Julia v. Russo, — So.2d —-, 2008 WL 2596324 (Fla. 4th DCA Jul 02, 2008)

The 4th DCA reversed itself on an important point involving joint bank accounts, withdrawing this opinion and replacing it with the linked-to opinion above. The issue on rehearing was a simple evidentiary burden-shifting question:

If a decedent funded a bank account 100% with his own funds, then put his girlfriend’s name on the account, does the girlfriend have to prove the decedent intended to make a gift to her of a 50% interest in the account, or does the decedent’s estate have to prove that the decedent did NOT intended to make this gift?

The first time around, relying on two divorce cases to resolve this probate dispute (??!!), the 4th DCA said girlfriend bore the burden of proof.  Girlfriend filed a motion for rehearing, took another crack at the issue . . . and won!  On rehearing the 4th DCA completely reversed its prior ruling. This time around the 4th DCA sided with the girlfriend, shifting the burden of proof over on to the estate.

The next time your involved in litigation involving a joint bank account owned by tenants in common, take another look at this case. Unless the facts are a slam dunk for one side or the other, who bears the burden of proof will probably by the single most important factor in determining who wins or loses the case. That’s usually the sort of thing you want to know up front, not once you’re six months into the case and going down in a ball of flames.

Here’s how the 4th DCA articulated the rule:

On appeal, appellant argues that the trial court erred in finding that there was no presumption of a gift of personal property because Florida law provides that when a joint bank account is created with the funds of one person, there is a presumption of a gift to the other person which may be rebutted only by clear and convincing evidence to the contrary. We agree.

Initially, the trial court’s reliance on Crouch and Grieco is misplaced. Both Grieco and Crouch were decisions which addressed the issue of whether certain assets were marital or nonmarital under section 61.075(5), Florida Statutes (2005). The principles involved in that determination are inapplicable here.

The issue here is how to determine what share a tenant in common is entitled to. “In absence of evidence to the contrary, co-tenants are presumed to owe [sic] equal undivided interests. Levy v. Docktor, 185 B.R. 378, 381 (S.D.Fla.1995). “[U]pon the death of a cotenant, the deceased cotenant’s interest in the property subject to the tenancy in common passes to his or her heirs, and not to the surviving cotenant.” 12 Fla. Jur.2d Cotenancy and Partition § 4 (1998). See, e.g., Reinhardt v. Diedricks, 439 So.2d 936, 937 (Fla. 3d DCA 1983). Taking title to property in joint names creates a presumption of a gift which may be rebutted. Sullivan v. Am. Tel. & Tel. Co., 230 So.2d 18, 20 (Fla. 4th DCA 1969). See also O’Donnell v. Marks, 823 So.2d 197 (Fla. 4th DCA 2002) (taking title as tenants in common is an indication of an intention to make a beneficial gift of an undivided interest to the other party); Mercurio v. Urban, 552 So.2d 236 (Fla. 4th DCA 1989) (stocks owned as tenants in common entitles co-owner to presumption of gift).

The trial court did not apply the presumption of a gift in appellant’s favor but instead erroneously required her to prove the decedent intended to make a gift. We therefore find it necessary to reverse and remand for the trial court to determine if there was clear and convincing evidence presented which rebutted the presumption of a gift.

If you’re representing a plaintiff in an undue-influence or testamentary-capacity case, one of your first challenges is mapping out the questions you’ll be asking when you depose the lawyer who drafted the will or trust being challenged.  If you’re representing the estate defending against this challenge, you’ll want to know how best to build a deposition record that dissuades the challenger from proceeding with his or her case, or encourages an early settlement on favorable terms.  Why is the deposition so important? Because the vast majority of contested probate proceedings settle before trial, so your depositions may be the only “trial” you’ll ever have, and will certainly tilt the negotiating leverage to one side or the other in any settlement negotiations.

And lest we forget our estate-planning brethren, if you’re an estate planner and for some reason you believe the estate planning documents you’re working on are likely to end up being challenged, then you’ll want to be especially sure that [a] your client is competent and not the victim of undue influence and [b] that you build a record documenting your conclusions.

In all of these circumstances a good checklist of questions is worth its weight in gold.  And a good starting point for building this kind of checklist is a recent article in the American Journal of Psychiatry entitled Assessment of Testamentary Capacity and Vulnerability to Undue Influence, by Kenneth I. Shulman, M.D., F.R.C.P.C., Carole A. Cohen, M.D., F.R.C.P.C., Felice C. Kirsh, LL.B., Ian M. Hull, B.A., LL.B., and Pamela R. Champine, J.D., LL.M.  Here’s an excerpt:

Documentation for Assessment of Testamentary Capacity and Undue Influence

In the absence of a validated assessment instrument, we propose that in addition to the traditional Banks v. Goodfellow criteria, the following issues should be addressed and documented in a forensic assessment, whether it is contemporaneous or retrospective:

  1. Rationale for any dramatic changes or significant deviations from the pattern identified in prior wills or previous consistently expressed wishes regarding disposition of assets.
  2. The appreciation of the consequences and impact of a particular distribution, especially if it deviates from or excludes “natural” beneficiaries, such as close family members or spouses.
  3. Clarification of concerns about potential beneficiaries who are excluded from the will or bequeathed lower amounts than might have been expected—that is, ruling out the presence of a specific delusion or overvalued idea that influences the distribution.
  4. Evidence of the presence of a specific neurologic or mental disorder that may affect cognition, judgment, or impulse control.
  5. Evidence of behavioral disturbances or psychiatric symptoms at the time of the execution of a will, for example, behavioral and psychological symptoms of dementia such as agitation, impulsiveness, disinhibition, aggression, hallucination, and delusions.
  6. The emotional/psychological milieu in which the testator lives, with specific reference to conflicts or tensions within the family, documenting the complexity and conflictual level of situation-specific factors.
  7. The testator’s understanding and appreciation of any conflicts or tensions in his or her environment.
  8. Evidence of a pathological or dependent relationship with a formal or informal caregiver, such as a younger woman who offers comfort and reassurance or plants seeds of suspiciousness toward family or friends.
  9. Evidence of inconsistency in expressed wishes or an inability to communicate a clear, consistent wish with respect to the distribution of assets; for example, frequent will changes are sometimes made in a desperate attempt to garner care, support, or comfort at a time when the testator feels increasingly vulnerable or threatened.
  10. Any of the indications of undue influence.

Specific questions posed to the testator may help in elucidating and probing the relationship between task-specific and situation-specific factors:

  1. Can you tell me the reason(s) that you decided to make changes in your will?
  2. Why did you decide to divide the estate in this particular fashion?
  3. Do you understand how individual A might feel, having been excluded from the will or having been given a significantly less amount than previously expected or promised?
  4. Do you understand the economic implications for individual B of this particular distribution in your will?
  5. Can you tell me about the important relationships in your family and others close to you?
  6. Can you describe the nature of any family or personal disputes or tensions that may have influenced your distribution of assets?

When a retrospective assessment is being conducted, assiduous review of medical records, examinations for discovery, and selective interviews of informants are needed to cast light on these issues.

Another excellent resource for those brave souls willing to delve into the murky waters of a testamentary-capacity lawsuit is a piece in the Journal of the American Academy of Psychiatry and the Law entitled Common Pitfalls in the Evaluation of Testamentary Capacity by Harvard Medical School Professor of Psychiatry Thomas G. Gutheil, MD.

Blogging credit:

Credit goes to Pennsylvania trusts and estates lawyer and expert witness Patti S. Spencer for bringing the linked-to articles to my attention in this post on her Pennsylvania Fiduciary Litigation Blog.

Mercurio v. Headrick, — So.2d —-, 2008 WL 2434193 (Fla. 1st DCA Jun 18, 2008)

The finality of death is the sort of thing most people can figure out pretty much on their own. Unfortunately, once you walk into the alternate reality of litigation, just because your opponent is dead doesn’t mean your case is over.  In the linked-to case the joint owners of a piece of property were suing each other for partition. The twist here is that they owned the property as joint tenants with right of survivorship.  So when one side died, "bingo" the survivor automatically owned the entire property, end of story, game over. Only problem is that the trial court didn’t see it that way, so now we have an appellate decision that reiterates property law 101:

The trial court ordered the parties to mediation in September 2006, but they apparently did not reach an agreement over their lingering disputes before Mr. Headrick died in late October. Ms. Mercurio moved for summary judgment on the ground that the joint tenancy remained intact at Mr. Headrick’s death, and that she was entitled to an undivided interest in the property as his joint tenant with a right of survivorship. Both the original judge and his successor judge denied Ms. Mercurio’s motion, finding that Ms. Mercurio’s admissions in her answer signified the parties’ mutual intent to partition the property. The successor judge ultimately rendered a final order partitioning the property and directing the parties to sell it at a private sale. Ms. Mercurio appeals that order.

The question in this case is whether a pending action to partition a joint tenancy with right of survivorship survives one joint tenant’s death. We hold that such an action does not survive the death of a joint tenant and, accordingly, absent a final judgment of partition at the tenant’s death, the action is abated, because the surviving tenant receives full title to the property, consistent with the right of survivorship.

This issue is one of first impression in Florida. Other jurisdictions, however, have confronted the question, and we adopt their common approach which we find persuasive and logical.
.     .     .     .     .

This approach comports with the established and undisputed rule in Florida that only a complete, final conveyance or disposition of jointly held property severs a joint tenancy with right of survivorship.  .  .  .   This case, as many divorce cases, involves a dispute over the disposition of jointly held property. In the case of a joint tenancy, the death of one party resolves that dispute by operation of law.

Berkow v. Isaevna, — So.2d —-, 2008 WL 2511272 (Fla. 3d DCA Jun 25, 2008)

Lest we forget, the 3d DCA reminds us all once again that a summary judgment hearing isn’t a trial.

The Appellants, Counter-Petitioners in a dispute over an estate that has escheated to the State of Florida, appeal an order that denied their motion for summary judgment, granted the Appellees/Petitioners final summary judgment, and awarded Petitioners the escheated funds. We reverse.

The record demonstrates that there were genuine issues of material fact regarding whether the Appellees were legitimate heirs of the decedent. Hence, the court erred in granting summary judgment. Moore v. Morris, 475 So.2d 666 (Fla.1985); Copeland v. Fla. New Invs., Corp., 905 So.2d 979, 980 (Fla. 3d DCA 2005). The Appellants had presented affidavits asserting that all of the decedent’s heirs above them in the statutory hierarchy had died, § 732.103, Fla. Stat. (2004), arguably entitling them to the funds. They had also presented affidavits challenging the legitimacy of the Appellees as heirs. These issues of fact cannot be resolved on summary judgment. Moreover, on summary judgment the court cannot weigh testimony or make factual findings. Deakter v. Menendez, 830 So.2d 124 (Fla. 3d DCA 2002). Therefore, the court erred in entering the orders on appeal here.

I’ve written before about the jurisdictional competition for trust funds, both within the U.S. among various states and internationally [click here].  Internationally, Switzerland has long relied on its reputation for banking secrecy (dating back to the Middle Ages) as a competitive advantage in this market [click here].

However, in a post 9/11 world financial transparency has become a national security issue [click here].  Which means jurisdictions like Switzerland, that sell their services in part on the assumption that government authorities in home-country jurisdictions will NOT be able to crack their veil of secrecy, are facing enormous pressure to open up.  The latest battle on this front was reported on today by the WSJ Law Blog in a post entitled: A Falling Shelter? DOJ Playing Hardball with UBS, Swiss Regulators.  Here’s an excerpt from the WSJ Law Blog post with links to underlying source materials:

.  .  .  In an unprecedented move against a foreign bank, the DOJ is seeking to force UBS AG to turn over the names of wealthy U.S. clients who allegedly used the giant Swiss bank to avoid taxes [click here]. Here are stories from the WSJ’s Evan Perez and the NYT’s Lynnley Browning. [Click here, here, here for a copy of the government’s ex parte petition, a supporting memo of law, and exhibits, all seeking disclosure UBS bank records in Switzerland.]

In seeking a federal court order Monday, the Justice Department ratchets up the pressure in its high-profile case, which has spawned federal criminal and civil probes into the alleged tax evasion. The matter places UBS in a bind between U.S. tax authorities and a Swiss law that prevents banks from disclosing confidential information without client approval.

.     .     .     .     .

The Justice and Internal Revenue Service investigation has been aided by information from a former UBS banker, Bradley Birkenfeld, who pleaded guilty June 19 to helping his U.S. clients evade taxes. Birkenfeld told U.S. prosecutors that UBS holds an estimated $20 billion in assets for U.S. clients in undeclared accounts. These accounts generated $200 million a year in revenues for the bank, prosecutors said.

Switzerland’s loss is Florida’s gain:

Florida trust companies cannot compete with off-shore jurisdictions willing to protect banking clients from legitimate investigations by home-country authorities.  To the extent jurisdictions such as Switzerland are compelled to open up their banking records to legitimate investigations by government authorities – or face pariah status in world financial markets if they don’t – that can only be a good thing for Florida trust companies.

Ehrlich v. Severson, — So.2d —-, 2008 WL 2512375 (Fla. 4th DCA Jun 25, 2008)

Although the 4th DCA reversed the probate judge’s ruling in this case, it did recognize that there’s a glitch in the statute governing the payment of examining committees.  If a large part of your practice focuses on guardianship matters (mine doesn’t) and you’re a member of the Florida Bar’s Elder Law Section or RPPTL Section, responding to the 4th DCA’s request for a legislative fix sounds like a great project to run with.

Gladys Ehrlich was the subject of a guardianship petition which was denied. She appeals an order which requires her to pay the fees of the examining committee.

Although we acknowledge that payment of the examining committee’s fees should not be contingent on the outcome of the competency determination, we agree with appellant that the procedural statute for determining incapacity does not make the potential ward responsible for examining committee fees where the guardianship petition is dismissed or denied. See § 744.331(7), Fla. Stat. (2007).[FN1]

[FN1.] We note that the subject statute formerly provided for examining committee fees to be paid from “the general fund of the county in which the petition was filed.” § 744.331(7)(a), Fla. Stat. (1995). However, the 1996 amendment to the statute appears to have eliminated the county’s liability except in cases where the ward is indigent. This leaves a gap in responsibility for payment of the fees where a good faith petition is denied or dismissed. The Legislature needs to specify who pays the examining committees fees in this circumstance.

Sarhan v. Rothenberg, Slip Copy, 2008 WL 2474645 (S.D.Fla. Jun 17, 2008)

Dr. Robert Sarhan, on behalf of himself and his mother, Yvonne Sarhan, filed suit in Miami’s U.S. District Court against one of this city’s most experienced and esteemed probate judges, Arthur Rothenberg, alleging that his mother’s constitutional rights had been violated when Judge Rothenberg adjudicated his mother incapacitated and appointed her a guardian.  Apparantly unhappy with the fact that Judge Rothenberg’s ruling was upheld on appeal by the 3d DCA, Dr. Sarhan sought another bite at the apple before a federal court.  And just to make sure everyone knew he meant business, Dr. Sarhan’s federal claim also sought $100 million in punitive damages.

This case highlights two themes I’ve written about before.  First, vexatious pro se litigants are simply a fact of life in probate litigation and counsel/judges need to know how to manage that problem, because it’s not going away [click here, here].  Second, the U.S. Supreme Court’s 2006 decision limiting the scope of the "probate exception" to federal jurisdiction is likely to trigger a surge in probate-related matters (like the linked-to case) ending up in federal court [click here, here].  Again, probate counsel need to know how to manage this jurisdictional issue as well.

No, you can’t relitigate your guardianship case in federal court:

The linked-to opinion is an excellent road map for probate counsel trying to figure out when (if ever) litigation related to contested guardianship proceedings can end up in federal court.  Most of us would automatically assume this case was silly to begin with (which probably explains why Dr. Sarhan filed it pro se), but not many could articulate exactly why, as a matter of jurisdictional jurisprudence, you’d get laughed out of court for pulling a prank like this.  After this case, you’ll know why.

Probate Exception to Federal Jurisdiction:

Under the probate-exception to federal jurisdiction, a U.S. District Court is preculded from adjudicating disputes having to do with property that is in the custody of a state probate court.  Here’s how the U.S. Supreme Court articulated the rule in 2006:

.  .  .  when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res. Thus, the probate exception reserves to state probate courts the probate or annulment of a will and the administration of a decedent’s estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction.

Marshall v. Marshall, 547 U.S. 293, 311-12, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006) (emphasis added).

In this case the Miami U.S. District Court applied this general rule to a contested guardianship proceeding relying heavily on an opinion out of the U.S. 7th Circuit penned by none other than Judge Richard Posner, probably one of the U.S.’s most prolific and well-known legal theorists (and blogger!).  Here’s your road map:

As explained by Judge Posner in Struck v. Cook County Pub. Guardian, 508 F.3d 858, 860 (7th Cir.2007), a case with very similar facts to the Petition before this Court, proceedings to resolve disputes over the administration of a incompetent’s estate are still in rem in character. “That is, they are fights over a property or a person in the court’s control.” Id. The Petition is an example of a case falling squarely within the probate exception as clarified by the Supreme Court in Marshall. Dr. Sarhan requests this Court to reverse the orders of the probate court and to return all assets and property distributed pursuant to the guardianship to him. (See D.E. 8 at 15.) These are not matters that are “outside the confines” of the state probate court’s supervision of Yvonne Sarhan’s guardianship. As such, Judge Posner’s analysis of the application of the probate exception in Stroud is directly on point here:

The res-the plaintiff’s mother-is in the control of the guardian appointed by the state court, and decisions concerning the plaintiff’s right of access to his mother and to her assets, her records, and her mail are at the heart of the guardian’s responsibilities and are supervised by the court that appointed him … [P]laintiff is seeking to remove into the federal court the res over which a state court is exercising control. That is the sort of maneuver that the probate/domestic-relations exception is intended to prevent.

508 F.3d at 860.

Rooker-Feldman doctrine:

Under the Rooker-Feldman doctrine, a United States District Court lacks subject matter jurisdiction to review final judgments of a state court.  If you don’t like a state-court ruling, then your options are to appeal up through to the Florida Supreme Court and from there the U.S. Supreme Court, but you can’t simply walk across the street to your local federal court house and ask for a do-over.

In this case Judge Rothenberg’s guardianship ruling had already been affirmed per currium by the 3d DCA before Dr. Sarhan filed his federal claim.  Rather than going up the appellate court chain, Dr. Sarhan simply refiled his case in the Miami U.S. District Court.  Wrong answer.  Here’s how the magistrate judge in the linked-to opinion applied the Rooker-Feldman doctrine to this case:

As was the case in the Seventh Circuit’s probate exception decision, Struck v. Cook County Public Guardian, there is also persuasive precedent for the application of the Rooker-Feldman jurisdictional doctrine to a guardianship proceeding. The Tenth Circuit’s recent decision in Mann v. Boatright, 477 F.3d 1140 (10th Cir.2007), stands squarely for the proposition that a pro se litigant in Dr. Sarhan’s position cannot obtain a do-over in federal court against the judges and interested persons in a state court guardianship proceeding that has been finally adjudicated. The Court relied primarily on the Rooker-Feldman doctrine:

To [petitioner] this means that having lost in probate court, she cannot file a federal complaint seeking review and reversal of the unfavorable judgment. Even if the probate court’s decision was wrong, that does not make its judgment void, but merely leaves it “open to reversal or modification in an appropriate and timely appellate proceeding.” … Nearly all of [petitioner’s] claims against the individual defendants assert injuries based on the probate court’s judgments and, for her to prevail, would require the district court to review and reject those judgments. As such, her claims are inextricably intertwined with the probate court judgments and are therefore barred by the Rooker-Feldman doctrine.

Id. at 1146-1147 (quoting Exxon-Mobil, 544 U.S. at 284, 125 S.Ct. 1517, 161 L.Ed.2d 454).

The very same type of claims raised in Mann have been raised here, over the same type of guardianship proceeding that was finally adjudicated in state court, and against the same defendant-the state court probate judge. Whatever merit Dr. Sarhan’s claims may have, they are left for the Third District Court of Appeal or the Florida Supreme Court to decide. And if those state appellate courts fail to grant him the relief he seeks, Dr. Sarhan’s sole remedy is to proceed by way of certiorari to the United States Supreme Court, as per 28 U.S.C. § 1257. This District Court, however, has no power to consider whether Dr. Sarhan was right and whether Judge Rothenberg’s judgments should be vacated or voided, as per 28 U.S.C. § 1331. The Rooker-Feldman doctrine, therefore, requires the dismissal of his Petition.

Bud Newman of the Daily Business Review reported here on the details of a settlement deal ending the high-profile battle over the multi-million dollar estate of Seth Tobias, a wealthy hedge fund manager who died last Labor Day weekend with cocaine, the prescription sleep aid Ambien and alcohol in his system. His brothers claimed in court papers that he was killed by his wife. An autopsy concluded he drowned, and Palm Beach prosecutors filed no criminal charges. I’ve written about this case before, click here.

The value of the estate was not disclosed but was estimated in several news reports to be $25 million to $35 million.

Settlement Terms:

As best as I could make out from the linked-to news report, here are the specific settlement deal terms:

  1. The Tobias brothers will withdraw the claim in their court filing that Filomena Tobias killed her husband.
  2. Filomena Tobias will become the administrator of the estate after a temporary curator is discharged.
  3. Each side agrees to place $400,000 into an escrow account pending final resolution of a claim involving an unresolved lawsuit against the estate.
  4. Seth Tobias’ brothers, Sam and Spence Tobias, will receive all of the estate’s stock and interest in Tobias Brothers Inc., in which Seth Tobias was a partner. The value of this stock was not disclosed.
  5. The estate will set aside a $3.6 million fund to be split among Seth Tobias’ relatives, friends, charities and their attorneys in the following order of priority:
    1. First a Pennsylvania high school scholarship fund and a Philadelphia rehabilitation center will split $400,000.  The remaining $3.2 million (3.6 – .4 = 3.2) is split as follows:
    2. Attorneys are next in line for an unspecified amount “equal to the reasonable attorneys’ fees of counsel for the Tobias brothers.”  In other words, the parties agreed to set aside a fund for attorney’s fees and allow the court to make the final call on who gets what.  According to the linked-to news report, the brothers were represented by West Palm Beach attorney Jamie Pressly of Pressly & Pressly, who declined to say what he will charge in attorney fees.
    3. After paying attorney’s fees, whatever’s left over will be split as follows: 11% to Seth Tobias’ mother, Esther Chakov, 11% to Seth Tobias’ father, Sidney Tobias, 18% to each of Seth Tobias’ four brothers (Scott Tobias, Sam and Spence Tobias, and Joshua Goldberg), 3% to Seth Tobias’ friend, Patrick Bransome, and 3% to Seth Tobias’ friend, Anthony Parker.

Lesson learned? Manage Expectations

What is striking about this settlement is the apparently low figure the brothers settled for.  Out of an estate worth from $25 million to $35 million, the widow basically gave up only $3.6 million (14.4% to 10.3% of the estate), and the $3.6 million share of the estate she is giving up will have to be split among a slew of parties – net of attorney’s fees.  That is not to say that this was a bad deal for the brothers.  In fact, this was probably a great deal for the brothers (if they’d gone to trial and lost, which is likely, they would have got NOTHING).

This case provides a reality check for future litigants (and their attorneys).  Managing expectations is 99% of the game when working with families in contested probate matters (the other 1% is probably all the stuff they teach you in 3 years of law school).  One of Florida’s most experienced and best known probate litigators, Jamie Pressly, advised his clients to settle for between 14.4% to 10.3% of the estate vs. rolling the dice on a winner-take-all trial.  If at the very beginning of the engagement someone sat down with the Tobias brothers and told them to assume their chances of winning at trial were not good (say less than 10%), then a last-minute deal in the 14.4% to 10.3% range was a big “win” and every penny in legal fees paid was well worth it.  If no one ever had this conversation with them or, even worse, if someone told them their case was a “slam dunk,” then a last-minute deal in the 14.4% to 10.3% range probably felt like a dumbfounding “loss” to these clients.  Win or lose, big case or small case, wild facts (gay murder conspiracy) or mundane facts (who gets dad’s WWII lighter), managing expectations is the key to happy clients.

A last-minute settlement deal means the widow of drowned hedge fund millionaire Seth Tobias will avoid a trial.  As reported here, here, lawyers for Filomena Tobias and Seth Tobias’ brothers Friday night made a confidential deal avoiding a week-long trial expected to receive national attention and provide an inside look into a life of money, sex and drugs.  The Tobias brothers were battling Filomena Tobias over the former CNBC commentator’s estate, worth $25 million.

As I previously wrote here, this case boiled down to a battle between two little known inheritance legal doctrines that can have a huge impact on who gets what from an estate: Florida’s slayer statute vs. it’s pretermitted spouse statute (both statutes are explained at length in my prior blog post on this case).  Fortunately for the parties involved the costs and uncertainties of a trial were avoided.  I once heard a friend say: “Your best outcome at trial is almost always second best to a negotiated settlement deal.”  I think that’s generally good advice.  On the other hand, for Florida probate attorneys this would have been a fascinating case to follow.

Reid v. Judea, — So.2d —-, 2008 WL 2356814 (Fla. 3d DCA Jun 11, 2008)

The linked-to opinion is interesting on several levels. 

1.  First, for reasons not explained, the probate court in this case denied a motion to disqualify trial counsel who was also submitting evidence in his capacity as drafter of the contested trust agreement. Here’s the relevant excerpt:

[Beneficiaries of the trust] moved to disqualify [the trustee’s] attorney, William Palmer, pointing to the fact that it was Palmer who had prepared the trust and its amendments for [the decedent/settlor]. On April 18, 2007, the trial court .  .  .  denied the motion to disqualify.

Appearing both as witness and trial attorney in the same proceeding is a big "no, no", for reasons I previously wrote about here.  I don’t understand the trial court’s ruling in this case.

2.  Second, a big issue in this case was whether new Florida Trust Code (FTC) section 736.04115  expanded pre-existing Florida law or merely codified pre-existing Florida law regarding a trustee’s standing to bring a trust reformation action.

In ruling on this point the 3d DCA gave a huge amount of deference to the Legislative Staff Analysis of FTC.  This legislative history is basically a verbatim recitation of the scrivener’s summary of the FTC prepared by none other than FSU Law Professor David F. Powell, whom I consider to be the single most authoritative source for understanding the new FTC [click here, here].  Hint: when in doubt, cite to Staff Analysis in all future trust litigation.

3.  Third, the 3d DCA asked for and received an amicus brief from the Florida RPPTL Section on the trustee standing issue in this case.  I would assume this bit of extra analytical "humph" should make this opinion especially persuasive authority for other Florida appellate courts addressing the same issue in the future.  Here’s the "thank you" note from the 3d DCA for the amicus brief:

[FN3.] We asked the Real Property, Probate & Trust Law Section of The Florida Bar to file a brief as amicus addressing the question of a trustee’s standing to pursue a claim for reformation [click here for copy]. We thank the section for taking the time to respond and to provide us with its input.

SUBSTANTIVE RULING

The substantive ruling in this case is significant: trustees have standing to prosecute trust reformation claims all on their own.  In the future, any time you have a trust reformation case where the person with the most to gain from the litigation is both trustee and beneficiary of the trust, you can bet that litigant will prosecute the claim in his or her capacity as trustee, not as a beneficiary.  Why?  Because as trustee you can use trust funds to finance your litigation expenses.  As beneficiary, you have to bear that expense out of your own pocket.  Yes, it’s good to be the king.

Anyway, here’s how the 3d DCA explained its ruling in this case:

Although [F.S. 736.04115] does not expressly mention trustees, its legislative history confirms that it is intended to encompass trustees whose authority to seek reformation has always been presumed to exist:

Reformation of a trust to cure mistakes is addressed in s.736.0415, F.S. Upon application of the trustee or an interested person, a court may reform the trust’s terms to conform to the settlor’s intentions [if] clear and convincing evidence proves that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake. Reformation under the section is available for mistakes of law and of fact, whether or not the terms of the trust are ambiguous. Florida case law supports reformation to cure scrivener’s errors. [See In re Estate of Robinson, 720 So.2d 540 (Fla. 4th DCA 1998) ] This section is broader, however, as it allows reformation for mistakes both in the expression and in the inducement.

Fla. S. Comm. On Banking & Ins., CS for SB 1170 (2006) Staff Analysis 20 (March 21, 2006) (emphasis added).

*     *     *     *     *

[I]t is clear to us that in cases involving a determination of the settlor’s true intent, a trustee is an “interested person,” and an “interested person” has standing to seek reformation of a trust. For these reasons, we reject the general notion that a trustee lacks the standing to seek reformation of a trust either before or after enactment of section 736.0415. Accordingly, we reverse the order dismissing Reid’s reformation action and remand for further proceedings on this claim.