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In Re Nestorovski Estate
Citations: 769 N.W.2d 720; 283 Mich. App. 177Docket: Docket 271704
Court: Michigan Court of Appeals; March 31, 2009; Michigan; State Appellate Court
Vasko Nestorovski appeals a decision from the Oakland County Probate Court that upheld an arbitrator's ruling which invalidated the decedent Vlado Nestorovski's 2001 will, set aside two deeds from 2001, and a power of attorney from 2000, directing estate distribution according to intestate succession laws. Vlado, born in Macedonia in 1925, emigrated to the U.S. in 1972 with his wife. His two children, Vasko (respondent) and Bora Petrovski (petitioner), are the only interested parties. In April 2001, Vasko consulted attorney Rod Sarcevich for an estate plan, who referred him to attorney Ronald Ambrose. Ambrose met briefly with Vlado, who had limited English proficiency and could not understand English documents. After this meeting, Ambrose drafted a will favoring Vasko and prepared two quitclaim deeds transferring property to him. On April 25, 2001, Vlado signed these documents, translated into Serbian by a priest, in the presence of a neighbor. Petitioner Bora challenged the will and deeds after Vlado's death, claiming undue influence and lack of testamentary capacity due to Alzheimer's disease. The probate court mandated facilitation, which failed, and subsequently ordered binding arbitration, approved by both parties. The arbitration took place over three days, where evidence was presented. The arbitrator, Patricia Gormely Prince, concluded that Vlado was unduly influenced and lacked the capacity to execute the will and deeds, leading to the court's affirmation of her decision. MCL 700.2101 and MCL 700.2103 mandate the equal division of Vlado's estate between the petitioner and respondent, with Prince recommending that each party cover their own attorney fees, leaving Vlado's estate unaffected by such costs. On May 31, 2006, the respondent filed objections in probate court regarding certain aspects of the arbitration decision, specifically concerning Vlado's real property and a 2000 power of attorney, citing MCL 600.5005 and McFerren v. B. B Investment Group. The respondent also submitted a "Supplemental Objection" to the whole arbitration decision, arguing that the probate court lacked authority to refer the estate-based dispute over Vlado’s testamentary capacity to arbitration, referencing the Michigan Supreme Court's ruling in In re Meredith Estate. The probate court confirmed the arbitrator's decision entirely, leading to this appeal. The respondent argues that the absence of a written arbitration agreement invalidates the probate court's adoption of the arbitrator's award, although this issue was not raised in the probate court, which typically precludes appellate review. Nonetheless, the court chose to address it since it involves a legal question with presented facts. The respondent had previously acknowledged the stipulated order for arbitration, which the court treats as a contract. This stipulated order clearly indicated that the matter was to be arbitrated, and by participating in arbitration without objection, the respondent waived any claim regarding the existence of a written agreement. Furthermore, the respondent's challenge to the arbitrator's ruling on jurisdiction, based on MCL 700.1302, relies on In re Meredith Estate, asserting that the stipulated arbitration cannot override the probate court's jurisdiction in determining testamentary capacity. Respondent argues that the probate court lacked the authority to adopt the arbitrator's decision regarding a decedent's estate. Petitioner acknowledges that under MCL 700.1302, the probate court has "exclusive legal and equitable jurisdiction" over estate matters but contends this does not prevent the court from enforcing a common-law arbitration agreement. Petitioner cites MCR 5.143(A) as permitting alternative dispute resolution methods and suggests that jurisdictional concerns from the In re Meredith Estate case are outdated. In In re Meredith Estate, the decedent's will and a subsequent codicil were contested after his death. The codicil named an additional executor but did not alter the will. Testimony indicated the decedent may not have had the mental capacity to execute the codicil. The parties agreed to seek a third-party attorney's assessment of the decedent's mental competency. The probate court admitted the will but rejected the codicil, leading to Campbell's appeal. The Michigan Supreme Court addressed whether the executors could submit the competency question to a third party. The Supreme Court clarified that while estates can be settled without probate court intervention, the case centered on who would act as executor of the will. It concluded the probate court erred in accepting the arbitrator's finding, emphasizing that statutory procedures required the probate court to hold a hearing and determine testamentary capacity, with proper notice to interested parties. The third-party attorney was not designated by the court to take testimony, which further invalidated the arbitration. The Supreme Court's decision in *In re Meredith Estate* was based on the probate statutes in effect at the time, emphasizing that only the probate court has the authority to determine a testator's mental capacity. The court rejected the idea that parties could circumvent statutory requirements regarding the investigation of testamentary capacity through agreement or stipulation. It noted that the executors and trustees could not bind the estate to arbitration regarding the testator's competency as this required the involvement of all interested parties. The court asserted that jurisdiction over competency determinations cannot be delegated to a non-judicial third party. Additionally, the Supreme Court criticized the informal arbitration process used in *In re Meredith Estate*, which lacked proper notice to interested parties and did not follow necessary procedural safeguards. In contrast, the current case involves all parties agreeing to binding arbitration with proper procedures, including a written stipulation and sworn witness testimony, distinguishing it from *In re Meredith Estate*. Despite these differences, the broad implications of the Michigan Supreme Court's statements regarding arbitration in probate disputes necessitate a review of whether Michigan law currently permits binding arbitration for such matters, especially considering that the probate laws have undergone significant revisions since the *In re Meredith Estate* ruling. The Supreme Court previously characterized probate courts as having limited jurisdiction concerning ordinary litigation. In 1939, Michigan enacted its original probate code (1939 P.A. 288), which was replaced in 1978 by the Revised Probate Code (1978 P.A. 642). Neither code granted general equitable powers to probate courts. However, the Revised Probate Code expanded probate court authority through MCL 600.847, allowing these courts to exercise powers similar to those of circuit courts for effective jurisdiction. In 1998, the Estates and Protected Individuals Code (EPIC) was enacted, taking effect in April 2000, which conferred exclusive legal and equitable jurisdiction over matters related to deceased estates (MCL 700.1302(a)). EPIC also provides concurrent authority to determine property rights, authorize partition, and compel specific performance of contracts related to wills (MCL 700.1303(1)). EPIC aims to simplify estate management, reduce court involvement, and promote efficiency in estate liquidation and distribution (MCL 700.1201). Procedural changes have also occurred; a 1980 ruling indicated that general court rules did not apply to probate courts unless referenced, but current rules align probate court procedures with those of civil proceedings, as modified (MCR 5.001(A)). The use of alternative dispute resolution (ADR) has increased, with judicial approval of arbitration gaining traction, seen as a cost-effective and fair dispute resolution method (Rembert v. Ryan's Family Steak Houses, Inc., 1999; Hetrick v. David A. Friedman, D.P.M. P.C., 1999). Historically, judicial hostility towards arbitration agreements limited their enforcement, as noted in Scherk v. Alberto-Culver Co., where English courts viewed such agreements as encroaching on judicial jurisdiction. The Supreme Court indicated that arbitration could potentially remove the probate court's jurisdiction, as suggested in In re Meredith Estate. However, it emphasized that no stipulation can divest the probate court of its jurisdiction or delegate its powers to a third party. In Rooyakker, the court upheld a circuit court's decision to refer a matter involving client solicitation and arbitration clauses to arbitration, despite claims that exclusive jurisdiction under the Michigan Antitrust Reform Act (MARA) precluded arbitration. The court reasoned that the existence of statutory jurisdiction does not negate the possibility of arbitration, and if the Legislature intended to exempt antitrust actions from arbitration, it could have explicitly done so. The ruling rejected the notion that arbitration ousts judicial jurisdiction, asserting that arbitration merely shifts a dispute from litigation without affecting a court's jurisdiction, akin to compromise or settlement. The waiver of the right to litigate can occur through contract or unilateral action, and the outdated belief that arbitration undermines judicial authority has evolved, with arbitration now being favored as a dispute resolution method. Additionally, common law has historically supported arbitration in will contests, as seen in prior cases that upheld agreements removing will challenges from probate court jurisdiction. Professor Martin Domke highlights the pro-arbitration stance in probate disputes, referencing President George Washington's will, which stipulates that any disputes should be resolved by three impartial individuals chosen by the parties involved. This provision emphasizes that their decision should be binding as if it were rendered by the Supreme Court. Although the Michigan Supreme Court previously rejected a specific probate arbitration in In re Meredith Estate, other cases support the acceptance of common-law arbitration in probate matters. In Hoste, the court upheld an arbitration agreement related to a will contest, clarifying that such agreements do not eliminate the jurisdiction of the Supreme Court but rather require decisions from a court of competent jurisdiction, affirming that public policy encourages finality in original jurisdiction decisions. Consequently, the argument against the arbitrability of probate proceedings is rejected, supported by Hoste's endorsement of arbitration even in historical contexts. The enactment of the Estates and Protected Individuals Code (EPIC) has significantly relaxed prior restrictions on probate court powers, furthering the acceptance of arbitration as a viable alternative to litigation complexities. Michigan Court Rules promote the use of Alternative Dispute Resolution (ADR) in legal disputes, specifically through MCR 2.410, which outlines various ADR processes such as settlement conferences and mediations. In 2001, a probate court rule, MCR 5.143(A), was adopted allowing for mediation and other ADR processes in contested proceedings. The ruling in In re Meredith Estate, which previously restricted arbitration of probate disputes, is deemed outdated due to recent legislative changes and court rule updates. The case is distinguishable as all parties were aware of and consented to arbitration regarding the testamentary capacity of Vlado, thus permitting binding arbitration in probate disputes. Regarding the quitclaim deeds, the respondent contends that the arbitrator overstepped by declaring that Vlado was unduly influenced and incompetent to transfer property. The petitioner counters that as the arbitration was common-law, the arbitrator rightfully addressed the property distribution. The respondent's engagement in the arbitration process limited his ability to contest its scope. Judicial review of arbitration awards follows a de novo standard, examining the existence and enforceability of arbitration contracts. In Michigan, arbitration can be either statutory, governed by the Michigan Arbitration Act (MAA), or common-law, with the former requiring specific statutory criteria to be met. If these criteria are not met, the arbitration is classified as common-law. Defective statutory arbitration defaults to common-law arbitration as established in Whitaker v. Seth E. Giem, Assoc. Inc. The arbitration order did not allow for a judgment based on the arbitrator's decision, thus applying common-law rules instead of statutory ones. Respondent argues that the arbitrator lacked jurisdiction over disputes involving Vlado's real property, citing MCL 600.5005, which prohibits arbitration concerning real estate ownership interests. The court in McFerren interpreted this statute to prevent arbitration of all fee ownership disputes in real property, emphasizing that arbitrators cannot resolve competing quiet-title claims due to this prohibition. However, arbitration is permitted for certain limited interests in real estate, such as terms of years or partition disputes. The Michigan Supreme Court reaffirmed in Wold Architects, Engineers that common-law arbitration remains valid and has not been preempted by statutory arbitration, highlighting that both forms coexist in Michigan law. The court noted that the Michigan Arbitration Act (MAA) does not demonstrate an intent to abolish common-law arbitration, meaning that agreements not conforming to the MAA are unenforceable under its provisions. If real estate disputes are arbitrated in violation of MCL 600.5005, the resulting award cannot be enforced in court. For an arbitration agreement to comply with statutory requirements, it must be written and explicitly allow for circuit court judgment on the award; otherwise, it defaults to common-law arbitration. In this case, the parties did not meet the statutory requirements, so their arbitration is not bound by statutory restrictions. The common law permits arbitration of real estate disputes, leading to the conclusion that MCL 600.5005 does not prevent arbitration regarding Vlado's ability to execute deeds. The precedent set in Hoste supports this interpretation, indicating that the statutory limitations on arbitration did not restrict the common-law arbitration involving married women, thus reinforcing the notion that common-law arbitration is not constrained by MCL 600.5005. The Supreme Court ruled that the arbitration at issue was governed by common law rather than statutory law, rendering the clause from section 10924 of the Compiled Laws of 1897—which excludes married women from statutory arbitration—irrelevant. The court noted that the parties were free to agree to arbitrate whether Vlado had the mental capacity when he signed two quitclaim deeds in April 2001. Although MCL 600.5005 prohibits certain real estate disputes from being submitted to statutory arbitration, it does not prevent common law arbitration of such disputes, as established in Wold Architects, Engineers. Respondent argued that neither the arbitrator nor the probate court had the authority to annul a power of attorney executed by Vlado in 2000, which designated a Macedonian attorney to manage Vlado's property. This argument was based on Niemetta v. Teakle, which stated that a court lacks jurisdiction over property outside its reach. However, the probate court did not assume jurisdiction over the Macedonian property; instead, it acted on the arbitrator's finding of Vlado's incompetence as of January 1, 2000, recommending the annulment of the power of attorney, and that the Macedonian property be treated as part of the probate estate unless it was transferred prior to that date. The probate court was deemed to have the authority to set aside the power of attorney. Lastly, the respondent contended that the arbitrator exceeded the scope of the arbitration agreement by addressing Vlado's testamentary capacity prior to the execution of the will and deeds. Despite this issue not being raised in the probate court, the court chose to address it due to its legal significance. A three-part test was outlined to determine the arbitrability of an issue, involving the existence of an arbitration agreement, whether the issue is within the arbitration clause, and if it is exempted from arbitration by the contract terms. The court expressed a preference for resolving doubts regarding arbitrability in favor of arbitration. The arbitration agreement between the parties stipulated its scope as encompassing "this matter," which involved the distribution of Vlado Nestorovski's entire probate estate. Petitioner's petition asserted that Vlado lacked the mental capacity to understand his property from 1999 until his death. The issue of Vlado's testamentary capacity was deemed relevant to the arbitration, as the respondent did not object to the arbitrator considering the power of attorney in the probate court. The arbitrator's decision to consider Vlado's capacity was upheld due to the basic arbitrability requirements being met. Respondent contested that the arbitrator exceeded her authority by ruling that both parties bear their own attorney fees, arguing that MCL 700.3720 mandates the estate to cover these costs if the personal representative acts in good faith. However, it was concluded that MCL 700.3720 did not apply, as the arbitrator found that the respondent exerted undue influence on Vlado, undermining any claim of good faith. A dissenting opinion expressed concern regarding the arbitrability of testamentary capacity based on the precedent set in In re Meredith Estate, where the Michigan Supreme Court held that testamentary capacity is not arbitrable. The dissenting judge emphasized that, as an intermediate appellate court, they are bound by this precedent and cannot overrule it, even if they believe the Supreme Court might change its position if revisited. Michigan Supreme Court precedent prohibits inferior courts, including appellate and trial courts, from overruling decisions made by the Supreme Court, which retains the exclusive authority to modify or overturn its own rulings. The case of Meredith is considered valid law until the Supreme Court declares otherwise, thus binding lower courts to adhere to its precedent. The ruling in Meredith specifically addresses the arbitrability of testamentary capacity, affirming that it is not arbitrable and establishing a narrow scope for its holding. The current case at hand directly relates to this issue, necessitating adherence to the Meredith ruling. Historical context is provided by People v. Mitchell, which underscores the principle of stare decisis, indicating that lower courts must follow the Supreme Court's decisions and cannot express disagreement through overruling. The Michigan Supreme Court has reiterated this principle, emphasizing its obligation to overrule or modify case law when necessary, thereby affirming that until it takes such action, lower courts remain bound by its precedents. This legal framework has been consistently reinforced in prior cases. The Supreme Court emphasized that while the Court of Appeals may believe a decision from the Supreme Court is outdated or incorrect, it is still required to apply that precedent until it is explicitly overruled by the Supreme Court itself. This principle, known as vertical stare decisis, is foundational to maintaining the predictability and integrity of the law. The U.S. Supreme Court has similarly mandated that only it can overrule its own precedents, as illustrated in Rodriguez de Quijas v. Shearson/American Express, Inc., where the Court affirmed that lower courts must adhere to existing precedents, even if they believe those precedents should be overturned. The document argues that allowing lower courts to ignore established precedents could undermine the rule of law and lead to unpredictability. It stresses that the appellate process allows for the correction of erroneous precedents without granting lower courts the authority to disregard established rulings based on speculation about future Supreme Court decisions. Overall, both the state and federal systems uphold the importance of adhering to precedent to maintain judicial consistency and uphold the rule of law. Intermediate appellate courts are bound by the precedent set by higher courts, specifically prohibiting them from overturning Supreme Court decisions, as established in Mitchell and Boyd. The majority’s attempt to overrule the precedent set in Meredith regarding testamentary capacity not being arbitrable is unsupported by legal authority and represents an improper exercise of power. The dissent emphasizes that only the Supreme Court has the authority to revisit its own rulings. It criticizes the majority’s rationale, which attempts to reconcile its decision with the evolution of the probate code and arbitration, as insufficient to justify departing from established precedent. The dissent calls for the reversal of the probate court's order affirming the arbitration award. Additional notes clarify that the case involves parties with no direct interest from a deceased individual, and it references various precedent cases that inform the discussion. The dissent insists that the majority's ruling does not align with the facts of the current case or the controlling statutes. Overall, the dissenting opinion firmly advocates for adherence to established judicial principles and the authority of the Supreme Court. Statutory arbitration is governed by "MCL 600.5001 et seq," as referenced in Engineers, supra at 235, 713 N.W.2d 750, but MCL 600.5005, part of the Michigan Arbitration Act (MAA), specifically pertains to condominiums and is not applicable in this context. The majority argues that amendments to statutes that influence higher court decisions can justify departure from the doctrine of stare decisis, citing People v. Pfaffle and Lamp v. Reynolds. However, the dissent points out that Pfaffle lacks supporting authority for this theory, and Lamp only reiterates that the Michigan Supreme Court, rather than an intermediate appellate court, has the authority to overrule its precedents. Additional cases from various jurisdictions are referenced to illustrate the limitations of appellate courts in modifying established precedents.