As noted on a recent blog entry by Juan Antunez in Florida (www.flprobatelitigation.com), a recent appeals court ruling1 bears mention because of the ethical issues involved. We continue to be amazed when attorneys, who stand in a fiduciary relationship to their clients, insert themselves as beneficiaries into their clients’ estate plans. The case that led to the ruling involved Virginia Murphy, who died in September 2006 at the age of 107, with a gross estate worth approximately $12 million.

Attorney Gets $100,000 Plus One-third of Residuary Estate

Following her first husband’s death, Virginia became re-acquainted with C. Frank (Cy) Harrison, an attorney, with whom she had attended high school. In the late 1960s, Virginia married Dr. Ralph Murphy, a St. Petersburg, Fla. pediatrician. Cy drafted their estate plans. Dr. Murphy died in 1972, and he and Virginia didn’t have any children. In October 1983, Cy passed away. His partner, Jack Carey, assumed responsibility for Virginia’s legal needs (Virginia was 84 at the time). Jack and his legal assistant, Gloria DuBois, developed a personal relationship with Virginia. In 1984, Virginia executed a health care power of attorney designating Jack and Gloria as her agents. She also granted them access to her safety deposit box. In 1988, at the age of 88 and in failing health, Virginia asked Jack to prepare checks for her signature and to balance her checkbook. Between 1984 and 1994, Virginia executed six wills, each giving ever-increasing amounts to Jack and Gloria. The final will, executed when Virginia was age 94, gave Jack $100,000 plus one-third of the residuary estate, Gloria $150,000 plus one-third of the residuary estate and Virginia’s accountant, George Tornwall one-third of the residuary estate (George died in 2005, but the will didn’t have a survivorship provision so his share went to Jack and Gloria).

Virginia’s second cousin, Jackie Rocke, contested the will, claiming that Jack and Gloria had unduly influenced Virginia. Jackie lived in St. Petersburg and had often socialized with Virginia and included Virginia in her family’s holiday celebrations. Virginia’s 1994 will left a specific bequest to Jackie of $400,000 and $50,000 to each of Jackie’s sons.

The record included notes from Virginia’s physician, documenting Virginia’s increasing levels of confusion and diminishing memory starting in 1985. The record also indicated that Jack’s law partner left the firm because she purportedly thought Jack’s dealings with Virginia were unethical. After that, he closed his law practice in 1993 with the exception of one client: Virginia.

Lower Court Finds Undue Influence

In an August 2008 ruling, the lower court ruled that Jack and Gloria had unduly influenced Virginia and that her residuary estate would pass by intestacy.

It noted evidence that they kept other people out of Virginia’s financial affairs and that Jack asked Virginia’s bank to deal with him because Virginia “became flustered.” Jack also admitted in a deposition that Virginia didn’t comprehend the size of her estate. The court focused on a document called “The Agreement” as the most indicative evidence that impropriety had occurred. Jack, Gloria, George (the accountant) and each of their spouses had signed The Agreement in 2002. It stated that no breach of fiduciary duty had occurred regarding Virginia and “should any of the parties have a mind to upset the grand plan, they should first check with the other two parties.”

The court, while acknowledging Jack’s exemplary professional career, stated that it had never seen a case in which it was so apparent that someone had unduly influenced a will. The court noted that though Florida law doesn’t specifically prohibit an attorney from naming himself as beneficiary of a will, doing so opens the attorney to undue influence charges. A comment to Florida’s ethical Rule 4-1.8(c) states that a client who wants to make a substantial gift to her attorney should have independent counsel. The court recognized that a violation of an ethical rule doesn’t constitute undue influence per se. Focusing on The Agreement, however, the court stated that “[t]his document wreaks of a consciousness of fraud, and the court finds it to be persuasive evidence of undue influence…The Agreement is also compelling evidence that the perpetrators knew all of the elements of undue influence were present.” An appeals court upheld the lower court's ruling but remanded the case back to the lower court to deal with one side issue.

Most states, including Florida, either by statute or common law, have a presumption of fraud that arises when a person standing in a fiduciary relationship receives a gift from his principal or meaningfully participates in the procurement of an estate plan for that principal that benefits the fiduciary. The fiduciary status is bestowed not only upon agents under a power of attorney, but also upon those individuals that the principal trusts and depends on for assistance with his finances or daily living activities.

As recognized by the lower court in Carey, one’s attorney is a fiduciary of the highest magnitude and the ethical rules’ prohibition on an attorney receiving gifts from his client is often insufficient to dissuade some from such conduct. In this case, the court noted the compelling evidence that the perpetrators knew all elements of the undue influence were present. Yet, because of the size of the estate, they repeatedly failed to conform to ethical guidelines, thereby causing an expensive and protracted trial. In this regard, the court found the attorney’s and assistant’s conduct reminiscent of the “South Indian Monkey Trap” where the monkey, having reached through a small hole to grab some food, is unable to get his hand back out of the hole and unwilling to drop the food to do so. He is trapped by his own greed.


Stricter Standard Needed

While this case seems to have reached the right result, it’s unfortunate that the undue influence issue needed to be litigated at all. A client legitimately wishing to give to his attorney a gift need only be referred to independent counsel to do so. We believe anything short of that standard should result in a conclusive presumption of fraud and be per se invalid so that courts can dispose of these types of cases on summary judgment. The lower court noted that by edict of the Emperor Claudius, under Roman law, the scrivener of a will couldn’t inherit under it. We think the Romans had it right.

Endnote

1. Carey v. Rocke, 18 So.3d 1266 (Fla. 2d Oct. 23, 2009), aff’g Carey v. Rocke, Case No. 06-6744ES-4 (Cir. Ct. Fla. Aug. 1, 2008).