Demircan v. Mikhaylov

Demircan v. Mikhaylov, --- So. 3d -- (Fla. 3d DCA 2020)

This Third DCA case addresses several elements of Florida trust law, with a focus on the ability to modify an irrevocable trust under the Florida common law. It involved an irrevocable trust established by the settlor for the benefit of his children, which initially appointed an independent trustee and a third party with trustee removal powers. When disagreements arose between the settlor and the beneficiaries against the trustee and the third party, litigation ensued. Prior to the final hearing, the third party had appointed a new trustee to succeed the independent trustee. At the final hearing, the trial court allowed a modification of the trust noting the consent of the settlor and all beneficiaries of the trust.

The Court first considered whether the new trustee had standing to appeal the modification of the trust.  It found that the new trustee had a sufficient stake in the controversy to seek judicial resolution of the controversy, and that because the trustee had standing to seek the trust's modification or sue for a declaration that he could not be removed, he also had standing to oppose the modification on appeal.

Next the Court considered whether the third party was an indispensable party to the action. The Court held that because a complete and efficient determination of the equities and rights between the other parties was possible without the third party, he was not an indispensable party.

The Court then focused on whether the trust modification was appropriate. The Trustee argued that because the trial court failed to make certain findings which are required for a trust modification under Chapter 736, the modification was in error. The Court considered the interplay between Chapter 736 and the Florida common law, and ultimately found that if the settlor and all beneficiaries agree to modify an irrevocable trust, Florida common law permits such a modification. Preston v. City National Bank of Miami, 294 So. 2d 11, 14 (Fla. 3d DCA 1974). The Florida Trust Code explicitly recognizes that "[t]he common law of trusts and principles of equity supplement this code, except to the extent modified by this code or another law of this state." F.S. 736.0106. Further, F.S. 736.04113, which authorizes judicial modifications where not inconsistent with the settlor's intent, also recognizes that "[t]he provisions of this section are in addition to, and not in derogation of, rights under the common law to modify, amend, terminate, or revoke trusts." F.S. 736.04113. As a result, nothing more than the consent of the settlor and beneficiaries is needed to modify an irrevocable trust under Preston, and the findings required for judicial modification under the Florida Trust Code are not necessary in these situations.

Finally, the Court reversed the trial court's denial of attorney's fees to the trustees because the trial court failed to make the requisite finding of bad faith or reckless indifference which the trust itself required.

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