Summary
The Florida Court of Appeals, Sixth District, reversed in part a damages award for breach of fiduciary duty, holding that damages are limited to the period the trustee served and cannot extend after resignation absent evidence the successor trustee demanded rent. The court also ruled that the rental value for the guest house must follow the settlor’s preexisting arrangement, and that income from a specifically devised trust property must be distributed according to the beneficiaries’ fractional interests under Florida Statutes §§ 738.201 and 738.202, not equally.
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Practice areas
Questions Presented
- Whether the trial court erred in calculating damages for breach of fiduciary duty by including periods after Appellant resigned as Successor Trustee.
- Whether the trial court erred in charging Appellant rent for the guest house at a rate higher than the existing rental rate set by the Grantor.
- Whether the trial court erred in ordering rental income from the Boggy Creek Property to be divided equally rather than according to the beneficiaries' fractional interests as specified in the trust and Florida Statutes.
Holdings
- Appellant should only have been ordered to compensate the Trust for her breach of fiduciary duty for the time period from August 2018 until February 18, 2020, because she ceased to be the Successor Trustee on that date and there was no evidence the successor trustee demanded rent or a lease.
- Appellant should not have been charged $1,250 per month for the guest house because the rate was already set by the Grantor at $700 per month, and the guest house could not have been separately rented to an outsider due to permitting restrictions.
- The income from the specifically devised Boggy Creek Property must be distributed according to the beneficiaries' fractional interests (two-thirds to Appellant, one-third to Appellee) as provided by Florida Statutes section 738.201(1) and consistent with the trust's clear intent.
Key quotations
“Appellant should only have been ordered to compensate the Trust for her breach of fiduciary duty for the time period from August 2018 until February 18, 2020, less the 3 months deduction for preparing the property to lease in accordance with the trial court's findings based upon Mr. Collison's testimony.”
“Since the rental income collected from the niece was separately addressed, Appellant should only have been charged $2,500 per month during the time Appellant was living on the property as Successor Trustee.”
“The Boggy Creek Property was to be specifically distributed to the parties with two-thirds to Appellant and one-third to Appellee, and the income derived from that property should likewise be distributed equal to the beneficiary's fractional interest in the undistributed property.”
“A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary under ss. 738.301-738.706 and subsection (5). The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property.”
“A fiduciary shall distribute the net income remaining after distributions required under subsections (1)-(3) in the manner described in s. 738.202 to all other beneficiaries ....”
“[e]ach beneficiary described in s. 738.201(4) is entitled to receive a portion of the net income remaining after the application of s. 738.201(1)-(3), which is equal to the beneficiary's fractional interest in undistributed principal assets....”
Factual background
Appellant and Appellee are siblings and the sole beneficiaries of their mother's irrevocable trust. The trust specifically devised a five-acre property (the Boggy Creek Property) two-thirds to Appellant and one-third to Appellee, but Appellant, as Successor Trustee, failed to distribute it after their mother's death. Instead, Appellant sold her own home and moved into the main house on the property in August 2018 without paying rent. The property included a guest house rented to a niece for $700 per month. Appellant resigned as Successor Trustee in February 2020, but the property remained undistributed. The niece moved out in June 2020.
Procedural history
Appellee filed a complaint alleging Appellant breached her fiduciary duties as Successor Trustee by occupying trust property without paying rent and failing to distribute trust assets. After Appellant resigned and an interim settlement agreement, a successor trustee was appointed. Following a final hearing, the trial court entered judgment finding Appellant breached her fiduciary duties and ordering her to pay $174,800 to the Trust. Appellant appealed, and Appellee cross-appealed but later abandoned the cross-appeal.
Remand instructions
Modify the damages award consistent with this opinion: reduce Appellant's liability for breach of fiduciary duty to $40,000 (16 months at $2,500 per month), and distribute one-third of the total rental income from the Boggy Creek Property to Appellee rather than half.