FALL 2012 CASE LAW UPDATE DADE COUNTY BAR PROBATE AND GUARDIANSHIP COMMITTEE by Eric Virgil, Esquire The Virgil Law Firm

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1 FALL 2012 CASE LAW UPDATE DADE COUNTY BAR PROBATE AND GUARDIANSHIP COMMITTEE by Eric Virgil, Esquire The Virgil Law Firm Presented 11/08/12 *PRESIDENTIAL ELECTION EDITION* 1. Oops. (Rick Perry). Fourth DCA explains how to analyze disputes regarding joint personal property (Beal Bank strikes again). Wexler v. Rich, 80 So.3d 1097 (Fla. 4 th DCA 2012). In Beal Bank, SSB v. Almand and Assocs., 780 So.2d 45 (Fla. 2001), the Florida Supreme Court held that unless the signature card on the account expressed a contrary intent or disclaimer, an account opened by a husband and wife creates a presumption that the account is held as tenants by the entireties, assuming that the other unities of time, title, and possession are present (be careful about making this assumption). If a couple seeks to shield a bank account from creditors using the TBE shield, the presumption shifts the burden to the creditor to prove by a preponderance of evidence that a tenancy by the entireties was not created. After Beal Bank, F.S. Sec (1) was amended to provide that any deposit or account made in the name of two persons who are husband and wife shall be considered a tenancy by the entirety unless otherwise specified in writing. What does contrary intent disclaimer or otherwise specified in writing mean? This case provides one answer. Here the bank provided the Riches with a signature card form that had an option for TBE ownership and a separate option for "joint account with right of survivorship." The Riches checked off joint account with right of survivorship (Oops) and did not choose TBE ownership. The 4 th DCA held that this demonstrates a type of express disclaimer contemplated by Beal Bank. The Court elaborated that freedom of contract includes freedom to make a bad bargain. The Court took a little poke at us lawyers by saying only a handful of attorneys in Florida are able to describe the differences between a tenancy by the entireties bank account and a joint account with right of survivorship. The Court further stated that a bank is not required to explain the legal ramifications of the various account options to customers. Application: This case indicates that TBE disputes involving bank accounts will hinge on what is found in the text of the account opening form. What the parties thought they were doing when they opened the account ( we re opening a marital account ) won t matter if they checked the wrong box. If you are involved in a case where such an account is at issue, you must get copies of the bank documents in order to determine the correct application of law. 1

2 2. Can you say that a little louder, Candy? (Barack Obama). The Fourth DCA helpfully explains how to analyze disputes regarding joint real property (hint, it s all about the deed). Bridgeview Bank Group v. Callaghan, 84 So.3d 1154 (Fla. 4 th DCA 2012). In this case a conveyance of real property was made into the Callaghans as husband and wife. A judgment creditor of the husband attempted to attach the property citing the Beal Bank concept of a rebuttable presumption of tenancy by the entirety that can be overturned by evidence of contrary intent. However, the rules are different with real property versus personal property. The Fourth DCA held that if the deed into a married couple doesn't mention some form of ownership other than TBE (tenants in common, joint tenants with right of survivorship, etc.), then the real property is deemed to be owned as TBE, and that presumption is not rebuttable by evidence of contrary intent. The Court found that Beal Bank recognized that with respect to real property [w]here real property is acquired specifically in the name of a husband and wife, it is considered to be a rule of construction that a tenancy by the entireties is created, although fraud may be proven. Therefore, the conveyance to the Callaghans created a tenancy by the entireties, and no express language in the deed showed a contrary intent. That presumption is not rebuttable, according to the Court, although it could be set aside if fraud were proven. Application: This shows the difference in analysis in joint property cases involving personal property and real property. In personal property, the presumption of TBE ownership is a rebuttable presumption but in real property TBE ownership, once shown, is not rebuttable by evidence of contrary intent. TBE ownership of real property can only be overturned by evidence of fraud or by some defect in the execution of the deed itself. 3. Democrats fall in love, Republicans fall in line. (Political Cliché) Second DCA explains how to determine ownership of property purchased with joint funds. Connell v. Connell, So.3d (Fla. 2d DCA 2012). The decedent was an elderly retired jeweler who liked expensive jewelry. While shopping with his wife, a woman he married eleven months prior to his death, he bought a $58,350 men's Rolex watch. Shortly thereafter, he purchased a $19,386 men's diamond ring. On both occasions he used funds from a checking account titled jointly with his wife and the wife knew of these purchases and did not object. The decedent wore the watch and ring every day. Shortly before his death, the decedent was hospitalized. Before going to the hospital, he gave the watch and ring to his wife to put away, and she put them in her purse. After the death of the decedent, decedent's son/personal representative asked the surviving spouse to return the watch and ring. She said no and the case ensued. To add some further complication, the decedent and surviving spouse had signed a prenup which gave joint property to the surviving spouse and individually owned property to the decedent s estate. The 2d DCA held that although the watch and ring were purchased with funds from a joint account the items were not owned jointly. This is due to the fact that when a joint account holder withdraws funds from a bank account that is held as a joint tenancy with the right of survivorship, it terminates the joint tenancy nature of the [funds] and severs the right 2

3 of survivorship as to the funds withdrawn. Wexler v. Rich, 80 So.3d 1097, 1100 (Fla. 4th DCA 2012). The Court also noted that the wife consented to the withdrawal of the funds for the jewelry purchases, so the decedent was not liable to her for her share of the joint account. Once the funds were withdrawn from the Connells' joint checking account, the funds lost their joint character. The Court further discussed the circumstances of the purchase and noted that it was for whom the watch and ring were purchased rather than how they were purchased that is important. The circumstances reveal that she was merely assisting the decedent buy a watch and ring for himself, not that they intended to jointly own the jewelry. The watch and ring were intended for the decedent's exclusive use. Finally, the Court discussed the law regarding joint tenancy and noted that a joint tenancy with right of survivorship must have five unities: survivorship, possession, interest, title, and time. Possession is joint ownership and control. Here, the unity of possession was not present in either the watch or the ring. Application: One takeaway from this case is how fact-intensive disputes can be regarding joint ownership of personal property. If you have a contested issue about joint ownership of personal property, you need to analyze whether the property is worth litigating over and what evidence might support the claims of each side. 4. I think you hit a reset button for the fall campaign. Everything changes. It s almost like an Etch A Sketch (Romney Campaign). The 4th DCA explains how to get jurisdiction over a trustee in probate and guardianship proceedings. Beekhuis v. Morris, 89 So.3d 114 (Fla. 4th DCA 2012). In 2010, Beekhuis, individually and not in her capacity as trustee for her mother, filed a petition to determine whether her mother was incapacitated and to appoint a plenary guardian. The petition did not refer to the trust. Morris, her brother, filed a counterpetition. The probate court appointed Steven Morris as the guardian after the incapacity proceedings. The proceedings were contested and soon thereafter, Morris filed several motions in the guardianship proceeding, in which he sought to have his sister removed as trustee of his mother s trust and to compel her as trustee to relinquish assets. In response, Beekhuis made limited appearances in court only in her individual capacity, arguing that the probate court lacked jurisdiction over her as trustee and over the trust property in the guardianship proceeding. Morris filed an Emergency Motion to Appoint Court Monitor and to Enjoin Trustee from Sale of Ward s Home and Request for Immediate Injunction. The probate court entered an ex parte order prohibiting the sale of Irene Morris homestead and directed Beekhuis, as trustee, to convey the property from the trust to Morris as guardian. Beekhuis argued on appeal that the probate court did not have jurisdiction over the trust or its trustee because she filed no pleadings and sought no relief in her capacity as trustee and did not subject either herself or the trust to the jurisdiction of the probate court. The 4 th DCA agreed with her and reversed the probate court ruling. It held that it was error for the probate court to assert jurisdiction over the trust property and Beekhuis, in her capacity as trustee, when the original pleadings in the case never raised any claim over the trust or its property, and Beekhuis continually asserted that the court lacked jurisdiction over the trust and trustee. 3

4 Application: To get jurisdiction over a trustee and trust property in probate and guardianship cases you must first file a complaint against the trustee. F.S. Sec This case also confirms the holding of the Chaffin v. Overstreet, 982 So.2d 11 (Fla. 5th DCA 2008) case I summarized in That case held that appearing before the probate court in one capacity (individually) does not subject that party in a separate capacity (as trustee) to the jurisdiction of the court. 5. Attacking me is not an agenda. (Mitt Romney). The Fourth DCA notes you must challenge a pour-over will in most cases where you attempt to revoke a revocable trust. Pasquale v. Loving, 82 So.3d 1205 (Fla. 4 th DCA 2012). This case involved the estate of a decedent named Porter. Porter executed a revocable trust and pour-over will. There were numerous amendments to the trust. After Porter s death, her PR served a Notice of Administration on Pasquale. Pasquale filed a trust contest within the notice time period, pursuant to a complaint in circuit court, but did not file a traditional will contest in probate court nor did Pasquale s trust complaint specifically request revocation of the pour-over will. The trial court dismissed Pasquale s lawsuit finding that the pour-over will incorporated the trust by way of a savings clause and that Pasquale missed the deadline to file a will contest. Pasquale s failure to contest the will eliminated his right to contest the trust found the trial court. The Fourth DCA confirmed that you must contest a pour-over will that contains a trust savings clause in order to contest a trust. However, the Court bailed out Pasquale by reading his complaint broadly enough to say he had pled a will contest so the action should not be dismissed. Application: If you decide to contest a revocable trust, you must check the underlying pour-over will as well. Most pour-over wills contain a provision incorporating the trust into the will if needed to give it effect. Assuming the will has such language, you must also contest the will to contest the trust. 6. Firewall. (Political Cliché). The Third DCA explains how to calculate the statute of limitations for trust actions. Taplin v. Taplin, 88 So.3d 344 (Fla. 3d DCA 2012). At common law statutes of limitations are inapplicable to shield trustees from their responsibilities to their beneficiaries. Nayee v. Nayee, 705 So.2d 961, 963 (Fla. 5th DCA 1998). Statutes of limitations in Florida relating to trust actions are now governed by statute. Under F.S , the statute of limitations period for most lawsuits starts running as of the date when the last element constituting the cause of action occurs. A breach of trust is treated as an intentional tort for statute of limitations purposes. Under F.S. Section , the statute of limitations time period (4 years generally or 6 months if the appropriate limitations notice is served on the beneficiary) begins running as of the date the beneficiary knew or should have known of the breach of trust. In this case the trustees first argued that the beneficiary did receive an accounting and that the 6 month limitation period should apply. The trustee s attempt to prove this point was by pointing to the beneficiary s complaint which alleges, The Defendants have never 4

5 provided the plaintiff with a trust accounting as required under Florida law. The trustees argued the language used in the complaint, as required under Florida law, presupposes the beneficiary did, in fact, receive some type of accounting, just not in accordance with Florida law. Second, the trustees argued the limitations period began running when the breach was alleged to occur and that the alleged breach occurred more than 4 years ago. The 3d DCA held both arguments to be incorrect. The allegation of the pleading was not found to admit an accounting had been served but rather to allege one had not been served. With regard to the statute of limitations the Court held that the statute only begins running after the beneficiaries get notice of the breach of trust or it can be shown they should have known of the breach. Basically, absent having complied with the Florida Trust Code provisions regarding accounting to a beneficiary the statute of limitations will not run against that beneficiary with regard to potential actions against the trustee by the beneficiary. The equitable defense of laches is still available but good luck getting a court to grant relief on that basis. Application: Account to qualified trust beneficiaries and include the statutorilydescribed 6 month limitations notice. 7. I like being able to fire people. (Mitt Romney). Third DCA reviews standard for disqualification of counsel who inadvertently receives confidential information from opposing counsel. Moriber v. Dreiling, So.3d (Fla. 3d DCA 2012). In this case you had ongoing probate litigation that was scheduled for mediation. Prior to the mediation counsel for one side inadvertently ed a confidential mediation summary to counsel for the other side. The mediation summary itself was not clearly marked at the top as confidential, although confidentiality was mentioned in the first paragraph of the summary. ing counsel discovery their mistake and requested opposing counsel destroy the summary, which was done. Opposing counsel testified later that she had only skimmed the summary and did not note it was confidential, explaining that frequently mediation summaries are not confidential. A motion to disqualify was filed and the trial court appointed a special master to review the issue. The master s report concluded there was no disclosure in the report that gave an unfair advantage to receiving counsel. The trial court then denied disqualification. The 3d DCA affirmed and held that receipt of an inadvertent disclosure warrants disqualification when the movant establishes that: (1) the inadvertently disclosed information is protected, either by privilege or confidentiality; and (2) there is a possibility that the receiving party has obtained an unfair informational advantage as a result of the inadvertent disclosure. the fact that the inadvertently disclosed information is privileged or confidential, standing alone, does not automatically warrant disqualification. As part of the second element, courts must look not only to the content of the inadvertent disclosure, but also to the actions taken by the receiving lawyers upon their receipt of the inadvertent disclosure. Here the Court found that the content of the disclosure (the mediation summary) did not give an unfair advantage nor did the behavior of the receiving lawyers (who did the right thing here according to the court) give rise to an unfair advantage. 5

6 Application: Expect to see this fact pattern more often as we now move into the E- Service world. Mistakes will happen and the wrong attachment will be sent out to opposing counsel. If you attempt to disqualify counsel who receives confidential information by mistake, understand the courts view disqualification as an extreme remedy and case law does not give an automatic remedy. You have to show an unfair information advantage and unfair relates at least partially to how the receiving party acts after receipt. 8. The only poll that matters is the one taken on Election Day. (Political Cliché). Fourth DCA holds that written examining committee reports, without testimony of committee members, are subject to evidentiary hearsay objections in incapacity proceedings. Shen v. Parkes, So.3d (Fla. 4 th DCA 2012). Shen appealed the order of the trial court which accepted and approved the general magistrate's recommendation that limited incapacity was established. Shen argued that the court erred in relying on the written reports of the examining committee members, when the incapacity hearing was contested and she objected to the reports as hearsay. None of the committee members testified and Shen had not stipulated to the entry of the reports into evidence or otherwise admitted to incapacity. The Fourth DCA agreed with Shen and reversed the trial court. The Court held that no exception to the hearsay rule applies to the reports if they are objected to. Further the Court held that the Evidence Code applies contested guardianship hearings, citing the recent Third District case of Fernandez v. Guardianship of Fernandez, 36 So.3d 175 (Fla. 3d DCA 2010) (that found that a trial court erred in denying a petitioner's request to invoke the rule of sequestration during the adjudicatory hearing in an incapacity case) and citing Florida Probate Rule The Court noted that the incapacity proceedings provide for an evidentiary hearing. See Section (providing that at any hearing under the guardianship law, the alleged incapacitated person has the right to remain silent, testify, present evidence, call witnesses, confront and cross-examine all witnesses, and have the hearing open or closed). Application: This issue can arise regularly in incapacity proceedings. If you are courtappointed counsel for the alleged incapacitated person, to the extent your client advises you to contest the proceedings or you otherwise determine capacity should be a contested issue, you should review this decision and the laws of evidence with regard to the incapacity hearing. Remember you are an attorney ad litem, not a guardian ad litem, on behalf of the alleged incapacitated person. If you do not contest capacity, then you should agree to a request by petitioner s counsel to stipulate to the entry of the reports into evidence so this issue is eliminated. If you are petitioner s counsel you need to be prepared to prove incapacity by live testimony if the issue is contested. 6

7 9. It all comes down to turnout. (Political Cliché). Fourth DCA holds F.S. Sec (4) is not unconstitutional and incapacity proceedings are required to be dismissed if two examiners find no incapacity. Rothman v. Rothman, So.3d (Fla. 4 th DCA 2012). In this mental health incapacity case, the alleged incapacitated person was examined twice and both committee reports contained two examiners who found no incapacity. The AIP moved to dismiss the proceedings based on F.S. Section (4), which states: If a majority of the examining committee members conclude that the alleged incapacitated person is not incapacitated in any respect, the court shall dismiss the petition. The trial court found the statute unconstitutional and did not dismiss the proceedings. The Fourth DCA reversed and dismissed the proceedings. The Court held that proceedings to determine the competency of a person are generally controlled by statute and where a statute prescribes a certain method of proceeding to make that determination, the statute must be strictly followed. In addition, other circuits have also held that the trial court need only consider the reports of the examining committee. If two of the examiners come back with reports of no incapacity, the petition must be dismissed and that dismissal is merely ministerial on the part of the court. Application: If you represent petitioner in an incapacity proceeding and the examiners come back with two reports of no incapacity, you won t get to try to explain to the judge why the petition should not be dismissed. Beware that if the petition is dismissed, costs and attorney s fees of the proceeding may be assessed against the petitioner if the court finds the petition to have been filed in bad faith. See F.S. Section (7). 10. "The private sector is doing fine." (Barack Obama). First DCA holds you can waive creditor exemption for life insurance proceeds if paid to a revocable trust without insurance exemption language. Morey v. Everbank, 93 So.3d 482 (Fla. 1 st DCA 2012). The Morey case is one of those unusual multimillion dollar estates (at least $8 million) that s insolvent. These probates can be very unpleasant to administer and the creditor issues can be tricky. In this case, the decedent purchased life insurance and named his revocable trust as the beneficiary of the insurance proceeds. However, the decedent's revocable trust had language making the trust assets available to creditors of his estate and that language did not make exception for the life insurance proceeds. The 1 st DCA held that while life insurance proceeds are not payable directly to the estate or subject to obligations of the estate merely by virtue of being directed to a grantor trust, in this case the clear and explicit terms of the trust made the policy proceeds available to satisfy obligations of the estate, pursuant to section (1). Unfortunately for Morey s beneficiaries, his estate plan defeated the protection found under F.S. Sec That statute allows Florida residents to leave their heirs unlimited amounts of life insurance money exempt from the decedent s creditors. This exemption applies regardless of whether the insurance proceeds are paid directly to your beneficiaries or paid to them via a revocable trust, so long as you put in appropriate language in the trust to exempt the funds from payment to creditors. But, you might ask, can the trust be judicially modified to eliminate the creditor exposure? Here the Court found it could not be 7

8 judicially modified under F.S. Sec (reformation to correct mistakes). The reason is that the Court analyzes the mistake issue as of the date of the execution of the document, not post-death. When the trust was drafted Morey was concerned that there be liquidity in his trust so that his businesses would not have to be sold on a firesale basis. The appellate court concluded that a reasonable trier of fact could have been left without a firm belief or conviction that the trust terms were contrary to the decedent's intent at the time he executed the trust amendment in question. The Court held that reformation is not available to modify the terms of a trust to effectuate what the settlor would have done differently had the settlor foreseen a change of circumstances that occurred after the instruments were executed. Application: When drafting revocable trusts, consider incorporating clauses designed to make sure life insurance proceeds paid to a revocable trust don't lose their creditorexempt status. 11. You didn t build that. (Barack Obama) Second DCA explains that a leasehold interest in property can qualify for homestead creditor protection. Geraci ex rel. Geraci v. Sunstar EMS, So.3d (Fla. 2d DCA 2012). The issue in this case was whether the decedent s condo, which he held pursuant to a 100-year lease, qualified for homestead creditor protection under the Florida Constitution (Article X, 4(a) and (b)). The probate court found that it did not, citing In re Estate of Wartels, 357 So.2d 708 (Fla. 1978). In that case, the Florida Supreme Court held that the descent and devise restrictions applicable to homestead property under Article X, 4(c) of the Constitution only apply to fee simple ownership interests in real property. The 2d DCA reversed and held that whether or not your residence qualifies for homestead creditor protection depends on whether you intend to make it your principal and primary residence, what kind of ownership interest you may have. Homestead creditor protection applies to fee simple ownership, long-term leases, co-ops, etc. Article X, section 4(a) does not distinguish between the different kinds of ownership interests that are entitled to the homestead exemption against forced sale. Any beneficial interest in land may potentially entitle its owner to the exemption. The Court said the analysis must focus on the debtor's intent to make the property his homestead and the debtor's actual use of the property as his principal and primary residence. The trial court was reversed because the homestead protection at issue in the case was not that of descent and devise (Article X, 4(c)) but rather the application of the homestead exemption from forced sale (Article X, 4(a) and (b)). Thus, Wartels was inapposite, and the rule that a fee simple estate is not necessary to the forced sale exemption applies. Finally, the Court explained that at least two courts have refused to so distinguish Wartels. See In re Lisowski, 395 B.R. 771, 777 (Bankr.M.D.Fla. 2008) (concluding that, under Wartels, the homestead exemption from forced sale applies only to improved land or real property that is owned by the debtor); Phillips v. Hirshon, 958 So.2d 425, 430 (Fla. 3d DCA 2007) (holding that a co-op did not qualify for homestead exemption for purposes of descent and devise because it was not an interest in realty under Wartels). The 2d DCA did not find the reasoning of those cases persuasive because they do not adequately reconcile the Supreme Court s decision in 8

9 Wartels with the court's jurisprudence extending the exemption from forced sale to other beneficial interests in land and not limiting the exemption to a fee simple interest. Application: When arguing homestead legal issues understand that Florida constitutional provisions for homestead relate to three different aspects of law: (1) Article X, 4(a) and (b) for creditor protection; (2) Article X, 4(c) for descent and devise, and (3) Article VII, 6 for taxation. When you look for law to argue your case and to explain to the court how it should rule, make sure the law and cases you cite actually relate to the aspect of homestead you are dealing with. 12. Change the narrative. (Political Cliché). The Third DCA determines precatory language in a devise does not make a will an oral will. Glenn v. Roberts, So.3d (Fla. 3d DCA 2012). The decedent s will contained the following clause as its third article: I hereby give, devise and bequeath all of the rest, residue and remainder of my estate, both real and personal, of whatsoever kind and nature, and wheresoever the same may be situate unto my friend, TERRY GLENN, having full confidence he will honor all requests made to him by me prior to my death as to friends whom I desire he benefit. The issue in the case was whether the article amounted to an oral will due to the language relating to requests the decedent had made of Glenn. The decedent s grandchild challenged the will and requested the court find the property passed under intestacy. Her theory was that under Florida law, wills must be in writing. You cannot give someone oral instructions regarding what you want done with your probate property after you die and have those oral instructions be legally binding. See F.S. Sections (40) and The will also contained the following final article: In the preparation of this, my Last Will and Testament, I have carefully and thoughtfully considered each member of my family and all of my friends, and have not unintentionally omitted any of them, as it is my desire, and I so direct, that only those beneficiaries named herein, share as beneficiary of my probate estate. In reviewing the case, the Third DCA found that the will was a valid will and not an invalid oral will. The Court held that the word requests indicated that the article was a valid devise that contained precatory language. Precatory language expresses a wish but doesn t create legal obligations or duties. The language here does not mandate Glenn to distribute the residuary estate according to the decedent s instructions but simply expresses her hope that Glenn will honor her requests. Glenn receives the devised property and then has the discretion to honor the requests. In addition, the Court found that the will's final article clearly indicated the decedent did not intend to benefit any members of her family or any of her friends other than Glenn (and a successor beneficiary). The polestar of will interpretation is the intent of the testator and allowing the grandchild to benefit when the decedent clearly intended otherwise added 9

10 to the Court s analysis of the questioned third article. Application: Although things worked out for Glenn here, you are asking for trouble if you draft a will containing language that references oral requests or other oral statements that are not contained in the will. In fact if the will devise in question references oral statements that the court finds mandatory ( instructions for example) then the will may be an invalid oral will. 10