First Union Nat. Bank v. Turney

• Decision Date: 26 November 2001
• Docket Number: No. 1D00-2803.,1D00-2803.
• Citation: 824 So.2d 172
• Parties: FIRST UNION NATIONAL BANK, Appellant/Cross-Appellee, v. Helen J. TURNEY, Appellee/Cross-Appellant.
• Court: Florida District Court of Appeals

824 So.2d 172

FIRST UNION NATIONAL BANK, Appellant/Cross-Appellee, v. Helen J. TURNEY, Appellee/Cross-Appellant.

No. 1D00-2803.

District Court of Appeal of Florida, First District.

November 26, 2001.

Rehearing Denied January 17, 2002.

Virginia B. Townes, Esquire, Stacey L. Cole, Esquire of Akerman, Senterfitt & Eidson, P.A., Orlando and E. Lanny Russell, Esquire of Smith, Hulsey & Busey, Jacksonville, for Appellant/Cross-Appellee.

Thomas S. Edwards, Jr., Esquire of Peek, Cobb, Edwards & Ashton, P.A., Jacksonville and James L. Ford, Sr., Atlanta, for Appellee/Cross-Appellant.

BENTON, J.

First Union National Bank (First Union) appeals the final judgment entered in favor of Helen J. Turney, the beneficiary of a trust First Union's predecessors administered for more than a decade following Robert Turney's death. During this period, the jury found, breaches of fiduciary duty cost Mrs. Turney $1,517,707.04. On appeal, First Union contends that the statute of limitations bars Mrs. Turney's claims, that Mr. Turney waived a conflict of interest (that arose after his death), that the evidence did not support the damage awards, compensatory or punitive ($2,000,000), that "the jurors demonstrated a failure to set aside their sympathies and to behave appropriately," and that the trial court erred in allowing documents in evidence over First Union's objection that they fell within the attorney-client privilege.

We affirm both on First Union's appeal and on Mrs. Turney's cross-appeal, addressing only First Union's contention that it is entitled to a new trial because certain correspondence and memoranda between bank officers and legal counsel (inside and outside the bank) came in evidence, despite objections on grounds the bank's attorney-client privilege protected them from disclosure. At least one letter should have been excluded, but that letter was merely cumulative to other evidence to which no objection was made. The documents received over objection on attorneyclient grounds which were likely to have affected the outcome below fell within the crime-fraud exception to the attorney-client privilege.

Trusts Created

Mr. Turney and his son Tom held all the stock of Port Comfort Marina, Inc., (Port Comfort) on March 22, 1982, when Port Comfort sold the marina property it owned in Fort Myers to Port Sanibel, Ltd. (Port Sanibel), a limited partnership controlled by the Wilbur Boyd family of Bradenton. Port Comfort took back a note in the principal amount of $2,972,000, secured by a purchase money mortgage on the marina property, subject to an agreement (set out in the contract for sale) to subordinate the purchase money mortgage on certain conditions, if Port Sanibel obtained construction loans from other lenders on specified terms. Upon Port Comfort's dissolution, Robert Turney ended up with a 62.8 per cent interest in the note and purchase money mortgage, which he assigned to a revocable inter vivos trust on July 2, 1982, nine days after Florida National Bank of Jacksonville had been named trustee.

With Robert Turney's death on September 19, 1982, Robert's share of the note secured by the purchase money mortgage became the property of two irrevocable trusts. Robert's daughter, Jane Whitener, was the sole beneficiary of one of the irrevocable trusts. The other irrevocable trust, of which his widow Helen was sole income beneficiary, took a 40.6 per cent share of the inter vivos trust's assets, consisting almost entirely of 25.5 per cent of the Port Sanibel note and the purchase money mortgage that secured it. Initially, the Florida National Bank of Jacksonville carried Helen's irrevocable trust's interest in the note on its books at a value of $757,860.

Loan From Affiliate

Port Sanibel never obtained a construction loan that met the conditions for subordination spelled out in the agreement for sale of the marina property. Port Sanibel asked the Turneys to subordinate the purchase money mortgage nevertheless to a mortgage securing a loan Florida National Bank of Miami offered to make to Port Sanibel. Port Sanibel furnished the Turneys a copy of the Miami bank's commitment letter, which contemplated a loan to be repaid within eighteen months.¹ At the time, the Florida National Bank of Jacksonville and the Florida National Bank of Miami were separately chartered national banks each wholly owned by Florida National Banks of Florida, Inc.²

Mr. Turney, who had retained authority to manage the inter vivos trust's assets, and his son Tom responded by letter to Port Sanibel on August 30, 1982, offering to subordinate the purchase money mortgage so the loan from the Miami bank could close on the terms stated in the commitment letter if certain additional conditions were also met. One new condition was that four of the Boyds "contractually commit," jointly and severally, to guarantee personally to Tom Turney and the trust that the Miami bank loan would be repaid on time and that all other obligations under the loan agreement would be discharged on or before the date the loan became due.³ On October 10, 1982, after Robert Turney's death, the Florida National Bank of Miami closed on a loan to Port Sanibel in the amount of $1,180,000. Thereafter, Port Sanibel asked the Florida National Bank of Jacksonville to subordinate the purchase money mortgage it held as trustee (and escrow agent for Tom) to the mortgage securing repayment of the Miami bank loan. Accompanying this request was a letter signed by the four individuals whose personal guarantees Mr. Turney had sought. Each of the four specified members of the Boyd family gave personal guarantees to the Florida National Bank of Jacksonville, as trustee, guaranteeing the timely discharge of Port Sanibel's obligations to the Florida National Bank of Miami under the loan agreement. (Three of them also gave separate guarantees to the Florida National Bank of Miami, guaranteeing repayment of the loan.)

On November 1, 1982, without seeking court approval and without informing Mrs. Turney, the Florida National Bank of Jacksonville subordinated the purchase money mortgage to the mortgage securing repayment of the loan to the Florida National Bank of Miami. The subordination was unconditional. At the time, lawyers advised the Florida National Bank of Jacksonville that it need not seek court approval or tell Mrs. Turney that a conflict of interest existed in order to subordinate the purchase money mortgage to the mortgage securing the note in favor of the Miami bank.⁴ At all pertinent times, Mrs. Turney had full authority under the trust instrument to name a new trustee in order to avoid any conflict of interest of which she was apprised (or for any other reason).

A memorandum dated December 17, 1982, from John R. Crawford, Esq., to a Jacksonville bank trust officer stated:

We all [except for Mrs. Turney, the jury later necessarily found] recognize, of course, that a potential conflict of interest exists. It is probable, in fact, that the Trustee will be held to a higher standard of care in this situation than it would if the first mortgage were held by an unaffiliated party. At the first indication that the Trustee may encounter difficulty in collecting the mortgage, the Bank will have to either resign as trustee (and its position as escrow agent for the other mortgagee) or, at a minimum, petition the Court to appoint a trustee pendente lite until the situation is resolved.

First Union called Mr. Crawford as its witness and examined him about this memorandum, which had come in without objection.

Remedies Forgone

In the fall of 1984, as time for an interest payment due on the note secured by the purchase money mortgage approached, Port Sanibel sought to renegotiate the note's terms and postpone the payment, but these efforts proved unavailing. Port Sanibel did not make the interest payment due September 30, 1984, until October 31, 1984, outside—albeit only by a day—the thirty-day grace period the note allowed.

By this time, Florida National Bank's Miami branch had twice extended the deadline for repayment of the money Port Sanibel had borrowed there. But with the written consent of the trusts' beneficiaries —obtained from Mrs. Turney without informing her of the Miami branch's loan extensions—Florida National Bank's Jacksonville branch accepted Port Sanibel's interest payment late.

The Florida National Bank did not inform Mrs. Turney of its conflict of interest, resign, or seek court approval for its actions. It also ignored Mr. Crawford's advice that, at the first sign that Port Sanibel might have difficulty meeting its obligations to the trusts, the bank would have to resign as trustee or seek appointment of a trustee pendente lite. Even though the principal owed the trusts was not due for another three years, the late interest payment and the Miami branch's loan extensions gave additional reason to believe that the Florida National Bank's Jacksonville branch might encounter difficulty in collecting on the note secured by the purchase money mortgage.

Under the contractual commitments four of the Boyds had jointly and severally given, they were personally responsible to the trusts for repayment on or before October 8, 1984—if not six months earlier—of the money Port Sanibel had borrowed from the Florida National Bank of Miami.⁵ Uncontroverted evidence showed that they had sufficient personal assets to pay Port Sanibel's loan debt to the Florida National Bank at all pertinent times.

Repayment of the loan with the Boyds' personal funds would have restored the security interest the trusts originally had in the marina property. On the other hand, Florida National Bank's decision not to demand that the Boyds repay Port Sanibel's loan and restore the trusts' security position (instead of granting extensions on the Miami loan) made it possible for the Miami branch to earn additional interest.

The Florida National Bank never advised Mrs. Turney that the Boyds had given the...