By Joan C. Rogers
A lawyer who drafted a power of attorney for an elderly client assumed an enhanced duty to the client by adding requirements that the designated agents submit an initial inventory to the lawyer and annual accountings to the lawyer or some other attorney, a divided Ohio Court of Appeals, Tenth District, ruled Dec. 27 (Svaldi v. Holmes, Ohio Ct. App. 10th Dist., No. 12AP-167, 12/27/12).
The court decided 2-1 that by including the inventory and accounting arrangement, the lawyer took on a responsibility to try to make the scheme work. The lawyer had a duty to follow up with the named agents about their obligation and encourage them to comply, but did not assume a broader duty to supervise them, Judge William A. Klatt said.
In 2008 attorney Robert D. Holmes met with 93-year-old Peter W. Svaldi at the request of Anita Esquibel. Svaldi came to the meeting with Esquibel and another woman, Deborah Johnson. The two women resided in and managed the apartment complex where Svaldi lived.
Svaldi had a power of attorney that designated a family friend as his agent, and he was concerned that she would make him move to the state where she lived and go into an assisted-living community there. Holmes advised Svaldi that to prevent the move he should select a different agent for his power of attorney. Svaldi indicated that he wanted to name Johnson and Esquibel as his agents.
Holmes drafted a new power of attorney making that designation, along with a revised will naming the women as executors. Svaldi executed the documents after Holmes confirmed in private that his client really wanted to name the two women as his agents.
The power of attorney Holmes drafted gave Johnson and Esquibel the authority to manage, sell, and transfer Svaldi's assets, and it allowed them to open and close bank accounts and sign checks on his behalf. The power of attorney also contained these two paragraphs:
10. The holder of this Power-of-Attorney shall within thirty (30) days of appointment, or as soon thereafter as possible make an inventory of my estate assets and list any claims or obligations which I have or may have, giving me a copy, keeping a copy for herself, and leaving a copy with my attorney, Robert D. Holmes….
11. The holder shall also file an annual account by January 31st of each year and deliver it to Robert D. Holmes, attorney, or any attorney licensed in Ohio, designated by me or by the holder of this Power-of-Attorney for safe-keeping.
Holmes did not receive an inventory from the two agents within the 30-day period. After a few months, he sent a letter to Johnson reminding her of the obligation to complete the inventory and provide Holmes with a copy. Neither Johnson nor Esquibel responded.
Holmes did not again ask for an inventory, nor did he receive any annual accountings. In 2011 large withdrawals from Svaldi's accounts prompted his bank to contact the police, and their investigation revealed that Johnson and Esquibel had stolen more than $800,000 from Svaldi.
Svaldi sued Holmes for malpractice, asserting that he was negligent by “failing to monitor the performance of the holders of the [power of attorney] through receipt and review of the inventory and annual accounting of assets and obligations.”
Svaldi claimed that Holmes incurred a duty to monitor events when the lawyer incorporated the inventory and annual accounting requirements into the power of attorney. Holmes argued that his sole duty to Svaldi was to exercise appropriate care in drafting the power of attorney and revising the will.
After discovery was completed, the trial court granted summary judgment in favor of Holmes, holding that the lawyer owed no enhanced duty to Svaldi. Disagreeing with that conclusion, the appellate court reversed.
The court posited that “an attorney only owes a duty to a client if the alleged deficiencies in his performance relate to matters within the scope of representation.” It grounded this principle on Ohio case law and the Restatement (Third) of the Law Governing Lawyers §50 cmt. d (2000), which states that a lawyer “must exercise care in pursuit of the client's lawful objectives in matters within the scope of the representation.”
According to Holmes, he incorporated the arrangement for an inventory and annual accountings into the power of attorney as a protective mechanism so that a third party could ascertain whether the designated agents were misappropriating or mismanaging Svaldi's assets.
The court pointed out that certain steps needed to occur in order for this arrangement to fulfill its protective purposes: the named agents had to create the inventory and annual accountings; Holmes had to receive the inventory; Holmes had to receive the annual accountings or, if they were submitted to another attorney, that attorney would need the inventory and any previous annual accountings; and Holmes or the other attorney needed to review and compare the documents.
By incorporating the inventory and accounting scheme into the power of attorney, the court said, Holmes expanded the scope of his representation of Svaldi beyond the mere drafting of legal documents.
“By setting up the inventory and accounting scheme, Holmes assumed a responsibility to attempt to make it work,” Klatt stated. “Thus, Holmes had a duty to follow up with Johnson and Esquibel regarding their obligation to complete an inventory and the annual accountings and encourage Johnson and Esquibel to comply with the scheme,” he said.
The court disagreed, however, with Svaldi's broad characterization of the duty that resulted from the inventory and accounting arrangement. Holmes did not assume an overarching duty to supervise the designated agents, the court declared. “Svaldi did not request and Holmes did not suggest that Holmes would serve as the guardian of Svaldi's financial well-being or the general overseer of Svaldi's agents,” Klatt wrote.
“Moreover, neither justice nor good sense warrants the imposition of such a broad duty in these circumstances,” the court stated.
In a dissenting opinion, Judge Judith L. French argued that neither the parties' attorney-client relationship nor the power of attorney itself required Holmes to review the inventory and annual accountings or to facilitate the evaluation of those documents. Nor was there evidence that Svaldi asked Holmes to undertake these additional tasks, French said.
Anne M. Valentine and Susie L. Hahn of Leeseberg & Valentine, Columbus, Ohio, represented Svaldi. Rick E. March of Lane, Alton & Horst, and Ray S. Pantle, both of Columbus, represented Holmes.
Full text at http://op.bna.com/mopc.nsf/r?Open=jros-93mv6r.
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