I recently found myself in an all day mediation.
I was sitting in a conference room for 8 hours straight.
Next to me was seated my client, across the table from me was seated my client’s brother and his lawyers.
The years of animosity between the siblings was obviously apparent to all in the room.
The thought crossed my mind – will this case ever get resolved?
Facts:
Father, business owner passed away at an old age, leaving his business in disarray, multiple parcels of real estate, and several bank and investment accounts.
Father also left six kids who did not get along with each other.
A recipe for disaster.
brother was named personal representative in dad’s will. Brother took control of dad’s estate, and did not keep his siblings apprised of his actions. He provided no accounting of his actions, receipts or disbursements, including the tens of thousands of dollars he paid himself for his time.
He basically failed all of his duties as a fiduciary.
At least one of his siblings did not appreciate brother’s actions.
I filed suit on behalf of one of brother’s siblings, and raised counts of breach of fiduciary duty and action for surcharge against the brother.
Law: Breach of fiduciary duty
Brother did not realize that when he accepted his role as personal representative he was taking on certain responsibilities as a fiduciary to act in the best interest of the other beneficiaries.
A breach of a fiduciary obligation occurs when a position of influence has been acquired and abused, when confidence has been reposed and betrayed. Smith v Saginaw Savings & Loan Association, 94 Mich App 263, 274, 288 NW2d 613 (Mich Ct App 1979).
As a fiduciary, brother owed certain duties to his siblings based in common law and Michigan statute. Those duties include
Michigan Compiled Laws 700.3703,
- “to settle and distribute decedent’s estate in accordance with the terms of a probated and effective will and this act” and
- to provide “annually, and upon completion of the estate settlement, account to each beneficiary by supplying a statement of the activities of the estate and of the personal representative, specifying all receipts and disbursements and identifying property belonging to the estate.”
A personal representative, is bound by the fiduciary duties of
honesty,
loyalty,
good faith, and
restraint from self-interest. In re Green Charitable Trust, 172 Mich App, 298 (1988).
A personal representative is required to “act as what a prudent person dealing with the property of another, including following the standards of the Michigan prudent investor rule.” To be prudent means to act with care, diligence, integrity, fidelity, and sound business judgment. In re Messer Trust, 457 Mich, 371, 380 (1998).
Damages may be obtained for a breach of fiduciary duty when a position of influence has been acquired and abused or when confidence has reposed and betrayed. In re Duane v Baldwin Trust, 274 Mich App 387, 398 (2007).
Surcharge
Under action to surcharge, MCL 700.7306(2) provides that a fiduciary is personally liable for an obligation arising from ownership or control of the estate property or for a tort committed in the course of administration of the estate, if the fiduciary is personally at fault.
This would require the fiduciary, brother, if found liable, to pay back to the estate any funds that he wrongfully took.
This is a good plug for using professional fiduciaries like Legacy Trust Chemical Bank Macatawa Bank Ameriprise or Edward Jones
Resolving Estate Lawsuits: The Role of Mediation
One thing was quite apparent when we began the process of mediation: whether or not the case got resolved the siblings were not going to reconcile that day.
But the mediator did his job: he showed both sides that they had much more to gain by resolving the case that day, as opposed to continuing with the dispute and going through trial.
The truth is that despite all of the real and intense emotions that both parties felt (which is quite typical in estate/trust litigation scenarios), it was much more worthwhile to come to a resolution that day and move on with the rest of their lives.
It took 8 hours though to get us there.
Questions? Comments?
jeshua@dwlawpc.com
Purpose Driven General Counsel 