Third District Finds Miami Probate Court Erred in Requiring Litigants to Prove Undue Influence as Part of a Breach of Fiduciary Claim. Court Finds Lawyer Used Client’s Money as His Own “Piggybank.”
On February 25, 2009, the Third District Court of Appeals released its much-anticipated opinion regarding the Brigham Tree Farms Trust litigation. Brigham v. Brigham, –So.2d–, 2009 WL 454492; (Fla. 3rd DCA, Feb. 25. 2009), 34 Fla.L.Weekly D443b involved, in part, a dispute over the trust assets which originated as a multimillion-dollar tree farm encompassing around 800 acres of land in western North Carolina.
In order to understand the facts of the case, you will probably need to make a family tree outlining the various parties and their relevance in connection with EFP Brigham and his wife Marion, and the table consanguinity:
EFP Brigham died in 1982, leaving his widow, Marion, as the sole owner of his estate valued at the time of his death at approximately $3 million. EFP and Marion had four children: (1) Edward Brigham, (2) Dana (3) Toby Brigham, and (4) Jerre.
Jerre died in 1996, leaving four children: Allen Forbes, Robin Forbes, Dana Forbes, and Sandra Forbes Beran. Peter Forbes was Jerre’s husband and the father of the four Forbes children.
A few years later, at the age of 98, Marion died. EFP’s estate contained real estate in North Carolina known as the “Brigham Tree Farms Property.” Brigham Tree Farms was an operating tree farm business consisting of 800 acres of forest land in western North Carolina.
Dana and his wife Patricia were named and acted as trustees of Marion’s trusts and assets during the final years of her life. When the other children believed they discovered self-dealing, they filed a complaint in the Miami Dade County Probate Court alleging (1) Undue Influence; (2) Breach of Fiduciary Duty; (3) Self Dealing; (4) Conversion of Trust Assets; (5) Mismanagement of Trust Assets; (6) Intentional Interference; (7) Constructive Trust; (8) Fraud; (9) Conspiracy; (10) Removal of Defendants as Trustees and Surcharge; and (11) Accounting. The plaintiffs also sought to restrict the trustees from paying their own attorneys fees out of Marion’s estate and trust assets.
Judge Stettin held a non-jury trial. The evidence adduced at trial established that after EFP’s death, Dana Brigham, with Patricia’s assistance, began acting as Marion’s lawyer, trustee, and trusted investment and business advisor. Dana and Patricia assumed control of all of Marion’s finances, taxes, and investments. Marion made no money from these investments and lost hundreds of thousands of dollars. Dana used Marion’s funds to make gifts and payments to himself and Patricia without prior court approval or any written authority from Marion.
The evidence also pointed to the conclusion that Patricia paid herself a salary for eleven years of approximately $300,000 in either gifts or salary for her part-time work (amounting to around six hours per month). Patricia and Dana fraudulently deducted $48,000 as a charitable donation on their individual tax return for 2001 for donating Marion’s admitted personal belongings to a church. Furthermore, Dana improperly paid for his personal legal fees from the trust funds subsequent to Marion’s death.
The case worked its way through the probate system and eventually to the chambers of the Third District Court of Appeals who stressed that they would examine the case using a de novo standard of review:
“The trial court’s failure to apply and/or the misinterpretation of several trust statutes are matters of law subject to de novo review. In addition, the standard of review is also de novo when reviewing the trial court’s interpretation and application of Florida law.”
Applying the old trust code, the Third District found, as a preliminary matter, that the probate court should have voided the transfers by the trustees of Marion’s property to themselves when done without prior court approval. These actions were all breaches of the fiduciary duty owed by a trustee to the other trust beneficiaries and to Marion.
Importantly, the Third District concluded that the trial court also erred by requiring appellants to prove undue influence to maintain their breach of fiduciary duty claims. The Court issued a scathing opinion of Dana Brigham’s conduct as a trustee, and as a lawyer:
“Dana Brigham had a fiduciary duty as Marion’s trustee and as a lawyer. Using the proper burden of proof to support this cause of action, the evidence is overwhelming that he breached his fiduciary duties as a trustee. A trustee has the duty to administer the trust diligently for the benefit of the beneficiaries….as Dana was also Marion’s lawyer, he likewise breached his fiduciary duty. An attorney in dealings with his client must exercise a much higher standard of good faith than is required in ordinary business dealings or arm’s length transactions. ..[t]ransactions between an attorney and client, where the attorney profits at the client’s expense, will, if not void, be closely scrutinized to determine utmost good faith…Business transactions between lawyers and clients are not prohibited by the Canons of Ethics. However, when they are alleged to have been unfair, this type of transaction is presumptively fraudulent and courts place the burden on the lawyer to prove complete good faith and the total absence of fraud or overreaching. The attorneys must show not only that they exercised no undue influence, but also that they gave their clients all the information and advice which it would have been their duty to give if the transaction were made with a stranger…Here, Dana did not meet this burden. Dana used Marion’s funds as his personal piggy bank. The trial court erred when it did not set aside Dana’s conflicted payments of Marion’s funds to himself and his wife, Patricia.”
This case is a good reminder of the standards that trustees are to be judged. Any potential conflict of interest, if not void as a matter of law, will at the very least be thoroughly scrutinized. Lawyers who serve as trustees are held to an even higher standard. This case is also a refreshing reminder that the district court of appeals in Florida will frequently apply a de novo standard of review to the issues arising in trust and estate litigation.