Necessary and Indispensable Parties in Trust Lawsuits: Second District Clarifies Rule in Trust Probate Dispute
Who is a Necessary Party?
The term “necessary party” has been defined in a variety of ways, but generally, most litigators will agree that a “necessary party” is:
(1) as a party whose rights and interests are to be affected by a court order; and
(2) whose actions with reference to the subject matter of litigation are to be controlled by the court order; or
(3) a person without whose joinder as a party effective court order or judgment cannot be rendered in the plaintiff’s favor; or
(4) A person who is materially interested in the subject matter of a suit and who will be directly affected by an adjudication of the controversy.
Whatever definition one uses, it is undisputed and well-settled law that if a necessary party hasn’t been named in any kind of lawsuit, the court cannot proceed until that person is joined.
Who is an Indispensable Party?
An indispensable party is “one who not only has an interest in the controversy but also an interest of such a nature that a final decree cannot be made without either affecting that interest or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience. Thus, an indispensable party is one whose interest will be substantially and directly affected by the outcome of the case and whose interest in the subject matter of the action is such that if he or she is not joined, a complete and efficient determination of the equities, rights, and liabilities of the other parties is not possible. Like a necessary party, unless such a person is made a party, the court will not proceed to a final determination.
Trust and Estate Lawsuits
Generally, a trustee is an indispensable party in any proceeding affecting the trust estate. The trustee is the person or entity vested with the authority to prosecute actions during the winding-up period following the termination of a trust. It is also well-settled law in Florida that where it is sought to have a trust by operation of law declared, the person holding the property and sought to be held as trustee is a necessary party to the suit, as is any other person against whom relief is sought. The general rule that a trustee is an indispensable party in any proceeding affecting the trust estate does not apply, however, where the trust is a merely passive or inactive trust.
Are Beneficiaries Necessary and Indispensable Parties in a Trust Lawsuit?
Generally, beneficiaries are necessary parties to a suit by or against a trustee relating to the trustor its property. In those cases where the issue is whether or not the trust instrument is valid, the law is clear in Florida that the beneficiaries are proper and necessary parties. Similarly, in a lawsuit to terminate a trust, the beneficiaries of the trust are necessary parties. An action or proceeding to enforce a trust, or to enforce the liability of a trustee for breach of trust, can and, in fact, must be brought by one with a beneficial interest in the subject matter of the suit, or a representative of such a person.
Second District Clarifies Rule
These general rules were recently examined in Crescenze v. Bothe, et al, 34 Fla.L.Weekly D284a (Fla.2nd DCA Case 2D08-2202, February 4, 2009:
“Crescenze was one of several beneficiaries of the Bothe Family Revocable Trust Agreement, executed by Andreas Bothe (the decedent) and his wife, Pamela Hansen, during their marriage. Both the decedent and Hansen were named as trustees of the trust. The decedent also executed a will during their marriage, which named Hansen as the sole heir and included a pour-over clause bequeathing all of the decedent’s estate to the trust in the event that Pamela Hansen predeceased the decedent. The decedent and Hansen subsequently divorced, and the decedent died seven days later on March 22, 2006, making the bequest to Hansen in the will void pursuant to section 732.507(2), Florida Statutes (2005).”
The decedent’s mother, E. Marie Bothe, filed suit to terminate or revoke the trust, naming Hansen as the only defendant. Crescenze and the other beneficiaries were not joined in or provided notice of the suit to terminate or revoke the trust. The probate court consolidated the suit to terminate or revoke the trust with the probate proceeding.
Thereafter, the probate court entered an order granting partial summary judgment in favor of Bothe terminating the trust. As a response, Crescenze filed a motion to intervene, which was denied by the probate court, who then entered final summary judgment in favor of Bothe terminating the trust.
Crescenze filed an appeal and the case worked its way up to the Florida 2nd District Court of appeals. On appeal, Crecenze asserted that the probate court committed an error of law in refusing to allow her to intervene as a necessary and indispensable party. The Court of appeals applied the general rules to the trust dispute and agreed with Cresenze:
“Crescenze is a beneficiary of the trust, and “Florida has long followed the rule that the beneficiaries of a trust are indispensable parties to a suit having the termination of the beneficiaries’ interest as its ultimate goal.” Fulmer v. N. Cent. Bank, 386 So. 2d 856, 858 (Fla. 2d DCA 1980) (citing Byers v. Beddow, 142 So. 894, 896 (Fla. 1932), which held that a court called upon “to dissolve or terminate a trust . . . must decline to act when there are, or maybe, persons interested in the trust who are not before the court”). “Indispensable parties are necessary parties so essential to a suit that no final decision can be rendered without their joinder.” Sudhoff v. Fed. Nat’l Mortgage Ass’n, 942 So. 2d 425, 427 (Fla. 5th DCA 2006)…Because Crescenze is a beneficiary of the trust and therefore an indispensable party to the action seeking to terminate or revoke the trust, we reverse the circuit court’s order denying Crescenze’s motion to intervene and remand for further proceedings consistent with this opinion.”
The ruling of the Second District confirms the general rule, as reflected in Florida decisional case law and in the new trust code, that beneficiaries are almost always necessary and indispensable parties to an action involving the validity of a trust.