We all know that, generally speaking, ignorance of the law is no excuse. But does this ancient maxim apply to Florida trust-accounting cases as well? Yes! According to the 4th DCA, just because you don’t know you’re legally entitled to trust accountings doesn’t mean you get sit on your hands for years before suing your trustee for never accounting to you.
At its core, the job of trustee is as much about keeping beneficiaries adequately informed as anything else. Most trust litigation can be traced back to a trustee’s inability to adequately explain him or herself to the trust’s beneficiaries, and this case is no different. It involves several family trusts that had been irrevocable for decades before suit was filed — one dating back to 1953 — for which the trustee had never prepared accountings. When the trustee was finally sued, the plaintiff demanded trust accountings going back decades to each trust’s respective start date.
While there’s no denying trust accountings are a good thing, asking an individual trustee (in this case the plaintiff’s mother) to reconstruct (and justify) every financial decision she’s made going back decades is going too far. So what’s to be done? Limit the accounting obligation to a reasonable window of time, which our legislature’s defined as being four years. There are two ways a defendant trustee can limit her accounting risk-exposure to just four years: on statute of limitations grounds or the “laches” affirmative defense.
SOL = 4 Years:
As explained by the 4th DCA, the applicable statute of limitations period for trust-accounting actions is four years:
Regardless of whether the breach is deemed to be the result of negligence or an intentional act, the statute of limitations for a legal action alleging breach of trust or fiduciary duty is limited to four years. §§ 95.11(3)(a), (o), (p), Fla. Stat. (2008).
That’s the good news; now here’s the bad. As explained by the 3d DCA in Taplin, trustees only get to rely on the statute-of-limitations defense if they comply with the two-part test currently found in F.S. 736.1008(1)(b). If your trustee’s never prepared accountings, he or she isn’t going to qualify for this defense, which is what happened here (and in Taplin). The fallback defense is the statutory-laches affirmative defense found in F.S. 95.11(6), which the 4th DCA tells us applies to trust-accounting actions:
We have previously held that section 95.11(6), referred to as “statutory laches,”[FN4] applies to an action for an accounting by a trustee. Patten v. Winderman, 965 So.2d 1222, 1225 (Fla. 4th DCA 2007). Section 95.11(6), Florida Statutes (2008), states:
(6) Laches.—Laches shall bar any action unless it is commenced within the time provided for legal actions concerning the same subject matter regardless of lack of knowledge by the [defendant] that the [plaintiff] would assert his or her rights and whether the [defendant] is injured or prejudiced by the delay. This subsection shall not affect application of laches at an earlier time in accordance with law.
[FN4.] In Corinthian Investments, Inc. v. Reeder, 555 So.2d 871, 872 (Fla. 2d DCA 1989), the Second District referred to section 95.11(6) as “statutory laches.” See also Nayee v. Nayee, 705 So.2d 961, 963–64 (Fla. 5th DCA 1998) (discussing the inapplicability of section 95.11 to actions against trustees until amended in 1974 to add section 95.11(6)).
Laches = 4 Years:
And because the statutory-laches defense applies, we get looped back to a 4-year statute of limitations for trust-accounting actions:
Because an action for accounting seeking to enforce a breach of trust or fiduciary duty entitles a beneficiary to damages, the application of section 95.11(6) [statutory laches] bars an action seeking an accounting from a trustee more than four years before the action is filed.[FN7]
[FN7.] Even though an action for an accounting is considered an equitable proceeding, it has the features of a legal action. § 736.0106, Fla. Stat. (2008) (“The common law of trusts and principles of equity supplement this code, except to the extent modified by this code or another law of this state.”) (emphasis added). “An action for an accounting was formerly cognizable both at law and in equity.” Nayee, 705 So.2d at 963 (citing Campbell v. Knight, 92 Fla. 246, 109 So. 577 (1926)).
Laches = Evidentiary Hearing = Cost + Delay + Uncertainty:
All things being equal, it’s faster and cheaper to cut off claims on statute of limitations grounds vs. laches. Why? Because the first defense gets decided purely on the pleadings depending only how much time has elapsed prior to the lawsuit being filed, while laches is an affirmative defense turning on factual issues requiring an evidentiary hearing and all of the delays and expense that entails.
And here’s another drawback to evidentiary hearings: even if the facts and law are on your side, there’s no guarantee your judge is going to get it right. Anytime you have an evidentiary hearing things can go sideways on you, which is exactly what happened in this case when the trial court concluded the laches defense didn’t apply because “[plaintiff’s] testimony [was] credible that he did not know he was entitled to an accounting until he met with a Florida attorney in April, 2007.” Based on this ruling the trial court ordered the defendant trustee to prepare trust accountings going back decades.
Ignorance of the law = NO excuse:
According to the 4th DCA, the trial judge got this one wrong. Defendant trustee is only required to prepare accountings going back four years. Why? Because a plaintiff’s ignorance of the law (for example, his legal right to annual trust accountings) doesn’t toll the laches clock until he finally gets around to consulting a lawyer — decades after learning the operative facts for an accounting action:
[Plaintiff] does not dispute that he had actual knowledge that he was a beneficiary of all four trusts for many years before filing suit against [the defendant trustee]. What he claimed at trial and on appeal is that he did not have actual knowledge he was entitled to accountings for each trust until he consulted with a Florida attorney in April 2007. . . . His failure to know the law or consult with an attorney is not a lack of actual knowledge of the facts (no accountings given to him) upon which the claim is based. See § 95.031, Fla. Stat. (2008) (stating a cause of action accrues when the last element constituting the cause of action occurs). Knowledge of the law is not an element to be proven to establish entitlement to an accounting by a trustee. [Plaintiff’s] lack of knowledge of the law had nothing to do with his knowledge that the accountings were not being given to him each year. . . . Research has not revealed a Florida case which holds that a lack of knowledge of the law is grounds to extend the period for laches or toll the running of the statute of limitations. . . . [T]he trial court concluded laches did not apply because [plaintiff] was not aware of the law. This was error.