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This distinction is the issue in a newly released unpublished case from the Court of Appeals.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.
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.