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 testified that Jaffe told them that the sale was a "fait accompli" and that their signatures were a legal formality.
On December 29, Jaffe wrote to Bishop McGehee and Dean Herlong advising them that another Honigman client was interested in another part of the property and requesting their consent to the multiple representation. In a letter dated March 5, 1984, Dean Herlong consented to the multiple representation, but asked for a written appraisal of the property before sale. According to Jaffe, Dean Herlong indicated for the first time that he was dissatisfied with the way in which the Cohen sale had been handled. Dean Herlong testified that he had orally conveyed his dissatisfaction earlier.
After the present controversy arose, appraisals of the market value of the Homestead as of September 15, 1983, were prepared by Majzels, who was selected by Jaffe, and by Proctor, who was selected by Dean Herlong from a list of appraisers submitted by Jaffe. Over Dean Herlong's objection, the instructions to the appraisers included information on the Cohen sale. The appraisals were completed in 1985, with Majzels indicating a value of $3.35 million and Proctor arriving at a value of $5.15 million for the Homestead.
On September 9, 1984, Comerica filed its first account on the estate of Edith Green. On October 29, 1985, St. Peter's Home for Boys filed a petition and objection to the account. On December 2, 1985, the Attorney General filed a similar petition. On November 12, 1986, Bishop McGehee and Dean Herlong filed petitions in the probate court pursuant to MCL 700.805; MSA 27.5805, to surcharge Comerica and Jaffe as trustees of the charitable trust, and the Attorney General filed a petition to surcharge and remove Comerica as executor of the Edith Green estate, as trustee of the marital trust, and as trustee of the charitable trust.
On November 13, 1986, Judge Benko began hearings on all of these petitions, excluding issues related to the marital trust because Comerica had been discharged as trustee when the Leslie Green estate had been closed in 1984. Following several days of testimony, the probate court issued its thirty-four page opinion, finding that Jaffe and Comerica violated their obligations as trustees to the settlors and beneficiaries of the charitable trust and that Comerica violated its obligation as personal representative to the Edith Green estate. As to Comerica, the court found that it had negligently handled the sale of the property, as evidenced by its inadequate efforts to determine the property's value and its failure to adequately market the property. Furthermore, the court found that Comerica was negligent in its response to Jaffe's acknowledged conflict of interest and in allowing Jaffe and his firm to control the negotiations. As to Jaffe, the court found that his conflict of interest, although acknowledged, tainted the sale because there was not full disclosure of the extent of his prior representation of Cohen on personal tax matters, because Jaffe actively participated in the negotiations and because his course of conduct insured that his client, Cohen, obtained the property at an inadequate price. The court found that both parties had failed in their duty to keep the beneficiaries reasonably informed and to fulfill a self-imposed duty to keep their co-trustees fully advised of developments.
We begin our review with two procedural issues raised by Comerica and Jaffe.
The probate court has exclusive jurisdiction over proceedings concerning the internal affairs of all trusts, including charitable trusts, in such matters as the removal of a trustee or the review of accounts. MCL 700.805; MSA 27.5805; MCL 700.21; MSA 27.5021; MSA 700.11(2); MSA 27.5011(2); Kowalesky v Kowalesky, 148 Mich App 151, 159-160; 384 NW2d 112 (1986); In re Americana Foundation, 145 Mich App 735; 378 NW2d 586 (1985).
This Court does not review a probate court's findings of fact de novo, MCL 600.866(1); MSA 27A.866(1); MCR 5.802(B)(1), but will review the record to determine whether the findings must be reversed because they are clearly erroneous. In re Sykes Estate, 131 Mich App 49, 53; 345 NW2d 642 (1983). Findings are clearly erroneous when this Court is left with the definite and firm conviction that a mistake has been made. Tuttle v Dep't of State Highways, 397 Mich 44, 46; 243 NW2d 244 (1976). Comerica argues that the standard should be the one employed in some federal cases of "intense scrutiny," because the probate court adopted language from petitioners' posttrial brief for use in its opinion. See, e.g., Andre v Bendix, 774 F2d 786 (CA 7, 1985). We decline to adopt this standard. The findings are those of the trial court and will be reversed only if clearly erroneous and not simply because of the particular language used. See Anderson v Bessemer City, 470 U.S. 564, 572; 105 S Ct 1504; 84 L Ed 2d 518 (1985).
Next, Jaffe cites the language of one subsection of one of the court's nineteen findings as evidence that the probate court failed to recognize the ...