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Delayed Discovery Doctrine Applies to Undue Influence Claims

Written by on Jan 12, 2018| Posted in: Probate Litigation

Flanzer v. Kaplan, — So.3d — (2017 Wl 5759041) – Gloria and Louis Flanzer created a philanthropic trust in December 2005. By its terms, the trust became irrevocable at its creation. Louis died in June 2013 and Gloria died in March 2015. In November 2015, Jan Flanzer sued to challenge numerous estate planning documents executed by her parents, including the philanthropic trust.  Jan Flanzer alleged that during a period of time from at least 2001 until her mother’s death, the Trustees maintained a fiduciary relationship with her mother and served as her personal accountant, business and financial advisor, and attorney.  According to the complaint, Gloria Flanzer had diminished mental capacity during this period and was emotionally and mentally susceptible to the undue influence of the Trustees. Jan Flanzer further alleged that the Trustees exploited their confidential relationship with Gloria Flanzer to alienate and ultimately eliminate Jan Flanzer from her mother’s estate plan.  In Count V of Jan Flanzer’s complaint, she alleged that the philanthropic trust was the result of the Trustees’ undue influence and she sought invalidation of the trust. The Trustees asserted that Count V must be dismissed with prejudice because the philanthropic trust became irrevocable at its creation in 2005 and “[t]he applicable statute of limitations to challenge an irrevocable trust is four years from the date of its creation.” The lower court agreed and determined that the count must be dismissed with prejudice because it was time barred.

The Second District observed that the Florida Trust Code permits a challenge to the validity of any portion of a trust procured by undue influence.  Fla. Stat. 736.0406.  Further, the court noted that an action to contest the validity of a trust may not be commenced until the trust becomes irrevocable by its terms or by the settlor’s death.  Fla. Stat. 736.0207(2).  However, the Trust Code does not specify a limitations period in which to challenge a trust, so the court looked to Chapter 95, Florida Statutes, which sets forth various limitation periods, commonly known as “statutes of limitation.”  In this case, the parties agreed that under Chapter 95, the limitations period applicable to the undue influence claim was four years.  See, Fla. Stat. 95.11(3), which deals with “legal or equitable actions founded on fraud.”  The parties disagreed on the application of the delayed discovery doctrine, which provides that an action founded upon fraud must be begun within the time prescribed (4 years) with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence…but in any event within 12 years after the date of the commission of the fraud regardless of whether it was discovered.  See, Fla.Stat. 95.031(2)(a).  The question is, when did the clock start to run?  Was it the date the Flanzer’s created the philanthropic trust in December 2005 or was it from the date Jan Flanzer learned of the creation of the trust?  The answer turned on whether undue influence is considered fraud for the purposes of Chapter 95.  The Second District, citing is prior ruling in In re Guardianship of Rekasis, 545 So.2d 471 (Fla. 2d DCA 1989), confirmed that while fraud and undue influence are distinct causes of action, undue influence is nevertheless a species of fraud and is treated as fraud for the purposes of the delayed discovery doctrine.  Thus, the answer was that the four-year limitations period commenced to run when Jan Flanzer learned of the undue influence, not when the trust was created.  The Second District reversed.  To read the complete opinion, click here:  Flanzer v Kaplan.

 

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