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

Carey v. Rocke, 18 So.3d 1266 (Fla. 2d DCA October 23, 2009)

I first wrote about this case here when it hit the papers in 2008. According to newspaper accounts this will contest revolved around allegations of undue influence and related attorney ethics violations. The decedent's attorney wrote himself and his paralegal into a client's will for what ultimately morphed into a $7.2 million bequest between the two of them, which is a big "no-no" under Fla. Bar Rule 4-1.8(c). That ethics violation played a central role in the outcome of this case. Which shouldn't be surprising. For a comprehensive list of cases across the country dealing with the same ethics rule, see ACTEC's Commentary on MRPC 1.8.

Unfortunately, the 2d DCA's opinion linked-to above provides zero insight into this extraordinary case, simply affirming "without discussion" the trial-court's first order and sending it back to the trial-court judge to address one open item. And that's where for all intents and purposes the public side of this story would have ended but for a lucky break. I had the good fortune of running into Fort Lauderdale probate litigator Lawrence Livoti, who was tangentially involved in the case. He was kind enough to provided me with copies of the trial-court orders [click here, here], both of which are discussed below.

The trial-court judge in this case was Pinellas Circuit Judge Lauren Laughlin. If you're a probate lawyer or estate planner, you need to understand both the ethics rule and legal issues at play in this extraordinary case. And there's no better way to do that than to carefully read both of Judge Laughlin's scholarly and well-reasoned orders.

[1] First Order: Does an ethics violation = undue influence?

You can't get sued because you violate an ethics rule, but it's powerful evidence against you. That is the crux of Judge Laughlin's analysis in her first order. Here's an excerpt:

The issue of whether an attorney may draft a will in which he is named as a beneficiary is not a new or novel question. Under Roman law, the scrivener of a will could not inherit under it. See Dig. 48.15 (supplement to the lex cornelia ordered in edict by Emperor Claudius). Although Florida law does not necessarily prohibit such a practice, an attorney naming themselves a beneficiary of a client’s will opens himself/herself up to a charge of undue influence because of the peculiarly confidential relationship between an attorney and client. “The greatest trust between man and man is the trust of giving counsel”. SIR FRANCIS BACON, Of Counsel, in Essays, Civil and Moral Ch. XX (Charles W. Eliot, ed. 1909-1914), at p. 181 (1846). “The duty to deal fairly, honestly, and with undivided loyalty superimposes onto the attorney-client relationship a set of special and unique duties, including maintaining confidentiality, avoiding conflicts of interest over the lawyer’s.” In re Cooperman, 633 N.E. 2d 1069 (N.Y. 1994). Indeed, “the lawyer may not place himself in a position where a conflicting interest may, even inadvertently affect, or give the appearance of affecting, the obligations of the professional relationship.” In re Kelly, 244 N.B. 2d 456. 460 (N.Y. 1968).

The nature of the attorney-client relationship in matters testamentary is a particularly circumspect matter for the courts. The decisions that go into the drafting of a testamentary instrument are inherently private. Because the testator will not be available to correct any errors that the attorney may have made when the will is offered for probate, a client is especially dependent upon an attorney’s advice and professional skill when they consult an attorney to have a will drawn. A client’s dependence upon, and trust in, an attorney’s skills, disinterested advice, and ethical conduct exceeds the trust and confidence found in most fiduciary relationships. Seldom is the client’s dependence upon and trust in his attorney greater than when, contemplating his own mortality, he seeks the attorney’s advice, guidance and drafting skill in the preparation of a will to dispose of his estate after death. These consultations are among the most private to take place between an attorney and his client. “The client is dealing with his innermost thoughts and feelings, which he may not wish to share with his spouse, children and other next of kin.” Kirschbaum v. Dillon, 567N.E. 2d 1291, 1296 (Ohio 1990).

The Florida Bar has adopted ethical standards to provide professional guidelines for lawyers who find themselves in the situation of a client wishing to leave them a bequest.

Gifts to Lawyer or Lawyer’s Family. A lawyer shall not solicit any substantial gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client.

R. Regulating Fla. Bar4-1.8(c)

The Comment to Rule 4-1.8(c) . . . provided a suggested procedure which might be curative of the inherent conflict of interest of an attorney/beneficiary.

If a client offers the lawyer a more substantial gift, subdivision (c) does not prohibit the lawyer from accepting it, although such a gift may be voidable by the client under the doctrine of undue influence, which treats client gifts as presumptively fraudulent. If effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, however, the client should have the detached advice that another lawyer can provide and the lawyer should advise the client to seek advice of independent counsel.

R. Regulating Fla. Bar 4-1.8, Comment
“Gifts to Lawyers.”

The court recognizes that a violation of a rule of professional conduct does not constitute per se proof of undue influence. The rule and its comment should be instructive to any lawyer on how to properly effectuate the testamentary wish of a client who wishes to make a gift to their lawyer without encumbering his client’s estate with the time and expense of a will contest. Sadly, these suggestions were not followed in this case.

*     *     *     *     *

The respondent has argued that a violation of the Rules of Professional Conduct does not provide a basis for a finding of undue influence in this case. This court agrees. In Florida, a violation of the Rules does not directly prove undue influence. The attorney-client relationship simply establishes one element of undue influence. The Rules establish a standard of conduct which, if followed, might avoid allegations of undue influence. To ignore that established standard of care when, in fact, the Rules are common knowledge within the profession, and one has been advised of the ethical problems, demonstrates a consciousness of the conflict of interest. The behavior demonstrated by the alleged undue influencers, in the face of knowledge of the curative steps which could have been taken to insure a valid bequest, was no more than a halfhearted attempt to comply with the ethical standard expected of the legal profession. This bears on the credibility of the testimony and the knowing, planned and measured conduct of the two beneficiaries in question: Jack Carey and his legal, assistant, Gloria DuBois.

It is difficult to completely separate the allegation of undue influence from the disciplinary rule because of the inherently confidential nature of the attorney-client relationship, which is an element of undue influence. Additionally, the attorney whose bequests are at issue in this case was himself sixty-eight years old and retired at the time of the 1994 will. This court must acknowledge that Mr. Carey has had an exemplary career in the legal profession. He enjoys a reputation as an honest professional and a civic-minded citizen of great integrity. For this reason, deciding the facts and issues in this case has been especially painful and troubling. The court cannot help but speculate on whether the lawyer made a cost/benefit analysis, weighing the risks of being charged with a disciplinary infraction (having no intention of continuing to practice law) against the economic benefits to be derived from the conduct. 

[2] Second Order: Will the doctrine of "dependent relative revocation" ALWAYS apply?

On remand the 2d DCA asked Judge Laughlin to enter a second order explaining why her original ruling resulted in the $7.2 million residuary value of this estate passing by intestacy rather than pursuant to the residuary clause of one of the decedent's multiple prior wills. Here again Judge Laughlin does a masterful job of deconstructing Florida law, this time focusing on the "dependent relative revocation" doctrine [a recurring topic on this blog], and explaining why it did NOT apply in this case. The key point here is that this doctrine should only apply if the decedent's prior will was NOT materially different from the will that's being set aside. If that's not the case (and for most serial testators it often isn't), then the doctrine doesn't apply. Here's how Judge Laughlin summarized the law on this point:

The doctrine of dependent relative revocation (DRR) is essentially based upon a fiction: " ... where a testator revokes a valid will, and the new will is found to be invalid, the prior will may be re-established on the ground that the revocation was dependent on the validity of the new will, and the testator would have preferred the earlier will to intestacy." Denson v. Fayson, 525 So. 2d 432 (Fla. 3d DCA 1988). It is not a rule of law, but rather, a rule of presumed intention. That presumption is rebuttable and can be overcome if contrary evidence concerning the testator's intent is admitted. In re Lubbe's Estate, 142 So. 2d 130, 135 (Fla. 2d DCA 1962). Application of DRR is dependent upon a showing that the testator only conditionally revoked the old will believing the new will would be effective. The proper application of the doctrine depends upon a sufficient showing that the provisions of the invalid will are not materially different from the prior will. If they are materially different, the doctrine is not applicable and the presumption is rebutted. See id.

The doctrine of DRR is more understandable when it is referred to by another name, such as ineffective revocation, the doctrine of retroactive revival, or revocation under mistake. See e.g., RESTATEMENT (THIRD) OF PROPERTY 4.3 cmt. a (1999) (ineffective revocation). See also Frank L. Schiavo, Dependent Relative Revocation Has Gone Astray: It Should Return to Its Roots, 13 WIDENER L.Rev. 73, 96 (2006) (doctrine of retroactive revival); Joseph Warren, Dependent Relative Revocation, 33 HARV. L. REV. 337,337 (1920). Historically the doctrine has dealt with cases of mistake: where there has been a revocation by physical act under a mistaken belief of fact or law or invalidity because of a defect in execution. Because of "mistake," all of the early cases go to a total, rather than partial, revocation of the subsequent will and reinstatement of the prior will. Onions v. Tyrer, 23 Eng. Rep. 1085 (Ch.); Hairston v. Hairston, 30 Miss. 276 (1855); Stewart v. Johnson, 194 So. 869,870 (Fla. 1940); In re Estate of Johnson, 359 So. 2d. 425 (Fla. 1978); In re Estate of Pratt, 88 So. 2d 499 (Fla. 1956); In re Estate of Lubbe, 142 So. 2d 130 (Fla. 2d DCA 1962); First Union Nan Bank v. Estate of Mizell, 807 2d 78 (Fla. 5th DCA 2001).

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If you're an estate planner, it's not unusual to get asked if the fees being proposed by trust company "X" are reasonable. We usually have a sense of what the going rate is in our market, but it's mostly a "guesstimate." So I was glad to see an excellent piece of market research published on The Trust Advisor Blog. In a blog post entitled Who's Charging What for Trust Services? trust advisor Jerry Cooper provides a comprehensive chart of the fee estimates he obtained from numerous well-established trust companies and an easy-to-understand explanation of how the various fees stack up. Good stuff to keep handy for the next time you're asked about corporate trustee fees.

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Foundation For Developmentally Disabled, Inc. v. Step By Step Early Childhood Educ. And Therapy Center, Inc., --- So.3d ----, 2010 WL 1135901 (Fla. 2d DCA Mar 26, 2010)

In the 1980's Florida philanthropist Edwin H. Bower made large charitable donations to the Foundation for the Developmentally Disabled, Inc. (the “Foundation”) through his charitable foundation, The Bower Foundation. Mr. Bower intended that his donations be used to acquire land and construct a facility to benefit pre-school-aged children with disabilities who participated in a program referred to as Step by Step. However, he never created a written trust or gift agreement when he made those donations. Mr. Bower died in 2003.

A dispute arose over whether Step by Step was entitled to rent-free use of the facility specifically constructed for it with Mr. Bower's donations. In the absence of a gift or trust agreement supporting Step by Step's claim to rent-free use of its facility, The Bower Foundation argued the existence of an implied trust under all three of the following theories:

1. Implied charitable trust
2. Resulting trust
3. Constructive trust

The 2d DCA shot down all three arguments. If a disgruntled donor asks you to consider suing a charity in the absence of a a written trust or gift agreement, you'll want to consider these arguments and understand why they failed in this case. Here's how the 2d DCA explained Florida law on all three:

[1] No implied charitable trust:

The Fifth District addresses a similar situation in Persan v. Life Concepts, Inc., 738 So.2d 1008, 1009 (Fla. 5th DCA 1999),[FN3] where a group of about twenty donors gave land to the Central Florida Sheltered Workshop, Inc. (“CFSW”), so that living facilities could be constructed for disadvantaged adults. CFSW also solicited the community for $200,000 to pay for the construction of the homes. Id. After the homes were operated for approximately fifteen years, a decision was made to sell the property. Id. As in the present case, there was evidence presented at trial that the donors gave the land with the intent that the land be used for the specific purpose of providing living facilities for disadvantaged adults, but a written trust was never created. Id. at 1010. In Persan, the court noted that there was no evidence of an intent to create any type of trust and that the evidence established only an intent to donate land and money for the homes to be constructed. Id. In holding that a charitable trust was not created, the court stated as follows:

Making a gift to a charity for a specific project or purpose does not create a charitable trust. For this court to suggest that it does would create havoc for charitable institutions. A charity has to be able to know when a donation is a gift and when it is merely an offer to fund a trust for which the charity is taking on fiduciary responsibilities. The creation of such a trust must be express.

Id.

[FN3.] In its amicus brief, the [Florida Attorney General] contends that Persan v. Life Concepts, Inc., 738 So.2d 1008, 1009 (Fla. 5th DCA 1999), was wrongly decided. However, it acknowledges that in the ten years following the decision in Persan, the legislature has made no changes to Florida law regarding constructive and resulting trusts.

[2] No resulting trust:

The Fifth District further concluded that a resulting trust was not established. “The evidentiary burden to prove a resulting trust is ‘clear, strong and unequivocal,’ beyond a reasonable doubt.” Id. To establish a resulting trust, the parties must “actually intend to create the trust relationship but fail to execute documents or establish adequate evidence of the intent.” Wadlington v. Edwards, 92 So.2d 629, 631 (Fla.1957). A typical example of a resulting trust is where one party “furnishes the money to buy a parcel of land in the name of another with both parties intending at the time that the legal title is held by the named grantee for the benefit of the unnamed beneficiary.” Id.

A resulting trust arises when the legal estate in property is disposed of, conveyed or transferred, but the intent appears or is inferred from the terms of the disposition, or from accompanying facts and circumstances, that the beneficial interest is not to go to or be enjoyed with the legal title. In such a case a trust is implied or results in favor of the person whom equity deems to be the real owner.

Howell v. Fiore, 210 So.2d 253, 255 (Fla. 2d DCA 1968).

In the case at bar, there was no evidence that the parties intended to create a trust relationship. In fact, the evidence was to the contrary-that Mr. Bower did not intend that his gifts to the Foundation be held in trust. Consequently, the trial court erred in finding that Step By Step established that there was a resulting trust as to the property.

[3] No constructive trust:

Unlike a resulting trust, a constructive trust does not have the element of intent or an agreement, either oral or written, to create a trust relationship. Wadlington, 92 So.2d at 631. “The trust is ‘constructed’ by equity to prevent an unjust enrichment of one person at the expense of another as the result of fraud, undue influence, abuse of confidence or mistake in the transaction that originates the problem.” Id. Here, there was no evidence of fraud, undue influence, abuse of confidence or mistake in the transaction. As a result, the trial court also erred in finding that there was a constructive trust between the parties. 

Lesson learned?

The big take-away from this case for potential plaintiffs is that absent a written trust or gift agreement, don't waste time and money on a lawsuit; donors should expect they'll have little to no say over how charities administer their donations once the gift is made - unless they document that retained right in a written trust or gift agreement. Here's how the 2d DCA made this general point:

We note the inherent problems that would be created if an individual who donates to a charitable organization with merely a stated intent that the donation be used for a specific purpose were able to control, or their heirs were able to control, that corporation in perpetuity. Although The Bower Foundation donated a significant amount of money to the Foundation, it was a small percentage of the money the Foundation used to construct and expand the facility. The board of directors of a nonprofit corporation has the responsibility to determine what is in the best interest of the corporation going forward, and therefore, absent a written trust agreement, it should not be bound by the intent of donors who gave many years ago when such is no longer in the best interest of the corporation.

What can charities do to avoid disputes?

The last thing a charity wants is to waste precious resources on litigation or alienate future donors as a result of a dispute over how a past donation is being administered. So what could the charities in this case have done differently? Good question. And the authors of The Unraveling of Donor Intent: Lawsuits and Lessons provide some solid answers. If you work with charities the article is well worth reading in its entirety. As to the specific question of what the charities could have done differently in this case, the authors recommend the following:

It is almost inevitable that charities will experience a need to make changes to long-term gifts. The need for change may result for a variety of reasons. The gift’s purpose may no longer effectively support the charity’s mission; the cost to administer the gift may outweigh the charitable benefits of the gift or the lack of funds may cause harm to the gift property; or the charity’s needs have dramatically shifted so that the gift revenue is no longer needed (or no longer needed at the level provided). When problems arise, charities should understand the options for resolution. In order of facility, those include: 1) change of gift terms negotiated with living donors; 2) provision for change pursuant to the gift agreement; 3) relief under the de minimus provisions of the Uniform Prudent Management of Institutional Funds Act; or 4) court approved changes.

[1.] Negotiating change of purpose with living donors. While donors who make gifts relinquish all control over contributed property, the provisions of UMIFA and UPMIFA allow charities to negotiate a change of purpose in long-term gift agreements with living donors. This means charities with living-donor gift may have the opportunity to examine existing documents renegotiate gift terms to provide flexibility over time, a moderation of purpose, or an alternative purpose if they act in a timely manner. This approach not only honors donor intent, but positions the charity as accountable and a good steward for the gift’s life. It is also the option with the lowest expense ratio.

[2.] Making changes pursuant to terms of the gift agreement. If possible, gift agreements should contain flexibility to make non-judicial changes with an emphasis on the triggers for change and clear direction on how that decision is made. For planners, this adds an extraordinary drafting challenge since it is difficult to take the gift through a period of 10, 25, 50 or even 100 years without knowing the environmental, cultural, and economic changes that will occur over that time. The alternatives may include secondary uses for the gift at the same institution, a gift over transferring proceeds to a succeeding charitable institution, or other creative alternatives.

The document should designate individuals responsible for making changes to the gift purpose. This group may be the same group set out in the paragraph above (who determine it is time to make a change) or it may be a different group. The document should also designate the type of changes that are appropriate without court approval, and what to do if there is conflict among the appointed group. Placing discretion in a group qualified to make those decisions based on the facts and circumstances at the time is a principal used in multi-generational trusts and makes those trusts effective long after the grantor is there to make decisions.

[3.] Seeking relief under the Uniform Prudent Management of Institutional Funds Act (UPMIFA). In 1972, the Uniform Management of Institutional Funds Act (UMIFA) was adopted at the 1972 Annual Meeting of the National Conference of Commissioners on Uniform State Laws. UMIFA (and its successor UPMIFA), adopted in whole or in part by all states except Alaska and Pennsylvania, governs long-term funds held by charitable institutions. Section Seven of the model statute permitted a “release of limitations that imperil efficient administration of a fund or prevent sound investment management if the governing board can secure the approval of the donor or the appropriate court” and had four parts:

• Restrictions can be released with the written consent of the donor.
• If the donor’s written consent cannot be obtained, a court of appropriate jurisdiction can release the restriction if the restriction “is obsolete inappropriate, or impracticable.”
• A release cannot change the use of the funds to non-charitable purposes.
• The section does not limit the court’s application of the cy pres doctrine.

In July 2006, The Commissioners on Uniform State Laws approved a revised version of UMIFA entitled the Uniform Prudent Management of Institutional Funds Act (UPMIFA) that made changes in areas from investment management standards, to provisions allowing the release of gift restrictions under certain circumstances. UPMIFA is rapidly replacing UMIFA across the country; more than 43 states have adopted a version of UPMIFA at last count [but NOT Florida].

UPMIFA expanded the power to release or modify donor gift restrictions in Section 6, allowing change under four circumstances:

• Donor release: “With the donor’s consent in a record”, the charity can release a restriction in whole or in part, so long as the gift is still used for the organization’s charitable purposes.
• Doctrine of deviation: If a modification to a gift agreement/document will enhance the furtherance of the donor’s purposes, or a restriction is “impracticable or wasteful and impairs the management or investment of the fund”, the charity can ask a court to modify the restriction. The Attorney General must be notified and allowed to be heard, and the modification must reflect the donor’s “probable intention.”
• Doctrine of cy pres: If the purpose or restriction becomes “unlawful, impracticable, impossible to achieve, or wasteful”, the court may use the cy pres doctrine to modify the fund purposes. The Attorney General must be notified and allowed to be heard.
• Small funds: For funds with a value less than $25,00036 that have been in place more than 20 years, court action is not required if the charity determines a restriction is “unlawful, impracticable, impossible to achieve, or wasteful” so long as the charity waits 60 days after notice to the state Attorney General of the intention to make the change, and the change is designed to be a good faith reflection of the expressed charitable purposes.

[4.] Seeking court approved changes. Although court action is generally perceived to the action of last resort, it may be the charity’s only solution when resolution is not available through one of the options above. Generally the state Attorney General will be a party to the action to represent the public’s charitable interests. These hearings may not only be costly, but unpredictable. (See the result in the Fisk/Georgia O’Keeffe Museum dispute described earlier.) Ultimately, the decision to seek court approval is a decision to make with legal counsel considering the burden or problems with the gift terms, the donor and donor family’s response, the public’s reaction to the request, and the potential downside if the court makes a ruling counter to the charity’s goals.

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