Source: https://caselaw.findlaw.com/ca-court-of-appeal/1697347.html
Timestamp: 2019-04-19 11:21:15+00:00

Document:
Stephen PAUL et al., Plaintiffs and Appellants, v. Richard PATTON, Defendant and Respondent.
The decedent, Gilbert Paul, retained attorney Richard Patton to draft an amendment to his revocable living trust. The decedent signed the “Trust Amendment,” which, as drafted by Patton, named the decedent's wife, Helen, and his children, Stephen Paul, David Paul, Alan Paul, and Nancy Dybdahl as beneficiaries. Stephen and David Paul also are the successor trustees of the trust. Following the decedent's death, they petitioned the probate court to modify the Trust Amendment, alleging it failed to conform to the decedent's intentions by erroneously granting Helen an interest in decedent's brokerage accounts and personal and real property. In connection with that probate court action, Patton admitted the Trust Amendment did not reflect the decedent's intention that his brokerage accounts and personal and real property be divided among his children. Stephen and David settled the probate court action with Helen.
Subsequently, Stephen, David, Alan, and Nancy (the Pauls) filed the legal malpractice action that is the subject of this appeal against Patton. They alleged that Patton failed to exercise reasonable care in performing legal services for the decedent by failing to draft the Trust Amendment in a manner consistent with the decedent's intentions. The trial court sustained without leave to amend Patton's demurrer to the Pauls' first amended complaint. We shall reverse.
Because this matter comes to us following a judgment sustaining a demurrer without leave to amend, we assume the truth of the material facts properly pleaded in the Pauls' operative first amended complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank ).) Facts appearing in exhibits attached to the first amended complaint also are accepted as true and are given precedence, to the extent they contradict the allegations. (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.) The exhibits to the first amended complaint were: (1) the Trust Amendment; (2) a December 13, 2011 letter from Patton regarding the decedent's intent in connection with the Trust Amendment; and (3) a partial transcript of a 2012 deposition of Patton in which he discussed the decedent's intent in connection with the Trust Amendment.1 In addition to the first amended complaint and its exhibits, we also may consider matters subject to judicial notice. (Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300.) The Pauls request that we take judicial notice of the amended petition to modify the Trust Amendment filed in the probate court action and its exhibits, which include the decedent's original revocable living trust. We grant that request pursuant to Evidence Code sections 452 and 459. Accordingly, the following factual recitation is based on the facts properly pleaded in the first amended complaint, facts appearing in exhibits attached to the first amended complaint, and facts appearing in the amended petition to modify the Trust Amendment and its exhibits.
The Pauls are the decedent's four children with his first wife, who died in 1970. The decedent married Helen in 1988. At that time, he had substantial separate property, including real property referred to as “the Quick Stop Property,” other real property, brokerage accounts, and personal property.
In 1995, the decedent established a revocable living trust (the “1995 Trust”) under which he was both trustor and trustee. The 1995 Trust provided that if Helen survived the decedent, she would have the right to live in (or lease) the marital home for the rest of her life and to receive the net income from the Quick Stop Property. The rest of decedent's property was to be divided among his children, the Pauls. Upon Helen's death, the Pauls were to receive the decedent's one half community property interest in the marital home.
The decedent's health and his relationship with Helen began to decline in 2009. In 2011, he retained Patton to amend the 1995 Trust.
With respect to the income from the Quick Stop Property, the Trust Amendment directs the successor trustees “to use up to $4,000 per month” of that income “to pay for the mortgage, insurance, taxes and maintenance of the marital home.” If the marital home has been sold, the successor trustees are to pay “$4,000 per month from the Quick Stop Property to Helen” as monthly income.
Thus, as drafted and executed, the Trust Amendment (1) entitled Helen to one-half plus one-fifth of the proceeds of the sale of the martial home, (2) limited the income Helen could receive from the Quick Stop Property to $4,000 per month, and (3) gave Helen a one-fifth share of the decedent's other assets (aside from his personal property). Under the 1995 Trust, she was entitled to live in or lease (but not to sell) the marital home and to all of the Quick Stop Property income, but to none of the decedent's other assets.
The decedent died in July 2011. In their capacities as successor trustees of the 1995 Trust, Stephen and David filed a petition to modify the Trust Amendment, arguing it did not conform to decedent's intentions. (In re the Matter of Gilbert L. Paul Revocable Living Trust dated April 6, 1995, as amended, Superior Court, Santa Cruz County, case No. PR 045678.) Helen opposed the petition.
Stephen and David reached a settlement agreement with Helen under which she received more than decedent intended.
Patton demurred to the first amended complaint, arguing he owed no duty of care to the Pauls because they were not his clients. In an order filed on December 16, 2013, the trial court sustained the demurrer without leave to amend, stating “no liability exists as a matter of law under the analysis and precedent set forth in, inter alia, Chang v. Lederman (2009) 172 Cal.App.4th 67.” A judgment of dismissal was entered on December 27, 2013. Patton served a notice of entry of judgment on January 6, 2014 and the Pauls timely appealed on February 10, 2014.
The Pauls argue their suit against Patton should have been permitted to go forward on either of two alternate theories—(1) Patton owed them a duty of care as trust beneficiaries or (2) they had standing as successor trustees. We address each theory in turn.
The first amended complaint does not allege Patton owed the Pauls a duty. Therefore, the trial court properly sustained Patton's demurrer. The more difficult question is whether there was a reasonable possibility that the Pauls could have amended their complaint to allege the duty element of their legal malpractice claim, such that the court should have granted leave to amend. At this early stage in the litigation, we cannot say as a matter of law that Patton did not owe the Pauls a duty to ensure the Trust Amendment reflected the decedent's testamentary intent. Accordingly, we conclude the Pauls should have been accorded the opportunity to amend their complaint.
Here, there is no executed trust instrument reflecting the decedent's alleged intent. According to Patton, that is fatal to the Pauls' action because attorneys owe a duty of care only to beneficiaries of executed wills or trust instruments that expressly reflect the testator's intent. The Pauls contend that whether the testamentary document properly reflects the testator's intent is irrelevant; as long as the testator's intent to benefit the plaintiff is clear, a duty exists.
Read liberally, as it is appropriate in evaluating a demurrer, the amended complaint alleges the decedent intended to grant the Pauls a particular bequest, directed Patton to draft an amendment to his trust effectuating that bequest, and signed the resulting Trust Amendment believing it made the intended bequest. But, as a result of Patton's drafting error, the Trust Amendment does not contain the terms that were intended by the decedent. Accepting those allegations as true, as we must, we view this case as more analogous to Osornio than to Radovich. Unlike in Radovich, here the decedent signed the testamentary document at issue, alleviating any concern that he changed his mind after directing Patton to amend the trust. And, under the facts as alleged, “there is none of the ambiguity concerning the testator's donative intent as was presented in Radovich.” (Osornio, supra, 124 Cal.App.4th at p. 336.) Of course, discovery may reveal more ambiguity than does the complaint. We merely conclude that, at this stage, we cannot say as a matter of law that Patton does not owe the Pauls a duty.
The six Biakanja/Lucas factors support our conclusion. We find Chang instructive as to the first four factors. In Chang, the plaintiff alleged the decedent instructed the defendant attorney to revise the decedent's trust (which named the decedent's son and plaintiff as beneficiaries) to leave the entire trust estate to the plaintiff. (Chang, supra, 172 Cal.App.4th at p. 73.) The attorney refused and advised his client, who was seriously ill, to “have a psychiatric evaluation before making any changes to his estate plan.” (Ibid.) While, unlike here, there was no allegation the attorney confirmed the decedent intended to revise his trust, Chang also was decided at the demurrer stage. Accordingly, the court “accept[ed] as true the factual allegation[ ]” that the decedent “advised [his attorney] of his desire to leave his entire estate to [the plaintiff].” (Id. at p. 83.) In view of that allegation, the court concluded that “at least four of the six Biakanja/Lucas factors point[ed] toward extending [the attorney's] duty of care to include” the plaintiff: “the transaction ․ was intended to directly affect [the plaintiff] (the first factor) and it was plainly foreseeable [the attorney's] failure to exercise due care in carrying out [the decedent's] instructions would harm [the plaintiff] (the second factor). [The plaintiff] has also alleged she suffered injury as a result of [the attorney's] negligence (the third factor); and from the allegations in her complaint there appear to be no intervening circumstances that might have broken the causal connection between [the attorney's] conduct and [the plaintiff's] damage (the fourth factor).” (Ibid.) To this point, the Chang court's analysis applies equally here.
Finally, the sixth factor—whether extension of liability would impose an undue burden on the profession—also favors the Pauls. Imposing liability on attorneys to properly define and use basic terms such as “beneficiaries” and “children” to carry out the testator's wishes does not impose an undue burden on the legal profession. And, where, as is alleged here, there is no dispute regarding the decedent's intent, the imposition of liability will not compromise the attorney's duty of undivided loyalty to the testator.
We recognize that in Chang, which is factually analogous to this case in many ways, the court found no duty based exclusively on the sixth factor. The Chang court expressed concern that “any disappointed potential beneficiary—even a total stranger to the testator—could make factual allegations similar in most respects to those in the second amended complaint․” (Chang, supra, 172 Cal.App.4th at p. 83.) “Without a finite, objective limit on the identity of individuals to whom they owe a duty of care, the burden on lawyers preparing wills and trusts would be intolerable.” (Id. at p. 84.) We find that analysis inapplicable to the facts of this case. While in Chang the plaintiff merely alleged the decedent “instructed [the attorney] to revise his trust” (id. at p. 73), something “any disappointed potential beneficiary” could allege (id. at p. 83), here the Pauls allege Patton admitted to a drafting error in another action. That is not an allegation most disappointed beneficiaries can make.
For the foregoing reasons, we conclude the trial court erred in concluding as a matter of law that the Pauls could not establish Patton owed them a duty as beneficiaries. On remand, the Pauls should be permitted to amend their complaint to allege such a duty.
The Pauls also maintain that Stephen and David stated a claim against Patton in their capacity as successor trustees. The Pauls did not raise this argument below, but we agree with their contention that they can assert it for the first time on appeal. (20th Century Ins. Co. v. Quackenbush (1998) 64 Cal.App.4th 135, 139, fn. 3 [“When a demurrer is sustained without leave to amend the petitioner may advance on appeal a new legal theory why the allegations of the petition state a cause of action.”].) However, we find the argument to be without merit.
The judgment is reversed and, on remand, the trial court is directed to grant the Pauls leave to amend. The Pauls shall recover their costs on appeal.
1. The Pauls request that we take judicial notice of their first amended complaint and the documents attached to it as exhibits. Judicial notice is unnecessary because, in our review of the demurrer ruling, we accept the allegations in the complaint and the facts in the exhibits as true. (Blank,supra, 39 Cal.3d at p. 318; Dodd v. Citizens Bank of Costa Mesa, supra, 222 Cal.App.3d at p. 1627.) Therefore, we deny their request as to the first amended complaint and its exhibits.
2. Biakanja v. Irving (1958) 49 Cal.2d 647.

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