The Docket March 2019 - Page 13

P RO P E RT Y A N D T R U S T L AW The most real party in interest: Trustees By CADY L. HUSS Spivey & Fallon, P.A. and ELIZABETH M. HUGHES Greenspoon Marder This article was originally published in the Winter 2018–2019 issue of ActionLine, a Florida Bar Real Property and Trust Law Section publication. F lorida Rule of Civil Procedure 1.210(a) permits actions to be prosecuted in the name of the real party in interest, including a personal representative or the trustee of an express trust who may sue in that person’s name without joining the party for whose benefit the action is brought. The Rules of Civil Procedure clearly contemplate that a trustee will prosecute a cause of action on behalf of the beneficiaries to which it owes fiduciary obligations. The Florida Trust Code also charges the trustee with the duty to enforce and defend claims or actions of the trust and to protect trust property. 1 To remedy a situation where a trustee is failing to adequately perform their duties, or maintains a conflict, the Florida Trust Code creates a mechanism which allows a beneficiary to seek the appointment of a special fiduciary. 2 However, beneficiaries and their wily counsel have attempted to circumvent the real party in interest rule and the overarching themes of the Florida Trust Code to pursue causes of action involving trust assets in their own, individual capacities. Fortunately, trustees have some reputable authority in defense of their position as the real party in interest and as the proper party to pursue actions on behalf of the trust. Florida Statutes and Case Law: The Real Deal The Florida Trust Code delineates specific duties and powers of a trustee. These statutes contain unequivocal provisions for which a trustee can be held liable for failing to abide. For example, Florida Statute § 736.0811 states: “A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.” Further, the trustee is required to collect all trust property and to accept or Cady L. Huss Spivey & Fallon, P.A Elizabeth M. Hughes Greenspoon Marder reject additions to trust property and to prosecute and defend claims in any jurisdiction to protect trust property. 3 The trustee also has the authority to bind the trust’s beneficiaries when establishing or adding to a trust. 4 While the Florida Trust Code outlines the various duties of a trustee and requires a trustee to take reasonable steps for the recovery of trust assets, this is not an exclusive power or responsibility under the Code. The Code does not contain language naming the trustee as the exclusive or sole party able to bring actions on behalf of a trust and therefore leaves a small door open for a beneficiary to pursue a claim involving trust assets. Fortunately, most of the Florida cases addressing this topic support the concept that the trustee is the proper party to bring claims on behalf of the trust as the real party in interest. As early as 1880, the Florida Supreme Court noted the importance of the trustee in litigation involving trust assets. The court explained that “a trustee, in whom is vested the legal estate, is a necessary party in all proceedings affecting the estate, where there is a remainder- man; for the trustee is liable for the proper care and preservation of the property.” 5 The Supreme Court of the United States has even recognized the vital role of the trustee in trust actions. In Hanson v. Denkla, the Court stated that “Florida adheres to the general rule that a trustee is an indispensable party to litigation involving the validity of the trust. In the absence of such a party a Florida court may not proceed to adjudicate the controversy.” 6 Courts have also addressed limited circumstances in which a trustee may not be required to bring the cause of action – for example, when the trust is a passive corporate entity or when the trustee maintains a conflict. 7 One of the most instructive cases in defense of the trustee as the proper party to bring claims on behalf of the trust, however, is a 1990 case from the Second District Court of Appeal. In Buerki v. Lochner, the grantor, Robin Buerki, Jr. established a revocable trust that named his son, Robin Buerki, III and his live-in companion, Frances Lochner, as beneficiaries. 8 Per the terms of the amended trust, which included a cohabitation agreement, the grantor was to sell his home and place the proceeds in the revocable trust within two months. 9 When the grantor ultimately sold the home, he placed the proceeds in a money market account in trust for Ms. Lochner. 10 When the grantor died, Ms. Lochner withdrew the funds from the money market account and deposited them in an account in her own name. 11 The trustee of Mr. Buerki Jr.’s Trust filed a declaratory action naming Robin Buerki, III and Ms. Lochner as co-defendants and asked the court to determine whether the trust had the duty to obtain the home proceeds from Ms. Lochner. 12 Ms. Lochner counterclaimed and alleged that the proceeds were a gift and Mr. Buerki, III crossclaimed seeking the imposition of a constructive trust. 13 On summary judgment, Ms. Lochner alleged that Mr. Buerki, III lacked standing to pursue his crossclaim because only the trustee had the right to assert a claim involving the trust’s property. 14 The trial court agreed and dismissed the amended crossclaim with prejudice. 15 The Second District affirmed and noted that while there is little authority on the issue, a claim must be brought by or on behalf of the real party in interest. 16 As the legal title holder to trust property, the trustee would be the real party in interest to a cause of action to determine the trust’s assets. 17 The court also recognized, however, that the beneficiary may have a right to intervene in a suit where the trustee is a party to secure the proper administration and distribution of trust assets. 18 While most courts, even outside of Florida, concur with the position stated in Buerki – the trustee, as legal title holder of trust property and as the real party in interest, is the proper party to bring actions involving trust assets – the Fourth District Court of Appeal in the outlier case Marshall-Shaw v. Ford, came to an inconsistent conclusion. In Marshall-Shaw v. Ford, jewelry owned by Kathleen Ford’s trust was stolen and Ms. Ford filed an action for conversion, civil theft, conspir- acy, unjust enrichment, and trespass See TRUSTEES , Page 16 The Docket · March 2019 13