On review from the Iowa Court of Appeals. Appeal from the Iowa District Court for Bremer County, Rustin Thomas Davenport, Judge. Plaintiff appeals the district court's decision granting defendant's motion for summary judgment.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED.
David J. Hanson of Hofmeyer & Hanson, P.C., Fayette, and John W. Hofmeyer III of Hofmeyer & Hanson, P.C., Oelwein, for appellant.
Robert M. Hogg and Patrick M. Roby of Elderkin & Pirnie, P.L.C., Cedar Rapids, for appellee.
CADY, Chief Justice.
In this appeal, the claims raised by the parties require us to examine the duty of care owed by an attorney hired by an executor of an estate to render legal services in the administration of the estate. The executor brought a legal malpractice lawsuit against the attorney for failing to adequately protect her personal interests during the administration of the estate and in the distribution of property of the estate. The district court granted summary judgment to the attorney based on its determination that the attorney did not have a duty to protect the personal interests of the executor. We transferred the case to the court of appeals, and it reversed the decision of the district court. On further review, we vacate the decision of the court of appeals and affirm the decision of the district court.
I. Background Facts and Prior Proceedings.
Elmer and Alberta Gaede owned a 120-acre farm near Tripoli, Iowa, in Bremer County. In early 2001, they entered into a contract to lease the farm to James and Marlys Gaede. James and Marlys were husband and wife, and James was a son of Elmer and Alberta.
The term of the lease was sixteen years, and the annual rent was $12,500. The contract gave James and Marlys the exclusive option to buy the property for $200,000 at any time during the lease. If the option to buy was exercised, the purchase price would be reduced by the total amount of the rent that had been paid. Ivan Ackerman, an attorney in Waverly, Iowa, prepared the lease and notarized the signatures of the parties to the contract.
Elmer died testate on February 27, 2005. He was eighty-six years old. Alberta had predeceased him. Under his
will, Elmer left his estate in equal shares to three of his four children. The three children were James; another son, Steven Gaede; and his daughter, Diean Sabin. Another daughter was not included as a beneficiary under the will. The largest asset of the estate was the farmland, which James was farming pursuant to the lease.
Diean was named executor under the will. She designated Ackerman as the attorney in the probate report filed with the court in the probate proceedings. There was no other written documentation of an attorney-client relationship between Diean and Ackerman. The farm was valued at $200,000 in the probate inventory.
During the pendency of the probate proceedings, James and Marlys exercised the option under the lease agreement to purchase the farm. In response, the three beneficiaries of the will and their spouses conveyed the farm by warranty deed to James and Marlys pursuant to the terms of the option. Ackerman prepared the documents to convey title and notarize the signatures on the documents. The deed was placed in escrow pursuant to a written agreement. Ackerman did not advise Diean that the validity of the option might be subject to a legal challenge and did not advise her to seek independent counsel to obtain legal advice on her personal interests in the transaction. Likewise, Diean never expressed to Ackerman any information to question the legality of the option. The estate was subsequently closed.
Diean and Steven later initiated a lawsuit against James, claiming the option under the lease was invalid. They claimed the market value of the farm was much more than the purchase price. Several specific grounds to invalidate the option were asserted, including unconscionability, unreasonable restraint on alienation, and undue influence. The parties later settled the action for a relatively small sum of money.
A short time later, Diean brought this legal malpractice lawsuit against Ackerman. She alleged Ackerman failed to advise her about the potential legal challenges to the enforcement of the option in the farm lease at the time it was exercised by James and Marlys during the administration of the estate. She also alleged Ackerman failed to advise her to seek independent counsel to protect her personal interests.
Ackerman moved for summary judgment. He claimed he had no duty of care to protect Diean's personal interests relating to the enforceability of the option because he only represented her in her capacity as the executor of the estate. In response, Diean argued an estate attorney represents an executor both in the capacity of an executor and with respect to the personal interests of the executor, unless the representation is specifically limited by the attorney. Consequently, she claimed Ackerman had a duty to examine and explain the validity of the option and advise her of the need for ...