The Beneficiaries of a Trust were Permitted to Intervene in a Suit where the Trustee was a Party, but the Order Granting Intervention Cannot Impose Limitations so Burdensome that they Amount to a De Facto Denial of the Motion to Intervene

In Genauer v. Downey & Downey, PA, 190 So.3d 131 (Fla. 4th DCA 2016), the former trustee’s former attorney brought suit against the successor trustee to recover attorney’s fees and damages alleging malicious prosecution. The beneficiaries, who were the children of the settlor of the trust, sought to intervene.  While the Court granted their intervention, the beneficiaries argue that the Circuit Court’s limitations in the order granting their intervention were in essence a denial.  The beneficiaries appealed the trial court’s order on its motion to intervene. 

Originally, Oppenheimer Trust Company (hereinafter “Oppenheimer”) was appointed as co-trustee of the Trust along with the beneficiaries’ mother. When the mother became incapacitated, Oppenheimer became the sole trustee. Eventually, the beneficiaries and the mother’s guardian agreed to discharge Oppenheimer as trustee for alleged misconduct. Oppenheimer retained Downey & Downey, P.A. (hereinafter “Downey”), to represent it in objecting to its discharge. BB & T became the successor trustee. Downey filed a trust accounting action in Miami–Dade County against the beneficiaries, the guardian, and BB & T on behalf of Oppenheimer. The relief sought in the action requested the court approve Oppenheimer’s final accounting of the Trust assets and award Downey its attorney’s fees and costs from the Trust assets. Oppenheimer later replaced Downey. Oppenheimer paid a portion of Downey’s attorney’s fees from the Trust, but BB & T successfully obtained an order for Downey to return all monies because the payments had been made without court authorization. The Trust provided that upon the mother’s death, the corpus was to be distributed to the beneficiaries in accordance with the mother’s will. The court appointed BB & T as limited curator of the mother’s estate. Downey brought an action in Palm Beach County against BB & T as the successor trustee of the Trust and curator of the mother’s estate seeking 1) payments due under an attorney’s fees contract, 2) attorney’s fees for services to the Trust, and 3) damages for malicious prosecution. Downey alleged they performed duties which benefitted the Trust and the settlors. Downey sought $132,627.50 in attorney’s fees, and an additional $20,000 they spent on counsel to defend against BB & T’s emergency motion seeking the return of the money Oppenheimer paid from the Trust for legal services. The beneficiaries moved to intervene and argued they were the real parties in interest, not BB & T, because the corpus of the Trust belongs to them. The trial court granted in part the motion to intervene, but held they did not have status as a party and could not file any motion or pleadings, and could not engage in discovery.

The issue presented here was whether and/or when limitations in an order that allows intervention become a de facto denial of the motion to intervene. In this case the limitations were extremely restrictive and burdensome as it prevented the beneficiaries from meaningfully participating in the proceedings as they were not permitted to file any motion, answer, counterclaims, or engage in any discovery.  The Fourth DCA’s opinion addresses the factors a court should consider in deciding whether to permit intervention including the derivation of the interest, any pertinent contractual language, the size of the interest, the potential for conflicts, and any other relevant circumstances. They stated that they agree with the Second DCA that the beneficiaries of a trust are permitted to intervene in a suit where the trustee is a party, and the beneficiaries desire to secure its proper administration and distribution. The Fourth DCA found that the beneficiaries had the appropriate interest to intervene as they could lose $150,000 of their inheritance from the Trust if Downey is successful in its lawsuit against BB & T.  It observed that the limitations were so burdensome that they amounted to a de facto denial of their motion.  The beneficiaries argued that while BB & T owes them a fiduciary duty to defend the corpus of the trust, its actions to protect the corpus may conflict with their interest.  The Fourth DCA agreed.  They held that while trial courts have discretion to limit the extent to which intervenors may participate in proceedings, “when that limitation completely bars the intervenors from addressing their concerns, it is an abuse of the trial court’s discretion.”  As a result, the Fourth DCA reversed.

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.