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Pence v. Slate

Court of Appeals of Wisconsin

April 11, 2019

Mary Jane Pence, Bryan Prahl, Christopher Prahl, William Byron Leek Irrevocable Trust, Joan Duvall, James Leek, John Leek, Thomas Leek, Daniel Prahl, Michael Prahl and Pamela Predick, Plaintiffs-Appellants,
v.
Joan R. Slate and Slate Tax Service, Defendants, William Slate d/b/a Slate Law Offices, Defendant-Respondent, American Family Mutual Insurance Company, Intervenor.

         Not recommended for publication in the official reports.

          APPEAL from an order of the circuit court for Green Lake County: No. 2016CV116 BRIAN A. PFITZINGER, Judge. Affirmed.

          Before Lundsten, P.J., Blanchard and Fitzpatrick, JJ.

          LUNDSTEN, P.J.

         ¶1 Wisconsin has a long-standing rule that an attorney is not liable to a non-client for "acts committed in the exercise of his [or her] duties as an attorney." See Auric v. Continental Cas. Co., 111 Wis.2d 507, 512, 331 N.W.2d 325 (1983). There are exceptions to this rule and one of those exceptions, established in Auric, applies in the estate-planning context.

         ¶2 In this case, beneficiaries of a trust seek to hold an attorney liable for his alleged negligence related to the trust, despite the fact that the beneficiaries were never clients of the attorney. They rely on the Auric exception. The attorney, William Slate, moved for summary judgment dismissing the malpractice claim, arguing that the Auric exception does not apply. The circuit court agreed, and dismissed the suit with respect to Attorney Slate.

         ¶3 We agree with the circuit court that Attorney Slate was entitled to summary judgment. Accordingly, we affirm.

         Background

         ¶4 In 1994, Attorney Slate drafted an irrevocable life insurance trust as a part of William Leek's estate planning. The purpose of the trust was to hold and maintain a previously purchased life insurance policy so that, upon Leek's death, an expected death benefit of $600, 000 would be distributed to the beneficiaries named in the trust.

         ¶5 In 2002, Leek learned that the trustee for the trust might need to resign and that the person named as the successor trustee had died. Leek and Attorney Slate discussed the trustee situation. They discussed whether Joan Slate could act as the trustee. At the time, Joan Slate prepared Leek's income taxes. Joan Slate owned and operated "Slate Tax Service" in a building next to Attorney Slate's law office.

         ¶6 Leek picked Joan Slate to be the new trustee. Attorney Slate drafted the trust amendment naming Joan, and she took over trustee duties at the beginning of 2003. In her role as trustee, it was Joan Slate's responsibility to make sure that an annual life insurance policy premium was paid.

         ¶7 So far as the record discloses, Joan Slate performed her duties competently until 2014. That year, the policy-issuing insurance company sent Joan Slate two notices informing her that the policy would lapse if the premium was not paid. After the policy lapsed, the insurance company provided Joan with information explaining how the policy could be reinstated.

         ¶8 There are more details but, for purposes of this opinion, we will assume that Joan Slate negligently failed to pay the premium and negligently failed to take the steps necessary to have the policy reinstated. As a result, the life insurance policy was not in effect when Leek died the next year on August 30, 2015, and the beneficiaries did not receive the death benefit as Leek intended.

         ¶9 The beneficiaries sued Joan Slate for breach of fiduciary duty and negligence. They later amended their complaint to include a legal malpractice claim against Attorney Slate, the claim at issue in this appeal.

         ¶10 Attorney Slate moved for summary judgment, arguing that the malpractice claim must be dismissed because the beneficiaries were not Attorney Slate's clients. The circuit court granted Attorney Slate's motion, thereby dismissing the sole claim against him. The beneficiaries appeal that decision.[1]

         Discussion

         ¶11 Generally, an attorney is not liable to third parties for negligent acts committed within the scope of the attorney-client relationship. Beauchamp v. Kemmeter, 2001 WI.App. 5, ¶7, 240 Wis.2d 733, 625 N.W.2d 297 (2000). There are exceptions. A non-client may sue an attorney based on alleged fraud. Auric, 111 Wis.2d at 512. A non-client may sue when an attorney knowingly "assists [a] client committing an unlawful act to the detriment of a third party." See Tensfeldt v. Haberman, 2009 WI 77, ¶¶59-68, 319 Wis.2d 329, 768 N.W.2d 641. A third exception applies in the estate-planning context and has come to be known as the Auric exception. In broad strokes, the Auric exception permits a named beneficiary to sue an attorney for malpractice when the beneficiary can show that he or she was harmed by attorney negligence that thwarted the intent of the attorney's client. See Auric, 111 Wis.2d at 512, 514; Beauchamp, 240 Wis.2d 733, ¶9 (non-clients must be "named in an executed or unexecuted will or similar estate planning document").

         ¶12 The beneficiaries here argue that summary judgment was improperly granted because, under the Auric exception, they may maintain a legal malpractice action against Attorney Slate. We disagree.

         ¶13 Our analysis proceeds as follows. First, we briefly set forth the legal principles governing summary judgment. Second, we discuss the beneficiaries' factual assertions regarding what the record says about possible negligence on the part of Attorney Slate and explain that the assertions are not supported by the record. Third, we summarily reject as undeveloped an argument that Attorney Slate may be found liable to the beneficiaries for Joan Slate's negligence because Joan was acting as Attorney Slate's agent while Joan was acting as the trustee.

         I. Summary Judgment Standards

         ¶14 We review summary judgment decisions de novo, applying the same methodology as the circuit court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315-17, 401 N.W.2d 816 (1987). The burden is on the moving party to establish the absence of a genuine disputed issue as to any material fact. Kraemer Bros. v. United States Fire Ins. Co., 89 Wis.2d 555, 565, 278 N.W.2d 857 (1979). We must view the evidence, and inferences from the evidence, in the light most favorable to the non-moving party. Id. at 567.

         II. The Beneficiaries' Factual Assertions

         ¶15 We agree with the statement in Attorney Slate's appellate brief that the beneficiaries "blur the distinction between the allegations in their complaint and their unsubstantiated conjecture on the one hand, with the undisputed material facts in the record on the other hand." As Attorney Slate goes on to state, our review "is limited to the facts in the record, not the case [the beneficiaries] wish[] they had."

         ¶16 We have identified 11 factual allegations that, so far as we can tell, form the factual basis for the beneficiaries' legal theory as to why they have a viable legal malpractice claim against Attorney Slate. According to the beneficiaries, Attorney Slate:

(1) recommended to Leek that Joan Slate be the new trustee;
(2) failed to disclose to Leek that Joan Slate had no trustee training;
(3) knew that Joan Slate did not have appropriate insurance;
(4) failed to warn Leek that Joan Slate lacked appropriate ...

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