By: David M. Garten, Esq.
ARTICLE: Beneficiary’s Standing To Sue Third Parties
Does a beneficiary of an estate/trust have standing to sue a third party? Maybe.
In St. Martin’s Episcopal Church v. Prudential-Bache Secur., Inc., 613 So. 2d 108 (Fla. 4th DCA 1993), plaintiff, as beneficiary of a trust, sued defendant securities dealer for negligence and improper trading of securities. The trial court granted defendant’s motion for summary judgment on the grounds that plaintiff lacked standing to sue defendant alone. The appellate court reversed holding that plaintiff had standing. The court reasoned that Fla. R. Civ. P. 1.210(a), dealing with persons who have an interest to bring an action, was a rule of enlargement rather than limitation and that a beneficiary of a trust may sue someone other than the trustee while permitting the trustee to sue the beneficiary as well.
In Marshall-Shaw v. Ford, 755 So. 2d 162 (Fla. 4th DCA 2000), a burglary occurred at Plaintiff’s residence. Plaintiff, as sole beneficiary of a trust, filed a lawsuit against defendant and others. Plaintiff’s attorney testified that the jewelry was owned by a trust in which he and plaintiff were co-trustees, with plaintiff being the sole beneficiary of the trust property. Defendant argued that since the trust owned the jewelry, the co-trustees were required to bring suit. The court rejected this argument. The court held that Fla. R. Civ. P. 1.210 authorizes plaintiff, as the sole beneficiary of the trust, to maintain a suit in her individual capacity, citing St. Martin’s Episcopal Church.
In Kent v. Kent, 431 So. 2d 279 (Fla. 5th DCA 1983), the trustee sold certain real property to a third party. Plaintiffs, as trust beneficiaries, sought to impose a constructive trust over the real property and filed a lis pendens. They alleged that this property was a major asset of the trusts and that it had been transferred by the trustee of the trusts to a third party for less than fair consideration with intent to defraud them. The trial court dismissed their lawsuit and discharged the lis pendens because plaintiffs lacked standing. The appellate court reversed. The court reasoned that the “beneficiary of a trust may pursue trust funds which have been wrongfully diverted…. Appellants alleged that appellee trustee knowingly acted in concert with appellee buyers to defraud appellants, which stated grounds for equitable relief. These allegations also stated a sufficient basis for appellants’ civil conspiracy claim”. Accordingly, the lis pendens was reinstated.
In Buerki v. Lochner, 570 So. 2d 1061(Fla. 2nd DCA 1990), decedent established a revocable trust with two beneficiaries, Lochner and Robin. After decedent’s death, Lochner improperly withdrew funds from the trust. In response, the trustee filed an action for declaratory relief seeking a decree that the funds were improperly transferred. Robin filed a crossclaim against Lochner seeking imposition of a constructive trust over the funds. The trial court dismissed the action with prejudice specifically finding that Robin lacked standing. The appellate court affirmed in part. The court held that the trustee, the legal title holder to the trust property, would be the real party in interest to a suit brought to determine the trust’s assets. However, the court held that the trial judge abused his discretion in denying Robin the right to intervene because she had a direct pecuniary interest in the outcome of the action which the trustee has brought against Lochner.
In Traub v. Zlatkiss, 559 So. 2d 443 (Fla. 5th DCA 1990), plaintiff, the estranged wife of the decedent, filed suit against the personal representative seeking to have included in her elective share certain assets transferred by the decedent to his sons shortly before his death. Plaintiff claimed her husband’s transfers were taken in order to defraud her of the full value of the elective share. The court found that plaintiff lacked standing. The court held that “[e]ven in cases where transfers by decedents are subject to rescission upon classic grounds such as fraud, undue influence, mistake, or lack of mental capacity (or assets subject to administration are held in a constructive trust for the decedent), the cause of action for rescission, or to establish a constructive trust, is in the personal representative of the decedent’s estate and cannot be directly asserted by the widow. When a probate estate appears to have a cause of action that will increase the assets of the estate and therefore the beneficial interests of legatees, or the widow’s statutory elective share, and the personal representative appears to have an interest that is adverse to, or which conflicts with, the interests of the estate, the law appears to provide a procedural remedy in Florida Rule of Probate and Guardianship 5.120(a)” for the appointment of an administrator ad litem.
In Brake v. Murphy, 687 So. 2d 842 (Fla. 3rd DCA 1996), plaintiffs, as beneficiaries of the decedent’s estate, sued to set aside as fraudulent two title transfers. The court rejected plaintiffs’ argument that they were the proper parties to bring this action. The court reasoned that the surcharge order inured to the estate’s benefit. As such, pursuant to §733.607, F.S., the personal representative is the proper party to bring an action on the estate’s behalf.
In All Children’s Hosp. v. Owens, 754 So. 2d 802 (Fla.2nd DCA 2000), there were twenty-eight charities listed as residual beneficiaries of the estate. The plaintiffs were eight charities entitled to receive 24% of the residue. The other twenty charities are not involved in the litigation. Defendant was the decedent’s caretaker. The personal representative arranged for the appointment of a administrator ad litem to pursue claims against the caretaker. The charities filed a civil suit against the caretaker seeking a constructive trust and damages for tortious interference with an expectancy which was denied on the basis of standing. The appellate court affirmed finding that the charities claim for tortious interference with an expectancy had not yet accrued because the estate administration was still pending so the charities had not yet been damaged. The court concluded that any attempts to retrieve estate property from the caretaker should be left to the personal representative or administrator ad litem through proceedings in probate.
In Parker v. Parker, 185 So. 3d 616 (Fla. 4th DCA 2016), after being advised of his terminal medical condition 15 days before his death, the decedent and his wife transferred title to a total of seven properties to their son and an entity solely owned by their son. Seven months later, the decedent’s children from former marriages sued to set aside the transfers on the basis of tortious interference with inheritance, unjust enrichment, and replevin. Defendants filed a motion to dismiss for failure to join the estate as a party. Defendants argued that the personal representative was an indispensable party under §733.607 and that plaintiffs lacked standing for failure to join the PR it in the action. The trial court granted defendants’ motion to dismiss with prejudice. The appellate court reversed. The court held that because the decedent transferred the subject properties prior to his death, the properties were not part of the decedent’s estate at the time he died because they had already been conveyed inter vivos; therefore, the estate is not an indispensable party. In support, the court cited to numerous cases where family members were allowed to pursue claims to set aside inter vivos conveyances without requiring that the PR to be joined as a party to the suit.
Did the PR/trustee refuse to pursue recovery from the third party? If so, does the PR/trustee have an interest that is adverse to or which conflicts with the interests of the estate/trust?
Is the transfer at issue an inter vivos/testamentary transfer and therefore not part of the estate/trust?
Is there more than one affected beneficiary that is not part of the litigation? If so, it may be necessary to appoint a separate fiduciary (special fiduciary, administrator ad litem, curator) to pursue recovery on behalf of all affected beneficiaries.