Only those persons who qualify under the normal rules for determining third party beneficiaries will be afforded the privileged status vis a vis attorney defendants. This would seem to limit the extension to actions based upon contract, to which the third party beneficiary theory is peculiarly applicable, and would not supply a basis for permitting third parties to sue attorneys on a pure negligence theory -- violation of some general duty arising in the absence of an underlying contractual attorney-client relationship.
Appellants were high bidders at a foreclosure sale, but the sale was set aside twice because appellee attorneys conducting the sale failed to follow proper procedures and ultimately the debtor successfully redeemed the foreclosed property, which deprived the appellants profits on its resale. Appellants sued the attorneys for their neglect to conduct the sale properly and carefully. The trial court, on the attorneys’ demurrer, dismissed the suit.
Did the attorneys of the mortgagee owe a duty of care to bidders at a sale of the mortgaged property?
The appellees did not owe a duty of care to appellants since the appellees represented the mortgagee. Due to the conflicting interests of the appellants and the mortgagee, it would have been illegal to presume or infer the appellants were third-party beneficiaries of the appellee attorneys' undertaking to represent the mortgagee, or that a duty of care was owed to the appellants.