to the demurrer to the original complaint.
In any event, Borissoff does not support plaintiffs' proposition that an executor may bring an action for legal malpractice on behalf of an estate's beneficiaries. The issue in that case was whether an executor could bring a negligence action against tax attorneys hired by a previous executor, based on increased tax liability incurred by the estate. Borissoff held that the Legislature filled the "gap" between the successor and the attorneys through provisions giving a successor executor the same powers a predecessor could have exercised, which included seeking recovery in an action for malpractice for harm to the estate. (Borissoff, supra, 33 Cal.4th at pp. 528, 530.) Borissoff expressly stated, however, that cases involving the relationship (or lack of relationship) between an estate's attorneys and the beneficiaries are inapposite "because California law does not equate the successor fiduciary's rights with those of the beneficiaries." (Id. at p. 530; accord, id. at p. 535.)*fn3
In this case, plaintiffs did not allege that defendants' negligence harmed the estate or resulted in Augello's liability as executor based on their actions. (Cf. Borissoff, supra, 33 Cal.4th at p. 531.) Therefore, the trial court correctly ruled that Augello failed to identify any cognizable damages that she as executor could seek from defendants.
Plaintiffs further assert that they are in the class of third parties to whom an attorney owes a duty, even absent privity of contract, relying on Biakanja, supra, 49 Cal.2d 647. They contend the trial court erred in deriving a requirement from the Biakanja line of cases that the negligence of an attorney must be contrary to the intent of the testator. Plaintiffs argue Goldberg v. Frye (1990) 217 Cal.App.3d 1258 (Goldberg), on which the trial court relied in its earlier rulings, is distinguishable because it involved an appeal from summary judgment.
In Biakanja, supra, 49 Cal.2d 647, a notary who was not an attorney drafted a will for a decedent bequeathing the entire estate to the plaintiff. (Id. at p. 648.) The notary did not arrange for proper attestation of the will and it was denied probate. (Ibid.) As a result, the plaintiff inherited a much smaller portion of the estate through intestate succession. (Ibid.) The issue on appeal was whether the notary had a duty to exercise due care to protect the plaintiff beneficiary from injury even though they were not in privity of contract. (Ibid.) The California Supreme Court held that the determination whether a defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, "among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to [plaintiff], the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm." (Biakanja, supra, 49 Cal.2d at p. 650.) The Supreme Court concluded that under the facts of that case, liability was appropriate despite the absence of privity. (Id. at pp. 650-651.)
In Lucas v. Hamm (1961) 56 Cal.2d 583, an attorney was retained by a testator to prepare a will. (Id. at p. 586.) The attorney's negligence in preparing the documents ultimately resulted in the plaintiff beneficiaries receiving a smaller share of the estate. (Id. at pp. 586-587.) The Supreme Court cited the Biakanja factors and concluded that the plaintiff beneficiaries were not barred from bringing suit against the attorney despite the absence of privity. (Id. at pp. 588-591.) Nonetheless, the Supreme Court held that the attorney's alleged conduct did not amount to negligence. (Id. at pp. 591, 594-595.)
In Morales v. Field, DeGoff, Huppert & MacGowan (1979) 99 Cal.App.3d 307 (Morales), the Court of Appeal applied the Biakanja factors (as recounted in the subsequent case Goodman v. Kenney (1976) 18 Cal.3d 335) to circumstances where the attorneys for trustee Wells Fargo Bank failed to notify the plaintiff beneficiary that the attorneys also represented third parties involved in a transaction with the trust. (Morales, supra, 99 Cal.App.3d at pp. 311-315.) The court in Morales stated that an attorney undertaking a position as adviser to a trustee "in reality also assumes a relationship with the beneficiary akin to that between trustee and beneficiary." (Id. at p. 316.)
Plaintiffs cite the foregoing cases to support their claims against the defendants. But those cases are factually distinguishable. Because Augello appeals from the first amended complaint in her capacity as executor, and all plaintiffs appeal from the second amended complaint as individuals, we must assume the truth of the well-pleaded factual allegations in those complaints. (Fogarty, supra, 148 Cal.App.4th at p. 540.) In addition, we also consider whether there is an unexplained suppression of unfavorable allegations. (Blain v. Doctor's Co. (1990) 222 Cal.App.3d 1048, 1058.) The record in this case establishes that Augello was the only one who retained defendants. She retained defendants in her capacity as executor. Augello employed defendants to represent "her" in the probate of decedent's will. Augello also asked defendants to make sure that plaintiffs received their full share of the estate. But she did this in her capacity as executor. The contrary assertion in the second amended complaint, that Augello did this as an individual, outside her duty as executor, is directly inconsistent with plaintiffs' prior allegations and constitutes the unexplained suppression of unfavorable allegations. (Blain, supra, 222 Cal.App.3d at p. 1058.)*fn4 Accordingly, we do not assume the truth of this inconsistent statement which, if accepted as true, would suggest that Augello had a conflict of interest and sought to place defendants in a conflict of interest. (Borissoff, supra, 33 Cal.4th at p. 534.)
Assuming that Augello was acting without conflict in her capacity as executor, plaintiffs cannot establish the first Biakanja factor. Defendants were retained to probate the will, with only incidental benefit to the beneficiaries. (See Goldberg, supra, 217 Cal.App.3d at p. 1268-1269;*fn5 Johnson v. Superior Court (1995) 38 Cal.App.4th 463, 472.) Plaintiffs' failure to establish
this first Biakanja factor effectively negates their claim of duty, and the trial court did not err.
The judgment is affirmed.
We concur: HULL , Acting P. J. BUTZ , J.