Lawyer May Receive Gift Under Will & Trust He Prepared For Client-Friend

A Michigan lawyer was not automatically prohibited by the attorney ethics rules from being named as a beneficiary in a will and trust that he prepared for his client, who was also a good friend, according to the Michigan Supreme Court.

In re Mardigian Estate (Docket No. 152655) involved attorney Mark S. Papazian, who primarily practices family law and business law at Giarmarco, Mullins & Horton PC in Troy. Papazian drafted a will and trust for his client and friend, Robert Mardigian. The documents gave Papazian and his children the bulk of Mardigian’s multi-million-dollar estate. 

When Mardigian died, his family and girlfriend filed suit in the Charlevoix County Probate Court, asserting the documents should be voided as contrary to public policy because Michigan Rule of Professional Conduct 1.8(c) had been violated. MRPC 1.8(c) says: “A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee.”

The Charlevoix County Probate Court ruled in favor of Mardigian’s family, finding a violation of MRPC 1.8(c). Papazian appealed, arguing that Michigan does not have a “per se” ban on gifts such as the one that Mardigian gave him. Papazian maintained that any breach of the attorney ethics rules may trigger the attorney discipline process but did not automatically void the documents that he had prepared for his client-friend.

The Michigan Court of Appeals agreed with Papazian in a published 2-1 decision. The Court of Appeals based its ruling on In re Powers Estate, 375 Mich 150 (1965), which held that the drafter of a will or trust is not disqualified from inheriting under the instrument and there is a presumption of undue influence. Relying on In re Powers Estate, the Court of Appeals said that, on remand, Papazian had to overcome “the presumption of undue influence arising from the attorney-client relationship.”

The Court of Appeals decision was appealed to the Michigan Supreme Court. In a rare 3-3 decision (one justice did not participate), the high court affirmed. The decision was affirmed because when a ruling results in a tie, the lower court’s decision stands.

Chief Justice Stephen J. Markman authored the opinion for affirmance, joined by Justice Brian K. Zahra and Justice Elizabeth T. Clement. Markman pointed out that, although MRPC 1.8(c) generally prohibits a lawyer from drafting documents that give himself or family members a substantial gift, doing so merely exposes the attorney to potential disciplinary action - it does not necessarily invalidate the documents that were prepared.

According to Markman, the relationship between a lawyer and a client making a testamentary gift creates a “rebuttable presumption of undue influence.” He said that, historically, the burden has been on the persons contesting the document to show that undue influence existed when the document was prepared. Adopting the suggested “per se” approach to these situations would “wholly ignore” any consideration of the decedent’s intentions, Markman said.

In addition, Markman explained that a per se rule against such gifts would be contrary to the Estates and Protected Individuals Code (EPIC). He noted that EPIC - specifically MCL 700.3407(1)(c) and MCL 700.3407(1)(d) - says a person who contests a will must establish undue influence. (Interestingly, while EPIC places the burden of proof on the person contesting the documents, Markman affirmed the Court of Appeals instruction on remand that attorney Papazian had to show that he did not unduly influence Mardigian.)

Justice Bridget M. McCormack wrote the opinion for reversal, joined by Justice David F. Viviano and Justice Richard H. Bernstein. McCormack asserted there should be a “per se rule of undue influence that voids substantial testamentary gifts to attorney-drafters.” Although the justice acknowledged that attorneys who receive substantial gifts from clients must show they did not use undue influence, she called it “disingenuous” because the client is dead, thereby giving the lawyer an evidentiary advantage.

“The affirming opinion’s decision to affirm this precedent leaves clients vulnerable, rewards unscrupulous attorneys, encourages costly litigation, and moreover does not account for the important shifts of the past half-century in our ethics rules, probate law, and evidentiary presumptions,” McCormack wrote. “We owe the public better. I would reverse the Court of Appeals.”

Justice Kurtis T. Wilder did not participate in the matter because he was on the Court of Appeals panel that decided the case.