Kelly v. Lindenau, — So.3d —-, 2017 WL 2180970 (Fla. 2d DCA May 17, 2017)

If you or your attorney make a mistake when drafting your revocable trust, and there’s “clear and convincing evidence” that the mistake is contrary to your testamentary intent, we’ve got a fix for that, and it’s found in F.S. 736.0415.

And because the statute’s “remedial” in nature, we learned in Megiel-Rollo v. Megiel that courts should err on the side of granting access to it whenever possible — no matter how big the drafting error might be (see here).

But there are limits to the mistakes F.S. 736.0415 can fix. For example, you can’t use this statute to give someone an after-the-fact “do over” just because things don’t pan out as expected when their trust was first signed — as the parties in Morey v. Everbank learned (see here). And what about innocuous technical defects in a signing ceremony (e.g., two witnesses are present, but only one signs the document)? Can you use F.S. 736.0415 to work around that problem? That’s the question at the heart of this case.

Case Study:

Back in 2006, while he was still living in Illinois, a man named Ralph created a revocable trust that provided for his wife and children. According to the 2d DCA, “The trust was validly executed pursuant to Illinois law.” After Ralph’s wife died he moved to Bradenton, Florida, met a new woman (Lindenau), and lived with her in a house he purchased in 2009. In 2014 Ralph hired his Illinois attorney to amend his trust so that Lindenau would get the Bradenton house upon his death. Ralph died in 2015. Lindenau claimed the house, Ralph’s children said no.

According to the 2d DCA, “There is no dispute that Ralph’s intent was to leave the Bradenton house to Lindenau.” So what’s the problem? Think execution formalities.

While Ralph’s Illinois lawyer may have done a fine a job under Illinois law, he blew Florida’s special execution rules for revocable trusts including “testamentary” provisions. Although the amendment was signed by Ralph in the presence of two witnesses, only one of the witnesses signed it. That’s a problem under Florida law.

Execution formalities required for non-Florida revocable trusts:

Under Florida law trusts don’t always have to be in writing; in fact F.S. 736.0407 tells us that under certain circumstances oral trusts work just fine. And if your trust’s executed somewhere else (like Illinois), F.S. 736.0403(1) tells us it’s generally going to be valid in Florida if it’s valid back home. But that last rule is subject to some big limitations, including Florida’s special execution rules for revocable trusts having “testamentary” provisions. In those cases F.S. 736.0403(2)(b) tells us your non-Florida revocable trust has to comply with Floria’s execution formalities for wills — no matter what the rule might be back home. Here’s how the 2d DCA explained this last point:

In Florida, the testamentary aspects of a revocable trust are invalid unless the trust document is executed by the settlor of the trust with the same formalities as are required for the execution of a will. § 736.0403(2)(b), Fla. Stat. (2014). In turn, the portion of the Florida Probate Code that addresses the execution of wills requires that wills must be signed in the presence of two attesting witnesses and that those attesting witnesses must themselves sign the will in the presence of the testator and of each other. § 732.502(1)(b)-(c), Fla. Stat. (2014). Consequently, a trust—or an amendment thereto—must be signed by the settlor in the presence of two attesting witnesses and those witnesses must also sign the trust or any amendments in the presence of the settlor and of each other. These requirements are strictly construed. Cf. Allen v. Dalk, 826 So.2d 245, 247 (Fla. 2002) (explaining that strict compliance with statutory requirements for execution of a will is mandated in order to create a valid will and recognizing that absent the requisite formalities, a will “will not be admitted to probate”).

Can you reform a trust to cure innocuous technical defects in a signing ceremony? NO

One of Ralph’s children was his successor trustee. After her father’s death she challenged the trust amendment gifting Ralph’s Bradenton, Florida home to Lindenau. Lindenau admitted the amendment wasn’t properly witnessed, but countered with two defenses: reformation and constructive trust.

As her fist line of defense Lindenau argued for reformation under F.S. 736.0415 to work around the execution problem. She won this argument at the trial court level, but struck out on appeal. According to the 2d DCA, the statute can be used to fix drafting mistakes in an otherwise valid trust, but it can’t be used to validate an improperly executed document.

Section 736.0415 provides in relevant part that the terms of a trust can be reformed “to conform … to the settlor’s intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.” Aside from the issue of the settlor’s intent, the statute thus focuses on the terms of the trust, not the execution of it. See also Megiel–Rollo, 162 So.3d at 1094 (quoting Morey v. Everbank, 93 So.3d 482, 489 (Fla. 1st DCA 2012), for the proposition that reformation is used to correct a “mistake in the form of expression or articulation” such as where a trust includes a term that “misstates the donor’s intention[,] fails to include a term that was intended to be included[,] or includes a term that was not intended to be included”). Indeed, in discussing Florida’s liberal policy regarding reformation, this court has acknowledged that the remedy is used “to cause the instrument to reflect the true agreement of the parties when the terms of the agreement have not been clearly expressed in the instrument because of [a] mutual mistake or inadvertence.” Id. at 1097 (emphasis added) (quoting Tri–Cty. Prod. Distrs., Inc. v. Ne. Prod. Credit Ass’n, 160 So.2d 46, 49 (Fla. 1st DCA 1963)). But here, the terms of the second amendment are clear that Ralph intended to leave the Bradenton house to Lindenau. Thus there were no terms of the trust that needed reformation. Rather, Lindenau sought reformation to remedy an error in the execution of the second amendment. But by the statute’s terms, reformation is only available to remedy mistakes that affect “both the accomplishment of the settlor’s intent and the terms of the trust.” § 736.0415.

Can an implied constructive trust rescue your invalidly executed trust agreement? NO

When the facts irrefutably demonstrate that strict compliance with our execution formalities will defeat a person’s testamentary intent (as in this case!), you’re probably going to get some sympathy from your judge. And sometimes that’s enough. It worked at the trial-court level in this case, and it also seems to have worked in In re Estate of Tolin, 622 So.2d 988 (Fla. 1993), in which the Florida Supreme Court held that a constructive trust should be imposed where the testator failed to validly revoke a codicil to a will because he mistakenly destroyed a copy rather than the original document.

But a lot’s changed since 1993. In today’s world the last thing any appellate judge wants is to get accused of legislating from the bench. So what does that mean? When in doubt, statutory execution formalities are going to trump testamentary intent, no matter how clearly the facts (and equities) may favor the contested document (as happened in a more recent Florida Supreme Court case: Aldrich v. Basile, see here). And — surprise! — that’s exactly what happened here.

We decline to hold that a constructive trust should be imposed in this case. We acknowledge that the court in Tolin used the constructive trust remedy to work around the invalid revocation of a codicil because the testator’s intent was clear and because a third party would otherwise benefit from the testator’s mistake at the expense of the intended beneficiary. Further, we are mindful of the facts that, as in Tolin, Ralph’s intent is clear in this case and a reversal of the final judgment will result in a benefit to Ralph’s estate (i.e., to Jill, Jeff, and Judy) at the expense of Lindenau. However, there was no dispute in Tolin about the validity of the original will or codicil. And in [Allen v. Dalk, 826 So.2d 245 (Fla. 2002)], the court expressly distinguished Tolin and declined to extend it beyond its facts. Allen, 826 So.2d at 248. Instead, the court in Allen refused to impose a constructive trust because the testator had failed to comply with a “major requirement for a validly executed will” (i.e., the testator’s signing of it) and thus “[a]n order imposing a constructive trust under these facts would only serve to validate an invalid will.” Id.

Read in conjunction, Tolin and Allen make it clear that while the imposition of a constructive trust might be appropriate where a will (and thus a trust) has been validly executed, that remedy is not appropriate where there is an error in the execution of the document. We conclude that that distinction should be extended to cases such as this one where an amendment to a trust was not validly executed. Because there was no valid, enforceable amendment, the imposition of a constructive trust on the Bradenton house “would only serve to validate an invalid” amendment. Allen, 826 So.2d at 248.