Lawyer/Draftsman Not Liable For Agent’s Misappropriations

DECEMBER 17, 2001 VOLUME 9, NUMBER 25

When Mark Hall decided to take financial advantage of Helen Fuite he began, as so many exploiters of the elderly do, by having her sign a financial power of attorney. He took her to his own attorney, Richard C. Holst of Wyoming, Michigan, to have the document prepared; at the same time Mr. Holst prepared a will naming Mr. Hall as the sole beneficiary of Ms. Fuite’s estate and deeds transferring her property into Mr. Hall’s name. After the exploitation was discovered Ms. Fuite’s conservator sought recovery against not only Mr. Hall but also against attorney Holst.

Ms. Fuite was a widow in her 80s when Mr. Hall befriended her. Although her mental capacity may have been diminished somewhat no court proceeding had ever been initiated to have her capacity legally determined. According to the conservator appointed later to handle Ms. Fuite’s estate, however, anyone could have seen at the time that she was incapacitated.

Ms. Fuite’s conservator filed a lawsuit against Mr. Holst, raising two separate arguments. According to the conservator Mr. Holst knew that Mr. Hall was “an illiterate, financial incompetent,” and he should have exercised his professional judgment to dissuade Ms. Fuite from naming him as her financial agent. Furthermore, argued the conservator, Mr. Holst had a duty to determine whether Ms. Fuite was competent before she signed any of the documents he prepared for her, and he should be liable for the losses she incurred by use of those documents.

The judge hearing the case threw both claims out, finding that they could not succeed under Michigan law. Ms. Fuite’s conservator appealed to the Michigan Court of Appeals, which upheld the dismissal of the claim against attorney Holst.

According to the appellate court, an attorney has no duty to talk his or her client out of making foolish mistakes. Even if Mr. Holst did know that Mr. Hall was financially incompetent he had no obligation to talk Ms. Fuite out of naming him as her agent. To hold otherwise, noted the court, would impose an impossibly high burden on attorneys to second-guess their clients’ decisions. Such a duty, if imposed, might even lead to an obligation to counsel clients against unwise selection of business partners or executors.

The appellate court also threw out the claim that Mr. Holst had not evaluated Ms. Fuite’s mental capacity before allowing her to sign the documents. Mr. Holst had made reasonable inquiry into Ms. Fuite’s understanding of the documents she was signing. He had acted, said the court, with “ordinary learning, judgment [and] skill under the circumstances using reasonable professional judgment.” If anything his mistake was a “mere error of judgment,” and he was not liable for the subsequent losses. Persinger v. Holst, December 4, 2001.

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