PBCBA BAR BULLETINS MAY 2020 BULLETIN - Page 17

PROBATE CORNER Third Party Liability For Breach Of Trust DAVID M. GARTEN Sec. 736.1002(2), F.S. reads in relevant part: “[I] f 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.” the purpose of selling the securities and investing the proceeds, the broker is not bound to inquire as to the authority of the trustee to sell or as to his authority to make investments, and the broker is not liable for participation in a breach of trust, although the trustee did not in fact have a power of The following legal theories support a third sale, and although the customer invested party’s liability for breach of trust: the proceeds in securities which are not ordinarily proper trust investments and A. Restatement 2d of Trusts, §326 which were not proper investments under the terms of the trust. Restatement 2d of Trusts, §326 reads: “§326 Other Dealings with Trustee. A third In International Community Corp. v. Young, person who, although not a transferee 486 So. 2d 629 (Fla. 5th DCA 1986), the of trust property, has notice that the attorney for a corporation, at the request trustee is committing a breach of trust of a corporate officer, prepared promissory and participates therein is liable to the notes, mortgages, deeds, and bills of sale beneficiary for any loss caused by the for execution by the corporate officer breach of trust.” encumbering and conveying corporate property to a trust of which the corporate The Comments & Illustrations to §326 officer was the sole beneficiary. The read: a. Knowledge of breach of trust. If a corporation sued the corporate officer and third person participates with the trustee the corporate attorney for damages for in committing a breach of trust, knowing breach of fiduciary duty, negligence, and that he is committing a breach of trust, he slander of title. The trial court entered a is liable to the beneficiary for participation summary judgment in favor of the attorney in the breach of trust. Thus, if the trustee and the appellate court reversed. The court directs an agent to sell trust property, held that the allegations in the complaint which the agent knows the trustee is not were sufficient to state a cause of action authorized to sell, and he does sell it, he against the corporate attorney for damages is liable for participation in the breach of resulting from participation in a breach trust. Similarly, if the trustee purchases of trust by the corporate officer citing through a stockbroker securities which Restatement (Second) of Trusts § 326 (1959), it is a breach of trust for him to purchase G. Bogert, The Law of Trusts and Trustees, § and the broker knows that the purchase is 901, et. seq., (rev. 2d ed. 1982), and the cases in breach of trust, the broker is liable for collected; IV A.W. Scott, The Law of Trusts, participation in the breach of trust. b. Notice § 326.4 (1967), and Centrust Savings Bank v. of breach of trust. If a customer deposits Barnett Banks Trust Company, 483 So.2d 867 with a broker securities standing in the (Fla. 5th DCA 1986). The court stated that name of the customer as trustee as security whether or not the corporate attorney knew, for speculative transactions on margin, the or should have known, that he was assisting broker is chargeable with notice that the in a breach of trust by the corporate officer customer is a trustee and is committing is a question of fact to be resolved by a fact a breach of trust. The mere fact, however, finder and not by summary judgment. that an account is opened with the broker in the name of the customer as "trustee" In Wolf v. Knupp , 76 Cal. App. 4th 1030, 90 does not put the broker upon inquiry as to Cal. Rptr. 2d 792 (Cal. App. 1999), a trust the existence and terms of the trust; and if beneficiary sued the trustee’s attorneys for the broker does not know facts from which actively participating with the trustee in he could conclude that the customer is a breaches of fiduciary duty that essentially trustee and that he is committing a breach looted the trust. The beneficiaries alleged of trust, he is not liable. If the customer that the attorneys were aware that the deposits with the broker securities standing assets of the trust were being commingled in the name of the customer as trustee, for with non-trust assets and were being PBCBA BAR BULLETIN 17 dissipated in breach of the provisions of the trust;  that they performed legal services intended to prevent the beneficiary from discovering these facts;  that they advised the beneficiary to waive his rights to on- going accountings that would have revealed the trustee's wrongful conduct;  that they made misrepresentations of material fact concerning the trust;  that they facilitated the dissipation of the trust by preparing legal documents that provided the trustee with access to the principle of the trust;  and that they drafted a codicil to the decedent’s will (providing that any questioning of the decedent’s acts as trustee would be a contest of his will) to discourage the beneficiary from taking legal action as a beneficiary of the trust upon learning what had happened to trust assets. The Trustee’s attorneys filed a motion for summary judgment arguing that the damages sought were damages for injury to the trust and that the beneficiary lacked standing to sue to recover those damages. The court denied the motion for summary judgment, in part, based on the Restatement Second of Trusts, §326. B. Civil Conspiracy The essentials of a complaint for civil conspiracy are: (a) a conspiracy between two or more parties, (b) to do an unlawful act or to do a lawful act by unlawful means, (c) the doing of some overt act in pursuance of the conspiracy, and (d) damage to plaintiff as a result of the acts performed pursuant to the conspiracy. See Walters v. Blankenship, 931 So. 2d 137 (Fla. 5th DCA 2006); Fla. Fern Growers Ass'n v. Concerned Citizens, 616 So. 2d 562 (Fla. 5th DCA 1993); Nicholson v. Kellin, 481 So. 2d 931 (Fla. 5th DCA 1985) (A conspiracy is a combination of two or more persons by concerted action to accomplish an unlawful purpose or to accomplish some purpose by unlawful means. Each act done in pursuance of a conspiracy by one of several conspirators is an act for which each is jointly and severally liable); Donofrio v. Matassini, 503 So. 2d 1278 (Fla. 2d DCA 1987) (the existence of a conspiracy and an individual's participation in it may be inferred from circumstantial evidence).