Florida Probate & Trust Litigation Blog

Florida Probate & Trust Litigation Blog

By Juan C. Antúnez of Stokes McMillan Antúnez P.A.

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Broward probate judge to personal representatives: “there is a higher power that [you're] accountable to and, short of God, that’s me.” 4th DCA says not so fast.

Posted in Compensation Disputes, Creditors' Claims, Practice & Procedure

Vazza v. Estate of Vazza, — So.3d —-, 2014 WL 4082864 (Fla. 4th DCA August 20, 2014)

“[R]egardless of whether the creditors gave approval or not, there is a higher power that [personal representatives are] accountable to and, short of God, that’s me.” Probate Judge Mark Speiser

On average Broward County’s probate judges each took on 2,848 new cases in FY 2012-13 (see here). The unavoidble consequence of that kind of case load is what’s been referred to as the “cold judge” factor; a term coined in a 2009 ABA Litigation magazine piece entitled Persuading a Cold Judge.

Probate courts are especially prone to cold judging. Not because our probate judges don’t want to do the right thing (most do), but because Florida’s state court system is so starved for resources they’re tempted to move cases through the system as quickly as possible. One way to do that is not requiring evidentiary hearings before ruling on temporary injunctions or “freeze” orders. Most of the time these no-evidence freeze orders don’t get appealed, but when they do, our appellate courts will step in from time to time and reverse them (see here, here). That’s what happened in this case.

Case Study:

The 4th DCA’s linked-to opinion above provides close to zero factual context for its three-paragraph ruling. Fortunately the case was reported on in the DBR in a piece by reporter Noreen Marcus entitled 4th DCA — Acting Somewhere Between God And Judge — Reverses Ruling Made Without Evidentiary Hearing. According to the DBR report, the decedent in this case is Richard R. Vazza, a wealthy real-estate developer who personally guaranteed loans worth $140 million. After his death Mr. Vazza’s creditors accused two of his sons of improperly siphoning funds out of the probate estate; they sought an order from the probate judge compelling the decedent’s sons, who were also serving as personal representatives, to return over $800 thousand in contested fees. The sons cried foul, claiming they’d acted with creditor approval. This argument didn’t get them very far with the judge. As reported by the DBR:

Broward Circuit Judge Mark Speiser seemed to side with the creditors when he said the court registry would retain $855,253 in disputed salaries and fees to the Vazzas. He issued his Dec. 18, 2013, ruling without first holding an evidentiary hearing. According to a transcript quoted by the sons’ lawyers, Speiser stated, “regardless of whether the creditors gave approval or not, there is a higher power that they’re accountable to and, short of God, that’s me.”

Probate judges will often go out of their way to tell the lawyers involved in this kind of hearing that the ruling is temporary in nature and in no way reflects how he or she is going to ultimately rule on the merits of the case, which is apparently what happened in this instance. As reported by the DBR:

When he required the Vazzas to turn over the $855,253 to the court registry, Speiser explained: “But, again, I’m probably being redundant and repetitious, but I want to do so to overemphasize, I am not ruling today that they’re not necessarily entitled to any or all of that money. They may very well be entitled to all of it, but the proper process and procedure is that that has to get prior court approval.”

I have no doubt the judge’s comments were sincerely made. However, in the real life push and pull of contested probate proceedings this kind of ruling is inevitably viewed as a big win for the prevailing party. Why? Because it’s perceived as a strong indication of how your judge is “leaning” in terms of a final ruling, which isn’t a problem if the judge’s “leanings” are based on actual evidence. What is a problem is when the court skips the evidence step and rules on nothing other than uncorroboarated argument of counsel, which is apparently what happened here. The DBR quotes the Vazzas’ lawyer, Gerald Richman of Richman Greer in West Palm Beach, as follows:

Richman characterizes what Speiser did as granting a mandatory injunction or prejudgment writ of attachment, both of which require a lot of record support.  “You don’t go ahead and say put this back when there’s no evidence that it wasn’t justified,” he said. “The important thing is that there’s a reason why you have to have an evidentiary hearing rather than just assuming that what was done is wrong.”

According to the 4th DCA he’s right: no evidence = reversal:

Despite the disputed allegations regarding whether the Vazzas acted properly under Florida law and within their statutory power, the trial court entered its order requiring return of specific funds without holding an evidentiary hearing. Accordingly, we reverse and remand the case back to the trial court to hold an evidentiary hearing. See In re Estate of Winston, 610 So.2d 1323, 1325 (Fla. 4th DCA 1992) (citing § 733.6175, Fla. Stat. (1991)) (“[T]he Florida probate court has exclusive jurisdiction and is obligated to review estate fees upon the petition of a proper party.”).

Lesson learned?

The problem here isn’t a particular judge who doesn’t understand the right way to go about entering a freeze order, in my opinion it’s structural: we ask our state court judges to do too much with too little. So what’s to be done? That depends on when you’re hired. Ideally, you’re brought in at the planning stage before the client passes away, which allows you to anticipate — and plan accordingly for — the structural limitations inherent to an overworked and underfunded state court system. As I’ve previously written here, one important aspect of that kind of planning should be “privatizing” the dispute resolution process to the maximum extent possible by including mandatory arbitration clauses in all our wills and trusts.

Once the client passes away, your options for opting out of the public court system are limited. What to do then? Anticipate — and plan accordingly for — the “cold judge” factor. And how do you do that? Follow the advice provided in Persuading a Cold Judge:

Begin at the beginning. In every court appearance, there are six basic queries to answer for a judge: [1] Who are you? [2] Who is with you, and whom are you representing? [3] What is the controversy, in one sentence? [4] Why are you here today? [5] What outcome or relief do you want? [6] Why should you get it? This last query is most often forgotten. Indeed, these six essential queries are a good beginning even when you are dealing with a warm judge. Consider putting them on a PowerPoint slide, a handout in the form of an “executive summary,” or a demonstrative exhibit to project through Elmo or other presentation technology.

A judge in a suburban district told me that the one thing I could do to assist his judging was to begin succinctly by telling him what was before the court, remind him of the nature of the case, and tell him what action I wanted the court to take and why I thought I had the right to that action. Once I did this for him, he would be ready to listen to my argument. This particular judge told me that he has so many cases that he can’t read the motions before the hearing, and if he has read them, it was so long ago that he couldn’t recall what he’d read. He has no legal assistant to write memos for him; he does his own legal research, and if you cited more than 10 cases for him to read, he couldn’t do it. He likes being a judge and wants to do the best job he can, but he is forced to come into hearings and trials cold. So, help him be the good judge he wants to be and the quality of his decisions will be your reward.

How much money do trust funders inherit?

Posted in Musings on the Practice of Law, Trust and Estates Litigation In the News

The median inheritance reported in the Federal Reserve’s Survey of Consumer Finances (SCF) was $69,000 (the average was $707,291). For trust funds, that median wealth transfer was way, way higher — $285,000 (and the average was $4,062,918).

If you earn your living as an attorney working with and around private and charitable trusts, it’s probably a good idea to have some sense of how large the “market” is for what you do and what your future prospects look like. Here’s my guess, based on personal experience and the best empirical data I’m aware of. First the good news: the market’s big — and growing fast. Now the bad: due to extreme market concentration and huge competitive barriers, most of that new business is going to go to a tiny % of lawyers.

Market size: think billions

In an article entitled The Prudent Investor Rule and Trust Asset Allocation: An Empirical Analysis, Prof. Sitkoff of Harvard Law reported that according to federal banking data roughly $760 billion was held in roughly 1.25 million private and charitable trust accounts as of year-end 2006, and according to IRS data in filing year 2007 more than 2 million 1041 tax returns were filed for trusts, reporting $142.5 billion in gross income, $3.7 billion in fiduciary fees paid, and $1.6 billion in attorney, accountant, and other professional services paid. These are all national figures.

The Florida-specific numbers are just as big. According to tax return data for 2012 (the latest available), the IRS received more than 140,000 fiduciary tax returns (Form 1041) for Florida-based trusts and estates, which reported in the aggregate over $6 billion in net income and approximately $273 million in attorney, accountant, and other professional services paid. These figures exclude trusts that are not “simple” or “complex” under the tax code, such as revocable trusts, thus understating the actual market size to some degree. On the other hand, the IRS figures lump all professional fees into a single line-item and include probate estates in their figures, which overstates the actual market size to some degree.

Florida – Filing Year 2012

IRS Tax Statistics — Fiduciary Income Tax Returns Filed (Form 1041)

Complex Trusts

Decedent’s Estates

Simple Trusts

Total

Returns Filed:

79,026

16,878

47,962

143,866

Net income:

$3,631,859,000

$850,236,000

$1,686,093,000

$6,168,288,000

Fees paid to Fiduciaries:

$160,018,000

$56,958,000

$84,963,000

$301,939,000

Fees paid to attorneys, accountants and other professionals:

$98,186,000

$137,765,000

$36,855,000

$272,806,000

Reflecting the rapid growth of this market, Prof. Sitkoff provided updated national figures in Major Reforms of the Property Restatement and the Uniform Probate Code: Reformation, Harmless Error, and Nonprobate Transfers, reporting that as of year-end 2010 federal banking data indicated $870 billion was held in trust accounts (in other words, an increase of over $1 billion or roughly 15% in just four years). As eye-popping as those figures might be, they exclude the vast majority of trusts. How do we know that? Because the federal banking data Prof. Sitkoff relies on only accounts for institutional trustees that are part of the U.S. Federal Reserve System, they categorically exclude all trusts in which the trustee or co-trustees are private individuals (which is most trusts). And we can expect these figures to skyrocket over the next few decades as we work our way through the largest generational wealth transfer in U.S. history. (See Why the $41 Trillion Wealth Transfer Estimate is Still Valid).

Market concentration: think 1.3%

With figures this big, you’d expect a lot more lawyers and other professionals to be active in this practice area. So why aren’t they? Think market concentration. While there may be huge sums tied up in U.S. trusts, those trusts are concentrated in a miniscule slice of the population, meaning the potential pool of clients is correspondingly limited. Which brings me to a cool set of charts recently published in this blog post on the FiveThirtyEight Blog. According to the blog-post’s author, Mona Chalabi, the most detailed data on inheritance in the U.S. comes from the Federal Reserve’s Survey of Consumer Finances (SCF). And according to the latest SCF data available, only 1.3% of the survey respondents who reported receiving an inheritance received it via a trust. In other words, close to 99% of all inheritances are NOT received in trust. (Think market concentration.) Here’s an excerpt from the FiveThirtyEight Blog post:

[A]ccording to the SCF, trust funds are rare. As of 2010 (yep, it’s a while ago, but this survey is only conducted every three years and SCF has yet to publish 2013’s results), 22.5 percent of respondents said they had inherited money. Only 1.3 percent said they had inherited money through a trust fund.

But how do trust inheritances compare to non-trust inheritances in terms of size: on average they’re orders of magnitude larger. (Think market size.) Here’s an excerpt from the FiveThirtyEight Blog post:

The median inheritance in the survey was $69,000 (the average was $707,291). For trust funds, that median wealth transfer was way, way higher — $285,000 (and the average was $4,062,918).

The outliers here are probably lying on a beach somewhere — one respondent inherited $105,000 in 1970, followed by $220 million via a trust fund in 2000 before finally receiving a $2 million top-up inheritance in 2005.

Malcolm Gladwell writes in Outliers it takes 10,000 hours of focused practice to master any skill. “What’s really interesting about this 10,000-hour rule is that it applies virtually everywhere,” Gladwell told a conference held by The New Yorker magazine. “You can’t become a chess grand master unless you spend 10,000 hours on practice. The tennis prodigy who starts playing at six is playing in Wimbledon at 16 or 17 [like] Boris Becker. The classical musician who starts playing the violin at four is debuting at Carnegie Hall at 15 or so.”

Market competition: think barriers to entry

The future growth prospects for this practice area are good, but the barriers to entry are huge. In terms of future “market” growth, the stat’s speak for themselves, so I’ll focus on the barriers-to-entry issue.

Malcolm Gladwell writes in Outliers it takes 10,000 hours of focused practice to master any skill. (Click here.) “What’s really interesting about this 10,000-hour rule is that it applies virtually everywhere,” Gladwell told a conference held by The New Yorker magazine. “You can’t become a chess grand master unless you spend 10,000 hours on practice. The tennis prodigy who starts playing at six is playing in Wimbledon at 16 or 17 [like] Boris Becker. The classical musician who starts playing the violin at four is debuting at Carnegie Hall at 15 or so.” Assuming you have the necessary education (usually that involves a tax or estate planning LL.M. in addition to your J.D.), the only way you’ll log the 10,000 hours of “practice” needed to master this very complex area of the law is by earning your stripes at a firm (usually a small boutique, the big firms have been abandoning this practice area for years) that’s already built a practice serving this highly-concentrated market niche. When it comes to competitive barriers, that one’s tough to beat.

Florida must recognize gay widower’s Delaware marriage for purposes of appointing the non-resident personal representative of his ancillary estate, Palm Beach probate judge rules

Posted in Marital Agreements and Spousal Rights, Removal of Personal Representatives and Surcharge

Estate of Bangor, Case No. 502014CP001857 (Fla. 15th Cir, Palm Beach, August 5, 2014)

Boca Raton attorney Andrew ‘Drew’ Fein successfully challenged Florida’s ban on gay marriage as applied to the appointment of a non-resident personal representative.

Florida law says you can’t appoint a non-resident to serve as personal representative of your estate unless that person’s your “spouse” or otherwise related to you. (See F.S. 733.304). This rule’s always struck me as an arbitrary trap for the unwary that doesn’t seem to serve any purpose other than create work for litigators (see here, here, here), and I’m not the only one that thinks so. In fact, in 1979 it was held unconstitutional by a federal trial court in Fain v. Hall, 463 F. Supp. 661 (M.D. Fla. 1979). Not wasting any time, the Florida Supreme Court stepped in the following year in In re Greenberg’s Estate, 390 So.2d 40 (Fla. 1980), in which the rule was rationalized as follows:

The state, in enacting these provisions, recognized that the administration of a decedent’s estate is an intensely localized matter requiring the personal representative to be thoroughly informed on local matters and to be available to the court, beneficiaries, and creditors of the estate. The state declares that these statutes serve the valid function of ensuring that the personal representative, if not a relative of the testator, is close enough in proximity to the Florida estate to protect the rights of the creditors, ensure that the estate will be probated without needless delays caused by travel, and reduce the cost of representation to the estate by reducing travel costs or preventing the need to associate an in-state representative.

But if residency is such an important requirement for Florida personal representatives, why is it OK to appoint my crazy non-resident uncle Joe, but not OK to appoint my non-resident college buddy who also happens to be a CPA with a genius I.Q.? Our Supreme Court didn’t even try to figure that one out, concluding instead that a statute doesn’t have to be perfect to be constitutional.

Pincus further maintains that the exemption in section 733.304 for nonresident relatives of a decedent demonstrates that the statute is irrational. We disagree. Where utilizing the rationality test, the equal protection clause is not violated merely because a classification made by the laws is not perfect. . . . Furthermore, we find that it is not unreasonable for an exception to be created for nonresident relatives because, more than likely, the nonresident relative will also be a beneficiary of the decedent’s estate.

United States v. Windsor changed everything:

Fast forward to 2014 and the constitutional challenge currently facing F.S. 733.304(3) is all about whether the non-residency exception for non-resident spouses also applies to same-sex couples. Until recently this argument would have been unthinkable in a place like Florida, which both in its state constitution (Article I, Section 27) and by statue (F.S. 741.212) has expressed unequivocal opposition to same-sex marriage. But everything changed after the U.S. Supreme Court’s 2013 ruling in United States v. Windsor, striking down as unconstitutional section 3 of the Federal Defense of Marriage Act, which defined marriage as a union between one man and one woman. After Windsor, our state attorney didn’t even show up to contest the issue.

Because the Amended Petition for Administration challenges the constitutionality of provisions of Florida law, Mr. Simpson properly gave notice of the challenge to the Florida Attorney General, Pamela Jo Bondi, pursuant to Florida Statutes Section 86.091. The Attorney General has not filed any response or an objection to the Amended Petition and did not attend the hearing.

Case Study:

In the linked-to order above a Palm Beach County probate judge ordered that W. Jason Simpson could serve as personal representative of the estate of his husband, Frank Bangor, who died March 14. The two men, together 37 years, were married Oct. 23, 2013, in Delaware and resided in Pennsylvania. Mr. Simpson, who was the sole beneficiary of the decedent’s estate and the named personal representative under his Will, would have been automatically barred from serving as personal representative unless he qualified as a non-resident surviving “spouse” under F.S. 733.304(3). Noting that Federal Courts in thirteen different states have all held that state laws prohibiting the recognition of same-sex marriages are now unconstitutional post Windsor, the probate court could find no “compelling state interest” in treating same-sex couples differently for purposes of the non-resident spousal exception under F.S. 733.304(3).

The State of Florida has not offered, and this Court cannot find, any compelling state interest in denying the Decedent’s choice for his Personal Representative to serve in the State of Florida. This Court routinely appoints non-resident surviving spouses as Personal Representatives without inquiry into the nature of their marriage. While the Courts cited above have considered and rejected many policy reasons proffered to support the ban on same-sex marriage, those reasons have no application to this Estate. Indeed, Florida’s Marriage Laws unconstitutionally impair Mr. Bangor’s right to choose his Personal Representative, and Mr. Simpson’s right to so act, not because of who they are married to, but only because of who they were married to, prior to Mr. Bangor’s death. There is no justification in denying Mr. Simpson the privilege of acting as the fiduciary, based solely on the gender and sexual orientation of his now-deceased spouse. “The Marriage Laws” unnecessarily discriminate against this “spouse”, who is recognized by other States as a “spouse”, to act as a fiduciary. Clearly, it was Mr. Bangor’s intent that Mr. Simpson serve as his Personal Representative and inherit all of his property.

Nothing in this Estate will be contested. This Estate would have been opened as a routine matter on this Court’s ex parte calendar but for their same-sex marriage. There is no rational basis to apply those laws to the facts of this case. Same-sex couples are entitled to respect, dignity and protection as any other spouse requesting to be a Personal Representative.

Here’s an excerpt from a Miami Herald piece entitled Florida must recognize gay widower’s Delaware marriage, Palm Beach judge rulesreporting on the case:

The Bangor-Simpson ruling is the first time any Florida judge has recognized an out-of-state same-sex marriage, according to Daniel Tilley, a staff attorney for the ACLU of Florida, who is helping represent other married gay couples in a current federal lawsuit filed in Tallahassee.

The Palm Beach case is the fourth in under three weeks to undermine Florida’s gay marriage ban.

On July 17, Monroe Chief Circuit Judge Luis Garcia ruled the ban unconstitutional and that Aaron Huntsman and William Lee Jones of Key West could marry.

Eight days later, Miami-Dade Circuit Judge Sarah Zabel ruled six same-sex couples in South Florida also had the right to marry. Those decisions are valid only in the judges’ respective counties, and both rulings have been put on hold pending appeals by Attorney General Pam Bondi.

On Monday, Broward Circuit Judge Dale Cohen ruled Florida must recognize and then dissolve the Vermont civil union of a lesbian whose partner left her four years ago. Bondi’s office hasn’t responded in that case.

Bondi’s office did not file a response or an objection in the Bangor-Simpson case, Lewis wrote in her ruling.

Her office has 30 days to appeal, but Fein thinks that’s unlikely.

“I really respect Pam Bondi’s office not to oppose my client’s petition and to allow my client the same rights and privileges as any other widow or widower in an opposite sex marriage,” Fein said.

3d DCA: Is a probate judge’s “jurisdictional” authority limited to only probate-related matters?

Posted in Practice & Procedure

Kates v. Lifter, — So.3d —-, 2012 WL 832802 (Fla. 3d DCA March 14, 2012)

Judge Schwartz reminds us that all circuit court judges share the same inherent jurisdictional authority; it doesn’t matter if he or she’s deciding a will contest or adjudicating a murder trial. The various divisions of a court operate for the convenience of the litigants and for the efficiency of the administration of the circuits’ judicial business, what they don’t do is create jurisdictional boundaries.

Our state circuit courts are usually split up into specialty divisions, as authorized by Article V, § 7, of the Florida Constitution. For example, my home circuit court in Miami-Dade, the 11th, has six specialty divisions: Circuit Civil, Circuit Criminal, Family, Juvenile, Probate, and the Unified Family Court (UFC) division. Pursuant to Administrative Order 78-31-S, Miami’s Probate division also hears all trust-related claims.

But just because a circuit court’s specialized divisions adjudicate different types of cases, doesn’t mean a judge sitting in one division (e.g., Probate) lacks authority to adjudicate a type of case usually handled in another division (e.g., a corporate dispute usually tried in Circuit Civil or a custody dispute usually decided in the Family division). You’d be surprised how often lawyers (and judges) seem to miss this basic point. In the linked-to opinion above Senior Judge Schwartz penned a concurring opinion reminding us that all circuit court judges share the same jurisdictional authority, no matter what division they happen to be serving in.

Is a probate judge’s “jurisdictional” authority limited to only probate-related matters? NO

Although the opinion doesn’t give us much in terms of facts, from what I can gather there was some kind of dispute involving “sweetheart” loans and a corporation that was at least partially owned by a trust. At trial the probate judge adjudicated related claims involving both the trust and the corporation. On appeal the losing side cried foul, arguing that the “probate court” had no authority over the corporation, and that a new and different proceeding in a “non-probate court” had to be prosecuted to achieve the same result. This argument went nowhere on appeal. Judge Schwartz explains why:

The basis for my vote is that the judge of the circuit court who made the decision on review had complete jurisdiction over both aspects of the existing litigation and that it does not matter in which division of the court he happened to find himself. As this Court has stated:

[E]very judge of the circuit court possesses the full jurisdiction of that court in his or her circuit and that the various divisions of that court operate in multi-judge circuits for the convenience of the litigants and for the efficiency of the administration of the circuits’ judicial business.

Maugeri v. Plourde, 396 So.2d 1215, 1217 (Fla. 3d DCA 1981); see Baudanza v. Baudanza, 78 So.3d 656 (Fla. 4th DCA 2012). In other words, there is no such thing as “a” or “the” Florida Probate Court with the limited jurisdiction the appellants argue is fatal to the order on review. The decisions which represent this position are based on [Gettinger v. Gettinger, 165 So.2d 757 (Fla.1964)]. But that case was decided in 1964, when there was a “probate court” in Florida, the County Judges’ Court. While it is understandable in view of the well-known judicial tendency to cling resolutely to the past, Parker v. Shullman, 906 So.2d 1236 (Fla. 4th DCA 2005), review denied, 915 So.2d 1196 (Fla.2005), for example, overlooked that, as recently as 1973, the County Judges’ Court was abolished and its jurisdiction transferred to the circuit court. See Art. V, § 20(c)(3), Fla. Const. (Rev.1972). I believe that this fact renders Gettinger obsolete and more modern authority which follows it incorrect.

Lesson learned?

All circuit court judges have the same inherent authority; it doesn’t matter if he or she’s deciding a will contest or adjudicating a murder trial: same authority. If you’re convinced a claim’s being litigated in the wrong division, the proper remedy is to file a motion seeking to transfer the case to the correct division. See Weaver v. Hotchkiss, 972 So. 2d 1060 (Fla. 2d DCA 2008); Fort v. Fort, 951 So. 2d 1020 (Fla. 1st DCA 2007). At its heart this is an administrative-convenience argument, not a jurisdictional challenge.

On the other hand, even when owned 100% by a decedent or trustee, corporations retain their separate legal existence, which means the corporation’s assets don’t automatically become assets of the probate estate or get sucked into a related breach-of-trust suit. As I’ve previously reported (see here and here), when probate judges get this point wrong it’s usually not because they lack subject matter jurisdiction to adjudicate the claim; more likely than not it’s a problem involving a failure to properly serve the corporation as a separate legal entity.

Note to readers:

The linked-to opinion above was first published in 2012. I try to report on cases as they’re published. I don’t always succeed. This blog post is part of an ongoing project to comment on older cases I wasn’t able to get to previously.

5th DCA notes conflict with 4th DCA while siding with 1st and 2nd DCA’s on when “reasonably ascertainable” creditor’s filing deadline begins to run; issue to be decided by Florida Supreme Court

Posted in Creditors' Claims

Souder v. Malone, — So.3d —-, 2014 WL 3756356 (Fla. 5th DCA August 01, 2014)

The growing split among our DCA’s on this important probate creditor issue should be resolved by the Florida Supreme Court in the near future, which has already agreed to accept jurisdiction of the Golden v. Jones case. Stay tuned for more . . .

Assuming I file my creditor claim before the 2-year post-death deadline set by F.S. 733.710 (Florida’s “statute of repose” for probate creditor claims), what’s my deadline for litigating whether or not I’m a reasonably ascertainable creditor?

First the 1st DCA in 2009, and then the 2d DCA in 2012, each held in separate cases that a creditor forfeits his chance to argue his status as being “reasonably ascertainable” and thus his entitlement to personal service of a “notice to creditors” (vs. publication notice alone), if he doesn’t also file a motion for an extension of time under F.S. 733.702(3) within the two-year repose period of F.S. 733.710. See Morgenthau v. Estate of Andzel, 26 So.3d 628 (Fla. 1st DCA 2009) (which I wrote about here), and Lubee v. Adams, 77 So.3d 882 (Fla. 2d DCA 2012) (which I wrote about here).

In 2013 the 4th DCA came to a different conclusion in Golden v. Jones (which I wrote about here), holding that there  is NO deadline for litigating a creditor’s status as being “reasonably ascertainable,” as long as the creditor gets his claim filed before the 2-year post-death deadline set by F.S. 733.710.

The 5th DCA has now jumped into the fray, explicitly rejecting the 4th DCA’s holding in Golden, siding instead with the 1st and 2d DCA’s reasoning in Morgenthau and Lubee.

We disagree with Golden’s apparent holding that the remedy for a personal representative’s failure to serve a known or reasonably ascertainable creditor with a copy of the notice to creditors is a determination that the limitations period set forth in subsection (1) does not begin to run. Subsection (3) expressly provides that a probate court may grant a petition to extend the time in which to file a claim where there was “insufficient notice of the claims period.” Thus, construing subsections (1) and (3) together, we believe that the Legislature has determined that where a personal representative has failed to serve a copy of the notice to creditors on a known or reasonably ascertainable creditor, that creditor’s remedy is to petition the probate court for an extension of time.

In summary, as stated in Lubee, creditors who are served a copy of the notice to creditors are required to file their claims within thirty days following service. Creditors who are not served a copy of the notice to creditors are required to file their claims within the three-month window following publication or, alternatively, may seek an extension from the probate court pursuant to section 733.702(3) within the two-year window set forth in section 733.710. Lubee, 77 So.3d at 884.

So what now?

The growing split among our DCA’s on this important probate creditor issue should be resolved by the Florida Supreme Court in the near future, which has already agreed to accept jurisdiction of the Golden v. Jones case. Stay tuned for more . . .

2012-13 Probate Court Filing Statistics Chart

Posted in Musings on the Practice of Law, Trust and Estates Litigation In the News

In Miami-Dade – on average – each judge took on 2,848 NEW cases in FY 2012-13, in Broward the figure was even higher at 3,105/judge, with Palm Beach scoring the lowest at 1,871/judge.

If you make your living in and around our probate courts you’ll find the FY 2012-13 Probate Court Statistical Reference Guide interesting reading. Below I’ve charted the “cases filed” data for three of our largest circuits/counties: Miami-Dade (11th Cir), Broward (17th Cir), and Palm Beach (15th Cir).

But numbers alone don’t tell the whole story. To understand the breadth of issues a typical probate judge contends with in an average year at the end of this post I’ve provided a glossary with the official definition given for each of the categories listed in my chart. (For a “battlefield” perspective on how varied a typical probate judge’s docket can be you’ll want to read Probate judges handle so much more, by Georgia probate judge William J. Self). Finally, as a rough measure of the crushing case load your average big-city probate judge is saddled with in Florida, I took the total filing figures and divided them by the number of probate judges serving in each of those counties.

So what’s it all mean?

In Miami-Dade – on average – each judge took on 2,848 NEW cases in FY 2012-13, in Broward the figure was even higher at 3,105/judge, with Palm Beach scoring the lowest at 1,871/judge. Keep in mind these figures don’t take into account each judge’s EXISTING case load or other administrative duties. These stat’s may be appropriate for uncontested proceedings, which likely represent 99% of the matters handled by a typical probate judge, but when it comes to that 1% of cases that are litigated, these same case-load numbers (confirmed by personal experience) make two points glaringly clear to me:

[1]  We aren’t doing our jobs as estate planners if we don’t anticipate — and plan accordingly for — the structural limitations inherent to an overworked and underfunded state court system. As I’ve previously written here, one important aspect of that kind of planning should be “privatizing” the dispute resolution process to the maximum extent possible by including mandatory arbitration clauses in all our wills and trusts. Arbitration may not be perfect, but at least you get some say in who your judge is and what his or her minimum qualifications need to be. And in the arbitration process (which is privately funded) you also have a fighting chance of getting your arbitrator to actually read your briefs and invest the time and mental focus needed to thoughtfully evaluate the complex tax, state law and family dynamics underlying these cases (a luxury that’s all but impossible in a state court system that forces judges to juggle thousands of cases at a time with little or no support).

[2]  We aren’t doing our jobs as litigators if we don’t anticipate — and plan accordingly for — the “cold judge” factor I wrote about here; which needs to be weighed heavily every time you ask a court system designed to handle un-contested proceedings on a mass-production basis to adjudicate a complex trial or basically rule on any technically demanding issue or pre-trial motion of any significance that can’t be disposed of in the few minutes allotted to the average probate matter.

FY 2012-13 Probate Court Filing Statistics

Type of Case Miami-Dade (11th Cir) Broward (17th Cir) Palm Beach (15th Cir)
Probate 3,864  3,839  4,531
Baker Act  4,882  3,845  1,319
Substance Abuse 835  805  696
Other Social Cases 917  345  246
Guardianship 835  413  482
Trust 58  68  211
Total 11,391  9,315  7,485
# Judges 4 3 4
Total/Judge 2,848  3,105  1,871

Glossary: 

Probate: All matters relating to the validity of wills and their execution; distribution, management, sale, transfer and accounting of estate property; and ancillary administration pursuant to chapters 731, 732, 733, 734, and 735, Florida Statutes.

Guardianship (Adult or Minor): All matters relating to determination of status; contracts and conveyances of incompetents; maintenance custody of wards and their property interests; control and restoration of rights; appointment and removal of guardians pursuant to chapter 744, Florida Statues; appointment of guardian advocates for individuals with developmental disabilities pursuant to section 393.12, Florida Statutes; and actions to remove the disabilities of non-age minors pursuant to sections 743.08 and 743.09, Florida Statutes.

Trusts: All matters relating to the right of property, real or personal, held by one party for the benefit of another pursuant to chapter 736, Florida Statutes.

Florida Mental Health Act or Baker Act: All matters relating to the care and treatment of individuals with mental, emotional, and behavioral disorders pursuant to sections 394.463 and 394.467, Florida Statutes.

Substance Abuse Act: All matters related to the involuntary assessment/treatment of substance abuse pursuant to sections 397.6811 and 397.693, Florida Statutes.

Other Social Cases: All other matters involving involuntary commitment not included under the Baker and Substance Abuse Act categories. The following types of cases would be included, but not limited to:

  • Tuberculosis control cases pursuant to sections 392.55, 392.56, and 392.57, Florida Statutes;
  • Developmental disability cases under section 393.11, Florida Statutes;
  • Review of surrogate or proxy’s health care decisions pursuant to section 765.105, Florida Statutes, and rule 5.900, Florida Probate Rules;
  • Incapacity determination cases pursuant to sections 744.3201, 744.3215, and 744.331, Florida Statutes;
  • Adult Protective Services Act cases pursuant to section 415.104, Florida Statutes.

5th DCA: Can a probate judge admit a challenged will to probate before the will contest is adjudicated?

Posted in Will and Trust Contests

Platt v. Osteen, — So.3d —-, 2012 WL 6629650 (Fla. 5th DCA December 21, 2012)

5th DCA: “Under Florida law, will contests and the rights of caveators must be determined prior to admitting a will to probate, appointing a personal representative or issuing letters of administration.”

The outcome of this inheritance dispute turned on two questions: first, was the decedent’s will valid, and second, did the party challenging its validity have a stake in the outcome as a “virtually adopted” intestate heir (see here, here, here for more on the test for virtual adoption in Florida). If the challenger lost on either of these two issues, the case was over. So which question gets decided first; the will contest or the virtual-adoption case? According to the 5th DCA, the virtual-adoption case establishes standing, so it goes first.

[W]e reverse and remand with directions that the trial court determine whether Platt has standing to contest the will;FN1 and, if she does, to adjudicate Platt’s challenge to the will before taking any action on the petition for administration.

FN1. Platt is a beneficiary under the will and is listed in the will, along with Osteen, as a daughter of the decedent. It is undisputed that Platt was not the decedent’s biological daughter and was never legally adopted by him. However, it also appears undisputed that the decedent raised Platt as his daughter from the age of three. As Platt alleges sufficient facts to establish all elements of virtual adoption, see Matter of Heirs of Hodge, 470 So.2d 740, 741 (Fla. 5th DCA 1985), she is entitled to an evidentiary hearing as to this issue.

Makes sense to me. By the way, how the virtual-adoption issue is “framed” can make a huge difference in terms of whether or not common sense prevails in your case. If you frame the issue in terms of “judicial economy” (i.e., why waste time/money litigating a claim if the challenger isn’t an intestate heir?), you’re undoubtedly right as a practical matter, but you might end up getting reversed on procedural grounds (which is exactly what happened in the McMullen case). But if (as was done in this case) you frame the virtual-adoption issue in terms of “standing” (i.e., we need to determine whether or not she can even bring a will contest as a predicate to deciding the validity of the will), not only does your argument pass the common-sense test, it’s also bullet proof on procedural grounds.

The second take-away from this case is how uncertain any contested probate proceeding can be. Even the simplest, most black-and-white legal rule can get swept aside in the rush to move huge caseloads through our overworked and underfunded probate courts (which is why we should all privatize these disputes by including mandatory arbitration clauses in all our wills/trusts). Case in point: how do you make sure a contested will doesn’t get admitted to probate before your client’s had her day in court? Simple, file a caveat (see here), followed by an answer and objection to administration. And that’s exactly what the challenger did in this case. So what happened next? The probate judge ignored it all and simply admitted the contested will to probate. Bottom line, we now have an appellate decision stating the obvious: you can’t admit a challenged will to probate before the will contest is adjudicated.

Elaine D. Platt timely appeals an order admitting the will of Martin S. Day to probate and appointing Sharon Day Osteen as personal representative. After Osteen filed a petition for administration of Day’s will, Platt filed a caveat, followed by an answer and objection to administration of the will. Under Florida law, will contests and the rights of caveators must be determined prior to admitting a will to probate, appointing a personal representative or issuing letters of administration. See, e.g., Rocca v. Boyansky, 80 So.3d 377 (Fla. 3d DCA 2012) (see here); In re Estate of Hartman, 836 So.2d 1038 (Fla. 2d DCA 2002); Grooms v. Royce, 638 So.2d 1019 (Fla. 5th DCA 1994); see also 18 Fla. Jur.2d Decedents’ Property § 494 (“After the filing of a caveat by an interested person other than a creditor, the court may not admit a will of the decedent to probate or appoint a personal representative without service of formal notice on the caveator or the caveator’s designated agent. [Fla. Prob. R. 5.260(f).] Thus, if a caveat is filed, a formal notice of the submission of a will for probate must be given, and the court must thereafter adjudicate any challenge to the will before admitting the will to probate.”). Here, without notice to Platt, the trial court simply entered an order admitting the decedent’s will to probate, erroneously finding that “no objection [had] been made to its probate [.]” Accordingly, we reverse and remand with directions that the trial court . . .  adjudicate Platt’s challenge to the will before taking any action on the petition for administration.

Note to readers:

The linked-to case above was first published in 2012. I try to report on cases as they’re published. I don’t always succeed. This blog post is part of an ongoing project to comment on older cases I wasn’t able to get to previously.

2d DCA: Does Florida’s Trust Code limit — or expand upon — existing common law when it comes to terminating irrevocable trusts?

Posted in Practice & Procedure, Will and Trust Contests

Peck v. Peck, 133 So.3d 587 (Fla. 2d DCA February 26, 2014)

Thinking outside the box is more than just a business cliché. It means approaching problems in new, innovative ways; conceptualizing problems differently; and understanding your position in relation to any particular situation in a way you’d never thought of before.

Part IV of Florida’s Trust Code provides precise, comprehensive, and easily accessible guidance on how to modify or terminate irrevocable trusts. (Click here for an excellent chart visually summarizing all of these provisions). That being said, our Trust Code doesn’t legislate on every issue. To the extent a specific trust-law scenario isn’t addressed or modified by our Trust Code, F.S.  736.0106 tells us common law still rules. This general reservation of the common law’s application to trusts in our state is reiterated in those subsections of our Trust Code where it’s especially relevant, as in F.S. 736.04113(4), which provides as follows:

The provisions of this section are in addition to, and not in derogation of, rights under the common law to modify, amend, terminate, or revoke trusts.

Case Study:

The linked-to case above starts with a father’s estate plan that provided for the ultimate residuary distribution of the family inheritance to two separate trusts established by each of his two children, a son named Daniel and a daughter named Constance. In other words, each child was the settlor of his or her own separate trust. After their father’s death, Daniel stepped in as co-trustee of his sister’s trust, which is referred to as the “CLP Trust”. According to the 2d DCA:

In 2012, Constance filed a petition to terminate the CLP Trust. Her children agreed to the termination. Daniel, as co-trustee, objected because Constance might unwisely dissipate the assets. Our record suggests that in crafting his estate plans, [Constance's father], too, had concerns about Constance’s ability to maintain financial stability. Daniel also argued that the trial court could not terminate the CLP Trust because under section 736.04113, Florida Statutes (2012), the trust’s purposes remained unfulfilled.

Florida common law requires the trial court to allow modification or termination of a trust if the settlor and all beneficiaries consent, even if the trust is irrevocable and even if the trust’s purposes have not been accomplished. See Preston v. City National Bank of Miami, 294 So.2d 11 (Fla. 3d DCA 1974). Based on this common law, the trial court authorized termination of Constance’s trust over the objections of her co-trustee — even if the trust’s purposes remained unfulfilled (a pre-requisite to termination under F.S. 736.04113(1)). Why? Because this trust code provision doesn’t limit a trial court’s common-law authority to terminate a trust. As explained by the 2d DCA:

Because . . . Constance . . . was the grantor/settlor, she could modify or terminate the trust, with the beneficiaries’ consent, even if it defeated her father’s intent as to how she could access his assets once distributed to the CLP Trust. The trial court correctly relied on Preston. Pursuant to subsection (4), section 736.04113 does not abrogate the common law. Accordingly, termination of the CLP Trust was not improper.

Lesson learned?

Don’t limit yourself to the four corners of our Trust Code — think outside the box!

The Corcoran Gallery of Art’s trustees expertly manage the public advocacy facet of their case in support of requested “cy pres” court ruling

Posted in Gifts and Charities Litigation

The Corcoran Gallery of Art is a federally chartered non-profit institution, initially established under a Deed of Trust by William Corcoran in 1869, and chartered by Act of Congress of May 24, 1870.

A lot’s changed in the over 100 years since William Corcoran executed a “Deed of Trust” in 1869, establishing the Corcoran Gallery of Art. Falling victim to competitive market pressures, Washington’s oldest private art gallery and art college recently filed this 204-page motion and supporting memorandum of law, asking a D.C. judge to apply the cy près doctrine in support of plans to permanently close its doors. I’ve previously written here about the cy près doctrine in the context of a contested Florida trust/estate, and the fact that the doctrine’s been codified as part of our Trust Code in F.S. 736.0413.

The Corcoran’s court motion is an excellent piece of lawyering (and a solid resource for anyone involved in similar cases in the future), explaining in detail:

  1. the underlying financial crises making its continued operations no longer viable,
  2. the gallery’s dissolution plan, which focuses on preserving the public benefits of this institution in the D.C. area to the extent possible, and most importantly,
  3. the lengths the Corcoran’s trustees have gone to confer with and obtain the prior consent of key stake holders, including D.C. Attorney General Irvin B. Nathan.

Non-profits and litigation PR:

Point #3 is especially instructive for any lawyer working on any kind of case involving a high-profile non-profit institution. I previously wrote here about the use of public relations in the context of the Robertson v. Princeton University case, a dispute where the public-advocacy facet of the litigation was in my opinion bungled. The Princeton case was an example of what not to do. In stark contrast, this time around the public-advocacy aspect of the case appears to have been handled expertly by Corcoran’s trustees (as documented here). I’m guessing the fact that no one’s objecting to the gallery’s dissolution plan (including local politicians) is a testament to months of hard work involving intensive lobbying, public education and presuit contractual negotiations. That’s exactly the way these cases should be handled.

For more on the back story to this case you’ll want to read a Washington Post piece entitled Corcoran maneuvers to keep its art from leaving the area. Here’s an excerpt:

The Corcoran’s court motion comes under the ancient legal doctrine of “cy près,” by which a court can modify restrictions placed on a charity when the charitable purpose becomes impossible to achieve. The gallery’s lawyers argue in the legal filing that chronic deficits and competition from free museums — notably the National Gallery — have doomed the Corcoran in its current form.

The Corcoran submitted annual budget summaries to the court, showing that it ran deficits in 11 of the past 13 years, including $5.5 million last year and $9.2 million in 2012.

“It is financially impracticable, and indeed in the medium- and longer-term, financially impossible, to continue the operations of the gallery and college in their current form,” Corcoran’s attorneys said in their brief.

So the Corcoran is asking the court to modify its founding 1869 [trust] deed and [federal] charter to enable the new arrangement. Those documents launched a gallery, and, in 1890, a college, and did not foresee the gallery and college being given to others. The reorganization is the next best way to fulfill the original vision, the lawyers argue.

The attorney general’s office oversees charitable institutions and is a party in the cy près proceeding. Superior Court Judge Robert Okun will have the final say, but to try to win the attorney general as an ally, the Corcoran has been sharing relevant documents for weeks.

The attorney general’s office requested the side-letter on keeping art in the building “as a condition to supporting the Corcoran’s position,” according to the letter.

Hat tip:

Credit goes to the Nonprofit Law Prof Blog for bringing this story to my attention in this blog post.

2d DCA: If the judge adjudicating your divorce enters final judgment, but retains jurisdiction to decide property issues, does that jurisdictional authority evaporate if one of the parties to the original divorce proceeding dies?

Posted in Creditors' Claims, Marital Agreements and Spousal Rights, Practice & Procedure

Passamondi v. Passamondi, — So.3d —-, 2014 WL 228648 (Fla. 2d DCA January 22, 2014)

The death of a spouse does not terminate the divorce proceeding or the family court’s jurisdiction if (i) a final judgment was entered prior to the death and (ii) the family court retained jurisdiction to resolve remaining property issues.

The traditional rule is that an action for divorce is purely personal in nature and that the death of one of the parties causes the action to terminate or “abate.” The rationale for this rule is simple: when one of the divorcing parties dies before a final divorce decree is entered, the marriage is over (you’re dead!), no need for a court to restate the obvious. But we all know the moment a lawyer utters the words “general rule,” you can expect the next sentence to start with, “but there’s an exception.” And this case is no different.

A well-recognized exception to the general rule applies when the divorce proceeding is bifurcated. The death of a spouse does not terminate the divorce proceeding or the family court’s jurisdiction if (i) a final judgment was entered prior to the death and (ii) the family court retained jurisdiction to resolve remaining property issues. See Fernandez v. Fernandez, 648 So.2d 712, 714 (Fla.1995); King v. King, 67 So.3d 387 (Fla. 4th DCA 2011). In other words, the property-division fight continues before your family-court judge, it doesn’t transfer over to your probate judge. It’s this last point that’s at the heart of the linked-to case above.

Case Study:

In this case when Former Husband filed his petition for divorce he was suffering from a terminal disease. For this reason, he filed a motion requesting a bifurcation of the proceedings. The family court granted the motion. According to the 2d DCA, in its final judgment dissolving the parties’ marriage, the family court specifically

[R]eserve[d] jurisdiction over this cause and each of the parties to enter such further Orders, Judgments, and Decrees as may be necessary at any time in the future to resolve all equitable distribution issues and any other issues which have been pled.

Former Husband died shortly thereafter. One of Former Husband’s children commenced a probate proceeding and Former Wife filed a creditor claim in the probate proceeding based on her “undetermined marital interest in all of the real, personal and intangible property of decedent preceding his death as so determined in” the pending dissolution of marriage proceeding. So far so good. But then the case basically went dormant . . . for four years! I’m guessing partly out of frustration at this inactivity, the family-court judge set a final hearing and basically booted the case off her docket. According to the family-court judge, this was now the probate judge’s problem. Here’s how the point was made in the family-court’s dismissal order:

[B]y virtue of the death of the Former Husband and the opening of a Probate Estate for him, the Probate Court was vested with exclusive control over the Former Husband’s assets and the Probate Court had exclusive jurisdiction to determine the proper manner of distribution of the Former Husband’s assets after payment of all creditors of the Estate of which the Former Wife was one….

While one might sympathize with the family court’s desire to clear its docket of do-nothing cases, the way the court went about dealing with the problem was fatally flawed. As explained by the 2d DCA, when a family-court judge retains jurisdiction to decide property issues post the couple’s divorce, the case doesn’t go away just because one of the ex-spouses dies.

If a trial court bifurcates a proceeding for dissolution of marriage by entering a judgment dissolving the marriage but retaining jurisdiction to determine property issues, the subsequent death of a party does not deprive the trial court of jurisdiction to determine the issues reserved. See Fernandez v. Fernandez, 648 So.2d 712, 714 (Fla.1995). In this case, the trial court had entered a final judgment dissolving the parties’ marriage and retaining jurisdiction to determine all other issues before the death of the Former Husband. Therefore, the trial court incorrectly concluded that it did not have jurisdiction to hear and to determine the Former Wife’s claims. It follows that the trial court’s dismissal of the Former Wife’s remaining claims constituted error. For this reason, we reverse the trial court’s order and remand this case to the trial court for further proceedings.