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Leyba v. Whitley6/30/1994
HARTZ, Judge.
This appeal raises questions regarding the liability of a lawyer to a non-client. In particular, if a lawyer represents a trustee, when, if ever, does the beneficiary of the trust have a cause of action against the lawyer? In the specific circumstances of this case we hold that the district court was largely correct in finding no liability, but we reverse the summary judgment in favor of the two defendant lawyers because there is evidence that could support at least one theory of liability.
I. BACKGROUND
Corrine Urioste (Corrine) retained Defendant Joseph E. Whitley to assert a claim for damages against certain health care providers for the death in February 1990 of her son, Phillip Urioste (the Decedent). Whitley then associated with Defendant Daniel W. Shapiro to assist him in the litigation. Pursuant to the New Mexico Medical Malpractice Act, NMSA 1978 §§ 41-5-1 to 41-5-28 (Repl. Pamp. 1989), Shapiro and Whitley filed an application with the medical review commission. Because New Mexico's Wrongful Death Act, NMSA 1978, §§ 41-2-1 to 41-2-4 (Repl. Pamp. 1989), requires that such a claim be brought by and in the name of a personal representative of the decedent's estate, the claim was filed on behalf of Corrine, as personal representative of Decedent's estate. No lawsuit was ever filed. The parties settled the matter for $548,931.59.
All the settlement checks were made payable to Corrine, as personal representative of Decedent's estate. Some checks also included Shapiro and Whitley as payees. The checks were endorsed by all payees and deposited in Shapiro's trust account. After payment of fees and costs to Shapiro and Whitley, the net proceeds were $324,816.11. In the Spring of 1991 Corrine received the net proceeds in three checks drawn on Shapiro's trust account, each made payable simply to "Corrine Urioste." Nothing on the checks indicated that the funds were paid to her in any fiduciary capacity.
Under the Wrongful Death Act, when the decedent is unmarried the decedent's descendants should receive the proceeds of the wrongful death action. Section 41-2-3. At the time of his death Decedent was not married. He had, however, fathered a child by Candace Leyba. The child, Phillip Leroy Urioste (the Child), was born almost seven months after Decedent's death. Decedent had previously fathered two other children, but Decedent's parental rights and the children's right to inherit from him were terminated when the children were adopted by others. Thus, the proceeds of almost $325,000 were for the benefit of the Child. Unfortunately for the Child, his grandmother, Corrine, dissipated more than $300,000 on herself and others.
When Corrine's defalcation was discovered, Candace Leyba, as conservator for the Child, sued Corrine, other recipients of the funds, Whitley, and Shapiro. This appeal concerns only the claim against the two lawyers.
Leyba contends that Shapiro and Whitley had a duty to disburse the net settlement proceeds only to a conservator for the Child, rather than to Corrine. Leyba also contends that Whitley and Shapiro failed to fulfill their duties to the Child with respect to the proper application of the proceeds by not taking steps--such as making the net--proceeds checks payable to "Corrine Urioste, as personal representative of the estate of Phillip Urioste"--to protect the Child's interest in the proceeds.
All parties sought summary judgment with respect to the liability of Whitley and Shapiro. The district court granted the lawyers' motions and denied Leyba's. One significant fact
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