William Cross, as Trustee of the Perl Donohue Cross Revocable Trust and as Trustee of the Charles William Cross Revocable Trust v. Annette Cross Caito, et al., Case No.: 502015CP001572XXXXMB
This decision raises a host of trust administration questions regarding claims of breach of fiduciary duty. While the specific breaches at issue in this case were very fact specific, the Trial Court's findings are useful in a variety of trust administration contexts:
A. Statute of Limitations
(1) Trust limitation notices:
The first question the Court dealt with was the adequacy of certain trust limitation notices to bind a beneficiary to a six-month statute of limitations as opposed to a four-year statute of limitations. The Court held that a specific reference to the six-month statute of limitations is required by F.S. 736.1008. Without such a reference, the statute of limitations will be four years.
(2) Adequacy of trust disclosure documents:
The Court next considered whether the accountings served by the trustee "adequately disclosed" matters such that the statute of limitations began to run. Under F.S. 736.1008(4)(a), a trust disclosure document adequately discloses a matter if the document provides sufficient information so that a beneficiary knows of a claim or reasonably should have inquired into the existence of a claim with respect to that matter. Unfortunately, the decision is vague as to why the Court ultimately held that the accountings served were not adequate. It simply states that the court could not say whether the beneficiary knew of or "reasonably should have inquired" into the existence of the claims.
B. Breach of Fiduciary Duties
(1) Providing information to beneficiaries:
The beneficiary sued the Trustee for various alleged breaches of fiduciary duties. The first was failure to provide the beneficiaries with relevant information about the particulars relating to the administration of the trusts and refusal to make the information available to the beneficiaries. The Court noted that while the trust was revocable, the duties of the trustee were owed exclusively to the settlor, and the trustee's duties to inform of the trust and its administration extended only to the settlor and not to the beneficiaries. F.S. 736.0603 and F.S. 736.0813. Upon the settlor's death, the beneficiaries became entitled to information.
The beneficiary, who was to received 50% of the net proceeds of the sale of a piece of trust property, requested the HUD-1 for that sale, and the Trustee refused to provide it to him. The Court held that by refusing to provide him with the HUD-1, the Trustee breached his duty to provide a qualified beneficiary of the Trust with information concerning the administration upon reasonable request.
(2) Improvements to property:
The beneficiary also sued the Trustee for breach of fiduciary duty for using trust assets to make improvements to one of the trust properties. The Court held that since the improvements were not necessary for the maintenance and upkeep of the property, and because the Trustee was to inherit that specific property, the burden was on the Trustee to show that the transactions were legitimate rather than motivated to benefit himself. Since the Trustee failed to do so by competent and substantial evidence, he did not meet his burden of showing that the expenditure of Trust monies was proper.
(3) Failure to make partial distribution:
The beneficiary also alleged that the Trustee breached his fiduciary duty by refusing to make a partial distribution to him so that he could obtain counsel to advise him about his rights regarding the Trust. The Court held that the Trustee's refusal to make a partial distribution, which was authorized by the terms of the Trust, was a breach of the Trustee's duties of loyalty and impartiality, and constituted self-dealing by the Trustee because he was placing his own interests (protecting himself as Trustee) ahead of the beneficiary's interests.
The Court required the Trustee to compensate the beneficiaries for his share of the unnecessary expenditures made to improve the trust property. It also held that the Trustee was not entitled to fiduciary compensation. The Trustee argued that the Court lacked personal jurisdiction over him to award surcharge against him, but the Court found that defense was waived and that he had affirmatively invoked the Court's jurisdiction by seeking an order discharging him from all liability, including surcharge.