Supreme Court of Washington, 1992
832 P.2d 71 (1992)
PROCEDURAL HISTORY: Plaintiff lenders appealed from the judgment of the Court of Appeals (Washington) upholding the summary judgment that was entered for defendant attorney in a action alleging negligence, breach of contract, and violation of conflict-of-interest rules with respect to the attorney's representation of the lenders' daughter and preparation of documents relating to a loan given by them to their daughter, on which she subsequently defaulted.
-Foreclosure proceedings were commenced against the lenders' daughter when she defaulted on a real estate contract.
-After agreeing to their daughter's request for a loan, the mother met with the attorney to discuss their arrangement.
-The attorney emphasized that he represented only the daughter and not the lenders, but said he would handle the paperwork to achieve the lenders' objective of having proper security for the loan. -The attorney did not tell the mother to obtain independent counsel or about tax liens on the property that he did not know about.
- After the lenders paid the amount needed to prevent foreclosure, the property was seized and sold at a tax sale.
-The daughter never repaid the lenders, so the lenders sued the attorney, but their claims were rejected on summary judgment.
-The supreme court ruled that an attorney-client relationship was not established with the lenders and the attorney did not violate conflict of interest rules.
-However, a factual dispute existed as to whether the attorney owed them a duty of care as third parties to his relationship with their daughter given their lack of representation in the transaction.
-An attorney/client relationship is not created merely because an attorney discusses the subject matter of a transaction with a non-client. Likewise, an attorney for one party to a transaction does not become the other party's attorney merely because he prepared the documents formalizing the transaction.
-Where an attorney represents the borrowing party to a intra-family loan, the attorney should advise the unrepresented lender to seek independent counsel before the attorney discusses the transaction with that party. It is not enough that the attorney tell the unrepresented party that he is not acting as her attorney. This information does not sufficiently convey to the general public the adversarial stance an attorney must take toward those having interests different from the client's own interests. -Moreover, if the attorney undertakes to tell part of the story to an unrepresented party with whom the attorney's client is doing business, the attorney must take reasonable steps to tell the whole story, not just the self-serving portions of it.
CONCLUSION: The summary judgment for the attorney was reversed in part with respect to the lenders' contract and negligence claims that they were within the class of third parties to whom an attorney would owe a duty of care. The summary judgment was affirmed in part with respect to their claims that an attorney-client relationship was formed between them and that the attorney violated disciplinary rules.
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?