Florida Probate Litigation, Will Contest Lawyer & Attorney : Juan C. Antúnez : Serving Miami, Jacksonville, Tampa Saint Petersburg, Orlando, Fort Lauderdale

In re Estate of Magee, --- So.2d ----, 2007 WL 2781131 (Fla. 2d DCA Sep 26, 2007)

When all else fails, one way to win a probate dispute is to challenge the portion of the probate code at issue on constitutional grounds.  A successful example of this approach was the Florida Supreme Court's 1990 decision in Shriners Hospital for Crippled Children v. Zrillic, 563 So.2d 64 (Fla.1990), where the court struck down Florida's mortmain statute, then codified at section 732.803, because it violated article 1, section 2 of the Florida Constitution by impermissibly infringing on the decedent's testamentary rights.

How hard is it to set aside a statute on constitutional grounds? VERY

Courts will bend over backwards to uphold a probate statute being challenged on constitutional grounds.  In Shriners Florida's Supreme Court ruled that the “reasonable relationship” or “rational basis” standard applies to review a statute that potentially infringes on (but does not destroy entirely) property or testamentary rights.  This is the lowest level of scrutiny applied by courts deciding constitutional issues through judicial review. The higher levels are typically referred to as intermediate scrutiny and strict scrutiny.

Is Florida's spousal elective share statute constitutional? YES

In the linked-to case Florida's spousal elective share statutes [click: 732.201 to 732.2155] were challenged on constitutional grounds.  The argument was that Florida law requiring that at least 30% of every married person's estate be set aside for a surviving spouse -- regardless of whether the surviving spouse had any financial need whatsoever -- violated the decedent's constitutionally protected property rights.

Nice try, but no cigar.  The 2d DCA upheld the constitutionality of Florida's elective share statutory scheme under the rational basis test.  The following excerpt from the linked-to opinion sums up the court's reasoning and also provides good guidance for anyone considering a future constitutional challenge to any other portion of Florida's probate code.

Fortunately, the Florida Supreme Court has recently clarified that the test to be applied in evaluating statutes and regulations that infringe on property rights or testamentary rights-at least those that do not require the absolute destruction of property-is not the “least restrictive means” test urged by Judith here, but rather a “reasonable relationship” test. In Haire v. Florida Department of Agriculture & Consumer Services, 870 So.2d 774, 783 (Fla.2004), the court explained,

[W]e have held that “[a]ll ... property rights are held subject to the fair exercise of the [police] power,” Golden v. McCarty, 337 So.2d 388, 390 (Fla.1976) (emphasis supplied), and have used the reasonable relationship test ... to evaluate statutes and regulations that infringe on property rights.

Id. (footnotes omitted).

As support for this proposition, the court expressly cited Zrillic. Haire, 870 So.2d 783 n. 9. In reconciling the cases, therefore, the Florida Supreme Court has now established that the “reasonable relationship” or “rational basis” standard applies to review a statute that potentially infringes on (but does not destroy entirely) property or testamentary rights.

As further explained in Haire,

Under this standard of review ... a “state statute must be upheld ... if there is any reasonable relationship between the act and the furtherance of a valid governmental objective.” Lane v. Chiles, 698 So.2d 260, 262 (Fla.1997) (emphasis supplied). Specifically, with respect to substantive due process, a statute is valid if it “bears a rational relation to a legitimate legislative purpose in safeguarding the public health, safety, or general welfare and is not discriminatory, arbitrary, or oppressive.” Chicago Title Ins. Co. v. Butler, 770 So.2d 1210, 1215 (Fla.2000).

870 So.2d at 782.

As noted above and acknowledged by Judith, this state has a “strong public policy concerning the protection of the surviving spouse of [a] marriage in existence at the time of the decedent's death.” See Via, 656 So.2d at 461. The provisions of the elective share statute thus serve a legitimate legislative purpose. The statutes are rationally related to that purpose in that they seek to provide any surviving spouse who has not waived such protections a minority share in the assets of the decedent in the event that spouse did not receive as much through testamentary dispositions. [FN3] This legislative scheme has strong historical roots in the common law, in existence before the enactment of our state constitution and undisturbed until now.

We therefore affirm the order on appeal.

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One of the primary benefits of mediating trusts-and-estates disputes is that the mediation session focuses everyone's attention and brings the case "to a head" in much the same way as a trial date; except it happens before the parties pour huge sums of money - and time - into pretrial discovery and motion practice. Taking full advantage of this window of opportunity requires thorough preparation, and nothing beats a good checklist when it comes to making sure you've covered all your basis.

THE MEDIATOR’S CHECK LIST 

ALL INFORMATION WILL BE MAINTAINED IN THE STRICTEST CONFIDENCE.

A CONFIDENTIALITY AGREEMENT HAS BEEN SIGNED BY ALL PARTICIPANTS IN THE MEDIATION BEFORE THE EXCHANGE OF ANY CONFIDENTIAL INFORMATION.

PARTIES

1. Identify each party and title of all participants involved in the dispute.

2. Identify each Disputant required to be present during the mediation process.

3. Identify each decision maker who will not be present during the entire mediation process.

4. Describe any special needs, demands, interests and goals of each Disputant and Counsel.

DISPUTE

5. Describe each claim, dispute and defense.

6. Describe each Disputant’s demands –the best case outcome-to be achieved in the Mediation.

7. Identify and quote the key statutes governing the claims and defenses.

8. Identify and quote the key cases governing the outcome of the liability issues. For example: Stout v. Turney (1978) 22 Cal.3d 718: “Of the two measures the ‘out-of-pocket’ rule has been termed more consistent with the logic and purpose of the tort form of action (i. e., compensation for loss sustained rather than satisfaction of contractual expectations) while the ‘benefit-of-the-bargain’ rule has been observed to be a more effective deterrent (in that it contemplates an award even when the property received has a value equal to what was given for it.)”

9. Identify the legal support for each demand for special, general and punitive damages.

10. Identify all defenses to the claims for special, general damages and punitive damages.

11. Identify key disputed facts discussed in the legal briefs.

12. Identify any key facts and legal issues overlooked by Counsel and the Disputants.

13. Identify other issues that may have an effect on the dispute, including change in case and statute law, change in management, change in key decision maker, vacations, trial dates, motions for summary judgment, divorce, employment termination, surgery, promotion, restructure of company, bankruptcy, sale of business, cancellation of insurance coverage, and the need for closure.

14. Should the mediation be conducted in segments? For example, if the claimant is rehired in wrongful terminations claim will the damage claim be resolved? If the franchisor reinstates a franchise will the damage claim be resolved? If the insurance company renews the insurance policy will the claim for bad faith claim be dismissed?

15. Identify possible resolutions of dispute by restoring, creating or enhancing a commercial relationship that the defendant may be able to provide as an alternative to payment of money damages. For example, a HR Director may be able to re-hire an employee without consulting with a higher authority, whereas the payment of a damage claim may have to go through several levels of review and approval and consultations with the company’s risk manger for reporting to an insurance carrier or audit committee.

EVIDENCE:

16. Identify and quote the key provisions of the key documents each party relies on to support a claim or defense.

17. Identify key witnesses necessary to support each Disputant’s claim or defense, and summarize the testimony.

18. Identify key authenticated documents that have been exchanged to support or refute the damage claims.

19. Identify all out of pocket expenses (loss of earnings, medical bills , repairs) exchanged to support or refute the claim.

20. Identify a key decision maker who has surfaced during the mediation.

21. Have arrangements been made to assure that the identified decision makers will be present during the mediation?

22. Which newly identified decision makers will not be able to participate in the mediation process? Should the mediation be rescheduled?

23. Identify all people who have had input on the value of claim.

24. Will an expert (and describe the area of expertise) be helpful in resolving the Dispute.

25. Will it be necessary to postpone the mediation pending a verification of an appraisal, an expert opinion or other information that needs to be made available to key decision makers.

SETTLEMENT

26. Identify all sources of insurance or other funds that will be available to pay a settlement.

27. What has been offered, demanded and rejected in any prior settlement discussions?

28. Describe what each Disputant demands as the minimum acceptable settlement to avoid a trial or other consequence.

29. Identify other cases or settlements of similar cases that have resulted in the minimum acceptable settlement value demanded during the mediation.

30. Is there a settlement in kind or a source of creating settlement value other than the payment of money that may result in resolution of the dispute? For example, in a dispute over the under-sized beams for a construction project, will the under-sized beams create value for another use for another project? In looking for value or settlements in kind, the Disputants should be encouraged to look for all potential sources of value.

RESOLUTION

31. Is a partial resolution possible?

32. Have the parties documented the settlement and final resolution in an enforceable format in compliance with the law?

33. Is the settlement confidential? If so, under what conditions may it be disclosed?

34. Has the mediator completed her case file, closure documents and procedures for any future references to the mediation. In court-annexed mediations the Mediator must file a form stating the matter resulted in partial agreement, total agreement or non-agreement.

35. For any information that has been disclosed to the Mediator in confidence, state how disclosure of that information affected the mediation?

FEES

36. Is there a dispute between the parties and their lawyers about the amount that is owed to the lawyers?

37. Is there a dispute between a party and her insurance company over coverage, legal fees and costs?

38. Identify the legal basis for the claim of recovery of reasonable attorney fees and costs.

39. Identify all objections to the claim for attorney’s fees and costs.

40. List all legal fees, expert fees and costs incurred by each party through the date of the first mediation session.

41. How much of any settlement payment will be paid to the lawyers?

42. Has the Mediator made arrangement for final payment of her fees, received evaluation forms of her performance and obtained permission to use favorable evaluations by Counsel and Disputants as references for marketing purposes?

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Effective July 1, 2007, Florida adopted legislation expressly authorizing mandatory arbitration clauses in wills and trusts.  The new statute provides as follows:

731.401 Arbitration of disputes.--

(1) A provision in a will or trust requiring the arbitration of disputes, other than disputes of the validity of all or a part of a will or trust, between or among the beneficiaries and a fiduciary under the will or trust, or any combination of such persons or entities, is enforceable.

(2) Unless otherwise specified in the will or trust, a will or trust provision requiring arbitration shall be presumed to require binding arbitration under s. 44.104.

Two of the Florida attorneys instrumental in passage of the new legislation, Bruce M. Stone and Robert W. Goldman, also co-authored a 2005 ACTEC article discussing mandatory arbitration clauses in wills and trusts entitled Resolving Disputes with Ease and Grace.  The ACTEC article does a good job of summarizing the pros and cons of arbitration, concluding that arbitration is likely "ideal" in the following circumstances:

1. Fee disputes, including fiduciary and legalfees
2. Prudent investing disputes
3. Document construction
4. Principal and income disputes, includingadjustment powers
5. Trust terminations or severances
6. Accounting disputes
7. Declaratory relief in general

This list of "ideal" abritration senarios implicitly recognizes that arbitration is NOT the best solution for resolving ALL disputes, a view I share and have written about [click here].

Sample arbitation clauses:

Sample clauses are often the best way to understand in concrete terms how a general concept may be applied in the real world.  Note that all of the sample clauses do two things:

• require arbitration; and
• define the procedural rules that would govern the arbitation proceeding (for example, who appoints the arbitrator, how many arbitrators are required, what are the discovery rules, etc). 

Under the new Florida arbitration statute, if the settlor does not identify  the procdural rules he or she would like to apply the default rules are provided by F.S. 44.104.

The AAA's website [click here] provides specific procedural rules for arbitrating such wills-and-trusts claims and the following sample arbitration clause:

AAA Standard Arbitration Clause:

In order to save the cost of court proceedings and promote the prompt and final resolution of any dispute regarding the interpretation of my will (or my trust) or the administration of my estate or any trust under my will (or my trust), I direct that any such dispute shall be settled by arbitration administered by the American Arbitration Association under its Arbitration Rules for Wills and Trusts then in effect. Nevertheless the following matters shall not be arbitrable questions regarding my competency, attempts to remove a fiduciary, or questions concerning the amount of bond of a fiduciary. In addition, arbitration may be waived by all sui juris parties in interest.

The arbitrator(s) shall be a practicing lawyer licensed to practice law in the state whose laws govern my will (or my trust) and whose practice has been devoted primarily to wills and trusts for at least ten years. The arbitrator(s) shall apply the substantive law (and the law of remedies, if applicable) of the state whose laws govern my will (or my trust). The arbitrator's decision shall not be appealable to any court, but shall be final and binding on any and all persons who have or may have an interest in my estate or any trust under my will (or my trust), including unborn or incapacitated persons, such as minors or incompetents. Judgment on the arbitrator's award may be entered in any court having jurisdiction thereof.

The authors of Resolving Disputes with Ease and Grace also provided four sample arbitration clauses, including the following two:

Generic provision—Short version:

It is my hope and expectation that there will be no dispute in relation to this Trust [my estate]. Nevertheless, if there is any dispute or controversy among any of the Trustee [personal representative] and the beneficiaries involving any aspect of this Trust [my estate] or its administration, the parties to the dispute may agree on the manner of resolution. If there is no such agreement, the disputing parties shall submit the matter to mediation, and, if unresolved by mediation, to binding arbitration. If a party to the dispute fails to participate in good faith in the mediation or arbitration, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from that party’s beneficial share or from other amounts payable to that party (including amounts payable to that party as compensation for services as a fiduciary).

Generic provision—Long version with forfeiture clause:

[Comment: As with other language in these sample clauses, the forfeiture provision in paragraph (c) below has not been tested in the courts. Assuming that a mandatory arbitration provision in a will or trust is otherwise enforceable in a given jurisdiction, it is believed that a forfeiture provision is likely to be enforceable also, including in jurisdictions that do not recognize the validity of no-contest provisions.]

(a) It is my hope and expectation that there will be no dispute in relation to this Trust [my estate]. Nevertheless, if there is any dispute or controversy among any of the Trustee [personal representative] and the beneficiaries involving any aspect of this Trust [my estate] or its administration, the parties to the dispute may agree on the manner of resolution. If there is no such agreement, the disputing parties shall submit the matter to mediation, and, if unresolved by mediation, to binding arbitration. If the parties are unable to agree on the selection of a mediator or arbitrator, the court having jurisdiction over this Trust [my estate] shall select the mediator or arbitrator. [The mediator or arbitrator shall have the following qualifications: ACTEC fellow; attorney with at least 10 years’ experience in trusts and estates; etc.]

(b) In the case of arbitration, the arbitrator shall establish the procedure for arbitrating the matter or matters and recognizing the goals of privacy, efficiency, less formality than in a judicial tribunal, and less expense than might be incurred in a judicial forum, while reaching a fair result. The decision of the arbitrator shall be final and binding on the Trustee [Executor], all beneficiaries, and their heirs, successors, and assigns. If the arbitrator determines that a guardian ad litem is needed to represent the interests of unborn, unascertained, or incapacitated interested persons, a guardian ad litem shall be appointed by the court having jurisdiction over this Trust [my estate].

(c) If a disputing beneficiary fails to participate in good faith in the agreed-on procedure for resolution, or in the mediation or arbitration if there is no such agreement, the disputing beneficiary’s interest in this Trust [my estate] shall be forfeited and the beneficiary, if an individual, shall be treated as having predeceased the Settlor [me] [with no surviving issue]. If for any reason it is determined by the court having jurisdiction over this Trust [my estate] that the foregoing provision for forfeiture is not effective, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from the beneficiary’s share or from other amounts payable to the beneficiary.

(d) The provisions of subparagraph (c) above shall not apply to the beneficial interests of:

(1) the Settlor’s [my] spouse, to the extent that his [her] interest would otherwise qualify for an estate or gift tax marital deduction;

(2) any beneficiary, to the extent that the beneficial interest would otherwise qualify for an income, gift, or estate tax deduction for charitable purposes unless and until all such charitable beneficial interests have expired.

If, however, the Settlor’s [my] spouse or any such beneficiary who is a disputing beneficiary to whom the above forfeiture provisions do not apply nevertheless fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, the arbitrator or the court having jurisdiction over this trust [my estate] is authorized to award costs and attorney’s fees from his, her, or its beneficial share.

(e) The acceptance of the Trust by any trustee or co-trustee constitutes the trustee’s or co-trustee’s agreement to comply with the above provisions. If a trustee or co-trustee is a party to a dispute and fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, it shall be deemed that the trustee or co-trustee has breached its fiduciary duties and has resigned, and the court having jurisdiction over this Trust is authorized to surcharge the trustee or co-trustee for costs, attorney’s fees, and any other sums deemed appropriate. [The personal representative’s consent to act constitutes his, her, or its agreement to comply with the above provisions. If a personal representative is a party to a dispute and fails to participate in good faith in the agreed-on procedure for resolution or in the mediation or arbitration, it shall be deemed that the personal representative has breached his, her, or its fiduciary duties and has resigned, and the court having jurisdiction over my estate is authorized to surcharge the personal representative for costs, attorney’s fees, and any other sums deemed appropriate.]

(f) If the validity of these provisions requiring arbitration is contested, the court having jurisdiction over this Trust [my estate] shall resolve that issue prior to resolution of the balance of the dispute. If the arbitration provisions are determined to be valid, the balance of the disputed issues shall be resolved as provided in this Article __.

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J.P. Morgan Trust Co., N.A. v. Siegel, --- So.2d ----, 2007 WL 2710957 (Fla. 4th DCA Sep 19, 2007)

Anytime trust beneficiaries object to a trust accounting or any aspect of a trust's administration the trustee is potentially subject to claims for damages.  This theoretical risk of damages arguably places the trustee's individual interests in conflict with those of the trust's beneficiaries, thus requiring the trustee to seek court approval under F.S. § 736.0802(10) prior to using trust funds to pay its attorney's fees.  Here's the text of the statute:

(10) Payment of costs or attorney's fees incurred in any trust proceeding from the assets of the trust may be made by the trustee without the approval of any person and without court authorization, except that court authorization shall be required if an action has been filed or defense asserted against the trustee based upon a breach of trust. Court authorization is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has committed a breach of trust.

I recently wrote about this rule in the context of a 2006 case out of the 3d DCA [click here].

But how clear must the conflict of interest be before the trustee's obligation to seek court approval prior to paying legal fees is triggered?  In the linked-to case the trial court determined that answers to interrogatories filed by trust beneficiaries in the context of an accounting proceeding hinting at possible future breach-of-trust claims were enough.  The corporate trustee in this case, J.P. Morgan, cried foul, arguing that in the absence of a breach-of-trust action being filed, it shouldn't be obligated to seek court approval prior to paying its legal fees with trust funds.  The 4th DCA saw it differently, and upheld the trial court's ruling:

J.P. Morgan argues that under the trial court's ruling all trustees are placed in a position of uncertainty as to when to seek court approval before paying attorneys' fees from trust assets. However, we hold that in this case J.P. Morgan should have known from the Siegels' answers to interrogatories in the 2003 action that it would face an action based on the alleged breaches of fiduciary duty and trust mismanagement. At the very least, J.P. Morgan should have realized it was in a position of conflict at that point. Based on the foregoing, we affirm.

Lesson learned:

What's most important about the linked-to case is that it's a prime example of the type of ambiguity the legislature was seeking to avoid when it amended F.S. 737.403(2)(e) in 2005 (this was the predecessor statute incorporated verbatim into new F.S. § 736.0802(10)).  Here's how the new legislation was addressed in the linked-to case:

Section 737.403(2), Florida Statutes, was amended effective July 1, 2005. Section 737.403(2)(e) now provides, in pertinent part:

(2) If the duty of the trustee and the trustee's individual interest or his or her interest as trustee of another trust conflict in the exercise of a trust power, the power may be exercised only by court authorization.... Court authorization is not required for any of the following:
....

(e) Payment of costs or attorney's fees incurred in any trust proceeding from the assets of the trust unless an action has been filed or defense asserted against the trustee based upon a breach of trust. Court authorization is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has committed a breach of trust.

§ 737.403(2)(e), Fla. Stat. (2005) (emphasis supplied).

The legislature has resolved the issue in favor of the interpretation urged by J.P. Morgan that requires a pleading be filed. However, as J.P. Morgan acknowledges, the new statute was not in effect for the vast majority of the time period at issue.[FN1]

[FN1.] The Siegels' 2006 lawsuit against J.P. Morgan and Judith Novak asserted various causes of action relating to the time period of January 1, 2003 through September 1, 2005.

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Opening safe-deposit boxes is a part of most probate administrations.  Banks are usually sticklers for protocol, which is understandable given their liability exposure if anything goes wrong.  Fortunately, Florida has a detailed statutory scheme governing access by fiduciaries to safety deposit boxes (see F.S. 655.93 - F.S. 655.94 and F.S. 733.6065).

Wachovia is learning the hard way that people will sue if things go wrong, as reported by Daniel Wise in Bank's Opening of Box Leads to Trial on Missing Cash Claim.  Here's an excerpt:

An elderly woman's claim that Wachovia Bank was liable for $75,000 allegedly lost when it authorized unsupervised locksmiths to break into her safety deposit box should proceed to trial, an acting Supreme Court justice in Manhattan has ruled.

The bank's failure to check one of its computer databases to see if the box had been rented raises a triable issue of fact as to whether the bank committed "gross negligence," Justice Michael Stallman ruled last week in Glassman v. Wachovia Bank, 115380/06.

In early 2005, Roberta Glassman, who has residences in Manhattan and Florida, rented a self-service safe deposit box at the Wachovia branch in West Palm Beach, Fla. Under the agreement, she was to be given the only keys.

The agreement also provided that any missing contents were Glassman's responsibility and that "the Bank has no liability whatsoever unless the loss is caused by the Bank's gross negligence, fraud or bad faith."

Glassman, 74, claimed that when she left in May 2005 for a trip to Europe, she removed $3,000 in cash from the safety deposit box, leaving $87,000 in $100 bills and a $100,000 Suffolk County bond.

However, an envelope bearing the box number and containing keys was mistakenly included in the bank's inventory of unrented boxes. The keys did not open her box.

On May 27, 2005, a short time after Glassman left on her trip, the bank called in locksmiths from Diebold Incorporated.

The bank's lawyer, Jocelyn Keynes, said it was the bank's policy not to supervise the work of locksmiths on unrented boxes. In this case, the locksmiths soon realized the box had been rented because it did not have a piece of white Styrofoam normally found between the door of unused boxes and the actual container for valuables.

The locksmiths, according to the lawyer's affidavit, then summoned two bank employees, who inventoried the contents of the box as $12,000 in $100 bills and the $100,000 bond.

Both sides sought summary judgment upon Glassman's claim. Wachovia claimed it had acted reasonably, and had certainly not been grossly negligent.

Stallman found that the agreement's gross-negligence provision was sustainable under both New York and Florida law.

Although the case referred to in the quoted piece [Glassman v. Wachovia Bank, 115380/06] is out of New York, fortunately for us in sunny Florida the court skirted the choice of law issues by simply applying both New York and Florida law.  Florida practitioners should find the following useful:

• Exculpatory clauses in safe-deposit box agreements are enforceable.

[I]n Florida . . . an appellate court has held that the limitation of liability provided in a safe deposit box agreement which limited the bank's obligations for loss to instances of gross negligence, fraud or bad faith was . . . [enforceable]. F.D.I.C. v. Carre, 436 So.2d 227, 229-230 (Fla App 2d Dist 1993)(court noted that whether or not “a customer is wise to enter into an agreement such as the one in this case, we cannot find that the agreement was against public policy.”). Thus, under the laws of New York and Florida, an exculpatory clause, such as the provision contained in the subject Agreement that limits a party's liability to grossly negligent conduct, is enforceable.

• If a gross-negligence exculpatory clause is enforceable, then what is "gross negligence"?

The Florida courts have acknowledged that their jurisprudence “reflects a history of difficulty in dividing negligence into degrees” and that “it is doubtful that gross negligence has precisely the same meaning in each context.” See Fleetwood Homes of Florida, Inc. v. Reeves, 833 So.2d 857, 865-66 (Fla App 2d Dist 2002); see also LeMay v. Kondrk, 860 So.2d 1022, 1025 (Fla App 5th Dist 2003) (“Courts have encountered great difficulty in attempting to draw clear and distinct lines between the various grades of negligence). In Fleetwood Homes, the court observed that, in the context of addressing workers' compensation and in awarding punitive damages based on gross negligence, the relevant statute defines gross negligence to include “conduct [that] was so reckless or wanting in care that it constituted a conscious disregard or indifference to the . . . rights of person exposed to such conduct.” Id. at 867.[FN3]

[FN3]. The same definition for gross negligence was noted in In re Standard Jury Instructions-Civil Cases, (797 So.2d 1199 [2001] ), where the Florida Supreme Court authorized the publication of guidelines for jury instructions and model verdict forms with respect to the award of punitive damages in instances that involve intentional misconduct or grossly negligent conduct.

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Vaughan v. Boerckel, --- So.2d ----, 2007 WL 2428516 (Fla. 4th DCA Aug 29, 2007)

If an estate plan involves real property, all of the formalities for conveying real property must be observed.  When it comes to conveying real property, Florida law treats wills and trusts very differently.  Forgetting this distinction can cause an entire estate plan to collapse in on itself (and maybe get the estate planning attorney in big trouble).

The law:

The key statute to keep in mind in this regard is F.S. 689.06, which provides that real property must be conveyed by deed or will.  Therefore, as a general rule, a declaration of trust alone will not be sufficient to convey real property to a trustee unless the declaration of trust contains language that both:

• purports to convey the real estate from the present owner to the trustee; and
• complies with the formalities required for a deed. 

The facts:

In the linked-to case the decedent executed a pour-over will and revocable trust.  The decedent owned 5 separate items of real property in New York, all of which were titled in the name of a single holding company called Eloise Management Corporation, Inc., a New York Corporation ("Eloise").  At the time of his death the decedent owned 100% of the stock of Eloise.  The decedent never deeded the real property to his revocable trust.

The decedent's revocable trust expressly identified the 5 items of real property and expressly provided for the conveyance of each separate item of real property from the trust to 5 separate family members (excluding second wife). The revocable trust complied with the formalities required for a deed, but contained NO language purporting to convey the real estate from its present owner to the trustee. Here's the key revocable trust language:

Upon my death, the Trustee shall distribute the then Trust Estate as follows:

a) I or the ELOISE MANAGEMENT CORPORATION, INC., a New York corporation wholly owned by me, are the owners of certain real property situated in the State of New York, as follows:

(i) 1430 Omega Street, Elmont, New York;

(ii) 1422 Omega Street, Elmont, New York;

(iii) 217 Franklin Avenue, Franklin Square, New York;

(iv) 205 Franklin Avenue, Franklin Square, New York;

(v) 20 Ronald Avenue, Hicksville, New York.

b) Upon my death, I direct that my Trustees distribute to my wife, MARY INTERLANDI, to have sole use and possessions during her lifetime, the real property situated at 1422 Omega Street, Elmont, New York, together with the furniture and furnishings therein contained. Upon her death or upon my death if she shall predecease me, said real property and contents shall be distributed to my grandson, BRETT BOERCKEL, outright and free of trust.

c) Upon my death, I direct that my Trustees distribute the real property situated at 1430 Omega Street, Elmont, New York, together with the furniture and furnishings therein contained, to my daughter, IRENE VAUGHAN, outright and free of trust. If IRENE VAUGHAN shall predecease me, then said real property shall be distributed to my grandson, CRAIG FIELDING.

d) Upon my death, the Trustees shall distribute the real property at 20 Ronald Avenue, Hicksville, New York, together with the furniture and the furnishings therein to my son, ROBERT BOERCKEL, outright and free of trust.

e) Upon my death, the Trustees shall distribute the real property at 217 Franklin Avenue, Franklin Square, New York, together with the furniture and the furnishings therein to my grandson, BRETT BOERCKEL, outright and free of trust.

f) Upon my death, the Trustees shall distribute the real property at 205 Franklin Avenue, Franklin Square, New York, together with the furniture and furnishings therein to my grandson, BRETT BOERCKEL, outright and free of trust.

The litigation:

When the decedent died his second wife claimed all of the real property for herself - and won at the trial court level on summary judgment.  Here's how the court summarized the widow's winning argument:

Mrs. Boerckel filed a motion for summary judgment, arguing that because Decedent failed to execute the deeds transferring the Properties from Eloise either to himself,FN1 individually, or to the Trust,FN2 the Properties were owned by Eloise at the time of Decedent's death and thus did not become a part of the corpus of the Trust. Because the Properties did not pass to the Trust, Paragraphs 7.3(a)-(f) of the Trust were ineffective, and the Eloise stock passed to Mrs. Boerckel as part of the residue of the Trust under Paragraph 7.4(a).

FN1. Thereby allowing the Properties to pass to the Trust pursuant to the pour-over provision of the Will.

FN2. Thus making the Properties part of the corpus of the Trust.

The decedents' children and grandchildren argued that because the holding company holding title to the real property became an asset of the trust, and the trust owned 100% of the stock of the holding company, the trustee was obligated to convey the real property out to the intended beneficiaries.  The court rejected this argument relying principally on the following 1986 3d DCA opinion:

We conclude that this case is more analogous to Flinn v. Van Devere, 502 So.2d 454 (Fla. 3d DCA 1986), wherein the Third District concluded that realty owned by the decedent was not validly transferred to a trust she established during her lifetime and thus remained an estate asset and the property passed under the residuary clause of her will rather than the trust. Id. at 454. The court held that the decedent's execution of a form instrument creating a standard inter vivos “living trust” of property owned by her and listed in an accompanying schedule was ineffective with respect to the real estate described because the settlor did not, as is required, also execute a deed which conveyed the realty to the trustees. Id. at 455. The court explained that the trust documents themselves plainly cannot be regarded as such a deed “for the obvious reason that, although they comply with the necessary formalities of two witnesses and an adequate legal description, they contain no expression which purports to convey, grant or transfer the real estate.” Id. The court also reasoned that the “only reference in the simultaneously executed will to the trust is the direction that the personal representative make demand upon the trustees for the trust's share of any estate taxes.” Id. The court found this language to be clearly insufficient to manifest an intention to incorporate the provisions of the trust for the disposition of the assets after the settlor's death into the will, so as to render them, in effect, testamentary in nature. Id. at 455-56. The court noted that such a result was required even though it would run contrary to the decedent's “actual desires and intentions.” Id. at 456. Even though the Will in this case did incorporate the Trust instrument by reference, the property in Flinn was not corporately-owned as in this case, and the corporate existence cannot be disregarded.

In sum, we conclude that the trial court did not err in finding that Mrs. Boerckel was entitled to summary judgment as a matter of law as to Counts I and II of the Petition. The Properties never became a part of the corpus of the Trust because the Decedent failed to execute the deeds that would have resulted in a funding of the Trust, thereby causing Paragraphs 7.3(a)-(f) to lapse. The Final Summary Judgment in favor of Mrs. Boerckel is affirmed.

Lesson learned:

Serious estate planning doesn’t stop when the documents are executed. Step two always focuses on ensuring the client’s assets are properly titled and if there’s a revocable trust involved, that the trust gets funded. If real property is involved, funding the trust entails executing deeds. In this case the client skipped step two and his estate plan was turned on its head. Maybe this is what he wanted all along? Who knows, but at the very least this case is an excellent case study to share with planning clients the next time they ask “do we really need to spend the money funding our revocable trusts?”

By the way, don't shed too many tears for the decedent, as noted in the linked-to case, his estate planning attorney gave him clear warning of what was going to happen if he didn't execute the necessary deeds and he chose to ignore those warnings:

Petitioners deposed Fred Weinstein, Esq., the Decedent's estate-planning attorney who prepared both Decedent's Will and the Trust. Weinstein testified that at the time the Trust was written, the Properties were not in the Trust, and prior to the Trust being signed, it was indicated that Weinstein would prepare deeds conveying the New York Properties from Decedent to the Trust. Weinstein testified that at the time the Trust was signed, Decedent's intent was to have the Properties go to the named distributees. However, after the Trust was signed, Weinstein prepared such deeds and advised Decedent that the failure to sign the deeds “would defeat the purpose of the rest of the Trust,” but Decedent refused to sign the deeds.

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Ripoll v. Comprehensive Personal Care Services, Inc., --- So.2d ----, 2007 WL 2043483 (Fla. 3d DCA Jul 18, 2007)

If the estate assets disappear while the parties litigate their claims against each other it doesn't really matter who wins or loses, the assets are gone.  The way to address this risk is to ask the court for a temporary injunction freezing the assets.  In general commercial litigation these types of orders should be rarely granted. In contested guardianship and probate proceedings they should be freely granted.  The trick is to make sure you, your opponent, and your trial judge all understand this dramatically different standard.

There's loads of case law out there saying temporary injunctions should be rarely granted.  All of that precedent comes from commercial litigation cases.  Don't get caught in that trap.  In probate and guardianship proceedings the key temporary-injunction case to focus on is In re: Estate of Barsanti, 773 So.2d 1206 (Fla. 3d DCA 2000), in which the probate court was reversed for failing to apply the different and much more liberal standard for granting temporary injunctions in contested probate proceedings:

Based on the record before us, we find that the probate court abused its discretion in failing to grant the temporary injunction and in finding that the P.R. failed to establish either a clear legal right or an inadequate remedy at law. In addition, we agree with the Estate that the probate judge failed to adhere to established law that the traditional standards controlling the issuance of temporary injunctions in other civil actions do not constrain the probate court in the exercise of its inherent jurisdiction over a decedent's estate.

The linked-to case is important because it explicitly extends the Barsanti rule to guardianship proceedings as follows:

A circuit court has the inherent authority to monitor a guardianship and to take action it deems necessary to preserve the assets for the benefit of the beneficiaries. See In re: Estate of Barsanti, 773 So.2d 1206 (Fla. 3d DCA 2000). To that end, the court:

has the authority to issue temporary injunctions freezing assets claimed to belong to [a guardianship], even though ultimate ownership of those assets may be in dispute. See Wise v. Schmidek, 649 So.2d 336, 337 (Fla. 3d DCA 1995); Sanchez v. Solomon, 508 So.2d 1264 (Fla. 3d DCA 1987).

Barsanti, 773 So.2d at 1208.

Lesson learned:

Niche practitioners distinguish themselves by delivering better results for their clients, at less cost, in a shorter time period, and with greater certainty of success.  One of the reasons why niche practitioners can distinguish themselves this way is that their expertise and experience in a particular area of the law makes it infinitely more likely that they will spot the key issues of a particular case early on and know how to effectively proceed.  If your niche is probate or guardianship law, make sure you know the cases cited above.  One day the key issue you spot will be the need for a temporary injunction freezing the estate assets, and when you do, these cases will make you look good.

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I previously posted here the text of new legislation proposed by the Florida Bankers' Association to allow "directed trusts" in Florida.  This type of legislation would allow Florida banks and trust companies to assume no fiduciary liability for those trusts where they assume very limited administrative trust duties and focus solely on managing the trust's portfolio.

The inter-state "trust legislation" market is headed in the direction of directed trusts, lead as usual by Delaware, so it's only a matter of time before Florida adopts its version of the statute.  Here's a link to an excellent white paper explaining Delaware's directed trust statute.

A recent LawyersUSA article entitled Family trusts branch out addressed the growing prevalence of directed-trust legislation and, most importantly, contained a few nice Florida references and quotes on the subject.  Here's an excerpt from the linked-to story:

Experts estimate that by the middle of this century, the largest intergenerational wealth transfer in the United States - more than $41 trillion - will have taken place.

Competing to capture the lucrative family trust business, states are revamping their trust statutes to offer tax breaks and encourage the use of multiple trust advisers. So far, 20 states have adopted the Uniform Trust Code, which allows trustees to delegate duties to co-trustees and agents, and generally provides that trustees are exempt from liability for others' actions, except in cases of a "serious breach of trust."

About 10 states have adopted "directed trusts" statutes that specifically authorize the appointment of co-trustees and advisers for investment, management and distribution duties.

South Dakota and Delaware, which are considered to have the strongest directed trust statutes, eliminate liability for a trustee who follows instructions from an adviser appointed in the trust agreement to make investment or distribution decisions. 

*     *     *     *     *

Bruce Stone, a trusts and estates lawyer and shareholder at Goldman, Felcoski & Stone in Coral Gables, Fla., said directed trusts can .  .  .  be used for running closely held family businesses.

"A corporate trustee doesn't want to get involved in running a closely held business, and families don't want corporate trustees interfering in a lot of their decisions," he commented. "The solution is that with a directed trust, the corporate trustee only has to do certain things."

Crain, of BNY Mellon Wealth Management, agreed: "The family wants a corporate trustee to do all the important things - like tax returns, compliance - so the directed trust is the answer, because by statute, you can relieve the trustee of liability and responsibility for holding those assets."

Crain is the chair of a Florida Bankers' Association Trust legislative committee, which expects to introduce a bill next year proposing a directed trustee statute in Florida.

"It's a competitive issue," she said. "I personally have lost trust business because Florida doesn't have a directed trustee statute."

Florida's existing trust laws "don't go far enough in insulating a trustee," Crain said.

"You still have the duty to oversee, to monitor, to intervene," she noted. "The directed trustee statutes in the few states that have strong ones are explicit as to the lack of responsibility on the part of the trustee for reviewing the actions of the investment manager."

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Ramunno v. Terranova, --- So.2d ----, 2007 WL 2480980 (Fla. 4th DCA Sep 05, 2007)

It happens all the time.  One side or the other in a probate proceeding files an un-sworn petition seeking an order that clearly determines someone's property rights.  For example, who benefits from a life insurance policy.  The petitioning party then argues the issue at a hearing where absolutely NO testimony or documentary material that's admissible in evidence ever makes an appearance.  And then the court rules.  Usually the economic stakes aren't high enough to appeal a no-evidence ruling.  But when they are, be careful, because as the linked-to case demonstrates, you just might end up getting reversed:

Lorenzo Ramunno appeals an order entered by the probate court, contending the court miscalculated the amount he owes under a final judgment obtained by the personal representative against him. We affirm the order in all respects, except as to that portion of the order which charges Mr. Ramunno $16,758.61 for life insurance proceeds he received from Metropolitan Life Insurance Co. upon his mother's death. This amount represents four-fifths of the proceeds, which the trial court concluded should have been shared equally by Lorenzo and his siblings.

We reverse as to this portion of the order because the only evidence presented to the trial court concerning the life insurance proceeds was Mr. Ramunno's testimony that he properly received the money. The trial court's contrary findings are supported only by the arguments of the estate's counsel and the unsworn pleadings and attachments from the estate's previous action against Metropolitan Life. These do not suffice as competent, substantial support for the trial court's ruling. See Romeo v. Romeo, 907 So.2d 1279, 1284 (Fla. 2d DCA 2005) (unauthenticated documents and arguments of counsel were not evidentiary support for general master's ruling); Loiaconi v. Gulf Stream Seafood, Inc., 830 So.2d 908, 910 (Fla. 2d DCA 2002) (document and argument of counsel were not sufficient proof to support venue determination); see also Leon Shaffer Golnick Adver., Inc. v. Cedar, 423 So.2d 1015, 1016-17 (Fla. 4th DCA 1982).

We therefore reverse only as to this $16,758.61 charge to Lorenzo Ramunno.

Lesson learned: evidence matters.

Most probate practitioners chose this practice area to specifically avoid anything having to do with civil litigation, including evidentiary rulings.  In 99% of probate proceedings, that's fine.  But when it's a contested proceeding, evidence, civil procedure, discovery, it's all there.  And it all matters. 

If you're the petitioning party, even when your side of the argument is a slam dunk, take the time to make sure you've created a solid evidentiary record.  If the probate court rules in your favor, the odds of surviving an appellate challenge are astronomically higher if the order is supported by evidence reflected in the record.  As the winning side learned in the linked-to case, in the absence of such evidence your victory may be short lived indeed.

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In a blog post entitled Rich vs. Super-Rich, WSJ blogger Robert Frank highlighted this very funny video produced by the folks at The Onion lampooning the pseudo class war brewing between millionaires and today's super-rich class of billionaires.  The video is hilarious, and well worth watching.  On a more serious note, Frank notes that the joke plays off of the very real, and growing, wealth gap in the U.S.  Here's an excerpt from Frank's blog post:

The main reason for all this class envy at the top is that inequality among the rich is now at its highest level in recent history. The economic distance between mere millionaires and the richest billionaires has more than doubled over the past decade. While the average income for the top 1% of income earners grew about 57% between 1990 and 2004, it grew by more than 80% for the richest one-tenth of one percent.

.  .  .

The rich (or even affluent) may be feeling more and more class envy because of all the people around them who are even richer. But mere millionaires are still among the luckiest people in the world. Instead of always looking up and counting their fortunes, they should also look down and count their blessings. Because, as the Onion video points out, “not everyone can vacation in Italy. Some of you have to vacation on Martha’s Vineyard.”

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I previously wrote here about a $71 million jury verdict entered against a large Texas firm for estate planning malpractice even though this same jury found that the client had suffered zero economic damages; and here about a $1.2 million jury verdict against a large Florida firm for estate planning malpractice even though the plaintiff in that case alleged only $1 million in damages.

In both of these cases it appeared to me that the attorneys were first sued then fared very poorly at trial not because of the economic harm caused, but rather because the plaintiffs felt that the trust they had placed in their attorneys' good faith had been betrayed.  In other words, non-economic factors were far more important than economic factors in determining the outcome of these cases.  A study of medical malpractice claims discussed in Malcolm Gladwell's 2005 book, Blink: The Power of Thinking Without Thinking, supports my theory.

In Blink Gladwell explores the power of the trained mind to make split second decisions, the ability to think without thinking, or in other words using instinct.  The author describes this phenomenon as "thin slicing": our ability to gauge what is really important from a very narrow period of experience. In other words, spontaneous decisions are often as good as—or even better than—carefully planned and considered ones.  When it comes to client interactions with professionals, be it lawyers or doctors, if the client's initial impression, hunch or instinct is that he or she isn't being seriously listened to, or that he or she is being talked down to or isn't being treated with respect, then the likelihood of a malpractice claim materializing somewhere down the line skyrockets.  Here's an excerpt from Blink discussing this phenomenon in the context of medical malpractice claims:

Believe it or not, the risk of being sued for malpractice has very little to do with how many mistakes a doctor makes. Analyses of malpractice lawsuits show that there are highly skilled doctors who get sued a lot and doctors who make lots of mistakes and never get sued. At the same time, the overwhelming number of people who suffer an injury due to the negligence of a doctor never file a malpractice suit at all. In other words, patients don’t file lawsuits because they’ve been harmed by shoddy medical care. Patients file lawsuits because they’ve been harmed by shoddy medical care and something else happens to them.

What is that something else? It’s how they were treated, on a personal level, by their doctor. What comes up again and again in malpractice cases is that patients say they were rushed or ignored or treated poorly. “People just don’t sue doctors they like,” is how Alice Burkin, a leading medical malpractice lawyer, puts it. “In all the years I’ve been in this business, I’ve never had a potential client walk in and say, ‘I really like this doctor, and I feel terrible about doing it, but I want to sue him.’ We’ve had people come in saying they want to sue some specialist, and we’ll say, ‘We don’t think that doctor was negligent. We think it’s your primary care doctor who was at fault.’ And the client will say, ‘I don’t care what she did. I love her, and I’m not suing her.’”

*     *     *     *     *

Malpractice sounds like one of those infinitely complicated and multidimensional problems. But in the end it comes down to a matter of respect, and the simplest way that respect is communicated is through tone of voice, and the most corrosive tone of voice that a doctor can assume is a dominant tone.

*     *     *     *     *

Next time you meet a doctor, and you sit down in his office and he starts to talk, if you have the sense that he isn’t listening to you, that he’s talking down to you, and that he isn’t treating you with respect, listen to that feeling. You have thin-sliced him and found him wanting.

Lesson learned: don't be a jerk

My experience has been that personal representatives or trustees or attorneys who treat estate beneficiaries dismissively or discourteously are exponentially more likely to have their fees challenged, accountings challenged, investment decisions challenged, distribution decisions challenged and generally end up in court over and over again until the beneficiaries resign themselves to the mistreatment or the professional resigns.  In other words, the best way to avoid getting sued if you are a personal representative or trustee or attorney is to be nice.  Nice trumps negligence any day of the week.  And just as importantly, being a jerk can get you sued, no matter how good you are at your job.

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BLOG POST UPDATE: SUBSTITUTE OPINION PUBLISHED

Kravitz v. Levy, --- So.2d ----, 2008 WL 441403 (Fla. 4th DCA Feb 20, 2008)

We deny appellees' motion for rehearing, withdraw our previously issued opinion, and substitute the following in its place.

A beneficiary of an estate appeals a final summary judgment in favor of the estate of the deceased personal representative of the estate, concluding that the beneficiary's cause of action against the personal representative for breach of fiduciary duty was barred by the statute of limitations. Because we conclude that there is an issue of material fact as to whether the actions of the personal representative constituted a continuing tort, we reverse.

ORIGINAL BLOG POST:

Kravitz v. Levy, --- So.2d ----, 2007 WL 2480538 (Fla. 4th DCA Sep 05, 2007)

Probate is often criticized as being too expensive and slow moving. Why the costs and delay? In large part because the probate code is full of protections against various forms of foul play, including fraud by the person who is primarily responsible for protecting the estate: the personal representative.  But these safeguards are limited, and sometimes it can be years - maybe decades - before foul play involving an estate comes to light.  Can the family do anything after all this time?

Continuing torts doctrine saves the day.

The linked-to case involves probate proceedings for Max Kravitz, a resident of Pennsylvania, who died in July 1958. Kravitz's will was admitted to probate in Pennsylvania in 1959, and Morris Passon, Max's brother-in-law and the family lawyer, was appointed executor of Kravitz's estate.  In 2000 - 41 years later! - Passon died in Florida.  In the course of administering Passon's estate it became clear he had improperly kept assets of Kravitz's estate for himself.  So 41 years after Passon was appointed executor, the heirs of Kravitz's estate sued Passon's estate in Florida for negligence, conversion, tortious interference with an inheritance, and breach of fiduciary duty.  The trial court dismissed all claims, finding that they were time barred under F.S. 95.031(2)(a). 

In the linked-to case the 4th DCA reversed the trial court's dismissal of the breach of fiduciary duty claims based on the "continuing torts doctrine."  The 4th DCA's opinion is extremely useful because it provides a possible road map for attorneys/families pursuing claims that could be decades in the making, which is not unheard of in contested probate proceedings.  Here's how the 4th DCA applied the continuing tort doctrine to the breach of fiduciary duty claims in this case:

This case is most like Halkey-Roberts Corp. v. Mackal, 641 So.2d 445 (Fla. 2d DCA 1994). There, a corporation brought an action against its former president claiming that he had repeatedly used corporate funds for his own personal interests. The trial court granted summary judgment on the president's statute of limitations defense, but the appellate court reversed on the claims of breach of fiduciary duty. It explained that the complaint alleged what constituted a continuing tort:

In regard to counts I and II, HRC contends that Mackal's [the former corporate president] behavior constituted continuing torts, for which the limitations period runs from the date the tortious conduct ceases. The continuing torts doctrine is recognized under our state law. See Seaboard Air Line R.R. v. Holt, 92 So.2d 169 (Fla.1956). The question of whether Mackal's actions constituted continuing torts precludes the granting of summary judgment as to counts I and II. To what extent, if any, the concept applies to this case is an issue for the trier of fact to decide.

Id. at 447. See also Carlton v. Germany Hammock Groves, 803 So.2d 852 (Fla. 4th DCA 2002) (whether continuing torts doctrine applies to facts of case is for trier of fact).  .  .  .  We conclude that material issues of fact remain as to whether Passon engaged in a continuing tort of breach of fiduciary duty until the date of his death. If so, the statute of limitations would not have begun to run until Passon's death. These issues are for a jury to resolve.

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“I rob banks because that's where the money is.”  Celebrity bank robber Willie Sutton gets credit for that gem.  The same logic applies to why trusts are often enmeshed in litigation: because that's where the money is.  The opposite is also true: no trust money usually = no lawsuit.

Can you sue a testamentary trust to collect on a decedent's personal debts? NO

One way to pull off the no-trust-money disappearing act is to obtain a court ruling dismissing a lawsuit against the trust because the trust is an improper party.  In other words, the trustee argues that regardless of the merits of the plaintiff's claims, the plaintiff is simply suing the wrong party. 

A recent case out of the Middle District in Florida is a great example of this defense strategy.  In Ziino v. Baker, --- F.Supp.2d ----, 2007 WL 2433902 (M.D.Fla. Aug 22, 2007), a trust was created by a settlor who subsequently died.  The plaintiff in this case had pending claims against the settlor. The plaintiff sued the deceased settlor's testamentary trust directly rather than suing his probate estate.  Why? I'm guessing because that's where the money was.  Rather than getting caught up in the merits of the case, the trustee successfully diverted the lawsuit away from the trust to the probate estate.  "Poof," claim goes away.  Here's how the Ziino court explained its ruling:

The Trustees move to dismiss the Complaint as against themselves on the ground that Florida law prohibits a creditor from bringing a direct action against a trust or its trustees after the death of the settlor, if that action is dependent upon the individual liability of the settlor.  .  .  .  The Florida Trust Code provides that:

After the death of a settlor, no creditor of the settlor may bring, maintain, or continue any direct action against a trust described in s. 733.707(3), the trustee of the trust, or any beneficiary of the trust that is dependent on the individual liability of the settlor. Such claims and causes of action against the settlor shall be presented and enforced against the settlor's estate as provided in part VII of chapter 733, and the personal representative of the settlor's estate may obtain payment from the trustee of a trust described in s. 733.707(3) as provided in ss. 733 .607(2), 733.707(3), and 736.05053.

Fla. Stat. § 736.1014(1). Accordingly, the Trustees are not proper parties to Count I because the settlor, William Wellman, is deceased and in Count I the Plaintiff purported to allege actions that are dependent upon the individual liability of the settlor. See Tobin v. Damian, 723 So.2d 396 (Fla. 4th DCA 1999).

Can you sue a spendthrift trust because the trust beneficiary isn't paying child support or alimony? YES

However, the issue in Ziino that should be of most interest to estate planners is the issue the plaintiff won on: piercing the protective wall of a spendthrift trust.  These types of trusts are at the heart of many estate plans.  One of the primary arguments for these trusts is their well-deserved reputation as asset protection vehicles.  Ziino is important because it addresses the rare exceptions to the general asset-protection benefits of spendthrift trusts: claims for alimony and child support. 

Here's how the Ziino court articulated this point:

Although Count III is obliquely drafted, in that Count the Plaintiff seeks a writ of garnishment under Florida law. In other words, the Plaintiff is seeking to garnish any disbursement from the Trust to Laura Wellman in order to satisfy her child support obligations evidenced by the promissory notes. Moreover, the Plaintiff has alleged in Count III that traditional remedies are not available to recover the child support owed, in that Laura Wellman does not have sufficient assets to satisfy the promissory notes. When “traditional remedies are not effective,” Florida law permits a court to garnish disbursements from a spendthrift trust to effect the collection of alimony and child support. See Bacardi v. White, 463 So.2d 218, 222 (Fla.1985).

Why do you think the plaintiff in Ziino sued the trust to collect on claims against the beneficiary for unpaid child support?  Answer: "because that's where the money is!"

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Becker v. Davis, 491 F.3d 1292 (11th Cir.(Fla.) Jul 11, 2007)

In trusts-and-estates litigation there are certain remedies that take on a life of their own; often plead as stand-alone causes of action.  They're not, they're remedies.  Examples include "constructive trusts" (see here) and "accountings."

The remedy v. cause-of-action distinction is not just semantics.  Understanding the distinction can have real life consequences: and the linked-to-case is a great example.

In the linked-to case one of the parties sued for a trust accounting in connection with a business dispute subject to an arbitration clause.  The trial court ruled the trust accounting "count" was not subject to the arbitration clause because it was an independent cause of action.  Wrong answer.  A trust accounting is a remedy.  Not a cause of action, so it can't be litigated as a stand alone claim.  Here's how the 11th Circuit articulated this point in its reversal of the trial court's ruling:

[A]n accounting is a remedy attached to a separate independent cause of action. See Johnson v. Pullman, Inc., 845 F.2d 911, 913 (11th Cir.1988) (“Although plaintiff's complaint contained a count in which an accounting was sought, that relief would not be available here absent some independent cause of action.”).

Accordingly, if the four substantive claims brought by the Trust against the defendants arise out of the agreements and are therefore subject to arbitration, as the parties agree, the Trust's claim for an accounting, which is merely a remedy for any liability, would also arise out of the agreements. Furthermore, to the extent that Becker's individual claims rely on the terms of the agreements and are therefore subject to arbitration, Becker's individual claim for an accounting of the Trust's assets also rely on the terms of the agreements and are subject to arbitration. Accordingly, we find that the district court erred in not sending Count Nineteen to arbitration.

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