DRAFTING ERROR WHICH OMITTED DESIGNATION OF RESIDUARY BENEFICIARIES SUBJECTS REVOCABLE LIVING TRUST TO REFORMATION PURSUANT TO SECTION 736.0415, FLA. STAT.

In Megiel-Rollo v. Megiel, 2015 Fla. App. LEXIS 5601 (Fla. 2d DCA 2015), the Second District Court of Appeal of Florida found that a revocable living trust was subject to reformation to correct alleged drafting error in which a schedule of beneficial interests was omitted. The Court found reformation to be permissible because the plain meaning of Section 736.0415, Fla. Stat. allows for the remedy of reformation with respect to mistakes of fact or law and the statute is a remedial statute which is to be liberally construed.

Before her death, Margaret J. Megiel (“Decedent”) owned a residence located in Punta Gorda, FL. Decedent died with three living children.  Her Will left the residue of her estate in equal shares to all three of her children. A few years after executing the Will, Decedent created a revocable Trust and transferred her home via warranty deed into that Trust. The Trust was to terminate upon Decedent’s death and the property was to be distributed to the beneficiaries as tenants in common in accordance with their respective interests as noted on an attached Schedule of Beneficiaries.  However, the draftsman of the Trust failed to prepare the Schedule of Beneficiaries. A dispute arose whether Decedent’s residence would be distributed pursuant to the Decedent’s Last Will and Testament or under the terms of her Trust. However, the primary issue on review was whether the Decedent’s Trust is subject to reformation to correct the alleged drafting error.  One of the children (Sharon Megiel, hereafter “Sharon”) filed a complaint against her siblings seeking declaratory relief, and her sister (Denise Megiel-Rollo, hereafter “Denise”) filed a counterclaim seeking judicial reformation of the Trust pursuant to §736.0415, Fla. Stat.  Cross motions for summary judgment followed, and the Circuit Court held a trust was not created under §736.0402, Fla. Stat. as there was no definite beneficiaries and granted summary judgment in favor of Sharon.

The Second DCA summarized the pre and post Florida Trust Code case law pertaining to reformation and noted that pre-Florida Trust Code case law does not limit reformation to the correction of simple scrivener’s errors.  See, Davis v. Rex, 876 So. 2d 609, 614 (Fla. 4th DCA 2004) (“the equitable remedy of reformation was available to avoid a resulting trust where the specified contingent beneficiaries for half of the trust’s assets did not exist.”). The Second DCA observed that Section 736.0415, Fla. Stat. provides that reformation of the terms of a trust is available “if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.” This does not limit reformation to simple scrivener’s errors. Since Section 736.0415, Fla. Stat. is a remedial statute, the Court found that it should be liberally construed.

In the subject case, affidavits were filed by Denise stating that the Decedent’s intent was for two of her three children, Denise and her brother (Robert Megiel), to be the beneficiaries of the Trust after the Decedent’s death and that the draftsman failed to prepare and attach the schedule of beneficial interests to the Trust when it was executed by the Decedent. Since the draftsman’s oversight thwarted the Decedent’s intent, the Trust was subject to reformation under Section 736.0415 to correct the alleged drafting error. The Second DCA noted that the possibility of merger of the legal and equitable interest (if the Trust were to fail for lack of remainder beneficiaries, as was argued by Sharon) does not mean that reformation of the Trust to supply the missing names of the remainder beneficiaries would be unavailable. Beyond the statutory grounds for the Court’s ruling, the Court noted that Sharon’s theory that reformation of trust in Florida is limited to simple scrivener’s errors or administrative matters is impractical and would prove to be incapable of judicial enforcement as she failed to explain how courts would distinguish simple scrivener’s errors which are subject to correction by reformation from the more complex, substantive errors which are not.

The Second DCA held the circuit court erred in ruling that the Trust was not subject to reformation and in entering a summary judgment in favor of Sharon. The affidavit from the draftsman admitting error in the preparation of the Trust was sufficient to avoid summary judgment. On remand, Denise must have an opportunity to prove her claim for reformation of the Trust and the standard of proof which she must meet is clear and convincing evidence.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.