By: David M. Garten, Esq.
What is a Surcharge? A”surcharge” is the amount that a court may charge a fiduciary that has breached his duty. The purpose of such an award is to make the estate whole when the fiduciary’s actions cause loss or damage. With regard to trusts, a surcharge is essentially the same as a breach of trust. See, §736.1001(1), F.S.
Statutory/Common Law basis for Surcharge:
|Probate||§733.609 (improper exercise of power; breach of fiduciary duty), §733.619 (individual liability of personal representative); Kozinski v. Stabenow, 152 So. 3d 650 (Fla. 4th DCA 2014); In re Estate of Winston, 610 So. 2d 1323 (Fla. 4th DCA 1992)|
|Guardianship||§744.361(powers and duties of guardian), §744.446(3) (conflicts of interest); Reed v. Long, 111 So. 3d 237 (Fla. 4th DCA 2013); Sugarman v. Galbut, 666 So. 2d 266 (Fla. 3rd DCA 1996) (Surcharge actions are utilized for the recovery of assets which have been mishandled or misappropriated by the guardian.)|
|Trust||§736.1001(remedies for breach of trust);§736.1013(limitation on personal liability of trustee); Miller v. Miller, 89 So. 3d 962, 962 n.1 (Fla. 5th DCA 2012) (A surcharge action seeks to impose personal liability on a trustee for breach of trust through either intentional or negligent conduct.)|
Pleading Surcharge: The petitioner must show (1) the existence of a fiduciary duty, (2) breach of that duty, and (3) that the breach was the proximate cause his damages. See, Reed v. Long, supra.
Burden of Proof: Who has the burden of proof depends on the basis for the surcharge action. For example, §733.6175, F.S. places the burden of proof on the PR as to the propriety, reasonableness and necessity of payments to himself, attorneys, accountants, appraisers and other agents employed by him. Accord, Beck v. Beck, 383 So. 2d 268 (Fla. 3rd DCA 1980).
Service of Process: A proceeding seeking an order or judgment imposing a surcharge against a fiduciary is tantamount to a judgment for damages requiring personal service on the fiduciary as an individual, and not in any representative capacity.
- Estates & Guardianships: A petition to surcharge a guardian or a personal representative is considered an adversary proceeding under the Florida Probate Rules; therefore, the action is conducted similar to suits of a civil nature and the Florida Rules of Civil Procedure govern. See, Fla. Prob. R. 5.025(a), (d)(2). The petitioner is required to serve his petition by formal notice on the fiduciary in his individual capacity. See Kozinski v. Stabenow, supra.
- Trusts: If the surcharge action is against a fiduciary as a result of payment of excessive fees to himself or his agents, §736.0206(1) allows for the review to be filed in the settlor’s probate proceeding [§736.0206(2)], in which case the Florida Probate Rules regarding formal notice apply. See, §736.0206(6), F.S. If action is not filed in probate, then the Florida Rules of Civil Procedure and service of process procedure under Chapter 48, F.S. applies. See, §§736.0201(1), 736.02025, F.S. In either case, the surcharge action must be served on the fiduciary in his individual capacity.
Damages: A fiduciary is liable for all economic damages proximately caused by his breach of fiduciary duty. Pursuant to §736.1002(1), F.S., a trustee who commits a breach of trust is liable for the greater of: (a) The amount required to restore the value of the trust property and trust distributions to what they would have been if the breach had not occurred, including lost income, capital gain, or appreciation that would have resulted from proper administration; or (b) The profit the trustee made by reason of the breach. In addition, a surcharge proceeding can be pursued when a fiduciary pays excessive fees to himself or his agents. See, Kozinski v. Stabenow, supra. A surcharge action does not apply to purely noneconomic losses (i.e. pain and suffering). See, Sugarman v. Galbut, supra.
Attorney’s Fees & Costs: A fiduciary may be liable for all attorney’s fees and costs incurred in pursuing damages caused by his breach of fiduciary duty. See, §§733.609, 736.1004, F.S.