PROBATE CORNER
PROBATE CORNER
Who Is The Real Party In Interest To Pursue Recovery Of Trust Assets From Third Parties ?
DAVID M . GARTEN
Fla . R . Civ . P . 1.210 ( a ) provides that every action may be prosecuted in the name of the “ real party in interest ”. Who is the real party in interest to pursue recovery of trust assets from third parties ?
Over the past six years , I have written extensively on this issue . Refer to my Probate Corner articles dated 5 / 17 , 5 / 20 , and 2 / 22 . On October 20 , 2023 , the appellate court finally answered this question in Roller v . Collins , 2023 Fla . App . LEXIS 7220 ; 48 Fla . L . Weekly D 2040 ; 2023 WL 6932574 ( Fla . 5th DCA 10 / 20 / 23 ).
In Roller , the Grantor executed a revocable trust . The Grantor , individually and as trustee , and Collins subsequently took out a loan and executed an amended promissory note with respect to the loan (" Note "). That same day , the Grantor executed a separate agreement pledging certain securities accounts held in the Trust as collateral on the Note . The proceeds of the Note were allegedly used for the personal benefit of Grantor and Collins , with the bulk , if not all , of the proceeds being used for the betterment and maintenance of their home . Collins held sole legal title to the home , which is not a Trust asset . After the Grantor ’ s death , the lender declared the Note to be in default for failure to make the required monthly payments and demanded the total outstanding balance . The trustee liquidated the trust assets to satisfy the outstanding amounts owed on the Note . No funds from Grantor ' s estate were applied to satisfy the Note , nor were any of Collins ' individual funds used to satisfy the amounts owed .
As a result of these events , the trust ’ s contingent beneficiaries sought reimbursement from Collins and the trustee . Thereafter , Collins filed a motion to dismiss the complaint in which she argued in relevant part that the beneficiaries lacked standing to bring this action against her as they were merely contingent beneficiaries under the Trust and that the trustee would be the only proper party to bring an action for damages against Collins . The trial court agreed with Collins and the appeal followed . The issue on appeal was whether the beneficiaries had standing to bring this action against Collins .
The beneficiaries argued , in part , that they have standing , citing St . Martin ' s Episcopal Church v . Prudential-Bache Securities , Inc ., 613 So . 2d 108 ( Fla . 4th DCA 1993 ). In St . Martin ' s , a beneficiary of a trust brought an independent claim against a securities dealer and the trustee , where a conflict of interest arose with the trustee . In particular , the beneficiary alleged that the securities dealer and the trustee who was employed by the securities dealer , colluded to " churn " an investment account to make unnecessary stock trades and earn unwarranted commissions which dissipated trust assets . The trial court dismissed the action , ruling that the beneficiary lacked standing . In reversing the trial court , the Fourth DCA held that the beneficiary had standing to bring an independent action against the securities dealer in regard to trust assets under the " particular facts " of the case . In its reasoning , the court read rule 1.210 ( a ) as " one of enlargement , rather than limitation " and stated that even though the trustee can sue , " it is all but expressly assumed in this rule that a beneficiary of a trust may sue someone other than the trustee for something ." As such , the court stated that under the facts of the case , the beneficiary had standing and could be considered the real party in interest .
The court disagreed . The court discussed at length why the trustee was the “ real party in interest ” and not the beneficiaries .
In addition , the court found that the beneficiaries ’ position would contradict the longstanding common law rule that absent certain exceptions ( which were not applicable ), the real party in interest is the trustee and that St . Martin ' s merely honoring a common law exception to the rule when the trustee has a conflict of interest , citing Restatement ( Third ) of Trusts § 107 , Bogert § 869 , and Kent v . Kent , 431 So . 2d 279 ( Fla . 5th DCA 1983 ) ( holding that beneficiaries of trust could maintain an independent action for a constructive trust regarding trust assets when there was a fraudulent conspiracy between the trustee and a third party to transfer real estate ).
The court , in a lengthy and well-reasoned opinion , affirmed the dismissal . The court held that the trustee was the real party in interest and was the only party that could bring an action to recover funds from Collins on behalf of the Trust .
PRACTITIONER ’ S CORNER : As noted above , where the trustee has a conflict of interest , the beneficiary of the trust may be the real party in interest to pursue recovery of trust assets . See also § 736.1002 , F . S . which provides that if more than one person , including a trustee or trustees , is liable to the beneficiaries for a breach of trust , each liable person is entitled to pro rata contribution from the other person or persons .
PBCBA BAR BULLETIN 14