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October 17, 1988


William R. Beasley, P.j., and Harold Hood and Randy L. Tahvonen,* JJ.

The opinion of the court was delivered by: Hood

Respondents, Comerica Bank and Miles Jaffe, appeal as of right from an order of visiting Oakland County Probate Judge George E. Benko which removed respondents as trustees of the Leslie H. Green and Edith C. Green Charitable Trust, removed Comerica as personal representative of the estate of Edith C. Green, deceased, and surcharged respondents in the amount of $1,900,000. The petitioners are the Michigan Attorney General, St. Peter's Home for Boys, Bishop of the Episcopal Church -- Diocese of Michigan, Dean of the Cathedral Church of St. Paul, and the Cathedral Church of St. Paul. This case is based on the petitioners' objections to respondents' sale of real property owned by the estate and charitable trust to Maurice Cohen, a client of respondent Jaffe.

Leslie and Edith Green owned and maintained a residence on 315 acres in Bloomfield Township, Oakland County, known as Turtle Lake Farms.

In 1969, Leslie and Edith Green created a charitable trust funded in part by a grant of an interest in Turtle Lake Farms. As finally amended, the beneficiaries of this trust are St. Peter's Home for Boys, the Cathedral Church of St. Paul and the Cathedral of the Episcopal Church, Diocese of Michigan. The named trustees were the Greens, Comerica and Miles Jaffe.

Mr. Green died in 1973. His will gave Mrs. Green a life estate in the portion of Turtle Lake Farms including their residence and created a marital trust for the benefit of his wife during her lifetime. The charitable trust was made the residuary beneficiary of the marital trust and would receive the marital trust's interest in Turtle Lake Farms upon Mrs. Green's death. Comerica was named sole trustee of the marital trust.

Mrs. Green died in March, 1983. Her will made specific bequests totaling $320,000 and directed the establishment of a million dollar trust fund for her granddaughter. The residue of her estate was left to the charitable trust. Mrs. Green's estate consisted of cash and securities valued at $1,340,000, plus her interest in Turtle Lake Farms. Comerica was designated personal representative of the estate.

Upon Mrs. Green's death, Bishop McGehee and Dean Herlong of the Episcopal Church became co-trustees of the charitable trust as provided for under the trust. Under the trust, only Comerica and Jaffe were empowered to make decisions regarding the Disposition of the real property.

According to respondents, soon after Mrs. Green's death they determined that the liquid assets of the estate were insufficient to satisfy the cash bequests, the funding of the $1,000,000 trust fund for the granddaughter, the estate taxes and the administrative expenses. After reviewing the options, Comerica and Jaffe concluded that the interests of the estate and its beneficiaries would best be served by the sale of the Turtle Lake property.

At Mrs. Green's death, three entities owned undivided interests in Turtle Lake: the Edith Green estate, the marital trust, and the charitable trust. For the sale, Comerica acted in three capacities: as executor of the estate, as sole trustee of the marital trust, and as one of the trustees of the charitable trust. Jaffe also acted in several capacities. He was a trustee of the charitable trust. Also, Jaffe and his firm, Honigman, Miller, Schwartz & Cohn, were attorneys for the estate, for Comerica as executor, for Comerica as trustee of the marital trust, and for Comerica as trustee of the charitable trust. The record also contains testimony of Dean Herlong to the effect that Jaffe, at least on one occasion, provided legal advice to him in his role as trustee. Jaffe had been a personal friend of the Greens, as well as their attorney. He drafted their wills and the trust instruments.

During the time between Leslie Green's death and the death of his wife, Comerica's trust department received inquiries from individuals interested in purchasing Turtle Lake Farms. Since the intent was for Mrs. Green to live out her life on the property, Comerica informed inquiring developers that the property was not on the market and that they would be notified when it became available. The parties' briefs describe in detail the events following Mrs. Green's death and leading up to the sale of the Homestead, the real property concerned in this action. The Homestead is the western portion of the Turtle Lake property, consisting of 211 acres and including the Green's mansion and other buildings, Turtle Lake, and lakefront property on Upper Long Lake.

On September 15, 1983, Comerica accepted an offer from Maurice Cohen for the Homestead. The sale was closed on November 1, 1983, by execution of a land contract for $3,250,000, with $1,500,000 down payment and the balance over two years at twelve percent interest. Maurice Cohen is a successful real estate developer and was represented by the Honigman firm.

This case concerns the objections by the charitable trust beneficiaries to Jaffe's and his law firm's conflicts of interest in representing both buyer and seller, to Comerica's management of the sale of the property, and to the adequacy of the price received for the Homestead.

At this point, it may be helpful to identify the remaining individuals involved.

Testifying for Comerica were Gari Kersten and Cleveland Thurber. Kersten was vice president of Comerica's trust real estate department which supervised the management of trust real estate and the Comerica representative who apparently worked most closely with Jaffe on the sale of property. Thurber was in charge of Comerica's trust department, which generally oversaw the trust, and one of the trust officers who participated in decisions to sell the property to and accept the Cohen offer. Another Comerica employee, the sales manager, Mr. Keating, apparently supplied information to Kersten on the value of the property. David Wind was another trust officer involved in various decisions. Neither of these two men testified.

Leo Majzels, who had done an appraisal of the property in 1973, was retained by Comerica following Mrs. Green's death as part of the efforts to prepare a marketing plan and as a consultant to assist in evaluating the value of the property. Calvin Hall was retained to submit a development plan on the possible uses of the land. Donald Tilton was retained to study possible environmental problems caused by the wetlands on the property.

Also testifying was Paul C. Robertson, a local land developer and builder, who had expressed interest in developing the property prior to Mrs. Green's death and who contacted Comerica regarding the property again in May, 1983.

The Attorney General is a petitioner as a necessary party in interest to estate proceedings involving charitable trusts. MCL 14.254(c); MSA 26.1200(4)(c).

While specific facts will be raised where relevant, an overview of the factual basis for this case may also be helpful at this point.

Maurice Cohen visited the Homestead in April, 1983, and expressed an interest in purchasing the Green residence and a few surrounding acres. Kersten told Cohen that the sale of such a small parcel was not desirable because it would reduce the marketability of the balance of the property. Jaffe put Cohen in touch with Calvin Hall and showed Cohen Hall's development plan to encourage Cohen's interest in a larger parcel. Throughout the summer, Jaffe continued to meet with Cohen to encourage him to make a suitable offer for the entire parcel.

According to Jaffe, when he realized in August that Cohen was interested in making "a hard offer" on the entire Homestead, he informed Thurber that there was a potential conflict of interest because his law firm represented Cohen. In a letter of August 12 to Thurber, Jaffe requested the consent of Comerica, Bishop McGehee and Dean Herlong, as trustees, to the Honigman firm's dual representation and indicated that, in any event, Jaffe would not act as co-trustee with respect to any offer by Cohen. It does not appear that Jaffe sent copies of the letter directly to Bishop McGehee or Dean Herlong.

On August 18, at a meeting of Comerica representatives and Honigman attorneys, Majzels expressed his opinion that the Homestead should sell for between $3 and $3.5 million.

On August 22, all of the trustees of the charitable trust met to discuss the possible sale of the land and the question of dual representation. Dean Herlong testified that Thurber informed them of the estate's cash needs and Jaffe discussed the various problems with development of the property. Jaffe, Thurber and Kersten also informed Bishop McGehee and Dean Herlong that they expected Cohen to make an offer for the western portion of the property. Jaffe explained the conflict of interest.

Former Chief Justice G. Mennen Williams was also present at this meeting in his capacity as Senior Warden of the Vestry of the Cathedral Church of St. Paul but he did not testify at trial. Dean Herlong testified that the Chief Justice was present at the Dean's request. The Senior Warden is the representative of the cathedral to whom Dean Herlong is ultimately responsible, and Dean Herlong felt it was in the best interest of the cathedral for the Chief Justice to be present. The Chief Justice, pursuant to MCL 600.207; MSA 27A.207, was precluded from practicing law, and we find no indication in the record that he was present as or in any way acted as a legal advisor. The record also does not indicate that the fact of the Chief Justice's position in the judicial system had any bearing on the proceedings.

On August 23, Cohen made an offer for the Homestead of $3 million. Neither the price nor the conditions were acceptable to Jaffe or Comerica, and Kersten directed Jaffe to go back to Cohen and see what could be done to better the offer.

On August 26, a one-page circular describing generally the land and its availability was sent to people who had expressed an interest in the property and to local real estate people. Kersten authorized the mailing against the advice of Jaffe.

On August 31, 1983, Bishop McGehee and Dean Herlong sent a letter to Jaffe consenting to the dual representation "subject to the satisfactory demonstration by the Comerica Bank after reasonable investigation that the offer is indeed suitable, appropriate, and in keeping with the present market situation."

On September 6, Kersten met with Robertson. Kersten apparently attempted to secure an offer on the entire parcel from Robertson, indicating that the asking price was $10 million, with $4 million down. Kersten met with Cohen on September 12, apparently in an attempt to secure a better offer and to obtain an extension of Cohen's offer, both of which Cohen refused. A revised offer at $3.25 million was prepared by the Honigman attorneys and accepted on September 15.

On September 19, Dean Herlong was informed of the sale. On September 26, Wind, Kersten, and Jaffe met with Dean Herlong, Bishop McGehee and Chief Justice Williams. Dean Herlong testified that he expressed at this meeting his concerns regarding the sale and Comerica's marketing of the property. The Cohen deal was closed on November 1, 1983. Bishop McGehee and Dean Herlong signed the land contract as trustees of the charitable trust. Dean Herlong ...

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