I dissent.
This case comes to us after resolution at the pleading stage. We must, therefore, assume all the allegations of the complaint can be established if plaintiffs are given their day in court. The majority erroneously deny them that opportunity.
Our problem is to decide whether negligent advice by an attorney to his client regarding the effect of a transaction contemplated by the client can be the basis for a cause of action by a third person who, foreseeably, has been damaged in the transaction.
Until relatively recent times, the absence of privity of contract precluded a person other than a client from recovering for the professional negligence of an attorney or an accountant. (See, e.g., Nat. Savings Bank v. Ward (1880) 100 U.S. 195 [25 L.Ed. 621].) The rationale underlying this rule can be traced to an opinion by Judge Cardozo in Ultramares Corporation v. Touche (1931) 255 N.Y. 170 [174 N.E. 441, 74 A.L.R. 1139] which involved the liability of a firm of accountants to a creditor who had extended credit to a corporation in reliance on a balance sheet of the corporation prepared by the defendant indicating that the corporation had substantial assets. The defendant knew that the document would be exhibited to potential creditors to establish the financial status of the corporation. Nevertheless, the court refused to hold the defendant liable on a negligence theory to a creditor who had relied upon the audit to his damage. Judge Cardozo, observing that the “assault upon the citadel of privity is proceeding these days apace" reasoned that if liability for negligence to one not in privity exists under these circumstances “a thoughtless slip or blunder . . . may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class. The hazards of a business conducted on these terms are so extreme as to enkindle doubt whether a flaw may not exist in the implication of a duty that exposes to these consequences.” (174 N.E. at pp. 444-445.)
*351Since Ultramares there has been a steady erosion of the privity requirement in malpractice actions, and California has been in the forefront of jurisdictions extending the scope of professional liability to third persons. In a series of decisions this court has established that, despite the absence of privity, negligence in drafting or attestation of a will may render a defendant liable to the intended beneficiary who failed to receive a share of the estate in accordance with the testator’s wishes. In Biakanja v. Irving (1958) 49 Cal.2d 647 [320 P.2d 16, 65 A.L.R.2d 1358], the intended beneficiary of a will which was denied probate because it was not properly attested was allowed to recover damages from a notary public whose negligence caused the will to fail. Likewise, in Lucas v. Hamm (1961) 56 Cal.2d 583 [15 Cal.Rptr. 821, 364 P.2d 685], and Heyer v. Flaig (1969) 70 Cal.2d 223 [74 Cal.Rptr. 225, 449 P.2d 161], it was held that an attorney who negligently drafted a will may be liable to a person who had not received the share of the estate to which he would have been entitled if the will had been drafted in accordance with the testator’s intention. In Hever the concept of privity as a bar to the maintenance of an action in these circumstances was abandoned altogether, and it was held that the defendant was liable not because he had breached a contract with the testator but because he breached a duty owed directly to the injured party, i.e.,-that liability was based on tort rather than on a contractual theory.
These decisions establish that the determination whether a duty was owed to a third party is a question of policy involving the balancing of various factors, including the extent to which the transaction was intended to affect the plaintiff, the degree of certainty that he suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm. An additional element to be considered if the defendant is an attorney is whether the recognition of liability would impose an undue burden on the essential functions of the legal profession.1
Defendant contends that Biakanja and its progeny are distinguishable because in those cases the purpose of the attorney’s employment by the testator was to benefit the heirs, whereas here plaintiffs were not the intended beneficiaries of defendant’s advice, which was given solely for the benefit of his clients. (See National Auto. Cas. Ins. Co. v. Atkins *352(1975) 45 Cal.App.3d 562, 565 [119 Cal.Rptr. 618].) Manifestly a duty to a third party can be more readily found in a situation in which the object of the attorney’s employment is the benefit of the third party; there the connection between the attorney’s negligence and the injury is evident. But it does not necessarily follow that the absence of direct service to or an intent to benefit the third party precludes liability. Rather, whether a duty is to be implied turns upon a balancing of the factors described in the Biakanja line of cases.
I turn, then, to the Biakanja factors. Defendant contends that his advice to his client was not intended to affect plaintiffs because at the time the advice was rendered plaintiffs had no connection with the corporation. While it is true that when defendant rendered his advice he was not certain the corporation would issue the additional shares and, of course, could not know the identity of prospective purchasers, there can be no doubt he knew that if his advice was followed those who purchased the stock would be affected thereby. The mere fact that he did not know their identity cannot be decisive. Nor is there any question that it was reasonably foreseeable if the advice was incorrect the purchasers of the stock would be injured.
The complaint leaves something to be desired in specifying the relationship between defendant’s negligence and the injury suffered by plaintiffs, but liberally construed, it can be read to allege that the corporation issued the additional shares as the result of defendant’s advice,2 which in turn caused the commission to suspend the Regulation A exemption, resulting in impairment of the value of the stock and the inability of plaintiffs to sell their shares. If we accept the allegations of the complaint as true, as we must, it is clear that plaintiffs suffered injury, for it is alleged that as a result, of the actions of the commission they were unable to sell their shares and the value of the stock declined.
Finally, the policy of preventing future harm and making injured parties whole weighs in plaintiffs’ favor. In the Biakanja line of cases, imposing liability on the defendant was justified because the intended ' beneficiary had no right of action against the estate, and his sole recourse was against the person who had drafted the will. Here, plaintiffs cannot *353recover against the corporation or Soma and Spencer3 the amount they paid for the securities, and'their only recourse is against defendant. Even if the corporation and its officers could recoup through a cause of action for malpractice against defendant, it is doubtful that their damages would include the amount plaintiffs paid for the stock, for the corporation received and used those funds.
In the light of the factors discussed above, I conclude that defendant should be held to owe a duty to plaintiffs. I disagree with the majority’s conclusion that the imposition of liability in this case will result in an undue burden upon the legal profession. The contention is not persuasive that the right to recover for malpractice must be limited to the client on a theory that “if we go one step beyond that, there is no reason why we should not go fifty.” (Nat. Savings Bank v. Ward, supra, 100 U.S. at p. 203 [25 L.Ed. at p. 624].) Attorneys are not provided the insulation of mere agents. As the Supreme Court has said many times, they “are officers of the law, as well as the agents by whom they are employed.” (Baker v. Humphrey (1880) 101 U.S. 494, 502 [25 L.Ed. 1065, 1068].)
In this case the class of persons certain to be damaged by the attorney’s negligent advice to his client was reasonably foreseeable and the damage was an inexorably direct consequence of the negligent act. Thus, the imposition of a duty toward the third party will not have the result that “assumption of one relation will mean the involuntary assumption of a series of new relations, inescapably hooked together.” (H. R. Moch Co. v. Rensselaer Water Co. (1928) 247 N.Y. 160 [159 N.E. 896, 899].)
No doubt gross extensions of liability, although involving similar conduct and results, can be conjured up: e.g., liability to the creditors of the insolvent corporation or to the children of stockholders deprived of their college tuition by the impoverishment of their parents. However recovery under such fanciful circumstances could be denied for remoteness. Furthermore, the liability of the attorney to third parties should be limited to cases in which, like the matter. before us and the Biakanja circumstances, the only recourse of the injured party is to pursue the negligent attorney.
*354The refusal to impose a duty on the attorney in these circumstances unfairly penalizes innocent persons whose injury was the foreseeable result of the attorney’s negligence. In this state we have laid to rest the strictures of the compulsory privity doctrine in malpractice actions by holding that the defendant’s liability is based upon tort rather than contract. It would appear to be a rational corollary and a logical consequence of that determination to hold that an attorney who negligently advises his client to enter into a transaction which will inevitably harm another may.be liable to the person injured.
The majority is correct as to the causes of action for fraud and violation of the California Corporations Code. However I would reverse the judgment as to the causes of action for negligence.
Tobriner, J., concurred.
On that subject the pithy comment in Coberty v. Superior Court (1965) 231 Cal.App.2d 685. 689 [42 Cal.Rptr. 64], is relevant: “a lawyer may not gain business as a specialist and defend mistakes as a layman.”
The complaint does not expressly allege that the corporation issued the additional shares as the result of Kennedy’s advice, but such an averment may be implied from the facts alleged. (Code Civ. Proc., § 452.)
It is alleged that Soma and Spencer are insolvent. Although the insolvency of the corporation is not directly alleged, a corporation whose stock is without any value is obviously not in a position to respond in damages.