Jarboe Family and Friends Irrevocable Living Trust v. Spielman, — So.3d —-, 2014 WL 185215 (Fla. 2d DCA January 17, 2014)

This case involved a Florida judgment creditor trying to sue a Kentucky trustee/trust in Florida. The Kentucky trustee moved to dismiss on jurisdictional grounds, tracking the procedures for contesting personal jurisdiction laid out by statute in F.S. 48.193 and by our supreme court in Venetian Salami Co. v. Parthenais, 554 So.2d 499, 502 (Fla.1989). Creditor argued this procedure was trumped by F.S. 56.29, which governs “proceedings supplementary” for the collection of unsatisfied judgments. Creditor won the argument at the trial-court level.

Spielman disagreed that Florida’s long-arm statute and Venetian Salami apply in proceedings supplementary. Spielman argued that the only allegations required to meet the jurisdictional pleading requirements were those setting forth a facially sufficient cause of action for proceedings supplementary under section 56.29, Florida Statutes (2011). Spielman asserted that the impleader complaint’s allegations that the Trust and the Trustee transferred property to delay, hinder, or defraud Spielman satisfied this requirement. Spielman alternatively asserted that Jarboe’s deposition refuted the factual allegations in the Trustee’s affidavit.

The trial court agreed with Spielman’s primary argument and entered an order denying the motion to dismiss.

Wrong answer says the 2d DCA. Here’s why:

As has been noted, long-arm jurisdiction is a separate species of jurisdiction from that which is dependent upon pleadings or other procedural happenings. See Judge Scott Stephens, Florida’s Third Species of Jurisdiction, 82 Fla. B.J. 10, 11 (Mar. 2008) (discussing the differences between subject-matter jurisdiction, in personam jurisdiction, and “procedural jurisdiction”). Indeed, at least two Florida courts have addressed the issue of in personam jurisdiction over nonresident third-party impleader defendants by applying Florida’s long-arm statute as set forth in Venetian Salami. See, e.g., Tabet v. Tabet, 644 So.2d 557, 559 (Fla. 3d DCA 1994); Neff v. Adler, 416 So.2d 1240, 1243–44 (Fla. 4th DCA 1982), superseded by statute on other grounds, Standard Prop. Inv. Trust, Inc. v. Luskin, 585 So.2d 1099 (Fla. 4th DCA 1991). Thus, the Trust and the Trustee correctly argue that the issue of in personam jurisdiction in this case must be determined in accordance with the procedures explained in Venetian Salami.

Lesson learned?

If you’re a non-Florida trustee, a Florida court’s personal jurisdiction over you is never a given, in any context, and that includes proceedings supplementary under F.S. 56.29. If you find yourself litigating this issue, you’ll want to make sure you comply with the traditional procedures for contesting long-arm jurisdiction, which I’ve previously written about in the probate context here. You’ll also want to make sure you factor in F.S. 736.0202, Florida’s brand new trust-specific long-arm statute, which was passed in 2013 and previously discussed here.

Stone v. Stone, — So.3d —-, 2014 WL 537547 (Fla. 4th DCA February 12, 2014)

If, when and how Civ. Pro. Rule 1.525, the rule setting a 30-day post-judgment deadline for filing attorney’s fee motions in civil litigation, applies to contested probate, guardianship and trust proceedings, is an important question. The last thing any lawyer wants to do is blow a deadline for claiming fees on behalf of his client, which is what happened in a string of cases I wrote about a few years ago (see here, here, here).

The problem was that a rule designed to apply in the general commercial litigation context didn’t really work in the probate, guardianship and trust context, where fee petitions are appropriately filed all the time, not just after a final judgment is entered. To fix this glitch in 2011 legislative and rule changes were adopted eliminating Rule 1.525′s 30-day deadline in the adversary probate and guardianship context, and limiting Rule 1.525′s 30-day deadline to fee petitions filed in trust proceedings by anyone other than the trustee (e.g., a beneficiary suing the trustee for malfeasance). Click here for my write of that legislation.

Unfortunately, not everyone got the memo; in the linked-to case above the trial court denied a motion for fees in an adversary probate proceeding based on Rule 1.525′s 30-day deadline. Wrong answer says the 4th DCA:

Generally, in civil proceedings, “[a]ny party seeking a judgment taxing costs, attorneys’ fees, or both shall serve a motion no later than 30 days after filing of the judgment … which judgment or notice concludes the action as to that party.” Fla. R. Civ. P. 1.525. However, under Florida Probate Rule 5.025(d)(2), adversary probate proceedings, “as nearly as practicable, must be conducted similar to suits of a civil nature, including entry of defaults. The Florida Rules of Civil Procedure govern, except for rule 1.525.” This probate rule is applicable to the order on appeal in this case. In re Amendments to the Florida Probate Rules, 95 So.3d 114, 115 (Fla.2012). The inapplicability of rule 1.525 in adversary probate proceedings functions identically to the inapplicability of the rule in proceedings governed by the Florida Family Law Rules of Procedure. See Montello v. Montello, 961 So.2d 257, 258–59 (Fla.2007); Hollister v. Hollister, 965 So.2d 341, 349–50 (Fla. 2d DCA 2007); Smith v. Smith, 902 So.2d 859, 862–63 (Fla. 1st DCA 2005).

As such, the trial court erred in striking appellant’s motion for costs based on the motion being untimely served under the thirty-day rule of Florida Rule of Civil Procedure 1.525. We, therefore, reverse and remand for further proceedings on appellant’s motion for costs.

In re Guardianship of O.A.M., — So.3d —-, 2013 WL 5927613 (Fla. 3d DCA November 06, 2013)

Guardianship proceedings involving minors can be especially challenging for all involved . . . including your judge. Here’s the main problem: unlike most civil cases, in guardianship proceedings the judge plays a dual role: he or she serves both as neutral arbiter and as the person ultimately responsible for protecting the ward’s best interests. In Florida the power and responsibility of a court exercising guardianship jurisdiction over minors is such that the court itself is considered to be the minor’s guardian. See Brown v. Ripley, 119 So.2d 712, 717 (Fla. 1st DCA 1960). Thus “the legal guardian of a minor is regarded as the agent of the court and of the state in the discharge of his duty as such.” Id. How trial judges balance their sometimes competing roles in guardianship proceedings is the subject of the linked-to opinion above.

Case Study:

A Miami probate judge was apparently concerned that the parents/guardians of a minor ward were using guardianship funds to pay for the child’s private school tuition. While these payments may seem benign to most of us (after all, the money’s being used for the child’s benefit), in a guardianship proceeding they raise red flags. Why? Because parents serving as guardians aren’t absolved of their legal responsibility to financially provide for their children. This point is codified in F.S. 744.397(3), which provides as follows:

If the ward is a minor and the ward’s parents are able to care for him or her and to support, maintain, and educate him or her, the guardian of the minor shall not so use his or her ward’s property unless directed or authorized to do so by the court.

In other words, you can’t use your child’s money to pay for normal child-rearing expenses; that’s a parent’s responsibility. That said, if the child/ward has special needs requiring specialized educational support, those costs may be paid for with guardianship funds . . . if approved of by a judge. See Valentine v. Kelner, 452 So.2d 965 (Fla. 3d DCA 1984).

Bottom line, the 3d DCA didn’t fault the judge for being concerned about the private-school payments, it’s how he went about addressing those concerns that lead to his disqualification. So what went wrong? Here’s how the 3d DCA summarized the key facts:

The McFaddens’ motion contains specific statements indicating that the trial judge interviewed, outside the presence of the parties, the principal of the school where the ward was registered to attend. The motion also alleges the trial judge directly obtained financial records from Chase Bank to investigate the guardianship account, without involving the parties. The McFaddens’ motion thus contains specific statements which, if true, indicate the trial judge engaged in an independent investigation of the facts in the case.

Judicial investigation = judicial disqualification:

Florida law is clear: you can’t be both investigator and judge. Once that line is crossed, a judge is subject to immediate disqualification. Here’s how the 3d DCA summarized the law on this point:

“A judge must not independently investigate facts in a case and must consider only the evidence presented.” Fla. Code Jud. Conduct, Canon 3B(7) cmt. A judge’s “neutrality is destroyed when the judge himself becomes part of the fact-gathering process.” Albert v. Rogers, 57 So.3d 233, 236 (Fla. 4th DCA 2011); see also Vining v. State, 827 So.2d 201, 210 (Fla.2002) (“The judge overstepped his boundaries by conducting an independent investigation….”); Wilson v. Armstrong, 686 So.2d 647, 648–49 (Fla. 1st DCA 1996) (holding that trial judge’s ex parte meeting with estate’s accountant constituted a departure from the essential requirements of law).

. . .

Thus, the McFaddens’ allegations, taken as true for purposes of this motion, support a reasonable fear that the judge could no longer serve impartially. The judge should have entered an order of disqualification.

For more on disqualification motions, you’ll want to read Judicial Ethics Bench Guide: Answers to frequently Asked questions.

A judge’s dual role in guardianship proceedings:

What’s most interesting about this case isn’t the disqualification motion itself; it’s the judge’s response to the motion. According to the 3d DCA:

The trial judge responded to the petition noting that “[i]n guardianship matters, there is no one protecting the ward against possible abuses [by the guardian], except the court.”

What I see happening here is a well-intentioned judge trying to balance the somewhat conflicting demands placed upon him in a guardianship proceeding, where he’s expected to serve both as neutral arbiter and as the person ultimately responsible for protecting the ward’s best interests. While sympathetic to his motives, the 3d DCA makes clear judges can’t exceed the clearly-defined boundaries they’re supposed to operate within (even in guardianship proceedings). If there’s any investigating to be done, judges need to use the tools available to them to get the job done the right way (such as appointing GAL’s); they can’t just do it themselves.

A trial judge . . . has methods to address . . . concerns [about possible abuses by a guardian] without engaging in a prohibited personal investigation of facts outside the record. The Florida Probate Rules, for example, authorize appointment of a guardian ad litem when the interests of the guardian are or may be adverse to those of the ward. While the trial court’s actions were undoubtedly motivated by a desire to protect the ward and might well be commendable in another context, those actions are inconsistent with the cold neutrality required of an impartial judge.

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Koshenina v. Buvens, — So.3d —-, 2014 WL 304889 (1st DCA January 29, 2014)

As the Baby Boomer generation passes age 65, the number of people living with cognitive impairment is expected to jump dramatically. Based on US Census data, researchers estimate that in 2000, 4.5 million Americans aged 65 years or older had some form of Alzheimer’s disease, the most well-known form of cognitive impairment; and this number is estimated to increase by almost 3-fold, to 13.2 million, by 2050. How our estate planning clients plan for this contingency may be one of the most important decisions they’ll ever make. In Florida a key component of that planning is a client’s written designation of a preneed guardian pursuant to F.S. 744.3045. As the 1st DCA noted in the linked-to case above:

This designation is one of life’s most intimate and important decisions involving highly personal and private judgments about who will provide care, love, and support when persons are unable to do so for themselves.

A person’s preneed guardianship designation is given “teeth” by F.S. 744.312(4), which obligates a probate judge to appoint your designated legal guardian unless the court determines that appointing such person is actually contrary to your best interests.

What makes the linked-to opinion so important for Florida trusts and estates lawyers is that it’s one of the very few reported cases to address specifically: (1) what’s the appropriate test for determining whether a person was competent at the time she executed her preneed guardianship designation, and (2) what’s the appropriate test under F.S. 744.312(4) for when a probate judge is authorized to disregard a person’s preneed guardianship designation.

Case Study:

In late 2010 wife (Linda) executed a designation of preneed guardian designating her husband (James) to be her preneed guardian. Sometime in 2010 at age fifty-seven, Linda began showing signs of mental deterioration and was subsequently diagnosed with Pick’s Disease—a rapidly progressive and terminal form of dementia. Because of the disease, Linda lost the ability to care for herself, interact socially, or control her behavior. She is unable to live independently and all parties—including James, Linda’s husband—agree that Linda needs care in a twenty-four hour, seven-days a week facility thereby excluding any arrangement where she would return to her home with her husband, even temporarily. There was a falling out between James and Linda’s two siblings, who in 2012 successfully petitioned for appointment of themselves as her emergency temporary guardians. In response James filed a notice of “Designation of Preneed Guardian” (Designation), which Linda had executed designating him as her preneed guardian. At the two-day evidentiary hearing on their petition, the siblings sought to prove the Designation was invalid either because Linda was incompetent when she made it or because of James’s undue influence on her. Here’s how the 1st DCA summarized the probate judge’s findings:

Thereafter, trial court found that Linda suffered no abuse at the hands of James and that all her injuries were a result of her progressing disease. The trial court further found, however, that Linda had done better in the care of the Siblings as emergency temporary guardians than she had done in James’s care and that James’s personality and social skills were not conducive to making appropriate decisions for the care of Linda. Further, although Linda executed the Designation naming James her preneed guardian, it was executed only “after the dementia process had seriously compromised her ability to understand what she was doing” and the trial court “seriously questioned”—despite possible lucid intervals that Linda may have experienced—whether Linda understood what she was doing when she executed the document. The trial court stopped short, however, of finding Linda incompetent at the time she executed the Designation. It went on to conclude that it was not in Linda’s “best interest” to honor Linda’s preference expressed in the designation “because of the [c]ourt’s findings regarding events subsequent to the execution of this document.” The trial court named the Siblings as plenary co-guardians of Linda, but prevented them from removing her from the Sunrise facility and restricted James’s visitation.

What’s the competency standard for preneed guardianship designations?

The first issue tackled by the 1st DCA was the challenge to the Designation’s validity on the grounds of capacity. We all know the legal standard for competency to execute a contract is different from the competency needed to sign a will or authorize medical care. What we didn’t know — until now — is what’s the legal standard for competency to execute a preneed guardianship designation. Did Linda need only have sufficient competency to know the person she was trusting to serve as her guardian was her husband or did she also have to understand the implications of that decision (similar to the standard applied to wills)? To my knowledge, this is the only Florida decision addressing that question directly. According to the 1st DCA, the standard is the same as applied to wills:

During oral argument, James urged this Court to hold that in the context of guardianship proceedings, determining a ward’s competency requires only a finding that the ward is capable of understanding that she is selecting a person she trusts. We reject this approach, however, because it would not require the ward to understand the implications of the document she is signing, something we believe is critical to making an informed decision.

Rather, we hold that the appropriate test for determining whether a ward was competent to make a decision regarding who will be her preneed guardian, is whether the ward had the capacity to generally understand the nature of the decision she is making and its implications. This test is analogous to that used in the context of testamentary capacity cases, which requires that a testator understand in a general way the nature and extent of his property to be disposed of, the testator’s relation to those who would naturally claim a substantial benefit from his will, and the effect his disposition will have. See, e.g., In re Estate of Edwards, 433 So.2d 1349, 1350 (Fla. 5th DCA 1983).

What’s the appropriate test under F.S. 744.312(4) for when a probate judge is authorized to disregard a person’s preneed guardianship designation?

The second and much thornier issue tackled by the 1st DCA goes to the heart of why clients sign preneed guardianship designation in the first place. What these documents are supposed to do is ensure your free will is respected — even after you’ve lost the ability to think for your self. So when we decide who our caretakers are going to be, we shouldn’t have to worry about whether our children, or a judge sitting in a courtroom years later, agree with us. Or should we? That’s the question presented to the 1st DCA.

According to the probate judge in this case he was authorized under F.S. 744.312(4) to disregard Linda’s designation of her husband as her preneed guardian if he, the judge, decided it would not be in Linda’s “best interest” to do so. Whether they know it or not, I think this is the standard most well-meaning judges operate under. For two prior cases involving preened guardianship designations in which I believe this mindset is reflected, see here, here.

Wrong answer says the 1st DCA. What the judge should have asked himself in this case is if appointing Linda’s husband was contrary to her best interests. In other words, courts don’t get to second guess a client’s freely-chosen guardian in hindsight. All they’re supposed to do is step in and make a change if the designated guardian will (or might) cause harm to the ward. This distinction is huge in terms of preserving personal autonomy.

Had section 744.312(4) been written to say that trial courts could simply apply a generalized “best interest” analysis—without consideration of whether the appointment of the preneed guardian “is contrary to the best interests of the ward”—the trial court’s analysis would be appropriate. But context and language matter. Once a determination is made that a ward competently designated a preneed guardian, that determination is entitled to deference and respect else the now-incompetent ward’s desires be too easily impeded, if not thwarted entirely. . . . It is why the legislature established a rebuttable presumption that the preneed guardian is “entitled to serve” absent disqualification or a finding that appointment “is contrary to the best interests of the ward.”

The linguistic distinction between what “is contrary to the best interest of the ward” and what may be in the “best interests” of a ward is subtle, but its legal ramifications are potentially life-altering, particularly in the context of overriding a ward’s personal designation of whom she wants to act on her behalf on private, personal health matters. This designation can be said to reflect what the ward believed was—and would be—in her long-run best interest. Overriding the statutory presumption in favor of the ward’s appointment of the designated preneed guardian is thereby no minor matter. It cannot be overcome with a generalized “best interest” approach; instead, the judicial mind must ask how is the appointment of the ward’s chosen guardian sufficiently “contrary” to her best interests that the court should disregard the ward’s choice and appoint someone else?

. . .

Accordingly, given the inherent flexibility of and lack of definitive caselaw on what constitutes a ward’s “best interest,” the standard in section 744.312(4) is best understood as creating a hurdle to show that specific actions/inactions of the designee are sufficiently egregious as to be “contrary to” the “best interests” of the ward thereby justifying a change in the status quo (or here, rebutting the presumption that a preneed guardian should be appointed).

So when will appointment of a person’s designated preneed guardian be contrary to her best interest? According to the 1st DCA, simply deciding some other relative might do a better job or that the designated guardian is a bit of a jerk, isn’t enough; what’s required is evidence of actual (or threatened) harm to the ward.

Admittedly, little judicial analysis exists on how the statutory standard at issue in section 744.312(4) (i.e., “is contrary to the best interests”) contrasts with a generalized “best interest” approach. At a minimum, that another relative might be a better caregiver is not enough under section 744.313(4) to unseat the designated preneed guardian; the ward’s designation of the preneed guardian-instead of the relative-reflects the ward’s preference on the matter. Similarly, the statutory standard requires more than a finding that a designated preneed guardian is lacking in interpersonal and social skills. For instance, in this case the record is bereft of any finding that James—and his bull-in-the-china-closet approach to caring for Linda—is anything other than his persona as Linda understood him to be. She may have dearly wanted a loving husband (no one disputes they love each other) aggressively advocating for her as she enters a life/health care environment that can be daunting to those unaccustomed to protocols and expectations within the walls of the medical community. Contrarily, a ward’s designation does not provide a guardian license to ignore medical directives and create disorder within a facility or office.

[1st DCA’s list of past cases in which courts have ruled against family members]:

FN6. See, e.g., Morris, 1 So.3d 1236 (affirming trial court’s finding that a ward’s minimally involved family members were not appropriate persons to appoint as guardians) [discussed here]; Davis, 686 So.2d 763 (finding conflict of interest rebutted the statutory presumption that a preneed guardian entitled to serve as guardian); In re Guardianship of Stephens, 965 So.2d 847, 851–52 (Fla. 2d DCA 2007) (reasoning it was contrary to a ward’s best interest to appoint any member of the ward’s dysfunctional family as guardians) [discussed here]. See also Duke v. Duke, 522 So.2d 258 (Ala.1988) (reversing trial court decision that appointment of son as guardian of incapacitated mother was contrary to mother’s best interest where there was no evidence son was dishonest, financially irresponsible or self-dealing, or uncaring and did not tend to her needs); In re Moses, 615 S.E.2d (Ga.Ct.App.2005) (affirming trial court’s decision to appoint ward’s sister rather than daughter as guardian of the person where although there was statutory preference for children over siblings, evidence showed ward expressed preference for sister and daughter was neglectful and abusive to ward); In re Hodgman, 602 S.E.2d 925 (Ga.Ct.App.2004) (finding no abuse of discretion for trial court to depart from statutory preference in appointing guardians where evidence demonstrated son mismanaged ward’s assets, acting in a manner contrary to the ward’s best interest); Brown v. Storz, 710 S.W.2d 402 (Mo.App.E.D.1986) (holding evidence supported appointment of mother as guardian of incompetent ward where substantial evidence demonstrated ward’s spouse was a habitual drunkard); see also Whitton, supra note 5, at 13.

Most inheritance litigation involving claims of undue influence arise in the context of a will or trust contest, and most of those cases revolve around whether the primary beneficiary actively procured the contested instrument. Active procurement can be difficult to prove (or disprove) because your single most important witness, the grantor, is dead, which means we have to litigate these cases based solely on circumstantial evidence.

But what circumstantial evidence should we focus on in these cases? That question was answered in In re Estate of Carpenter, 253 So. 2d 697 (Fla. 1971), in which the Florida Supreme Court reviewed prior case law on active procurement and listed “[s]everal criteria to be considered” in determining active procurement. In effect, the court was listing the circumstantial evidence we need to consider when litigating cases involving wills challenged on undue influence grounds. These are the famous “Carpenter factors” referred to in almost every undue-influence case ever since:

  1. Presence of the beneficiary at the execution of the will;
  2. Presence of the beneficiary on those occasions when the testator expressed a desire to make a will;
  3. Recommendation by the beneficiary of an attorney to draw the will;
  4. Knowledge of the contents of the will by the beneficiary prior to execution;
  5. Giving of instructions on preparation of the will by the beneficiary to the attorney drawing the will;
  6. Securing of witnesses to the will by the beneficiary; and
  7. Safekeeping of the will by the beneficiary subsequent to execution

Since the same factors used to prove undue influence are also used to prove active procurement, this list is a good summary of the factors lawyers need to consider when litigating undue influence cases, especially once the evidentiary presumption is triggered and the burden of proof is flipped by F.S. 733.107(2) (see here, here).

Undue influence: testamentary vs. inter vivos (lifetime) gifts: do the same factors apply?

Here’s the problem: the Carpenter factors are specific to wills (i.e., testamentary gifts) and are of little use in the lifetime (inter vivos) gift context; and no list of indicia of active procurement for lifetime gifts has ever been adopted by our courts. Into this gap stepped Miami attorney Patrick Lannon, who in 2008 published Challenging Inter Vivos Transfers Procured by Undue Influence: Factors to Consider. Mr. Lannon argued that in reported Florida cases dealing with lifetime gifts challenged on undue-influence grounds, courts have been swayed not by the traditional indicators of undue influence, which rely heavily on the involvement of an attorney and the execution of formal documents, but by one or more of a somewhat expanded and related set of factors, namely:

  1. Donee’s level of involvement in the donor’s affairs;
  2. Donee’s level of involvement in the actual gift in question;
  3. Relationship of the donee to the donor as compared to the natural objects of the donor’s bounty;
  4. Secrecy or openness of the transaction;
  5. Effect of the transfer on the donor’s pre-existing estate plan; and
  6. Physical health and mental acuity of the donor at the time of the gift.

Estate of Kester – Undue Influence Challenge to Inter-Vivos Transfers:

Fast forward to 2013, and the 1st DCA’s decision in Estate of Kester v. Rocco, — So.3d —-, 2013 WL 3155849 (Fla. 1st DCA June 24, 2013), which I wrote about here. This case involved lifetime gifts challenged on undue influence grounds. Although the 1st DCA dutifully parroted the Carpenter factors, the outcome of the case actually turned on the lifetime-gift factors identified in Mr. Lannon’s 2008 article; which is exactly the point he made in his follow up article entitled Estate of Kester – Undue Influence Challenge to Inter-Vivos Transfers, published in the Winter 2014 edition of ActionLine. Here’s an excerpt:

Interestingly, in overturning the probate court and determining that no undue influence occurred, the court in Estate of Kester ignored most of the factors it quoted, but directly or indirectly hit on every one of the factors listed above. Among other things, the court found that:

  • While Glenna had a close relationship with her mother, other heirs (siblings) also had close relationships and assisted her with various tasks (factor 1, factor 3).
  • Glenna did not actively participate in the process of changing the relevant account designations (factor 2).
  • For one of the accounts in question, a sibling (not Glenna) accompanied the decedent to the bank to make the beneficiary change (factor 4).
  • The decedent had made various pre-death outright gifts to her children, and there was no evidence that her intended equal treatment of heirs was to be accomplished by the probate proceedings alone without reference to other gifts effective at death (factor 5). An unsigned, undated, unwitnessed “to do list” referencing contrary intentions was deemed insufficient to take precedence over the actual actions taken by the decedent.
  • The decedent acted without confusion or anxiety, retained her mental faculties, and was fully aware of her actions when the accounts were changed, even shortly before death (factor 6).

While no one set of factors will ever perfectly capture the tangled web of facts present in any real-life situation involving potential inter-vivos undue influence, the guidance offered by the courts in this area is distinctly lacking. The proposed alternate factors above, however imperfect, may serve as a guide for those assisting clients where undue influence is alleged.

Mr. Lannon’s insightful analysis is gold for working litigators, and it’s the best we have until our appellate courts start doing a better job of distinguishing between testamentary and inter vivos undue influence cases. Until then, Mr. Lannon’s two articles are “must reads” for lawyers involved in any case in which a lifetime gift is challenged on undue influence grounds.

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Most inheritance cases settle, and most settlement agreements are never contested. But when they are, it’s good to know what the rules are. For example, if one side is trying to get out of her deal because she claims it was all a big mistake on her part, that’s a unilateral mistake argument, and Florida law is especially tough on them. On the other hand, if your settlement agreement is screwed up because of an obvious typo both sides missed, that’s a mutual mistake argument, and Florida law’s a little more lenient in those instances. And finally, if one side wants out of her deal because she was allegedly coerced into signing it, the alleged coercion better be more than just having second thoughts. That’s what happened in the linked-to case above.

Case Study

Pierce v. Pierce, — So.3d —-, 2013 WL 6438955 (Fla. 1st DCA December 10, 2013)

The two sisters involved in this case were, as the 1st DCA put it, “embroiled in a bitter will contest since the death of their mother.” In an effort to resolve their dispute, they sought mediation, with their respective lawyers in attendance, and reached a settlement agreement. Unfortunately, within hours of executing the agreement, one of the sisters apparently doubted the wisdom of her decision. Six days later she filed a motion to vacate the settlement agreement, claiming she was coerced into signing it after the mediator allegedly denied her request to take the agreement home over the weekend in order to study it.

Proving once again that no one ever knows for sure what a probate judge is going to do in the face of a good sob story, the judge granted complaining sister’s request to back out of her mediated settlement agreement. In that order, the trial judge found that complaining sister had, in fact, requested additional time to review the agreement but, “this additional time was not provided, not because of any nefarious dealings or subterfuge but rather due to the fact that the final signing by the parties came at the end of a prolonged Friday mediation session.” Based on these findings, the judge ruled he could not find that the complaining sister had “freely, knowingly and intelligently entered into the agreement.”

Does buyer’s remorse equal coercion? NO

When the order vacating the settlement agreement finally got to the 1st DCA, they weren’t impressed. A long day of mediation might be tiring, and signing a settlement agreement at the end of that long day might be stressful, and wishing you might have had more time to think about the deal might lead to second thoughts, but none of this adds up to “coercion.” Once you sign your deal, you own it.

While at one point during the day-long mediation, appellee might have asked if she could have taken the agreement home over the weekend to review it, the record shows only that, at the end of the day, she read and signed the settlement agreement without requesting additional time. That appellee may have been fatigued and distressed by the labor, and later suffered second thoughts, these facts, without more, do not provide grounds for setting aside an otherwise valid agreement.

For those of you faced with this situation, you’ll appreciate the 1st DCA’s summary of the law on this point. It’s the kind of one-paragraph case-law summary that’s perfect for cutting and pasting into your brief.

It is well established that “mediation and settlement of family law disputes is highly favored in Florida law.” Griffith v. Griffith, 860 So.2d 1069, 1073 (Fla. 1st DCA 2003). The Florida Probate Code has embraced this preference in section 733.815, Florida Statutes, which provides that “interested persons may agree among themselves to alter interests, shares, or amounts to which they are entitled in a written contract executed by them. The personal representative shall abide by the terms of the contract ….” (Emphasis added.) While much of the decisional law we cite on mediated settlement agreements arises from family law cases, we consider the rules expressed in those opinions to be applicable to a mediated settlement agreement arising in probate proceedings. Thus, as a general rule, “[t]he standard for disregarding a settlement agreement between parties is high” and “‘the fact that one party to the agreement apparently made a bad bargain is not a sufficient ground, by itself, to vacate or modify a settlement agreement.’” Griffith, 860 So.2d at 1073 (quoting Casto v. Casto, 508 So.2d 330, 334 (Fla.1987)). Put succinctly, “[t]he inquiry on a motion to set aside an agreement reached through mediation is limited to whether there was fraud, misrepresentation in discovery, or coercion.” Crupi v. Crupi, 784 So.2d 611, 612 (Fla. 5th DCA 2001). See also Griffith, 860 So.2d at 1072. Furthermore, it has been acknowledged that entering into a settlement agreement may be emotionally stressful, but “emotion is not grounds to set aside an otherwise duly-executed property settlement agreement.” Hahn v. Hahn, 465 So.2d 1352, 1354 (Fla. 5th DCA 1985) (observing that while “[t]he wife did testify, without specifics, that she was “emotionally abused” at the time she signed the agreement, [ ] courts have recognized that it is normal for parties in a dissolution proceeding to be emotionally upset”). See also O’Connor v. O’Connor, 435 So.2d 344, 345 (Fla. 1st DCA 1983) (holding a property settlement agreement made “in good faith and free from fraud, deceit, duress, coercion or overreaching should be upheld by the court.”); Bailey v. Bailey, 300 So.2d 294, 295 (Fla. 4th DCA 1974). In other words, where “the evidence establishes nothing more than that, upon reflection, [the party to the agreement] felt the terms of the agreement were not in her best interest[,] ‘[b]uyer’s remorse’ is not a sufficient basis for overturning a settlement agreement freely and voluntarily entered into.” Tanner v. Tanner, 975 So.2d 1190, 1191 (Fla. 1st DCA 2008) (citing, generally, Casto).

Professor Robert H. Sitkoff of Harvard Law School published an article that should warm the heart of your favorite law-and-economics geek who also happens to make his or her living as a trusts and estates lawyer. The article’s entitled An Economic Theory of Fiduciary Law, and below are a few excerpts I found especially interesting and relevant for practitioners (especially litigators).

The Agency Problem

The law tends to impose fiduciary obligation in circumstances that present what economists call a principal-agent or agency problem. An agency problem arises whenever one person, the principal, engages another person, the agent, to undertake imperfectly observable discretionary actions that affect the welfare of the principal. Agency problems therefore arise not only in relationships governed by the common law of agency, but also in trust law, corporate law, and a host of other contexts.

. . .

Loyalty and Care

The primary fiduciary duties are the duties of loyalty and care. The duty of loyalty proscribes misappropriation and regulates conflicts of interest by requiring a fiduciary to act in the “best” or even “sole” interests of the principal. . . .

The duty of care prescribes the fiduciary’s standard of care by establishing a “reasonableness” or “prudence” standard that is informed by industry norms and practices. The fiduciary standard of care is objective, measured by reference to a reasonable or prudent person in like circumstances. If a fiduciary has specialized skills relevant to the principal’s retention of the fiduciary, then the applicable standard of care is that of a reasonable or prudent person in possession of those skills.

. . .

Compensation and Disgorgement

In the event of a fiduciary’s breach of duty, the principal is entitled to an election among remedies that include compensatory damages to offset any losses incurred or to makeup any gains forgone owing to the fiduciary’s breach, or to disgorgement by the fiduciary of any profit accruing to the fiduciary by reason of the breach. The former is a standard measure of make-whole compensatory damages. The latter is a restitutionary remedy that, within the American tradition, is commonly implemented by way of a constructive trust to prevent the unjust enrichment of the breaching fiduciary.

Image courtesy of Wikimedia Commons.

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Russell R. Winer of St. Petersburg, Florida was on the winning side of Geraci ex rel. Geraci v. Sunstar EMS, — So.3d —- 2012 WL 2401793 (Fla. 2d DCA June 27, 2012), an interesting homestead case I wrote about here. Given the thicket of complexity presented by Florida homestead law, I invited Russell to share some of the lessons he drew from this case with the rest of us and he kindly accepted.

[Q] Were there any developments after your win at the 2d DCA?

[A] Yes. The Florida Supreme Court entered this order accepting jurisdiction of the case, but did not cite a reason. I had assumed it was that I, as Respondent, had consented to jurisdiction based on the 2d DCA having interpreted a provision of the Constitution. I had opposed jurisdiction based on a conflict. Then, the Florida Supreme Court entered this order in which  (for the first time) it cited to “express and direct conflict.” So this supports AHCA (& Pinellas County’s) theory that the holding in Geraci is applicable in the 2d DCA, and not in the 3d DCA, which addressed a similar homestead issue in Phillips v. Hirshon, 958 So.2d 425 (Fla. 3d DCA 2007). Once the case got back to the probate court, it entered this amended homestead order.

[Q] What strategic decisions did you make in this case that were particularly outcome determinative at the trial-court level? On appeal?

[A] Initially, the trial court simply declined to enter my proposed homestead order finding that the leasehold interest was exempt from claims of creditors. I then submitted a proposed, appealable final order. The Court entered its own order instead. As for the appeal, I kept the brief to the 2DCA concise. The statement of the case and facts was two pages. The argument was three pages. The conclusion was one page. Our appellate courts have a mountain of materials they must go through and I wanted this brief to stand out, because I very much needed the Court to take a close look at this issue; our only chance for relief was the 2DCA.

[Q] Would you have done anything differently in terms of framing the issues for your probate judge?

[A] Our probate judge in South Pinellas County has served 17 years as a Circuit Judge, the last 8 of which have been in probate. Before serving as a Judge, she was staff counsel in probate, so it’s not a division where time needs to be spent orienting the Court to the legal issues. The Court is keenly aware of the legal issues, and in this case, there were zero facts in dispute.

[Q] Do you think there’s anything that could have been done in better estate planning to avoid this litigation or at least mitigate its financial impact on the family?

[A] As the late Judge Paskay was fond of saying in that thick Hungarian accent, “there’s more than one way to skin a cat!” Had the Decedent met with an estate planning attorney, particularly one with a Medicaid background, then suitable arrangements could have been made.

[Q] Any final words of wisdom for probate lawyers of the world based on what you learned in this case?

[A] Our colleagues in Criminal Court are sensitive to appellate issues, as are our colleagues in Civil Court. In contrast, I don’t see as much appellate activity in Probate, and I would encourage Probate attorneys to consider an appeal if warranted. I do recommend attending several CLE’s before filing your first notice of appeal, and if possible, your first (few) trips to the DCA should be as Appellee.

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Cessac v. Stevens, — So.3d —-, 2013 WL 6097315 (Fla. 1st DCA November 20, 2013)

The grant of a power of appointment to a trust beneficiary offers flexibility in an estate plan that’s virtually impossible to achieve any other way. For example, arming a beneficiary with a testamentary power of appointment allows that beneficiary to custom tailor what the next generation receives (if anything), based on the facts as they exist years (or decades) after the trust agreement was first executed. That’s what was supposed to happen in the linked-to case above, in which three trusts were created in 1970, all of which contained testamentary powers of appointment exercisable by the settlor’s daughter (Sally Christiansen), all of which became effective 41 years later when Sally died in 2011. Here’s how the power of appointment was stated by Sally’s father:

Upon the death of my daughter, SALLY, the Trustees shall transfer and deliver the remaining principal of this share of the trust, together with any accumulated or undistributed income thereon to or for the benefit of such one or more persons, corporations or other organizations, in such amounts and subject to such trusts, terms and conditions as my daughter may, by her will, appoint, making specific reference to the power herein granted. ….

(Emphasis added).

Something must have happened in the 41 years between 1970 and 2011, because Sally apparently intended to exercise her power of appointment in a way that disinherited her surviving children (the default beneficiaries under her father’s trust). Unfortunately for Sally, the lawyer she hired to draft her will didn’t take the time to read her father’s trust. According to the 1st DCA:

[T]he [drafting] attorney testified that he made no effort to ensure that [Sally’s] will complied with the trusts’ requirements when preparing the decedent’s final will in 2009 even though he had previously been provided a copy of at least one of the trusts.

Not having read the trust, it’s no surprise the lawyer hired to draft Sally’s will left out the following key text: a clause making specific reference to the trust’s power of appointment. Oops! Instead, the only reference in Sally’s will to her father’s trusts was the following single sentence:

Included in my estate assets are the STANTON P. KETTLER TRUST, FBO, SALLY CHRISTIANSEN, under will dated July 30, 1970, currently held at the Morgan Stanley Trust offices in Scottsdale, Arizona, and two (2) currently being held at Northern Trust of Florida in Miami, Florida.

Can the “equitable exception” doctrine salvage a will’s non-existent exercise of a power of appointment? NO

Powers of appointment have been around for a long time, so Sally wasn’t the first person to sign a will that managed to muck up the mechanics of this simple — but powerful — estate planning tool. Rather than hammer family members (and other favored classes of beneficiaries) for these drafting mistakes, the English courts of Chancery developed the “equitable exception” doctrine, which salvages bad drafting as long as the defective will is arguably somewhere close to the mark. The doctrine’s been applied in the U.S. (but not Florida), and is articulated in Restatement (First) of Property § 347 as follows:

Failure of an appointment to satisfy formal requirements imposed by the donor does not cause the appointment to be ineffective in equity if (a) the appointment approximates the manner of appointment prescribed by the donor; and (b) the appointee is a wife, child, adopted child or creditor of the donee, or a charity, or a person who has paid value for the appointment.

At issue in this case was whether Sally’s will was close enough to qualify for the equitable exception doctrine. Answer: NO. Why? Bad drafting’s forgivable, but a blank slate isn’t. In other words, Sally’s intent to exercise the power of appointment had to be reflected somewhere within the four corners of her will, because her will failed to include any reference to the power whatsoever, it fails . . . no matter how strong the extrinsic evidence of her contrary testamentary intent might be. Here’s how the 1st DCA explained this point, relying heavily on a similar 1986 case out of Arizona:

[I]n In re Strobel, 149 Ariz. 213, 717 P.2d 892, 893–94 (1986), Mr. Strobel created two trusts, each of which gave Mrs. Strobel a power of appointment which required specific reference in her will. Mrs. Strobel’s will stated that she had been given a power of appointment in Mr. Strobel’s will rather than the trust documents and that, pursuant to such power, she appointed all of the trust assets to her estate. Id.

The Strobel court noted that the general rule is that an exercise of a power of appointment must comply with the specific requirements imposed by the donor. Id. at 896–97. However, the court adopted the view of the Restatement of Property § 34[7] (1940) that “equity will ‘aid the defective execution of a power’ ” if the defect was due to mistake, the appointment approximately met the requirements of the manner of exercise, and the appointee was a natural object of affection. Id. The court concluded that the evidence showed that Mrs. Strobel clearly intended to exercise the power of appointment and that the invalidity of her exercise of the power was due to mistake. Id. at 897. The court then, after concluding that granting equitable relief would not defeat Mr. Strobel’s purpose in imposing the requirements on exercising the power of appointment, gave effect to the defective exercise of appointment in light of Mrs. Strobel’s approximate compliance with the requirements. Id. at 899.

Here . . . the decedent’s will did not include even a general reference to the powers of appointment held by the decedent. Without such, the decedent’s will failed to even substantially comply with the “specific reference” requirements of the trusts. The Strobel court made this precise point when it noted:

[T]he donee’s intent to exercise the power of appointment must be evident from the document itself. Thus, for example, if the donee’s will makes “no reference at all to any power,” and the donor required “specific reference to the power,” the will cannot exercise the power of appointment, even under the equitable exception. Furthermore, “no amount of intent by the donee will exercise a power in the face of a contrary intent by the donor.”

Id. at 897 (citations omitted and emphasis in original).

What about Fla. Stat. § 732.607? Can it save the day? NO

Having struck out under the equitable exception doctrine, Sally’s personal representative pointed to Fla. Stat. § 732.607, our probate code section dealing with powers of appointment, and again tried to argue the will’s exercise of the power of appointment should be given effect based on extrinsic evidence of Sally’s intent. Fla. Stat. § 732.607 provides as follows:

A general residuary clause in a will, or a will making general disposition of all the testator’s property, does not exercise a power of appointment held by the testator unless specific reference is made to the power or there is some other indication of intent to include the property subject to the power.

Noting this same argument was tried — and rejected — in Talcott v. Talcott, 423 So.2d 951 (Fla. 3d DCA 1982), the 1st DCA again said no. It’s the settlor’s intent that matters, not Sally’s. Here’s how the 1st DCA summed up it’s thinking on this point and the case as a whole:

The Talcott court rejected an identical argument as to the applicability of section 732.607 when, citing the statute, the court stated, “[i]f the trust contains no specific limitation on the manner of executing the power, other evidence that the power had been executed may be considered to determine intent [but][w]hen the trust defines the manner in which the power must be exercised, noncompliance with the donor’s requirements defeats the appointment.” 423 So.2d at 955–56 (citations omitted). We agree; nothing in section 732.607 limits the power of an individual to place specific requirements on the disposition of his or her property and where, as here, a settlor of a trust places specific restrictions on the exercise of a power of appointment, section 732.607 is inapplicable.

In sum, we conclude that to properly exercise a power of appointment such as the powers provided for in the trusts at issue in this case, the decedent must at least make reference in his or her will to the powers of appointment held by the decedent. Here, the mere reference to one of the trusts and to the location of the property of the other two trusts was not sufficient to even substantially comply with the “specific reference” requirements in the trusts. Accordingly, because the decedent failed to comply with the requirements of the trusts when attempting to execute her powers of appointment, the assets in the trusts did not become part of her estate and must pass to the decedent’s children, as directed in the original trusts, rather than to Ms. Cessac as provided in the decedent’s will.

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If your law practice involves inheritance disputes, you’ll want to read Sycamore Row, by John Grisham. In his latest novel Grisham returns to his roots, revisiting small-town Mississippi lawyer Jake Brigance, who we first met in Grisham’s break-through thriller turned Hollywood blockbuster A Time To Kill (Jake is played by Matthew McConaughey in the movie version); and the will contest, a plot device Grisham mined to great effect in The Testament, his 10th novel.

“‘Sycamore Row’ reminds us that the best legal fiction is written by lawyers — Grisham, Scott Turow (who still practices), Louis Auchincloss (a trusts and estates lawyer), the Michigan judge William Coughlin.” (See A Time to Die, NY Times Book Review.)

Although first and foremost a great story, Grisham’s latest novel also delivers a virtual mini-course in probate law and the courts. At one point every character with an interest in the inheritance has lawyered up so that the presiding judge counts 12 attorneys in his courtroom, and he doesn’t like it. Through the filing of petitions, taking of depositions, revelation of witnesses, choosing of the jury, we get to follow the details of the case from beginning to end. Good stuff for lawyers and non-lawyers alike, a point underscored in The Washington Post’s glowing review of the book:

Grisham’s return to Clanton is triumphant. “Sycamore Row” is easily the best of his books that I’ve read and ranks on my list with Stephen King’s “11/22/63” as one of the two most impressive popular novels in recent years. Grisham, at 58, has many books ahead of him, but this could be the one he’ll be remembered for.

It’s an ambitious, immensely readable novel about a bitterly contested will, but about other things as well. It’s often funny and sometimes tragic. If at least a few scenes don’t move you to tears, you may not be alive. It’s above all a novel about the Deep South, about Mississippi, where Grisham lived his formative years. At one point, Brigance tells an older lawyer that the battle over the will is simply about money. The man replies, “Everything is about race in Mississippi, Jake, don’t ever forget that.” He’s right, of course.

For an insightful and scholarly examination of Grisham’s Sycamore Row and the history of racial violence animating its plot, you’ll want to read Prof. McMurtry-Chubb’s The Rhetoric of Race, Redemption, and Will Contests: Inheritance as Reparations in John Grisham’s Sycamore Row. Here’s an excerpt:

When Henry “Seth” Hubbard renounced his formally drawn wills and created a new holographic will on the day of his suicide, one that excluded his children, grandchildren, and ex-wives, and gave the bulk of his estate to his housekeeper and caretaker, a will contest was imminent. That Seth Hubbard was a white man living in rural Mississippi and his housekeeper, a Black woman, made the will contest illustrative of our ongoing national discomfort with slavery, the Confederacy, and the respective obligations of and responsibilities to the descendants of both. This is John Grisham’s Sycamore Row, a novel in which the reader journeys to discover the mysteries behind Seth Hubbard’s will, his intentions, his burden as a witness to a lynching over his ancestor’s land, and the fate of the descendants of the formerly enslaved who worked and settled that land known as Sycamore Row only to see its destruction when they asserted their right to it. Seth’s act of bequeathing the bulk of his estate to a stranger made family through blood spilled over stolen land and stolen, broken Black bodies is an important start to an important discussion: Who bears responsibility to the survivors of domestic terrorism, white supremacy, and for the benefits that white privilege bestows? The will contest encapsulates the rhetoric of race and redemption; in Sycamore Row Hubbard’s estate acts as reparations.

The Washington Post review picks up on a point that’s especially important if you hope to have any chance of really understanding Grisham’s latest novel: the South’s tortured history of race and violence is still very much with us . . . yes, even in something as mundane as a will contest. For example, and hopefully without giving away too much, you can’t truly “get” how horrific Grisham’s depiction of a man’s lynching in 1930 is, or why the present-day African American lawyers who appear in Grisham’s story conduct themselves the way they do, without having some inkling of what it was like to live as an African American in the “South” (which very much includes Florida), both then and now.

Context is everything (both in and out of the court room). And the threat of racial violence (often aided and abetted by local police and judges) was never far, a point made chillingly clear in another recently published book I highly recommend for Florida lawyers, Devil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New America, by Gilbert King, winner of the 2013 Pulitzer Prize for General Nonfiction. Here’s an excerpt from the book’s back cover.

In 1949, Florida’s orange industry was booming, and citrus barons got rich on the backs of cheap Jim Crow labor. To maintain order and profits, they turned to Willis V. McCall, a violent sheriff who ruled Lake County with murderous resolve. When a white seventeen-year-old Groveland girl cried rape, McCall was fast on the trail of four young blacks who dared to envision a future for themselves beyond the citrus groves. By day’s end, the Ku Klux Klan had rolled into town, burning the homes of blacks to the ground and chasing hundreds into the swamps, hell-bent on lynching the young men who came to be known as “the Groveland Boys.”

And so began the chain of events that would bring Thurgood Marshall, the man known as “Mr. Civil Rights,” and the most important American lawyer of the twentieth century, into the deadly fray. Associates thought it was suicidal for him to wade into the “Florida Terror” at a time when he was irreplaceable to the burgeoning civil rights movement, but the lawyer would not shrink from the fight–not after the Klan had murdered one of Marshall’s NAACP associates involved with the case and Marshall had endured continual threats that he would be next.

Drawing on a wealth of never-before-published material, including the FBI’s unredacted Groveland case files, as well as unprecedented access to the NAACP’s Legal Defense Fund files, King shines new light on this remarkable civil rights crusader, setting his rich and driving narrative against the heroic backdrop of a case that U.S. Supreme Court justice Robert Jackson decried as “one of the best examples of one of the worst menaces to American justice.”