In the recent case In Laureen Gordon Revocable Trust, the Michigan Court of Appeals digs into these questions. Docket No. 363546 (Dec. 14, 2023)
Gordon Trust involved a fight between an uncle and his niece and nephew primarily over the distribution of family business assets between a new spin-off business and two trusts. The disputing family members agreed to have an arbitrator decide how to equally divide the family business assets between the two businesses and trusts. The arbitration decision specifically addressed and contemplated that the trustee would need to complete a final accounting for inter-company transactions after January 1, 2017. In a prior appeal, Michael (the uncle), challenged the arbitrator’s final decision but it was affirmed on appeal.
The trustee presented its 2017 accounting that included adjustments for inter-company transactions and Michael objected to these adjustments. When a resolution could not be reached, the trustee filed a petition for instruction with the probate court asking that the court approve its accounting with the adjustments. The probate court granted the trustee’s petition and approved the accounting. Michael then filed (another) appeal challenging the probate court’s decision.
Michael took the position that the trustee’s petition violated the arbitrator’s decision. Judicial review of an arbitrator’s decision is narrow and limited and a court cannot modify an arbitration award. In rejecting Michael’s argument, the court held that the arbitrator’s decision stated there would be a need to prepare a 2017 accounting addressing inter-company transactions. The court stated, “It is clear that the arbitrator anticipated that accounting adjustments might be necessary,” and the court clarified that the trustee’s adjustment approved by the probate court “did not modify the arbitrator’s final order.”
Michael further argued that the proposed accounting adjustment also modified the trusts, and modification of a trust cannot be done without court approval per MCL 700.7411. The court rejected this argument because 1) the accounting adjustments did not substantively modify the trusts’ distribution and 2) Michael waived the right to argue the trusts could not be modified by submitting the dispute to arbitration.
Finally, the niece and nephew argued that Michael could not appeal the probate court’s decision on the trustee’s petition for instructions because of Michael’s prior appeal of the underlying arbitrator’s award. In probate court disputes, there are often various decisions that the probate court makes relating to an estate or trust in the context of one court file. The court held that “there are many types of orders in probate court proceedings that are appealable by right” and that it is not true as a general rule that there can only be “one final order” in a probate case. MCR 5.801 identifies the orders that are final orders appealable by right and includes an order “allowing or disallowing an account.” Thus, Michael could appeal as of right the probate court’s order granting the trustee’s petition for instruction. Nonetheless, Michael’s appeal was unsuccessful for the reasons described above.
If you have questions about a probate or estate dispute, please contact Laura Morris at lmorris@wnj.com or 616.752.2407.
