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Tuesday, October 10, 2017

Florida 2016 Notable Cases

SATISFACTION OF NUPTIAL AGREEMENT – CLAIM BY SURVIVING SPOUSE The Northern Trust Company v. Shaw, 196 So. 3d 424 (Fla. 2d DCA June 3, 2016)

DECISION –  The Fourth District Court of Appeals held that a prenuptial agreement was satisfied when a decedent’s wife received $480,000 from the decedent’s IRA and testamentary gifts of personal property worth approximately $103,000.

Before their marriage, the decedent and his wife entered into a prenuptial agreement in which the wife waived her rights to her husband’s estate with exceptions for the following items: items: (1) the sum of $500,000 from the decedent’s estate conditioned upon neither party having filed a petition for dissolution of marriage; (2) any testamentary gifts made by the decedent during the marriage; (3) any retirement and pension benefits for which the decedent’s wife is a named beneficiary; and (4) a life estate in the interest in any principal residence owned by the decedent. Upon the decedent’s death, the wife received $480,000 from the decedent’s IRA and testamentary gifts of the decedent’s personal property worth approximately $103,000. The wife filed a claim in the decedent’s estate seeking the $500,000 distribution. The Personal Representative, Northern Trust Company, objected to the claim and the decedent’s wife filed a complaint in the circuit court for breach of contract. Northern asserted that the decedent’s wife was precluded from receiving the $500,000 distribution because she already received over $500,000 from the decedent’s “estate” as defined in the prenuptial agreement as “any living trust created by the party, as well as life insurance, individual retirement accounts, qualified and nonqualified deferred compensation plans and other assets that may pass by beneficiary designation our of will or trust documents…” The trial court held that the decedent’s wife was entitled to the additional $500,000 and granted summary judgement. On appeal, the Fourth District Court of Appeals reversed the trial court’s ruling, holding that according to the plain language of the prenuptial agreement does not allow for an additional payment of $500,000 to the wife when she has already received at least $500,000 in assets from the decedent’s estate, as defined by the prenuptial agreement.

ELECTIVE SHARE – ATTORNEY’S FEES AND COSTS – Blackburn v. Boulis, 184 So.3d 565 (Fla. 4th DCA January 20, 2016)


DECISION - The Fourth District Court of Appeals held that the probate court did not abuse its discretion by ordering the estate to pay interest on 40% of the surviving spouse’s minimum elective share. Further, the Fourth District Court of Appeals reversed the probate court’s order directing that attorney’s fees from estate litigation be paid from the elective share.

In a protracted probate litigation between the estate and a surviving spouse, the probate court ordered the estate to pay interest on 40% of the surviving spouse’s minimum elective share and allowed the estate to deduct attorney’s fees incurred by the estate in litigating claims against the spouse’s elective share, from the elective share. The Personal Representative’s appealed. The Fourth District Court of Appeals affirmed the probate court’s order regarding the interest payment, holding that it would be “inequitable for [the] [s]pouse to be denied the opportunity for a reasonable return on her court-determined minimum elective share.” However, relying on Fla. Stat. 732.207 (the 1998 version of the elective share statute, which was replaced by Fla. Stat. 732.2065), the Fourth District Court of Appeals reversed the probate court’s order regarding the deduction of attorney’s fees, and held that the Florida elective share statute clearly and unambiguously sets forth only four types of expenses or costs which the probate court is to deduct from the value of the assets in the surviving spouse’s elective share, and attorneys’ fees are not one of those four.

AD VALOREM TAX EXEMPTION – MULTIPLE EXEMPTIONS- Endsley v. Broward County, 189 So.3d 938 (Fla. 4th DCA March 23, 2016)

DECISION – A harmonious family unit, even if they live apart in different states, cannot claim more than one homestead exemption.   

Endsley received a homestead exemption on Florida property, which was titled in her name alone, while her husband received a homestead exemption on Indiana property, which was titled in his name alone. In 2006, upon discovery of the husband’s homestead exemption in Indiana, the Broward County Property Appraiser removed Endsley’s exemption for tax years 1996 through 2005. The Appraiser's action was based on Article VII, Section 6(b) of the Florida Constitution, which provides that “[n]ot more than one exemption shall be allowed any individual or family unit....” In 2007, Endsley’s husband cancelled his Indiana homestead exemption and Endsley reapplied for her Florida homestead exemption in 2007. However, the Property Appraiser  reset the value of the Florida property to its market value as of the time of the application rather than the lower valuation under the “Save Our Homes” provision in Article VII, section 4(d) of the Florida Constitution. The trial court granted summary judgement for the Property Appraiser, holding that Endsley and her husband were a single-family unit and could not claim separate homestead exemptions. The Fourth District Court of Appeals affirmed, holding that the language of Article VII, Section 6(b) of the Florida Constitution clearly prohibits multiple homestead exemption regardless of location.


ESTATES – STANDING – ASSETS OF ESTATE Giller v. Giller, 190 So. 3d 666 (Fla. 3d DCA, April 27, 2016)

DECISION – Personal Representatives of decedent’s estate had standing to seek declaratory judgement that parcels of Florida real property titled in the name of decedent as “Trustee” were actually owned in fee simple by decedent, and therefore were subject to probate administration.

The Personal Representatives filed a complaint for declaratory relief under Fla. Stat. 689.07(1), which sought declaration that six parcels of Florida real property which were conveyed to the decedent grantee “as Trustee” were actually owned in fee simple by the decedent at the time of his death. Although the deeds referred to the decedent “as Trustee,” they did not contain the title or date of the decedent’s trust, names of any beneficiaries, or nature or purposes of the trust. The trustee of the trust filed a motion to dismiss the complaint, asserting that the Personal Representatives lacked standing to bring an action under Fla. Stat. 689.07(1), because they were not subsequent transferees entitled to bring action under Fla. Stat. 689.07(1). The trial court granted the motion to dismiss, holding that the Personal Representatives were not “subsequent parties” entitled to bring action under Fla. Stat. 689.07(1), and the Personal Representatives appealed. On appeal, the Third District Court of Appeals held that Fla. Stat. 689.07(1) does not state that it can be applied only by “subsequent parties” and does not preclude an action by the Personal Representatives to determine ownership of the properties. As such the Third District Court of Appeals reversed the trial court’s holding and remanded for further proceedings.


E-FILING OF CREDITOR CLAIMS United Bank v. Estate of Franzee, 197 So.3d 1190 (Fla. 4th DCA July 13, 2016)

DECISION – The Fourth District Court of Appeals held that the creditor, United Bank, which was represented by Florida counsel, was required to submit its claim electronically, and therefore its claim was not timely filed.

United Bank attempted to file paper copies with the court of its claims on the last day of the creditor claims period, but was informed by the Clerk, after the deadline to file claims had passed, that the claims were required to be filed with the court electronically. Subsequently, United Bank e-filed the claims and moved the court to find that the claims were timely filed. The trial court declined to make such a finding, and held that Fla. Rules of Judicial Administration 2.520 and 2.525 require that statements of claims be filed with the court electronically, unless one of the eight exceptions under Fla. Rule of Judicial Administration 2.520 apply. The Fourth District Court of Appeals affirmed the trial court’s holding, and held that United Bank’s interpretation of Fla. Rule of Judicial Administration 2.520 would essentially add another exception by allowing paper filing for everyone, so long as the party later submitted the filing electronically.


TRUSTEES FEES – Robert Rauschenberg Foundation v. Grutman, 198 So.3d 685 (Fla. 2nd DCA January 6, 2016)

DECISION – In calculating reasonable trustee compensation under Fla. Stat. 736.0708, when the trust is silent regarding compensation, the court must apply the factors under West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958), rather than the lodestar method under Florida Patient’s Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985).

The Robert Rauschenberg Foundation, the sole remainder beneficiary of the Robert Rauschenberg Revocable Trust, sought review of the Circuit Court’s order granting $24,600,000 to the trustees as fees for their services. The trust did not contain a provision addressing trustee compensation. At trial, the trustees asserted that they were entitled to between $51,000,000 and $55,000,000 in fees based on the factors set forth in West Coast Hospital Ass’n. However, the Foundation asserted that the trustees were only entitled to $375,000 in fees based on the lodestar method calculation set forth in Rowe.


In West Coast Hospital Ass’n Florida’s Supreme Court rejected the percentage-based approach and approved a standard under which the court would consider several factors to determine reasonable trustee compensation, including: “the amount of capital and income received and disbursed by the trustee; the wages or salary customarily granted to agents or servants for performing like work in the community; the success or failure of the administration of the trustee; any unusual skill or experience which the trustee in question may have brought to his work; the fidelity or disloyalty displayed by the trustee; the amount of risk and responsibility assumed; the time consumed in carrying out the trust; the custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks; the character of the work done in the course of administration, whether routine or involving skill and judgment; any estimate which the trustee has given of the value of his own services; payments made by the cestuis to the trustee and intended to be applied toward his compensation.”


Almost thirty years later, Florida’s Supreme Court issued Rowe in which the court used the lodestar method to calculate attorney’s fees. The lodestar method entails multiplying the number of hours reasonably expended by a reasonable hourly rate. In Rowe, the court looked at similar factors to those under West Coast Hospital Ass’n to determine the reasonable number of hours and reasonable hourly rate.


Many years after West Coast Hospital Ass’n and Rowe, Fla. Stat. 736.0708(1) was enacted regarding trustees’ fees, which requires that trustees’ fees be “reasonable under the circumstances.” However, the statute does not set forth a methodology or factors for calculating trustees’ fees.


The Foundation argued that the term “reasonable” as used in Fla. Stat. 736.0708, indicated a legislative intent to adopt the lodestar method under Rowe. However, the Second District Court of Appeals rejected this argument, affirmed the trial court’s decision, and held that the legislative history of Fla. Stat. 736.0708(1) indicated an intent to apply the factors in West Coast Hospital Ass’n in calculating reasonable trustee compensation.


TRUSTS – BENEFICIARIES’ RIGHT TO INTERVENE Genauer v. Downey & Downey, P.A., 190 So.3d 131 (Fla. 4th DCA January 6, 2016)

DECISION – The beneficiaries of a trust were permitted to intervene in trust litigation where the trustee was a party and the beneficiaries’ interest in the matter was sufficiently direct to allow for intervention.

Upon the death of one of the trust settlors (who was the father of the beneficiaries), Oppenheimer Trust Company was appointed as co-trustee with the settlor’s wife (the mother of the beneficiaries).  When the settlor’s wife became incapacitated, Oppenheimer became the sole Trustee. After allegations of misconduct, Oppenheimer Trust Company engaged the law firm of Downey and Downey to represent it in objecting to its discharge as trustee. Ultimately Oppenheimer was discharged and BB&T became the successor trustee. Upon discharge, on behalf of Oppenheimer, Downey & Downey, P.A. filed a trust accounting action requesting that the court approve Oppenheimer’s final trust accounting and requesting an award of attorneys’ fees and costs from the trust assets. Oppenheimer subsequently replaced Downey & Downey, P.A. as counsel, and issued checks from the trust as partial payment for the firm’s fees and costs. BB&T objected to this payment and successfully obtained an order requiring the firm to return the payments, as they were made without court approval. Downey & Downey, P.A. then commenced an action against BB&T for attorneys’ fees and costs, and the beneficiaries of the trust moved to intervene in the litigation, and argued that they were the real parties in interest, not BB&T, because the corpus of the trust belonged to them. Downey & Downey, P.A. argued that the beneficiaries did not have the right to intervene because their interests were adequately represented by BB&T, and their interests were aligned.  The trial court granted the beneficiaries’ motion to intervene, but placed restrictions on such holding, stating that then beneficiaries shall not have status as a party and shall not file any motion, answer, counterclaims, or engage in discovery. The beneficiaries appealed and argued that BB&T could not adequately protect their interests, and while BB&T owes them a fiduciary duty to defend the trust corpus, its action to protect the corpus may conflict with the beneficiaries’ interests. Ultimately, the Fourth District agreed and held that the trial court abused their discretion when it limited the beneficiaries’ ability to meaningfully participate in the proceedings.


TRUST ADMINISTRATION - LIMITATIONS NOTICESTurkish v. Brody, 2016 WL 6992203 (Fla. 3rd DCA November 30, 2016)

DECISION – The disclosure of a loan transaction in a trust accounting without additional detail did not amount to adequate disclosure, and therefore a beneficiary bringing a claim regarding the loan transaction was not barred by the six-month statute of limitations notice.

Settlor settled outstanding gift taxes with the I.R.S. for years 1991 through 2004 and requested that the tax liability be paid out of one of her trusts. The Settlor executed a promissory note, individually, in favor of the trustee of the trust evidencing over $1,000,000 in indebtedness, and the trustee made payment to the I.R.S. The Settlor’s daughter, a beneficiary of the trust, received various accountings for time periods covering years 2005 through 2010 along with Receipt and Release Agreements (“RRA”). The accountings included a statute of limitations notice consistent with Fla. Stat. 736.1008(4), which notified the beneficiaries that claims are barred by the applicable six months limitations period. The daughter brought an action for breach of fiduciary duties against the Trustee, making claims regarding various transactions, including the loan transaction. The court held that the trust disclosure documents, including the accountings, did not adequately disclose the loan transaction, even though the accounting disclosed the transaction itself, because accounting did not disclose that the note was basically worthless due to decedent’s (and later her estate’s) lack of funds to repay the note.


JOINT PROPERTY – MARITAL SETTLEMENT AGREEMENT – Ebanks v. Ebanks, 198 So.3d 712 (Fla. 2nd DCA January 29, 2016)

DECISION – The Second District Court of Appeals held that the trial court improperly enforced the marital settlement agreement and final dissolution judgement with respect to properties in the Cayman Islands held by the decedent and the decedent’s ex-wife as the Florida equivalent of joint tenants with rights of survivorship, where the marital settlement agreement and final dissolution judgement did not address what would happen with those properties upon the death of either joint tenant.

The decedent and his ex-wife divorced in Florida in 2008. On the date the decedent filed for divorce in 2006, the decedent executed his will stating that on his death, any property held jointly as joint tenants with right of survivorship will pass to the survivor, and that the decedent’s personal representative shall make no claim to such property. Four years later, the decedent died jointly owning three properties with his ex-wife in the Cayman Islands. The decedent’s personal representative filed a motion to enforce the final dissolution judgement, and the trial court ordered the decedent’s ex-wife to sell the properties or to purchase the decedent’s interest in them.

The properties were held as a “joint proprietorship,” which was the equivalent of what Florida law refers to as “joint tenancy with rights of survivorship.”  Under the law in the Cayman Islands, the owners may sever the tenancy by executing an instrument signifying that they agree to sever the joint ownership and to take the property as “proprietors in common in equal shares,” which is the equivalent of what Florida law refers to as “tenants in common.” The final dissolution judgement stated that if one party does not wish to buy the other out, the parties are required to sell the Cayman Islands properties and to use those proceeds to accomplish the detailed equitable distribution scheme. Significantly, neither the final dissolution judgement nor the marital settlement agreement required the parties to alter the tenancy in which the properties were held from a joint proprietorship to a proprietorship in common. Further, neither the final dissolution judgement nor the martial settlement agreement addressed what would happen to the Cayman Island properties in the event one of the parties predeceased the other. However, the decedent’s will essentially restated what the law of the Cayman Islands and the law of Florida requires; he provided that the property held in a joint tenancy with rights of survivorship would pass directly to the surviving tenant, and instructed his personal representative to make no claim on behalf of the estate for any property held with that type of ownership.  The Second District Court of Appeals reversed the trial court’s order which directed the enforcement of the final dissolution judgement and marital settlement agreement against the ex-wife, and held that the testator’s intent regarding the properties was made clear in his will.  

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