Seeing Redd

Here’s another important published opinion on the topic of adult guardianships. The case is about the removal of a guardian of an adult ward appointed under EPIC.

The case deals with the very common, and therefore very important, situation in which a guardian is using its position to undermine healthy family relations. In this case, the facts relied upon by the trial court and the COA are that the existing guardian was actively interfering with visitations, and taking steps to cause the ward to be distrustful of other family members.  These alienation cases go on all the time.  It is helpful to have an opinion that clarifies that such behavior is a basis for removal of a fiduciary.  It is likely that this case will be cited frequently where such facts arise, and I suspect that the finding that such behavior disqualifies a guardian will be offered by extension to cases involving conservators and other fiduciaries.  And that’s good.  We need this law.

So basically the trial court removed a guardian for the reason that he was undermining family relations, and the COA affirms. Click here to read In re Guardianship of Dorothy Redd.

In reaching its decision, the COA holds that the standard for removal is “suitable and willing to serve.” This finding is an important clarification of MCL 700.5310 which is silent on the requirement for removal.

The COA also finds that the standard of proof for removing a guardian for unsuitability is not clear and convincing evidence, but rather a preponderance. Interestingly, in reaching this conclusion the COA indicates that the standard for proving unsuitability in the initial appointment hearing is clear and convincing evidence.  This reading of the priorities in a guardianship proceedings seems inconsistent with the conclusions regarding priorities and unsuitability reached by a separate panel discussing these issues in the context of a conservatorship, as addressed in my other post of today’s date regarding In Re Conservatorship of Rhea Brody.

So, it’s a big day in the world of litigating guardianships and conservatorships. These two published cases (Brody II and Redd) will be cited in the future, each for their own important conclusions of law.  Probate litigation in the age of living to be 100, where the fun never ends.

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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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Attorney-Fiduciary Relationships

A new published circuit court case addresses the often confused issue of who an attorney hired by a fiduciary represents and is accountable to. This is technical stuff, so if you’re not in the mood or you don’t do this type or work, spare yourself and read no further.

In Estate of Tyler Jacob Maki (click on the name to read the case); the Court of Appeals affirms the trial court, and in doing so, holds that an attorney who is hired by a conservator cannot be sued for negligence by a subsequently appointed conservator. This is true because there is no attorney-client relationship between the subsequent conservator and the attorney, and also because the ward is not a third-party beneficiary of the contract between the first conservator and the attorney.

This issue comes up periodically. It is not unimportant.  At times appellate courts generate decisions that feed into the confusion.  However, this Court reaches the conclusion that I think most probate practitioners believe is the right result, and the result intended by MCR 5.117(A).  Presumably, this decision can be extended to cases in which other types of fiduciaries retain lawyers.

A lot more could be said about this issue and this case. I will limit my thoughts to these few additional points:

In a footnote the COA recognizes the apparent injustice in the result – the result being that if a person who is under the protection of the court has a fiduciary, and that vulnerable person is injured as a result of the bad acts of their court-appointed fiduciary, and that harm could have been avoided if the lawyer representing the fiduciary (and being paid by the ward) had taken steps to protect the ward, a subsequent fiduciary appointed to clean up the mess can’t seek recovery from the lawyer even if they could show that the lawyer’s conduct was negligent. The COA says, that may not be good public policy, but public policy is not their job.  Take it up with the legislature.

Second point, the COA glosses over the fact that the conservator, who stole money from the ward, was apparently not sufficiently bonded. I don’t know the facts and there is very little in the opinion to go on.  But when you read this opinion you can’t help but wonder: How did this ever turn into a malpractice action against the lawyer? Or, said another way: Why didn’t the bonding company make the ward whole?  As best I can make out from the opinion, the reason that the conservator was apparently not sufficiently bonded is because the lawyer didn’t report the money from a personal injury settlement paid to the ward on the inventory or accountings because the lawyer, knowing that the settlement was subject to a confidentiality provision, didn’t think he had to.  Well, if that is what happened, there’s something very wrong with this picture.  Clearly the Trial Court would have been informed of the settlement, and clearly there are ways to set a sufficient bond without putting the amount of the settlement in the record.

Finally, in its decision, this Court spends time distinguishing between “standing” and the “real party in interest” rule which, for litigators, may be worth a read.

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Medical Experts Carry Conservatorship Case

medical expert

Nice analysis in this recent unpublished COA opinion. Click here to read In Re Conservatorship of Stephen Michalak.  Congrats to my colleague Valerie Kutz-Otway for her successful advocacy on behalf of her client, Mr. Michalak.

The case suggests an issue that I think we all struggle with at times, the extent to which the determination of capacity is a legal or medical matter. While the correct answer is clearly – it’s a legal determination made by the probate judge – as the analysis suggests, the line is fuzzy at best.  Courts often rely extensively on medical opinions to make their findings, and the use of medical experts is becoming more and more important in our practices.  This opinion only bolsters the proposition that medical opinions carry a lot of weight – especially, where, as in this case, they remain uncontroverted by offsetting medical proofs.

It is worth note that in this case that the COA does not order that the conservatorship be terminated, but only remands the matter and instructs the trial judge to consider a less restrictive arrangement, which could be a limited conservatorship or, although not suggested by the COA, perhaps the execution of a new power of attorney by Mr. Michalak appointing someone other than the petitioner-child.

This case relies heavily on the Bittner decision, discussed in a prior post (click here to read about Bittner) and displays some of the same dynamics – probate judges seeing problems with vulnerable adults and moving to put the matter under their watch so as avoid further mischief – an understandable and somewhat noble sentiment.  But the COA here, as in Bittner, pushes back against this inclination; reminding us once again that the balance of dignity and independence against safety and convenience remains the tricky sticky wicket at the heart of our common efforts.  For more on my thoughts on “the balance” click here.

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Bittner’s Bite

So we have a new published opinion on a probate court case – something unusual these days.  In Re Conservatorship of Shirley Bittner was published September 8, 2015.  Click here to read the case.

In Bittner, the probate court imposed a conservatorship over the vulnerable adult, and did so over what the Court of Appeals calls her “strenuous objections.”

The subject of the petition was Shirley Bittner.  The petition was brought by her daughter Suzanne.  Shirley was a 74 year-old widow.

Suzanne had been granted power of attorney over Shirley by Shirley, and had been made co-trustee of Shirley’s trust; that is until Shirley concluded that Suzanne had misused those powers for her own benefit.  At that time Shirley petitioned the Court to recover the property she believed had been misappropriated by Suzanne.  Suzanne countered with a Petition to have a third party (public fiduciary) appointed as Shirley’s conservator.  Meanwhile Shirley appointed a second daughter, Stacey, as her agent under a new power of attorney.

The probate court took evidence and appointed Stacey (the new agent under power of attorney) as conservator.

Appointment of a conservator is a two-prong test.

1. Is the person unable to make their own decisions (are they sufficiently impaired to invoke the Court’s jurisdiction to take away their rights)?; and

2. If the Court does not act, will this person’s resources be mismanaged?

Both prongs must be met to impose a conservatorship over an adult.

The Court of Appeals reviewed the decision of the trial court and reversed.

As to the first prong, the Court of Appeals found that the evidence was marginal.  Shirley clearly had some impairments, but it was not so clear that those impairments rose to the level necessary to impose a conservatorship over her.

As to the second prong, the Court of Appeals found no evidence that anything was being mismanaged, at least now that Stacey was acting has power of attorney.

The case is important, as it fires a shot across the bow of the trial courts that are routinely imposing conservatorships over older adults.  And importantly, by analogy, the case will serve the same purpose with respect to the imposition of guardianships.

But nothing is simple in terms of this area of the law.  As to the law, there is no question that the Court of Appeals is right on.  No doubt courts are way too quick to impose guardianships and conservatorships without sufficient legal basis.  That said, it is also true that there is a great deal of mischief in the world of vulnerable adults.  Once one child is taking advantage of mom, one wonders whether the next child is likely to do so and/or whether in time mom will be persuaded to create yet another power of attorney appointing the daughter who allegedly misappropriated assets, or yet another child who may or may not be acting in mom’s best interests.  Mom is vulnerable – that’s the point.  So, left unchecked, these cases can go on and on.  Where there is money and family dysfunction, there is a high likelihood of further issues.  I would suggests that there is something to be said for probate judges who have seen enough of these cases to want to simply grab control, create a conservatorship, and thereby put themselves in the position of monitoring what goes on in the future; and by doing so, shut the door to future mischief.

Accordingly, I appreciate the Court of Appeals upholding the rules.  I greatly respect my many colleagues who recognize that taking away the rights of an adult should only be done as a last resort.  But I worry about law that makes trial judges less willing to step in and grab control when it is clear that the mayhem has begun.

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