ROTHENBERG, J.
Arthur S. Turkish ("Arthur") and Shari Turkish ("Shari") (collectively, "Co-Trustees") appeal, and Carole Brody ("Carole")
Mrs. Trask died on June 2, 2010. Later that month, the Estate was opened, and Arthur was named as the Estate's personal representative. Mrs. Trask's last will and testament named two of her adult children, Arthur and Carole, as equal beneficiaries and disinherited a third adult child.
Prior to her death, Mrs. Trask created the Ada Turkish Trask 2005 Trust Number One ("Trust Number One") and the Ada Turkish Trask 2005 Trust Number Two ("Trust Number Two") on January 27, 2005, naming Arthur and his daughter, Shari, as co-trustees.
Carole and Arthur were the beneficiaries of Trust Number One during Mrs. Trask's lifetime, and upon Mrs. Trask's death, the remaining principal was to be divided equally between Carole and Arthur. Trust Number One vests the Co-Trustees with "absolute discretion" during Mrs. Trask's lifetime to make distributions from the trust's principal to Arthur and/or Carole "in equal or unequal amounts and to either one of them to the exclusion of the other." Trust Number One also permits Arthur, as trustee, to make distributions to himself for his "support, health, education and/or maintenance without the consent of any other Trustee then serving." The primary asset transferred into Trust Number One was a 99% interest in the Ada Turkish Trask Family Limited Partnership ("FLP"), which was valued at $2,299,700 when transferred.
Mrs. Trask was the sole beneficiary during her lifetime of Trust Number Two. Upon Mrs. Trask's death, the remaining principal was to be divided equally between Arthur and Carole.
The year after Trust Number One and Trust Number Two were created, Mrs. Trask, through counsel, voluntarily disclosed to the Internal Revenue Service ("IRS") that she owed over $3 million in outstanding gift taxes for the years 1991 through 2004. In June 2008, Mrs. Trask and the IRS settled for $1,022,500.
In late July 2008, Carole's counsel objected to the IRS transaction, asserting that the transaction was a breach of the Co-Trustees' "responsibility" because the effect was to give over $1 million to Arthur from Trust Number One, which was intended to benefit both Arthur and Carole.
On August 19, 2009, Carole received revised accountings for the time period covering January 27, 2005 through December 31, 2007, for Trust Number One and Trust Number Two ("2005 to 2007 accountings"), along with a Receipt and Release Agreement ("RRA"). These accountings included a statute of limitations notice consistent with section 736.1008(4), Florida Statutes (2009), which notified Carole that there is a six-month statute of limitations for any claim for breach of trust based on matters adequately disclosed in the accountings or any other written report of the trustees.
In September 2009, in response to Carole's objections to the IRS transaction, the Co-Trustees and Carole executed a Supplemental Release Agreement ("SRA"), which provides that the
On July 7, 2010, Carole received the accountings for Trust Number One and Trust Number Two for the time period stemming from January 1, 2008 to December 31, 2008 ("2008 accountings"), along with the RRA for those accountings. Along with the 2008 accountings and the RRA, the Co-Trustees submitted a Summary of Assets, which adequately disclosed the value of the assets in Trust Number One and Trust Number Two. The 2008 accountings contained the statute of limitations notice, notifying Carole of the applicable six-month statute of limitations for a breach of trust action based on matters
On October 11, 2011, Carole received the accounting for Trust Number One and Trust Number Two for the period stemming from January 1, 2009 to June 30, 2010 ("2009 to 2010 accountings").
On April 6, 2011, Carole sued Arthur and Shari individually and as trustees. The operative complaint asserts, in part, claims for breach of fiduciary duty and unjust enrichment based on their actions as co-trustees of Trust Number One during three separate time periods — January 27, 2005 through December 31, 2007; January 1, 2008 through December 31, 2008; and January 1, 2009 through June 30, 2010 — contesting the numerous distributions to Arthur from Trust Number One, including the distribution to Arthur in the amount of $1,022,500 for the IRS transaction in 2008.
The Co-Trustees answered the operative complaint, asserting several affirmative defenses, including that Carole's claims are barred by the RRA and SRA. Both the Co-Trustees and Carole moved for summary judgment. In moving for summary judgment, the Co-Trustees argued that: (1) the distributions, including the distribution for the IRS transaction, were disclosed in the accountings, and therefore, Carole's claims are barred by the applicable six-month statute of limitations for claims brought by a beneficiary against a trustee for breach of trust; (2) the distributions made to Arthur were permitted under the broad terms of Trust Number One; and (3) Carole's claim as to the IRS transaction is barred by the SRA, which supplemented the RRA for the 2005 to 2007 accountings. The trial court denied the motions.
In October 1991, Carole and her late husband, Jeffrey Brody, executed two demand promissory notes ($20,000 and $45,000) in favor of Arthur, individually, and in March 1997, they executed a third demand promissory note ($45,000) in favor of Arthur, individually. Following Mrs. Trask's death, Carole learned that each time she asked Arthur to loan her money, Arthur obtained the funds from Mrs. Trask.
In October 1991, Mrs. Trask handwrote the following letter:
Further, in March 1997, Mrs. Trask penned the following letter:
In July 2011, Arthur assigned the three promissory notes to himself as the personal representative of the Estate based on the theory that the money was never owed to Arthur, but to Mrs. Trask's Estate. Thereafter, Arthur, as personal representative of the Estate, demanded payment of the three promissory notes plus accrued interest. After Carole failed to pay the amount demanded, Arthur, as personal representative of the Estate, filed suit against Carole to enforce the demand promissory notes. In response, Carole raised several affirmative defenses, including waiver by both Arthur and Mrs. Trask. The Estate moved for summary judgment, which Carole opposed.
The trial court conducted an evidentiary hearing on the issues pertaining to the 2005 to 2007 accountings, the RRA for those accountings, and the SRA pertaining to the IRS transaction. The trial court found that prior to Carole's execution of the SRA, Arthur failed to disclose to Carole that Mrs. Trask had very little money of her own and that the $1,000,000 condominium Mrs. Trask lived in was owned by a trust Mrs. Trask created in 1980 ("1980 Trust"), not by Mrs. Trask. The trial court ruled that Arthur's failure to disclose this information "was a conflict of interest because Arthur Turkish was a Co-Trustee of Trust [Number] One," and therefore, "the SRA is not valid to bar Carole Brody's claims with respect to the [IRS] transaction covered in the SRA." Based on these findings, the trial court ordered Arthur to repay $511,250 (one-half of the promissory note executed by Mrs. Trask for the funds loaned to her to satisfy her IRS debt) plus interest to Trust Number One.
At that same hearing, the trial court addressed the Estate's motion for summary judgment filed in the Promissory Notes Litigation. Carole's counsel argued that the Estate's motion for summary judgment should be denied because genuine issues of material fact exist as to Carole's defenses, including waiver. The trial court rejected this argument and granted summary judgment in favor of the Estate, finding that Carole owes the Estate $304,525.90
The trial court addressed the remaining issues during several days of trial. The trial court entered a final order finding that Arthur, as trustee, owed Carole a fiduciary duty when making distributions to himself from Trust Number One for his health, maintenance, and support. The trial court noted that Arthur had been "historically" receiving $114,000 per year, and that as the funds in Trust Number One were being depleted, he should have
Following the entry of the trial court's final order, the trial court denied rehearing. These appeals and cross-appeal followed.
The parties have raised numerous issues in these appeals. As to the Trust Litigation, the Co-Trustees appeal: (1) the portion of the trial court's final order determining that Arthur breached his fiduciary duty to Carole by making certain distributions to himself for his health, maintenance, and support from Trust Number One from January 2008 to the date of Mrs. Trask's death on June 2, 2010, and ordering Arthur to return a portion of the distributions to Trust Number One; and (2) the portion of the December 6, 2013 order finding that the SRA executed by the parties is invalid and unenforceable because Arthur, as trustee of Trust Number One, breached his fiduciary duty to Carole, and therefore, ordering Arthur to return $511,250 to Trust Number One. Carole appeals from the portion of the trial court's December 6, 2013 order granting summary judgment and subsequent final judgment in favor of the Estate in the Promissory Notes Litigation, thereby enforcing the three demand promissory notes. For the reasons that follow, we reverse the trial court's determination that Arthur breached his fiduciary duty relating to the distributions he made to himself from Trust Number One for his health, maintenance, and support; affirm the trial court's order finding that the SRA is invalid and unenforceable; and reverse the trial court's granting of summary judgment in favor of the Estate in the Promissory Notes Litigation and remand for further proceedings.
Arthur contends that the trial court erred by finding that he breached his fiduciary duty to Carole by making certain distributions to himself from Trust Number One and ordering Arthur to return $253,000 to Trust Number One. Because the distributions Arthur made to himself from January 2008 through June 2010 were authorized by the express terms of Trust Number One, we agree.
The record before this Court reflects that, despite Arthur's lack of significant outside employment for decades, he nonetheless maintained an extravagant lifestyle. His mother, Mrs. Trask, was aware of, participated in, and enjoyed Arthur's lifestyle, and opted to finance his lifestyle through distributions from Trust Number One
Carole contends, and the trial court found, that the SRA, which is a supplement to the 2005 to 2007 RRA, is invalid because Arthur, as a co-trustee, failed to disclose to Carole, a beneficiary, material facts pertaining to the matter being settled in the SRA. Specifically, Arthur failed to
We acknowledge that generally a release between adversaries constitutes a complete bar to an action which is the subject of the release. See, e.g., Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 17 N.Y.3d 269, 929 N.Y.S.2d 3, 952 N.E.2d 995, 1000 (2011) ("Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release.") (internal citation and quotation marks omitted). However, the SRA was not merely a settlement between adversaries, but rather a supplement to the RRA entered into between the Co-Trustees and Carole, a beneficiary. Thus, under New York law, which the parties agree controls as to the SRA, Shari and Arthur, as co-trustees, owed a duty to fully disclose all pertinent facts to Carole, a beneficiary, even though the Co-Trustees and Carole were adversaries at that point.
Under New York law, the SRA, as a supplement to the RRA, is binding only if the Co-Trustees made a "full disclosure."
In re LeoGrande, 13 Misc.3d 1070, 821 N.Y.S.2d 862, 867 (N.Y.Surr.2006) (internal citations and quotation marks omitted; emphasis added); see also Matter of Birnbaum, 117 A.D.2d 409, 416, 503 N.Y.S.2d 451 (N.Y.App.Div.1986) (noting that a "Release and Discharge" obtained by fiduciary from a beneficiary is "voidable" by the beneficiary "if the fiduciary fails to disclose material facts which he knew or should have known, if he used the influence of his position to induce the consent or if the transaction was not in all respects fair and reasonable").
In the instant case, although the facts recited in the SRA were accurate, the Co-Trustees failed to make a "full disclosure" to Carole, a beneficiary — that the promissory note Arthur agreed to "contribute" to Trust Number One in exchange for Carole's release was virtually worthless because Mrs. Trask did not have the ability to repay the promissory note during her lifetime and there would be insufficient estate assets to pay the promissory note upon her death because the Bal Harbour condominium was not owned by Mrs. Trask. Therefore, we affirm the trial court's ruling that the SRA is invalid due to Arthur's failure to disclose material facts.
The Co-Trustees argue that even if the SRA was voidable based on Arthur's failure to disclose material facts to Carole before she signed the SRA, Carole's claims
Section 736.1008(2) of the Florida Statutes provides:
(emphasis added). Section 736.1008(4)(a), which addresses when "a matter" is adequately disclosed, provides as follows: "A trust disclosure document adequately discloses a matter if the document provides sufficient information so that a beneficiary knows of a claim or reasonably should have inquired into the existence of a claim with respect to that matter."
In the instant case, Carole's claims against the Co-Trustees for breach of fiduciary duty was not based solely on the IRS transaction itself, but also on Arthur's agreement to resolve Carole's objections to the IRS transaction by "contributing" the promissory note executed by Mrs. Trask to Trust Number One without disclosing that he knew that the promissory note was virtually worthless. Therefore, we must determine whether the 2008 trust accountings provided Carole with sufficient information such that she should have known of her claim or reasonably inquired into her claim.
The 2008 accounting for Trust Number One disclosed that Arthur received a $1,022,500 distribution on October 24, 2008, and that disclosure references Note 5 of the appendix attached to the 2008 accounting. Note 5 provides:
Therefore, the 2008 accounting for Trust Number One discloses the IRS transaction itself, and that Arthur "contributed" the promissory note to Trust Number One as part of an agreement among the beneficiaries. The 2008 accounting, however, fails to disclose that the promissory note that Arthur contributed to Trust Number One was basically worthless due to Mrs. Trask's lack of personal funds and due to the fact that the Bal Harbour condominium Mrs. Trask lived in would never be part of the Estate because the condominium was owned by the 1980 Trust, not Mrs. Trask. Further, the 2008 accounting for Trust Number One did not provide Carole with sufficient information that reasonably should have led her to inquire into her claim against the Co-Trustees. Therefore, the six-month statute of limitations set forth in section 736.1008(2) is not applicable because the matter was not "adequately disclosed in a trust disclosure document." As such, Carole's claims for breach of fiduciary duty against Arthur and Shari were not time barred.
Carole contends that the trial court erred by granting summary judgment in favor of the Estate in the Promissory
"Summary judgment is proper if there is no genuine issue of material fact if the moving party is entitled to a judgment as a matter of law. Thus, our standard of review is de novo." Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So.2d 126, 130 (Fla.2000) (citation omitted).
We have reviewed the letters written by Mrs. Trask in 1991 and 1997. The gist of those letters is that if Carole does not repay Arthur, Arthur does not have to repay his mother, Mrs. Trask. Therefore, as the three promissory notes have now been assigned to the Estate, which is not at issue in this appeal, it appears that repayment of those notes may have been waived because Arthur can no longer seek repayment from Carole, and Mrs. Trask specifically provided in her written "letters" that she (and thus now her Estate) would not seek repayment of the notes unless they were paid in full (to Arthur). Thus, there exists material issues in dispute as to whether Arthur waived his right to seek repayment of the notes by assigning them to the Estate, and whether the Estate may seek repayment of the notes where Mrs. Trask's intent not to do so has been clearly stated and memorialized. Accordingly, we reverse the trial court's ruling as to the promissory notes, and on remand, the trial court is to fully address this issue.
Based on the above analysis, we reverse the portion of the order under review requiring Arthur to return $253,000 to Trust Number One; affirm the portion of the order finding that Arthur breached his fiduciary duty to Carole; and reverse the portion of the order enforcing the three demand promissory notes and remand for further proceedings to fully address Carole's affirmative defense of waiver. All remaining issues raised by the parties are affirmed.
Affirmed in part; reversed in part and remanded for further proceedings.
SCALES, J., concurs.
SHEPHERD, J., concurring in part and dissenting in part.
I concur in Parts III. A and III. C of the majority opinion. I respectfully dissent from Part III. B, which affirms that portion of the trial court's order requiring Arthur to return $511,250 (one-half of the promissory note executed by Mrs. Trask for funds loaned to her by Arthur to satisfy her IRS debt). As is well summarized in Parts I. C and I. D of the Facts and Procedural History of this case, Carole objected to the IRS settlement transaction from July 2008 until the time the SRA was executed by the Co-Trustees and Carole in September 2009. As counsel for Arthur accurately sets forth in the Initial Brief, by this time:
I agree with this reasoning and would therefore completely reverse the judgment entered below.
