Written by: Austin Boyd
Member, American Journal of Trial Advocacy
Introduction:
Recently, in Hodnett v. Hodnett,[1] the Court of Appeals of Mississippi issued an opinion involving an attorney that drafted a series of transactions for her parents, which resulted in her obtaining the entire estate of her parents.[2] Interestingly, her brother, whom she had also represented in an unrelated matter, received nothing from their parents estate.[3] The brother, Tim Hodnett, then sued his sister, Sarah Hodnett, to “set aside a deed to the family farm from their mother to a revocable trust [which named the sister as sole beneficiary].”[4] The brother argued that an automatic presumption of undue influence was created when his sister drafted legal documents for her parents because of their attorney-client confidential relationship.[5] To see how this plays out, it is useful to provide some background information around the presumption of undue influence in attorney-client relationships.
Section 81 of Corpus Juris Secundum states that:
A confidential relationship exists, for purposes of establishing undue influence in the creation of a trust, where a person is so situated as to exercise a controlling influence over the will, conduct, and interest of the grantor. A confidential relationship involved in a trust case may not be misused, unfairly and unreasonably, to the advantage of the dominant party. A transfer of property to the dominant party must be a deliberate and voluntary act of the grantor, and must be fair, proper, and reasonable under the circumstances. In accordance with rules as to deeds, the mere fact that a confidential relationship exists between the grantor and the grantee does not alone invalidate a trust, especially where it appears that the grantor had competent and independent advice of an attorney, or the trust was not procured through improper means attended with circumstances of oppression or overreaching. This rule applies even though the relationship of conservator, guardian, or administrator exists between the grantor and the trustee. Where, however, the person in whom confidence is reposed exerts his or her influence to procure an advantage at the expense of the grantor, the trust may be deemed invalid and may be set aside. Whether such close and confidential relationships exist between the parties as to enable one to dominate and control the other is ordinarily a question of fact dependent on the circumstances of each case.[6]
Section 380 of Corpus Juris Secundum further provides: “[a] rebuttable presumption of undue influence applies to all transactions between an attorney and client for the benefit of the attorney.”[7] Once the presumption has been created, it can be rebutted as mentioned above. This could be done as follows:
The presumption of undue influence arising from transactions between those in confidential or fiduciary relationships may be rebutted by competent evidence or by clear and convincing evidence. To rebut the presumption of undue influence, it is necessary to show that the person alleged to have been influenced had competent and disinterested advice, or that he or she performed the act or entered into the transaction voluntarily, deliberately, and advisedly, knowing its nature and effect, and that his or her consent was not obtained by reason of the power and influence to which the relation might be supposed to give rise. Also, the presumption may be rebutted by proof that the transaction was fair, just, and equitable.[8]
Facts of this Case:
In Hodnett, the lower court found that the sister had a confidential relationship with her mother when the deed was executed due to her preparing various legal documents during the years leading up to that execution.[9] The confidential relationship between the daughter-attorney and mother-client raised the presumption that the deed was the “product of undue influence.”[10] On appeal, the daughter argued that the lower court applied the wrong legal standard in concluding there was a confidential relationship.[11]
Reasonableness and Fairness of the Transaction:
The daughter’s argument on appeal was based on Rule 1.8(c) of the Mississippi Rules of Professional Conduct, which provides that: “[a] lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee.”[12] The Court of Appeals looked further to the comments of the rule and noted that “such gifts are permissible only ‘if the transaction meets general standards of fairness.’”[13] The Court then quoted cases from the Supreme Courts of South Dakota, Wisconsin, and California, which elaborated on this principle.[14] One of these quotes was from a “similar case,” which stated “Rule 1.8(c) cannot be used to excuse substantial gifts which are facially disproportionate to gifts made to other relatives in the same class.”[15]
Per se confidential relationship and public policy:
Next, the Court stated that under Mississippi law, “an attorney-client relationship is a per se confidential one.”[16] After noting that the Mississippi Rules of Professional Conduct are not substantive law, the Court of Appeals cited a Mississippi Supreme Court case that reasoned the general public policy behind the rule was to protect the people from fraud:
[T]he law declares that when there is a fiduciary or confidential relation, and there is a gift or conveyance of dubious consideration from the subservient to the dominant party, it is presumed void. This is not because it is certain the transaction was unfair; to the contrary, it is because the Court cannot be certain it was fair. As stated in Meek v. Perry, “if the court does not watch these transactions with a jealousy almost invincible, in a great majority of cases, it will lend its assistance to fraud.” Further, this is a “policy of the law, founded on the safety and convenience of mankind … preventing acts of bounty.” And, the Court will not permit such a transaction to stand, “… though the transaction may be not only free from fraud, but the most moral in its nature.” “The rule of law in these cases is not a rule of inference, from testimony, but a rule of protection, as expedient for the general good.”[17] (internal citations omitted).
To complete the presumption argument, the Court provided that “a presumption of undue influence arises even without a showing that the recipient played an active part in the preparation or execution of the instrument” due to the gifts being inter vivos and the existence of a confidential relationship between the daughter-attorney-donee and the mother-client-donor.[18]
Jurisdictions Vary on Exceptions Involving a Lawyer that is a Family Member:
Acknowledging that other states, such as Ohio, “have allowed attorneys to prepare wills and deeds for family members to the attorney’s benefit without an automatic presumption of undue influence,” the Court of Appeals of Mississippi was not aware of any “Mississippi authority making an exception to this general rule for an attorney who is a relative of the grantor.”[19] Further, the court reasoned that even if the lower court erred by not finding an exception for a lawyer that drafted legal instruments for relatives, the error would be harmless due to the “particular facts of [the] case.”[20]
Holding:
Ultimately, the Court of Appeals of Mississippi held that the lower court did not err in finding a presumption of undue influence.[21]The Court stated that there was clear evidence in the record that proved there was a confidential relationship between the daughter and mother, regardless of any per se confidential relationship.[22] There was “little evidence” that the parents of the attorney-daughter had any mental incapacity or “physical dependency.”[23] However, the Court provided that “a confidential relationship can be founded on trust just as it can upon physical weakness or dependence.”[24] Additional evidence showed that the daughter prepared all of the documents that ultimately led to her “inheriting [her parents] entire estate,” was attorney-in-fact for both of them, and had a “longstanding attorney-client relationship” with her parents.[25]
Further, the evidence revealed that the daughter used the power of attorney to execute the deed from her father to her mother “when he was dying of cancer,” and had not advised her parents to consult with independent, outside counsel.[26] Additionally, the lower court found that the daughter “had concealed the terms of the trust—if not its existence—from her brother, whom she had previously represented as an attorney.”[27] Ultimately, the daughter received the entire estate of her parents and the brother received nothing.[28] To conclude, the Court of Appeals of Mississippi stated “[a]ttorneys should be held to a higher standard than laymen, to protect both the general good and integrity and reputation of the legal profession.”[29]
Conclusion:
As always, it is best practice to verify the law of your jurisdiction. If your parents, grandparents, or similar family member requests you to draft legal documents, in which you will be a beneficiary, research the law in your jurisdiction and reach out to other lawyers who routinely do this in practice.
[1]2018 WL 1805477 (Miss. Ct. App. 2018).
[2]Hodnett v. Hodnett, 2018 WL 1805477, at *4 (Miss. Ct. App. 2018).
[3]Hodnett, 2018 WL 1805477, at *4.
[4]Id. at *1.
[5]Id. at *1, *3.
[6]90 C.J.S. Trusts § 81 (2018).
[7]95 C.J.S. Wills § 380 (2018).
[8]25 Am. Jur. 2d Duress and Undue Influence § 45 (2018).
[9]Hodnett, 2018 WL 1805477, at *4.
[10]Id.
[11]Id.
[12]MS R RPC Rule 1.8.
[13]Hodnett, 2018 WL 1805477, at *3.
[14]Id.
[15]Id. (citing In re Discipline of Mattson, 651 N.W.2d 278, 288 (S.D. 2002)).
[16]Id. at *3.
[17]Id. at *4 (citing Estate of McRae v. Watkins, 522 So.2d 731, 737 (Miss. 1988)).
[18]Id. (citing In re Will of Moses, 227 So.2d 829, 835 (Miss. 1969)).
[19]Hodnett, 2018 WL 1805477, at *4 (citing Krischbaum v. Dillon, 58 Ohio St.3d 58, 567 N.E.2d 1291, 1296–97 (1991)).
[20]Id. at *4.
[21]Id. at *5.
[22]Id. at *4.
[23]Id.
[24]Id. (citing Norris v. Norris, 498 So.2d 809, 812 (Miss. 1986)).
[25]Hodnett, 2018 WL 1805477, at *4.
[26]Id.
[27]Id. at *4.
[28]Id.
[29]Id. at *5 (citing Estate of McRae v. Watkins, 522 So.2d 731, 737 (Miss. 1988); Lowrey v. Will of Smith, 543 So.2d 1155, 1161–62 (Miss. 1989));
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