Court Opinion

ID: 9615551
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:38:04.05926+00
Date Added: 2024-06-11T09:00:39.507425
License: Public Domain

SHEPARD, Justice,
dissenting.
In my view, the basics of this case can be stated relatively simply. The Smiths, as sellers of the property, allegedly contracted with All American for the payment of a real estate commission for consummating the sale of property, and there is allegedly unpaid and owing All American some part of that commission. Farmers Home Administration, who held a mortgage on the property, designated Sweet as a “closing agent.” While the majority designates Sweet as an escrow holder, it thereby errs. An escrow holder of necessity operates pursuant to a multiple party contract where each party to a transaction authorizes and directs the escrow holder to perform certain duties. Here there is absolutely no showing that the Smiths or the Wilsons were parties to any contract which required and directed Sweet to pay any moneys to All American. Likewise, there is no showing that Farmers Home Administration had authority to determine that Smith owed All American any money; to say what amount of money was owed; or to direct payment of such alleged indebtedness. Since Smith had not authorized the payment of any money to All American, Sweet had absolutely no authority to make that payment absent such consent, and particularly over the protest of Smith. From the view of All American, at best, Sweet might have declared that the sale could not be closed, but in such case All American would have been in no better position than it is now in. I must further point out that the copy of the alleged earnest money agreement furnished to Sweet -by Farmers Home Administration contained no signature by Smith and no statement of the alleged amount of real estate commission.
For some inexplicable reason, All American has not sought to have its claim against Smith adjudicated through an action brought against Smith. Rather, it sought in the instant action to assert its claim against Smith by its action against Sweet, thereby precluding the assertion of any defenses to its claim. As pointed out in the very well-reasoned opinion of the trial judge, since the Smith debt allegedly owed All American has not been adjudicated, and since All American has not brought an action against Smith, and the record contains no explanation for the absence of such an action, it is simply impossible on the state of this record to determine that Sweet’s acts have in any way been harmful or detrimental to All American.
I reiterate that the “closing” in which Sweet participated was not an escrow. There is no showing that Smith, by any sort of contract, documentary or otherwise, authorized Sweet to pay any of Smith’s money to All American. Again as noted by the trial judge, it would have been a breach of Sweet’s fiduciary duty, as Smith’s attorney, to pay Smith’s money over to All American, contrary to the directions of Smith.
On the other hand, the record demonstrates no contract between All American and Sweet imposing a fiduciary relationship upon Sweet toward All American. As noted by the trial judge, the plaintiff asserted three theories of recovery before the trial court, only one of which is dealt with by the majority opinion. Not discussed are (1) that the plaintiff is a third party benefi*239ciary of an agreement between defendants and the Farmers Home Administration, and (2) that defendant, acting as an attorney, owes a duty of professional competence to the plaintiff, even though the plaintiff was not the defendant’s client (malpractice theory).
All American argues that, regardless of the lack of privity between it and Sweet because of the lack of an attorney-client relationship, nevertheless a line of California decisions has established that privity is not a prerequisite to the recovery of a third party injured by an attorney in the negligent performance of his duly to his client. This Court has never adopted that reasoning of the California court and the instant case is not an appropriate one in which to so adopt that reasoning. Moreover, I disagree with All American’s interpretation of those cases. While the California court did indeed abolish the necessity of privity between an attorney and third parties affected by the alleged negligence of an attorney in serving his client, those decisions only related to situations wherein an attorney was negligent in performing duties for a client in the drafting of a will of which the third parties were the clearly intended beneficiaries. See Bucquet v. Livingston, 57 Cal.App.3d 914, 129 Cal.Rptr. 514 (1976); Heyer v. Flaig, 70 Cal.2d 223, 74 Cal.Rptr. 225, 449 P.2d 161 (1969); Lucas v. Hamm, 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685 (1961), cert. denied, 368 U.S. 987, 82 S.Ct. 603, 7 L.Ed.2d 525 (1962); Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958). The circumstances of the instant case are clearly distinguishable. There is no indication in the record that any of the instruments underlying the closing transaction were prepared by Sweet or that they resulted from his lawyer-client relationship with Smith and/or Wilson. The allegations of negligence here relate to Sweet’s failure to distribute money to All American during the closing transaction. The record is clear that All American was not the intended beneficiary of Smith and/or Wilson. Rather, the record shows that the parties to the sale were adamant that All American should receive no moneys from the proceeds.
Although not discussed by the majority, I deem it necessary to also discuss All American’s assertion that it is a third party beneficiary of a contract. It should be noted that there are various contractual relationships in the instant case. First,- a direct contractual relationship exists between All American and Smith wherein All American contracted to perform certain services regarding the sale of Smith’s property and Smith contracted to pay a commission to All American, if All American performed those services. The performance of those services is in dispute, the alleged indebtedness arising therefrom is not liquidated, and the amount, if any, of the alleged debt has not been adjudicated. Although defendants have brought Smith into the action by way of a third party defendant, All American has asserted no claim against Smith.
Secondly, a contractual relationship exists between Smith and Wilson for the purchase of the Smith property. Conceivably, All American could argue that it was an intended third party beneficiary of the Smith-Wilson contract, but All American has asserted no such claim against Wilson. In any event, such would not avail All American in its claim against Sweet, since Sweet was not a party to the Smith-Wilson contract.
Thirdly, there is an asserted contractual relationship between Sweet and the Farmers Home Administration. It is asserted that under that contractual relationship, Sweet was obligated to pay All American the unliquidated, unadjudicated debt allegedly owing All American from Smith. Wilson had contracted to pay Smith a certain sum. Farmers Home presumably was lending Wilson part of that money. To assert that Farmers Home could, over the protest of Smith, dictate to Sweet the disposition of Smith’s money simply boggles the imagination. Absent Smith’s consent, Farmers Home could confer no authority on Sweet to pay All American. While Farmers Home, under the instant circumstances, might have refused to participate, thereby blocking the sale, All American would have been in no better or worse condition than it is in at the present time. There is no showing that Farmers Home Administration objected to Sweet’s action, nor is Farmers Home Administration a party in the instant case objecting that Sweet has breached his contract with Farmers Home Administration.
Assuming that the documents which Farmers Home Administration sent to Sweet constitute some evidence of a contractual relationship, nevertheless, All American does not occupy a third party beneficiary status here. Under traditional analysis, All American would have to be more than an incidental beneficiary and *240would be required to establish itself as either a donee beneficiary or a creditor beneficiary of Farmers Home Administration, in order to claim a benefit under the contract. 4 Corbin on Contracts § 774 (1951). See also Dawson v. Eldredge, 84 Idaho 331, 372 P.2d 414 (1962). There is no assertion that Farmers Home Administration was indebted to All American and, therefore, it was not a creditor beneficiary. Likewise, All American was apparently not a donee beneficiary, there being no indication that Farmers Home Administration intended to or was authorized to, over Smith’s objection, donate Smith’s money to All American.
Even assuming that this Court has adopted § 133 of the Restatement (Second) of Contracts, and that the term “intended beneficiary” is substituted for the former concepts of “creditor” or “donee” beneficiary, see Just’s, Inc. v. Arrington Construction Co., 99 Idaho 462, 583 P.2d 997 (1978), there remains no showing that All American was an intended beneficiary of the alleged contract between Sweet and Farmers Home Administration. All American’s right to payment, if any, arose from the contract between it and Smith, or perhaps from the contract between Smith and Wilson. If All American is an "intended beneficiary,” it occupies that status only because of the contract between Smith and Wilson.
Whether a contract was intended by the parties to be for the benefit of a third person is a question of construction of the contract. Davis v. Nelson-Deppe, Inc., 91 Idaho 463, 424 P.2d 733 (1967). Where, as here, the contract is clear and unambiguous, a determination of its meaning and legal effect are questions of law for determination by the court. Beal v. Mars Larson Ranch Corp., Inc., 99 Idaho 662, 586 P.2d 1378 (1978). As found by the trial court, the alleged contract between Sweet and Farmers Home Administration contains no ambiguity such as would raise an inference that either Farmers Home Administration or Sweet intended the contract primarily for the benefit of All American. Clearly, the primary beneficiary of that alleged contract was Wilson, to whom Farmers Home Administration was loaning funds for the purchase of the property. See Dawson v. Eldredge, 84 Idaho 331, 372 P.2d 414 (1962).
Just’s, Inc. v. Arrington Construction Co., supra, is of no avail to All American. In Just’s, the third party beneficiary right arose from a provision of a contract between the City of Idaho Falls and a construction company, wherein it was agreed that the conduct of downtown businesses during construction would be allowed to continue without interference. Here, the right, if any, of All American arose by virtue of the contract between Smith and Wilson; it did not arise from the contract between Smith and Farmers Home Administration, under which All American would now claim a right as third party beneficiary.
In sum, the holding of the majority results in a procedural morass. All American attempts to sue Sweet for an alleged debt which Smith may or may not owe to All American. All American asserts no similar claim against Smith. Consequently, as held by the trial court, All American is unable to show in this action any damage arising from the conduct of Sweet. I suggest that the majority’s ruling today distorts and confuses the duties and liabilities of closing agents in real estate transactions.
Lastly, as to attorney’s fees, I would note that the cause was initiated prior to March 1, 1979, and, therefore, it was not required that the trial court make the findings presently required by our I.R.C.P. 54(e)(1). Attorney’s fees were avoided pursuant to I.C. § 12-121, and I find no indication that the trial court decision was an abuse of discretion. See Anderson v. Ethington, 103 Idaho 658, 651 P.2d 923 (1982).
DONALDSON, C.J., concurs.