UPDATES & ANALYSIS

Iowa Supreme Court: An Estate’s Lawyer Is Not Automatically An Executor’s Personal Counsel

by Colin Smith | March 28, 2014

By Colin Smith

Does an attorney designated by an executor or administrator of an estate to assist in the distribution of property under a will owe an independent duty to represent the personal interests of the executor or administrator that hired the attorney?  No, according to the Iowa Supreme Court in an opinion released today in the case of Sabin v. Ackerman.

In Sabin, Elmer Gaedes, along with his wife, owned a 120-acre farm in Bremer County, Iowa.  In early 2001, Elmer leased the farm to his eldest son James.  The lease was for a term of sixteen years, and provided that at any time during the term of the lease, James could purchase the farm outright for a payment of $200,000.  Prior to the lease’s expiration, both Elmer and his wife died, leaving the farm as the largest asset under Elmer’s will.  The will requested that Elmer’s estate be divided amongst three of his four children: James, Steven, and Diean.

Elmer’s daughter, Diean, was named as the executor in the will.  To assist her with administering and distributing the property of the estate, Diean hired a lawyer, Ivan Ackerman.  While Ackerman was in the process of administering the estate for Diean, James exercised his option to purchase the farm under the lease for $200,000, which Diean and Ackerman accepted on behalf of the estate.  Later, Diean alleged the option in the lease under which James purchased the farm was invalid. Ackerman, while administering the estate, never informed Diean that the option might be subject to a legal challenge, and did not advise Diean to obtain independent legal counsel to protect her own personal interests as a potential beneficiary under the will.

Diean sued Ackerman for legal malpractice alleging that Ackerman failed to adequately represent her personal interests, as well as those of the estate, when James purchased the farm during the administration of the will.  Diean argued that an estate lawyer should be presumed to represent the executor of an estate in their official capacity as well as their personal capacity, unless otherwise agreed.  In other words, Diean asserted that when an estate lawyer signs on to assist an executor of a will, that attorney automatically becomes the personal lawyer of the executor as well as the attorney for the estate which the executor is overseeing.  Ackerman disputed this theory, arguing he only agreed to represent Diean as the executor of the will insofar as it was necessary to administer the estate.  Ackerman claimed he never agreed to assume the additional role of being Diean’s personal lawyer as well as the lawyer for Elmer’s estate.

The district court found in favor of Ackerman and declined to recognize the expanded scope of representation advocated by Diean.  The Court of Appeals reversed, holding that an estate lawyer could be considered an executor’s personal lawyer when they represent an estate.  Today, the Iowa Supreme Court reversed the appeals court and affirmed the district court.  The High Court noted that an attorney-client relationship only arises where there is a mutual agreement on the scope of the representation at issue between the lawyer and the client.  Here, under the facts in the record, the Court found that there was no reasonable basis for Diean to have concluded that Ackerman was her personal lawyer as well as the lawyer for the estate.  Conversely, there was no reasonable basis for Ackerman to have been on notice that when he agreed to represent the estate, he was also implicitly agreeing to represent Diean personally.

The Sabin case is important because it represents the divergence that sometimes arises between what a client thinks their lawyer is supposed to do, and what a lawyer is actually professionally obligated to do.  The Court noted that it might be a “better practice” for Iowa estate lawyers to clearly explain to the executors who hire them that they are not agreeing to serve as the executor’s personal counsel, but only as counsel to the estate.  This, the Court suggested, might avoid the type of confusion that led to the litigation in Sabin and would more accurately express the obligations and duties that estate lawyers owe to those who retain them for legal services.