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

Dynasty trusts are a huge growth industry [click here], and one of the main selling points for these trusts are their creditor-protection properties.  When Florida adopted its version of the Uniform Trust Code in 2007 some questioned whether Florida's existing spendthrift-trust protections had been watered down.  To me the answer was always an obvious "NO".  But this point is important enough to reiterate again . . . and again . . . and again.  Which brings me to a recently published article entitled UNIFORM TRUST CODE SECTION 503: APPLYING HAMILTON ORDERS TO SPENDTHRIFT INTERESTS, that summarizes the point nicely:

Florida’s enactment of the UTC was merely a codification of the state’s existing case law. In Bacardi v. White, 463 So.2d 218 (Fla. 1985), after a beneficiary with a substantial interest in a spendthrift trust refused to pay court ordered child support and alimony, the Florida Supreme Court held that the beneficiary’s interest in the spendthrift trust could be reached to satisfy the beneficiary’s child support and alimony creditors. The Florida Trust Code preserves the Bacardi requirement that child support and alimony creditors reach a beneficiary’s spendthrift interest “only as a last resort.”[FN]

[FN]  Compare FLA. STAT. § 736.0503(3) (West 2005 & Supp. 2008) (“[T]he remedies provided . . . apply to a claim . . . in paragraph (2)(a). . . . only as a last resort upon . . . showing that traditional methods of enforcing the claim are insufficient.”), with Bacardi, 463 So. 2d at 222 (allowing garnishment “only as a last resort”).

The linked-to article also does a good job of providing a plain-English explanation of the general public policy rationale underlying exceptions to spendthrift-trust protections.  If you're ever litigating this point, understanding the "why" of the rule will be just as important as understanding what the statute actually says.

The primary policy justifications for allowing a settlor to prevent beneficiaries from losing their interests in a spendthrift trust are that (1) a settlor should have the right to dispose of his property as he chooses, and (2) as part of that right, the settlor should have the opportunity to protect beneficiaries from creditors taking advantage of the beneficiaries’ misfortune or improvidence.

Most states provide exceptions that allow certain creditors to reach a beneficiary’s interest in a spendthrift trust. The two most common exceptions are for child support and alimony creditors. The primary justifications for allowing child support and alimony creditors to reach a beneficiary’s interest in a spendthrift trust are that (1) unlike ordinary creditors, child support and alimony creditors are unable to protect themselves from the debtor’s irresponsibility, and (2) while a settlor should be able to protect a beneficiary from personal pauperism, a beneficiary should not be able to enjoy an interest in a spendthrift trust while neglecting to support those dependent on him.

• Email This
• Print
• Comments
• Trackbacks

Wagner, Vaughn, McLaughlin & Brennan, P.A. v. Kennedy Law Group, --- So.2d ----, 2008 WL 2668801 (Fla. 2d DCA Jul 09, 2008)

Ever wonder why your friendly neighborhood plaintiff's lawyer gets a bit tense when he hires you to get his client appointed personal representative . . . PRONTO! Easy, because under F.S. 768.20 only the PR has standing to bring a wrongful death suit on behalf of the estate and the survivors. If your guy's client doesn't get appointed PR, he's out of the game.

But just because the PR is the only party with standing to prosecute the liability phase of the wrongful-death suit, doesn't mean the survivors may not need independent counsel when it comes time to litigating the damages phase of the case and apportioning damages among them. Under F.S. 768.22 the jury apportions damages among the survivors if there's a trial. If there's no trial, then the survivors can hire their own lawyer to negotiate their own individual share of the damages payout to the extent there's a conflict of interest between them and the PR.

With that background in mind the following excerpt from the linked-to case should make sense. In this case two firms were litigating entitlement to the contingency fee resulting from $1.23 million in settlement proceeds. The 2d DCA awarded 100% of the fee solely to the PR's counsel because there was NO conflict of interest between the PR and the survivors when it came time to divvying up the damages pie. Here's how the 2d DCA explained its ruling:

As we stated previously, when survivors have a conflict of interest with the personal representative, the attorney for the personal representative is precluded from collecting fees out of the survivors' portions of the recovery. Wiggins, 850 So.2d at 450. In this case, the probate court denied the Wagner firm's objection to KLG's request for fees based on its determination that Larry and Robert did not have a competing claim or conflict of interest with Gary. The Wagner firm argues that the probate court's finding on this issue is erroneous because “[t]he record contains compelling and uncontroverted evidence of a deep-seated divide between Gary, on the one hand, and Larry and Robert on the other, which came to the fore as a result of their parents' tragic deaths.” The Wagner firm argues that KLG was placed on notice of the conflict when the Wagner firm objected to the one-third apportionment of the bodily injury settlement and attempted to remove Gary as the personal representative.

It is true that the Wagner firm's objection to the apportionment of the bodily injury settlement would have established a conflict of interest between Larry and KLG had it been pursued. However, Larry abandoned his objection to the apportionment after his petition to remove Gary was dismissed. While there was certainly a potential conflict of interest between Larry and Robert and KLG, an actual conflict never arose because Larry and Robert never objected to the amount or apportionment of the UM settlement. Larry and Robert may have believed that the settlement was a bit low and that they were entitled to a greater portion of the settlement proceeds, but they waived any objection to the settlement by accepting their equal shares.

*   *   *   *   *

As the Fourth District has stated, “counsel retained individually by survivors, and not by the personal representative, cannot expect to be compensated for work on those aspects of the case on which counsel for the personal representative has no conflict of interest.” In re Estate of Catapane, 759 So.2d at 11 n. 1. Because the Wagner firm did not perform any work on any aspect of the case in which KLG had a conflict of interest, the probate court did not abuse its discretion in declining to award the Wagner firm a share of the attorney's fees in this case.

• Email This
• Print
• Comments
• Trackbacks

Click here for a PDF copy of the Agenda and related Reports/White Papers for the upcoming meeting of the Florida Bar's Probate & Trust Litigation Committee on Thursday, July 24, 2008 from 3:00 p.m. to 5 p.m. at the Breakers in Palm Beach County.  These materials are an excellent way to keep up on the latest probate-related developments that could affect you, your firm or your clients.  Any questions/comments regarding the meeting and the linked-to materials should be directed to the committee chair: William ("Bill") T. Hennessey.

• Email This
• Print
• Comments
• Trackbacks

Hirchert v. Hirchert Family Trust, --- So.2d ----, 2008 WL 2695897 (Fla. 5th DCA Jul 11, 2008)

California constructive-trust judgment:

This case started in California where, after a two-day bench trial, the trial court found that a California trustee had breached his fiduciary duties by wrongfully withdrawing trust funds, which were then used to buy a house for himself and his wife in California. After the trustee died, his widow sold their California home, moved to Florida, and bought a Florida home with the sales proceeds of the California residence. The California court entered a judgment imposing a constructive trust on the widow's Florida home.

The first issue on appeal was whether the California court had jurisdictional authority to enter a judgment imposing a constructive trust on Florida real property. The trial court said yes, based on the following reasoning, which was adopted verbatim by the 5th DCA:

The trial court analyzed the jurisdictional issue as follows:

The Superior Court of the State of California for the County of San Diego, which entered the judgment in question in this matter, entered said judgment after a trial on the merits. Counsel for Defendant, JOHNEE ANN ALLE HIRCHERT actively participated in the trial. The California court, while not having in rem jurisdiction over the property that was situated in Florida did have in personam jurisdiction over the Defendant, JOHNEE ANN ALLE HIRCHERT.
....

A court of one state does not have the power to directly affect title to land physically located in another state. However, “[a] court of equity, having authority to act upon the person, may indirectly act upon real estate in another state, through the instrumentality of this authority over the person.” Fall v. Eastin (1909) 215 U.S. 1 at 8, 30 S.Ct. 3, 54 L.Ed. 65 (Emphasis supplied) [sic]. “The court's decree does not operate directly upon the property or affect its title, but is made effectual through coercion of the defendant.” Groza-Vance v. Vance, 834 NE.2d 15 (Ohio App.2005) citing Fall at 10, 11 supra. See also MDO Development corporation v. Kelly, 735 F.Supp 591 (S.D.N.Y.1990)....

Counsel for the Defendant has raised the “local action rule.” Under such rule, “... court may not exercise in rem jurisdiction over property located outside its geographical territory.” Bauman v. Rayburn, 878 So.2d 1273 (Fla. 5th DCA 2004) (Emphasis in the original] [sic]. However, as long as in personam jurisdiction exists, relief may be granted even if it might incidentally affect real property. Bauman at 1274. In that the California court in this matter had in personam jurisdiction, the local action rule would not apply for the relief sought and subsequently obtained in this matter. See also Gardiner v. Gardiner, 705 So.2d 1018 (Fla. 5th DCA 1998).

While “... jurisdictional authority exists over the property only in the circuit where the land is situated,” this rule does not apply where a party, “... [seeks] equitable relief alleging, inter alia, resulting and constructive trust claims....” Ruth v. Department of Legal Affairs, 684 So.2d 181, 186 (Fla.1996). “The court's in personam jurisdiction alone provides the court with authority to determine the equitable rights of the parties.” Id. See also General Electric Capital Corporation v. Advance Petroleum, Inc., d/b/a World Fuel Services of Florida and World Fuel Services, 660 So.2d 1139 (Fla. 3d DCA 1995) [In personam jurisdiction comports with the mandates of the Federal and Florida Due Process Clause.]

(Emphasis in original). We agree with the trial judge's analysis.

Was Florida's homestead creditor protection pierced? Probably NOT

As I've written before, under Florida law the circumstances permitting the imposition of an equitable lien on homestead property are extremely narrow [click here, here]. Apparently hoping to avoid getting sucked into the twilight zone that is Florida homestead jurisprudence, the trial court attempted to punt on this issue as follows:

The trial court went on to note:

Defendant has also raised the issue of her homestead status of the Florida property. Here, the property is not being conveyed or the title changed or transferred. No change in legal ownership has been ordered. A constructive trust has been established by the California court and the legal document so establishing the constructive trust is being filed in the Florida courts. Homestead is not a matter before the Court at this point.[FN 1]

[FN 1]. It may be that at a later point when, and if, there is an attempt to convey the property an issue may arise as to the validity of the Homestead status based, in part, on the source of the funds used to purchase the property. LaBelle v. LeBelle, [sic] 624 So.2d 741 (Fla. 5th DCA 1993) [.] That issue is one for another day and another court.

Nice try, but no cigar. The 5th DCA remanded the case back to the trial court to decide the homestead issue:

We believe that the homestead issue raised in Ann's declaratory judgment count was properly before the court. The domesticated California judgment is creating homestead issues which the trial judge needs to resolve. We therefore remand for a judicial determination of homestead status and the legal effect, if any, of the California judgment on Ann's property.

• Email This
• Print
• Comments
• Trackbacks

Jonathan Klick of the Florida State University College of Law and Robert H. Sitkoff of Harvard Law School just published an outstanding article entitled Agency Costs, Charitable Trusts, and Corporate Control: Evidence from Hershey's Kiss-Off.  What this article does well is "crunch the numbers" to answer the sort of open-ended question trusts-and-estates litigators face all the time:

Is a particular investment strategy in the "best interests" of the trust's beneficiaries?

Crunching the Numbers:

Being non-math types, lawyers and judges often shy away from the type of quantitative, objectively-verifiable, empirical analyses employed in this article. Whether you agree or disagree with the findings, the value of this approach to any contested trust proceeding should be self evident.  Rather than relying on the judge's gut to figure out if a "prudent investor" would invest trust assets in a certain way under the terms of a specific trust agreement within the context of a specific class of trust beneficiaries, hire a finance whiz to crunch the numbers and demonstrate, in an objectively-verifiable and quantitative manner, which option results in the best overall economic benefit for the trust's beneficiaries. Once the legal wrangling over how to define the operative terms is done, everyone should step back and let the finance gurus quantitatively fill in the blanks.

Trustees Lose PR Battle:

The controversy surrounding the Hershey School Trust's decision to diversify its trust holdings by attempting to sell its controlling stake in the Hershey Company (thus potentially putting a lot of people in Hershey, Pennsylvania out of work) and subsequently backing out of the deal (thus depriving the trust's beneficiaries of a control-premium windfall profit estimated to be as high as $1 billion) is often cited as a terrible example of "politics" trumping sound sound fiduciary decision making.  For more on the political back-story of this case read The Hershey Power Play in Trusts & Estates Magazine by Pennsylvania attorney Christopher H. Gadsden, and Daniel Gross's piece in Slate entitled Hershey Barred, whose subtitle says it all: How Pennsylvania officials screwed poor kids out of $1 billion by stopping the sale of the candy-maker.

However, blaming the politicians is way too easy. They were (not surprisingly) simply responding to legitimate concerns raised by their constituents. The board of directors of the Hershey School Trust deserves equal blame.  The general public holds non-profit entities to a higher civic standard than for-profit companies, which means trustees of high-profile charitable trusts need to address any potential contested proceeding with two sets of professionals: lawyers and litigation-public-relations experts [click here, here].  It's obvious the board of directors of the Hershey School Trust was blindsided by the "politics" of this deal, and bungled it terribly  .  .  .  to the detriment of the poor children they have a fiduciary duty to serve.

If someone from the trust's board of directors had reached out to the key political players from the start, involved local civic groups in the decision-making process, and preempted any local bad press with a smart PR campaign using quantitatively-verifiable facts developed using the analytical tools employed in the linked-to law review article, the end result might have been very different.  For example, if the Hershey School Trust's upside from the deal was going to be around $1 billion, its board of directors could have easily set aside $100 million (or some other mind boggling large figure) for worker retraining, community redevelopment, generous termination packages for all fired employees (not just the top brass), etc. The trustees would have come out looking like heroes, and still vastly improved the economic well-being of trust's beneficiaries. That would have been a good deal for everyone.

Blogging credit:

Credit goes to the Wills, Trusts & Estates Prof Blog for bringing the linked-to law review article to my attention in this blog post.

• Email This
• Print
• Comments (2)
• Trackbacks (1)

Klem v. Espejo-Norton, --- So.2d ----, 2008 WL 2511276 (Fla. 3d DCA Jun 25, 2008)

What do you do if an heir shows up after the probate proceeding has been closed? You can try to reopen the estate under F.S. 733.903.  But what if that doesn't work, then what? The 3d DCA answers that question in this case by first suggesting that the plaintiff pursue a "constructive trust" theory, then explaining the quasi in rem jurisdictional basis for this type of claim.

Constructive Trust

The linked-to opinion is actually the second time this case has come before the 3d DCA.  In the first appeal the 3d DCA affirmed a probate court's order refusing to reopen a probate proceeding so that a newly-discovered heir could claim her share of the estate. But in a specially concurring opinion the court suggested that the "lost heir" sue for her share of the estate's assets under a constructive trust theory.  Here's an excerpt from the first appellate opinion in this case, Espejo-Norton v. Estate of Merry, 869 So.2d 1255 (Fla. 3d DCA 2004), where the court explained the constructive trust theory:

This is a fascinating case in which one of the two goddaughters who were the named residual devisees of the testatrix's $400,000.00-plus estate turned up several years after the estate had been closed, after she had quite erroneously been declared dead by the circuit court, and after all the proceeds had been distributed to the other devisee. Because, insofar as the record shows, diligent, although futile, efforts had been expended to find her, I must agree with affirmance of the order before us denying her motion to reopen the estate.

It should be pointed out, however, a separate action may now be successfully maintained against the other devisee to impose a constructive trust upon the half of the estate that that devisee received, but which in law and equity belongs to the appellant. As the Restatement says:

§ 126. Rights of Intended Payee or Grantee. Business Transaction.

(1) Where a person has paid money or transferred property to another in the erroneous belief, induced by a mistake of fact, that he owed a duty to the other so to do, whereas such duty was owed to a third person, the transferee, unless a bona fide purchaser, is under a duty of restitution to the third party.

* * *

Illustrations:

2. A, administrator of B's estate, pays money out of the assets of the estate to C, B's brother, whom both A and C believe to be B's sole relative. Later D, B's son and next of kin, believed to be dead, appears. D is entitled to restitution from C. (e.s.)

Quasi in Rem Jurisdiction

Based on the 3d DCA's friendly advice in the first appeal, the plaintiff, a California resident, sued the defendant, a Maryland resident, in a Miami-Dade County court house seeking to impose a constructive trust on a brokerage account in Broward County, which is where some of the subject probate funds had been deposited.  Obviously the Miami court didn't have in personam jurisdiction over the California defendant, and the court didn't have general in rem jurisdiction over the estate assets because the estate had already been closed.  What the Florida court did have was quasi in rem jurisdiction over the brokerage account. Confused yet?

Reading the 3d DCA's linked-to opinion wont exactly clarify things for you. It's basically a series of long string cites and close to zero discussion by the 3d DCA of the point it was trying to make. If you're ever confronted with a quasi in rem issue in the future take the time to read a March 2008 Florida Bar Journal article cited by the 3d DCA in its opinion entitled Florida's Third Species of Jurisdiction. Written by Tampa trial judge Scott Stephens, this article does an excellent job of actually explaining why the 3d DCA ruled the right way in this case.

The logic underlying the 3d DCA's ruling on the quasi in rem issue in this case can be broken down as follows:

1. A Florida circuit court has authority over any person or item of property located anywhere in the state of Florida. In other words, a circuit court in Key West has jurisdictional authority to enter a judgment determining ownership of a bank account located in Key West, or "next door" in Miami, or across the state in Pensacola.
   
2. The phrase "territorial jurisdiction" is used as a stand in for the word venue in quasi-in-rem cases. Which means just like with venue, you can waive an objection to territorial-jurisdiction if not properly asserted at the beginning of your case. But just because your case may end up getting litigated in the wrong venue/territory somewhere within the State of Florida, doesn't mean your Miami-Dade County judge lacks "jurisdictional" authority to enter a judgment affecting a bank account in Broward County.
   
3. What's confusing about all this is the use of the same word "jurisdiction" to mean different things within a single case. This is the key point made by Judge Stephens in his exceptional Florida Bar Journal article.

Here's how the 3d DCA "explained" the territorial-jurisdiction point in the linked-to opinion:

As Escudero indicates, the fact that the res in question is not within the Eleventh Circuit makes no difference. This is because the issue, properly considered, is not one of subject matter jurisdiction, which may not be waived. . . . Rather, it involves a question of “territorial jurisdiction,” as it is sometimes called in this context, which may be waived by a failure properly to assert it below, as it was in this case.

Bonus material:

Judge Stephens provides the following factoids in footnote 1 to his article:

A sample of 7,490 district court of appeal cases using the term “jurisdiction” was taken through Lexis-Nexis on August 10, 2007. Cases using the term “subject matter jurisdiction” were counted separately, as were cases using one of several variants of personal or in personam jurisdiction.  .  .  .  The various subspecies of subject matter and personal jurisdiction collectively add up to less than one percent of the appearances of “jurisdiction” in the district court of appeal cases: pendent jurisdiction, three cases; ancillary, one; in rem, 43; quasi-in-rem, six.

If only 6 appellate decisions out of 7,490 mention the phrase "quasi in rem jurisdiction" (less than one-tenth of 1%), is it any wonder these sorts of questions make most lawyers break out in hives?

• Email This
• Print
• Comments
• Trackbacks (1)

Hoegh v. Estate of Johnson, --- So.2d ----, 2008 WL 2605068 (Fla.App. 5 Dist. Jul 03, 2008)

In this case there's no question whom the courts considered to be the villain of the story.

According to the trial court Hoegh, the appellant and pro se litigant, attempted to "perpetrate a fraud on the court" by knowingly seeking to have a forged will admitted to probate. According to the 5th DCA, Hoegh didn't do herself any favors on appeal, acting in "bad faith" because her appeal failed to raise any justiciable issue of law. And just to make sure everyone got the point, the 5th DCA charged the estate's reasonable appellate attorney's fees against Hoegh through application of the "inequitable conduct" doctrine.

So far so good for the estate.  But then the 5th DCA reversed the trial court's award of $37,125 in appellate fees, loping off $15,125 of the trial court's original fee award (a 41% reduction)!! So what happened? Sometimes a slam dunk can work against you. On appeal the court asked why the estate was claiming 135 hours worth of attorney time (over three weeks of full-time labor) on an appeal that was baseless? Apparently the estate couldn't come up with a convincing answer.

Notwithstanding Hoegh's misconduct, the estate is only entitled to recover reasonable appellate attorney's fees. Here, pursuant to Florida Rule of Appellate Procedure 9.400(c), Hoegh has filed a motion to review the trial court's award of $37,125 for appellate attorney's fees. (It appears that the trial court's award of $37,125 was based on multiplying 135 hours by an hourly rate of $275 .) She contends that this award was excessive. We agree.

The amount of appellate attorney's fees awarded by a trial court is reviewed by an abuse of discretion standard. Pellar v. Granger Asphalt Paving, Inc., 687 So.2d 282, 284 (Fla. 1st DCA 1997). However, an appellate court has a greater ability to review the reasonableness of an appellate attorney's fee award than an award for trial court work because the legal work was done in the appellate court. Id. at 285; see also G.H. Johnson Const. Co. v. A.P.G. Elec., Inc., 656 So.2d 566 (Fla. 2d DCA 1995); Dalia v. Alvarez, 605 So.2d 1282 (Fla. 3d DCA 1992). As previously noted, Hoegh did not raise any justiciable issue of law in her appeal. No oral argument was held. The primary issue presented to us was whether there was substantial competent evidence to support the trial court's decision. We find no error in the trial court's determination that $275 per hour was a reasonable rate for the estate's attorneys. However, after a thorough review of the record, we find that it was an abuse of discretion to find that more than 80 hours of attorney time was reasonably necessary for this appeal. Accordingly, we reverse the trial court's award of appellate attorney's fees and remand for entry of an order awarding the estate appellate attorney's fees of $22,000.

• Email This
• Print
• Comments (3)
• Trackbacks

Staup v. Wachovia Bank, N.A., Slip Copy, 2008 WL 2598005 (S.D.Fla. Jun 27, 2008)

The substantive issue in this case is pretty simple: if you lose in state court, you don't get another bite at the apple by simply re-filing your same case in federal court. More technically speaking the plaintiff's lawsuit was dismissed under the Rooker-Feldman doctrine, which I recently wrote about here in connection with a contested guardianship proceeding.

Poster child for mandatory arbitration clauses:

When you read the background facts of this case, the substantive ruling becomes almost meaningless. This opinion is just that last stop for a litigation train involving this trust that has been rolling along for over 10 years! A mandatory arbitration clause in the trust agreement, as expressly authorized by F.S. 731.401 [click here for form clauses], wouldn't have eliminated all of the litigation involving this trust, but I'm sure it would have dramatically reduced its scope and cost. Here's how the court described the "back-story" on this case:

By way of background, Plaintiff filed more than thirty state court actions dating as far back as 1996 with the same operative facts in Circuit Court in and for Sarasota County Florida. That court found it necessary to order a permanent injunction restricting Plaintiff from filing civil actions relating to cases involving the Mary Staup Estate in the state of Florida. Additionally, Plaintiff has filed at least eight federal court lawsuits on similar operative facts in the Middle District of Florida. Each of these lawsuits was dismissed for lack of subject matter jurisdiction under the Rooker-Feldman doctrine.

Note to estate planners: include mandatory arbitration clauses in your trust agreements.

The Rooker-Feldman doctrine:

Here's how the court explained its application of the Rooker-Feldman doctrine to this case:

Next, Defendant argues the Rooker-Feldman doctrine bars the Court from having jurisdiction over Counts I and II, as a state court previously rendered judgments for the claims raised in these two counts. Plaintiff responds by concluding that the underlying state court judgment is void, resulting in the Rooker-Feldman doctrine being inapplicable. Plaintiff goes on to acknowledge that although the claims in Counts I and II have previously been litigated, he has never plead the postal service fraud count. (Plaintiff's Response [DE 20], p. 7.)

The Rooker-Feldman doctrine provides that no federal courts, other than the United States Supreme Court, have the authority to review final judgments of state courts. Goodman v. Sipos, 259 F .3d 1327, 1332 (11th Cir.2001). This doctrine encompasses claims that are “inextricably intertwined” with a state court judgment. Id. The Rooker-Feldman doctrine applies to “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the federal district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon Mobile Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 281 (2005).

Essentially, Plaintiff is asking the Court to invalidate the state court actions by ruling that the state court judgment is void. Additionally, the postal fraud claim has been dismissed, making this action identical to the previous state court claim. Accordingly, this Court lacks subject matter jurisdiction, as Plaintiff seeks a de facto appeal of a previously litigated state court matter. Defendant's Motion to Dismiss as to Count I and II of the Complaint will be granted.

• Email This
• Print
• Comments
• Trackbacks (1)

Julia v. Russo, --- So.2d ----, 2008 WL 2596324 (Fla. 4th DCA Jul 02, 2008)

The 4th DCA reversed itself on an important point involving joint bank accounts, withdrawing this opinion and replacing it with the linked-to opinion above. The issue on rehearing was a simple evidentiary burden-shifting question:

If a decedent funded a bank account 100% with his own funds, then put his girlfriend's name on the account, does the girlfriend have to prove the decedent intended to make a gift to her of a 50% interest in the account, or does the decedent's estate have to prove that the decedent did NOT intended to make this gift?

The first time around, relying on two divorce cases to resolve this probate dispute (??!!), the 4th DCA said girlfriend bore the burden of proof.  Girlfriend filed a motion for rehearing, took another crack at the issue . . . and won!  On rehearing the 4th DCA completely reversed its prior ruling. This time around the 4th DCA sided with the girlfriend, shifting the burden of proof over on to the estate.

The next time your involved in litigation involving a joint bank account owned by tenants in common, take another look at this case. Unless the facts are a slam dunk for one side or the other, who bears the burden of proof will probably by the single most important factor in determining who wins or loses the case. That's usually the sort of thing you want to know up front, not once you're six months into the case and going down in a ball of flames.

Here's how the 4th DCA articulated the rule:

On appeal, appellant argues that the trial court erred in finding that there was no presumption of a gift of personal property because Florida law provides that when a joint bank account is created with the funds of one person, there is a presumption of a gift to the other person which may be rebutted only by clear and convincing evidence to the contrary. We agree.

Initially, the trial court's reliance on Crouch and Grieco is misplaced. Both Grieco and Crouch were decisions which addressed the issue of whether certain assets were marital or nonmarital under section 61.075(5), Florida Statutes (2005). The principles involved in that determination are inapplicable here.

The issue here is how to determine what share a tenant in common is entitled to. “In absence of evidence to the contrary, co-tenants are presumed to owe [sic] equal undivided interests. Levy v. Docktor, 185 B.R. 378, 381 (S.D.Fla.1995). “[U]pon the death of a cotenant, the deceased cotenant's interest in the property subject to the tenancy in common passes to his or her heirs, and not to the surviving cotenant.” 12 Fla. Jur.2d Cotenancy and Partition § 4 (1998). See, e.g., Reinhardt v. Diedricks, 439 So.2d 936, 937 (Fla. 3d DCA 1983). Taking title to property in joint names creates a presumption of a gift which may be rebutted. Sullivan v. Am. Tel. & Tel. Co., 230 So.2d 18, 20 (Fla. 4th DCA 1969). See also O'Donnell v. Marks, 823 So.2d 197 (Fla. 4th DCA 2002) (taking title as tenants in common is an indication of an intention to make a beneficial gift of an undivided interest to the other party); Mercurio v. Urban, 552 So.2d 236 (Fla. 4th DCA 1989) (stocks owned as tenants in common entitles co-owner to presumption of gift).

The trial court did not apply the presumption of a gift in appellant's favor but instead erroneously required her to prove the decedent intended to make a gift. We therefore find it necessary to reverse and remand for the trial court to determine if there was clear and convincing evidence presented which rebutted the presumption of a gift.

• Email This
• Print
• Comments (3)
• Trackbacks

If you're representing a plaintiff in an undue-influence or testamentary-capacity case, one of your first challenges is mapping out the questions you'll be asking when you depose the lawyer who drafted the will or trust being challenged.  If you're representing the estate defending against this challenge, you'll want to know how best to build a deposition record that dissuades the challenger from proceeding with his or her case, or encourages an early settlement on favorable terms.  Why is the deposition so important? Because the vast majority of contested probate proceedings settle before trial, so your depositions may be the only "trial" you'll ever have, and will certainly tilt the negotiating leverage to one side or the other in any settlement negotiations.

And lest we forget our estate-planning brethren, if you're an estate planner and for some reason you believe the estate planning documents you're working on are likely to end up being challenged, then you'll want to be especially sure that [a] your client is competent and not the victim of undue influence and [b] that you build a record documenting your conclusions.

In all of these circumstances a good checklist of questions is worth its weight in gold.  And a good starting point for building this kind of checklist is a recent article in the American Journal of Psychiatry entitled Assessment of Testamentary Capacity and Vulnerability to Undue Influence, by Kenneth I. Shulman, M.D., F.R.C.P.C., Carole A. Cohen, M.D., F.R.C.P.C., Felice C. Kirsh, LL.B., Ian M. Hull, B.A., LL.B., and Pamela R. Champine, J.D., LL.M.  Here's an excerpt:

Documentation for Assessment of Testamentary Capacity and Undue Influence

In the absence of a validated assessment instrument, we propose that in addition to the traditional Banks v. Goodfellow criteria, the following issues should be addressed and documented in a forensic assessment, whether it is contemporaneous or retrospective:

1. Rationale for any dramatic changes or significant deviations from the pattern identified in prior wills or previous consistently expressed wishes regarding disposition of assets.
2. The appreciation of the consequences and impact of a particular distribution, especially if it deviates from or excludes "natural" beneficiaries, such as close family members or spouses.
3. Clarification of concerns about potential beneficiaries who are excluded from the will or bequeathed lower amounts than might have been expected—that is, ruling out the presence of a specific delusion or overvalued idea that influences the distribution.
4. Evidence of the presence of a specific neurologic or mental disorder that may affect cognition, judgment, or impulse control.
5. Evidence of behavioral disturbances or psychiatric symptoms at the time of the execution of a will, for example, behavioral and psychological symptoms of dementia such as agitation, impulsiveness, disinhibition, aggression, hallucination, and delusions.
6. The emotional/psychological milieu in which the testator lives, with specific reference to conflicts or tensions within the family, documenting the complexity and conflictual level of situation-specific factors.
7. The testator’s understanding and appreciation of any conflicts or tensions in his or her environment.
8. Evidence of a pathological or dependent relationship with a formal or informal caregiver, such as a younger woman who offers comfort and reassurance or plants seeds of suspiciousness toward family or friends.
9. Evidence of inconsistency in expressed wishes or an inability to communicate a clear, consistent wish with respect to the distribution of assets; for example, frequent will changes are sometimes made in a desperate attempt to garner care, support, or comfort at a time when the testator feels increasingly vulnerable or threatened.
10. Any of the indications of undue influence.

Specific questions posed to the testator may help in elucidating and probing the relationship between task-specific and situation-specific factors:

1. Can you tell me the reason(s) that you decided to make changes in your will?
2. Why did you decide to divide the estate in this particular fashion?
3. Do you understand how individual A might feel, having been excluded from the will or having been given a significantly less amount than previously expected or promised?
4. Do you understand the economic implications for individual B of this particular distribution in your will?
5. Can you tell me about the important relationships in your family and others close to you?
6. Can you describe the nature of any family or personal disputes or tensions that may have influenced your distribution of assets?

When a retrospective assessment is being conducted, assiduous review of medical records, examinations for discovery, and selective interviews of informants are needed to cast light on these issues.

Another excellent resource for those brave souls willing to delve into the murky waters of a testamentary-capacity lawsuit is a piece in the Journal of the American Academy of Psychiatry and the Law entitled Common Pitfalls in the Evaluation of Testamentary Capacity by Harvard Medical School Professor of Psychiatry Thomas G. Gutheil, MD.

Blogging credit:

Credit goes to Pennsylvania trusts and estates lawyer and expert witness Patti S. Spencer for bringing the linked-to articles to my attention in this post on her Pennsylvania Fiduciary Litigation Blog.

• Email This
• Print
• Comments
• Trackbacks

Mercurio v. Headrick, --- So.2d ----, 2008 WL 2434193 (Fla. 1st DCA Jun 18, 2008)

The finality of death is the sort of thing most people can figure out pretty much on their own. Unfortunately, once you walk into the alternate reality of litigation, just because your opponent is dead doesn't mean your case is over.  In the linked-to case the joint owners of a piece of property were suing each other for partition. The twist here is that they owned the property as joint tenants with right of survivorship.  So when one side died, "bingo" the survivor automatically owned the entire property, end of story, game over. Only problem is that the trial court didn't see it that way, so now we have an appellate decision that reiterates property law 101:

The trial court ordered the parties to mediation in September 2006, but they apparently did not reach an agreement over their lingering disputes before Mr. Headrick died in late October. Ms. Mercurio moved for summary judgment on the ground that the joint tenancy remained intact at Mr. Headrick's death, and that she was entitled to an undivided interest in the property as his joint tenant with a right of survivorship. Both the original judge and his successor judge denied Ms. Mercurio's motion, finding that Ms. Mercurio's admissions in her answer signified the parties' mutual intent to partition the property. The successor judge ultimately rendered a final order partitioning the property and directing the parties to sell it at a private sale. Ms. Mercurio appeals that order.

The question in this case is whether a pending action to partition a joint tenancy with right of survivorship survives one joint tenant's death. We hold that such an action does not survive the death of a joint tenant and, accordingly, absent a final judgment of partition at the tenant's death, the action is abated, because the surviving tenant receives full title to the property, consistent with the right of survivorship.

This issue is one of first impression in Florida. Other jurisdictions, however, have confronted the question, and we adopt their common approach which we find persuasive and logical.
.     .     .     .     .

This approach comports with the established and undisputed rule in Florida that only a complete, final conveyance or disposition of jointly held property severs a joint tenancy with right of survivorship.  .  .  .   This case, as many divorce cases, involves a dispute over the disposition of jointly held property. In the case of a joint tenancy, the death of one party resolves that dispute by operation of law.

• Email This
• Print
• Comments
• Trackbacks

Berkow v. Isaevna, --- So.2d ----, 2008 WL 2511272 (Fla. 3d DCA Jun 25, 2008)

Lest we forget, the 3d DCA reminds us all once again that a summary judgment hearing isn't a trial.

The Appellants, Counter-Petitioners in a dispute over an estate that has escheated to the State of Florida, appeal an order that denied their motion for summary judgment, granted the Appellees/Petitioners final summary judgment, and awarded Petitioners the escheated funds. We reverse.

The record demonstrates that there were genuine issues of material fact regarding whether the Appellees were legitimate heirs of the decedent. Hence, the court erred in granting summary judgment. Moore v. Morris, 475 So.2d 666 (Fla.1985); Copeland v. Fla. New Invs., Corp., 905 So.2d 979, 980 (Fla. 3d DCA 2005). The Appellants had presented affidavits asserting that all of the decedent's heirs above them in the statutory hierarchy had died, § 732.103, Fla. Stat. (2004), arguably entitling them to the funds. They had also presented affidavits challenging the legitimacy of the Appellees as heirs. These issues of fact cannot be resolved on summary judgment. Moreover, on summary judgment the court cannot weigh testimony or make factual findings. Deakter v. Menendez, 830 So.2d 124 (Fla. 3d DCA 2002). Therefore, the court erred in entering the orders on appeal here.

• Email This
• Print
• Comments
• Trackbacks

I've written before about the jurisdictional competition for trust funds, both within the U.S. among various states and internationally [click here].  Internationally, Switzerland has long relied on its reputation for banking secrecy (dating back to the Middle Ages) as a competitive advantage in this market [click here].

However, in a post 9/11 world financial transparency has become a national security issue [click here].  Which means jurisdictions like Switzerland, that sell their services in part on the assumption that government authorities in home-country jurisdictions will NOT be able to crack their veil of secrecy, are facing enormous pressure to open up.  The latest battle on this front was reported on today by the WSJ Law Blog in a post entitled: A Falling Shelter? DOJ Playing Hardball with UBS, Swiss Regulators.  Here's an excerpt from the WSJ Law Blog post with links to underlying source materials:

.  .  .  In an unprecedented move against a foreign bank, the DOJ is seeking to force UBS AG to turn over the names of wealthy U.S. clients who allegedly used the giant Swiss bank to avoid taxes [click here]. Here are stories from the WSJ’s Evan Perez and the NYT’s Lynnley Browning. [Click here, here, here for a copy of the government’s ex parte petition, a supporting memo of law, and exhibits, all seeking disclosure UBS bank records in Switzerland.]

In seeking a federal court order Monday, the Justice Department ratchets up the pressure in its high-profile case, which has spawned federal criminal and civil probes into the alleged tax evasion. The matter places UBS in a bind between U.S. tax authorities and a Swiss law that prevents banks from disclosing confidential information without client approval.

.     .     .     .     .

The Justice and Internal Revenue Service investigation has been aided by information from a former UBS banker, Bradley Birkenfeld, who pleaded guilty June 19 to helping his U.S. clients evade taxes. Birkenfeld told U.S. prosecutors that UBS holds an estimated $20 billion in assets for U.S. clients in undeclared accounts. These accounts generated $200 million a year in revenues for the bank, prosecutors said.

Switzerland's loss is Florida's gain:

Florida trust companies cannot compete with off-shore jurisdictions willing to protect banking clients from legitimate investigations by home-country authorities.  To the extent jurisdictions such as Switzerland are compelled to open up their banking records to legitimate investigations by government authorities - or face pariah status in world financial markets if they don't - that can only be a good thing for Florida trust companies.

• Email This
• Print
• Comments
• Trackbacks