First Union Nat. Bank of Fla. v. Whitener

• Decision Date: 12 June 1998
• Docket Number: No. 97-2630,97-2630
• Citation: 715 So.2d 979
• Parties: 23 Fla. L. Weekly D1446 FIRST UNION NATIONAL BANK OF FLORIDA, etc. Petitioner, v. Jane R. WHITENER, Respondent.
• Court: Florida District Court of Appeals

Page 979

715 So.2d 979

23 Fla. L. Weekly D1446

FIRST UNION NATIONAL BANK OF FLORIDA, etc. Petitioner, v.Jane R. WHITENER, Respondent.

No. 97-2630.

District Court of Appeal of Florida Fifth District.

June 12, 1998.

Rehearing Denied Aug. 20, 1998.

Gregory A. Presnell, and Stacey C. Rosenthal, of Akerman, Senterfitt & Eidson, P.A., Orlando, for Petitioner.

Mel Pearlman, of Mel Pearlman, P.A., Fern Park, and Lee H. Schillinger and John A. Brekka, Jr., of Law Offices of Lee H. Schillinger, P.A., Hollywood, for Respondent.

PER CURIAM.

Petitioner seeks certiorari review of a discovery order of the lower court releasing a substantial number of attorney-client documents containing communications between the petitionertrustee and its attorneys from 1988 through 1995.¹For the reasons set forth below, we grant the writ and quash the order.

The action below is a breach of fiduciary duty action where a trust beneficiary claims the trustee bank, through its neglect or misconduct, diminished the value of the only asset of the trust, an interest in a purchase money mortgage on marina and waterfront property.Prior to the order under review, the lower court had been provided with a similar discovery issue involving three letters written in 1988 by one of the trustee's attorneys, William G. Cooper.The lower court determined there was an attorney-client relationship between the trustee and Cooper, but accepted respondent's argument that there was sufficient evidence of fraudulent concealment to abrogate the privilege.Petitioner sought certiorari review of the prior order.Respondent urged not only the fraud exception to attorney-client privilege but waiver because the three letters had already been voluntarily disclosed by petitioner through discovery.This court denied the trustee's petition without opinion.Subsequent to this court's denial of certiorari, the beneficiary sought even more attorney-client communications between the trustee and its attorneys.The lower court, noting this court's previous denial of the trustee's petition for writ of certiorari, ruled the documents discoverable.Then, without giving the trustee a chance to seek certiorari review, the judge, in open court, released all of the documents which had been produced for in camera inspection.

BACKGROUND FACTS

The trust was created in 1982, after Robert Turney sold marina and waterfront property to a partnership controlled by Wilbur Boyd and his family.Turney created the trust, and the sole asset was a 62.8% interest in the $2,972,000 promissory note secured by a purchase money mortgage on the waterfront property.The note went into default in 1987, foreclosure proceedings were initiated in 1988 and the waterfront property was sold in 1995 at a substantial loss to the trust.

The trustee bank is First Union National Bank (formerly Florida National Bank).The trust department of the Jacksonville branch administered the trust.In 1982, the Miami branch of the bank made a commercial loan to the Boyd family in the amount of $1,180,000, payable in eighteen months.Boyd and Turney agreed to subordinate the trust's purchase money mortgage to this commercial loan.The beneficiary asserts that Turney required the Boyd family to personally guarantee the commercial loan.Shortly thereafter, Turney died before the subordination agreement was formally executed.The beneficiary maintains that the Miami branch then changed the commitment by permitting an extension of six months, and deleted one of the Boyds as a guarantor.After the loan closed, the Miami branch demanded that the trustee in Jacksonville execute the subordination agreement, and the trustee complied.

The Miami commercial loan was not timely repaid, and several more extensions were granted.In March, 1985, the trustee received notice from the Boyds' attorney that the Boyds intended to pay the Miami commercial loan with funds from two other loans to be made to the Boyds by the County Bank of Bradenton.The County Bank was controlled by the Boyds.The trustee refused to subordinate the purchase money mortgage to the County Bank loans.County Bank still made its loans, with a provision for subrogation of their respective mortgages to the first lien of the Miami commercial loan.

In 1986the trustee's real estate department obtained confirmation that the Miami commercial loan had been satisfied.At that point the trust officer concluded that the purchase money mortgage was in first lien position.In 1987, County Bank was taken over by the FDIC.On maturity and default of the purchase money mortgage, the FDIC claimed to hold a superior position to the purchase money mortgage by virtue of the County Bank loans used to satisfy the Miami commercial loan.After the trustee initiated foreclosure proceedings in 1988, the FDIC filed a counterclaim alleging subrogation.The beneficiary hired counsel to explain the proceedings to her.The trustee then retained William G. Cooper, Esq., because of his experience in complex commercial litigation, and to review another attorney's recommendation that the bank should advance approximately $200,000 to construct new docks at the marina.After meeting with the beneficiary and her attorney, he drafted letters to the trustee acknowledging that the Miami commercial loan had been paid with funds from the County Bank loans, and recommending that the trustee might want to take steps to terminate the trust.Cooper also gave his opinion on the dock construction issue.

In response to an accounting, the beneficiary filed her initial complaint in 1993.As part of a settlement agreement between the FDIC and the trustee in 1990, the marina and waterfront property was eventually sold at auction in 1995 for $1,650,000 and FDIC received $1,029,460.After the trustee deducted its fees and costs, the beneficiary was given a statement showing her distribution share was a negative $6,870.

Preliminary Considerations

As an initial issue, it must be determined whose interests were represented by the attorneys hired by the trustee.If the client is the beneficiary, then a showing of a fraud is not necessary, as the beneficiary would be the holder of the attorney-client privilege.However, if the "true" client is the trustee, then the beneficiary would have to prove the existence of fraud or some other exception to overcome the privilege.

In the instant case, because of the ongoing foreclosure proceedings in 1988, FDIC's claim of subrogation, and complaints and threats of litigation by the beneficiary and her counsel, the trustee realized there were problems, including a perceived conflict of interest, and therefore retained William Cooper for legal advice.Therefore, it appears that Cooper's true client was the trustee, not the beneficiary.SeeBarnett Banks Trust Co., N.A. v. Compson, 629 So.2d 849(Fla. 2d DCA1993);Paskoski v. Johnson, 626 So.2d 338(Fla. 4th DCA1993);In re Estate of Gory, 570 So.2d 1381(Fla. 4th DCA1990).

Factual questions in these types of cases are never easily resolved.Although it seems fairly clear that the trustee hired counsel because of the foreclosure proceedings and problems with the trust, the respondent beneficiary and her attorney testified that they had been led to believe by Cooper that the trustee had retained him for the benefit of the trust and beneficiaries.However, the respondent beneficiary had already retained her own counsel in May 1988, and was questioning the trustee's conduct before the trustee retained Cooper for legal advice in September, 1988.It therefore appears that the trustee retained Cooper for its own benefit as the trial court found in the previous order which was the subject of the first certiorari proceeding.

Fraud

Section 90.502, Florida Statutes(1995), provides that there is no attorney-client privilege when the services of the lawyer are sought or obtained to enable or aid anyone to commit or plan to commit what the client knew was a crime or fraud.The party seeking to invoke the fraud exception must present prima facie evidence that the client sought the advice of counsel to procure a fraud.SeeClark v. United States, 289 U.S. 1, 53 S.Ct. 465, 77 L.Ed. 993(1933);Shell Oil Co. v. Par Four Partnership, 638 So.2d 1050(Fla. 5th DCA1994).

The respondent beneficiary has no shortage of claims of fraud; however, they all resolve into various sorts of breach of the fiduciary duty owed by the bank as trustee to the beneficiaries.The beneficiary's complaint in this case essentially alleges that the trustee negligently or intentionally acted in conflict with the beneficiary's interests and then concealed its multiple breaches of fiduciary duty.

Constructive fraud is the term typically applied where a duty under a confidential or fiduciary relationship has been abused, or where an unconscionable advantage has been taken.Constructive fraud may be based on misrepresentation or concealment, or the fraud may consist of taking an improper advantage of the fiduciary relationship at the expense of the confiding party.SeeFulton v. Clewiston, Ltd., 100 Fla. 257, 129 So. 773(1930);Pryor v. Oak Ridge Dev. Corp., 97 Fla. 1085, 119 So. 326(1928).

Our review of the documents and the record discloses no "fraud" that would abrogate the attorney-client privilege.The three Cooper letters which were voluntarily disclosed and were the subject of the first certiorari proceeding show that Cooper gave the bank his opinions concerning several issues regarding the foreclosure action, including the subrogation theory raised by the FDIC, the dock permits question, and how to administer the trust in light of the perceived problems.None of these letters show that Cooper was aiding a contemplated fraud.The letters do not show...