Brigham v. Brigham, — So.2d —-, 2009 WL 454492 (Fla. 3d DCA Feb 25, 2009)
This case has already had a huge impact on Florida’s trust-law landscape. When the 3d DCA first weighed in on this case in 2006, it upheld a trial court ruling cutting the trustees off from trust assets to pay for their legal-defense [click here]. That opinion lead directly to a change in Florida’s trust code that impacts every new trust-related lawsuit in this state [click here].
This time around the 3d DCA again made new law, addressing the following issue of first impression:
Is the trustee of a “land trust” subject to the conflict-of-interest rules generally applicable to trustees under Florida law?
The uncertainty at the heart of this question is a consequence of the unique nature of land trusts, sometimes referred to as “Illinois land trusts” because of where they were first invented [click here for more on land trusts]. The defining characteristic of a land trust is that the trustee doesn’t have any of the independent fiduciary authority of a regular trustee, all a land-trust trustee is supposed to do is follow orders and hold title to real property. Here’s a quote from the linked-to opinion encapsulating this point:
The trustee accordingly is a mere vessel of title. It exercises no control over the property and only acts according to the beneficiaries’ directions. People v. Chicago Title & Trust Co., 75 Ill.2d 479, 27 Ill.Dec. 476, 389 N.E.2d 540 (1979). Accordingly, the single warranty or representation that a trustee makes upon execution of documents is that it has the power and authority to appropriately execute the instruments.
If all you are is a “mere vessel of title” with no independent fiduciary authority, does it make sense to subject you to the duties and conflict-of-interest rules generally applicable to trustees? According to the 3d DCA the answer is “YES,” here’s why:
Appellees argue that pursuant to section 731.201(33), land trusts are excluded from the definition of a “trust” under all of chapter 737. We disagree. Chapter 737 has been applied by courts to regulate and to rule on land trusts, and chapter 737 is directly referred to in the Florida Land Trust Act, section 689.071(5). The definition of a “trust” under section 731.201(33), states it does not include a land trust created under section 689.05. However, the trust created by the EFP Brigham Land Trust No. 1 dated September 28, 1991 (the “EFP Trust”), was not a land trust created under section 689.05. Although the EFP Trust was executed by Marion and was a written trust, it did not comply with the requirements of section 689.071.
* * * * *
The EFP Trust Deed failed to contain language that conferred on Dana, the trustee, the power and authority “either to protect, conserve and to sell, or to lease, or to encumber, or otherwise to manage and dispose of the real property described in the recorded instrument.” Because Dana, as the lawyer that created and transferred the Deed to North Carolina attorneys for recordation, failed to include the formalities in the Deed required to create a Florida Land Trust under section 689.071, it is a trust regulated by chapter 737.
Moreover, even if it had qualified as a land trust, we agree with appellants that the reasoning set forth in the case of In re Saber, 233 B.R. 547 (Bkrtcy.S.D.Fla.1999), is instructive on why the requirements of section 737.403, should apply to Dana, as the trustee: “Although the real and personal property interests of Florida land trust are divided between the trustee and beneficiary, a Florida Land Trust is essentially the same as an ordinary trust in terms of the duties, rights and responsibilities of the trustee and beneficiary.” Id. at 554. For these reasons, Dana, as Trustee, of either a land trust or a trust, was required to comply with section 737.403(2), when Dana gifted the Brigham Tree Farm Property to himself.
Additional Take-Away Points:
The linked-to opinion is long and it covers a lot of ground. Clearly, this case was hotly contested by determined lawyers on both sides who knew their way around a court room. But aside from the key land-trust ruling, I think there are two additional take-away points probate lawyers in general can learn from.
- A de novo appellate standard of review can be your best friend in trust litigation:
First, the linked-to opinion is another example of why “de novo” review can be your best friend in trust litigation. That was the standard of review in this case:
The trial court’s failure to apply and/or the misinterpretation of several trust statutes are matters of law subject to de novo review. In addition, the standard of review is also de novo when reviewing the trial court’s interpretation and application of Florida law. See Gordon v. Regier, 839 So.2d 715, 718 (Fla. 2d DCA 2003); Gilliam v. Smart, 809 So.2d 905, 907 (Fla. 1st DCA 2002). Likewise, the interpretation of several unambiguous trust provisions is also subject to de novo review. See Miller v. Kase, 789 So.2d 1095 (Fla. 4th DCA 2001).
Based on this standard the 3d DCA basically stepped in and second guessed almost every substantive decision made by the trial-court judge, reversing every order he entered after what must have been a very long trial. If you’re representing the side trying to sue the trustee, winning your case based on trustee negligence is a daunting task [click here], and you have little recourse on appeal. Fact-based rulings by the trial-court judge are almost untouchable on appeal. But, as I’ve written before [click here], if the case against the trustee is framed as a fight over how a statute or trust instrument is supposed to be applied, then you basically get a do over on appeal because of the de novo review standard. That’s what the plaintiffs did in this case and it paid off for them in a stunning appellate victory.
- De-facto trustee concept:
Probate litigation is usually the last act in a play that’s been going on for years. The starting point in this litigation often revolves around allegations of wrong doing by someone the decedent trusted and counted on before he or she died. This trusted person could be a family member or some sort of care giver (e.g., an at-home nurse). These allegations are often the basis for an undue-influence claim. In the linked-to opinion the plaintiffs went a step further, using these sorts of allegations as a basis for a breach-of-fiduciary-duty claim against someone who wasn’t the named trustee of any the decedent’s multiple trust. So how’d they do it? By implication:
Turning now to Patricia, the record clearly shows that she acted as a fiduciary for Marion and as Dana’s de-facto trustee conducting all of the tasks either at the direction of Dana or on her own accord. Patricia owed a fiduciary duty to Marion. “If a relation of trust and confidence exists between the parties (that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has been acquired and abused), that is sufficient as a predicate for relief.” Doe v. Evans, 814 So.2d 370, 374 (Fla.2002); Susan Fixel, Inc. v. Rosenthal & Rosenthal, Inc., 842 So.2d 204 (Fla. 3d DCA 2003). “Fiduciary relationships may be implied in law and such relationships are ‘premised upon the specific factual situation surrounding the transaction and the relationship of the parties.’ ” Id. at 207. Courts have found a fiduciary relation implied in law when “confidence is reposed by one party and a trust accepted by the other.” Capital Bank v. MVB, Inc., 644 So.2d 515, 518 (Fla. 3d DCA 1994). To establish a fiduciary relationship, a party must allege some degree of dependency on one side and some degree of undertaking on the other side to advise, counsel and protect the weaker party. Watkins v. NCNB Nat’l Bank of Fla., N.A., 622 So.2d 1063, 1065 (Fla. 3d DCA 1993).
Moreover, Patricia owed a duty to Marion as Marion’s employee. An employee owes a duty to her employer to exercise diligence and good faith in matters relating to the employment. Haynes v. The Singer Co., 1981 WL 2344 (N.D.Fla. June 19, 1981); Kilgore Ace Hardware, Inc. v. Newsome, 352 So.2d 918, 919 (Fla. 2d DCA 1977). It is undisputed that Patricia was Marion’s employee. Additionally, the record reflects that Patricia received $218,607, ostensibly as salary, plus $56,000 as gifts during the final years of Marion’s life.