Florida Probate & Trust Litigation Blog

Florida Probate & Trust Litigation Blog

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

2d DCA says YES to $24.6 million in trustee fees; NO to hourly billing

Posted in Compensation Disputes

Robert Rauschenberg Foundation v. Grutman, — So.3d —-, 2016 WL 56456 (Fla. 2d DCA January 06, 2016)

RauschenbergWe can all agree hourly billing is a terrible way to do business. Unfortunately, Florida courts are required— as a matter of law — to evaluate contested attorney’s fees using the “lodestar” method (which is all about hourly billing, see here). And that means that in the absence of agreement we lawyers are stuck with the tyranny of the billable hour. But does the same rule apply to trustees? That was the $24.6 million question the 2d DCA grappled with in this blockbuster case involving the $2 billion estate of Robert Rauschenberg, the most famous American artist you’ve never heard of.

Case Study:

Prior to his death in 2008 Rauschenberg established a revocable trust whose sole remainder beneficiary was the Rauschenberg Foundation. Rauschenberg’s trustees were three long-time friends and business associates. Shortly after Rauschenberg’s death the three trustees and the Foundation became entangled in litigation after the trustees’ claimed they were entitled to $60 million in fees — a sum that an expert hired by the Foundation maintained was “unconscionable,” amounting to a $40,000-an-hour wage.

Now $60 million may sound like a lot, but it’s less than a rounding error when you consider that during the four years the trustees were in charge of the Rauschenberg collection its value more than tripled, going from a paltry $600 million to slightly over $2 billion. But we’ve all seen cases where an estate’s largest asset is a business or real estate investment that shoots up in value due to market conditions having nothing to do with a trustee’s efforts. Is that what happened in this case? Not according to the trial judge. According to his order (see here), the trustees were actively involved in building the collection’s market value after Rauschenberg’s death.

Upon Rauschcnberg’s death, the Trustees planned, advertised, and managed several exhibitions and memorials. The Trustees developed a strategic plan to withdraw Rauschenberg’s art from the market, in order to prevent a decline in value from speculators or collectors flooding e market with his art. [The Trustees] testified that this decline in value had occurred following the death of other famous artists, such as Andy Warhol. The Trustees contacted all galleries holding art on consignment, and directed that the art be returned. They contacted insurance agents regarding insurance on all assets. The Trustees moved all artwork to the Mount Vernon warehouse in New York for inventory and appraisals. They hired an art advisor. They then interviewed companies regarding a formal appraisal of all artwork, and hired Christie’s to perform the appraisal. The Trustees reviewed the collection to determine which pieces should remain in the Foundation’s permanent collection. The Trustees oversaw security, maintenance and conservation of the art and properties. The Trustees handled litigation of employment and intellectual property issues, and managed authentication requests. The Trustees managed placement of art in museums and galleries for exhibitions when the time was right to re-introduce the art on the market. They interviewed galleries and selected the Gagosian Gallery to hold exhibitions worldwide. The Trustees curated, set prices, negotiated with the galleries and museums, and were involved in all aspects of each exhibition, such as advertisements and catalogs.

Are trustees (like lawyers) condemned to getting paid by the hour if their fees are disputed?

Rauschenberg’s trust didn’t contain a specific fee clause (which is the norm). In the absence of a specific fee schedule written into the trust agreement (which never happens), F.S. 736.0708(1) tells us a trustee’s “entitled to compensation that is reasonable under the circumstances.” One man’s “reasonable” payday could be another’s highway robbery. Which is basically what happened here. By the time the case got to trial the two sides had staked out hugely varying positions. According to the trustees a reasonable fee for the job they’d done was in the range of $51-55 million. According to the Foundation they were only entitled to $375,000.

The reason the competing offers were so far apart is that they reflect two fundamentally different world views: one based on getting paid for the value you create (the trustee’s worldview) and the other based on getting paid a fair hourly wage for the time you spent on the job (the Foundation’s worldview).

Both approaches are defensible economically and as a matter of fiduciary law. So at its core this case boiled down to one legal question: are courts prohibited — as a matter of law — from evaluating contested trustee fees on any basis other than some form of hourly billing? The Foundation said YES, pointing to decades of Florida law applying the lodestar method to contested attorney’s fees. The trustees said NO, pointing to the following 11-factor test adopted by the Florida Supreme Court in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla.1958) for contested trustee fees.

  1. The amount of capital and income received and disbursed by the trustee;
  2. the wages or salary customarily granted to agents or servants for performing like work in the community;
  3. the success or failure of the administration of the trustee;
  4. any unusual skill or experience which the trustee in question may have brought to his work;
  5. the fidelity or disloyalty displayed by the trustee;
  6. the amount of risk and responsibility assumed;
  7. the time consumed in carrying out the trust;
  8. the custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks;
  9. the character of the work done in the course of administration, whether routine or involving skill and judgment;
  10. any estimate which the trustee has given of the value of his own services; and
  11. payments made by the cestuis to the trustee and intended to be applied toward his compensation.

After hearing testimony from 21 witnesses and admitting over 300 exhibits as evidence, the trial court basically split the difference (which is exactly what you’d expect under the “midpoint rule” discussed below), awarding the trustees about half of their total ask. No matter how warranted this fee award may (or may not) have been on the merits, it was subject to reversal as a matter of law if the 2d DCA bought the Foundation’s legal argument. So did they? NO:

The Foundation argues that the use of the term “reasonable” in section 736.0708(1) without further elucidation suggests a legislative intent to adopt the lodestar method set forth in [Florida Patient’s Compensation Fund v. Rowe, 472 So.2d 1145 (Fla.1985)]. The Foundation asserts that the lodestar method, which the Rowe court applied to calculate attorney’s fees, is equally applicable to trustee’s fees. The Foundation points to the supreme court’s application of the lodestar method in [In re Estate of Platt, 586 So.2d 328, 336 (Fla.1991)] to “reasonable compensation” for attorneys and personal representatives in probate actions.

However, the legislative history of section 736.0708(1) indicates an intent to apply the West Coast factors. Specifically, the Senate Staff Analyses in support of the bill reference section 736.0708(1) and explain, “On the factors to be taken into account in determining a reasonable compensation, see West Coast Hospital Association v. Florida Nat’l Bank of Jacksonville, 100 So.2d 807 (Fla.1958) citing with favor Bogert, Trusts and Trustees, s.976.” Fla. S. Comm. on Banking & Ins., CS for SB 1170 (2006) Staff Analysis 18 n. 258 (Mar. 21, 2006); Fla. S. Comm. on Jud., CS for SB 1170 (2006) Staff Analysis 19 n. 255 (Mar. 10, 2006). And there is no indication of legislative intent to apply the lodestar method in any manner. Thus, we conclude that the lodestar method set forth in Rowe does not apply to trustee’s fees.

Takeaway No. 1: Concrete advice for trustees and the lawyers who advise them

Corporate trustee fees are almost never a mystery: they abide by their published fee schedules (see here). And individual trustees usually opt for payment that is equal to or slightly less than the prevailing corporate trustee rates for their area. So figuring out what’s “reasonable” compensation for most trustees isn’t as difficult as you’d think.

But what if the trust’s unusual? Or the trustees want to make a case for getting paid some kind of extraordinary fee based on an especially challenging assignment or successful business strategy they formulated and executed? In those cases you’ll want to apply the 11 West Coast factors. And the best guidance for how to do that in real life is the example provided by the trial court’s order in this case (see here). It’s a must read for trust lawyers.

Takeaway No. 2: Behold the power of “anchoring”

For me, what’s most interesting about this case is the apparent impact “anchoring” had on the outcome. Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. A corollary to the anchoring bias is the “midpoint rule,” which states that the best predictor of the final deal price in any negotiation is the midpoint between the first semi-reasonable offer and counter offer. At trial the midpoint rule manifests itself this way: your judge or jury splits the difference.

As a starting point, Rauschenberg’s trustees set a high “anchor” with an aggressive fee request in the $51-55 million range that was at least arguably plausible. Based on the 2d DCA’s ruling we now know you can’t use a strict legal argument to block this kind of first-mover advantage. So what’s left? Double down on your negotiation/advocacy efforts by “defusing” the high anchor rather than simply ignoring it. Defusing is a term used in negotiation research for tactics designed to counter aggressive (but plausible) anchors.

The extent to which you can achieve or even surpass the midpoint rule will depend on how effectively you’ve defused the anchor. For a user-friendly introduction to these concepts you’ll want to read Dealmaking: Grappling with Anchors in Negotiation. Here’s an excerpt:

A well-known cognitive bias in negotiation, anchoring is the tendency to give too much weight to the first number put on the table and then inadequately adjust from that starting point. When your counterpart has dropped an anchor, the first and perhaps most important step is to recognize the move, since you can’t defend against something that you don’t see coming. Fortunately, you’ve already identified your counterpart’s maneuver as an attempt to anchor the negotiation in his favor.

Next, you need to defuse the anchor clearly and forcefully: “I’m not trying to play games with you, but we are miles apart on price.” A common mistake is to respond with a counter offer before defusing the other side’s anchor. If someone opens with $100, and you want to counter with $50, before presenting your number you need to make clear that $100 is simply unacceptable. If you don’t defuse the anchor first, you are suggesting that $100 is in the bargaining zone.

. . .

In making your counter offer, be sure to explain your proposal; don’t just throw a number over the fence. It’s particularly important to explain why your counter offer is fair. Also, be aware of the “midpoint rule”: the best predictor of the final deal price is the midpoint of the first semi-reasonable offer and counter offer. The extent to which you can achieve or even surpass the midpoint rule will depend on how effectively you have defused the anchor.

4th DCA: When does the “renunciation” rule NOT apply in trust litigation?

Posted in Will and Trust Contests

Gossett v. Gossett, — So.3d —-, 2015 WL 8947627 (Fla. 4th DCA December 16, 2015)

renunciationAs a general rule, a trust litigant can’t have it both ways: he can’t simultaneously benefit from and contest the validity of the same trust agreement. Which means that if a beneficiary wants to sue to invalidate a trust agreement, he first has to renounce his interest in the trust and give back any contested trust assets he’s previously received. Known as the “renunciation rule,” it’s an equitable doctrine I’ve written about before that’s premised on three underlying rationales. Renunciation:

  1. protects the trustee if the trust is invalidated,
  2. shows that the suit is sincere and not vexatious, and
  3. ensures the property is available for disposition and free from third-party claims.  Barnett Nat’l Bank of Jacksonville v. Murrey, 49 So.2d 535, 536–37 (Fla.1950).

But what if the same trust agreement’s been amended on multiple occasions (which often happens) and no matter what version finally gets upheld in court, your beneficiary client’s guaranteed a floor amount of the trust. Does this beneficiary have to renounce all his interest in the contested trust, or just the share that’s in dispute? That’s the question at the heart of this case.

The renunciation doctrine doesn’t force you to give back uncontested trust assets:

This case involves a trust agreement that had been amended five times. The 4th and 5th amendments included the settlor’s wife, the 3d cut her out. According to the 4th DCA:

At some point after executing the Third Amended Trust, the settlor filed for divorce from the surviving spouse, but was still married when he died. The settlor died from a stroke he suffered on the same day he and the surviving spouse were in a divorce settlement meeting.

Settlor’s son from a prior marriage challenged the 4th and 5th amendments to his dad’s trust. Wife shot back, contending son’s lawsuit was barred as a matter of law because he’d already accepted limited trust distributions, which he refused to give back. In his defense son argued he didn’t have to give the money back because “he was entitled to an equal or greater amount under each of the Amended Trusts.” This was the same argument that won the day in the Fintak case, which I wrote about here. Apparently unswayed by the 2d DCA’s reasoning/holding in Fintak, the trial court dismissed son’s trust challenge. Wrong answer says the 4th DCA. Here’s why:

[T]he [central] issue [in this appeal] is whether the renunciation rule applies to the son under the circumstances of this case. We find Fintak v. Fintak, 120 So.3d 177 (Fla. 2d DCA 2013), helpful in arriving at the answer. . .

[T]he son is in a similar situation as the settlor in Fintak. He will receive more than the distributed amounts under any version of the Trust. Applying the three rationales underlying the renunciation rule, the son prevails. First, the trustee is protected because the son is entitled to more than the distributions made under any of the Amended Trusts. Second, the risk of vexatious and insincere claims is present in any case, but no more so here. Third, the distribution to the son is free from third-party claims as he is entitled to more than the distributed amount. “[A]n individual cannot be estopped from challenging an instrument by accepting that which he or she is legally entitled to receive regardless of whether the instrument is sustained or overthrown.” Id. at 185 . . .

Although the son did not restore the monies received, the renunciation rule is inapplicable where none of the three rationales support its application.

Lesson learned?

There are two key takeaways from this case, one practical and the other doctrinal. First, just because the law and facts are clearly on your side, doesn’t mean you’re going to win. As I reported here, our courts are overworked and underfunded. In that context, you can’t expect perfection. Client expectations need to be managed accordingly.

Second, the renunciation rule’s an equitable doctrine that should be applied “equitably” based on the particular facts and circumstances of each case. If a litigant’s entitled to a floor % of the trust no matter what happens, that fact should bar dismissal of his or her complaint. Blindly applying an all-or-nothing standard invites unfair manipulation, which is exactly what son accused wife of in this case:

The son alleged that the surviving spouse, as trustee, began sending him distributions under the Fifth Amended Trust, while failing to provide him with Trust documents he had requested. The distributions were sent to the son when he was in financial need, and the surviving spouse intended that he accept them to prohibit him from challenging the validity of the Fourth and Fifth Amended Trusts.

Firm announcement: Juan Antúnez voted the 2016 lawyer of the year by “Best Lawyers” for trusts and estates litigation in Miami, Florida

Posted in Musings on the Practice of Law, Other Articles

LOTY_2014_for_brochureI’m pleased to announce I’ve been voted the 2016 lawyer of the year in Best Lawyers for trusts and estates litigation in Miami, Florida.

I’m a bit ambivalent about rating services in general, and I certainly didn’t seek this one out. But then again, gone are the days when word of mouth was all we had. Pre-internet, if you didn’t know someone who knew the “right” lawyer for the job, you were out of luck. Today, the internet has become the place where most professionals “check each other out,” and where most laypeople shop for the exact specialists they need to solve their particular problem, including lawyers. This world favors niche practitioners (like yours truly!). And ratings services are an integral part of that informational ecosystem. So who am I to judge?

Anyway, here’s how Best Lawyers described its background and methodology in an ABA piece entitled The Lawyer Raters: In Their Own Words:

Best Lawyers was first published in 1983, founded by the Harvard Law grads who were hired by a publisher to produce a book called “What Every Client Needs to Know About Hiring an Attorney.” Because attorneys know each other’s work and because they are quite candid about each other, it was decided that if you ask enough people the right questions, you’ll get something close to the truth.

Best Lawyers is still an advertisement-free publication. From the beginning, Best Lawyers has been excerpted in various city and regional publications to let people know about the local attorneys who represent the best in their profession, based on detailed evaluations by other lawyers.

Methodology
The peer review methodology lets you know who the voting pool is. The listees in the previous edition are asked to give their opinion on the quality of the work of nominees and other listees. You have to be voted into the books each year. There’s no sequential ranking within the book. It represents about 3% of private practice attorneys in the United States.

Recently we announced a partnership with U.S. News and World Report, which is known for its institutional rankings, to power its list of Best Law Firms. U.S. News came to Best Lawyers because of our strength in the legal marketplace and our reputation built on providing rankings of individual lawyers.

4th DCA: The sins of our fathers. Does Florida’s “slayer rule” also disinherit a killer’s descendants?

Posted in Will and Trust Contests

Fiel v. Hoffman, — So.3d —-, 2015 WL 4549604 (Fla. 4th DCA July 29, 2015)

novack_murder

In 2009, Bernice Novack and her son Fontainebleau Miami Beach hotel heir Ben Novack, Jr, were murdered three months apart. In 2012, Narcy Novack, Ben’s estranged wife, was convicted of orchestrating the murders and after a highly publicized trial, was sentenced to life in prison without the possibility of parole. The 4th DCA ruled Narcy’s daughter and her grandsons were not disinherited by Florida’s Slayer Statute.

This appeal is the latest chapter in the battle over the fortune of Fontainebleau heir Ben Novack Jr. Novack was murdered in 2009. In 2012, his estranged wife, Narcy Novack, was sentenced to life in prison for paying hitmen to  kill him and his 86-year-old mother. Prosecutors alleged that Narcy was afraid that her husband would leave her for his mistress, and that a prenuptial agreement would only leave her $65,000 instead of the bulk of her late husband’s multimillion dollar estate. They claimed she was motivated by “hatred, greed, and vengeance.”

Novack’s murder was the subject of intense media coverage, including a multi-part series on NBC’s Dateline entitled Family Affair, and a made-for-television movie entitled Beautiful & Twisted, which starred Rob Lowe as Novack. What gets lost in all the hype over the gruesome murders and ensuing criminal trial is the heated probate litigation over Novack’s estate, which has been ongoing for years, as reported by the Miami Herald in As family fight continues, Ben Novack Jr. fortunes shrink:

Novack’s assets, once estimated at as much as $10 million, appear to have dwindled down to less than $4 million, according to court documents. The estate has been the focus of a five-year probate battle involving a legion of family members, long-lost relatives and even one possible illegitimate child. They have been contesting the slain millionaire’s 2006 will, which left the bulk of his property, cash, life insurance, Batman collectibles and other valuables to his wife, Narcy.

Florida’s Slayer Statute:

Novack’s wife, Narcy, is prohibited from inheriting any of her husband’s wealth by Florida’s version of the “slayer rule,” a common-law doctrine that prohibits a murderer from inheriting property from the person he or she killed. This doctrine’s been codified in section 732.802 of Florida’s Probate Code, and comes up more often than you’d expect (for recent examples see here, here, here). With Narcy out of the picture, Novack’s last will leaves $150,000 to Narcy’s daughter, with the bulk of Novack’s multimillion dollar estate going to Narcy’s two adult grandsons.

So here’s the question raised by this appeal. If a murderer indirectly benefits from her crime because her family members inherit the wealth of the man she killed, is that legal? Again as reported in the Miami Herald piece:

Harvey Morse, a genealogist researcher and lawyer, is representing some members of the clan who believe that the slayer statute should be expanded to include Narcy’s daughter and grandsons. “Look at it this way. Grandmom is in prison and she tells her grandsons she needs money for legal fees,” Morse said. “It’s not out of the possibility that the grandsons would help her out.”

Does Florida’s Slayer Statute also disinherit a killer’s descendants? NO

This is not a new argument — and it’s not without its philosophical justifications (e.g., one could argue it’s not the actual fault that’s passed down to the killer’s descendants, but the consequences of the original crime, see here). Ultimately, however, this kind of public policy balancing act is best left to our legislature. As Florida’s Slayer Statute currently reads, our courts simply do not have the authority to extend the rule’s reach to a murderer’s family members.

The extension argument’s been consistently rejected by our appellate courts. First by the 2d DCA in In re Estate of Benson, 548 So.2d 775 (Fla. 2d DCA 1989) (“Slayer Statute” did not prevent minor children of man who murdered his mother and brother from inheriting their father’s share under his mother’s will or their father’s share of his brother’s intestate estate.), then by the 3d DCA in Lopez v. Rodriguez, 574 So.2d 249, 250 (Fla. 3d DCA 1991) (“We decline to hold that the legislature intended the statute to deprive an innocent beneficiary of the trust proceeds.”), and then again by the 1st DCA in Chatman v. Currie, 606 So.2d 454, 456 (Fla. 1st DCA 1992) (“We hold as a matter of law that section 732.802 does not apply to an innocent contingent beneficiary’s entitlement to life insurance benefits resulting from the killing of the primary beneficiary by the insured who then commits suicide.”). In all of these cases the courts focused on the clear and unambiguous text of the statute, which only applies to the killer — not his family members. Not surprisingly, the extension argument didn’t work this time around either. So saith the 4th DCA:

We agree with our sister courts [in Benson (2d DCA), Lopez (3d DCA), and Chatman (1st DCA), as well as the trial court [in this case], that the statute is clear and unambiguous and disinherits only the slayer, or anyone who participates in the killing of the decedent, from any rights to the victim’s estate. Appellants contend that Benson and its progeny all involved innocent family members related by blood, whereas here the daughter and grandchildren were related to the murderer and not to the decedent. Benson, however, did not turn on this factor. Rather, the Benson court relied on the plain language of the statute, which by its terms excludes only those who actively participate in procuring the death of the decedent.

. . .

The statute is clear. To interpret the statute to preclude the stepchildren from recovering would require us to add words to the statute, something we cannot do. If the Legislature deems as a public policy matter that anyone inheriting through the slayer should be barred from receiving any share of a victim’s estate, it can amend the statute to accomplish that result.

1st DCA: Can you challenge “joint” accounts and “POD” accounts on undue influence grounds in nonprobate inheritance cases?

Posted in Will and Trust Contests
Saving-Your-Budget

If you can prove undue influence, that same evidence should control the outcome of your inheritance case regardless of whether or not you’re litigating a will contest governed by F.S. 732.5165, a joint account case governed by F.S. 655.79, or a POD account case governed by Florida common law.

In today’s world the vast majority of inherited wealth gets transferred from one generation to the next by nonprobate “will substitutes” that are not subject to probate, are not controlled by a person’s will, and are not governed by our probate code. Known as the nonprobate revolution, it’s a trend that’s been accelerating for decades.

If you’re a trusts and estates lawyer, the challenge is to adapt to this new reality . . . or perish. For example, under section 732.5165 of our probate code a will that’s the product of fraud, duress, mistake, or undue influence is invalid. This kind of probate-code provision was all we needed when most wealth was in the form of real estate, and most of that property transferred from one generation to the next in the context of a probate proceeding. Today, most wealth is in the form of investment and savings accounts that usually transfer from one generation to the next via nonprobate transfers. These transfers aren’t governed by our probate code. So if one of these transfers is the product of undue influence, can it also be invalidated? Maybe, but you won’t find your answer in our probate code. For these cases you need to look elsewhere.

Fortunately, the 1st DCA’s published two opinions that give us a roadmap for navigating nonprobate inheritance disputes involving two of the most common will substitutes out there: joint accounts and pay-on-death (“POD”) accounts.

Can you challenge a joint account designation on undue influence grounds? YES!

Brown v. Brown, — So.3d —-, 2014 WL 4435974 (Fla. 1st DCA September 10, 2014)

Mrs. Brown’s will split her estate equally among her six children. Her savings and investment accounts didn’t, these accounts were either titled jointly with one adult child or designated POD to that same adult child. In other words, all of the probate assets went one way (to her 6 children in equal shares), and all of her nonprobate assets went another (to 1 child only). The trial court appointed a magistrate to conduct an evidentiary hearing, who concluded Mrs. Brown’s nonprobate accounts didn’t reflect her true testamentary intent. Specifically, the magistrate determined:

[Appellee] has demonstrated by clear and convincing evidence, which includes the admissions of Defendant, that the decedent’s intent was for her “cash accounts,” including her certificates of deposit, to first be used to pay expenses associated with her death and the balance to be divided equally among her six children.

So far so good. And the magistrate also got it right when he applied F.S. 655.79 to invalidate the joint account designations. Under F.S. 655.79, you can invalidate a joint account designation by proof of “fraud or undue influence or clear and convincing proof of a contrary intent.” The statute reads in pertinent part as follows:

(1) Unless otherwise expressly provided in a contract, agreement, or signature card executed in connection with the opening or maintenance of an account, including a certificate of deposit, a deposit account in the names of two or more persons shall be presumed to have been intended by such persons to provide that, upon the death of any one of them, all rights, title, interest, and claim in, to, and in respect of such deposit account … vest in the surviving person or persons….

(2) The presumption created in this section may be overcome only by proof of fraud or undue influence or clear and convincing proof of a contrary intent….

Where things went sideways is the law that was applied to invalidate the POD account designations (this is the kind of mistake that only happens in a nonprobate world!). Who gets these accounts when someone dies is controlled by F.S. 655.82, which does not have the same statutory invalidation mechanism that applies to joint accounts. Bottom line, even though the evidence was the same for all accounts, the POD account ruling was reversed because the wrong law was applied.

Regarding ownership of the funds in a POD account when the account owner dies, the statute provides, “On the death of the sole party or the last survivor of two or more parties, sums on deposit belong to the surviving beneficiary or beneficiaries.” § 655.82(3)(b), Fla. Stat. (2007) (emphasis added). No rebuttable presumption applies. Because the magistrate applied the incorrect statute to the POD accounts, the trial court abused its discretion in adopting the portions of the magistrate’s report and recommendations relating to those accounts.

So does this mean POD accounts are immune to challenge on undue influence grounds? Based on the 1st DCA’s ruling in Brown you might think so. And you’d be wrong, as the litigants learned the hard way in Keul, the next POD account case the 1st DCA tackled.

Can you challenge a POD account designation on undue influence grounds? YES!

Keul v. Hodges Blvd. Presbyterian Church, — So.3d —-, 2015 WL 7444212 (Fla. 1st DCA November 24, 2015)

In this case a POD account designation was invalidated on undue influence grounds. The issue on appeal was whether this kind of case was possible as a matter of law. Trial court said yes, and the 1st DCA agreed. Here’s why:

A POD designation or Totten trust, like a transfer-on-death (TOD) provision, is a “will substitute” that does not transfer ownership of funds until the death of the account holder. E.g., Blechman v. Estate of Blechman, 160 So.3d 152, 157 (Fla. 4th DCA 2015) (recognizing the existence of these and other will substitutes). These are generally considered inter vivos transfers, although they also have attributes of testamentary transfers because they have no effect until the death of the owner. Under Florida law, they are subject to challenge on grounds such as undue influence, fraud, duress, and overreaching.

But what about Brown? According to the 1st DCA, it never ruled you can’t invalidate a POD account designation on undue influence grounds, all it said was that the plaintiff in that case went about it the wrong way. In this case, the challenger got it right. Here’s why:

Appellant misplaces reliance on our decision in Brown v. Brown, 149 So.3d 108 (Fla. 1st DCA 2014). The issue in Brown was whether the decedent’s intent in establishing joint accounts was consistent with property distribution provisions in her will. We held that the magistrate incorrectly applied section 655.79 of the Florida Statutes, as it relates to ownership of funds after death of any joint account owner, to POD designations. Brown did not involve, and does not preclude, an undue influence challenge to a POD designation.

Likewise, Appellant misplaces reliance on the absence of express undue influence provisions in Florida’s banking law on POD designations. The banking statute, section 655.82 of the Florida Statutes, defines a POD designation; and further provides that, “On the death of the sole party or the last survivor of two or more parties, sums on deposit belong to the surviving beneficiary or beneficiaries.” § 655.82(3)(b), Fla. Stat. (2013). Appellant argues that a POD designation cannot be invalidated for undue influence because this statute does not contain the same undue influence provision that the Florida Probate Code contains. The fact that the banking regulatory statute does not expressly address grounds for invalidating a POD designation is not controlling. Seymour v. Seymour, 85 So.2d 726, 727 (Fla.1956) (holding that banking laws, designed primarily to regulate banks, “are not necessarily conclusive of the ownership of deposited money”). We reject Appellant’s argument because a POD account, although not in the strictest sense a testamentary device and not subject to the formalities required of wills, functions as a will substitute and partakes of many of the same equitable considerations that apply to testamentary transfers. Florida law and policy against abuse of fiduciary relationships apply to contracts, inter vivos transfers, and testamentary transfers, and are properly applied to determine whether a POD designation has been obtained through undue influence. We affirm the trial court’s conclusions that, on the evidence presented, Appellant obtained this POD designation through undue influence, and the gift is void.

So what’s the take away?

The nonprobate revolution is a game changer for trusts and estates lawyers. But fundamentally speaking, there’s nothing new here; will substitutes are simply a different way of doing the same job traditional wills have always done. As explained by Prof. Langbien in The Nonprobate Revolution and the Future of the Law of Succession, modern will substitutes are “functionally indistinguishable from a will – each reserves to the owner complete lifetime dominion, including the power to name and to change beneficiaries until death.” And POD and joint accounts are two of the most common will substitutes out there. Here’s what Prof. Langbien had to say about them:

In arranging their personal banking, Americans meet another raft of invitations to execute will substitutes. Married persons in particular elect these options widely. The purest of the bank-operated will substitutes are accounts over which the depositor retains explicit lifetime dominion while designating beneficiaries to take on his death. Where local law permits, such arrangements may assume the blatant form of the P.O.D. (“pay on death”) account, which was pioneered by the United States Treasury for selling government bonds. . . .

More commonly, the joint bank account – whether savings or checking – is manipulated to do the work of a will. In theory, joint accounts differ from other pure will substitutes: they look more like gifts than like wills. When the owner of property arranges to take title jointly, he supposedly creates a present interest in his donee-cotenant. In the prototypical joint tenancy of realty, the donee receives an interest equal to the donor’s, and the donor loses the power to revoke the transfer. Moreover, the commonality-of-use rule requires that the cotenants act together in order to transfer the realty. Joint accounts of personalty, however, “differ from the true joint tenancies as defined in [real] property law, for by the privilege of withdrawal either [cotenant] may consume the account.” Accordingly, a depositor may name a cotenant on a bank account but deal with the account as though it were his own. The cotenant may not even know that he has been designated. Depending on his contract with the bank, the depositor may revoke and alter cotenancy designations as freely as he would beneficiary designations under any of the other will substitutes. He may also achieve the same result by closing the account, withdrawing the funds, and opening another account as he pleases. In this way, joint accounts may be used to approximate the incidents of a will; the cotenancy designation is effectively revocable and ambulatory.

So what’s it all mean? Will “substitutes” = Wills. So the basic facts driving a traditional will contest are also going to drive inheritance cases involving nonprobate transfers. Which means that if you can prove undue influence, that same evidence should control the outcome of your case regardless of whether or not you’re litigating a will contest governed by F.S. 732.5165, a joint account case governed by F.S. 655.79, or a POD account case governed by Florida common law. And if you’ve been litigating will contests all your life, don’t fret. You’ll do fine in this brave new world. The hard part’s proving your case. The law’s the easy part. And the 1st DCA’s just made it easier for all of us the next time a client walks through the door with an inheritance case involving contested joint or POD accounts.

2d DCA: What’s the “dependent relative revocation” doctrine and why should trusts and estates lawyers care?

Posted in Dependent Relative Revocation Doctrine

In re Estate of Murphy, — So.3d —-, 2015 WL 6777216 (Fla. 2d DCA November 6, 2015) 

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Dependent relative revocation (“DRR”): “This doctrine has been stated and reiterated by many courts since it was first expounded in 1717, but stated simply it means that where [a] testator makes a new will revoking a former valid one, and it later appears that the new one is invalid, the old will may be re-established on the ground that the revocation was dependent upon the validity of the new one, [the] testator preferring the old will to intestacy.” Stewart v. Johnson, 142 Fla. 425, 194 So. 869, 870 (Fla.1940) (citation omitted). (Illustration: The Court of Chancery, London, in the early 19th century.)

This case has it all. It’s been in the news for years (see here), resulted in a prominent lawyer’s tragic fall from grace and eventual disbarment (see here), was at least partially responsible for new legislation fundamentally changing Florida common law involving gifts to lawyers (see here), and last but not least, it’s produced a must-read appellate decision dissecting Florida’s version of the dependent relative revocation doctrine and how it comes into play when a will’s challenged on undue influence grounds.

Dependent relative revocation (“DRR”) doctrine:

In this latest chapter of the Murphy estate saga the 2d DCA’s provided a detailed road map for litigating undue influence claims against the backdrop of the dependent relative revocation (“DRR”) doctrine, which although centuries old (it’s been around since 1717), rarely gets much air time in our appellate courts. Without getting sidetracked by why I think this issue rarely gets appealed, suffice it to say the DRR doctrine’s lurking under the surface of every will contest where the testator signed more than one will (which is almost always). Here’s how the 2d DCA defined the doctrine and its intended purpose:

We begin by examining the legal construct at the heart of this appeal, the doctrine of dependent relative revocation. Founded in the common law of early eighteenth century England, the doctrine was first adopted by the Florida Supreme Court, which explained:

This doctrine has been stated and reiterated by many courts since it was first expounded in 1717, but stated simply it means that where [a] testator makes a new will revoking a former valid one, and it later appears that the new one is invalid, the old will may be re-established on the ground that the revocation was dependent upon the validity of the new one, [the] testator preferring the old will to intestacy.

Stewart v. Johnson, 142 Fla. 425, 194 So. 869, 870 (Fla.1940) (citation omitted). Grounded in the axiom of probate law that intestacy should be avoided whenever possible, the doctrine of dependent relative revocation, our court has observed, is “a rule of presumed intention” that creates a rebuttable presumption that the testator would have preferred to have a prior will effectuated over statutory intestacy.

The DRR doctrine is intended to avoid intestacy whenever possible. See In re Estate of Baer, 446 So.2d 1128, 1128 (Fla. 4th DCA 1984) (“[T]he law abhors intestacy.”). It does this by focusing on a will’s revocation clause. These are simple, one-line boilerplate clauses included in all new wills that avoid confusion by explicitly revoking all prior wills. Here’s a sample revocation clause published on the Nolo website:

“I revoke all wills and codicils that I have previously made.”

If a testator’s last will’s invalid for any reason, the DRR doctrine tells us we’re supposed to presume his revocation clause is also invalid, which avoids intestacy by resurrecting his most recently signed and preexisting “similar” will. In undue-influence cases, this presumption can be overcome (“rebutted”) if there’s evidence that the testator specifically wanted to revoke all of his prior wills no matter what happens, in other words, he intended to die intestate rather than resurrect a prior will. Here’s how the 2d DCA made this point:

In cases of undue influence, if a prior will is sufficiently similar to an invalidated will then the presumption arises but may be rebutted by evidence that “the revocation clause was not invalidated by undue influence and that it was not intended by the decedent to be conditional on the validity of the testamentary provisions” of the will. Wehrheim, 905 So.2d at 1009–10; cf. § 732.5165 (stating any part of a will procured by fraud, duress, mistake or undue influence is void, “but the remainder of the will not so procured shall be valid if it is not invalid for other reasons”).

Who bears the burden of proof?

In real life, who bears the burden of proof can determine the outcome of a case. So who bears the burden of proof in these cases? Depends. If a will’s set aside on undue influence grounds, it’s the party arguing against application of the DRR doctrine. Here’s why:

The Florida Probate Code clarifies that presumptions arising from undue influence “implement public policy” that justify shifting the entire burden of proof when a presumption arises. § 733.107(2), Fla. Stat. (2014) (“In any transaction or event to which the presumption of undue influence applies, the presumption implements public policy against abuse of fiduciary or confidential relationships and is therefore a presumption shifting the burden of proof under ss. 90.30190.304.”); see also Hack v. Janes, 878 So.2d 440, 443 (Fla. 5th DCA 2004) (“The 2002 amendment to section 733.107, adding subsection 2, was intended to incorporate sections 90.301–90.304 of the Florida Evidence Code, and require a shifting of the burden of proof after the presumption of undue influence arises in a will contest.”). Thus, the doctrine of dependent relative revocation, when applied in a case of undue influence, shifts the burden of proof to the parties opposing its application.

How “similar” does a prior will have to be?

But the DRR doctrine doesn’t make sense if a testator’s prior will bears no resemblance whatsoever to his invalidated will. In other words, it doesn’t make sense to presume a testator would want to resurrect a prior will if it’s antithetical to his last will. So how “similar” does a prior will have to be for the DRR doctrine to apply? Does it have to be identical, or close enough to arguably fit into a general pattern of testamentary intent? Depends on how narrowly or broadly you define the word “similar.” According to the 2d DCA, it should be defined broadly:

The discrete point of contention here is one of measurement. Somewhere in the conceptual space between “identical” and “antithetical” resides “similar,” and the parties disagree where its boundaries should be marked for this kind of case. One could draw the notion of sufficient similarity between wills broadly or narrowly. Florida courts have seldom expounded upon the issue, but in the context of undue influence we would incline toward a broader definition of similarity, one that takes into account the testamentary instruments themselves and any admissible evidence that may be relevant. We do so for several reasons. . . .

Keeping in mind that the requirement of sufficient similarity serves to ensure the indicia of the testator’s intent, any construction of similarity must necessarily account for the intrusion of another’s intentions in cases of undue influence. A broad construction of similarity does so. . . .

Indeed, to hold otherwise, to apply an overly strict or narrow construction of similarity, would likely consign the doctrine of dependent relative revocation to a minute corner of irrelevance for cases of undue influence. We see no reason to corral the presumption for this class of cases.

Case Study:

This case revolves around a woman who died at that age of 107 after having executed at least six wills: one in 1989, a second in 1991, a third in February 1992, a fourth in August 1992, a fifth in 1993, and a sixth in 1994. The last five wills provided for nominal preresiduary gifts then left the bulk of her multi-million dollar estate to four residuary devisees. In 2008 the trial court determined that three of the four residuary devisees were guilty of undue influence. The fourth residuary beneficiary was “Ms. Rocke,” the decedent’s second cousin. She last appeared as one of four residuary beneficiaries in the 1992 will. The trial court held the DRR doctrine didn’t apply, which meant the decedent was deemed to have died intestate.

OK, so tying together all the elements summarized above, the 2d DCA applied the following three-part test to this case, which is the same test we should all apply in any case involving multiple wills and allegations of undue influence (which is always):

[T]he proper analysis in this case on remand should have proceeded along the following sequence: (i) did Ms. Rocke establish sufficient similarity between Mrs. Murphy’s wills that would have given rise to the doctrine of dependent relative revocation; (ii) if so, were there sufficient record facts to overcome that presumption so that the 1994 will’s revocation clause [should be enforced]; and (iii) if not, if the presumption remained intact, which, if any, will or residuary devise in Mrs. Murphy’s prior wills reflected her true testamentary intention?

So how do you prove “similarity”? Think: “extrinsic” evidence.

The 2d DCA concluded all three prongs of the DRR doctrine cut in Ms. Rocke’s favor, meaning she ended up inheriting the bulk of the fortune at stake in this case. In arriving at its final holding, the 2d DCA “parted company” with the 5th DCA on an important evidentiary point. The 2d DCA concluded the trial court should have considered extrinsic evidence (which it had refused to do) when ruling upon the “similarity” of the wills at issue in this case, which is directly at odds with the 5th DCA’s ruling in Wehrheim:

But we must part company with the Fifth District insofar as Wehrheim would preclude a probate court from considering extrinsic evidence when deciding the doctrine’s applicability in claims involving undue influence. Wehrheim, 905 So.2d at 1008 (noting that a court “must confine its inquiry to the testamentary documents before it without resort to extrinsic evidence”). In determining whether testamentary instruments are sufficiently similar for purposes of the doctrine of dependent relative revocation, a court should always look first to the documents themselves. Brickell v. DiPietro, 145 Fla. 23, 198 So. 806, 810–11 (Fla.1940) (“It is the duty of the court to give effect to the intention of the testator where it can be ascertained and determined from the four corners of the will.”). However, in cases of undue influence, its analysis cannot simply end there.

If you’re involved in one of these cases, this point is crucial. It will shape the entire course of your litigation. Regardless of which side of the argument you end up on, you’ll want to know why the 2d DCA decided extrinsic evidence should be allowed:

We find no reason to erect a barrier between admissible evidence and the task of sifting similarities between wills that have been affected by undue influence. Rather, we join the courts of our sister states to hold that, in cases involving undue influence, a probate court is not confined to the testamentary documents when determining whether the doctrine of dependent relative revocation should apply. See Estate of Anderson, 56 Cal.App.4th 235, 247–49, 65 Cal.Rptr.2d 307 (Cal.Ct.App.1997) (observing that questions of ambiguity or revocation of a will permit consideration of extrinsic evidence; “[a]pplying these principles, we conclude that extrinsic evidence may be considered in determining whether Anderson conditioned the revocation of the first will on the exercise of the power of appointment in De Paul’s favor” (citing In re Kaufman’s Estate, 25 Cal.2d 854, 155 P.2d 831 (Cal.1945))); In re Estate of Anthony, 265 Minn. 382, 121 N.W.2d 772, 779 (Minn.1963) (remanding case to district court “to receive whatever extrinsic evidence of the testator’s intention may be available”). Upon a finding of undue influence, a probate court may consider any relevant, admissible evidence to decide if the testator intended a will’s revocation clause to be conditional upon the will’s efficacy.

So what’s the takeaway?

Far and away, the single most common line of attack in any will contest is undue influence. And in most of these cases there’s going to be at least one other will floating around that could conceivably get revived under the DRR doctrine. Which means the 2d DCA’s lengthy and detailed three-step analysis for how these cases should be litigated is a must read for Florida trusts and estates lawyers.

For those of us in the trenches, there’s another important — and scary —  lesson to be drawn from this extraordinary case. As I reported here, if your client legitimately wants to include you in his or her will — there’s a right way to go about handling that scenario. Do it the “wrong” way and a proud reputation you’ve worked a lifetime to build could be irrevocably stained by ugly accusations of self-dealing and bad faith. The decedent’s drafting lawyer had been practicing law in this state since 1951. As noted by the 2d DCA, after decades of good work, this case will sadly overshadow an otherwise “exemplary professional reputation.” It didn’t have to end this way.

We need not recount all of the probate court’s findings of undue influence—which were quite extensive—but would echo the court’s sense of puzzlement as to why Mr. ___, an esteemed lawyer and a former city councilman, FBI agent, and Army Air Corps veteran, succumbed to the temptation to pursue a pecuniary windfall at the expense of a frail and susceptible client. Sadly, the pall of this case cast a long shadow over an otherwise exemplary professional reputation. Cf. Fla. R. Prof. Conduct 4–1.8(c) (“A lawyer shall not … prepare on behalf of a client an instrument giving the lawyer … any substantial gift unless the lawyer … is related to the client.”). We make this observation not to impugn the memory of Mr. ___, who passed away in 2014, but to state this simple point: the repercussions from a single ethical lapse may carry far beyond a lawyer’s license to practice law.

Probate Law 2015 Seminar — Friday, December 4, 2015

Posted in Musings on the Practice of Law

rppt-sealI’m going to be one of the speakers at next week’s Probate Law 2015 Seminar. The organizers have put together a great program. If you’re able to attend, you should. It’ll be time well spent. For a link to the seminar registration form, click here.

Here’s the official seminar summary:

This seminar is intended to provide practitioners with real life insight in handling challenging issues that arise in the course of a Florida probate proceeding. Speakers will focus on dealing with digital assets and the impact of mobile device technology on probate practice, the effect of a party’s death during the course of litigation, and recent developments in the law governing attorneys’ fees and personal representative commissions. Other topics include a primer on statutory entitlements under the Florida Probate Code, a beginner’s field guide to jurisdictional issues in trust and estate proceedings, as well as a session on the complex probate issues that can arise when dealing with modern families. The seminar also includes the always popular probate case law, rules, and legislative update, along with a presentation on the ethical dilemmas faced by fiduciaries and probate practitioners.

Fla/3d DCA: What’s a “reasonably ascertainable” probate creditor and why should you care?

Posted in Creditors' Claims

Golden v. Jones, — So.3d —-, 2015 WL 5727788 (Fla. October 1, 2015)

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The Florida Supreme Court put to rest a statutory-interpretation issue involving F.S. 733.702(1)’s 3-month filing deadline for creditor claims that’s been roiling the Florida Probate Bar for years and lead to a split among 4 of our appellate courts. BONUS MATERIAL: You can access the Florida Supreme Court’s video of oral argument for this case by clicking here.

A cause of action against a probate estate is private property that’s protected by the Fourteenth Amendment’s due process clause. Which means it can’t be taken away from you in a probate proceeding without notice. But what we mean by “notice” depends on what kind of creditor you are. If you’re a known or reasonably ascertainable creditor, than you’re entitled to direct, personal notice. Otherwise all you get is publication notice in a local newspaper (which in today’s world equals no notice as a practical matter). This distinction’s at the core of our supreme court’s ruling in this case:

In Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478, 489–91, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988), the United States Supreme Court held that where a creditor is known or reasonably ascertainable, that creditor’s claim may not be barred merely by publication of the notice to creditors. Noting that a claim against an estate is property subject to protection by the Fourteenth Amendment, the Supreme Court weighed the important state interests in regulating the timeliness of creditors’ claims against the rights of those creditors to have their intangible interests in property protected by the Fourteenth Amendment. Id. at 485, 108 S.Ct. 1340. The Supreme Court determined that where a time bar is self-executing—such as the two-year statute of repose in section 733.710—there is insufficient state action to implicate the Due Process Clause of the Fourteenth Amendment. Id. at 485–87, 108 S.Ct. 1340. However, where a time bar is triggered by legal proceedings—such as the limitations periods in section 733.702—there is sufficient state action to implicate the Due Process Clause. Id. at 487–88, 108 S.Ct. 1340. The Court thus concluded that where there is sufficient state action and a creditor is “known or ‘reasonably ascertainable,’ then the Due Process Clause requires that [the creditor] be given ‘[n]otice by mail or other means as certain to ensure actual notice.'” Id. at 491, 108 S.Ct. 1340 (quoting Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 800, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983)).

With this background in mind, the Florida Supreme Court put to rest a statutory-interpretation issue involving F.S. 733.702(1)’s 3-month filing deadline for creditor claims that’s been roiling the Florida Probate Bar for years, and was at the center of 4! appellate court decisions, 3 of which ruled one way (Morgenthau, Lubee and Souder) and 1 which went the other (Golden). Proving once again that nothing’s ever certain in litigation, our supreme court held that 3 of the 4 lower appellate courts got it wrong! The one court that got it right was the 4th DCA in Golden (is it really that hard to read the text of a simple probate statute and do what it says?). Anyway, here’s how the court summarized its ruling:

We have for review Golden v. Jones, 126 So.3d 390, 390 (Fla. 4th DCA 2013), in which the Fourth District Court of Appeal held “that if a known or reasonably ascertainable creditor is never served with a copy of the notice to creditors, the statute of limitations set forth in section 733.702(1), Florida Statutes, never begins to run and the creditor’s claim is timely if it is filed within two years of the decedent’s death.” The Fourth District certified that its decision is in direct conflict with the decisions of the First and Second District Courts of Appeal in Morgenthau v. Andzel, 26 So.3d 628 (Fla. 1st DCA 2009), and Lubee v. Adams, 77 So.3d 882 (Fla. 2d DCA 2012), which held that even a reasonably ascertainable creditor who was not served with a copy of the notice to creditors is required to file a claim within three months after the first publication of the notice, unless the creditor files a motion for an extension of time under section 733.702(3) within the two-year period of repose set forth in section 733.710. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.

Because we conclude that the limitations periods prescribed in section 733.702(1) are not applicable to known or reasonably ascertainable creditors who are never served with a copy of the notice to creditors and that the claims of such creditors are timely if filed within two years of the decedent’s death under section 733.710, we approve the decision of the Fourth District in Golden and disapprove the decisions of the First and Second Districts in Morgenthau and Lubee.

So what’s the take away?

Bottom line, if you’re a known or reasonably ascertainable creditor who’s never been personally served with notice, you have up to 2 years to file your claim. And you don’t have to ask a probate judge to pretty please give you an extension to file your claim under the very tough standard found in F.S. 733.702(3), which only allows for extensions if you prove fraud, estoppel or insufficient notice.

Based on the Florida Supreme Court’s ruling in Golden, there’s now an even greater premium on being a known or reasonably ascertainable creditor vs. an unknown or conjectural creditor, which means we can expect the litigation focus to turn in that direction. And that’s exactly what happened in the Soriano case.

“Reasonably ascertainable” creditors vs. “conjectural” creditors. Guess which one you want to be.

Soriano v. Estate of Manes, — So.3d —-, 2015 WL 5965203 (Fla. 3d DCA October 14, 2015)

The U.S. Supreme Court’s drawn a clear distinction between the due process rights afforded to known or reasonably ascertainable probate creditors vs. unknown and conjectural creditors. Here’s how the 3d DCA summarized this point:

In Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) the United States Supreme Court . . . explained, it is not “unreasonable for the State to dispense with more certain notice to those beneficiaries whose interests are . . . conjectural . . .” Id. at 317. Years later, in Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988), the Supreme Court . . . held . . . “[I]t is reasonable to dispense with actual notice to those with mere ‘conjectural’ claims.” Id. at 490. See also Strulowitz v. Cadle Co. II, 839 So.2d 876, 880 (Fla. 4th DCA 2003) (noting a “personal representative has no duty to speculate and conjecture that someone might possibly have a claim against the estate” (citing Jones, 609 So.2d at 102)).

If you’re a “conjectural” creditor who happened to miss the creditor notice buried in the back of your local newspaper that no one ever reads, you’re stuck with F.S. 733.702(1)’s 3-month filing deadline. And if you miss that very short window of opportunity, you’re stuck arguing fraud, estoppel or insufficient notice under F.S. 733.702(3) to hopefully get an extension to file your claim when you finally find out the guy who owes you money died. The extension argument’s a tough one to win under the best of circumstances. On the other hand, you could argue none of this applies to you because you were really a reasonably ascertainable creditor all along, which means you have up to 2 years to file your claim if no one ever got around to personally serving you with notice. That’s what the creditor in this case tried to do.

Case Study:

Four months after the estate’s “notice to creditors” was first published in a local newspaper (i.e., after F.S. 733.702(1)’s 3-month filing deadline), Ms. Soriano filed a creditor claim against the estate, alleging she had an unsecured claim “based upon an imminent private tort action against [the Decedent] stemming from a criminal charge he incurred on May 28, 2013 in Monroe County, Florida.” Attached to the statement of claim was a document entitled “Traffic/Criminal Case Detail Information” which showed that the Decedent had been charged with misdemeanor battery in June 2013, and that the State nolle prossed the criminal case on December 4, 2013 (a month following Decedent’s death).

Ms. Soriano asserted she was a reasonably ascertainable creditor who wasn’t personally served with a notice to creditors, thus absolving her from F.S. 733.702(1)’s 3-month filing deadline. Whether or not you’re a reasonably ascertainable creditor is an intensely fact-specific decision. So both sides filed supporting affidavits. The estate’s personal representative (PR), Ms. Manes, filed an affidavit claiming she’d done everything a PR’s supposed to do to find creditors, and she had no idea the claimant existed. According to the 3d DCA, in response:

Ms. Soriano filed three affidavits from the following individuals: (1) Luke Bovill, the prosecutor in the criminal case against the Decedent; (2) Elena Vigil–Farinas, the Decedent’s criminal defense attorney; and (3) Robert C. Stober, Ms. Soriano’s personal attorney. Bovill’s affidavit averred that the Decedent was represented by Jessica Reilley, Esq., and that Bovill was aware Ms. Soriano had retained personal counsel. Vigil–Farinas’ affidavit averred that the Decedent’s “wife contacted me and paid the retainer for [Decedent’s] criminal defense.” Finally, Stober’s affidavit averred that he “was retained by Ms. Soriano to assist her with a workplace battery” committed by Decedent and that, on or about November 13, 2013,3 he “spoke with Mr. Manes’ criminal defense attorney, Jessica Reilly, and advised Ms. Reilly of my representation of Ms. Soriano.”

So was this enough to save the day for this creditor? No. Here’s why: she couldn’t prove the PR ever had actual notice of her intent to sue the estate or that the PR wasn’t diligent in her search for creditors. Sure, maybe the PR could have guessed this claim was coming, but according to her testimony she didn’t, and that was enough to block the claimant.

There is nothing in the affidavits filed by Ms. Soriano to suggest that Ms. Manes, or Decedent’s criminal defense counsel, had any actual knowledge of Soriano’s civil claim against Decedent. Nor is there any evidence (or assertion in the affidavits) that a search more diligent than that conducted by Ms. Manes would have revealed the existence of Ms. Soriano’s claim. Neither Ms. Soriano nor her attorney placed Ms. Manes on notice of any such claim. In fact, the affidavits fail to contain an averment that Ms. Soriano or her attorney placed anyone on notice that she was pursuing, or intended to pursue, a civil claim against Decedent or his estate.

It is the absence of any such averment that distinguishes the instant case from the cases relied upon by Ms. Soriano. Compare, e.g., In re Estate of Ortolano, 766 So.2d 330 (Fla. 4th DCA 2000) (finding appellant was a reasonably ascertainable creditor where it was established that the personal representative had actual notice of the contingent creditor’s claim); Foster v. Cianci, 773 So.2d 1181 (Fla. 2d DCA 2000) (same).

The affidavits presented to the trial court failed to establish that Ms. Soriano was a reasonably ascertainable creditor and further failed to establish that Ms. Manes, following a diligent search, should reasonably have ascertained that Ms. Soriano had a claim or a potential claim. The trial court properly denied Ms. Soriano’s petition because, as a mere conjectural creditor, she was not entitled to personal service of the notice to creditors, her petition was untimely, and her asserted claim was barred by section 733.702(1), Florida Statutes.

Lesson learned?

Our supreme court’s ruling in Golden highlights again the preferential treatment afforded to known or reasonably ascertainable creditors. On the other hand, the 3d DCA’s ruling in Soriano reminds us that just because you think you’re a reasonably ascertainable creditor, doesn’t make it so. If you’re involved in one of these cases you’ll want to use Soriano as an evidentiary road map; which means these cases all boil down to two questions:

  1. Did the personal representative have actual knowledge of the probate creditor’s existence?
  2. Would a reasonably diligent search have revealed the probate creditor’s existence?

Bench trials and unconscious bias, are judges people too?

Posted in Musings on the Practice of Law

Unconscious BiasIn Florida, inheritance disputes are decided by a jury of one: your judge. These cases are all bench trials, which has huge implications for litigants and the lawyers who advise them.

One obvious challenge for those of us making a living in Florida’s overworked and underfunded court system, is how do you help your judge make the best decisions possible under pressure-cooker conditions? For example, as I reported here, in Miami-Dade each of our probate judges was assigned an average of 3,069 new cases in FY 2013-14, and in Broward the figure was even higher at 3,899/judge. And as caseloads go up, court funding goes down, depriving our judges of the support most of us in private practice take for granted. The best strategies I’ve found for dealing with this particular challenge are summarized beautifully in Persuading a Cold Judge, a 2009 article published in the ABA’s Litigation magazine which I refer to all the time (and wrote about here).

Are Juries Really Such a Wildcard Compared with Judges?

Another fundamentally important issue to deal with in bench trials, which is less obvious but equally outcome determinative, are the unconscious biases that drive much of our decision making as human beings. Most studies investigating this kind of bias focus on the general public (which I’ve reported on here in the context of settlement negotiations). We now have research focusing specifically on judges, as reported in Are Juries Really Such a Wildcard Compared with Judges? Here’s an excerpt:

[A] growing body of research supports what many of us have always known—judges are people, too, and are subject to many of the same unconscious influences and decision-making shortcuts as jurors. Regardless of background, education, and occupation, we are all remarkably bad at understanding what influences us when we make decisions. . . . We think we know why we made certain decisions and what we relied on when doing so, but we often discount factors that had a larger impact on us than we thought. Judges are not immune to this either. Pertinent research on judicial decision making indicates that biases and errors occur both unconsciously and unintentionally.

Yes, judges are people too; so what’s to be done?

First, understand the problem. We’re not talking about intentional bias here. What we’re talking about are the factors affecting decision making that most of us are simply unaware of. The linked-to article does a good job of identifying the typical unconscious biases we’ll encounter in a courtroom. Yes, “who” your judge is matters (i.e., race, gender and background), but “how” his or her brain works is just as important. Our brains use a number of mental shortcuts, or “cognitive heuristics,” that help us make decisions more quickly and efficiently by operating in a matter of milliseconds, without our realizing that it is happening. Understanding how these mental shortcuts work, and what you need to do to make sure they’re working in a way that helps your judge do the best job possible, is crucial.

Second, be proactive, take steps to neutralize unconscious biases that hinder a judge from making thoughtful, well-reasoned decisions. The linked-to article provides a solid list of compensating strategies; here are my favorites:

Because external accountability can . . . increase deliberative processing, call attention to the fact that the decision will draw scrutiny, for example, through . . . appellate review. While risky, it could be effective if handled delicately.

On a more strategic level, use a narrative to tell a story in briefs, in opening statements, and through witness testimony. Having judges consider alternative explanations leads to more deliberative analysis, and simply attacking the adverse party’s story does not provide that alternative. Provide your own story that includes an alternative cause, motive, narrative, etc., so the judge has to consider both versions rather than just the strengths and weaknesses of only one.

An assessment of the judge’s inclination to tackle complex information can also help guide the complexity of the presentation. A judge who exhibits an inclination to make sure he or she understands complex evidence will inherently be more likely to make more deliberative decisions. However, if a judge is more prone to quick decisions, then counsel should make extra use of tools like simple visuals, decision trees, and tag lines to create a less effortful path to a favorable decision.

Bottom line, judges are people too. Understanding how they make decisions is crucially important in cases such as ours, where the same person is both judge and jury.

3d DCA: What’s a “notarial will” and when do they work in Florida?

Posted in Practice & Procedure

Malleiro v. Mori, — So.3d —-, 2015 WL 5714701 (Fla. 3d DCA September 30, 2015)

civil-law-notary

BONUS MATERIAL: You can access the 3d DCA’s video of oral argument for this case. Just click here, then enter case number 14-0095 in the search box, then press the search button. When you see this case listed, click the link to download the file to your computer. (Image: 16th-century painting of a civil law notary, by Flemish painter Quentin Massys)

As long as we’ve had probate courts, people have been trying to figure out how to avoid them. In common-law jurisdictions like Florida, the most common technique is to use non-probate assets that automatically transfer at death (known as the nonprobate revolution, it’s a trend that’s been accelerating for decades). In civil-law jurisdictions (i.e., all of Latin America) and mixed civil-law jurisdictions (like Quebec, Louisiana and Puerto Rico), they’ve come up with another way to avoid probate, and it’s called the “notarial will.”

What’s a “notarial will”?

Civil-law notaries, or “Latin” notaries, act in a quasi-judicial capacity when they’re involved in the preparation and execution of a person’s will. Which means that once your will’s been authenticated by a civil-law notary, you usually don’t need a probate court to do it over again after you’ve died. Bottom line: no probate.

What makes notarial wills “tick” is the level of authority a notary’s vested with in most civil-law jurisdictions, as noted by the 3d DCA:

The main characteristic of a notarial will is the central role played by the civil law notary in supervising the creation of the will and permanently storing the will. When performing this task, the civil law notary is acting in a quasi-judicial capacity in a manner that has no counterpart in common law jurisdictions and which should not be confused with the ministerial functions of a common law notary public. See Thomas A. Thomas & David T. Smith, Florida Estates Practice Guide, § 7.04(5) (2015).

But for this system to work, the notary’s required by law to retain custody of the original document. Here’s how this point was explained in In Defense of Notarial Wills, an article discussing notarial wills in Quebec:

[The notary] is required by the notarial code to retain the original will in a vault having maximum fire proof standards, burglar and dampness resistance. Therefore, the original is always available and cannot become lost, destroyed or mislaid. . . . Certified copies may be obtained from the notary or the depositary of his records with no other formality. The original will is never delivered except upon Court order in unusual circumstances, e.g. as evidence when the validity of its execution is questioned.

Do notarial wills work in Florida?

So here’s the problem. In common-law jurisdictions like Florida a court usually won’t validate/probate your will unless the original’s been deposited with the court. Copies don’t work unless you overcome the very tough “lost will” presumption of revocation (see here). This common-law emphasis on original documentation creates a fundamental conflict with a civil-law notary’s duty to retain custody of original wills, again as noted in In Defense of Notarial Wills:

Since the common law requires production of the original document for probate, the two systems of law contradict. The original notarial will cannot remain in the notary’s repertoire as required by . . . law and also be delivered for probate elsewhere.

What to do? Follow the steps laid out in F.S. 733.205, Florida’s specifically designed mechanism for dealing with foreign notarial wills. The statute lets you use an authenticated copy of a foreign notarial will “if the original could have been admitted to probate in this state.” In other words, all this statutory fix is supposed to do is let us use copies to address a civil-law notary’s duty to retain custody of his original documents, it’s NOT supposed to lower the standard for what kind of will is otherwise valid in Florida. It’s this last point that’s at the heart of the 3d DCA’s ruling in this case.

Case Study:

This case involves an Argentine notarial will that was apparently accepted as valid by an Argentinian court. The notarial will was typed up and signed by the notary, but it wasn’t signed by the testatrix or her witnesses, as explained by the 3d DCA:

The Testator orally pronounced her testamentary wishes to a notary who transcribed them. The Argentine will sets forth that the Testator made her attestations before the notary in the presence of three witnesses who were identified by name, address, and national identity card number. The Argentine will explains that the notary typed up the testamentary wishes and presented the typed document to the Testator, who declined to read it. The document was then read back to the Testator, who orally approved it in the presence of the witnesses. The notary signed and stamped the will, but the Testator and the witnesses did not sign it.

The Argentine will revoked a prior will singed in New York that favored a different group of beneficiaries. So which will’s valid matters. A few years after the Argentine will was created, the testatrix moved to Miami where she died owning property both in the U.S. and Argentina. The probate court in Miami ruled the Argentinian will was valid — even though it wasn’t signed by the testatrix.

The general rule in Florida is that we’ll accept the validity of a will created by a nonresident anywhere else on the planet, as long as one non-negotiable, bare minimum requirement is met: it’s signed by the testator. Under F.S. 732.502(2), oral (i.e., nuncupative) wills aren’t valid in Florida under any circumstances. And it doesn’t matter how strong the evidence is that the foreign will accurately reflects a person’s testamentary intent, or even if a court in another jurisdiction’s blessed it (as I reported here in a case involving an unwitnessed holographic will that was approved by court order in Colorado but rejected in Florida), if the will’s not signed, it’s not going to fly in Florida. But F.S. 732.502(2) shouldn’t be a problem for most notarial wills because the norm seems to be that these wills are always signed, as noted by the 3d DCA:

A treatise that surveyed the practices of different countries concerning notarial wills noted four stages commonly involved in the creation of a notarial will:

First, the testator makes an oral declaration of the will to the notary and two witnesses. Second, the notary (or an assistant) reduces the will to written form. Third, after being read aloud by the notary, the will is signed by testator, notary, and witnesses, with the notary adding information about the execution, including, usually, its date and place and the names of witnesses. Finally, the will is retained by the notary and, in some countries, registered in a central register.

1 Kenneth G.C. Reid, Marius J. de Wall & R. Zimmerman, Comparative Succession Law, Testamentary Formalities 449 (2011). Significantly, according to this treatise, the required third step in the creation of a notarial will is the signing of the will by the testator. Indeed, the treatise does not mention or acknowledge any type of notarial will that is not signed in some manner by the testator. Id.

Can a written will still be considered an invalid oral will?

Whether the Argentine notarial will at issue in this case is valid or not depends on whether a written will that’s not signed by the testator is still considered to be an invalid oral will. At the trial court level the argument seems to have been that since the will is in writing, it’s not an invalid oral will. The challengers argued that if it’s not signed, it’s an oral will — even if the will’s in writing. Here’s how this argument was reported by the DBR in Which Will Work? Court Chooses New York Version Over Argentina:

“This will certainly was reduced to writing, so it wouldn’t meet the definition of a nuncupative will,” said attorney Sergio Mendez, who represented the heirs under the second will.

Mark Hasner, the attorney for the New York beneficiaries, disagreed.
“Florida law is clear that nuncupative wills are not admissible,” he said. “The testator never signed her Argentinean will and therefore it fits into the definition.”

By the way, Florida courts have dealt with this kind of mixed oral/written will argument in the past. A will can be in writing and still contain an invalid oral directive that’s unenforceable. See Estate of Corbin v. Sherman, 645 So.2d 39 (Fla. 1st DCA 1994). On the other hand, just because a will contains a reference to unstated oral instructions, doesn’t make it invalid, as the 3d DCA held in Glenn v. Roberts (see here). In this case the 3d DCA focused on the fact that the will wasn’t signed by the testatrix, ultimately ruling against it. Here’s why:

In one sense, every notarial will is nuncupative: it is orally pronounced by the testator to the notary. . . . Nevertheless, there would be no point to recognize foreign notarial wills in section 733.205 if they were all barred by the prohibition of nuncupative wills in section 732.502(2). We decline to interpret these provisions in a manner that renders one of them a nullity. . . . Instead, we hold that section 732.502(2)‘s prohibition of nuncupative wills does not bar all notarial wills, but does bar notarial wills that are unsigned by the testator. We reach this conclusion based upon the near universal emphasis in both foreign and domestic probate laws on the importance of the testator’s signature. This reading of the statute honors the policy of comity reflected in section 733.205 by recognizing the validity of most notarial wills, almost all of which are apparently signed by the testator according to the authorities disclosed by our research. It also honors the policy of limiting fraud and mistake reflected in section 732.502(1)‘s strict formalities for wills in general and 732 .502(2)‘s exclusion of nuncupative wills from acceptable foreign wills.

Lesson learned? Think global, act local:

Florida is a hub for international business and investment. Which means a lot of people own property in Florida, but reside and work in another state or country, frequently owning property in several jurisdictions. So it shouldn’t come as a surprise to anyone that multi-jurisdictional estates (be it the state-to-state or country-to-country variety) are a large part of our practice here in Florida. This case highlights what can go wrong when someone has a will prepared back home, and assumes it’ll automatically work in Florida too. It ain’t necessarily so. When in doubt, the safe bet is to simply sign a new will in Florida drafted by a Florida lawyer who knows what he’s doing. A little bit of collaboration with our non-U.S. brethren is probably a good idea too, as noted in a DBR report on this case entitled Which Will Work? Court Chooses New York Version Over Argentina:

Hasner said the opinion . . . underscored the importance of collaboration when it comes to estate planning for people like Isleno, who had property in two countries. “I think the big takeaway is estate planning lawyers need to have communication with the offshore planners as well,” he said.

By the way, if you’re looking for an easy way to meet top international attorneys (and just about anyone else who makes a living working with international estate planning clients), your best bet is to join your nearest STEP branch. I’ve been a member of the STEP Miami Branch for some time. If you have any interest whatsoever in international trusts and estates matters, STEP is where you want to be.

BONUS MATERIAL: ORAL ARGUMENT VIDEO

You can access the 3d DCA’s video of oral argument for this case. Just click here, then enter case number 14-0095 in the search box, then press the search button. When you see this case listed, click the link to download the file to your computer