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

In re Kurzon, 399 B.R. 274 (Bankr.M.D.Fla. Apr 17, 2008)

When it comes to enforcing money judgments: bankruptcy is the last refuge of a scoundrel. But if the particular scoundrel you're trying to track down is a former personal representative who's been surcharged by your probate judge, you can tell him to wipe that smirk off his face because "no", not even bankruptcy will save him now.

In the linked-to order the bankruptcy court ruled that a $60,000 money judgment previously entered against a Chapter 7 debtor in his capacity as personal representative of his late aunt's probate estate was NOT subject to discharge. Here's why:

The Plaintiff, to prevail on its 11 U.S.C. Section 523(a)(4) fraud or defalcation nondischargeability count, must establish by a preponderance of the evidence: (i) the Debtor was acting in a fiduciary capacity; and (ii) while acting in a fiduciary capacity, he committed fraud or defalcation. In re Goodwin, 355 B.R. 337, 343 (Bankr.M.D.Fla.2006). The fiduciary relationship must exist at the time the act creating the debt was committed. Guerra v. Fernandez-Rocha (In re Fernandez-Rocha), 451 F.3d 813, 817 (11th Cir.2006).

.     .     .     .     .

The Debtor was obligated to make distribution expeditiously to the Plaintiff, who was a beneficiary of the Will, pursuant to Florida Statute Section 733.602(1). The Probate Court found the Debtor failed to make distribution of $60,000.00 to the Plaintiff. He was removed as the Personal Representative as a result of such failing. His failure to make distribution to the Plaintiff of funds that were entrusted to him as the Personal Representative constitutes a defalcation of fiduciary duty. Fla. Stat. §§ 733.602(1), 733.608(1)(c), 733.609(1); Quaif, 4 F.3d at 955.

The Judgment is a final judgment on the merits rendered by a court of competent jurisdiction. The Judgment litigation and this adversary proceeding involve the same operative facts and the same parties. The Judgment issued by the Probate Court is binding in this proceeding pursuant to the doctrines of res judicata and collateral estoppel. The Judgment is entitled to preclusive effect and the Debtor is barred from challenging it. The Plaintiff has established the Judgment Debt is nondischargeable pursuant to 11 U.S.C. Section 523(a)(4).

The Plaintiff's documentary evidence, independently of the Judgment, establishes the Judgment Debt is nondischargeable pursuant to 11 U.S.C. Section 523(a)(4). The Debtor did not act in the best interests of the estate. He was required to keep the estate funds separate from his personal and business funds. Fla. Stat. § 733.602(1); Lahurd, 632 So.2d at 1104. He diverted all of the cash assets of the estate to his personal and business accounts, without the knowledge or the consent of the estate beneficiaries, and dissipated the funds for his own personal benefit. Such actions constitute defalcations of his fiduciary duty.

The Debtor concealed such diversion and dissipation through materially false and fraudulent accountings filed with the Probate Court. He failed to settle the estate and distribute the assets to the estate's beneficiaries and claimants. The Judgment Debt results from his improper conduct. The Judgment Debt is nondischargeable pursuant to 11 U.S.C. Section 523(a)(4). In re Valdes, 98 B.R. at 80.

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Especially in large or fairly complex estates or trusts, the ultimate value of your client's inheritance often depends in large part on how income and expense items are accounted for and allocated among the beneficiaries. Spotting these fiduciary accounting issues in advance (either as an estate planner or probate lawyer) is easier said than done.

One way to tackle that problem is to have a list of hot-button fiduciary accounting scenarios to be on the look out for. Which is exactly what William C. Carroll and John W. Randolph, Jr., deliver in an excellent article they published in this month's Florida Bar Journal. In Things That May Surprise You About Florida’s Principal and Income Act and Related Accounting Law, Part I, the authors explain how Florida's Principal and Income Act would apply (in often unexpected ways) in each of the following scenarios:

1. Specifically Devised Real Estate
2. Rental Real Estate
3. Distributions Received by a Private Trustee from Investment Entity and a Targeted Entity
4. Allocation of Receipts at Decedent’s Death
5. Death of an Income Beneficiary
6. Pecuniary Amounts

Here's an excerpt from the article's introduction:

In 2002, the Florida Legislature adopted the Florida Uniform Principal and Income Act, effective on January 1, 2003 (the act). The act, which is found in F.S. Ch. 738, is a modified version of the Uniform Principal and Income Act (1997) [click here]. The statutory sections of the act allocate trust and estate receipts and disbursements between income and principal. Additionally, the act contains provisions that allow a trustee to make adjustments between income and principal (§738.104) and to convert a trust to a unitrust (§738.1041). Sections 738.104 and 738.1041 are beyond the scope of this article.

It is significant to note that the statutory sections of the act are “default” sections, meaning that the provisions of Ch. 738 only apply if the terms of the trust or will do not contain a different provision or do not give the fiduciary a discretionary power of administration. It is critically important that attorneys practicing in the trusts and estates area have a working knowledge of the act. Through extensive examples, this two-part article will explore the inner workings of some of the more significant provisions of the act. These examples assume that the will or trust is silent as to allocating the receipt or disbursement at issue to either income or principal, and does not give the fiduciary a discretionary power of administration.

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Fintak v. Wachovia Bank, N.A., Slip Copy, 2009 WL 413599 (M.D.Fla. Feb 18, 2009)

Say you have a trust that owns two CDs that together are worth a little over $200,000 and Wachovia pays them out to one of your three co-trustees . . . and he runs off with the loot. Now assume the bank wasn't supposed to pay those CDs unless at least two of the co-trustees signed off on the transaction. Oops!!

Most of us - whether we represent the bank or the trust - would intuitively know there's a lawsuit lurking around in there somewhere, but actually formulating that lawsuit (or predicting what the claims will be if you're playing defense) is how lawyers add value. Once you know what the claims will be, both sides can evaluate the risks of winning/losing and negotiate a settlement  before a lot of money, time and effort is poured into pre-trial motion practice.

And that's where the linked-to order comes into play: we now have a battle-tested road map for evaluating this type of case. The plaintiffs in this case sued Wachovia on the following three grounds:

• conversion (Count I),
• breach of contract (Count II), and
• negligence (Count III)

Wachovia sought to dismiss the conversion and negligence counts . . .  and lost. Here's why the court said the claims stood.

Conversion:

In Count I, the plaintiffs allege that Wachovia is liable for [Wachovia's] conversion of the trust's funds in violation of Section 673.4021, Florida Statutes. (Doc. 2, ¶ 13) The defendant argues that the conversion claim fails because no conversion action arises from a mere obligation to pay money and because the plaintiffs “fail to describe with particularity any identified, specific money.” (Doc. 7 at 3) The statute provides:

The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment.

§ 673.4021, Fla. Stat . Under the Florida Commercial Code, a certificate of deposit is an “instrument.” See § 673.1041, Fla. Stat .

The plaintiffs allege that Wachovia converted the certificates of deposit by allowing Edmund Fintak to redeem the certificates without obtaining the signatures of two trustees. Construed most favorably to the plaintiffs, the allegations in the complaint establish that [Wachovia] permitted Edmund Fintak to redeem the certificates of deposit and that Edmund Fintak lacked the authority to receive payment without the signature of at least one more trustee. Accordingly, the motion to dismiss Count I is DENIED.

Negligence:

In Count III, the plaintiffs allege that [Wachovia] negligently failed to comply with the terms of the certification of trust. (Doc. 2, ¶¶ 22-29) Moving for dismissal of Count III, Wachovia argues that the economic loss rule bars the plaintiffs' negligence claim. However, the economic loss rule primarily applies “to limit actions in the product liability context.” See Moransais v. Heathman, 744 So.2d 973, 983 (Fla.1999); Ron's Quality Towing, Inc. v. Se. Bank of Fla., 765 So.2d 134, 136-37 (tort claims against bank not barred by the economic loss rule). Wachovia fails to show that the economic loss rule bars the plaintiffs' negligence claim. See Fed. Ins. Co. v. NCNB Nat'l Bank of N.C., 958 F.2d 1544, 1546 (11th Cir.1992) (applying Florida law and recognizing a negligence action against a bank for bank's failing to obtain two hand signatures before paying on corporate checks). Accordingly, Wachovia's motion to dismiss Count III is DENIED.

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Morris v. Knight, --- So.2d ----, 2009 WL 321586 (Fla. 4th DCA Feb 11, 2009)

Trial Judge's Power in Guardianship Proceedings:

Florida probate judges get a huge amount of deference when deciding whom to appoint as guardian. So if your client is on the losing end of an order appointing someone else guardian, an appeal is probably a waste of money. Here's how this point was made in the linked-to opinion:

 The standard of review here is abuse of discretion. In re Guardianship of Sitter, 779 So.2d 346 (Fla. 2d DCA 2000). The appointment of guardian is a discretionary act of the trial court, which must be supported by logic and justification and founded on substantial competent evidence. Id. at 348. The trial court's decision should be reviewed for reasonableness. Id. And the appellate court should not find an abuse of discretion unless “no reasonable person would take the view adopted by the trial court.” Wilson v. Robinson, 917 So.2d 312 (Fla. 5th DCA 2005).

Bottom line, figure your client has only one real shot in this type of case. Don't count on an appellate court second guessing your judge.

Family Preference in Guardianship Proceedings:

Once your client realizes that yes, what your probate judge thinks really matters, and no, an appeal is probably not a good idea, then hopefully everyone will focus on what's most important: the ward's best interests. It doesn't matter if your client is related to the ward [click here] or if the ward executed a pre-need guardian declaration naming your client his or her guardian [click here], if the judge decides it's in the ward's best interests to appoint someone else as guardian, that's probably the end of the story. Here's how the 4th DCA made this point:

Under [F.S. § 744.312], “a person who is related by blood or marriage to the ward” does receive preference in appointment; however, the inquiry does not end there. The court also has the discretion to give preference to a non-relative who possesses particular experience or ability to serve as guardian. See, e.g., Treloar v. Smith, 791 So.2d 1195 (Fla. 5th DCA 2001) (finding that while next of kin are given first consideration, statute does not mandatorily require that such an appointment be made; rather, statute specifically provides that court may appoint any person who is qualified, whether related to the ward or not). Moreover, it is the best interest of the ward that trumps other considerations in the appointment of a guardian. See, e.g., In re Guardianship of Stephens, 965 So.2d at 852 (“The best interests of the Ward-which include choosing a qualified guardian for the Ward-come first. Family member preference in and of itself is secondary, regardless of how well qualified the family members are.”).

In this case, Morris and Glinton argue that they are better fit than Knight to serve Barker's interests because they plan to move her to a better nursing home. Even setting aside the trial court's finding that both Morris and Glinton are unfit to become Barker's guardian, they have not demonstrated how simply moving Barker from one facility to another would best serve her interests. Morris and Glinton have maintained minimal involvement in Barker's care, whether family or not, and they are not now in the position to serve Barker's best interests, whether family or not. It is thus our view that the trial court was reasonable in concluding that Barker's care and interests would be best left up to Knight. See In re Guardianship of Stephens, 965 So.2d 847, 849 (Fla. 2d DCA 2007) (finding that as long as the record contained competent evidence to support the trial court's decision to appoint a non-relative as guardian, there is no abuse of discretion).

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Texas probate litigator J. Michael Young wrote here on his Texas Probate Litigation Blog about a recently published AARP research piece entitled Power of Attorney Abuse: What States Can Do About It. Here's an excerpt:

The primary goal of this report is to inform state legislators, policymakers, practitioners, and advocates about the [Uniform Power of Attorney Act (UPOAA), click here]. provisions that protect against POA abuse and promote autonomy, and to support enactment efforts within the states. The secondary goal is to offer legal professionals information about their own state's law and the laws of other states. The latter information may foster inclusion of additional protections in the POA those professionals draft for clients, as well as inform advocacy efforts by the-state bar association or other organizations.

Toward those goals, this report highlights the problem of PO A abuse, explains why the UPOAA was developed, and identifies and discusses the UPOAA provisions related to protecting against POA abuse and promoting autonomy. It provides a series of charts that compare the state POA laws in effect on December 31, 2007, to each relevant provision of the UPOAA, as well as a master chart for all provisions. Finally, the report's appendixes include tips for advocates who desire to promote adoption of the UPOAA provisions in their state, a document titled "Why States Should Adopt the Uniform Power of Attorney Act (2006)," and a chart of citations to state POA laws.

Last year the UPOAA reporter, Prof. Linda Whitton of Valparaiso University - Law School, published an excellent article discussing the perceived shortcomings of current power-of-attorney statutes and how the UPOAA addresses those issues. Entitled The New Uniform Power of Attorney Act: Balancing Protection of the Principal, the Agent, and Third Persons, it's another solid resource for anyone working on a particularly thorny power-of-attorney matter.

Why read this stuff? Issue spotting, issue spotting, issue spotting . . .

It doesn't matter if you're an estate planner or probate litigator, spotting the issues most relevant to your client's interests is how we really add value as lawyers. The linked-to materials highlight the planning and litigation issues to think about in connection with powers of attorney, be it up front in the planning stage or at the back end when fraud or abuse is detected.

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Estate of Shefner v. Shefner-Holden, --- So.2d ----, 2009 WL 322153 (Fla. 3d DCA Feb 11, 2009)

When is probate litigation a compensable "service" to the estate?

There were two issues at play in the linked-to opinion. One was whether the PR's were entitled to payment of their attorneys fees after successfully defending against a claim that F.S. 732.802 (Florida's Slayer Statute) precluded them from inheriting under their father's will because they assisted in his suicide. (By the way, I previously wrote here about a similar assisted-suicide/Slayer Statute case out of Wisconsin . . . the plaintiffs lost that one too.)

As is always the case in this type of fee dispute, the question was whether this litigation "rendered services" to the estate [click here]. According to the 3d DCA the answer was . . . yes. Here's why:

In probate matters, section 733.106, Florida Statutes (2003), controls the question of attorney's fees. Subsection (3) states: “Any attorney who has rendered services to an estate may be awarded reasonable compensation from the estate.” An attorney may render services to an estate by: (1) bringing about an enhancement in value or an increase in estate assets, or (2) actions which establish and effectuate the decedent's testamentary intent. See, e.g., Estate of Brock v. Brock, 695 So.2d 714 (Fla. 1st DCA 1996); Segal v. Levine, 489 So.2d 868 (Fla. 3d DCA 1986); In re Estate of Lewis, 442 So.2d 290 (Fla. 4th DCA 1983).

.  .  .  .  .

[A]s a result of Deborah and Frank's defense of the Slayer Statute claim, the terms of the decedent's will were upheld. Thus, under section 733.106(3), Deborah and Frank are entitled to reimbursement of the attorney's fees and expenses for defending the claim. We, therefore, reverse the order denying attorney's fees. 

But can you dip into the homestead sales proceeds to pay the lawyers?

The second issue decided by the 3d DCA was whether the following clause in the decedent's will was the equivalent of a direction that the homestead property be sold and distributed to his heirs (thus stripping the sales proceeds of their creditor-protected status) or a devise of homestead property that was subsequently sold (thus preserving the creditor-protected status of the sales proceeds):

“I give my son, FRANK SHEFNER, JR. my house at 3420 SW 2nd Street, Miami, Florida. If and when the house is sold by my son, he will divide the proceeds equally among my children. My son is not to be forced to sell the house against his will.”

According to the 3d DCA, this was a devise of homestead property, so when Frank subsequently sold the house and split the proceeds with his siblings, the funds retained their creditor-protected status and were thus NOT subject to court ordered payment of probate-related attorneys fees.

It is well settled that homestead property devised to an heir is protected from forced sale to pay creditors' claims of the decedent and administrative expenses of the estate under Article X, Section 4 of Florida's Constitution. See, e.g., Pub. Health Trust of Dade County v. Lopez, 531 So.2d 946 (Fla.1988); Engelke v. Engelke, 921 So.2d 693 (Fla. 4th DCA 2006); Thompson v. Laney, 766 So.2d 1087 (Fla. 3d DCA 2000). Heirs are those persons entitled to receive property under the laws of intestacy. §§ 731.201(18), 732.103(1), Fla. Stat. (2003); Snyder v. Davis, 699 So.2d 999, 1003 (Fla.1997). Thus, when devised to a qualified heir, decedent's homestead property is not distributed as part of the decedent's estate, and passes directly to the designated heir. See McKean v. Warburton, 919 So.2d 341, 347 (Fla.2005); Estate of Hamel v. Parker, 821 So.2d 1276, 1280 (Fla. 2d DCA 2002).

The heir's sale of the property, after the decedent's death, does not change the legal consequences of the bequest from the decedent to the heir. After the decedent's death, the heir has legal ownership of the property, and he or she may sell it without regard to decedent's creditors or administrative expenses. See Thompson, 766 So.2d at 1088 (concluding that heir, to whom decedent's residence was devised, “was entitled to sell the homestead property ... and keep the proceeds of the sale); Estate of Tudhope v. Rudkin, 595 So.2d 312 (Fla. 2d DCA 1992) (holding that proceeds derived from sale of decedent's homestead property directly devised to decedent's minor children could not be reached by decedent's creditors).

When a testator directs that his or her homestead be sold and the proceeds distributed to devisees, the property loses its constitutional protection. In such cases, the decedent is devising money, not homestead property, and the proceeds may be subject to the claims of decedent's creditors and administrative expenses. Knadle v. Estate of Knadle, 686 So.2d 631, 632 (Fla. 1st DCA 1996) (finding that because decedent specifically directed that her homestead be sold and distributed as part of her residue estate, proceeds became subject to the claim of decedent's creditor); Elmowitz v. Estate of Zimmerman, 647 So.2d 1064, 1065 (Fla. 3d DCA 1994) (stating that homestead property devised to trust in favor of decedent's sister and two sons “lost its homestead status and became merely another asset of the trust”).

Here, Frank is a qualified heir, and the decedent's will directed that Frank not be forced to sell the house. Therefore, the homestead property passed directly to Frank, and never became a part of decedent's probate estate. Because the property was not a part of decedent's probate estate, the trial court properly concluded that the proceeds from the subsequent sale of the property could not be used to pay creditors' claims or administrative expenses of the estate.

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Crescenze v. Bothe, --- So.2d ----, 2009 WL 284858 (Fla. 2d DCA Feb 04, 2009)

Trust beneficiaries can avoid being sidelined in litigation involving their trusts by moving to "intervene" in the case under Civ.P. Rule 1.230. Here's what the rule says:

Anyone claiming an interest in pending litigation may at any time be permitted to assert a right by intervention, but the intervention shall be in subordination to, and in recognition of, the propriety of the main proceeding, unless otherwise ordered by the court in its discretion.

As I've previously written, if a trust beneficiary doesn't intervene in the case he or she will probably be stuck with the outcome [click here].

In the linked-to case the trust beneficiary did exactly what she was supposed to do, she filed a motion seeking to intervene in litigation involving her trust. The probate court denied her motion based on what most of us would say was an "unorthodox" reading of Florida's probate code (proving once again that no matter how right you may be on the law, you can never predict with absolute certainty what will happen once you step through those courtroom doors). Here's how the 2d DCA explained its rationale for reversing the probate court's order:

On appeal, Crescenze argues that the circuit court erred in denying her motion to intervene. We agree. Crescenze is a beneficiary of the trust, and “Florida has long followed the rule that the beneficiaries of a trust are indispensable parties to a suit having the termination of the beneficiaries' interest as its ultimate goal.” Fulmer v. N. Cent. Bank, 386 So.2d 856, 858 (Fla. 2d DCA 1980) (citing Byers v. Beddow, 142 So. 894, 896 (Fla.1932), which held that a court called upon “to dissolve or terminate a trust ... must decline to act when there are, or may be, persons interested in the trust who are not before the court”). “Indispensable parties are necessary parties so essential to a suit that no final decision can be rendered without their joinder.” Sudhoff v. Fed. Nat'l Mortgage Ass'n, 942 So.2d 425, 427 (Fla. 5th DCA 2006).

Because Crescenze is a beneficiary of the trust and therefore an indispensable party to the action seeking to terminate or revoke the trust, we reverse the circuit court's order denying Crescenze's motion to intervene and remand for further proceedings consistent with this opinion.

The circuit court concluded that Crescenze's request to intervene was barred because it was not filed prior to the expiration of the two-year statute of limitations set forth in section 733.710(1), Florida Statutes (2005). However, it is clear from the language of the statute and its place in chapter 733 of the Probate Code that section 733.710(1) applies exclusively to claims against an estate in a probate proceeding and has no application in a civil action to terminate a trust. See also Henry P. Trawick, Jr., Trawick's Redfearn Wills and Administration in Florida § 2:11 (2008-09 ed.) (recognizing that “[s]everal statutes of limitation apply only to probate matters” and discussing section 733.710).

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Chicago-area probate lawyer Joel A. Schoenmeyer wrote here on his Death and Taxes Blog about an article discussing why even probate lawyers feel the heat as our economy continues its downward spiral: Tough times making even probate practice riskier.  One particular risk the linked-to article points out is worth focusing on:

Before the bottom started falling out of the real estate market, a probate lawyer who was dilatory in dealing with an estate could point to the fact that the property had increased in value while he fiddled. Not any more. In some cases, property values are fluctuating tens of thousands of dollars in a month. Beneficiaries do not take kindly to seeing their nest egg evaporating in plain sight. While the estate’s lawyer can’t determine when a property will sell or for what price, he does have some say over when it gets on the market, and the sooner the better, according to White, who is based about 400 kilometres northeast of Vancouver.

And if you think estate beneficiaries won't sue over plunging values, think again. Back in 2006 I wrote here about a New Hampshire priest serving as executor of an estate who was tagged with a $1,256,000 surcharge judgment after the estate's stock portfolio dropped in value from $6.5 million to $500,000 on his watch. And guess who the priest sued for malpractice? Who else, his probate lawyer.

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I don't know of a better way to quickly get your arms around the hot-button issues driving today's estate-tax planning world [and current reform proposals, click here] than the three white papers listed below, all of which were prepared and published by the Joint Committee on Taxation, a nonpartisan committee of the United States Congress. These papers do a good job of explaining highly technical estate tax issues in clear, easy to understand prose that even a U.S. senator can understand.

Taxation of Wealth Transfers Within a Family: A Discussion of Selected Areas for Possible Reform (JCX-23-08), April 2, 2008.

This paper is divided into two parts. The first part describes a prominent feature of the current Federal estate and gift tax system, the partially unified credit against estate and gift tax, and evaluates two possible reforms to that credit. One possible reform to present law’s partially unified credit would be to make the credit fully unified. A second possible reform to the unified credit, referred to as portability, would allow a surviving spouse to benefit from unused exemption amount of the first spouse to die. The second part of this document sets forth a discussion of liquidity to pay estate tax when estates consist largely of farms or other businesses.

Description and Analysis of Alternative Wealth Transfer Tax Systems (JCX-22-08), March 10, 2008.

This paper addresses broad design issues such as rates, exemption amounts, the treatment of farms and family businesses, and alternatives to the present estate and gift tax system. These alternatives include an inheritance tax, an income inclusion approach (under which gifts and bequests are included in the income of the recipient), and a deemed realization system (under which a gratuitous transfer is treated as a realization event and the transferor is taxed on any gain in the property transferred, generally at rates applicable to capital gains).

History, Present Law, and Analysis of the Federal Wealth Transfer Tax System (JCX-108-07), November 13, 2007.

This paper describes the history of the U.S. Federal estate and gift tax system, summarizes the present estate and gift tax rules, and sets forth data and an economic analysis related to wealth transfer taxation.

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Hays v. Lawrence, --- So.2d ----, 2009 WL 211048 (Fla. 5th DCA Jan 30, 2009)

The probate bar has been mulling over the question of if, when and how Civ. Pro. Rule 1.525, the rule setting a 30-day post-judgment deadline for filing fee motions in civil litigation, applies to contested probate and trust proceedings.  This is an important issue; the last thing any lawyer wants to do is blow past a deadline for claiming fees on behalf of his client. Here's what the rule says:

Any party seeking a judgment taxing costs, attorneys' fees, or both shall serve a motion no later than 30 days after filing of the judgment, including a judgment of dismissal, or the service of a notice of voluntary dismissal.

Then a few months ago comes the Donkersloot opinion, a case out of the 2d DCA implying that Civ. Pro. Rule 1.525 applies to trust litigation (this was a first).  In the context of writing about that case I also linked to the excellent work being done by a subcommittee of the RPPTL section looking at possible statutory fixes [click here].

Then the Winter 2009 edition of ActionLine contained an article by Jon Scuderi, Esq., Goldman, Felcoski & Stone P.A., Naples, FL and Rebecca Y. Zung-Clough, Esq., Wealth Strategist, Northern Trust, NA, Naples FL, entitled Does Florida Rule of Civil Procedure 1.525 Apply to Probate and Trust Proceedings? Their conclusion: YES!

And now, in the linked-to case above, the 5th DCA has weighed in on whether Civ. Pro. Rule 1.525 applies to adversary probate proceedings. Their conclusion: YES!  Here's an excerpt:

Appellants filed a petition for administration, claiming, in part, that a handwritten document dated August 13, 1978, was the last will of James Douglas Lawrence. Appellants' petition requested that the court admit the handwritten document to probate and appoint them as personal representatives of Lawrence's estate. On the same day, Appellants filed a declaration that the proceeding was adversary. After a trial was held on the petition in accordance with Florida Probate Rule 5.025, the court issued a final order denying Appellants' petition for administration and refusing to admit the handwritten document to probate. Appellants appealed the decision to this Court, which ultimately dismissed the appeal on March 1, 2007.

On March 29, 2007, Appellants' attorneys filed a petition for order authorizing the payment of attorney's fees and expenses pursuant to section 733.106(2), Florida Statutes (2007). Appellees moved to strike the petition, arguing, in part, that the petition for fees and costs was untimely because it was filed seven months after the final order was entered instead of within thirty days as required by rule 1.525. The trial court granted the motion to strike.

The central issue framed by the parties is whether the rules of civil procedure applied to the proceeding below. The resolution of this issue turns on whether the underlying dispute in probate court was an adversary proceeding. In a probate action, if the case is determined to be an adversary proceeding, it “shall be conducted similar to suits of a civil nature and the Florida Rules of Civil Procedure shall govern, including entry of defaults.” Fla. Prob. R. 5.025(d)(2). Notwithstanding Appellants' prior declaration that the dispute was adversary, they urge that it was not. We disagree. See Fla. Prob. R. 5.025(b) (proceedings are adversary if declared as such).

Contrary to Appellant's argument, In re Estate of Beeman, 391 So.2d 276 (Fla. 4th DCA 1980), is distinguished. There, our sister court addressed the issue of whether the rules of civil procedure applied in a probate proceeding to determine fees of counsel for the estate. In ruling that the civil rules did not apply, the Beeman court emphasized that the proceeding below had not been “designated” an adversary proceeding. We think this finding distinguishes Beeman from this case. Here, the proceeding was declared as an adversary proceeding to determine the validity of the purported will and tried as such. Under these circumstances, the rules of civil procedure, and specifically, rule 1.525 were applicable. Therefore, the motion was not timely.
 

Lesson learned:

If anyone was hoping this trap-for-the-unwary would just go away, forget about it. Now that we have a couple of appellate decisions plus an ActionLine article plus the RPPTL section all talking about how Civ. Pro. Rule 1.525 applies to "adversary" probate proceedings and trust litigation, you need to assume everyone's heard of this issue by now and will be more than happy to spring this trap on you if you blow the 30-day deadline to file your motion for fees. You've been warned.

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Belanger v. Salvation Army, 2009 WL 223884 (11th Cir.(Fla.) Feb 02, 2009) [Attorney Interview]

The Salvation Army has been enmeshed in litigation since 2007 over approximately $105,000 it received from a pay-on-death account [click here]. At issue was whether a corporation, such as the Salvation Army, could be the beneficiary of a pay-on-death bank account under Florida law. According to the trial court and now the 11th Circuit, the answer is "yes." The following excerpt from the 11th Circuit opinion does a good job of framing the issue and explaining the court's statutory-construction ruling:

Richard Jason Belanger, as son and personal representative of the Estate of Richard Jose Belanger, deceased, brought this diversity action against The Salvation Army to recover funds which The Salvation Army had obtained from a pay-on-death bank account established in the name of “Richard J. Belanger, In Trust For The Salvation Army.” The Estate argues that The Salvation Army, a corporation, cannot be considered a “surviving beneficiary” under the pay-on-death account provisions of section 655.82, Florida Statutes. The district court granted a motion to dismiss in favor of The Salvation Army, finding that a corporation can be a beneficiary of a pay-on-death bank account under Florida law. The Estate appeals.

This case presents an issue of first impression: whether a corporation qualifies as a “person” permitted to be a lawful beneficiary of a pay-on-death account under section 655.82 of the Florida Statutes. We, therefore, must form a reasoned opinion as to how this statute should be interpreted. We determine that the plain language of section 655.82 permits a corporation to be a beneficiary of a pay-on-death account because the definition of the term “person” in section 1.01(3) of the Florida Statutes includes corporations. Accordingly, for the reasons set forth in greater detail below, we affirm.

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Taylor v. Taylor, --- So.2d ----, 2009 WL 186155 (Fla. 1st DCA Jan 28, 2009) [Attorney Interview]

I wrote here in 2006 about an "ambiguous" premarital agreement that the 3d DCA held was a valid waiver of a widow's marital rights under F.S. § 732.702. Here's the clause at the center of the 3d DCA case:

"It is [husband's] intent that, in the event of his death, all of his separate property be given to his children, STEVEN M. LADD and BETHANY S. LADD, or as otherwise provided for in his Last Will and Testament."

In that case the court relied on evidence outside of the four corners of the agreement as the basis for enforcement. In other words, the 3d DCA held this clause was NOT precise enough on its own to effectuate a waiver of spousal rights under F.S. § 732.702, so the probate court was right to accept parol evidence when enforcing it.

Fast forward to the present and the linked-to opinion out of the 1st DCA. Here's the waiver clause at the center of the new case:

"All property which belongs to each of the above parties shall be, and shall forever remain, their personal estate, including all interest, rents, and profits which may accrue from said property, and said property shall remain forever free of claim by the other."

According to the 1st DCA this clause was just fine, thank you very much. No ambiguity here. In fact the 1st DCA goes out of its way to let the probate court know that it should NOT have taken parol evidence to "decipher" its meaning. Here's how the 1st DCA explains its ruling upholding this clause on the grounds that under F.S. § 732.702 a contract's broadly-stated intention to waive spousal rights in whatever form they may take is sufficient:

Application of section 732.702(1) leads us to conclude that the trial court erred in determining that the prenuptial agreement was ambiguous as to Appellee's rights in the decedent's estate. Section 732.702(1) does not require that the parties specify an intent to relinquish rights given to surviving spouses in order to effectively relinquish those rights. Instead, the statute provides that a general relinquishment of “all rights” or equivalent language is sufficient to accomplish this purpose. Here, Appellee agreed, under paragraph one, that after marriage, the decedent's property would “forever remain [his] personal estate” and that such property would be “forever free of any claim by [Appellee].” Because this language is equivalent to a statement that Appellee waived “all rights” in the decedent's property or estate, section 732.702(1) compels a conclusion that the prenuptial agreement was a valid waiver of those rights.

Lesson learned?

I think it's impossible to reconcile the different approaches taken first by the 3d DCA in 2006 and then by the 1st DCA above when applying F.S. § 732.702 to what all of us can agree are less than artfully drafted prenuptial agreements. So what's a probate litigator to do? Cover all your bases. How? Argue in the alternative: build a record that wins your client's case based both on parol evidence (à la the 3d DCA's approach in 2006) and on the text of the agreement itself (à la the 1st DCA's approach in the linked-to case above). Either way, you're ready, willing and able to win your case.

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