Attorneys – Fiduciary Duty – Question of Law – Breach – Question of Fact – Former Client – Trusts & Estates – Life Insurance

Spence v. Wingate (Lawyers Weekly No. 010-156-11, 10 pp.) (Donald W. Beatty, Acting Chief Justice) (Alexander Macaulay, Acting Justice, joined by John W. Kittredge, J., concurring in part & dissenting in part) Appealed from Richland County Circuit Court. (G. Thomas Cooper Jr., J.) On writ of certiorari to the Court of Appeals. S.C. S. Ct.

Holding: Although the existence of a fiduciary duty is a question of law for the court, our Court of Appeals was correct that there is a genuine issue of material fact as to whether the defendant-attorney breached his fiduciary duty to his former client.

We modify and affirm the Court of Appeals’ decision, which reversed the circuit court’s grant of partial summary judgment for the defendant-attorney.

Background

Plaintiff sought defendant’s legal counsel when her husband was dying. Defendant negotiated a trust agreement for plaintiff’s benefit with her husband’s four sons from a previous marriage.

After plaintiff’s husband died, defendant began representing the estate, without discussing any conflict of interest issues with plaintiff. While representing the estate, defendant recommended that plaintiff share her husband’s life insurance proceeds with his sons.

Plaintiff asked defendant to resume representation of her, but he refused.

Plaintiff later filed suit and had the trust agreement set aside.

Plaintiff, individually and on behalf of her late husband’s estate, filed the instant action alleging, among other claims, breach of fiduciary duty.

Plaintiff alleged defendant failed to disclose any potential conflict of interest created by him representing her and then the estate, and that he failed to either obtain her waiver of this conflict or to protect her interests, breaching his fiduciary duty. Plaintiff further alleged defendant failed to protect her interests regarding the proceeds of the $500,000 life insurance policy, for which she was the sole beneficiary. Plaintiff asserted defendant owed her a fiduciary duty because defendant had served as her lawyer and he had discussed the insurance policy issue with her during the course of this representation.

The circuit court granted partial summary judgment for defendant, ruling that defendant owed plaintiff no duty in connection with the life insurance policy.

Discussion

Contrary to the finding of the circuit court, S.C. Code § 62-1-109 does not apply to the issue of the life insurance policy. The policy was a non-probate asset, and the manner in which it was paid was not controlled by the estate’s personal representative.

Section 62-1-109 negates any duty owed by an estate representative’s attorney to persons other than the representative in matters concerning estate assets or assets controlled by the representative. Although defendant represented the estate, the life insurance policy was not part of the estate and was not controlled by the personal representative; therefore, the protection provided by § 62-1-109 does not attach to defendant on the issue of the life insurance policy.

As to the existence of a fiduciary duty, an attorney-client relationship is, by its very nature, a fiduciary relationship.

Furthermore, the determination of the existence of a duty is solely the responsibility of the court.

To the extent the Court of Appeals stated that a question of fact exists as to whether a fiduciary duty is owed in the current matter, this was error. However, we find the Court of Appeals was correct in determining summary judgment should be reversed because a question of fact exists as to whether defendant breached a fiduciary duty to plaintiff.

Fiduciary duties created by an attorney-client relationship may be breached even though the formal representation has ended.

We agree with the Court of Appeals that “duties to a former client on a related matter are separate and distinct from any duties arising from [defendant’s] representation of the estate; therefore, the circuit court erred in finding § 62-1-109 … absolved [defendant] of any duty he owed to” plaintiff.

Section 62-1-109 simply provides that an attorney acting as a fiduciary in a probate matter has no obligation, without more, to other parties with interests in the fiduciary property. This statute does not purport to eliminate all obligations or duties the attorney might have to parties arising by other means.

Thus, although plaintiff is not owed a fiduciary duty based on her status as a beneficiary of the estate, she alleged defendant’s fiduciary duty arose based on their prior attorney-client relationship. Defendant concedes that an attorney owes a fiduciary duty to former clients. Contrary to the circuit court’s conclusion, § 62-1-109 is not determinative of whether plaintiff is owed a fiduciary duty as a former client.

Affirmed.

Concurrence & Dissent

(Macaulay, Acting Justice) I concur with the majority opinion that “the determination of the existence [of a] fiduciary duty is for the court” and not the jury. Nevertheless, the circuit court’s grant of summary judgment to defendant should be affirmed.

Defendant undertook the representation of plaintiff with regards to the assets of her husband, her inheritance rights, and her rights in his estate. As noted by the majority, “it is undisputed that the congressional life insurance policy in question was a non-probate asset,” and, further, “although [defendant] represented the estate, the property in question was not a part of the estate.”

The matters of the policy and the estate, ergo, are not related.

Not only was there no confidential prior or ongoing attorney/client relationship regarding the life insurance policy, but there is also no allegation that defendant actively misrepresented anything “in connection with the congressional life insurance policy or the manner it was paid” – as the circuit court concluded in granting summary judgment. In fact, when “the estate and the life insurance were discussed by the parties” and others in a family meeting in October 2001, plaintiff acknowledged that there was no ongoing attorney/client relationship with regard to the subject policy, and she called defendant “after the meeting and asked him to put his hat back on as her attorney and he refused.”

Plaintiff retained counsel, who advised the representatives of “The Estate of Congressman Floyd David Spence” that their firm was asking the federal government for a review of the payments that were made pursuant to the policy and that they “[did] not expect this [will] have any impact on the estate.” Accordingly, I would affirm the circuit court.