Taxation & Estate Planning

: Florida Probate Litigation Blog

3d DCA: Trustee, acting solely in her capacity as trustee, has standing to bring a trust reformation action

By Juan C. Antúnez (all)

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. 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.

Full post as published by Florida Probate Litigation Blog on June 14, 2008 (boomark / email).