July 29, 2009 – An attorney who advised that a client could ignore a stipulation in the client’s divorce judgment is liable as a matter of law for aiding and abetting an unlawful act, the Wisconsin Supreme Court held on July 14.
The dissent in Tensfeldt v. Haberman, 2009 WI 77, argued that the stipulation in question exceeded the court’s subject matter jurisdiction to rule on a divorce and so no unlawful act occurred when it was ignored.
But the majority held that a court may incorporate into a divorce judgment the agreements parties reach on subjects beyond those the Legislature has specifically assigned to the court. The dissent charged that this amounts to new law and criticized the majority for holding an attorney to a standard different from the one in effect at the time of the conduct in question.
A stipulated property division
Robert Tensfeldt had three adult children when his first marriage ended in Wisconsin in 1974. The divorce judgment incorporated a stipulation by which Tensfeldt agreed to execute and keep in effect a will “leaving not less than two-thirds of his net estate outright” to these children.
In 1978, Tensfeldt executed a will in compliance with the stipulation. But in 1980, Tensfeldt retained Roy C. LaBudde of Michael Best & Friedrich LLP to write a new estate plan. When Tensfeldt met with LaBudde, he gave the attorney a copy of the divorce judgment and stipulation. LaBudde told Tensfeldt he could either comply with the stipulation; negotiate with the children to alter his obligation; or ignore it, knowing that his children might contest the will.
Tensfeldt chose the third option, and LaBudde drafted an estate plan in 1981 accordingly. Even though Tensfeldt moved to Florida with his second wife in 1985, he retained Michael Best & Friedrich to handle a series of revisions to his estate plan, including the 1992 plan in effect when he died in 2000. None of the revised plans conformed to the stipulation.
After LaBudde scaled back his practice, Tensfeldt consulted another Michael Best & Friedrich attorney, F. William Haberman, in 1994 at which time Tensfeldt chose to make no changes to his 1992 estate plan.
When Tensfeldt died in Florida, his children sued to enforce the stipulation and order promising them two-thirds of the estate. A Florida circuit court held that the children’s claim was barred by the 20-year statute of limitations for judgments. However, the Florida Court of Appeals held the claim was enforceable as a contract.
Following that, the children sued LaBudde, Haberman, and their law firm in Wisconsin. All parties moved for summary judgment and the circuit court determined as a matter of law that LaBudde aided and abetted his client’s violation of the divorce judgment.
The Wisconsin circuit court dismissed the claims against Haberman, concluding that he was negligent for failing to advise Tensfeldt in 1999 of a Florida ruling that enhanced his second wife’s share of the estate. But the court said that the children failed to present evidence that Tensfeldt would have changed his estate plans if he had known of the new law.
On review, the court of appeals certified several questions to the supreme court regarding the claims against LaBudde.
LaBudde argued that he had not assisted his client with an unlawful violation of a court order because the court lacked the authority to impose it under the law of that time. He said the stipulation was merely a contractual obligation, as the Florida Court of Appeals concluded. But the supreme court disagreed in a majority opinion authored by Justice Ann Walsh Bradley.
In support of his argument that the 1974 divorce statutes did not allow a court to order property division for the benefit of children of the marriage, LaBudde cited Vaccaro v. Vaccaro, 67 Wis. 2d 477 (1975), and Estate of Barnes v. Hall, 170 Wis. 2d 1 (Ct. App. 1992).
Divorce judgments in both of those cases included a stipulation that the former husband would maintain a life insurance policy for the benefit of minor children. When the children attempted to enforce the stipulation as a property right after they became adults, the courts determined the provisions were for child support, not a property division for adult children.
The court explained that Vaccaro and Barnes applied the divorce statutes appropriately for cases involving minor children, but that the statutes extend further to reach the situation of Tensfeldt’s children who were adults at the time of the divorce.
“Both Vaccaro and Barnes conclude that because divorce is created by statute, divorce courts had the authority to order only what was allowed for under § 247.26 at that time – division of the estate between the spouses, alimony, and child support,” the court said. “In both cases, the courts chose the interpretation that was expressly provided for in § 247.26.”
To reach the circumstances of Tensfeldt’s stipulation, the court found that § 247.10 of the 1973-74 statutes “explicitly provided for the parties to stipulate to a division of the estate, and for the court to accept the parties’ stipulation and incorporate it into the divorce judgment.” Further, the court said that unlike § 247.26 which speaks only to divisions between the divorcing parties, § 247.10 imposes “no restriction on who can be the beneficiary of the parties’ voluntary stipulation for a division of the estate.”
Accordingly, the court declared that “[t]o the extent that Barnes can be read to imply that a property benefit for adult children cannot be incorporated into a court order, we reject the premise. It is not a complete statement of the law.”
Justice Patience Roggensack disagreed that courts may impose a valid order that it could not make on its own initiative, but does so by incorporation of the parties’ fair and equitable stipulations consistent with public policy.
The subject matter jurisdiction of circuit courts in divorce actions is entirely dependent on legislative authority, Roggensack said. She said the majority “ignores at least 69 years of precedent, which uniformly has concluded that subject matter jurisdiction cannot be conferred on a court by agreement of the parties.”
Section 247.10 of the 1974 statutes did not broaden the scope of property divisions as the majority found, Roggensack continued. Further, the court of appeals had declared in Barnes, shortly before LaBudde drafted Tensfeldt’s will in 1992, that a circuit court cannot order estate planning in a divorce judgment, she said. Thus, that portion of the divorce judgment directing Tensfeldt to will two-thirds of his estate to his adult children was void for lack of jurisdiction and lawfully ignored, she said.
The majority and Roggensack argued whether previous cases demonstrated an incorporated stipulation expanded the reach of a court order. In particular, the justices debated Bliwas v. Bliwas, 47 Wis. 2d 635 (1970), in which the court sanctioned a party for breaching a stipulation. The majority pointed to the Bliwas court’s observation that without the stipulation, “the family court would have been without jurisdiction to enter an order requiring the father to contribute to the education of his son beyond the son’s twenty-first birthday.”
But Roggensack said the stipulation in Bliwas was enforced because Mr. Bliwas had been estopped from arguing against the validity of the agreement after accepting a benefit from it, not because the statutes permitted parties to expand subject matter jurisdiction by their stipulations.
A ‘careless conclusion’
Roggensack warned of repercussions of the majority’s holding.
“The majority opinion’s careless conclusion that a stipulation between the parties can expand the subject matter jurisdiction of a circuit court sitting in divorce is particularly troubling because stipulations continue to be permitted in divorce judgments,” Roggensack wrote. “Therefore, the majority opinion’s conclusion in this case will affect a dramatic sea change in Wisconsin, if the majority truly means to conclude that parties can expand the subject matter jurisdiction of a circuit court by agreement.”
In response, the majority said Roggensack “misconstrues the breadth of our holding” by characterizing it as license for a divorce court to enter any type of stipulation into a divorce judgment. “It is clear that the court had subject matter jurisdiction over division of the estate, and the stipulation at issue here was for a division of the estate,” the court said.
LaBudde argued that an attorney is not liable to third parties for acts committed on behalf of a client in fulfillment of professional obligations, absent fraud or malice. But the court majority said this immunity does not apply to assisting a client with an unlawful act that harms a third party, citing Strid v. Converse, 111 Wis. 2d 418 (1983).
Likewise, the majority found LaBudde could not claim a good faith advice privilege. The court acknowledged that in some circumstances, a lawyer may properly give truthful information or honest advice that leads a client to breach a contract. But in this case, the court said, LaBudde drafted an estate plan to violate a court judgment, not a contract.
In dissent, Roggensack argued that LaBudde drafted the 1992 will with a good faith belief – bolstered by Barnes – that the 1974 stipulation was only a contractual obligation, not an enforceable judgment.
“[I]t is patently unfair of the majority opinion to overrule Barnes which was decided only a few months before LaBudde drafted the 1992 will, and then to declare there was no law on which LaBudde could have raised a good faith belief that he assisted [Tensfeldt] only in a potential breach of contract [rather than violation of a valid court order],” she said.
Roggensack further took issue with the majority’s contention that even if LaBudde believed the judgment exceeded the court’s authority, he was required to follow it, seek its modification, or appeal it. “[T]he law in Wisconsin does not require compliance with a void judgment,” she wrote.
Not liable for negligence
The court held that neither LaBudde nor Haberman were liable for negligence.
Intended beneficiaries who are unable to take under a will because of an attorney’s negligence in preparing the will can sue that lawyer under Auric v. Continental Cas. Co., 111 Wis. 2d 507 (1983). The court explained that if it did not allow these suits, there would be no one to vindicate the deceased client’s expectation of competent representation.
But in this case, the court said Tensfeldt’s children could not show that LaBudde frustrated his client’s clear intent, given Tensfeldt’s explicit instruction not to leave two-thirds of his net estate to them.
Similarly, the court concluded that an Auric negligence claim did not extend to Haberman who neither drafted nor supervised the execution of Tensfeldt’s will.
Alex De Grand is the legal writer for the State Bar of Wisconsin.