Settling a Probate Claim? READ the Documents Supporting the Claim!
The recent case of Millini v. Paulucci reminds us that simple mathematical calculations may not correct if you do not read the document on which you are basing the calculations. Incorrect calculations can lead to the dreaded word for any attorney… malpractice…
Unfortunately, but not uncommon, Jeno (“Father”) and his daughter, Gina (“Daughter”) were involved in many lawsuits against each other. They came to a mediated settlement in which Daughter agreed to sell her interest in Apopka, Florida real estate to Father for $12 million, 2 million due at closing and 10 million reflected in a promissory note at 6 percent interest, to be repaid in 3 annual payments of 1 million each, with a balloon payment due on Sept. 9, 2011.
As part of the settlement agreement, Daughter, in turn, agreed to pay Father 2.9 million for which a note was signed. Father had a right to offset this note against the amount he owed Daughter.
Thus, at the end of day, Father owed Daughter 10 million (after the 2 million paid at settlement) at an interest rate of 6 percent and Daughter owed Father 2.9 million (the annual interest rate was not stated in the case).
Daughter received the three 1 million dollar payments but Father could not come up with the funds for the balloon payment due to Daughter on Sept. 9, 2011. Daughter agreed to a 60 day moratorium on collection efforts.
On Nov. 24, 2011 Father passed away. Daughter filed a statement of claim against Father’s estate for 7 million plus interest for the note due her.
On January 15, 2013, attorney for the personal representative of Father’s estate sent a check to Daughter’s counsel for $4,677,594.52 to fully satisfy the claim against the estate. Attorney calculated 7 million plus interest less the 2.9 million owed by Daughter to Father (Daughter had only paid interest on this note to Father before he died).
Daughter, upon advice of her attorney, signed a satisfaction of claim and both notes were marked paid in full.
Later, when Daughter’s CPA was preparing Daughter’s income tax return, the CPA determined that the 1 million dollar payments paid by Father to Daughter should have satisfied the interest on the 10 million note first and THEN the principal. If interest had been satisfied first, then the balance due on the note from Father to Daughter would have been $8,726,560 NOT $7.0 million, a difference of $1,726,560. What attorney wants to get that phone call?
Daughter’s counsel filed a petition in the probate court to amend her claim and the lower court determined that Daughter’s filing of an amended claim was permissible under Florida law and the “unilateral mistake committed by Gina’s attorneys’ in preparing the statement of claim ‘was not the result of [an] inexcusable lack of due care’ “. At this point you can hear Daughter’s attorneys’ sigh of relief. But… not so fast.
On appeal, the court determined that Daughter’s attorneys “admittedly did not review the terms of the mediated settlement agreement and the promissory notes executed by Jeno prior to preparing the statement of claim. Had they done so it would have been readily apparent that each $1,000,000 annual payment received by Gina was applied first toward the accrued interest and then to reducing the principal balance”.
The appellate court “respectfully” disagreed with the lower court in the finding that the action of Daughter’s attorneys were not an inexcusable lack of due care. The court noted the terms of the note were not complicated. The court stated… “[T]here was no excuse for the attorneys not to review the terms of the documents before preparing the statement of claim for Gina’s execution”. As Daughter did not establish a legitimate basis to set aside the satisfaction and release of claim, the lower court’s order was reversed.
ADVICE: This case illustrates the importance, when monies are in dispute, of hiring a specialist that understands the calculations. Generally, attorneys are not experts in calculations and this is the time to hire a CPA to confirm the calculations. Further, as this author’s mentors always advised, READ the documents!
WORD OF THE WEEK: Unilateral mistake refers, in a contract, to a situation when one party is mistaken regarding a word, definition, term, quantity, or other measurement. Such a mistake can create litigation, especially when the mistake causes a party to suffer substantial monetary losses.
GENEROSITY IS A KEY TO HAPPINESS …REACH OUT AND HELP SOMEONE TODAY! 😎