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Michigan’s New Discovery Rules Part 2

Proceeding or Civil Action

The distinction between a “probate proceeding” versus a “civil action” which happens to be initiated in a probate court, remains unaltered. MCR 5.101.

For the uninitiated, a probate proceeding is initiated by filing a petition. A civil action is initiated by filing a complaint.  Whether and when it is proper to file a civil action in probate court depends on a variety of factors, a discussion of which is outside the scope of this article.  Suffice to say, such instances occur regularly, and experienced probate litigators often file both types of actions in the same matter.  While probate litigators have always needed to be mindful of where they stand in terms of a proceeding or civil action, these rules make that distinction even more critical in the context of conducting discovery.

Proportional Discovery

Technically, there continues to be a difference between the “scope of discovery” available in a probate proceeding vis a vis a civil action. I say “technically” because in practice the distinction is rarely given any significance.

In a probate proceeding, the scope of discovery remains: “limited to matters raised in any petition or objections pending before the court.” Currently found at MCR 5.131(B). As of 1/1/20, to be found at MCR 5.131(B)(3).

The real change comes from the rewrite of MCR 2.302(B)(1) which defines the scope of discovery in civil actions. The shorthand version of that rule has long been: anything not privileged that is “reasonably calculated to lead to the discovery of admissible evidence.”  It now says:

… any non-privileged matter that is relevant to any party’s claims or defenses and proportional to the needs of the case, taking into account all pertinent factors, including whether the burden or expense of the proposed discovery outweighs its  likely benefit,  the complexity of the case, the importance of the issues at stake in the action, the amount in controversy, and the parties’ resources and access to relevant information.   Information within the scope of discovery  need not  be admissible in evidence to be discoverable.

The new rules also provide a process for parties to have a court address whether particular discovery requests are, or are not, justified by the factors laid out above.

This change essentially shifts the burden of proving the necessity or appropriateness of a discovery request from the party (or non-party) receiving it, onto the party issuing it. The practice for many litigators now is to flood the opposing party with extensive requests and let them file a motion for protective order, from which platform they can argue that the requests are overly broad or unduly burdensome.

FOOTNOTE: While one could suggest that these new proportional balance rules are not applicable to discovery in probate proceedings, I believe, as a practical matter, this is not the case. Although the above-cited language comes from the definition of the “scope of discovery” in civil actions, and, as indicated above, the scope of discovery for probate proceedings is separately defined by its own rule, the new probate rules also state that all the discovery rules for civil actions apply to probate proceedings except for the rules regarding required disclosures. MCR 5.131(B)(1). Accordingly, it seems unlikely that a trial judge would entertain the argument that discovery requests in a probate proceedings can continue to operate outside the bounds of proportionate justification that the Supreme Court has seen fit to place on all other forms of discovery.

Michigan’s New Discovery Rules Part 1

Litigation of all types will soon be more complicated and more expensive, probate litigation included. This development comes about because of the extensive revisions to the Michigan Court Rules relating to civil discovery which take effect January 1, 2020.  For those who litigate primarily, these changes will require you to up your game.  For those who litigate less frequently, these changes will invite you to consider whether to stay in the game at all.

It would not be wrong to say that, as a practical matter, the new “required initial disclosure” rules will convert Michigan from a notice pleading state to a something arguably more onerous than code pleading state. At the same time, the availability of discovery tools are being reined in, both by specific limitations on their use, and by a new concepts of proportionality.

I have a lot to say about this topic. I’ve divided my thoughts into five parts (this being the first) and will post these parts over the course of this week. In those five parts I will attempt to provide a broad overview of these new rules, with a focus on the manner in which these rules apply to actions arising in probate courts.

To read the new rules, click here.

If you are especially interested in this topic, I will be leading a discussion on it as part of my annual “Litigation Update” at the ELDRS conference in Crystal Mountain, which takes place October 2-4. Click here for information on the conference, and to register.

I’ve got a feeling

The big news at our firm is that James P. Spica is joining Chalgian and Tripp as of September 1.

The big news in my personal life is that I turned 60 years-old a few weeks back.

Looking for Adventure

Jim is leaving the silk stocking firm of Dickinson Wright, a firm that is well over 100 years-old, and which has more than 400 lawyers; to join what is little more than a startup – albeit a rather successful one, if I do say so myself.

Why would he make such a move? You ask.

I asked.

He said: adventure.

Dang.

I’ve been feeling my age lately, and wondering if the days of tilting at windmills were behind me. Then suddenly a colleague and contemporary shows me the light.  Having Jim join the firm is awesome in so many ways, but on a personal note, his sense of adventure is reinvigorating.

Synergy

Jim is a creative lawyer of the scholarly variety. His love is writing, analyzing, and making new law.  He’s had a hand in every major development in Michigan trust law for more than decade:  our modified rule against perpetuities, decanting statutes, and divided and directed trustees – to name a few.

We are good (very good I think) at mining the unexplored and cutting edge regions of probate law, estate planning, elder law, and special needs.

The idea of combining these two energies, of bringing Jim’s creativity into these new arenas – down to the people, as it were – is beyond exciting.

Of All the Gin Joints in All the World

I’ve known Jim for years. Through our professional activities we’ve shared dinner and conversation more than once. But I didn’t really know or understand Jim until recently.  And now that I do, I’m feeling a bit like Humphrey Bogart at the end of Casablanca; a feeling that this may be the beginning of a beautiful friendship.

Not Making This Up

In a recently released unpublished opinion, a panel of the Michigan Court of Appeals has held that a trust can own real property as a joint tenant with rights of survivorship. Only two members of the panel signed on to the decision, a third dissented.

In the case of Schaaf v Forbes (click on the name to read the case), a deed was created whereby the trustee of a trust was made a joint tenant with other individuals, with rights of survivorship.  The trial court concluded that the deed was invalid because a trust cannot be made a party to such a deed, for the reason that a trust has no measuring life.

On appeal, the COA goes to great lengths to find statutory authority to reverse the trial court’s finding and to conclude that a trust can in fact be a joint tenant on such a deed.  They do not explain how such a deed would operate.

The dissenting judge (very politely) points out that the outcome offered by the majority of the panel is not only a stretch with respect to the statutes they rely upon, but provides a ridiculous outcome. Click here to read the dissent.

Let’s Talk About Medicaid Changes

Chalgian and Tripp will be putting on a series of conversations about recent changes to Medicaid planning rules, including the impact of the Hegadorn decision, the status of SBO Trusts, and the latest considerations regarding homestead treatment and protective orders.

There will be a program in Saginaw (August 20), with the discussion led by David Shaltz and Joe Weiler; and a program in Southfield (August 29), with the discussion led by David Shaltz and Sara Schimke.  A third program is being planned for Jackson, although the date has not been confirmed.  The plan is for David Shaltz and Amy Tripp to lead the conversation in Jackson.

To sign up for the Saginaw program: click here.

To sign up for the Southfield program: click here.

To get on the waiting list for the Jackson program, send an email with your contact information to clouser@mielderlaw.com.

These programs are for lawyers and other professionals involved in Medicaid planning. Seating will be limited. There is no charge. Registration is required.

I hope you will join us.

Drafting Trap Proves Litigator’s Life Line

The Michigan Trust Code provides for a fairly strict statute of limitations to contest the validity of a trust agreement that “was revocable at the settlor’s death.”  Most estate planning lawyers presumably operate on the assumption that this protection applies to the revocable trust agreements they routinely draft for their clients. But as this (unfortunately) unpublished Court of Appeals decision explains, whether or not a trust was revocable at the settlor’s death may depend on what the trust says about the incapacity of the settlor while alive.

MCL 700.7604 says that a trust contest must be started within two years from the date of the death of the settlor, if the trust was revocable when they died. The statute also provides a six month statute of limitations if the trustee provides sufficient notice, the requirements of which notice are defined in the law.  Click here to read MCL 700.7604.

In Linda Dice v Esther G. Bennett Revocable Trust (click on the name to read the case) a trust was contested two years and nine months after the death of the settlor.  The trustee moved for summary disposition based on the statute of limitations for such contests as provided for in MCL 700.7604.  The trial court granted that motion.  But the litigants appealed and the COA reversed.  The decision of the COA exposes a litigation opportunity that I expect few trust drafters or probate litigators have considered.

The Esther G. Bennett Revocable trust agreement included a settlor incapacity provision that said:

In the event two  registered  physicians, one of whom should be the Grantor’s  personal physician,  deliver an instrument  to  the  Successor  Trustee certifying that the Grantor during her lifetime has become incapable of managing her own affairs, the Grantor shall cease to be the Trustee, and the successor trustee shall, upon giving its acceptance of trust, become sole Trustee without requiring action or permission of any nature or kind whatsoever from the Grantor, and shall possess and be subject to those rights, duties and obligations which it would assume if it had been named as the initial trustee hereunder. Until two registered  physicians shall  certify that  Grantor has  again become  capable of managing Grantor’s own affairs, any attempt by Grantor to exercise any reserved rights and powers under this Trust, including but not by way of limitation, the right  of modification,  revocation, amendment, withdrawal or  principal and/or receipt or direction of income, or the sale of principles of this trust estate, or change of beneficiary of any insurance policy subject to this Trust, shall be void and during such period of time this Trust shall be irrevocable and not amendable.

In analyzing this case, he COA notes that the definition of revocability in the MTC is a default definition, and can be overridden by the terms of the trust itself. Here the Court concluded that the facts of this case, and the language of this trust agreement, caused this trust to have become irrevocable upon the settlor’s incapacity and, accordingly, the statute of limitations set forth in MCL 700.7604 did not apply.

Interestingly, in this case, a fact issue remains as to whether the medical reports obtained through discovery were sufficient to meet the requirement that two doctors certified the settlor’s incapacity. But that’s an issue for another day.  For the purposes of this blog post, it is enough to say to our readers who draft trust agreements:  It’s probably a good idea to look at the language you include in your settlor incapacity provisions and consider whether a modification may be warranted.  And to the litigators who handled this case: Bravo.  I doubt that many of your colleagues would have recognized this opportunity or pursued it was well.

Probate Appeals: By the Numbers

If you like statistics, you might find this interesting.

With the assistance of a law clerk, we cataloged every case appealed from a probate court between June 1, 2016 and May 30, 2019 (three years), to see what we could find out.

We came up with 144 cases. For the purposes of this blog post, I decided to ignore 26 of those cases. I ignored some cases because, although they arose from a probate court decision, the issues involved were not traditional probate questions.  That is, they were only tangentially probate cases.  I also decided to disregard the mental health commitment cases.  Although these are probate matters, the issues they raise on appeal are so distinct from the other types of probate cases, that it just seemed helpful to leave them out.

As to the remaining cases, here’s what we found:

Publication

90% of probate cases are unpublished (just 12 published out of 118 cases in three years)

Nature of Dispute

58.4% of the cases appealed involved issues related the administration of a trust or decedent’s estate. This category includes a variety of issues that come up in the context of administration, including, for example: efforts to remove or surcharge a fiduciary, fee disputes, and litigation involving property rights or values.

20.3% involved the validity of a will, trust or other testamentary document.

12.7% were guardianship or conservatorship matters that related to the need for, or the appointment of, a fiduciary.

The remaining 8.5% dealt with administrative issues in guardianship or conservatorship matters.

Outcome

Most cases are affirmed. Of course, just because a trial court decision was not affirmed doesn’t mean the trial court was reversed. A case that was not affirmed may have been reversed, remanded, vacated, affirmed in part and reversed in part, etc.. But rather than try to slice things too finely, I simply calculated the likelihood of complete affirmation.

72% of all cases are affirmed in full on appeal.

The likelihood of affirmation seems to vary somewhat with the type of matter. Among trust and estate administrative matters, the likelihood of affirmation is slightly higher than average: 76%.  For cases involving the validity of a testamentary document, affirmation occurs only about 62.5% of the time.  For guardianship and conservatorship cases, the Court of Appeals affirmed 68% of the cases decided during the three years reviewed.

Conclusions

Only a small percentage of probate cases are published: 10%.

A significant majority of the time, the trial court’s decision is affirmed in whole: 76%.

This post deals only with cases in the Court of Appeals. While a few of these cases were taken up by the Michigan Supreme Court, I did not track those.

Thanks to our awesome clerk, Asma Ali, for her excellent work in compiling information and assisting me with this project.

Published Opinion Clarifies Joint Account Rights

This case was handled by our firm:  Chalgian and Tripp.  We represented the Appellant at trial an in the Court of Appeals.

This case clarifies a heretofore confusing issue involving joint accounts and the rights of joint account owners pre-death.

Most importantly, this case is published.

While many cases address the issue of survivorship rights in joint accounts, this case deals with the question of what happens when one joint account owner removes assets from a joint account before the other account owner dies.

Our client made his accounts joint with a person with whom he had a long relationship, but to whom he was not married. He got sick.  When it was evident that his condition was rapidly depleting his savings, the non-client co-owner went to the bank and removed essentially all the money she could get.

At trial, the non-client co-owner argued that she had the same rights to the money as our client, and therefore that she did nothing wrong by defunding these accounts.  This was her position even though evidence at trial showed that she contributed nothing to the accounts, and that any significant withdrawals from the account had to be made with the approval of our client.

The trial judge accepted their argument, and ruled in favor of the non-client owner largely based on the application of cases related to survivorship rights in joint accounts. We appealed.

The appellate court reverses and remands to the trial court, holding that our client’s claims of conversion were wrongly dismissed, and also that our client’s claims of breach of fiduciary duty and constructive trust may likewise be revived. On remand, the trial court is tasked with determining damages for the conversion.

Click here to read: In Re Estate of Robert G. Lewis.

Thanks to Phil Harter of our office for his excellent research on the issue, and for taking the lead with the appellate brief.

Expressions of Intent: Admissible but Insufficient

Dad holds family meeting before he dies, and says he wants everything to go equally to his six children. He specifically indicates that this includes all assets controlled by beneficiary designation.  His will likewise provides for equal division.  But when he dies, the beneficiary on one IRA is to one of his children, individually.

The other children go to great lengths to show that there were defects in the way the financial institution tracked the paperwork associated with the beneficiary designation on this IRA, which defects, they claim, opens to the door to extrinsic evidence and ambiguity. But their case falls short, particularly because the financial advisor who managed the accounts testified that he had a conversation with the decedent when the account needed to be updated, and the decedent reaffirmed that he wanted to retain the single child as beneficiary.

The case, In re Estate of William Patrick McNeight (click on the name to read the case), offers a good discussion of admissible evidence of intent [hearsay exception 803(3)]; as well as the difference between a contest over a joint account (in which there is merely a presumption of ownership in the survivor) versus a beneficiary designation (which is conclusive subject to being set aside by evidence sufficient to invoke a legal or equitable theory for relief). The case is unpublished.

The trial court decided the case on summary disposition, which was affirmed by a majority of the COA panel. The dissenting COA judge writes that, in light of the amount of paperwork, the number of accounts held by the institution, and the institution’s seemingly imperfect ability to track their own forms, the case should not have been disposed of on summary disposition.  To read the dissent, click here.

A lot of potential litigation matters start with the proposition that: “Our parents always said everything would be divided equally.”  The Appellants in this case did a good job trying to make something of these statements.  But in the end, as with most such matters, that expression simply isn’t enough to overcome a written testamentary document that indicates otherwise.

Judge Jails Trustee/P.R.

A new unpublished case offers a helpful refresher on contempt proceedings in the context of trust and estate administration.

“Vera” was removed as co-trustee and co-personal representative of her mother’s trust and estate. After her removal, the probate Court determined that Vera had deeded herself real property that she was not entitled to receive.  The Court ordered Vera to sign a deed conveying the property back to the trust and threatened incarceration if she did not comply.  In open court, Vera refused to sign the deed as ordered.   But the trial judge did not immediately send Vera to jail for her contempt.   Rather, the Court  issued an order which allowed her time to consider her situation and to “purge the contempt” by signing the deed at a later time.  The Court explained that if she failed to do so, she would be jailed for her contempt at some later date. When that time passed and Vera still refused to comply, the Court issued a recordable order correcting title to the disputed real estate and sent Vera to jail for seven days for contempt.

The Court then ordered Vera to account for her actions as Trustee and P.R. for the period of time prior to her removal. When Vera refused to provide what the Court considered adequate accountings, she was again sent to jail for contempt, this time until she decided to cooperate.

Vera appealed both orders pursuant to which she was jailed.

In this opinion, the COA explains that there are two kinds of contempt. Criminal contempt is imposed for actions which are an affront to the Court, and which occur in the immediate presence of the Court.  The purpose of criminal contempt action is to punish the wrongdoer for disrespecting the Court’s authority.  Civil contempt is imposed for violating a Court’s order and continues until the contemptuous party complies.  The purpose of a civil contempt action is to coerce a person to comply with an order of the Court.

The COA says that the trial Court was wrong when it jailed Vera for not signing the deed. Although the trial Court could have done so as an exercise of its criminal contempt powers when Vera first refused in open court to comply with the Court’s order, by delaying the punishment and giving her the opportunity to remedy the wrong, this became an exercise of civil contempt powers.  That is, the purpose of the order was not to punish Vera for disrespecting the Court’s authority, but rather to coerce her into signing the deed.  However, when the trial Court finally sent Vera to jail for refusing to sign the deed, the Court had already issued its own order invalidating Vera’s wrongful deed, and therefore there was no longer any coercive purpose to the Court’s sentence, the matter having been remedied by alternate means.  As such, this jailing failed to meet the requirements of either a civil or criminal contempt proceeding.

As to jailing Vera for refusing to provide appropriate accountings, the COA says that this was a proper exercise of the trial Court’s civil contempt power.  That jail sentence was designed to coerce Vera to provide information known to her, which she was ordered to produce, and which she had a legal obligation to provide.

So, clients who don’t follow Court orders can go to jail for contempt. Courts must be careful about how these contempt powers are exercised, and must make appropriate distinctions between civil and criminal contempt powers.

The case is called: In Re Estate of Lois C. Washington.  Click on the name to read the opinion.