In a recent case, Ellerson v. Brendon F. Moriarty and the Moriarty Law Firm, an appellate court determined that it was an error to dismiss a beneficiary’s complaint against an attorney who drafted a trust amendment but did not fund the trust with an asset that would benefit the beneficiary.
Erica Ellerson’s (“Ellerson”) grandmother hired Brendon Moriarty (“Moriarty) as her attorney to draft an amendment to her trust. The amendment provided that a parcel of real estate in Palmetto Florida (“Real Estate”) would be distributed to Ellerson upon grandmother’s death.
Ellerson’s grandmother died in 2018 and unfortunately the Real Estate was not titled in the name of her trust and thus, was not available to be transferred to Ellerson. It is unclear what happed with the pour over will.
As can be expected Ellerson sued Moriarty. Ellerson argued that, while Moriarty was not Ellerson’s attorney, Ellerson was a third-party beneficiary and that Moriarty never transferred the Real Estate into the trust and he never limited his duty to her grandmother to “exclude advice or services to fund the trust”. Ellerson also stated that there were conversations about the funding of the trust between Moriarty and Ellerson’s grandmother.
The lower court dismissed Ellerson’s complaint stating that Moriarty’s only obligation to Ellerson, the third-party beneficiary, was to draft a facially valid amendment, not fund the trust. Ellerson appealed.
Further the appellate court determined that while this case involved intent in a trust rather than a will, such difference did not preclude the application of the intended third-party beneficiary exception to the privity requirement.
The appellate court then discussed the extrinsic evidence (the outside discussion Ellerson’s grandmother and Moriarty had on funding the trust) and determined that it was admissible. “Indeed, the use of extrinsic evidence might the be the only way to prove that an attorney specifically undertook the duty to fund a trust devise.”
If the appellate court found that a third-party beneficiary could not state a cause of action where he or she relied on extrinsic evidence to prove that the grantor’s intent was frustrated due to an attorney’s negligence…”we would, in effect, be granting immunity to every attorney who agrees to but fails to fund a trust and/or trust amendment which he or she drafted.”
The court remanded the case and stated that there were “critical factual issues that could only be resolved upon the taking of evidence:…” and such factual issues were crucial to determine Moriarty’s duty to Ellerson.
Ellerson had standing to sue Moriarty and her complaint alleged sufficient ultimate facts that (1) Ellerson was a third-party beneficiary, (2) her grandmother intended for the Real Estate to pass to her, (3) Moriarty did not limit his scope of services to exclude the drafting and recording of the deed and (4) Morairty agreed in conversations that he would draft a deed to effectuate Ellerson’s grandmother’s intent.
ADVICE: This case is a great reminder for estate planners that the signing of the estate planning documents may only be the BEGINNING of the estate planning process. All attorneys should clearly define their scope of work and even include a checklist as to what the attorney and client agree as to whom is responsible for funding the trust. If Moriarty had a checklist that clearly indicated that grandmother was responsible for following up with the preparation of the deed, or a fee agreement that clearly limited the scope of his work, then this lawsuit may have not happened.
Also, anytime a trust amendment is prepared, then be sure that the related pour over will is reviewed and if, impossible, draft a new pour over will.
WORD OF THE WEEK: Privity is generally defined as a doctrine of contract law that says contracts are only binding on the parties to a contract and that no third party can enforce the contract or be sued under it. Thus, if a lawyer and a client sign a fee agreement the privity is between the lawyer and the client and normally third parties can not sue under the agreement. However, as discussed in this case, a “third-party” beneficiary can sue if they can prove that the lawyer’s negligence to his client caused a detriment to the third party beneficiary.
GENEROSITY IS A KEY TO HAPPINESS …REACH OUT AND HELP SOMEONE TODAY!