The opinion of the court was delivered by
This is a legal malpractice action brought by the potential
beneficiaries of an inter vivos trust of Charles Pizel, deceased,
against the defendants, attorneys Eugene P. Zuspann and B.E.
Prior to trial, defendant Zuspann's motion for summary judgment
was granted. Plaintiffs appeal this decision. The claims against
defendant Whalen proceeded to a seven-day jury trial. The jury
assessed fault at 60% to the appellants and Charles Pizel, 35% to
defendant Whalen, and 5% to defendant Zuspann. Damages of
$204,550 were awarded to appellants, which were reduced to the
percentage of fault of Whalen, resulting in a judgment totaling
$71,592.50. The trial court overruled plaintiffs' post-trial
motions, from which plaintiffs appeal. The defendants
cross-appealed the district court's ruling that nonclients may
sue for negligence and that the claims were not barred by the
statute of limitations. This court granted defendants' motion to
transfer to the Supreme Court for final disposition pursuant to
Supreme Court Rule 8.02 (1989 Kan. Ct. R. Annot. 39) on March 27,
Charles Pizel was a single man who owned and farmed over 1,760
acres of farm land in Sherman County, Kansas. He died in April
1979. The appellants here are three nephews of Charles
Pizel. Allen lives in Colorado, where he owns and farms 2,700
acres of land. Allen's brother, Wilfred, also known as Bill or
Billy, died after Charles and after the trust Charles created had
been set aside by the Court of Appeals. Herbert, or Herb, is a
farmer living in Kansas and the cousin of Allen and Wilfred.
Herbert Pizel had seven brothers and sisters, who were also
nieces and nephews of Charles Pizel, but who were not mentioned
in Charles' trust. Along with Herbert, they were named as
residuary beneficiaries in Charles' will. These seven brothers
and sisters sued Herbert, Allen, and Wilfred to quiet title to
the land contained in the trust and won in Pizel v. Pizel,
7 Kan. App. 2d 388, 643 P.2d 1094, rev. denied 231 Kan. 801
(1982). The land in the trust was sold, and the proceeds were
divided among the residuary legatees.
Eugene P. Zuspann is an attorney at law who has practiced law
in Kansas since October 1939. For several years prior to 1962,
Zuspann did Charles' taxes. In late 1961 or early 1962, Charles
went to Zuspann to have him draft a contract of sale to transfer
his 1,760 acres of land to Allen and Wilfred, who accompanied
Charles. At this first meeting, Zuspann suggested a trust to
accomplish what Charles wanted and provided a form on revocable
trusts for Charles to read. Charles met with Zuspann several
times over the next two months to discuss and prepare the trust,
with Zuspann explaining that Charles would be deeding his
property away to the trustees. Zuspann advised Charles that the
trust could be canceled at any time to get the land back. Charles
signed the trust on May 23, 1962. The same day, Charles executed
a will and a deed conveying all his real estate to the trust. At
that time, Zuspann believed Charles understood what he was doing
and that he intended to create a trust. Zuspann represented
Charles in this matter, not Allen or Wilfred. Zuspann believed a
potential conflict of interest existed in advising Allen or
Wilfred about their rights under the trust.
The trust named Charles, Allen, and Wilfred as trustees.
Zuspann explained to Charles and Allen that the trustees owned
the property, should manage it, and had the right to deal with
the property as owners. No one, including Charles, ever asked
Zuspann to change the trust after it was executed in 1962.
In 1962, Zuspann was involved in a law partnership with B.E.
Whalen. Whalen was not involved in the preparation of the trust
or estate plan or will in 1962. Whalen began representing Charles
in the early 1970s. When he took over as Charles' lawyer, Whalen
believed Allen, Wilfred, and Charles understood that the land was
in trust, that the income from the land went to Charles, and that
they had responsibility as trustees to take care of the land. The
trust had been in effect for ten years and Whalen assumed Allen
and Wilfred knew of their roles as trustees because they were
involved in running the land and helped Charles with his affairs.
Based upon his experience with Zuspann, Whalen believed the trust
and the duties of the trustees had been explained to Charles.
About 1972, Charles indicated to Whalen his belief that Allen,
Wilfred, and Herb were in charge of the land. When Whalen, after
looking at the trust documents, told Charles that Herb was not
involved, Charles indicated his desire to have Herb named a
trustee. Whalen prepared an amendment to the trust that included
Herb as a trustee, and he discussed the proposed amendment with
Charles. This was Whalen's first work on the trust and estate
planning matters. Whalen met with Charles, Herb, Allen, and
Wilfred and explained the amendments to the trust and the new
deed needed to reflect Charles' desire to include Herbert as a
trustee. The instrument amending the trust was signed on June 10,
1975, by Charles, Allen, and Herb, and later by Wilfred.
At the time the trust was amended, Whalen believed Herb knew
the duties of a trustee because he had been with Charles on many
occasions and because he was a real estate owner, appraiser, and
expert witness in condemnation cases. Charles had told Herb about
the trust before it was amended, and Herb received copies of the
amended documents that had been signed on June 10, 1975. Whalen
believed Charles understood the trust and the amendment. Whalen
believed Allen and Wilfred had been operating as trustees for 13
years. On many occasions, Charles told Whalen he wanted the trust
kept secret because he feared the reaction from Herb's brothers
and sisters. Charles instructed Whalen not to record the deeds
until after his death. Allen and Herb were also aware that
Charles wanted to keep the trust secret.
After the trust was amended, Charles' mental and physical
condition deteriorated. In the fall of 1976, Whalen wrote Herb,
Allen, and Wilfred, asking them to schedule an appointment to
discuss the trust and Charles' affairs. Whalen was considering
what would need to happen if Charles became incompetent. The
trustees did not come to see Whalen prior to Charles' death.
Charles entered the hospital in 1978 and remained there until he
died in April 1979.
Whalen recorded the deeds to the trust land after Charles died.
Allen and Herb farmed the land from 1980 until August 1982. They
received $69,000 in income. Suit was filed by Charles' other
heirs in August 1980. In his deposition in the trust lawsuit,
Allen stated that he, Herb, and Wilfred had done nothing as
trustees before Charles died and that he did not think the trust
took effect until after Charles' death, even though Allen had
been a named trustee and had worked the land for 18 years. The
trial court invalidated the trust in February 1981, finding that
Charles treated the land as if it were his own, that the trustees
denied doing any acts as trustees, and that the trustees
testified that Charles intended the trust to arise after his
death, when their duties would begin. See Pizel v. Pizel,
7 Kan. App. 2d at 396.
Under the trust agreement drafted by Zuspann in 1962, 1,760
acres of land were transferred to Charles, Wilfred, and Allen as
trustees. Charles was entitled to income from the land during his
life and was required to pay taxes on it. The income from the
land, which consisted of crops and agricultural program payments,
averaged $3,590.55 per year from 1962 to 1978. When Charles died,
two trusts would be created one for Wilfred and one for Allen.
Neither Allen nor Wilfred had the right to demand a distribution
from the trust, and only a disinterested trustee, in his
uncontrolled discretion, could approve such a transfer. When
Allen and Wilfred died, their children would receive the property
of their trusts per stirpes. If neither had children, the
assets returned to the intestate heirs of Charles.
Whalen prepared an amendment to the trust that was executed on
June 10, 1975. It substituted Herb for Charles as a trustee and
created three trusts, instead of two, upon Charles' death. Other
substantive provisions of the trust were not changed.
Plaintiffs called Robert Groff, a Topeka lawyer, as an expert
witness. He testified that, during Charles' lifetime, the deed to
the trust should have been recorded or the deed should have been
delivered to someone other than the lawyer, tax returns should
have been filed for the trust, and accounts should have been
established at banks and grain elevators in the trust's name.
According to Groff, a lawyer who sets up a trust has an ongoing
duty to see that the trust is functioning properly. The trust
agreement can be viewed as a contract where Allen, Wilfred, and
then Herb agreed to care for the property as stated in the
agreement. Whalen's representation of Charles would potentially
conflict with the interests of Herb, Allen, and Wilfred. Groff
agreed that the testimony of the trustees regarding their belief
that no trust existed prior to Charles' death was considered by
the Court of Appeals in affirming the decision finding the trust
did not exist.
Another lawyer, Donald Horttor, testified on behalf of
defendants. Horttor believed Zuspann had acted properly when
preparing and executing the trust in 1962. According to Horttor,
unless a client asks questions, a lawyer can assume the client
understands documents he or she is asked to read and sign.
Horttor noted that a lawyer's correct creation of a trust can
still be invalidated if the creator does not follow through.
Horttor also noted that the lawyers represented Charles and not
Allen and Wilfred. A potential conflict of interest existed
between the grantor, Charles, and the trustees. The defendants
also called Professor John Kuether of Washburn Law School as an
expert witness. He expressed his opinion that the decision in
Pizel changed prior law that had indicated an attorney could
rely on a statement in the trust document to establish the
trust's intent. Professor Kuether concluded Whalen had no direct
duties to Herb, Allen, and Wilfred as trustees because of the
potential conflict with his duties to his client, Charles.
Additional facts will be mentioned where necessary to determine
the issues raised in this appeal.
We first consider whether the trial court erred in granting
Zuspann's motion for summary judgment. In granting the summary
judgment motion, the trial court made the following additional
findings of fact. In September 1975, Zuspann and Whalen dissolved
their law partnership and Zuspann left the firm. The
deeds and trust instruments remained with Whalen. On January 11,
1979, Whalen prepared a codicil to Charles' last will and
testament, which was executed that day. This added Herb as a
beneficiary to the will to receive certain livestock and farm
equipment. Charles died April 24, 1979.
The court also found no evidence that Zuspann did legal work
for Charles from September 1975 until Charles' death in April
1979. After Charles' death, the deeds were recorded. The
residuary beneficiaries under Charles' will challenged the
validity of the inter vivos trust. The trial court and the Court
of Appeals held that no valid inter vivos trust existed because
the deeds to the trust were never recorded, nor put beyond the
control of the grantor, and because the grantor was the only
person who dealt with the land during his lifetime and never took
any steps to indicate that a trust existed. Pizel v. Pizel,
7 Kan. App. 2d at 396-97.
The trial court concluded that appellants failed to state a
legal malpractice claim against Zuspann because he had ceased to
represent Charles and was replaced by other counsel before the
opportunity to activate the inter vivos trust ended. The court
noted that this legal malpractice claim involved the failure to
advise the trustees of their duties, the failure to record a deed
or otherwise put the deed out of the control of the grantor, and
the failure to advise the client of the necessity of having the
trustees take control of the trust res during Charles' lifetime
if a valid trust existed, including filing tax returns in the
name of the trust. Any of these events could have occurred at any
time between Zuspann's departure from the law practice in
September 1975 until Charles' death in April 1979. During this
time, Charles was represented concerning his estate by attorney
Whalen. The court stated:
"This is particularly so since the deeds and Trust
instruments had in effect become a part of the legal
file of B.E. Whalen, not one of the files which
Zuspann took with him upon his departing the law
practice in 1975. In effect, Zuspann resigned and
Whalen took over during a period of time when no
damage had occurred and no cause of action had
To support its decision, the trial court relied upon Knight v.
Myers, 12 Kan. App. 2d 469, 748 P.2d 896 (1988). In that case,
when the Laukalas sued the Knights for nuisance, the Knights
filed, among other things, a pro se "countersuit." Subsequently,
the Knights hired attorney Myers to represent them. Myers failed
to obtain proper service on the "countersuit" and it was
eventually dismissed. Myers terminated his employment with the
Knights on December 1, 1981, and formally withdrew from the two
cases in which he represented the Knights on December 14, 1981.
Within the next year and a half, the Knights were represented by
at least two other attorneys. At the time Myers withdrew, the
Knights probably had until July 8, 1983, to file their
countersuit before the statute of limitations ran. The court
concluded that Myers could not be held liable for failing to file
an action prior to the expiration of the statute of limitations
because he had ceased to represent the Knights and was replaced
by other counsel before the statute ran. 12 Kan. App. 2d at 477.
Although this action did not involve failing to file a
particular kind of lawsuit before the statute of limitations ran,
the trial court found the holding in Knight v. Myers
controlled. Zuspann's resignation from the law firm in September
1975 and Whalen's assumption of activity on the file, in effect,
resulted in Zuspann's withdrawal from representation of Charles.
Steps needed to assure creation of the inter vivos trust were
possible until Charles' death in April 1979.
We do not agree with the trial court that Knight is analogous
to the present case, nor do we find it controlling. As appellants
correctly note, this case is distinguishable from Knight v.
Myers because, to carry out the terms and conditions of his
employment during his representation of Charles, Zuspann had a
continuing duty to assure that Charles' intent to pass the land
to his nephews was realized. Zuspann's alleged failure to
adequately advise Charles of the steps needed to effectuate the
trust constituted a special obligation that was continuous in
nature and that resulted in injury to Charles and his intended
third-party beneficiaries. More importantly, in Knight,
attorney Myers committed no act of negligence prior to
terminating his representation of Knight. The attorneys who
subsequently represented Knight had ample opportunity to file the
action prior to the expiration of the statute of limitations. The
only act of negligence was by the subsequent attorneys for
failing to file the action in time. In the instant case,
plaintiffs allege various acts of negligence by both Zuspann and
Whalen. The mere fact that Whalen subsequently represented
Charles does not relieve Zuspann of liability for his acts of
negligence prior to the termination of his attorney-client
relationship with Charles. The fault of each attorney, if any, is
for the jury to ...