In Thorsen v. Richmond Society for the Prevention of Cruelty to Animals, the Supreme Court of Virginia held that a named contingent remainder beneficiary to a will has standing to sue an attorney for legal malpractice as an intended third-party beneficiary of the attorney-client relationship created by the contract for legal services between the decedent and the attorney. Specifically, the Court concluded that a contingent remainder beneficiary is an intended beneficiary of the attorney-client relationship between the decedent and the attorney drafting the will. Therefore, the third-party could sue the attorney who drafted a will for legal malpractice arising from a scrivener error that resulted in a smaller bequest, if it was a “clearly and definitely intended beneficiary” of the decedent’s oral agreement with the attorney for legal services. According to the Court, for the third-party to have standing, “one of the primary purposes for the establishment of the attorney-client relationship [must be] to benefit the [third-party]. . . .” Op. at 12. Moreover, the Court held that the statute of limitations did not begin to run until the decedent died.
A copy of the opinion can be found here.
In 2003, Decedent hired Attorney to prepare her will. Decedent instructed that, upon her death, she wanted to convey all of her property to her mother or, if her mother predeceased her, to the Richmond Society for the Prevention of Cruelty to Animals (“Third-Party”) as contingent and residuary beneficiary of the will.
Decedent died five years after Attorney prepared the will, whereupon Attorney notified Third-Party that it was the sole beneficiary of Decedent’s estate. Due to a drafting error, the operative language of the will limited the bequest to Third-Party to only Decedent’s tangible property, rather than the entirety of the estate, which included real property.
Third-Party filed a lawsuit to correct the “scrivener’s error,” based on Decedent’s clear original intent. The trial court rejected the Third-Party’s claim, holding that the will was unambiguous, and determined that the bequest to Third-Party was limited to only tangible property.
Thereafter, Third-Party sued Attorney for legal malpractice, asserting that Attorney and his law firm were liable for breach of the legal services agreement, and claimed to be an intended third-party beneficiary of such agreement. In defense, Attorney filed a demurrer (motion to dismiss), asserting, among other things, that Third-Party was not an intended beneficiary of the legal services agreement, and further plead that a such claim was barred by a three-year statute of limitation applicable to oral agreements, which according to Attorney, began to run upon accrual of the breach of contract cause of action (i.e. when the breach occurred and when the erroneous will was drafted and executed).
The trial court rejected such defenses, and ultimately, judgment was granted in favor of Third-Party. Attorney thereafter noted this appeal.
The Supreme Court first determined that under the common law, a third-party could sue upon an oral contract, and that certain statutes authorizing unnamed persons to sue on an instrument, i.e., Va. Code § 55-22, did not alter the common law. Op. at 4-5.
The Court next considered whether Third-Party had standing as a third-party beneficiary in a legal malpractice action under the facts of this case. The Court noted that in Copenhaver v. Rogers, 238 Va. 361, 384 S.E.2d 593 (1989), it previously determined that “[i]n order to proceed on the third-party beneficiary contract theory, the party claiming the benefit must show that the parties to a contract clearly and definitely intended to confer a benefit upon him.” Op. at 7-8. The Court emphasized that the third party must be an intended beneficiary of the contract between the attorney and client, not merely an incidental beneficiary of the estate. Op. at 8-9. Accordingly, the Court stated that to have standing to sue, a nonparty to the contract for legal services must allege facts sufficient to support the conclusion that it was a “clearly and definitely intended beneficiary” of the contract for legal services. Op. at 12.
Under the facts of this case, the Court concluded, the Third-Party sufficiently alleged that it was a “clearly and definitely intended beneficiary” of the attorney-client contract between the Decedent and Attorney. Notably, the Court observed that the Decedent wanted to confer a benefit upon the Third-Party upon her death, and sought Attorney’s professional services to do so. Op. at 13. When Attorney “accepted the contract to prepare Decedent’s will as she specified, the [Third-Party] became not only the intended beneficiary of Decedent’s will but also the intended beneficiary of her contract of employment with [Attorney].” Op. at 13. Therefore, the Court concluded that the Third-Party had standing to allege a cause of action for breach of contract/professional negligence as a third-party beneficiary of the contract between the testator and her attorney. Op. at 14.
Attorney argued that Third-Party, as a contingent, residuary beneficiary, as a matter of law could not qualify as a “clearly and definitely intended” beneficiary of the will because its interest under the will was contingent, as a residuary beneficiary. Op. at 14. The Court rejected such proposition, explaining that whether a residuary beneficiary is a third-party beneficiary of the contract for legal services is a fact intensive inquiry. Op. at 14-17. The Court noted that depending on the facts of a particularly case, both contingent and residual beneficiaries may be considered third-party beneficiaries to an attorney-client contract between the testator and drafting attorney. Op. at 14-17.
Attorney also argued that Third-Party’s claim was barred by the three-year statute of limitations under Virginia Code § 8.01-246 for breach of an oral contract. Op. at 17. Notably, Attorney argued that the three-year limitations period had expired because it began to run at the time of breach (i.e. when the Attorney drafted the will in 2003). Op. at 18. The Court rejected this argument, determining that the three-year period “cannot begin to run as to the testamentary beneficiary until a cause of action accrues, after the death of the testator.” Op. at 19. Acknowledging that under Virginia Code § 8.01-230, a right of action for breach of contract accrues when the breach of contract occurs and not when the resulting damage is discovered, the Court held that for a cause of action to accrue for breach of contract, “some injury or damage, however, slight, is essential to a cause of action.” Op. at 18. In the case of a testamentary beneficiary, the Court concluded, no injury, however slight, can be sustained prior to the testator’s death. Op. at 20. “This is when the attorney’s negligence becomes irremediable and the impact of the injury occurs, . . ; before a testator’s death, the potential beneficiaries possess no recognized legal interest in the estate.” Id. (citations omitted).
Finally, the Court determined that the evidence as to the Decedent’s and Attorney’s intent sufficient to uphold the judgment in favor of Third-Party. The evidence demonstrated that Decedent specifically intended to benefit the Third-Party when she hired Attorney, and that by agreeing to draft a will for Decedent, Attorney impliedly agreed to comply with her specific directives. Op. at 23-24.
Accordingly, the Court affirmed the judgment in favor of Third-Party. Op. at 25.
One Justice dissented, concluding that Third-Party lacked standing to sue Attorney because “the common law has long provided that [a legal malpractice action] requires the existence of an attorney-client relationship as a threshold requirement.” Op. at 25-26. Criticizing the opinion, the Dissent warned that “[f]rom this date forward, attorneys will owe a legal duty to nonclients by virtue of legal services agreements with their clients whenever ‘a lawyer knows that a client intends as one of the primary objectives of the representation that the lawyer’s services benefit the nonclient.’” Op. at 32.
The Dissent noted that the determination of whether to abolish the common law strict privity requirement is a policy decision that should be made by the General Assembly, and not the Court. . Op. at 25. The Dissent cited several policy concerns in favor of the strict privity rule, particularly the “preservation of the sanctity of the attorney-client relationship,” protection against “the potential for conflicting duties owed to clients and third parties by the attorney,” and concerns over uncertain or unlimited attorney liability. Op. at 28-30.