Appeal from Superior Court of King County. Docket No: 93-2-02155-1. Date filed: 12/12/94. Judge signing: Hon. Charles V. Johnson.
Petition for Review Denied May 6, 1997,
Authored by Faye C. Kennedy. Concurring: C. Kenneth Grosse, Susan R. Agid. WE Concur.
The opinion of the court was delivered by: Kennedy
KENNEDY, A.C.J. -- Norine Williams appeals the trial court's order of summary judgment dismissing her claims of legal malpractice and violation of the Consumer Protection Act (CPA) against Smith, Carney and Stevenson (the law firm) and Milton Smith. Williams contends that the trial court erred in dismissing her legal malpractice claim because the law firm owed her a duty as a third party beneficiary of the transaction to which Smith's legal advice pertained, and that the trial court confused her action for malpractice with her separate action under the CPA. Williams also contends that the trial court erred in striking portions of the affidavits of two of her witnesses. We affirm.
Kenneth Miles and Norine Lawrie were married on December 17, 1976.
Lawrie had a daughter from a prior marriage, the appellant Norine Williams, born February 3, 1972. In addition, Miles and Lawrie had a son together, Kenneth Miles, Jr., born April 7, 1978. By late 1980, the marriage was in trouble, and Miles and Lawrie began contemplating options for the future.
In early December of 1980, Miles went to the law firm of Smith, Carney and Stevenson for advice on estate planning. Miles requested that the law firm draw up an estate plan serving three goals: (1) to reduce his personal holdings to the point of little or no net worth; (2) to limit estate tax to the extent possible on his and the children's estates, as well as the estates of future generations; and (3) to provide income through a trust arrangement which would be sufficient to support the children and perhaps future generations. Respondent Milton Smith, the attorney who worked with Miles on the estate plan, testified that Miles "was fearful that he might lose everything in the business that he was in," and accordingly the goals were listed in the order of importance. Clerk's Papers at 17-18.
The estate plan drawn up by Smith provided for the creation of a new corporation, Nordata Investments, Inc., as a holding company. The holding company was to be capitalized with the stock of another corporation, Nordata, Ltd., then owned by Miles and Lawrie, as well as with the separate and community real property held by Miles and Lawrie. Under the plan, Miles and Lawrie were to make a gift of the holding company's common stock to a trust. A life estate in the holding company's preferred, voting stock was to be transferred to Miles as his separate property, representing a portion of the value of his separate property contributed to the holding company. The beneficiaries of the trust were to be Kenneth A. Miles, Jr., and the appellant Norine Williams. The trustee of the trust was to be Peoples National Bank (the Bank).
On December 31, 1980, at 3:30 p.m., Miles brought Lawrie to Smith's office to sign various papers in furtherance of the estate plan. Lawrie testified that she understood, based on Discussions with Miles, that Smith was going to represent her and Miles in preparing a trust for the children, together with an agreement regarding other financial matters in the event of a dissolution of the marriage. During the meeting, Miles and Lawrie signed an Irrevocable Trust, an Agreement With Respect to Disposition of Property (Property Agreement), and quitclaim deeds to four parcels of real property. *fn1 In accordance with the estate plan, the trust instrument identified the beneficiaries of the trust as Kenneth A. Miles, Jr. and Williams. The trust instrument specified: "The purposes of this trust shall be to provide income to Kenneth A. Miles, Jr. and Norine Williams after they attain the age of eighteen[.]" Clerk's Papers at 99.
The Property Agreement provided that:
the parties have agreed to place in irrevocable trust, to minimize estate and inheritance taxes, the ownership of all of the common stock of [the holding company] which will hold substantially all of the physical assets belonging to Kenneth A. Miles as his separate property and belonging to the marital community as community property.
Clerk's Papers at 107. In accordance with the estate plan, the Property
Agreement provided that "the income, if any, from the assets of the Trust will be available for Kenneth A. Miles, Jr., a child of the parties hereto, and Norine Williams, child of [Lawrie] by a prior marriage[.]" Id. After providing for the allocation of the stock of the holding company in accordance with the estate plan, the Property Agreement concluded:
2. The parties further agree that inasmuch as they have, by contribution to the [holding company], and will, by subsequent gift of the common shares to the Trust, part with substantially all of their community and separate assets, that in the event of a dissolution of their marriage that Kenneth A. Miles will pay to [Lawrie] as alimony the sum of $1,800.00 per month for 120 months.
3. [Lawrie] has not been represented by legal counsel who prepared this Agreement, and has been advised to seek separate legal counsel.
Lawrie testified that when she expressed concern regarding the disclaimer of legal representation in the Property Agreement, Smith told her "not to worry about it, that it was a formality, and that she could trust his 'honest' intentions." Clerk's Papers at 605. Moreover, Lawrie testified that Smith and Miles emphasized the importance of signing the documents that afternoon, citing detrimental tax consequences if they waited until after the first of the year. According to Lawrie, Smith assured her that all arrangements had been made with the Bank to act as trustee, and that the children's futures were "totally protected." Clerk's Papers at 605.
In his deposition testimony, Smith presented a slightly different version of the meeting with Lawrie and Miles. Smith testified that he was aware that there was "tension in the marriage" and accordingly he could not represent both Miles and Lawrie. Clerk's Papers at 32. He testified that Miles was his client, and that in addition to the disclaimer in the signed Property Agreement, he orally advised Lawrie to "obtain her own Counsel."
Clerk's Papers at 34. With respect to the arrangements with the Bank, Smith testified:
I don't think that -- I believed at that time that the Bank would not sign the Trust Agreement. I had no indication, and in fact the subsequent correspondence would suggest with some changes they might in fact approve the Trust Agreement. So I certainly went into this transaction thinking that there would be a Trustee and that the Trust would be created.
So, whatever I said to [Lawrie] on December 31, would have had that in mind. But I certainly didn't tell her that the Bank had approved the Trust. And certainly she could have asked the Bank herself ...