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This distinction is the issue in a newly released unpublished case from the Court of Appeals.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

The Court of Appeals recently issued an unpublished opinion in three combined appeals all relating to the Estate of Robert Winfield Cederquist (click here to read the opinion).  The case provides a good launching spot from which to review the rules related to sanctions for frivolous pleadings and wasteful litigation in the course of probate matter.

The opinion ominously introduces the case as follows: “The now-decimated estate at the heart of this suit has been the subject of extensive litigation in the probate court…” And the COA goes on to explain that the total value of this estate when the litigation started was about $500,000, while the appellant is seeking to recover legal fees and costs in excess of $600,000.  That’s right – more legal fees than assets in the entire estate – and those are the fees of just one of the parties.

The party that prevailed in the trial court (the appellant) sought to recover the fees they spent on the case by having the trial court determine that this case was frivolous, and therefore that the losing party was obligated by statute to pay their legal fees. The trial court did not award the fees, and the aggrieved party appealed. The COA affirmed the trial court.

Very importantly, the appellant sought sanctions only under the statute (not the court rule, as discussed below) and under only one prong of the statute. The statute is MCL 600.2591(click here to read the entire statute).  This statute mandates that a trial court sanction the losing party (and their attorney) in any case in which the court finds that the action was “frivolous.”  The statute then defines “frivolous” as one of the following:

(i) The party’s primary purpose in initiating the action or asserting the defense was to harass, embarrass, or injure the prevailing party.

(ii) The party had no reasonable basis to believe that the facts underlying that party’s legal position were in fact true.

(iii) The party’s legal position was devoid of arguable legal merit.

This appellant sought relief only under the first of those prongs. The trial court found, and the COA affirmed, that appellant failed to establish that at the time the original pleadings were filed the primary purpose was to harass, embarrass or injure the respondent.

Abusive Discovery. The case includes a discussion of wasteful and excessive discovery in the course of litigation and the relevance of such conduct in determining whether such sanctions apply. My shorthand characterization of their conclusion is that:  While abusive discovery may be evidence of a bad intent, if is not determinative.  Further, the COA looks at the “defense” that a party cannot assert that the discovery was unnecessary (and therefore evidence of a frivolous action) when that party did not move to have the discovery stricken (i.e., seek protective orders) during the course of discovery.  The COA rejects that defense, and says that abusive discovery can be evidence, but that wasteful discovery alone does not mean that the “primary purpose” at the time the case was started was to harass, injure or embarrass.

The Court Rule Option. The COA notes that the case is limited to the issue raised: the application of MCL 600.2591(3)(a)(1); and that appellant did not assert on appeal that the action, when filed, was without any factual basis or legal merit (the other two options available under the statute), nor did appellant pursue sanctions under the court rule, MCR 2.114.

The relevant provisions of MCR 2.114 are:

(C) Signature.

(1) Requirement. Every document of a party represented by an attorney shall be signed by at least one attorney of record. A party who is not represented by an attorney must sign the document.

(2) Failure to Sign. If a document is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the party.

(3) An electronic signature is acceptable provided it complies with MCR 1.109(D).

(D) Effect of Signature. The signature of an attorney or party, whether or not the party is represented by an attorney, constitutes a certification by the signer that

(1) he or she has read the document;

(2) to the best of his or her knowledge, information, and belief formed after reasonable inquiry, the document is well grounded in fact and is warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law; and

(3) the document is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

(E) Sanctions for Violation. If a document is signed in violation of this rule, the court, on the motion of a party or on its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including reasonable attorney fees. The court may not assess punitive damages.

(F) Sanctions for Frivolous Claims and Defenses. In addition to sanctions under this rule, a party pleading a frivolous claim or defense is subject to costs as provided in MCR 2.625(A)(2). The court may not assess punitive damages.

Click here to read MCR 2.114 in its entirety.

As this case demonstrates, it is important to appreciate the differences between the statute and court rule in the context of sanctions. For one thing, while sanctions are mandatory for violation of either the court rule or statute, the mandatory sanctions under the statute are the costs and fees of the prevailing party.  Under the court rule the sanction is “an appropriate sanction” which may include legal fees and costs.  The court rule applies separately to each and every document filed (and signed) with the court.  The statute only applies to the pleading that initiated the case: the initial petition or complaint.

Conclusion

Clients always want to recover their fees in cases they win, or where assertions are made without any reasonable basis in fact or law. Michigan law allows for that result in many of those situations. But what clients think is frivolous or wasteful is much different from how the law defines it. [I have written before about managing client expectations on this point.  Click here to read “I love you but…” ]  What this case helps us understand is that when parties seek to recover costs and fees as sanctions, they must be mindful of the very precise language of the statutes and court rules that apply, and must carefully tailor their pleadings accordingly.

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Show Me the Money

money

There’s a new published probate court case arising out of two matters in Jackson County. The case holds that if you don’t have any money, and even if you are on public benefits, you still have to pay an inventory fee so long as the estate has resources – but maybe not the filing fee. Not that interesting (to me), but it is a published probate opinion, so for what it’s worth, click here to read the case.

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Two Quickies

  1. The End of MCR 5.801(B)

The worst Court Rule ever, which requires some probate matters to be appealed to Circuit Court and some to the Court of Appeals, is about to be fixed. The Michigan House and Senate have passed legislation which would send all final orders of the probate court to the Court of Appeals.   The Governor is expected to sign.

Forever we have had a bizarrely complicated rule which required you to try and figure out what type of order you had, in order to figure out where you could appeal to. Worst of all, final orders appointing a conservator were appealed to the Court of Appeals, whereas final orders regarding the appointment of a guardian were appealed to the Circuit Court.  I, and I am sure many others, have had cases in which both guardianship and conservatorship actions were commenced, after which one action would be appealed to the Court of Appeals and one to the Circuit Court.  It made no sense.

2. California’s Assisted Suicide Law Takes Effect

Today is the day California’s citizens begin to have the right to legal assisted suicide. Until California joined the movement, only Oregon, Vermont and Washington had assisted suicide laws.  Montana allows assisted suicide based on case law.

California is obviously the big dog in this pack. One might speculate that the addition of California changes the dynamics, and may signal the beginning of a trend. How soon before public opinion shifts and we see these laws come to the Midwest? For the record, it has been 26 years since Michigan’s own Dr. Jack Kevorkian made this issue a mainstream topic.

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