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Barner v. Sheldon

May 3, 1995

JERRY A. BARNER, DONALD BARNER, JOAN SADLER, INDIVIDUALLY, AND JOAN SADLER AS EXECUTRIX FOR THE ESTATE OF ELEANOR BARNER, PLAINTIFFS, - VS - ROBERT L. SHELDON, ESQ., DEFENDANT.


Menza, J.s.c.

The opinion of the court was delivered by: Menza

MENZA, J.S.C.

Defendant moves in limine to dismiss plaintiffs complaint on the basis that the defendant owed no duty to the plaintiffs.

This is a legal malpractice case. The defendant, an attorney, prepared a will for the decedent, Gerry Barner, in which he left his business equally to his three children, the plaintiffs in this case. He left the residuary of his estate equally to his three children and his wife, Eleanor Barner. The parties agree that Jerry Barner did not wish to leave any part of his estate to his wife, and that he did so only after being advised by the defendant that the decedents wife could make an election to take against the will. According to the defendant, the decedent provided for potential estate taxes by acquiring a life insurance policy payable to the business. The defendant's secretary was named in the will as executrix of the estate.

Jerry Barner died on September 7, 1983 and the executrix appointed the defendant as attorney for the estate. As part of his legal representation, the defendant filed a federal tax return on behalf of the estate. The tax obligation under this return was $80,589.00. Mrs. Barner died testate on June 25, 1985, and left her entire estate to the plaintiffs.

Plaintiffs allege that the defendant had a duty to inform them that they had a right to disclaim their share of their father's estate (N.J.S.A. 3B:9-1 et eq.) in favor of their mother, which would have resulted in either an avoidance or diminution of federal estate taxes. The plaintiffs also contend that if they had disclaimed, their mother would have given each of them a tax free gift of $10,000 during her lifetime. Thus, plaintiffs contend that defendant's failure to advise them of their right to disclaim was negligent and they now seek damages for the amount of taxes that they claim the estate needlessly paid.

The defendant admits that he did not advise the plaintiffs to disclaim their share of the estate, but he contends that he had no duty to do so because he represented the estate, not its beneficiaries.

The concept of duty is premised on what reasonable persons recognize as fair.

No better general statement can be made than that the courts will find a duty where, in general, reasonable persons would recognize it and agree that it exists. Prosser and Keaton on Torts, 5th Ed. Sec. 54 p. 359

Whether a duty exists is ultimately a question of fairness. The inquiry involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution. Goldberg v. Housing Auth. of Newark, 38, N.J. 578, 583 (1962).

Plaintiffs argue that this is a classic case for the imposition of a duty because the plaintiffs' interests were the same as that of the estate and that it was only the plaintiffs who could be harmed by the improper administration of the estate. They argue that fairness dictates the imposition of a duty upon the defendant.

Defendant concedes that in certain situations, based either on concepts of equity or on public policy, a court could and should impose a duty upon an attorney to third persons. He maintains that this case, however, is not one of them. He argues that the plaintiffs' positions are adverse to that of the estate in that a disclaimer would be violative of the testator's intent that his children be the beneficiaries of his business and the bulk of his estate. Plaintiffs respond that the testators' ultimate intent was not to give his children assets burdened by a severe tax obligation and that if the defendant had advised Jerry Barner of the tax consequences of his will, he would have given a greater share of his estate to his wife, who then would have left her estate to her three children (which she in fact did), the result being that the children would get all of Jerry Barner's estate without tax liabilities.

Our courts have made it clear that duty is not always dependant upon a direct relationship between the parties and that a duty may be imposed on an attorney, where fairness and common sense dictate such a duty, even when privity is lacking. In the case of Rosenblum v Adler 93 N.J. 324, 461 A.2d 138 (1983), the Supreme Court held that an independent auditor had a duty to all those whom the auditor could reasonably foresee would be recipients of the financial statement it prepared for a particular corporation.

It stated:

Recovery of economic loss, due to negligent misrepresentation by one furnishing a service, has long been permitted when there existed a direct contractual relationship between the parties or when the injured third party was a known ...


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