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Reflections from a Costly Goose Chase

The crux of this unpublished opinion is whether the cost of litigation initiated by a conservator that turns out to be a big waste of money, should be paid out of the estate.

In In Re Conservatorship of Marilyn Burhop the probate court appointed a local lawyer (“Jones”) as conservator over a vulnerable adult (click on the name to read the case).  Jones learned that prior to her appointment, the ward, Marilyn, transferred nearly $500,000 to certain acquaintances (the “Sirchias”).  In addition, Marilyn changed her estate plan to benefit the Sirchias exclusively.

After some preliminary investigation, Jones decided to sue the Sirchias to recover the funds and to initiate litigation to set aside the estate planning changes. After incurring about $175,000 in legal and fiduciary fees, Jones settles. Curiously, perhaps conveniently, the COA fails to share the details of the settlement – such as whether the conservator recovered anything. But reading between the lines, it seems that Jones simply dropped the case.  The issue then became whether the massive fees that Jones and her attorneys charged to pursue this litigation should be allowed as expenses of the estate, when, in the end, the estate received no benefit.  The trial court allowed the fees in their entirety, and the order allowing those fees is what was appealed and affirmed.

Here’s what I think:

Seek Instruction

The way this case begins is all too common. These days, conservators are often appointed to protect a vulnerable adult from financial exploitation, which exploitation may have already begun.  Accordingly the question of whether the conservator should simply protect what’s left or pursue recovery of what may have been improperly removed is typical.  In this case, Jones apparently did some preliminary investigation before initiating litigation, but what Jones did not do, and what I think was her initial mistake, was to ask the probate court for instruction.

In our firm, when handling these matters, we commonly to seek court instruction at the outset. We ask the court to authorize the conservator to pursue litigation and also to enter into an engagement with our firm.  In that process we present the court with the proposed engagement letter.  We don’t do this in every case, but I am thinking we will start doing it more often.

Certainly, it seems to me that, before Jones was $175,000 into the litigation, she should have gone before the court and asked whether this matter should continue to be pursued and at what cost. Perhaps the court would have told her not to pursue the litigation at all, perhaps the court would have found that a contingency fee arrangement would have been more appropriate, or perhaps the decision to drop the matter would have been made at an earlier date?  We won’t know, because court instruction was apparently never requested.

Asset Recovery v Estate Plan Changes

In this opinion, the COA fails to address what I think is a critical distinction. The appropriateness of a conservator seeking to recover misappropriated funds is one thing, challenging estate planning documents is quite another.

With respect to misappropriated funds, such funds would become property of the conservator, would provide additional resources to benefit the ward during her remaining life, and failure to pursue recovery in a timely manner would present the possibility that a statute of limitations would be missed or that the funds would be dissipated and become unrecoverable.

Challenging the estate planning documents is different. Assuming the changes are strictly with respect to testamentary disposition, setting them aside would not increase the resources available to provide for the ward’s needs, and in most cases there would be no statute of limitations to worry about.  In fact, our laws are structured so that such changes are disclosed to the real parties in interest upon death (or in the case of a trust, upon incapacity) and the real parties in interest are empowered to protect their own interests at their own cost.  If there is any argument that a conservator would have a reason to engage in litigation over the validity of estate planning documents, it would be with respect to MCL 700.5428 which imposes duties on the conservator to manage resources in manner that does not disrupt the known estate plan.  Accordingly, for instance, if there are specific gifts, beneficiary designations or joint accounts, in deciding what resources to dissipate on the needs of the ward, the conservator must take into account the impact of those decisions on the overall estate plan of the ward.  But this issue was not raised in this case, and if it were, the appropriate approach would seemingly be to seek court instruction regarding the use of resources.

To my thinking, the decision of this conservator to spend money litigating the validity of the estate planning documents in this case is highly questionable.

Disregarding Valentino

There is an old rule that says a fiduciary is entitled to fees when what they have done has benefitted the estate. The 1983 Michigan Court of Appeals case In Re Valentino Estate, 128 Mich App 87 (1983) is often cited for this rule.  This opinion holds that Valentino was superseded by EPIC.  Well, that’s news to me.  First, I would be interested in knowing whether there is any published authority for that conclusion, I know of none and they cite none.  Further, it is worth noting that as recently as 2010, with the adoption of the Michigan Trust Code, the concept of a benefit to the estate being a basis for allowing fees was seemingly recognized in MCL 700.7904.  While that law relates to a non-fiduciary’s claim for recovery of fees from a trust, the commentary cites cases much older than Valentino for this rule.

Outspent

A common litigation strategy is to simply outspend your opponent until they wilt. In this case, the COA asserts that the Sirchias did just that.  The COA says the Sirchias engaged in a “scorched earth” litigation strategy, noting that no less than sixteen motions for summary disposition were filed (and denied).  The suggestion is that Jones may have had a case, but only relented because she was running out of money to spend on the litigation.  Seems plausible.  But where in the law does it say that in deciding whether to initiate litigation the conservator should assume that the opposing party will play nice? Rather, I think, this is all the more reason that Jones should have sought court instruction before starting this fight, should have limited the scope of litigation to asset recovery, or retained counsel on a contingency basis.

A Duty to Litigate

In passing the COA in this opinion says that Jones would have been negligent “under the circumstances” not to have pursued this litigation. Um.  Not a published decision so I guess I will leave that conclusion alone.

The Specter of Bleak House

Let’s step outside our bubble for a minute and look at this from the perspective of the Sirchias. The estate of someone they apparently had a close relationship with is diminished by $175,000.  Their inheritance is diminished by $175,000.  They presumably had to spend a similar amount defending themselves against claims that, in the end, were dropped.

Many people (who are not probate lawyers) perceive the probate court as a place where the property of the dead and dying is consumed by a hungry pack of lawyers and court officials. It’s an unflattering image that dates back centuries. Without passing judgment on anyone involved in this sordid affair, you can’t help but acknowledge, I think, that this case sort of feeds into that perception.

Conclusion

I’ve gone on long enough.

Many many conservatorship cases arise where something is amiss and prior conduct may give rise to the possibility of financial exploitation of the ward. Whether the conservator tries to remedy those wrongs and recover the missing assets, or to simply move forward and do their best with what they have control over, is often a decision they need to make.

I don’t mean to beat up on the conservator in this case, or to suggest that she didn’t act in good faith. Jones may well have been justifiably outraged by the actions of the Sirchias in the period prior to her appointment as conservator. But even giving this conservator the benefit of every doubt, in the end, it is hard to say that the ridiculously unfavorable outcome of this case could not have been ameliorated, perhaps avoided, had other reasonable decisions been made along the way.

Capacity to Nominate

The question is this: When a person who is the subject of a petition for guardianship or conservatorship nominates an individual they want to serve in those capacities, to what extent is the court required to grant the nominated individual a priority of appointment?  A new unpublished opinion discusses that question, and while I think the opinion falls short in some respects, the issue comes up routinely in contested guardianship and conservatorship matters and this case offers the opportunity to delve into the law.  So here we go:

Let’s start with the law.

MCL 700.5313(2) provides the order of appointment for a guardianship. Its relevant provisions say:

(2) In appointing a guardian under this section, the court shall appoint a person, if suitable and willing to serve, in the following order of priority:

(a) A person previously appointed, qualified, and serving in good standing as guardian for the legally incapacitated individual in another state.

(b) A person the individual subject to the petition chooses to serve as guardian.

(c) A person nominated as guardian in a durable power of attorney or other writing by the individual subject to the petition.

(d) A person named by the individual as a patient advocate or attorney in fact in a durable power of attorney.

For a conservatorship the relevant language is in MCL 700.5409(1), which says:

(1) The court may appoint an individual, a corporation authorized to exercise fiduciary powers, or a professional conservator described in section 5106 to serve as conservator of a protected individual’s estate. The following are entitled to consideration for appointment in the following order of priority:

(a) A conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides.

(b) An individual or corporation nominated by the protected individual if he or she is 14 years of age or older and of sufficient mental capacity to make an intelligent choice, including a nomination made in a durable power of attorney.

These provisions are similar, but importantly different:

While both statutes provide that, unless someone has already been appointed to serve as guardian or conservator by another state, the highest priority goes the person nominated by the proposed ward. But in the guardianship context, the law provides that the court “shall appoint” the person with priority if they are suitable and willing to serve. In a conservatorship proceeding, the court “may appoint” and having a priority merely provides that such persons “are entitled to consideration.”

Interestingly, the conservatorship statute says that before considering a person nominated by the proposed ward, the court must find that the proposed ward “is of sufficient mental capacity to make an intelligent choice.” In the guardianship context there is no requirement that the proposed ward be capable of making a good choice.

The guardianship law also elevates the person nominated by the proposed ward at the hearing above a person previously nominated in a power of attorney or patient advocate designation. In the conservatorship context, those two forms of priority are equal.

For the record, both statutes are further buttressed by MCL 700.5106 which more specifically addresses the limitations placed on a court with respect to the appointment of a public fiduciary.

All three cited statutes are linked to the law, which can be read in their entirety by clicking on the statute.

Now let’s look at the case of  In Re Guardianship and Conservatorship of David P. VanPoppelen.  Click on the name to read the opinion.  Click here to read the concurrence/dissent which goes into an interesting issue about suitability, which, for the sake of brevity, I won’t discuss in this post.

In this case, the proposed ward (“David”) nominated June to be his guardian and conservator.  He did so both in his power of attorney and patient advocate designation, and he did so when he was questioned by the court-appointed guardian ad litem.  But the trial court bypassed June by finding that the David was not competent to execute the patient advocate designation and power of attorney when they were executed, and further, the court says “He was similarly incompetent to informally select his fiduciary.”

So my complaint with this holding is that while I think the court was certainly within its power to invalidate a power of attorney and patient advocate designation based on a finding of lack of capacity at the time of execution; and to bypass June as conservator by finding, in accordance with MCL 700.5409, that David lacked the ability to “make an intelligent choice” at the time of his verbal nomination; because MCL 700.5313 (the guardianship law) does not include a provision that allows the court to make a verbal nomination contingent on the existing mental capacity of the proposed ward, to my thinking, June should have been given the priority in the guardianship matter.

In conclusion, although I think this court provided an imperfect analysis, I appreciate the opportunity to review the law as it relates to this important question.

COA Sets the Record Straight on Priorities

This new published Court of Appeals opinion shouldn’t surprise anyone. The COA holds that where a professional guardian/conservator resigns, and the only adult child of the ward petitions to be appointed guardian and conservator, the probate court cannot appoint a new professional guardian and conservator unless it makes a finding that the child is unsuitable.  That’s because the child has priority to be appointed.  The fact that the probate judge by-passed the child and appointed a new professional fiduciary without such evidence was reversible error.

Click here to read In Re Guardianship/Conservatorship of Harold William Gerstler.

The facts are kind of fun: a devious Aunt, a lazy guardian ad litem; but in the end the COA simply reads the statutes regarding priority of appointments and applies them to the facts.

The only thing curious about this case is that it is published. But perhaps the timing of this publication tells us something.  Perhaps, just maybe, the COA is trying to clean up the confusion left from the recently published (and revised and republished) Brody case which said that the statutory priorities were “merely a guide for the probate court’s exercise of discretion.”  [Check out the post “Better Than Nothing?” for a discussion of that case.]

Significantly, the Gerstler opinion also adopts the position that the standard of proof necessary to by-pass a person with priority is as stated in the Redd case: a preponderance. [Click here to read “Seeing Redd”.]

So, when the issue of appointment of either a guardian or conservator is in play, a party with priority is entitled to appointment unless it is shown by a preponderance of evidence that they are not suitable. That means a probate court has to have a hearing and consider evidence to make this decision. I, for one, am glad that’s clear.

Better Than Nothing?

The Michigan Supreme Court has issued an Order denying leave in In Re Conservatorship of Rhea Brody.  However, this same Order “further notes” that the Opinion of the Court of Appeals which was the subject of the request for leave was reformed after the briefs in the case were filed.

Click here to read the Supreme Court Order.

So, a published COA decision is issued. Leave to the MSC is sought.  Briefs are filed, and then the COA revises its opinion so that MSC is satisfied that there is no reason to hear the case. How about that?

I first wrote about this Brody case (there were two of them, a trust case and this conservatorship matter) in the post: Another Brody Bombshell (click on name to visit that post). As discussed at that time, the opinion was riddled with bad law.  As mentioned in another post (Storm Clouds), our firm was hired by the Probate Section of the State Bar to prepare the amicus brief in this matter, which we did.*

The Probate Section wanted only two issues raised:

  1. The finding that the priority given to a “conservator, guardian, or similar fiduciary recognized by the appropriate court of another jurisdiction” could mean an independent trustee over a trust agreement of which the ward was settlor, which trustee was appointed by the same court hearing the conservatorship matter; and
  2. The statement of the Court of Appeals that the statutory priorities for appointment of a conservator “are merely a guide for the probate court’s exercise of discretion.”

I personally also found the case to be worthy of reversal or remand on a third point, which was that the Court appointed a conservator even where a power of attorney was in place and appeared to be effectively handling the affairs of the ward.

The Order of the MSC informs us that the COA has remedied issue number 1 above by issuing a revised opinion.

The second issue is not addressed, and therefore remains problematic language in this published opinion. Presumably we can now argue that appointment of conservators are not controlled by statutory priorities, but are rather left to the discretion of the trial court.

The third issue likewise remains unresolved, and therefore this case seems to stand in opposition to other cases, such as In Re Bittner.

Click here to read the COA Brody opinion as revised.

Better than nothing, I suppose.

*[Much thanks to CT Attorney Drummond Black for his excellent work on the amicus brief.]

The Imperfect Bandage of Undue Influence

A rant this morning. Something to think about over your Sunday morning coffee (or tea).

Our firm starts lawsuits involving vulnerable adult exploitation as much as anyone I suppose. And we almost always plead two things: incapacity and undue influence.  While in some cases the evidence may support the proposition that the person really was so cognitively impaired that they didn’t know what they were doing, most often that is not the case.  Most often we plead incapacity in order to introduce the idea that this person’s capacity was impaired to the point that it reduced the level of persuasion that would be necessary to overcome their volition = undue influence.

For those who practice in this area, they know how difficult it is to win a case on undue influence. You have to show that the victim was essentially a conduit through which the bad actor achieved their objective – that the free will of the victim was completely overwhelmed by the power of the undue influencer.  The so-called “presumption of undue influence” can be a help, but most court cases hold that the presumption, even where it is established, can be rebutted with nominal evidence.  In any event, the presumption is not the topic today.

My point (or argument) today is that we rely on undue influence because we don’t have anything better. We don’t have law that reflects the reality of the aging process today.

I have discussed the research of Dr. Lichtenberg before (see Peter’s Principles and Our Evolving Understanding of Exploitation). His work, and the experience of those of us who handle these cases, informs us that older people can be exploited because of circumstances that have nothing to do with cognitive impairment – that exploitation can occur simply because an older person loses their sense of control, dignity and/or empowerment.

These cases don’t fit well into any current legal theory. But the best we have is undue influence. Other legal theories like unconscionability, mistake, fraud  and constructive trust are available, but like undue influence, these theories are imperfect for our purposes.

The most promising development is the concept of a “vulnerable adult,” which recently entered the legal lexicon. It now appears in the criminal code and in policy for adult protective services workers.  But it has yet to find its place in the civil and probate world. Perhaps the concept of vulnerable adult exploitation will lead to new civil theories and remedies.  But we have to be mindful of what that would mean.

If we move the goalpost, as it were, from incapacity to vulnerable adult, are we going too far? There are good reasons that incapacity has served as the bright line for (1) court jurisdiction to invade the rights of an individual through a guardianship or conservatorship, and (2) as grounds for setting aside estate planning documents, deeds, beneficiary designations and contracts entered into by adults who are presumed to have the ability to understand what they are giving up and what they are getting in return.  Is it a good idea to reduce the proofs necessary for either or both of these outcomes?

Societal changes triggered by modern medicine and the resulting explosion of people living to an advanced age have come upon us quickly. The law evolves slowly, but evolve it must.  Elder law attorneys and probate litigators are struggling to find legal theories to adequately address the civil injuries impacting our clients and their family members.  Undue influence is an imperfect bandage, but for now, it’s the best we’ve got.

 

Storm Clouds in Elder Law Land

It seems to me that we are living through what could be a case study on the way the law evolves to address a rapidly changing social environment. More people are living longer.  More people are experiencing age-related cognitive impairments.  At the same time family dysfunction seems to be the rule, not the exception.

As a result, the law in the arena of adult guardianships and conservatorships is experiencing stress and litigants are experiencing a high degree of instability with respect to the process and outcomes in the trial courts. Trial courts hardly know what to do with these cases. They need clearer direction.  The issues that are coming up are difficult and deeply personal, factually unique in each case.  The laws only offer general guidelines about how to resolve these conflicts.  It is time for our appellate courts to figure out how these laws can best be construed to provide just results notwithstanding the complex issues, and to make practical compromises to allow the system to work in larger counties. More laws, I think, are not the answer.

My thoughts on this topic were triggered by a recent unpublished opinion, In re Conservatorship of Janet Kapp (click on the name to read the case). The case itself is insignificant, but offers a good example of the issues that commonly arise in these matters – both in terms of the facts that are coming into court, and the legal challenges that trial courts are struggling to address.  But the problem has been festering for some time.  In fact, I wrote an article for the State Bar Journal several years ago on the topic: Adult Guardianships, the New Divorce (click on the name to read the article).  It was evident then that we were facing a storm, now it seems the storm has arrived.

The issues include:

What does a Court have to do before passing over a family member with priority and appointing a professional fiduciary?

What role does family dysfunction play in this decision? Is it good enough for the trial judge to say: “You all can’t get along, so I’m appointing someone from outside the family”?

What role does alienation of affection play? Where a family member keeps other family members away, is that per se a basis for passing over that family member, or must a court look into whether that decision is rationally based? [On this point it is interesting that legislation is being proposed to create a process to address family visitation rights for vulnerable adults.  Click here to read that proposed legislation.  I personally see this effort as well-meaning but misguided.  We don’t need more laws, and the process proposed by the legislation is, to my mind, unworkable.  Trial courts have this power now (click here to see blog post Seeing Redd, for instance).]

What role do existing estate planning documents play? In this new Kapp case we see the trial court simply blowing past the existing documents, based on a Guardian ad Litem’s conclusion that the older adults were probably impaired when they were signed.  Is that ok?

How much discretion do trial courts have in this context to avoid holding an evidentiary hearing?

In numerous unpublished opinions, the Court of Appeals has been all over the board on all of these issues. As for published opinions, in the last three years alone we have seen wild fluctuations from, for instance, the Bittner case (click here to read Bittner’s Bite) to the rather incredible legal conclusions reached in Brody (click here to read Another Brody Bombshell).  Trial courts need guidance, but we need to appreciate this guidance has to allow for practical implementation – a workable system.  It is one thing for an experienced and engaged trial judge in a small county to hold a two day (or more) trial on the issue of suitability, and another thing to tell larger counties with busy dockets and a high percentage of pro per litigants to do the same.

Some help may be coming. The Michigan Supreme Court has agreed to take up Brody, and the Probate Section of the State Bar has been approved to file an Amicus Brief (proud to say that Chalgian and Tripp has been retained by the Section to prepare that brief).  But I wouldn’t expect too much.  While this case opens the door to the MSC to address many of these issues, they are likely to offer only some direction on the narrow issues in the appeal.

Finally, there’s an old saying: “May you live in interesting times,” and I’ve always felt that one of the things I enjoy about my chosen practice area is that it’s changing so rapidly, and the law is struggling to keep up – which makes for interesting times indeed for those of us who work with aging issues and vulnerable adult exploitation in particular. But when I looked up the saying on Wikipedia, I found this explanation of the saying, which suggests I may want to temper my enthusiasm:

“May you live in interesting times” is an English expression purported to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is always normally used ironically, with the clear implication that ‘uninteresting times’ of peace and tranquillity are more life-enhancing than interesting ones, which from historical perspective usually include disorder and conflict.

Lay Witness Testimony Regarding Cognitive Impairment

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.

 

Meritless is Good. Frivolous would have been Better.

This is a Chalgian and Tripp case just handed down from the Court of Appeals. Unpublished.  Click here to read In Re Conservatorship of Ueal E. Patrick.

Ueal is a prominent business man in Jackson. He was involved in litigation.  Ueal’s health was declining and the stress of the litigation was making it worse.  In the context of working with him on a separate trust matter, we suggested that it might be beneficial to have his child Mark act as his conservator so that he (Mark) could handle the litigation.  Mark was already deeply involved in the management of the business, and very sophisticated in business matters.  In addition, predating all this was a power of attorney created by Ueal, appointing Mark as his agent, and nominating Mark as conservator should that become necessary.

A hearing was held at which several attorneys were present. The opposing parties did not contest that the appointment of a conservator was appropriate.  They simply opposed the appointment of Mark.  They presented no evidence, called no witnesses, merely made legal arguments.

On appeal, the appellant argued that the trial court erred in finding Ueal to be a person in need of a conservator, even though they stipulated to it in their pleadings and in court. They argued that the trial court erred by not requiring an independent medical exam be conducted to determine the amount of weight that should be given to Ueal’s nomination of Mark.  And they argued that Mark should not have been appointed because he had a conflict of interest with respect to the other matters being separately litigated.

The COA goes through each of appellant’s arguments, systematically pointing out the deficits in their reasoning. At various points the COA labels their arguments “abandoned,” “without merit,” and “meritless.” I beat up on our COA enough in this forum.  They got this one right.  I appreciate it.

Thanks to our John Mabley for doing an excellent job briefing the case and helping the COA clearly see the deficiencies in appellant’s positions.

Another Brody Bombshell

UPDATE:  This decision was subsequently revised.  Some of the problematic aspects of the COA opinion were corrected.  See Better Than Nothing? for details.

 

This is a published Court of Appeals opinion involving the appointment of a conservator over an adult under EPIC. Click here to read In Re Conservatorship of Rhea Brody.

This case comes out of same family that was involved in the In Re Rhea Brody Living Trust, which case is the topic of the post earlier this month. That prior case dealt with the Rhea Brody Trust, and offered the surprising revelation that a contingent beneficiary of a Trust could contest the actions of the Trustee even while the trust remained revocable.  Click here to read that post.  This second Brody case deals with the appointment of a conservator for Ms. Brody.

The litigants in the case are aligned similarly. In the Trust matter, husband and son were aligned in defending the removal of husband as Trustee, which arose as a result of favorable business dealings between the husband as trustee and the son; which dealings were perceived as being done to the detriment of the daughter, a contingent beneficiary.  In this case, husband and son oppose appointment of a conservator, which appointment is supported by daughter.  The court appointed an attorney who was also acting as Trustee of Rhea’s Trust to serve as her conservator.  The COA affirms.

The husband, as appellant, contests pretty much every aspect of the trial court’s decision, except the finding that Rhea was incompetent. The conclusions of the COA are intriguing.  Look for this case to be cited often by litigators seeking to impose conservators and desiring to by-pass priorities of appointment.  To some extent, perhaps a large extent, this case is the counter balance to In Re Bittner, a relatively recent published opinion addressed in the post “Bittner’s Bite” (click on name to read that post).  In Bittner, the COA chastised a trial judge for imposing a conservator where the requirements of EPIC were not met.  Here, the COA goes to great lengths to justify the appointment over seemingly problematic facts.

One issue relates to whether the evidence supported the finding that appointment of a conservator was necessary to provide for management of assets and avoid waste. In this case the evidence is that husband was agent under a valid POA for Rhea, and further, that all of her assets (except one IRA) were joint with husband.  Further, husband alleges that the IRA was set up to make minimum required distributions annually.  The basis for finding necessity appears to be the conclusion that husband wasn’t really managing these matters, but rather that he had “abdicated” his role to the son, and that son was a potentially devious manipulator of the situation.  The COA goes so far as to suggest that the appointment of a conservator was necessary so that someone independent could review the tax returns.

Which leads to another conclusion of law by the COA in this matter: that the appointment of a conservator does not require a finding that there has been waste of assets, only that such waste could occur in the future. So reasonably founded speculation is enough.

Additionally, and perhaps most concerning, are the findings of the COA with respect to the priority of appointment. The COA cites MCL 700.5409(1)(a)  for the proposition that an independent fiduciary has priority over a spouse and agent under a POA where the POA nominates the agent as conservator. MCL 700.5409(1)(a) says:

(1) The court may appoint an individual, a corporation authorized to exercise fiduciary powers, or a professional conservator described in section 5106 to serve as conservator of a protected individual’s estate. The following are entitled to consideration for appointment in the following order of priority:

(a) A conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides.

I have always understood this section to mean that a conservator previously appointed by another court would have priority. In this case, the COA seems to say that a professional fiduciary appointed as Trustee over the ward’s Trust by this same Court meets that definition.  The COA states:

Under MCL 700.5409, a protected individual’s spouse is entitled to consideration for appointment as conservator, and is granted priority over all other individuals except “[a] conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides,” MCL 700.5409(1)(a), and “[a]n individual or corporation nominated by the protected individual if he or she is 14 years of age or older and of sufficient mental capacity to make an intelligent choice, including a nomination made in a durable power of attorney,” MCL 700.5409(1)(b). As Rhea’s husband, Robert was an individual entitled to priority consideration. However, Robert was not entitled to consideration unless the probate court considered an independent fiduciary and found him or her unsuitable. Lyneis, as trustee and independent fiduciary, had statutory priority over Robert, despite Robert’s marriage to Rhea. MCL 700.5409(1).

Wait – WHAT? Where is the other jurisdiction?

Further, and maybe even more unsettling, the COA says:

The statute’s priority classifications are merely a guide for the probate court’s exercise of discretion.

Really?  This statement seems to fly in the face of a long line of cases that require a finding of unsuitability – including, perhaps ironically, the case of In re Guardianship of Dorothy Redd, which is the topic of the other post I wrote today, a case issued by a separate panel of the COA on the same date as this matter.

That said, the COA goes on to say that the husband is unsuitable, again, because the son is a manipulative fellow and may use his influence over husband to Rhea’s detriment in the future.

There are other issues addressed in this case, but I think I’ve hit the ones that seem most significant, and that are those most likely to be cited by litigators in the future.

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.