I mentioned this article in a prior post. Something I wrote that was published in this month’s Michigan Bar Journal. If you haven’t seen it, and want to read it, click here: Best Practices for Family Exploitation Cases.
In Re Margaret Krum Trust is an unpublished decision of the Court of Appeals dealing with undue influence. [Click on the name to read the case.] This is a case that was handled by our firm. We represented the appellee.
Two sisters were cut out of their mother’s trust, and contested the validity of the document when their mother died. They originally pled undue influence and lack of capacity, but withdrew the incapacity claim after discovery was complete. Our client, the Trustee, brought a motion for summary disposition on the remaining claim of undue influence, and prevailed. The appeal was from that order.
In affirming the trial court, the COA addresses two points worth noting:
First, the COA says that the existence of a financial power of attorney nominating the alleged undue influencer as agent is sufficient to establish the element of a fiduciary relationship for the purpose of giving rise to the presumption of undue influence, even when there is no evidence that the nominated agent ever exercised any authority under the document.
Second, the COA holds that summary disposition can be granted in an undue influence case even when the presumption of undue influence has been established. This appears to be an accurate statement of the law, even though other panels of the COA have, at times, held otherwise.
If you read the case you will note that the COA deals with the issue of after discovered evidence in the context of a motion for reconsideration. Kind of an interesting twist in this case, if you’re looking for more.
And if you read the case you also learn that the scrivener of the contested document was our friend and colleague Danielle Streed. Thanks for your help in this matter Danielle.
Finally, our own Drummond Black did all the heavy lifting on the MSD and COA briefs. Thanks D. You’re the best!
Relish the moment because this is as exciting as probate law gets.
We’ve written about the case before (See: This is Awkward). Attorney prepares an estate plan (will and trust) for non-relative, leaving millions to said attorney and attorney’s family.
Trial court says: An attorney can’t do that under the rules of professional conduct, and therefore the estate plan is void – on summary disposition.
Court of Appeals reverses the trial court. COA says: While the lawyer may face discipline for the ethics violation, the validity of the trust is not implicated by the ethics rule. That decision was 2 to 1.
Now, the Michigan Supreme Court reviews the Court of Appeals, and it’s a 3 to 3 tie [The 7th Justice abstains because he was on the COA panel that decided it – and was one of the two votes on the prevailing side.] Apparently a tie means the COA decision is affirmed.
So the issue is whether a violation of the MRPC rule 1.8(c) (which precludes an attorney from creating estate plans for non-relatives in which they receive a substantial benefit) has any role in a trial contesting the validity of the estate plan? The answer is “no, it does not.” While everyone agrees that the attorney is a fiduciary and that, as such, the presumption of undue influence is in play, the prevailing opinion is that the ethics violation, in and of itself, is not a factor in the case.
It’s a Long Decision
As indicated, there are two opinions, each with 3 signatories. In all it’s 53 pages long. Click here to read the case.
The three who vote to affirm the COA ultimately conclude that it’s not their role to change the law of undue influence to enforce ethical obligations of the bar. The other three see this as an opportunity to do just that. Their approach would be to treat a violation of the ethics rule as giving rise to an per se finding of undue influence. They assert that the law needs to catch up with changes that have taken place since the last time the MSC reviewed this question more than 50 years ago, which changes included the adoption of MRPC 1.8(c).
Each opinion includes a lengthy discussion of undue influence and the presumption. It at least attempts to clarify some of the confusion that exists about the presumption and particularly about how it is rebutted. This case will no doubt be quoted in litigation going forward. So if you do this kind of work, you need to read this case.
They’re Making My Point
The Supremes don’t know it, and likely won’t revisit this issue in my lifetime, but their decision demonstrates the point I was trying to make in my recent post: The Imperfect Bandage of Undue Influence (click on name to read it). My point is that: Undue influence isn’t cutting it.
In both opinions, but especially the opinion of the non-prevailing Justices, the Justices seem uncomfortable with how difficult it is to prove undue influence and how easy it is for the presumption to be rebutted. For me though, their distress is too narrowly focused. Even the side that would change the law to prevent this result in this case, would only do so in situations where a lawyer is involved. From my perspective, it is just as suspicious when a benefiting child or housekeeper prepares the will, deed, beneficiary designation, etc..
So, in conclusion, the MSC has spoken. It’s a long opinion and long awaited by many in the probate community. The facts of the case and the evenly divided court add a dash of drama. Required reading for probate geeks.
In the recently unpublished Court of Appeals case of Rebecca L. Clemence Revocable Trust (click on name to read the case), the trial judge essentially granted summary disposition in a trust contest case, without summary disposition even having been requested. In doing so, the trial judge expressed frustration that the matter had continued for so long and that, in the judge’s opinion, inadequate evidence of wrongdoing had been discovered.
The Court of Appeals reversed and remanded.
What I find helpful about the case is the COA’s discussion of lay witness testimony as evidence regarding incapacity. We have discussed before the growing inclination of court’s to look for medical evidence as the last word on incapacity and vulnerability. One of the challenges of handling capacity and undue influence cases is that very few people happened to have medical evaluations done contemporaneously with the event in question.
The portion of this case which I will keep in my notes, provides authority for the proposition that the observations of lay witnesses are admissible evidence of incapacity and, if sufficient, can preclude summary disposition. Specifically, this portion of the opinion is on point:
Certainly it would be easier to prove whether Rebecca possessed testamentary capacity or was vulnerable to undue influence if the probate court could review medical records contemporaneous with her estate plan amendment. But such records are not the only method of proof. A lay witness may place his or her opinions into evidence as long as they “are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue.” MRE 701. And our Supreme Court has specifically found lay opinion testimony admissible to establish a decedent’s testamentary capacity. See In re Moxon’s Estate, 234 Mich 170, 173-173; 207 NW 924 (1926) (holding that a lay witness “who [has] had the opportunity to observe and talk to [the decedent]” may form “impressions” of the decedent’s testamentary capacity and may cite examples for the factfinder’s consideration);
Proving that an older person suffered from cognitive impairments at that time they executed a document being contested is central to nearly every will and trust contest or case of financial exploitation. Lack of Capacity and Undue Influence remain the most common theories of probate and elder law litigation. These are often fact-rich cases and discovery is frequently extensive. Trial judges may have limited patience and are under pressure to close cases expeditiously. Many trial judges also have a strong inclination to require medical evidence in cases where cognitive impairment is a factor, but such evidence is not always available. As a result, introducing lay testimony to establish cognitive decline is necessary, and often the best evidence available. In those cases, it is not unusual when presenting such lay witnesses, for the opposing counsel to assert that the lay witness has no medical training and therefore their testimony should not be allowed. This case supports the proposition that such objections should not prevail. Lay people can observe behavior in older adults that suggests impairment, and those observations can be admitted and relied upon by a fact-finder.
The topic of this post is: How to gather information at an initial meeting with clients seeking representation in an undue influence case, from a lawyer’s perspective.
Start with the proposition that nearly all will and trust contests, and many financial exploitation cases, are, at their core, undue influence cases. Lack of capacity is commonly pled, but in all but a few cases, the real issue is undue influence. Essentially, the case comes down to a story about someone persuading a vulnerable adult to sign something that accrued a benefit to that person, and caused a harm to someone else (the prospective client). The document that got signed could be a will, a trust amendment, a deed, a life insurance beneficiary designation, or any number of other documents of that type.
I spend a lot of time talking to potential clients about these types of cases, but only agree to take a few. As we say in the office, we kiss a lot of frogs to find a few princes. The goal is not to get bogged down with cases that are uneconomical, unwinnable, or both. While no simple formula controls the decision to accept or forego a case, what follows is my list of the things that seem most important to me in deciding whether a prospective undue influence case seems worthwhile.
- Who prepared the document? Was it prepared by an attorney?
- If not, who did? Who witnessed it? Where did this take place?
- If prepared by an attorney, who made the appointment and how did the person who signed the documents get there? Who went with them? Who was in the room when the document was signed? Was there a prior relationship between this attorney and the benefactor?
- Skill level and reputation of that lawyer.
- What are the relationships of the parties and interests involved?
- Second marriages.
- Caregiver child.
- Favoritism between siblings.
- Is there a history of financial dependence?
- Is there a pattern of alienation from family and friends?
- Where did the vulnerable person live, and who lived with them?
- Physical dependence.
- Was the person who made the change housebound?
- Could they drive? If not, who drove them?
- Was there a fiduciary relationship between the vulnerable adult and the benefactor?
- Was the person who signed the documents experiencing age-related cognitive impairments: dementia, paranoia, depression. Are contemporaneous medical records available and what would they say?
- Non-age related personality traits. Was someone involved overly controlling, manipulative, narcissistic?
- How long ago did this occur? If it did not occur recently, did it just come to light? If not, why wasn’t something done sooner?
- How much money are we talking about?
- What are the respective financial positions of the parties? Can one party simply wear out the other party on legal fees?
- What witnesses who have nothing to gain or lose by the outcome of the case are available? And what will they say?
- History of relationships of people involved. Does it make sense in the big picture that this person or these people are favored?
- Drug and alcohol use and history of person who made the change and people who benefited or were harmed?
- Credibility. How do the potential clients appear? Is the way they present consistent with a wronged individual, or an individual seeking simply to upset something they knew was coming?
- What county? What judge?
Undertaking litigation of any type, and undue influence cases in particular, involves a substantial commitment of time and resources. These cases are never easy. The initial interview is a delicate thing. Clients deserve to be heard, and the attorney needs to be able to guide and educate the client on the value of their case – the likelihood of success, the prospects of a favorable settlement, and the costs (emotional and financial) of pursuing the action. At the same time, the attorney needs to be efficient in obtaining enough information to be able to assess whether the matter is one that makes sense for the lawyer and the firm. The outline above is designed to accomplish both objectives, and to help the attorney making this decision to distinguish between the frogs and the princes.
To read other posts in this series, click below:
In Re Benedetti Estate and Trust is a recent unpublished opinion from the Court of Appeals, so take it for what it’s worth. (Click on the case name to read the case.)
The opinion offers an extensive discussion of a key issue in will and trust litigation, specifically the nature of the relationship that must exist to give rise to a “fiduciary relationship” sufficient to meet the requirements for a presumption of undue influence.
Background: Most contests of this type involve the allegation that the contested document was a product of undue influence. The standard of proving undue influence is very high. One way to overcome that burden (or at least, overcome summary disposition on the issue of undue influence) is to establish three elements that give rise to a presumption of undue influence. Those elements are: (1) That there was a fiduciary relationship between the person who executed the document and the person who is alleged to have exercised undue influence; (2) That the person alleged to have exercised undue influence had an opportunity to do so, and (3) That the person alleged to have exercised undue influence benefited from the document.
This case discusses the first element.
It has been held that the existence of a formal agency (i.e., power of attorney appointing the person alleged to have exercised undue influence) is sufficient to establish a fiduciary relationship. However, the Courts have held that such formality is not necessary and that a fiduciary relationship may exist whenever the person creating the document was in a relationship in which s/he put their trust in the person alleged to have exercised undue influence.
In this case the evidence of a formal fiduciary relationship (power of attorney) was imperfect. However, it appears to be acknowledged that the person alleged to have exercised undue influence did in fact help the person who created the trust and will with his finances, paying bills and other such activities. The trial court held that notwithstanding these activities, the party challenging the documents failed to establish the existence of a fiduciary relationship sufficient to give rise to the presumption. The reasoning hinges on the finding that although the one person was helping the other person with their finances, the person who created the will and trust did not rely on the judgement of the purported undue influencer – that is, they continued to exercise their own independent judgment as to these affairs and the role of the assisting party was more or less ministerial. This is significant. If this is the law, it weakens cases in which these facts are relied upon as a basis for the presumption.
In will and trust litigation, the importance of the presumption of undue influence can hardly be overstated. It is raised in a high percentage of such cases. The presumption is a finding of the court, even in cases that go to the jury. That means a failure to establish the presumption will often result in summary disposition, as was the result in this case. The value of such cases (from the perspective of the contesting party) increases dramatically when it is clear that the case will be decided by a jury. As such, for lawyers handling these types of cases, this case is worth saving as it provides a roadmap when defending documents in which no formal power of attorney exists, the contesting party seeks to impose the presumption, and the question of whether or not the element of a fiduciary relationship has been met is in play.
New published Court of Appeals opinion. Click here to read it.
Lawyer prepares an estate plan for client (and purported friend). The estate plan leaves most of the multi-million dollar estate to himself (the lawyer) and the lawyer’s son.
This is against the Michigan Rules of Professional Conduct for lawyers, which rules prohibit lawyers from making themselves beneficiaries of estate plans that they prepare for non-family members.
The trial judge rules in favor of the parties seeking to set aside the document. The trial court says that the violation of the Rules of Professional Conduct makes the estate plan invalid.
The Court of Appeals reverses – meaning that while the Attorney may face disciplinary action by the State Bar for violating the Rules of Professional Conduct, these rules do not control the outcome of litigation over the validity of a document prepared in violation of those rules. Rather, the Court of Appeals says this is a case in which the normal rules of undue influence apply, and because the attorney who prepared the document had a position of trust (fiduciary relationship) with his client, a presumption of undue influence applies.
Suffice to say cases like this make lawyers uncomfortable. These things shouldn’t happen. If this individual really was so friendly with his attorney that he wanted to leave his estate to him, the simple solution would have been to have this client go to another lawyer to have his documents prepared.
It is an important decision, in that it clarifies that the Rules of Professional Conduct which control the way lawyers can act, do not control the outcome of civil actions in which the attorney engaged in professional misconduct.
The issue however may not be settled. There is enough money involved so that it is almost certain that the Michigan Supreme Court will be asked to review the Court of Appeals’ decision. Whether the Supreme Court elects to do so, and what they conclude if they do, will be interesting. Stay tuned.
There’s a case I read a couple years ago that bothers me and that I’ve been wanting to comment on it since. It is an unpublished decision in which the trial court held that a trust amendment was invalid due to lack of capacity and undue influence. The Court of Appeals reversed the trial court. It is called Estate of Edward E. Lerg, COA case 293012, January 27, 2011. Click here to read it.
What bothers me about the case is what bothers me about the legal concept called the “lucid moment.” The problem I have with the lucid moment is twofold:
(1) It is out of touch with the modern understanding of dementing illnesses. That is, we’ve come a long way toward understanding cognitive impairment. One thing we know for sure is that people with dementing diseases don’t get better – only worse.
(2) It supports that concept that the scope of relevant/admissible evidence in capacity contests is limited to the moment of execution. Again, I would suggest that this is completely inconsistent with the way dementing conditions work, and would, if adhered to, negate most of the best evidence available in these cases.
Mr. Lerg was diagnosed with dementia in 2005 as determined by a medical professional with a high level of expertise in such matters. The doctor found that he had moderate to severe dementia and that the dementia was then to the point that Mr. Lerg had poor insight and judgment. Mr. Lerg executed a trust amendment in 2006. He was evaluated again by the same expert in 2007 and was found to have substantially declined.
While I agree that a well presented case with significant counterbalancing evidence could have been presented to overcome the medical evidence, that’s not how this case played out or how this opinion reads. Rather, the Court of Appeals reversed the trial court by severely discounting the doctor’s opinion, stating that such evidence (the Doctor’s findings) is of “very little probative value.” That statement is incredible to me and is, I would suggest, attributable to the archaic concept of a “lucid moment” (although that language was not expressly used by the Court). What’s more, the Court of Appeals cited a 1965 case for the scary proposition that: testamentary capacity “is judged as of the time of the execution of the instrument, and not before or after, except as the condition before or after is competently related to the time of execution.”
At least in the context of dementing illnesses (as opposed, for instance, to mental illness or alcoholism), it is time for the law to catch up with science and for Court’s to recognize that although persons with dementia may be better some days than others, they don’t improve over time, they only get worse. Evidence of where they were in terms of cognitive impairment a year before they executed the document in question, and where they were a year after, should be extremely probative of the question of their capacity at the time of execution. Further, if someone is significantly impaired and has a “good day” or “good hour” that “good day” or “good hour” must be seen in the context of their impairments. That is, if I don’t recall what I did yesterday and won’t remember tomorrow what I am doing today, how can it be said that I fully understand the implications of my actions today?
An unpublished Court of Appeals opinion out of Kent County offers some interesting issues regarding the scope of no contest clauses.
Decedent had three children, one of whom was developmentally disabled. Decedent was that child’s plenary guardian. Daughter A was the standby plenary guardian.
Decedent left a will that said that Daughter A would receive a 1/3 interest in the residue of the estate, but that her share would be forfeited if she acted as guardian for disabled sibling.
After Decedent’s death, Daughter A took steps to obtain her appointment as guardian over her disabled sibling, obtaining the appointment based on her position as standby guardian.
Personal Representative petitioned the Court to affirm the enforcement of the terror clause, and prevailed on summary disposition, which decision was upheld by the Court of Appeals in Estate of Rudy Jauw, September 13, 2012.
It is notable that in this case the terror clause was used to cause a beneficiary to lose her share of the estate for something other than challenging the validity of the instrument. Rather, the penalty was imposed for behavior unrelated to the validity of the document itself. Planners may want to consider other applications for this type of expanded terror clause.
It’s over – at least for now. The Mortimore case.
This is a case I have spoken and written about quite a bit for the past year.
Common facts: Older gentleman. His wife of many years dies. New woman becomes involved. Alienates family. He dies. She produces a will (surprise) leaving everything to her.
At the trial level, which I did not handle, a will contest takes place. Trial court rules in favor of the woman (and against the kids). Trial court says: I don’t know what to make of this, two very different stories. I am upholding the will.
I am retained to handle the appeal. We raise the issue that the trial court failed to consider the presumption of undue influence that arises when a person (1) has a fiduciary/confidential relationship with the decedent, (2) the opportunity to influence the decedent, and (3) benefits from the document thereby created.
The Court of Appeals not only agrees, but reverses the decision of the trial court and throws out the will. They say: had the trial court considered the presumption, they would have found the presumption applied, AND that the Appellee failed to rebut the presumption. Nice Result!!
But, not the go down easy, woman hires counsel to request the Michigan Supreme Court review the Court of Appeals decision. They agree the presumption applies, but they argue that the Court of Appeals failed to apply the proper standard for rebutting the presumption.
The Michigan Supreme Court accepts the case, briefs are filed, and oral arguments are held. At the Supreme Court hearing, I am grilled by the Chief Justice who is clearly convinced that the Court of Appeals erred – specifically, that the standard that the Court of Appeals used to rebut the presumption (preponderance of evidence) is too high. The thinking is that if the standard to rebut the presumption is a preponderance, the result, in effect, is that by establishing the presumption the burden of the entire cases is shifted to the party defending the document.
The truth is that Michigan Court of Appeals cases are all over the board on this. The last pronouncement by the Michigan Supreme Court on this point was more than 30 years ago in Kar v Hogan, 399 Mich 529, 542; 251 NW2d 77 (1976).
The options are anywhere from a scintilla of evidence to a preponderance, with most cases coming down somewhere in between.
In light of my treatment at oral arguments, I was not hopeful about my prospects. So, wasn’t I surprised when we received an order from the Michigan Supreme Court vacating the original order accepting the case. In other words, they changed their minds and decided (after hearing oral arguments) that they never should have taken the case in the first place. That means they left the Court of Appeals decision in place. Whew….
The Chief Justice wrote on lengthy dissent which offers one perspective on this issue.
The truth is that this is an important issue, and we don’t have clear law. The problem is that if, as argued by the Chief Justice, the presumption of undue influence is given as much respect as are presumptions in other areas of the law (which is very little respect), the role of the presumption in protecting vulnerable adults will be diminished, and depending on the new standard adopted, perhaps dramatically so.
Request for reconsideration to the Michigan Supreme Court was denied, so, for now, the case is back in the trial court with the will thrown out. There are other interesting issues in this case, which could lead us back into the appellate courts again, but the Supreme Court walked away from this opportunity to address is important and complicated issue.