410 S.C. 475, 765 S.E.2d 132 (2014)
Erika Fabian brought suit against attorney Ross M. Lindsay, III and his firm Lindsay & Lindsay after a trust drafted for her uncle failed to carry out his intended distributions.1 On May 25, 1990, Dr. Denis Fabian, then approximately eighty years old, executed the trust agreement prepared by the respondents.2 Dr. Fabian named his wife Marilyn as the life beneficiary of the trust.3
Dr. Fabian had one living brother, Eli Fabian, in his seventies and in poor health, and two nieces: Miriam Fabian, Eli's daughter, and Erika Fabian, the daughter of Dr. Fabian's predeceased brother Zoltan.4 Dr. Fabian and his wife had told Erika that she would receive a share of the estate.5 Dr. Fabian died on February 5, 2000, and Eli died a few weeks later, so Eli survived Dr. Fabian but not the life beneficiary.6
After Dr. Fabian's death the respondents sent Erika Fabian a letter and two pages of the trust instrument stating she would receive nothing because the share intended for her would pass to Eli's estate.7 The disputed provision directed the trustee, upon the death of the survivor of Dr. Fabian and his spouse, to divide the trust into two shares, one for Marilyn's children and one for Eli, with alternate gifts to Miriam and to Erika if Eli predeceased the testator; the clause used the word "me" rather than language keyed to the survivor's death.8 Miriam stood to receive both her own share and Erika's share.9
Erika Fabian filed a reformation action against the trustees.10 Two trustees agreed the document contained a drafting error and supported reformation, while Miriam and the drafting attorney opposed it.11 After years of litigation Erika accepted a settlement funded by the trust but expressly reserved any claims against the respondents.12 She then filed the present action asserting professional negligence and breach of contract as a third-party beneficiary.13
The circuit court granted the respondents' Rule 12(b)(6) motion and dismissed both claims, holding that South Carolina law required privity and that no cause of action existed for an intended beneficiary of estate planning documents.14 Erika appealed, and the Supreme Court of South Carolina certified the appeal from the Court of Appeals pursuant to Rule 204(b), SCACR.15
Whether South Carolina recognizes a cause of action in tort by a third-party beneficiary of a will or estate planning document against the drafting attorney whose error defeats or diminishes the client's intent?16
The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of the following factors: the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury, and the policy of preventing future harm.17 Recognition of liability to beneficiaries of wills negligently drawn by attorneys does not place an undue burden on the profession.18
Yes. The trust agreement executed by Dr. Denis Fabian on May 25, 1990, was intended to affect Erika Fabian because the document named her as an alternate beneficiary of Eli Fabian's share.19 The harm from the erroneous use of the word "me" in the distribution clause was foreseeable to respondents Ross M. Lindsay, III and Lindsay & Lindsay, who drafted the instrument and knew Dr. Fabian wanted the nieces to receive the share if Eli predeceased the time of distribution.20 It became evident upon Dr. Fabian's death on February 5, 2000, and Eli's death shortly thereafter that Erika Fabian would lose her intended benefit but for the drafting error.21 The connection between the respondents' conduct and the injury is direct because the clause as written routed the share to Eli's estate, creating an unintended windfall for Miriam Fabian.22 Allowing the tort claim serves the policy of preventing future harm by ensuring estate planning attorneys remain accountable for professional negligence rather than leaving the loss on the innocent beneficiary.23
The facts further show that Dr. Fabian and his wife had informed Erika Fabian she was provided for in the estate plan, confirming the transaction's purpose to benefit her as a named niece.24 The circuit court's dismissal under Rule 12(b)(6) therefore cannot stand because the well-pled allegations establish each balancing factor in her favor.25
South Carolina recognizes a cause of action in tort by a third-party beneficiary of a will or estate planning document against the drafting attorney whose error defeats or diminishes the client's intent.26
Related opinions on this issue
Joined by Toal, C.j.
Justice Pleicones agrees that public policy considerations dictate a relaxation of the strict privity requirement for purposes of asserting a legal malpractice claim against an attorney who drafts an estate planning document.27 He cites prior cases where the court acted when public policy was offended by outdated rules of law.28 Justice Pleicones would require a beneficiary asserting such a legal malpractice claim to prove by clear and convincing evidence that the attorney breached the duty owed to the beneficiary. The beneficiary must also prove that damages were proximately caused by the attorney's breach.
He notes that this standard is consistent with the burden in will reformation actions under South Carolina law.29 Justice Pleicones would apply the decision only prospectively except as to the present appellant.30
Whether South Carolina recognizes a cause of action in contract by a third-party beneficiary of a will or estate planning document against the drafting attorney whose error defeats or diminishes the client's intent?31
If a contract is made for the benefit of a third person, that person may enforce the contract if the contracting parties intended to create a direct, rather than an incidental or consequential, benefit to such third person.32 Intended beneficiaries of a will who lose their testamentary rights because of failure of the attorney who drew the will to properly fulfill his obligations under his contract with the testator may recover as third-party beneficiaries.33 Recovery is limited to persons who are named in the estate planning document or otherwise identified in the instrument by their status.34
Yes. Dr. Denis Fabian contracted with respondents to draft the trust agreement for the direct benefit of his named nieces, including Erika Fabian, who was expressly identified by name and status in the alternate gift clause.35 The main purpose of that contract was to accomplish the future transfer of the estate to the beneficiaries named in the instrument, so the intent to benefit Erika Fabian was clear rather than incidental.36 Because Dr. Fabian is deceased and the estate lacks a viable claim or damages, only the intended beneficiary can enforce the duty created by the attorney-client agreement.37 The facts establish that the drafting error defeated the client's intent, routing Eli Fabian's share to his estate instead of dividing it between Miriam Fabian and Erika Fabian as Dr. Fabian desired.38
The circuit court erred in holding that no contract action exists for an intended beneficiary.39 South Carolina already recognizes third-party beneficiary claims generally, and extending that principle here places estate planning attorneys in the same position as other professionals who may be held responsible for professional negligence.40
South Carolina recognizes a cause of action in contract by a third-party beneficiary of a will or estate planning document against the drafting attorney whose error defeats or diminishes the client's intent. Recovery is limited to named or status-identified beneficiaries.41
Whether extrinsic evidence is admissible to prove the client's intent in such an action?42
Extrinsic evidence is admissible to prove the client's intent in an action by a third-party beneficiary against the drafting attorney.43 The Florida-Iowa Rule, which would bar all extrinsic evidence and limit inquiry to the four corners of the testamentary document, is rejected because extrinsic evidence is often essential to the pursuit of a claim and vital to proving an attorney's drafting error.44
Yes. The trust agreement contains a latent ambiguity. It was created by the use of the word "me" in the final sentence of the distribution clause. This conflicts with the opening direction that division occurs upon the death of the survivor of Dr. Fabian and his spouse.45 Evidence that Dr. Fabian told Erika Fabian she would receive a share, that he wanted Eli's share to pass to the two nieces if Eli was not alive at distribution, and that the trustees initially agreed a drafting error existed is admissible to establish the client's true intent.46 The respondents' own letter to Erika Fabian after Dr. Fabian's death, enclosing pages of the trust and stating she would receive nothing, further illustrates the need for context beyond the document itself.47
The circuit court's acceptance of the Florida-Iowa Rule's prohibition on extrinsic evidence would improperly prevent Erika Fabian from proving the error that disinherited her.48 Allowing such evidence aligns with the general rule that extrinsic evidence is admissible to resolve latent ambiguities in will contests and ensures the claim can be fairly litigated.49
Extrinsic evidence is admissible to prove the client's intent in an action by a third-party beneficiary against the drafting attorney.
Whether the burden of proof in an action by a third-party beneficiary against the drafting attorney is clear and convincing evidence?50
A beneficiary asserting a legal malpractice claim against an attorney who negligently drafted an estate planning document must prove by clear and convincing evidence that the attorney breached the duty owed to the beneficiary. The beneficiary must also prove that damages were proximately caused by the attorney's breach.51
Yes. Although the majority opinion does not address the burden of proof, the concurring justices correctly determine that the clear and convincing standard applies to claims by non-client beneficiaries.52 This standard is consistent with the burden imposed in will reformation actions under South Carolina law and with the approach taken by other jurisdictions that permit such malpractice claims. Applying the standard here would require Erika Fabian to present clear and convincing evidence that respondents' use of the word "me" breached their duty and proximately caused her disinheritance.53
The facts alleged, including the respondents' letter confirming the unintended distribution and the trustees' agreement that a drafting error thwarted Dr. Fabian's intent, provide a sufficient basis to proceed under this heightened burden at the pleading stage.54
The burden of proof in an action by a third-party beneficiary against the drafting attorney is clear and convincing evidence.55
Related opinions on this issue
Joined by Toal, C.j.
Justice Pleicones would require a beneficiary asserting such a legal malpractice claim to prove by clear and convincing evidence that the attorney breached the duty owed to the beneficiary. The beneficiary must also prove that damages were proximately caused by the attorney's breach. He notes that this standard is consistent with the burden in will reformation actions under South Carolina law.
He would allow Appellant the benefit of pursuing her claim because the decision recognizes a duty that has been foreshadowed by this Court.56
Justice Kittredge concurs in the majority opinion except as may concern the applicable burden of proof, which is not addressed in the majority opinion. He agrees with Justice Pleicones that the burden of proof should be the clear and convincing standard.57 This position underscores the need for a heightened evidentiary threshold in third-party beneficiary malpractice claims to balance accountability with protection against speculative litigation.