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Settlement of creditor's claims does not include wrongful death recovery where no good faith claim existed

Paul A. Smith committed suicide owing Huntington National Bank and Comerica Bank somewhere between 17 and 18 million dollars.  The banks sued his Estate and the Estate took the position  that improper actions by the bank had caused Smith to commit suicide.  Ultimately, the case was resolved with a savings of one to two million dollars, waiver of the Estate's redemption rights, and a release of all claims against the banks.  The Estate did not identify any of the savings as a wrongful death recovery, however, and did not attempt to distribute any of the recovery to Interested Persons.

The Decedent's son petitioned the Court to assign a wrongful death value to part of the savings and to hold that the Decedent's widow had violated her fiduciary duty in failing to comply with the Wrongful Death Act.  The Probate Court held a hearing and concluded that "no evidence reasonably substantiates that the estate in good faith could have asserted a wrongful death claim against Comerica Bank."  The son argued, however, that since the claim had been raised by the Estate, a savings had been achieved, and release of the claim had been structured in the settlement, it had some value that must be recognized by the Court.

The Court held that the cases applying the rule cited by the son apply only to the withdrawal of  "bona fide" claims raised in good faith.  Since the Court found that the son had not found evidence of a good faith claim, these cases did not apply.  Further, the modification (and reduction) of the original indebtedness was adequately supported by the waiver of procedural rights by the Estate; therefore the Court did not need to assign value to the wrongful death claim as evidence of consideration for the modfication.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
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