Posts Tagged ‘joint control agreement’

“Joint Control Agreement” Leads to Lawyer’s Liability

JUNE 15, 2009  VOLUME 16, NUMBER 44

Tranquilino Ventura was a child when his father died, and just fourteen years old when a lawsuit arising from his father’s death was settled. The total settlement, after costs and fees, exceeded $500,000. When Mr. Ventura turned eighteen he found out that the money was all gone.

Mr. Ventura’s mother, Patricia Dutton, had been appointed conservator by an Alabama probate judge. The judge had ordered that she post a $620,000 bond to secure her proper management of the money, and then given her authority to handle her son’s lawsuit proceeds. Over the next four years she apparently managed to lose much of it in poor stock investments.

There were other questionable uses of the money. Ms. Dutton bought her son a BMW automobile for his sixteenth birthday, and paid for polo lessons and a polo pony. She also loaned $120,000 of her son’s money to her parents, who lost those funds in several schemes involving auto and mobile home sales.

After Mr. Ventura discovered that his money was gone, he brought suit against a number of individuals and organizations. He sued Hartford Insurance, who had issued the bond assuring that his mother would manage the money properly. He also sued the lawyer who had represented his mother, Billie B. Line, Jr., and two brokerage houses that had each handled a portion of the conservatorship money.

Mr. Ventura’s case has made its way to the Alabama Supreme Court twice in the seven years since he reached his majority. The first case, Edward D. Jones & Co. v. Ventura, was decided in 2005. It stands for the proposition that the mandatory arbitration agreements contained in almost all brokerage new account forms can bind the ward even though signed by a conservator. But the more interesting case was decided just last month.

Mr. Ventura secured a $500,000 judgment, plus interest, against his mother, and sought to collect the money from Hartford Insurance, which had (after all) promised to pay off on any claims against the conservator. Hartford, however, wanted to raise another argument. It had gotten Ms. Dutton’s lawyer (Mr. Line) to sign a “joint control agreement,” in which Mr. Line agreed to personally oversee Ms. Dutton’s management of the money — and to sign every conservatorship check that might be issued.

Joint control agreements are popular among bonding companies, and less so among lawyers. The idea is that, since the attorney has some responsibility to monitor the estate anyway, the bonding company can leverage that responsibility into more protection on its bond. It may be hard to see how this works to the lawyer’s benefit, but some insurance agents even hold the joint control agreement out as a boon to lawyers.

Whether or not it was a smart decision for Mr. Line to agree to the joint responsibility, he did. By his signature he actually became an agent of Hartford Insurance. So what did he do next? Mr. Line then signed a number (somewhere between 50 and 150 — the testimony was unclear) blank checks for Ms. Dutton, and let her take over management of the money.

Mr. Line’s failure to monitor the conservatorship went further than that, however. He borrowed $5,000 from Mr. Ventura’s assets himself to make a down payment on a house in Reno, Nevada. Later he and Ms. Dutton would agree that could be a part of his fees, along with another $4,000 he received from the estate.

Although the probate judge had ordered Ms. Dutton to post an additional $120,000 bond, Mr. Line never saw to it that the extra bond was posted. When the judge scheduled an accounting two years into the conservatorship, Mr. Line failed to get it filed and instead asked for dismissal of the guardian ad litem, the attorney who had been appointed to represent Mr. Ventura’s interests. The probate judge declined to grant his request, but Mr. Line later testified that he did not get the judge’s order, and he never prepared an accounting or appeared for the hearing scheduled in the probate court.

Before trial Mr. Ventura settled with Hartford Insurance on the claim against the bond issued to Ms. Dutton, and that meant the trial proceeded with Hartford moved from the “defendant” category to “plaintiff.” Testimony at the trial indicated that Mr. Ventura’s estate should have been worth in excess of $920,000, even if some of Ms. Dutton’s expenditures had been approved.

The jury awarded $200,000 in actual damages against Mr. Line, and another $550,000 in punitive damages. The Alabama Supreme Court ruled that Mr. Line had undertaken a fiduciary relationship not only with his client, Ms. Dutton, but also with Hartford Insurance and with Mr. Ventura. In these facts, and given the magnitude of Mr. Ventura’s loss, the court had no trouble upholding the judgment. Line v. Ventura, May 22, 2009.

Footnote: on February 8, 2008, Mr. Line filed a Chapter 7 bankruptcy petition. It is not yet clear whether Mr. Ventura or Hartford Insurance will receive all or any significant portion of their judgment.

What can we glean from the story of Mr. Ventura, Ms. Dutton, Mr. Line and Hartford Insurance? Several points:

  • If a lawyer is willing to sign a “joint control agreement,” he or she should do so with eyes wide open  and the lawyer needs to treat the agreement seriously and actually monitor his or her client’s actions
  • In any case, agreement or no agreement, a lawyer who ignores his client’s failure to handle conservatorship funds subjects himself or herself to personal liability for that failure
  • If there is any question about the ability of a family member — even a trusted and loved family member — to handle fiduciary responsibility, it is better for the ward, for the bonding company, for the court and ultimately for the lawyer if a professional fiduciary is selected instead.

Employer Pays Twice After Guardian Mishandles Funds


When Ashley Tatum’s father Ernest died Ashley was still a minor. Ernest Tatum had named Ashley as beneficiary on several retirement and life insurance accounts with his employer, BellSouth, and so Ashley’s mother Rosalyn Felder had to go to court to secure an appointment as guardian of Ashley’s estate in order to handle the proceeds.

Ms. Felder hired Memphis, Tennessee attorney Philip Cooper as her attorney for the guardianship proceeding. Mr. Cooper presented the pleadings and evidence to the court, and Ms. Felder was appointed as guardian of Ashley’s estate (in Arizona and a number of other states, incidentally, Ms. Felder would have been named as “conservator” rather than “guardian”—but the roles would be the same).

The court was concerned, however, about protecting Ashley’s estate from poor management or misappropriation. In order to ensure that nothing would go awry, the court imposed two requirements on Ms. Felder. She was ordered to post a surety bond and the accounts were to be under the “joint control” of Ms. Felder and her attorney, Mr. Cooper.

A surety bond is essentially an insurance policy protecting the estate in a guardianship or conservatorship proceeding, and Ms. Felder purchased her bond through Fidelity & Deposit Company of Maryland (F&D). The joint control requirement was to be satisfied by attorney Cooper taking responsibility for collecting and overseeing Ashley’s money.

Mr. Cooper wrote to BellSouth to tell them of the conservatorship appointment. His letter enclosed a copy of the court pleadings and instructions that all monies were to be sent to his office address. Then he set up a guardianship account for Ashley and began depositing the life insurance and retirement proceeds into it.

Despite the instruction, however, BellSouth sent one of the checks directly to Ms. Felder, made payable to “Ashley J. Tatum, Rosalyn W. Felder Guardian of”. That check was in the amount of $18,622.38, and it never made it into the guardianship account. Presumably, Ms. Felder cashed the check and spent it, without ever notifying her attorney she had received it.

Five years later Ms. Felder was removed as guardian of Ashley’s estate and Fidelity & Deposit (the insurance company) paid off on its bond. Then the bonding company went after BellSouth for its failure to follow the lawyer’s initial instructions. The probate court (which handles guardianships of minors’ estates) ordered BellSouth to pay F&D the amount it had sent directly to Ms. Felder, plus interest, and BellSouth appealed.

The Tennessee Court of Appeals upheld the probate court’s judgment against BellSouth. The company knew about the joint control requirement, said the court, and if the company had followed instructions no loss would have occurred. BellSouth was ordered to pay the original amount, plus interest, and also costs of the appeal. Guardianship of Tatum, February 4, 2002.

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