By Lee Dryden
BridgeTower Media Newswires
DETROIT — Lower courts are split on whether a lawyer can benefit from a will and trust that he prepared, so it’s up to the Michigan Supreme Court to provide clarity.
The high court heard oral arguments recently for In re Mardigian Estate. Attorney Mark S. Papazian prepared documents that left most of Robert D. Mardigian’s $16 million estate to Papazian and his children, according to a case summary from the Michigan Courts.
After Mardigian’s death, Papazian sought a ruling from the Charlevoix County Probate Court that the will and trust were valid and enforceable. Mardigian’s family members and friends, who are contingent beneficiaries under the will and trust documents, objected.
They argued that the bequest to Papazian was void because he violated the Michigan Rules of Professional Conduct. MRPC 1.8(c) prohibits a lawyer from drafting an instrument that gives the lawyer or the lawyer’s relatives any substantial gift.
The probate judge agreed, ruling that the will and trust would not be enforced because they benefitted the attorney who drafted them in violation of MRPC 1.8(c). The Court of Appeals reversed and remanded in a split published opinion.
Justices will consider whether MRPC 1.8(c) trumps a 1965 Michigan Supreme Court decision in In Re Powers Estate, which held that the drafter of a will or trust is not disqualified from inheriting under that instrument, but that there is a presumption of undue influence.
In the October 2015 opinion, the Court of Appeals panel majority stated that Powers is “directly on point to the facts presented in the instant case, and as such is binding on this Court.”
“Under Powers, we are required to remand for further proceedings, where appellant would be required to overcome the presumption of undue influence arising from the attorney-client relationship in order to receive the devises left to him and his family.”
The opinion — written by Judge Kurtis T. Wilder, joined by Judge Cynthia Diane Stephens — stated that the “primary goal of interpreting wills is to give effect to the testator’s intent as long as it is lawful.”
“The decedent’s purported intent, to transfer assets to appellant and appellant’s children, is not per se unlawful, as demonstrated by the fact that, had an independent attorney drafted the documents rather than appellant, there was nothing illegal about the devises,” the opinion stated.
“Rather than the purpose of the devises being illegal, it is the fact that the person drafting the documents did so contrary to the letter and spirit of the rules of professional conduct that raises suspicion of the validity of the devises.
“Where a trust or will is deemed void as against public policy because the drafting attorney violated the MRPC, the invalidation of the bequest potentially fails to honor the actual and sincere desires of the grantor.
“Thus, as noted in Powers, the proper remedy for the rule violation may be to follow the normal procedures intended to effectuate the grantor’s intent, but to also view the devises to the drafting attorney and his family with suspicion, by application of the presumption of undue influence, rather than to declare the devises void on their face.”
Judge Deborah A. Servitto dissented, stating that “Powers was decided long before the 1988 enactment of the MRPC, or even its predecessor, the Code of Professional Conduct, which was adopted in 1971. MRPC 1.8(c) now specifically prohibits this conduct.”
“Moreover, this Court has held, in the context of a referral fee contract sought to be upheld by the attorney, a contract is unethical when it violates the MRPC, and ‘unethical contracts violate our public policy and therefore are unenforceable.’
“Once the trial court has found the terms of a trust or instrument of disposition to be contrary to public policy, the legal effect of the instrument is a foregone conclusion and the meaning of the instrument is no longer open to interpretation or subject to dispute concerning intent.”
Paul D. Hudson of Miller Canfield in Kalamazoo, who represents Mardigian’s relatives, said “the question in this case is whether a lawyer can inherit under a will he prepared in violation of the Michigan Rules of Professional Conduct.”
“We submit that the answer to that question is no. And the big-picture reason is that courts should play no role in helping a lawyer profit from his ethical misconduct and certainly the court should play no role in incentivizing that behavior.”
When a lawyer violates an ethics rule, the offending provisions he prepared are void and can’t be enforced, Hudson said, such as the gift to Papazian and his children.
“The moment his pen hit the paper, so to speak. It’s as if they never happened,” he said.
Hudson said there is a built-in contingency clause that if any provision of the will and trust failed, the money goes to the heirs. He added that the ethics rule displaces Powers.
Justice Robert P. Young Jr. pointed out that “the public policy of our canons, our ethical canons, is limited to the regulation of the practice, not the substantive law of wills and trusts.”
If a lawyer violates a rule of professional conduct, it’s a violation of public policy, Hudson said, adding that a provision of a document that violates public policy is void as a matter of law.
“It’s a lawyer’s job to make sure there’s a legally enforceable, valid expression” of the decedent’s intent, Hudson said.
“The purpose of this will is to dispose of this property to an unethical lawyer who prepared a will in violation of the Rules of Professional Conduct,” he added.
This case highlights the danger of relying entirely on Attorney Grievance Commission sanctions to dissuade lawyers from such conduct, Hudson said.
“If the stakes are high enough and you are close enough to retirement, unscrupulous lawyers perhaps might say ‘you know what, I’m going to roll the dice on this,’” he said.
Justice David F. Viviano questioned how an ethics rule could overturn binding precedent from the Michigan Supreme Court.
“That seems like a strange position to take,” he said.
J. David Garcia of Young & Associates in Farmington Hills, who represents Papazian, said Mardigian’s intent was “to give money to a lifelong friend.”
The question of whether professional conduct rules can supplant substantive law has been “answered as a no,” Garcia said.
Justice Richard H. Bernstein offered a suggestion to provide clarity in such cases.
“Why is there not a red-line rule that just simply says if a lawyer participates in an action where they’re going to inherit from a will, or a trust, or whatever the instrument in question is, that it’s no longer valid?” he asked. “It’s quick, it’s red-line, it’s easy to understand, you understand what the penalty is, you understand what the sanction is. It makes it very easy to appreciate what happens if someone were to do that.”
Garcia responded, “I think the simple straightforward answer to that is because such a rule would be completely offensive to the top priority of all of probate law which is to honor the testamentary intent of the person making the will, who doesn’t know what the rules of conduct are.”
Garcia added that there are “already statutory broad reasons to throw out a will, throw out a trust, undue influence, fraud, duress, and others.”
In this case, Mardigian became aware that there could be issues with leaving money to his lawyer, Garcia said, but was content with the plan after speaking to another lawyer and a financial advisor.
“He was fine with his estate plan and he was signing off on it. He didn’t want to make any changes,” Garcia said.
As for the half-century-old Powers case, Justice Bridget M. McCormack asked, “Isn’t it a little bit like citing Leviticus?”
Garcia disagreed, saying, “I don’t think that the passage of Rule 1.8 is nearly the tectonic shift in law that the appellants are trying to make it sound like.”
He asked the court to reaffirm Powers and embrace the Court of Appeals approach, suggesting that the application for leave be denied with a note to the Legislature as direction is needed from Lansing.
“If the Legislature doesn’t like it, it should step in and act,” he said.
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