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

Supreme Court of Minnesota

June 27, 2018

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

          Office of Appellate Courts Court of Appeals

          Paul A. Sortland, Sortland Law Office, PLLC, Minneapolis, Minnesota, for respondent/cross-appellant.

          Sally J. Ferguson, Stephen M. Warner, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, Minnesota, for appellant/cross-respondent.

         SYLLABUS

         1. The personal representative of a decedent's estate does not have standing to pursue a cause of action for legal malpractice against the decedent's estate-planning attorneys if no cause of action accrued to the decedent before the decedent's death.

         2. An entity, in its capacity as trustee of a decedent's trust, does not have standing to pursue a cause of action for legal malpractice against the decedent's estate-planning attorneys if the entity was not a direct and intended beneficiary of the estate-planning services.

         Reversed.

          OPINION

          McKEIG, Justice.

         This case arises out of a district court order granting a motion for judgment on the pleadings. Respondent/cross-appellant Security Bank & Trust Company ("Security Bank") sued appellant/cross-respondent Larkin, Hoffman, Daly & Lindgren, Ltd. ("Larkin"), alleging legal malpractice related to estate-planning services for deceased client Gordon P. Savoie. Security Bank, as trustee and personal representative of Savoie's estate, alleged that Larkin failed to advise Savoie that his estate would be subject to a substantial generation-skipping transfer tax upon a distribution to a beneficiary who was more than 37.5 years younger than him. The district court granted Larkin's motion for judgment on the pleadings because it determined that Security Bank lacked standing both in its capacity as personal representative of Savoie's estate and in its capacity as trustee of the Gordon P. Savoie Revocable Trust. The court of appeals reversed and remanded, concluding that Security Bank had standing as personal representative of the estate because a cause of action for legal malpractice accrued to Savoie during his lifetime, and thus survived to Security Bank. Because we agree with the district court, we reverse the court of appeals.

         FACTS

         Larkin drafted a will and revocable trust agreement for Gordon P. Savoie in 2009. Following a number of specific bequests, Article 7 of the trust agreement directed that 45 percent of the remaining trust assets be distributed to a beneficiary who was more than 37.5 years younger than Savoie. As a result, the distribution was subject to a generation-skipping transfer tax totaling about $1.654 million. See 26 U.S.C. §§ 2601-03, 2611, 2651(d) (2012).

         Following Savoie's death, Security Bank was appointed trustee and personal representative of Savoie's estate. In these capacities, Security Bank sued Larkin for legal malpractice. Security Bank alleged that Larkin never advised Savoie of the generation-skipping transfer tax, nor discussed with him options for reducing the tax burden to the estate.

         Larkin moved for judgment on the pleadings under Minn. R. Civ. P. 12.03. Larkin argued that Security Bank lacked standing as personal representative of Savoie's estate to bring an action for legal malpractice because no cause of action accrued during Savoie's lifetime. Larkin also argued that Security Bank lacked standing as trustee of the Gordon P. Savoie Revocable Trust because Larkin had no attorney-client relationship with Security Bank in that capacity.

         The district court granted Larkin's motion. The court applied the "some damage" rule of accrual discussed in Antone v. Mirviss, 720 N.W.2d 331 (Minn. 2006). The court determined that "some damage" did not occur until after Savoie's death, at the point when the estate became liable for the generation-skipping tax. Thus, as no cause of action accrued during Savoie's lifetime, no cause of action survived to Security Bank as personal representative. Further, the court held that Security Bank did not have standing as trustee because it did not have an attorney-client relationship with Larkin, and was not a direct and intended beneficiary of Larkin's relationship with Savoie.

         In a published decision, the court of appeals reversed. Security Bank & Trust Co. v. Larkin, Hoffman, Daly & Lindgren, Ltd., 897 N.W.2d 821, 828 (Minn.App. 2017). The court agreed with the district court that, for a claim of legal malpractice to survive to a client's personal representative after death, the cause of action must accrue during the client's life. Id. at 824-25 (citing Minn. Stat. § 524.3-703(c) (2016)). The court interpreted Antone's requirement of "some damage" to include "reliance" on an attorney's allegedly negligent advice. Id. at 825-27. Accordingly, the court concluded that "some damage" occurred when Savoie executed the will and trust because he relied on the allegedly negligent advice of the attorneys "to the detriment of [his] legal rights." Id. at 826-27. Therefore, the court held, the cause of action accrued to Savoie before his death, and Security Bank had standing to pursue the claim on behalf of the estate as personal representative. Id. at 827. Because the court determined that Security Bank had standing as personal representative, the court did not address whether Security Bank had standing as trustee. Id. at 828.

         We granted Larkin's petition for further review on the issue of whether the cause of action accrued before Savoie's death. We also granted Security Bank's request for cross-review. Security Bank argues that the court of appeals incorrectly concluded that, if no cause of action for legal malpractice accrues during a client's lifetime, "no cause of action exists to which a personal representative may succeed after the client's death[.]" Id. at 825. Security Bank also renews its argument that it has standing as trustee of the Gordon P. Savoie Revocable Trust to sue Larkin for negligent preparation of the estate-planning documents.

         ANALYSIS

         We review a district court's grant of a motion for judgment on the pleadings "to determine whether 'the complaint sets forth a legally sufficient claim for relief.'" Burt v. Rackner, Inc., 902 N.W.2d 448, 451 (Minn. 2017) (quoting Zutz v. Nelson, 788 N.W.2d 58, 61 (Minn. 2010)). In considering whether the district court properly granted the motion, "we 'consider only the facts alleged in the complaint, accepting those facts as true and drawing all reasonable inferences in favor of the nonmoving party.'" Id. Whether a complaint sets forth a legally sufficient claim for relief is a question of law that we review de novo. Walsh v. U.S. Bank, N.A., 851 N.W.2d 598, 606 (Minn. 2014).

         For Security Bank to bring a cause of action for legal malpractice, Security Bank must have standing to bring the action in the first instance. See In re Petition for Improvement of Cty. Ditch No. 86, 625 N.W.2d 813, 817 (Minn. 2001) ("Standing is a prerequisite to a court's exercise of jurisdiction."). Standing is the "requirement that a party have a sufficient stake in a justiciable controversy." McCaughtry v. City of Red Wing, 808 N.W.2d 331, 338 (Minn. 2011) (citation omitted) (internal quotation marks omitted). A party may acquire standing either as the beneficiary of a statutory grant of standing or by suffering an "injury-in-fact." Webb Golden Valley, LLC v. State, 865 N.W.2d 689, 693 (Minn. 2015). Further, in the legal-malpractice context, a non-client third party must ...


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