Prolonged Fees Fight Offers Lessons and Concerns

Cases about legal fees are always curious, and who pays whose legal fees is almost always an issue in probate litigation.  This new unpublished Court of Appeals opinion is the second appeal in the same matter.  The facts are complicated and somewhat hard to follow – but for those of us who handle these issues, I think the case is sufficiently interesting to make the exercise worthwhile.

Click here to read: In Re Estate of Charlotte Westman.

Basically it seems an attorney was appointed PR of his mother’s estate. He hired a large metro-Detroit firm to represent him as PR. In that capacity he was involved in extensive litigation.  As a result of the litigation the trial court found that over $100,000 of legal fees charged to the estate did not benefit the estate and that he was personally responsible for those fees.  The law firm he hired then brought an action against him to have their fees secured against his share of his mother’s trust.  He contested that action – but lost in the trial court. In the first appeal, the COA held that the law firm could not secure their fees against the trust because they only represented him in the estate, but that the client/son could potentially be sanctioned for the pleadings he filed without representation in which he opposed the law firm’s efforts to collect.  That issue was remanded. On remand, the trial court decided that he would be sanctioned and coincidentally that the amount of the sanction would be the same amount as the law firm’s claim – $20,000+.   So, to be clear, a law firm that represented a former PR was able to file an action in the estate proceeding to recover legal fees it incurred in its own efforts to secure fees from a former client, and even though the law firm was unsuccessful in its efforts to obtain that secured position, the probate court could nonetheless require the former client to pay the law firm for its costs based on sanctions imposed under MCR 2.114, leaving the former client still responsible for the $100,000+ obligation incurred by him while PR, and an additional $20,000+ imposed upon him as a sanction.  This sanction is the subject of this second COA decision.

The client makes a number of seemingly reasonable arguments as to why this process and outcome may not be appropriate under Michigan law. Among other things, the client argues that:

  • He engaged the firm as PR and did not contractually agree to be personally responsible for the disallowed fees.
  • This is basically an action in contract between himself and the law firm, which law firm is not an interested party or creditor in the estate proceeding, and therefore is using an improper forum.
  • That, even if this were a proper forum, the fact that he was not allowed to engage in discovery to defend himself would make the trial court’s decision void.

None of these arguments prevail and the COA affirms the decision of the trial court.

The legal analysis and conclusions of the COA are far more detailed than I have time or inclination to present.  Sure, the law firm is entitled to be paid.  And I understand (and often appreciate) that trial courts tend to do what they can to make sure that the lawyers who advocate in front of them get paid. But, I have to say that I am left with the feeling that if I wasn’t a lawyer, I might think the system was rigged.

 

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Civil Actions versus Proceedings in Probate Court

When starting a new litigation matter in probate court, a threshold issue is to determine whether the matter should be characterized as a probate “proceeding” or a “civil action.” There are significant differences between the two, including what court or courts it can be filed in; and what type of pleading, a petition or a summons and complaint, must be prepared.

Generally, a claim against a third party filed by a Trustee or Conservator would be a civil action; whereas things like surcharging a fiduciary, construing or modifying a trust, or seeking to invalidate a will or trust, would be a proceeding. The primary source distinguishing between the two is MCR 5.101.

This distinction is the issue in a newly released unpublished case from the Court of Appeals. In this case, a seasoned Oakland County public fiduciary, John Yun, was appointed conservator over the estate of a demented person who had apparently been exploited by a Mr. Hartman.  The conservator filed a petition for surcharge seeking recovery of assets that Hartman allegedly converted to himself before the conservatorship was created.  Mr. Yun followed the requirements of notice for a proceeding by mailing a copy of the petition and notice of hearing to Hartman.  Hartman did not show up for the hearing, and the trial court entered an order finding that he was liable for nearly $200,000.  Mr. Yun then brought a motion to have the order converted to a judgment.  Hartman objected, claiming that the process by which the order against him had been entered was defective as it should have been filed as a civil action and not a proceeding; and accordingly that he should have been served with a summons and complaint and not a petition.

Click here to read In Re Doreen Seklar.

In its opinion, the COA reviews the distinctions between a proceeding and civil action and concludes that the probate court was correct in allowing the order to enter through the proceedings process. In reaching this conclusion the COA relies on the proposition that Hartman was a “fiduciary.”  In fact, the protected person had created a power of attorney appointing Hartman as her agent, and a revocable trust nominating Hartman as successor Trustee.  These documents were all set aside by the probate court in its initial hearing.  But what troubles me about the case is that the COA holds that a person nominated as a successor trustee is a fiduciary for purposes of MCR 5.101.  It says:

Further, Hartman meets the definition of a fiduciary. First, the March 14, 2014, revocable trust named Hartman a successor trustee.

That seems like a stretch. And while I appreciate expediency, I worry that such rationale could be applied in similar and dissimilar situations with unanticipated outcomes.  While in this case, Hartman no doubt was aware of his nomination as a successor Trustee, apparently having had a large role in obtaining the estate planning documents, people are frequently nominated to such roles without ever being advised.  It seems potentially problematic to me to have a case that holds that a person who never accepted or acted in a nominated fiduciary role is a fiduciary for the purposes of being subject to a probate proceeding.

I am certainly not challenging Mr. Yun’s approach. He is highly experienced in this type of work, and he got the job done and did so very efficiently.  However, another approach to this case could have been to have the probate court order Hartman to account, and/or to simply have sued Hartman for conversion, fraud and other civil causes of action by filing a summons and complaint.

In any event this case highlights an issue that comes up regularly in probate litigation matters. For those interested in the topic, it’s worth a read.

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Back from the UP, Reading Ford

I guess this post is about Michigan. It should be a Sunday post – but I’m on vacation so:

Like most native Michiganders, I love the U.P. and thanks to Susan Wideman and Paul Sturgul for allowing me to present to the Elder Law for Yoopers Program this past weekend.   There’s just something about crossing the bridge – maybe it is too much to compare it to Mecca, but certainly for Michiganders, it is good for the spirit to get up there once every few years.

My wife, Susan (pictured above on the Lake Superior shore), is reading to me – a fine biography of Henry Ford, which we continued while in Marquette. We’re almost done.

In my nearly sixty years, I have experienced much good and bad in our great State. I remember the riots.  I remember the invasion of Japanese cars.  I have witnessed the decline of the high quality of life that working class people once enjoyed here.  But what remains, what endures about our State, is no small thing.  How can you stand on the shores of Lake Superior and not feel a sense of pride and awe?

I accept that Michigan is a place of decline, at least as defined by political prominence and financial strength. I appreciate the Detroit comeback mantra – but have heard that mantra all my life – yet as I drive downtown I see that the houses along the Lodge remain burned out and abandoned. Perhaps that will change some day.  I hope so.

I think of the process in terms of Henry Ford. He was born here.  And because of that simple fact, Michigan became the center of the greatest industry of that age.  The age of transportation and consumerism were both triggered by his ingenuity – and he knew exactly what he was doing.  Amazing.  We have lived on his vision for 100 years, and now we survive on the last few trickles of his blood.  We are winding down.  I think that when Henry Ford was the most well-known person in America, and Detroit was the center of the new age, there were people in far flung places who looked on with envy – and people in far flung places who looked on with “meh – let them have it.”

We have had as a speaker at several probate institutes, Michael Giflix, a founding member of the NAELA (the National Association of Elder Law Attorneys) who remains a leading light in probate and elder law. He practices in Palo Alto, but he is a native Michigander.  It is always nice to see Michael enjoy Michigan when he comes to visit.  He talks about his office, down the street from the Google headquarters, and around the corner from Apple’s.  That is the center of the new age industry.  Steve Jobs and Bill Gates were born there.  A small part of me thinks it would be fun to be there in this time, but standing on the shores of Lake Superior my first instinct is reinforced: “meh – let them have it.”

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MSC Takes Its Shot at Estate Recovery

The Michigan Supreme Court has released an opinion in four combined cases all involving Michigan’s Medicaid Estate Recovery Program.  As we’ve learned from prior posts, the Michigan Court of Appeals has not been a friendly environment for Medicaid long term care planning (see for instance the “Bloody Thursday” from just a few weeks ago).  Well it turns out the Supremes are even less welcoming.

In their opinion the Michigan Supreme Court concludes the Court of Appeals was too generous in calculating the start date for estate recovery. They hold DHHS can go back to July. 2010.  The Supremes reject all constitutional arguments or considerations, and address the “house of modest value” issue by vacating those portions of the Appeal’s Courts decisions that discuss it.

Click here to read In Re Rasmer Estate, Gorney Estate, French Estate and Kethcum Estate.

Appreciation for all who have worked so hard on this issue. It appears however that the time has come to let it go.

 

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