In re Estate of Vlado Netorovski, Deceased _____ Mich App _____ (2009), #271704, 3/31/09
Return to Probate Review MenuDecedent emigrated to the United States in 1972 from Macedonia. He had two children, Respondent Vasko Nestorovski and Petitioner Bora Petrovski. They are the only interested persons. Decedent only spoke “broken English” and had suffered from Alzheimer's Disease since 1999. In April 2001, Respondent consulted an attorney regarding an estate plan for decedent and was referred to another attorney to do the estate plan. The attorney met with Respondent and decedent at his office for 10 minutes. Decedent could not read or understand documents written in English. After this meeting, the attorney prepared a will for decedent which devised all of his property and assets to Respondent with the exception of a $60,000 payment to Petitioner. The attorney also prepared two quitclaim deeds conveying decedent's individual ownership of two Michigan properties to Respondent with joint ownership and survivorship rights. On April 25, 2001, the attorney brought the will, the deeds, and a power of attorney to decedent's home. The documents were signed in the presence of a priest and a neighbor. The attorney did not speak Serbian and made no attempt to explain the documents to decedent. The priest translated the documents into Serbian for decedent.
After decedent's death, Petitioner filed a petition in the Oakland County Probate Court challenging the validity of the will and the two deeds based on undue influence and lack of capacity. Petitioner requested an award of attorney fees and costs. The probate court ordered facilitated mediation without success. On September 27, 2005, the day set for trial, the probate court entered a handwritten order prepared by Petitioner's attorney stating, “This matter is to be scheduled for binding arbitration before a sole arbitrator to be determined by the parties within one week.” Respondent's attorney approved the order. Neither party sought to revoke the agreement before the arbitrator rendered a decision. The arbitrator concluded that decedent was subject to undue influence and not competent to make a will. The arbitrator also concluded that decedent's lack of capacity warranted the setting aside of the two quitclaim deeds signed in April 2001 and a power of attorney decedent signed in 2000. The arbitrator recommended that the parties bear “their own attorney fees,” and that no fees be charged to decedent's estate. On May 31, 2006, Respondent filed objections with the probate court contesting the arbitration decision and award. The probate court confirmed the arbitrator's decision and Respondent appealed.
The Court of Appeals affirmed the decision of the probate court.
The Respondent contended that the parties did not have a written arbitration agreement. The Court of Appeals rejected the argument observing that a stipulation is a type of contract. In this case, the stipulation clearly provided for arbitration. Moreover, the Respondent voluntarily participated in the arbitration process without objection. This participation waived the issue of whether a valid agreement to arbitrate existed. You may not wait until the end of the arbitration and only object if the ruling is unfavorable.
The Respondent contended that the arbitrator's ruling violated MCL 700.1302 which gives the probate court exclusive jurisdiction over estate-related disputes. The Respondent cited In re Meredith Estate, 275 Mich 278 (1936) which held essentially that testamentary capacity was not arbitrable. The Court of Appeals engaged in an extensive analysis of In re Meredith Estate as well as the changes to our law and jurisprudence which have taken place since it was decided. They concluded that to the limited extent that In re Meredith Estate barred arbitration of probate disputes, the holding lacks continued viability because it has been superseded by more recent legislative developments and intervening changes in the court rules. For example, they pointed out that EPIC has eliminated virtually all restrictions that applied to probate court powers in 1936. Therefore, the parties were not precluded from conducting binding common-law arbitration of probate disputes, including the question of testamentary capacity.
The Respondent argued that the arbitrator lacked the authority to render any award regarding the quitclaim deeds. Respondent pointed out that MCL 600.5005 of the Michigan Arbitration Act (MAA) prohibits submitting a dispute involving real estate to arbitration. The Court of Appeals rejected Respondent's argument observing that Michigan recognized both statutory arbitration under the MAA and common-law arbitration. Since the parties failed to conform their arbitration agreement to the statutory requirements, the agreement was treated as common-law arbitration. Common-law arbitration is not subject to the statutory arbitration requirements or prohibitions. They held that MCL 600.5005 did not eliminate the parties' ability to arbitrate a real estate dispute under the common-law.
Respondent next argues that neither the arbitrator nor the probate court possessed the authority to set aside a power of attorney Vlado executed in 2000. The power of attorney permitted a Macedonian attorney to act on Vlado’s behalf with respect to real and personal property Vlado owned in Macedonia. Respondent avers that the probate court lacked jurisdiction to enter an order regarding the Macedonian property or affecting the actions of the foreign attorney. The Court of Appeals rejected this argument observing that the probate court did not assume jurisdiction over the Macedonian property. The arbitrator merely determined that decedent had become incompetent by January 1, 2000, and recommended that the probate court set aside the power of attorney and that the foreign property be considered as assets of the estate unless it had been transferred prior to January 1, 2000. The Court of Appeals concluded that the probate court had the authority to set aside the power of attorney.
Respondent argued that the arbitrator exceeded the scope of the arbitration agreement by considering whether decedent lacked testamentary capacity before the date that he executed the will and deeds. The Court of Appeals pointed out that there is a three-part test for ascertaining the arbitrability of a particular issue: “(1) is there a arbitration agreement in a contract between the parties; (2) is the disputed issue on its face or arguably within the contract’s arbitration clause; and (3) is the dispute expressly exempted from arbitration by the terms of the contract.” In this case the arbitration agreement described the scope of the arbitration as “this matter.” The “matter” pending before the probate court involved the distribution of decedent's entire estate. Petitioner had alleged that decedent had lacked mental capacity from 1999 until his death. Therefore, decedent's testamentary capacity to execute the power of attorney plainly fell within the broad scope of the matter presented in the case.
Finally, Respondent argued that the arbitrator exceeded her authority by requiring that both parties bear their own attorney fees. Respondent maintained that MCL 700.3720 provides, “If a personal representative or person nominated as personal representative defends or prosecutes a proceeding in good faith, whether successful or not, the personal representative is entitled to receive from the estate necessary expenses and disbursements including reasonable attorney fees incurred.” However, the Court of Appeals pointed out that when a fiduciary is partially to blame for bringing about unnecessary litigation, the fiduciary rather than the estate should be responsible for attorney fees. The Court of Appeals concluded that given the well-reasoned opinion of the arbitrator that Respondent exerted undue influence over decedent, MCL 700.3720 would not apply because Respondent did not defend the will in good faith.
There is a dissenting opinion in this case which should be mentioned. The dissent does not disagree with the reasoning and conclusion of the majority. It does, however, raise the issue that the Court of Appeals may not overrule a Michigan Supreme Court case just because they believe the Michigan Supreme Court would overrule it if faced with the issue. While the majority goes to great lengths to distinguish In re Meredith Estate, it is still a good point to ponder.
There are, I believe, two principals to take from this case. First, the case holds that binding common-law arbitration is available for probate disputes, including questions of testamentary capacity. Second, most judges are familiar with the principal that the proponent of a will get to have his or her attorney fees paid from the estate whether or not he or she prevails. This was true under the Revised Probate Code and thought to be true under the Estates and Protected Individuals Code. The last paragraph of this 15-page opinion would seem to announce a possible exception to this principal in cases where the proponent's actions are a reason for the will failing to be admitted to probate. In this case, it would appear Respondent was acting as a proponent of the will, but was denied attorney fees from the estate because of his undue influence.
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