Florida Probate & Trust Litigation Blog

Florida Probate & Trust Litigation Blog

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

Text Size: A A A

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.

2014 Florida trust and estate legislative roundup

Posted in Probate & Guardianship Statutes

Driven partly by inter-state competition for a bigger slice of the lucrative family trust business, and partly by developments in our own courts, 2014 was a busy legislative season on the trusts and estates front.

Driven partly by inter-state competition for a bigger slice of the lucrative family trust business, and partly by developments in our own courts, 2014 was a busy legislative season on the trusts and estates front. Here’s my summary:

1. New “Florida Family Trust Company Act”:

As reported here by the WSJ, increasingly the über wealthy are setting up their own family-owned trust companies to handle their trust assets. To maintain its competitive edge in the trust world, Florida needed to react to this new trend, and it has. With the passage of CS/SB 1238, effective October 1, 2015 we now have a statutory framework tailored specifically for family-owned private trust companies. The new legislation will be contained in new chapter 662 and will be called the “Florida Family Trust Company Act.” Here’s an excerpt from the legislative Staff Analysis summarizing the new act:

CS/SB 1238 creates “Family Trust Companies” in Florida. Trust companies are for-profit business organizations that are authorized to engage in trust business and to act as a fiduciary for the general public. Some states allow families to form and operate private or family trust companies that provide trust services similar to those that can be provided by an individual trustee or a financial institution. However these family trust companies are owned exclusively by family members and may not provide fiduciary services to the public. These private, family trust companies are generally formed to manage the wealth of high net-worth families in lieu of traditional individual or institutional trustee arrangements for a variety of personal, investment, regulatory, and tax reasons. Currently, there are no Florida statutes authorizing the formation of family trust companies, licensed family trust companies, and foreign licensed family trust companies.

The bill authorizes families to form and operate any of these three family trust companies in Florida, subject to varying regulatory requirements, including a license or registration with the Office of Financial Regulation (OFR), maintenance of minimum capital accounts with a principal place of business in Florida, and certain reporting requirements. This bill specifies the powers of family trust companies such as serving as a trustee of trusts held for the benefit of family members and providing fiduciary, investment advisory, and wealth management services to a family. A family trust company cannot perform these services for the general public.

This bill authorizes the OFR to investigate applications for licensure or registration, requires annual renewals and other regulatory filings from licensees and registrants, and authorizes the OFR to conduct periodic examinations of family trust companies, licensed family trust companies, and foreign licensed family trust companies.

This bill is effective October 1, 2015, if the linked public records bill or similar legislation is adopted in the same legislative session.

2. Florida improves its “directed trust” statute:

This legislation is another example of Florida reacting to competitive market forces (which is a good thing!). The subject is “directed trusts”, a trust-administration tool that’s much in demand (as reported here by the WSJ), which Florida first provided for by statute in 2008 with amendments to F.S. 736.0703(9) (as I reported here). With the passage of CS/CS/HB 405, effective July 1, 2014 Florida’s taken another crack at improving its directed-trust statute. So how does it measure up? Is the latest version as good as – or better than – that of Delaware or Nevada? Only time will tell. For now, here’s an excerpt from the legislative Staff Analysis explaining the new legislation:

The bill amends s. 736.0703(9), F.S., to allow drafting of a trust document that fully exonerates an excluded cotrustee. The bill enhances the previously existing exoneration of an excluded cotrustee by fully removing any duty of inquiry. The excluded cotrustee is exonerated under the new provision even if he or she has actual knowledge of willful misconduct by the included cotrustee, and regardless of the information available to the excluded cotrustee. The bill provides that the excluded cotrustee is exonerated from liability for following the direction of the included cotrustee, except in cases of its own willful misconduct.

 3. Greater protection for life insurance proceeds payable to trusts:

In 2012 I wrote here about the Morey v. Everbank decision, in which the 1st DCA held that loose language contained in the decedent’s revocable trust resulted in a waiver of the creditor protection usually afforded to life insurance proceeds under F.S. 222.13. Oops! That decision caused a whole lot of heartburn for Florida estate planners, which didn’t waste any time getting new legislation passed (CS/CB 998) aimed at avoiding a repeat of this case in the future. Here’s an excerpt from the legislative Staff Analysis explaining the new legislation:

These . . . changes are a response to the 2012 Morey v. Everbank decision . . . and are intended to clarify the circumstances under which death benefits, such as life insurance, payable to a trust are exempt from any obligation to pay the expenses of the administration and obligations of the decedent’s estate.

Section 5 amends s. 733.808, F.S., to provide that a waiver of the statutory exemption, protecting death benefits from claims of creditors or the decedent’s estate, must be explicit. It clarifies that a general provision directing the trustee to pay all debts does not waive the statutory exemption from creditor claims for death benefits paid to the trustee.Section 6 provides that the changes to s. 733.808, F.S., are intended to clarify existing law, are remedial in nature, and apply retroactively without regard to the date of the decedent’s death.

Section 9 amends s. 736.05053, F.S., and is designed to insure that a trustee, paying the expenses of administration and obligations of the settlor’s estate, cannot use the death benefits described in s. 733.808(1), (2), or (3), F.S., unless the settlor specifically waived the prohibition of the use of those benefits in accordance with s. 733.808(4), F.S. If the settlor desires to waive the exemption, there must be a specific waiver. This language establishes that a general direction to pay all of the settlor’s debts is not sufficient.Section 10 provides that the changes made to s. 736.05053, F.S., are intended to clarify existing law, are remedial in nature, and apply retroactively without regard to the date of the settlor’s death.

4. Synchronizing Florida’s probate and trust code “antilapse” provisions:

As I’ve previously discussed here, at common law, a “lapse” occurs when the beneficiary or the “devisee” under a will predeceases the testator, invalidating the gift. The gift would instead revert to the residuary estate or be granted under the law of intestate succession. Florida enacted F.S. 732.603, an anti-lapse statute, to ameliorate the potentially harsh effects of this common law rule. Rather than lapsing, gifts covered by the statute go to a pre-deceased beneficiary’s descendants. There’s a similar, but not identical, antilapse provision contained in our trust code (F.S. 736.1106). There’s no rhyme or reason to the difference between these two statutes, resulting in arbitrarily different outcomes depending on whether the dispositive document happens to be a will or revocable trust. In CS/CB 998, F.S. 736.1106 is amended to make the trust code and probate code provisions consistent with each other. Here’s an excerpt from the legislative Staff Analysis explaining the new legislation:

Presently, the antilapse statute of the Trust Code saves all devises without regard to the familial relationship between the recipient and the creator of the gift. This was apparently done for administrative convenience. This approach differs from the Probate Code and what was an earlier version of the Trust Code. It often results in unintended consequences and litigation under the Trust Code.

. . .

The purpose of this section is to make the antilapse statute of the Trust Code consistent with the antilapse statute of the Probate Code in the area of outright devises to persons who do not survive the settlor of a revocable trust or the testator of a testamentary trust. The bill amends the antilapse provisions of the Trust Code to cause an outright devise to a deceased beneficiary to lapse unless the beneficiary was a grandparent, or lineal descendant of a grandparent of the settlor of a revocable trust, or the testator of a testamentary trust. It is the opinion of some practitioners of probate and trust law that people enter into trust arrangements thinking that a trust devise operates the same as a will. When the results under the terms of a trust are not what the individuals had hoped for litigation ensues.This provision amending s. 736.1106, F.S., applies to trusts that become irrevocable after June 30, 2014.

5. Synchronizing Florida’s probate and trust code provisions as to the burden of proof in will and trust contests:

The Florida probate code and the Florida trust code both provide that a will, trust, or revocation of a will or trust, is void if it is procured by fraud, duress, mistake, or undue influence. Both codes also specify grounds for a will or trust contest that challenges the validity of the document. But only the probate code specifies which party bears the burden of proof in a contest. There’s no equivalent statute in our trust code. In CS/CB 998, that gap is filled by new statutory language clarifying who bears the burden of proof in a trust contest. Here’s an excerpt from the legislative Staff Analysis explaining the new legislation:

Sections 3 and 7 amends ss. 733.107, F.S., and 736.0207, F.S., to clarify that the party contesting the validity of a trust or seeking to revoke a trust, in whole or in part, bears the burden of establishing the grounds for invalidity on all issues. Because the current trust code is silent on this matter, these changes may provide clarity to the courts and attorneys involved in trust disputes as to which party bears the burden of proof. Unlike a will contest, these changes place the complete burden on the contestant.

Section 4 of the bill provides that the changes to the burden shifting provisions in s. 733.107, F.S., are intended to clarify existing law, are remedial in nature, and apply retroactively to proceedings pending on or before the bill becomes law and all cases that are begun on or after the effective date of this bill.

Section 8 provides that the changes made to s. 736.0207, F.S., trusts contests, apply to all cases commenced on or after the effective date of the act. The effective date of the act is “upon becoming a law.”

6. Pre-2013 gifts to lawyers and other disqualified persons “grandfathered” in by statute:

The common law rule in Florida was that gifts made to lawyers in violation of ethics Rule 4-1.8(c) weren’t void per se, but they did trigger a rebuttable presumption of undue influence by the drafting lawyer. If lawyer couldn’t rebut the presumption, the gift was then voided (see here, here). In other words, under our prior common law improper gifts to lawyers weren’t automatically void, but they were voidable. As I reported here, in 2013 Florida adopted F.S. 732.806, effectively reversing the common-law rule. Improper client gifts are now automatically void as a matter of law, which should make it less expensive and time consuming for parties contesting such gifts to have them set aside. Unfortunately, the new statute didn’t make clear it only applied to prospective gifts, not gifts made prior to adoption of the new statute in 2013. CS/CB 998 fixes that glitch. Here’s an excerpt from the legislative Staff Analysis explaining the new legislation:

Section 732.806, F.S., generally prohibits an attorney or any of the attorney’s relatives from being the beneficiary of a gift in a written instrument drafted by the attorney. The bill provides that the prohibition applies to written instruments executed on or after October 1, 2013. This effectively grandfathers such gifts in written instruments preexisting the effective date of the 2013 legislation. The bill further provides that this change is intended to clarify existing law and is remedial in nature.

4th DCA: Once a probate judge grants a motion to compel arbitration, can that same judge dismiss the claim because one side fails to initiate the arbitration proceeding on a timely basis?

Posted in Practice & Procedure, Will and Trust Contests

Gren v. Gren, 133 So.3d 1066 (Fla. 4th DCA January 8, 2014)

4th DCA: “Timeliness of a demand for arbitration is a fact question reserved for an arbitrator, not the trial judge. . . . Delay does not waive arbitration. . . .”

Why any estate planner would in good conscious subject his or her clients to all the systemic problems inherent to our underfunded and overworked probate courts is beyond me; especially in Florida, which in 2007 was the first state in the nation to pass legislation expressly authorizing mandatory arbitration clauses in wills and trusts (see F.S. 731.401). As I’ve previously written here, in my opinion mandatory arbitration clauses are the best way to allow our clients to “opt out” of an underfunded/overworked court system (for sample arbitration clauses, see here). Which is why I was especially interested in the linked-to case above; to my knowledge it’s Florida’s first appellate decision enforcing a trust agreement’s mandatory arbitration clause.

Case Study:

In the linked-to case above the decedent included a mandatory arbitration clause in his revocable trust. After his death a dispute arose between his ex-wife (who was representing the interests of his now-deceased son) and his new wife, who also happened to be serving as successor trustee of the decedent’s revocable trust. New wife obtained an order compelling arbitration of the dispute. So far so good. But then nothing happened for six months. New wife accused ex-wife of dragging her feet, as explained by the 4th DCA:

[New wife] alleged the ex-wife had failed to take any action since the court compelled arbitration. The ex-wife had not filed a request for arbitration, provided any names of potential arbitrators, or attempted to schedule arbitration. . . . [New wife] complained that the ex-wife was preventing her from winding down the Grantor’s affairs.

There’s nothing wrong with objecting to unreasonable delay. But rather than address the problem with the arbitrator, new wife asked the probate judge to reinsert himself into the dispute.

As a result of the ex-wife’s inaction, [new wife] claimed she was unable to file tax returns and disburse assets, and she had suffered hardship and mental anguish. She argued that dismissal was her only remedy.

At this point you’d think the probate judge would say “no way, you asked for arbitration, now live with it.” Unfortunately, that’s not what happened. As explained by the 4th DCA, this is where things inexplicably went sideways:

Without articulating a basis for its decision, the [probate] court dismissed the ex-wife’s petition with prejudice. From this order, the ex-wife has appealed.

Once a probate judge grants a motion to compel arbitration, can that same judge dismiss the claim because one side fails to initiate the arbitration proceeding on a timely basis? NO

On appeal the 4th DCA delivered an excellent opinion for those of us favoring arbitration clauses in wills and trusts. First, the court gave us all ammunition to generally enforce mandatory arbitration clauses in this context. Second, it addressed a specific objection we can expect to come up with some frequency in these cases: unreasonable delay. As explained by the 4th DCA, once arbitration is triggered, if anyone’s got a problem with the pace of the proceedings, that issue needs to be addressed by the arbitrator — NOT your probate judge.

Courts favor arbitration as an alternative to litigation. See, e.g., Seifert v. U.S. Home Corp., 750 So.2d 633, 636 (Fla.1999); Pub. Health Trust of Dade Cnty. v. M.R. Harrison Constr. Corp., 415 So.2d 756, 758 (Fla. 3d DCA 1982). In deciding a motion to compel arbitration, a trial court is restricted to three issues: “(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.” Seifert, 750 So.2d at 636; § 682.03, Fla. Stat. (2012).

Once those issues are determined, “‘permitting the parties to litigate the dispute in the courts instead of proceeding by arbitration as agreed would constitute a departure from the essential requirements of law.’” . . . Timeliness of a demand for arbitration is a fact question reserved for an arbitrator, not the trial judge. . . . Delay does not waive arbitration. . . . 

Here, the parties did not dispute the validity of the trust or the existence of an arbitrable issue. The Successor Trustee did not argue that the ex-wife waived her right to arbitration by petitioning the court to construct the trust instrument. Procedurally, the trust only required that the arbitrator “be a practicing lawyer” with ten years of experience primarily devoted to wills and trusts. It did not require that the demand for arbitration be made within a specific or reasonable time period.

Once the trial court granted the Motion to Compel Arbitration, factual issues other than the three Seifert issues, including the timeliness in initiating the arbitration proceeding, belonged to the arbitrator. Collyer, 616 So.2d at 178–79. We therefore reverse and remand the case for reinstatement of the petition and arbitration of the dispute.

1st DCA: In case of first impression Appellate Court rules successor PR has standing to sue prior PR’s attorney for malpractice

Posted in Ethics & Malpractice Claims, Practice & Procedure

Bookman v. Davidson, — So.3d —-, 2014 WL 1772707 (Fla. 1st DCA May 05, 2014)

1st DCA: “[B]y virtue of the plain language of section 733.614, we hold all of the power and rights [the original PR] possessed, including the right to bring suit against [her lawyer for malpractice] on behalf of the estate, likewise transferred to . . . the successor [PR]. In essence, [the successor PR] stepped into the shoes of [his predecessor] . . . [The] successor [PR] has every right and duty under the Florida Probate Code to pursue legal action for malpractice against [the predecessor PR’s attorney] on behalf of the estate.”

There’s nothing like the threat of a malpractice suit to focus the mind. And in the trusts-and-estates context this risk is exponentially greater for all sorts of reasons, including the fact that you can get sued by lots of people who were never even your clients. How can this be you ask? Think privity of contract, then get used to the idea that this requirement’s been basically eliminated in most malpractice cases arising in the trusts-and-estates context (see here, here). This case continues the general trend in favor of expanding the possible universe of non-clients who can sue you for legal malpractice.

Successor PR steps into the shoes of his predecessor office holder:

When a personal representative (PR) hires you to be his attorney, your client’s acting in a representative capacity, which means the authority your PR is operating under belongs to the “office” of the PR, not the PR individually. So when your PR client steps down (or gets removed) before the estate-administration process is completed, the rights and duties he had in his representative capacity as PR don’t go with him, they stay behind for the next guy to take over and get the job done with. Here’s how the 1st DCA explained this point:

To accommodate the personal representative’s exercise of her or his duties, section 733.612, Florida Statutes, governs the transactions authorized by the personal representative, including the employment of an attorney. See § 733.612(19), Fla. Stat. Most significantly, section 733.614 addresses the “[p]owers and duties” of a successor personal representative:

A successor personal representative has the same power and duty as the original personal representative to complete the administration and distribution of the estate as expeditiously as possible, but shall not exercise any power made personal to the personal representative named in the will without court approval.

Therefore, the powers granted to the original personal representative flow to the successor personal representative.

No one would argue a PR can’t sue his own lawyer for malpractice. So does it then follow that his successor office holder can do the same? You’d think this question would have come up before, but it hasn’t, at least according to the 1st DCA:

This case presents a question of first impression in Florida, that being whether a successor personal representative of an estate may bring a cause of action for legal malpractice against an attorney hired by her or his predecessor to provide services necessary to the administration of the estate.

Does a successor PR have standing to sue a prior PR’s attorney for malpractice? YES

Not surprisingly, the attorney-defendant in this case raised the lack-of-privity defense. In other words, he argued that as a matter of law he can’t be sued for malpractice by someone (i.e., the successor PR) who was never his client. This argument won the day at the trial-court level, which dismissed the successor PR’s malpractice claim for lack of standing. On appeal, the privity defense went nowhere:

Primarily, appellee argued a successor personal representative is not in privity with the original personal representative’s attorney, a necessary prerequisite to maintaining a malpractice claim under Florida law. . . . In reaching our decision to reverse the summary final judgment, we conclude we need not address the privity issue. Instead, our decision is informed by the plain meaning of the language of the relevant statutes in the Florida Probate Code, sections 733.601–733.620, Florida Statutes. . . .

Rather than getting caught up in esoteric privity arguments, the 1st DCA skirted the issue entirely and instead based its ruling reinstating the malpractice suit on the probate-code provisions governing the flow of authority from an original PR to his successor office holder.

[T]here is no dispute that Ford, as the estate’s personal representative, had standing to bring suit against appellee for legal malpractice. Yet, by virtue of the plain language of section 733.614, we hold all of the power and rights Ford possessed, including the right to bring suit against appellee on behalf of the estate, likewise transferred to appellant as the successor personal representative. In essence, appellant stepped into the shoes of Dana Ford when he became the successor personal representative. Consequently, the trial court erred when it entered summary judgment in favor of appellee, claiming appellant lacked standing. Appellant, as successor personal representative, has every right and duty under the Florida Probate Code to pursue legal action for malpractice against appellee on behalf of the estate. Cf. Onofrio v. Johnston & Sasser, P.A., 782 So.2d 1019 (Fla. 5th DCA 2001).

Bottom line: If your PR client gets removed, it’s possible his successor (who may have been your adversary in the underlying removal proceeding) could end up suing you for malpractice.

4th DCA: Are a deceased son’s ashes “property,” subject to 50/50 partition between his divorced parents?

Posted in Practice & Procedure

Wilson v. Wilson, — So.3d —-, 2014 WL 2101226 (Fla. 4th DCA May 21, 2014)

Lili Wilson (left), mother of Scott Patrick Wilson, who was the victim in the John Goodman DUI manslaughter case, leaves the 4th District Court of Appeal in West Palm Beach after oral arguments in the dispute between Wilson’s divorced parents over his ashes. (Lannis Waters/The Palm Beach Post)

Burial disputes are gut wrenching affairs, and in my opinion (based on personal experience), Florida law remains woefully ill-equipped to handle them.

The latest burial dispute to hit our appellate courts started on the night of February 12, 2010, when a Bentley driven by Palm Beach polo tycoon John B. Goodman sped through a stop sign striking the car driven by 23-year old Scott Wilson. Wilson’s car ended up in a canal, where he drowned as Goodman drove away. In 2012 a jury found Goodman guilty of DUI manslaughter and failure to render aid in the crash that cost Wilson his life, however his conviction and 16-year prison sentence were thrown out because of jury misconduct. A second trial has yet to take place. By the way, Goodman’s legal troubles haven’t been limited to his criminal case, as I reported here in connection with a 3d DCA ruling involving his $300 million family trust and Goodman’s related adoption of his 42-year-old girlfriend.

After Scott Wilson’s death his divorced parents agreed to cremate his remains, but couldn’t agree on where his ashes should be buried. Eventually, the dispute ended up in court. In an apparent attempt to break the deadlock over their son’s ashes, Wilson’s father proposed a Solomaic solution: split the ashes 50/50 between himself and Wilson’s mother, Lili Wilson. As reported here, Ms. Wilson objected to this approach on religious grounds:

Lili Wilson has maintained that her Catholic faith is driving her belief that the remains of her 23-year-old son Scott, who was killed in 2010 when his car collided with one driven by Wellington polo mogul John Goodman, should not be divided between her and her ex-husband. Instead, she claims, the ashes should remain together and buried in Palm Beach County.

William Wilson, father of Scott Patrick Wilson, who was the victim in the John Goodman DUI manslaughter case, leaves the 4th District Court of Appeal in West Palm Beach after oral arguments in the dispute between Wilson’s divorced parents over his ashes. (Lannis Waters/The Palm Beach Post)

Are deceased son’s ashes “property”? NO

Unfortunately for Wilson’s father, his split-the-baby solution depended on the following legal fiction: his son’s ashes were “property” of the probate estate, thus susceptible to partition like any other item of joint property. In 2005 the 4th DCA rejected a similar property-based argument in Cohen v. Guardianship of Cohen, a case I wrote about here involving non-cremated bodily remains, and in 2007 the 3d DCA came to a similar conclusion in City of Key West v. Knowles, a case I wrote about here. Not surprisingly, the result was the same this time around: a decedent’s ashes are NOT property subject to probate administration. Here’s how the 4th DCA explained its ruling:

Our probate code defines “property” as “both real and personal property or any interest in it and anything that may be the subject of ownership.” § 731.201(32), Fla. Stat. (2012). That definition has existed since 1975. Yet, as our supreme court has articulated, “[a]ll authorities generally agree that the next of kin have no property right in the remains of a decedent.” State v. Powell, 497 So.2d 1188, 1191 (Fla.1986) (emphasis added). The supreme court clarified its position in Kirksey v. Jernigan “to be consistent with the majority view that the right [to the remains] is limited to ‘possession of the body … for the purpose of burial, sepulture or other lawful disposition….’ “ Id. at 1191–92 (citing Kirksey v. Jernigan, 45 So.2d 188, 189 (Fla.1950)).

It reiterated its position again in 2001 in Crocker v. Pleasant, 778 So.2d 978, 988 (Fla.2001), acknowledging that “there is a legitimate claim of entitlement by the next of kin to possession of the remains of a decedent for burial or other lawful disposition.” But a claim of entitlement is not a property right, nor does it make the remains “property.”

Ashes are the decedent’s remains. Common law, our supreme court, and this Court have always held that a decedent’s remains are not property. See id.; see also Cohen v. Guardianship of Cohen, 896 So.2d 950, 954 (Fla. 4th DCA 2005) (“a dead body is not properly viewable as property or assets”).

For those of you with a weakness for all things historical (like me!), you’ll appreciate the 4th DCA’s explanation of how 18th Century English jurisprudence is largely responsible for how this 21st Century Florida case was decided.

We are presented with an issue of first impression, for no Florida court has answered the precise issue posed. And so, we start by traveling back in history to reflect on how deceased bodies and ashes have been viewed over time. In 1753, Sir William Blackstone commented:

 Pews in the church are somewhat of the same nature, which may descend by custom immemorial (without any ecclesiastical concurrence) from the ancestor to the heir. But though the heir has a property in the monuments and escutcheons of his ancestors, yet he has none in their bodies or ashes; nor can he bring any civil action against such as indecently at least, if not impiously, violate and disturb their remains, when dead and buried.

 Sir William Blackstone, Commentaries on the Laws of England in Four Books 429 (Philadelphia, J.B. Lippencott Co. 1893), available at http://oll.libertyfund.org/title/2140 (emphasis added).

. . .

The historical basis for this thinking was derived in part from the English view that “the secular tribunals would protect the monument, the winding-sheet, the grave-clothes, even down to the ribbon (now extant) which tied the queue; but the Church would guard the skull and bones.” In re Widening of Beekman Street, 4 Bradf. 503, 522 app. (1856) (historical note on the law of burial by the Honorable Samuel B. Ruggles, Referee).

So what now?

In the absence of agreement by Wilson’s parents or a legal mechanism for resolving their deadlock (there isn’t one), the trial judge is left to his own devices to figure this mess out. In this case, it looks like the trial judge will appoint a neutral third party as “curator” and that person’s job will be to decide where Wilson’s ashes are buried (this is effectively the same approach taken in the Anna Nicole Smith burial-dispute case). Bottom line: a stranger who never met Wilson will decide his final resting place. As noted by the 4th DCA:

The court gave [Wilson's parents] 30 days “to carry out their duties and responsibilities to finally dispose of [their son's] remains….” If they were unable to reach agreement, the court indicated that it might appoint a curator or other suitable person to carry out the task.

By the way, this is exactly what Wilson’s father wanted to avoid, as reported here:

William Wilson’s lawyer, Joy Bartmon, said she was disappointed with the decision. ”This opinion does not guide the trial court in the determination to be made,” she said in an email. “Instead, what will occur when the decision as to the ashes goes back to the trial court, is what I wanted to avoid. The final resting place for this young man may be left to the discretion of an administrator who never knew him.”

We need a legislative fix:

At their core burial disputes are moral dilemmas — not legal disputes — which means “we” (as in all of us acting through our elected officials) need to develop mechanisms for resolving them that reflect our civic values. Presently, our trial judges are doing the best they can to fill the legislative vacuum. As noted by the 4th DCA appellate panel, and reported here, there’s really no current mechanism under Florida law for resolving the type of burial dispute represented by this case.

In addition to the emotional issues surrounding the case, all three judges [on the 4th DCA appellate panel] also seemed to struggle with whether the question before them is really a legal issue. “Isn’t it something the Legislature should be doing?” [Judge] Levine asked. [Judge] Warner pointed out that there isn’t any mechanism in the law to settle the dispute.

We owe it to the families involved in burial disputes to construct a viable legal mechanism for resolving them. How do we do that? Look at what our sister states are doing and cherry pick their best practices and procedures. For an excellent article surveying burial statutes nationwide and suggesting a form of uniform law, you’ll want to read Uniform Acts-Can the Dead Hand Control the Dead Body? The Case for a Uniform Bodily Remains Law. What I find particularly helpful about this article is that it provides a detailed, well-researched and thoughtful proposed statute from beginning to end. Now all we need is someone in Tallahassee to take notice and make it happen!

What litigators can learn from the OCC’s “Comptroller’s Handbook for Fiduciary Activities”

Posted in Trust and Estates Litigation In the News, Trustees In Hot Water, Will and Trust Contests

“Very often, consumer complaints and threatened litigation are a direct result of inadequate communication of policies, responsibilities, account objectives and strategies, and other client expectations.” OCC’s Handbook for Personal Fiduciary Services.

The fiduciary duty of care sets the minimum level of diligence and competence we expect of trustees, objectively measured by reference to what a “reasonable” or “prudent” person would do in like circumstances, and informed by industry norms and practices. As I previously wrote here in the context of trustee investment decisions, the duty of care focuses on process, not end results. Which means a trustee’s compliance with this duty is evidenced most directly by its practices and procedures.

Think like an auditor:

Talk of fiduciary duties makes sense in the abstract, but what kind of hard evidence is going to help you — a litigator — win your next trustee mismanagement case? Answer: think like an auditor. Whether you’re playing defense or offense, you’ll want to plan your discovery strategy by acting like a bank auditor evaluating your trustee’s practices and procedures. The goal here is to gather up the evidence (documents + witness statements) needed to answer one basic question: would the trustee “pass” or “fail” its next audit. If the answer is “fail,” then it’s a safe bet your trustee hasn’t complied with its fiduciary duty of care.

The OCC’s Comptroller’s Handbook for Fiduciary Activities:

Thinking like an auditor may sound like a good idea in concept, but, you might ask, how’s a working litigator to pull this off? One option is to purchase a trustee auditing manual, such as Sheshunoff’s Trust Department Policies and Procedures, and use it to design your “audit”. Another is to use a free resource, such as the OCC’s Comptroller’s Handbook for Fiduciary Activities. I like the second option better.

As explained by Jacqueline C. Zipser in What OCC Regulation of Corporate Fiduciaries Means to the Practicing Attorney, if a corporate trustee scores below a certain rating on its OCC audit, bad things can happen, including a loss of its bank trust powers. Again, this same evidence should also determine if your trustee’s complied with its fiduciary duty of care. Here’s how Ms. Zipser describes the OCC’s rating system:

The OCC uses the Uniform Financial Institutions Rating System (UFIRS) to evaluate a national bank’s fiduciary operations. Each bank gets a composite rating based on five factors: management, adequacy of operations and controls and audits, quality of earnings, compliance with laws and regulations and governing instruments, and asset management. The ratings go from a high of 1 to a low of 5. A rating of 1 indicates strong performance by the bank and the least degree of supervisory concern. A rating of 2 indicates that the bank is fundamentally sound. A 3 rating indicates general adequacy. A rating of 4 indicates the presence of at least one major problem and 5 indicates very weak performance and a high degree of supervisory concern. Regulatory Compliance Associates, Inc., Sheshunoff Trust Department Policies and Procedures Manual 9-3 (2001) [hereinafter Sheshunoff].

If the OCC assigns a rating of 3, 4 or 5, additional supervision will be imposed. Additional reports will be required, examinations will be more frequent. The OCC may issue a cease and desist order for a 4 or 5 rated bank, preventing it from opening any new fiduciary accounts until deficiencies are remedied. The OCC can also revoke a bank’s trust powers.

The OCC’s trust-department handbook is foreign territory for most estate planners. It shouldn’t be. Even if you never intend to use it as a litigation tool, it’s the kind of resource that will set you apart as a practitioner. According to Ms. Zipser, your existing (or future) corporate trust department clients live and die by these regulatory compliance issues. If it’s that important to them, shouldn’t it be for you? Here’s another excerpt from Ms. Zipser’s excellent article:

Based on an unscientific survey of trusts and estates attorneys, the OCC intrudes into the consciousness of those practitioners rarely, if at all. The most common response when I ask the question is, “The what?” . . .

In contrast to the drafting attorneys, trust officers are aware of OCC regulation on a daily basis. It affects just about every area of trust administration. We can’t forget about it, because most banks will have an on-site examination from the OCC every year. Some exams are more detailed than others, but trust officers always know that a bank regulator is looking over their shoulders.

Hat tip:

Hat tip to Stephen Salley, a Partner with Banyan Family Business Advisors LLC, whose recent LISI article entitled Trusts & Their Trustees: The Housekeeper in the Soap Opera, pointed me to the OCC handbook.

Interview with a Probate Lawyer: William (Bill) Glasko

Posted in Interview with a Probate Lawyer

“At the trial court level we were shocked that the court not only ruled against us on a Motion for Summary Judgment, but went on to adjudicate the ultimate issue of the pretermitted child in favor of our opponent without further proceedings.” William Glasko

William (Bill) Glasko of Miami, Florida has been on a winning streak lately. Last year he notched an impressive win before the 4th DCA in an appeal involving a tricky creditor-deadline issue, which I wrote about here. Bill followed that win with another appellate-court victory this year before the 3d DCA in Estate of Maher v. Iglikova, — So.3d —-, 2014 WL 1386660 (Fla. 3d DCA April 09, 2014), a case I wrote about here involving Florida’s pretermitted child statute.

I asked Bill to share some of the lessons he drew from the Maher case with the rest of us and he kindly accepted.

[1] What strategic decisions did you make in this case that were particularly outcome determinative at the trial-court level? On appeal?

In this case, the Decedent unknowingly conceived a child who was born prior to the making of his will. The child was not discovered by the Decedent until after the will was executed. The argument at the trial court level was straight forward – the plain language of the statute requires that the child cannot be pretermitted unless he or she is born after the will is executed. This child was born before the will was executed. At the appellate court level, the strategy shifted to the assertion of the appellate court’s role in interpretation and modification of statutes. On appeal, I emphasized what I perceived as a ‘failsafe’ in that the Decedent had made minimal provisions for a class gift to “children” which meant that the appellee had not been “omitted” from the estate – another reason why the child could not meet the statutory definition.

[2] If you had to do it all over again, would you have done anything different in terms of framing the issues for your trial-court judge? On appeal?

At the trial court level we were shocked that the court not only ruled against us on a Motion for Summary Judgment, but went on to adjudicate the ultimate issue of the pretermitted child in favor of our opponent without further proceedings. The appellee in her answer brief cleverly asserted that the “after discovered” child (rather than the “after born” child) should be treated as an “after adopted” child; who would take under the plain language of the statute: The statute provides that after born or after adopted children are pretermitted. On appeal , I focused on the appellate Court’s restrictions in modifying statutes. I also pointed out that paternity in our case was adjudicated after birth, and I drew a distinction between “adoption” and “adjudication of paternity” – the former establishing new rights, and the latter adjudicating an pre-existing relationship. I asserted that the appellate Court would go beyond its authority by modifying the statute, and argued that the relationship could not be construed legally as “adoption”. If I had it to do again, I would have made that distinction at the trial level. To the credit of appellee’s counsel, I didn’t consider it.

[3] Looking back from your perspective as a litigator, do you think there’s anything that could have been done in terms of better estate planning while Mr. Maher was alive to avoid this litigation or at least mitigate its financial impact on the family?

Estate planners know that people do not like to confront estate planning – there is something morbid about it. The reality is that our clients must reexamine everything with every life change. A new baby, a better job, an inheritance, marriage, divorce, adoption, everything warrants a fresh look at the current state of the “plan”. As litigators, we make our living in litigation resolving the problems that arise from inadequate planning. If we get in early enough, we can help the client make provisions to avoid unnecessary litigation. The money spent planning before death pales in comparison to the potential cost of resolving conflict after death. In this case, had the Decedent consulted his attorney upon learning of the child and made specific provisions in his will to include or exclude the child, the litigation would have been avoided.

[4] Any final words of wisdom for estate planners and probate lawyers of the world based on what you learned in this case?

My primary areas of practice are probate litigation and family litigation. I routinely advise my family clients on estate planning and insurance issues as they come out of marriages and reevaluate their relationships. This is the perfect time to caution “fresh starters” on the importance of estate planning. We should all be diligent in attacking the potential problems before they arise.

3d DCA: Does an adjudication of paternity = “adoption” for purposes of Florida’s pretermitted child statute?

Posted in Will Construction Litigation

Estate of Maher v. Iglikova, — So.3d —-, 2014 WL 1386660 (Fla. 3d DCA April 09, 2014)

3d DCA: “Iglikova argues that an adjudication of paternity should be equated with an adoption that took place after the execution of the will. We decline to adopt such a rationale, as the two are distinct.”

In 2004 James Maher’s small twin-engine plane went missing somewhere over the jungle between Honduras and Costa Rica (see here). His body was never found.

Maher executed a valid will in 2001. Under F.S. 733.209 Maher’s heirs are permitted to petition to administer his estate while he’s missing; however, no personal representative can be appointed until a court determines he’s dead. So how do you do that in the absence of a body? If someone’s missing for over 5 years or there’s direct or circumstantial evidence of death, under F.S. 731.103 a court can enter an order declaring that person dead (see here, here). That’s what apparently happened in this case. In 2009 (five years after Maher went missing) the probate court entered an order determining him to be dead, and shortly thereafter admitted his 2001 will to probate.

Maher wasn’t married when he died, but he did father two children, a son and daughter, with two different women. At issue in this case was whether the daughter he fathered in 1999, whose existence he was unaware of until 2002, should be considered a “pretermitted” child under F.S. 732.302 for purposes of his 2001 will. I’ve previously written about pretermitted children in the context of actor Heath Ledger’s death (see here). The pretermitted-child issue was also raised by the recent death of actor Philip Seymour Hoffman (see here).

As a pretermitted child, Maher’s daughter would be entitled to 1/2 of his estate as an intestate heir, regardless of what his 2001 will might say. Although Maher’s will did provide for a class gift for his “children,” I’m guessing it wasn’t as generous as a 1/2 intestate share (otherwise, why sue?).

Does an adjudication of paternity = “adoption” for purposes of Florida’s pretermitted child statute? NO

The purpose of our pretermitted-child statute is to avoid an unintentional or inadvertent disinheritance of a child. Under F.S. 732.302 there are three elements that must be satisfied for a child to be pretermitted. The child must be: (1) omitted from the will, (2) born or adopted after the making of the will, and (3) have not received a part of the testator’s property equivalent to a child’s part by way of advancement. The child’s mother argued her daughter should be considered Maher’s pretermitted child because her adjudication of paternity wasn’t completed until 2005, about 4 years after Maher executed his 2001 will, and this post-will-execution adjudication was the functional equivalent of a post-will-execution adoption. There’s some logic to that argument, and maybe that’s what the law should be. But changing the law’s a job for the legislature, not our courts.

Despite the clear text of the statute, the Miami probate judge bought into the argument in favor of daughter’s pretermitted-child status. On appeal, she didn’t fare so well. According to the 3d DCA, an adjudication of paternity is not equivalent to an adoption, and if you think the statute’s too narrow, you need to get the law changed by legislation, not by court order.

[U]nder the plain and obvious meaning of the statute, A.M.I. is not a pretermitted child because she was born before the execution of the decedent’s will. Iglikova argues that an adjudication of paternity should be equated with an adoption that took place after the execution of the will. We decline to adopt such a rationale, as the two are distinct. “‘Adoption’ means the act of creating the legal relationship between parent and child where it did not exist.” § 63.032(2), Fla. Stat. (2010). However, adjudication of paternity merely acknowledges an existing relationship. See e.g. Guerrero v. Staglish, 400 So.2d 190, 191 (Fla. 1st DCA 1981). In addition, it is not within the purview of this Court to expand the meaning of the statute when its language is clear and unambiguous. Accordingly, we hold that the trial court erred when it denied Taran’s motion for summary judgment and determined A.M.I. is a pretermitted child.