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Security Bank & Trust Co. v. Larkin, Hoffman, Daly & Lindgren, Ltd.

Court of Appeals of Minnesota

May 15, 2017

Security Bank & Trust Company, Appellant,
v.
Larkin, Hoffman, Daly & Lindgren, Ltd., Respondent.

         Hennepin County District Court File No. 27-CV-16-1804

          Paul A. Sortland, Sortland Law Office, PLLC, Minneapolis, Minnesota (for appellant)

          Stephen M. Warner, Sally J. Ferguson, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, Minnesota (for respondent)

          Considered and decided by Jesson, Presiding Judge; Halbrooks, Judge; and Worke, Judge.

         SYLLABUS

         For purposes of determining when a cause of action for legal malpractice arising from estate planning services accrues, "some damage" occurs when the client takes action pursuant to the attorneys' allegedly negligent advice.

          OPINION

          JESSON, Judge

         Appellant Security Bank & Trust, as trustee and personal representative for a decedent, challenges the district court's dismissal on the pleadings of its legal-malpractice claim arising from estate planning services performed by respondent Larkin, Hoffman, Daly & Lindgren. We conclude that because some damage occurred before the decedent's death, when he signed the estate planning documents pursuant to the attorneys' advice, the cause of action accrued at that time. Thus, the bank, as personal representative, succeeded to the decedent's claim under Minnesota's survival statute, Minnesota Statutes section 524.3-703(c) (2016), and has standing to pursue this action. We therefore reverse and remand for further proceedings.

         FACTS

         In 2009, decedent Gordon Savoie sought estate-planning assistance from respondent law firm Larkin, Hoffman, Daly & Lindgren. Larkin Hoffman attorneys drafted a revocable trust and will for Savoie, who signed those documents in September 2009. The will was structured so that when Savoie died, assets remaining after gifts and personal items would pass into the trust. The trust directed that approximately 45% of the undistributed estate be distributed to a beneficiary who was more than 37.5 years younger than Savoie. But neither the will nor the trust contained a provision for a generation-skipping trust or other mechanism for avoiding a generation-skipping tax.[1]

         After Savoie's death, appellant Security Bank & Trust was appointed successor personal representative and successor trustee. In 2015, the bank, in those capacities, commenced a malpractice action against Larkin Hoffman. The bank's complaint alleged that because Larkin Hoffman failed to advise Savoie of the tax implications of a generation-skipping tax, he missed opportunities to provide for alternative estate dispositions to avoid the tax, such as using sophisticated estate planning techniques to reduce the size of his estate, or arranging a different tax-payment methodology to shift the burden of the generation-skipping tax. It alleged that, as a result of Larkin Hoffman's negligence, the estate had been required to pay approximately $1.654 million in generation-skipping transfer taxes.

         Larkin Hoffman moved for judgment on the pleadings. The firm argued that, as personal representative of the estate, the bank lacked standing to pursue a malpractice action because no damages had occurred before Savoie's death, so that no cause of action for legal malpractice accrued during his lifetime, and therefore no cause of action existed to which the personal representative might succeed. Larkin Hoffman also argued that the bank, acting as trustee, lacked standing to sue because it had no attorney-client relationship with the firm.

         After a hearing, the district court issued an order dismissing the matter on the pleadings. The district court concluded that the bank lacked standing to sue as personal representative because (1) any cause of action for malpractice based on the failure to advise Savoie about the possibility of a generation-skipping tax on his estate did not cause compensable damage before his death; so that (2) no malpractice action accrued before he died; and (3) a cause of action for legal malpractice that does not accrue before death does not survive. The district court also concluded ...


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