Fraser v. Southeast First Bank of Jacksonville

• Decision Date: 07 July 1982
• Docket Number: No. 80-1370,80-1370
• Parties: John R. FRASER, John Walter Fraser, Joan Elizabeth Fraser, Elaine Fraser, and Virgil Bryan Fraser by Joan Fraser, his mother and next friend, Appellants, v. SOUTHEAST FIRST BANK OF JACKSONVILLE, a national banking corporation, and Margot C. Valcarce, Appellees.
• Court: Florida District Court of Appeals

Page 707

417 So.2d 707

John R. FRASER, John Walter Fraser, Joan Elizabeth Fraser, Elaine Fraser, and Virgil Bryan Fraser by Joan Fraser, his mother and next friend, Appellants, v. SOUTHEAST FIRST BANK OF JACKSONVILLE, a national banking corporation, and Margot C. Valcarce, Appellees.

No. 80-1370.

District Court of Appeal of Florida Fifth District.

July 7, 1982.

Rehearing Denied Aug. 3, 1982.

John F. Corrigan and Courtney Wilder Stanton, of Ulmer, Murchison, Ashby, Taylor & Corrigan, Jacksonville, for appellants.

Delbridge L. Gibbs, of Marks, Gray, Conroy & Gibbs, Jacksonville, for appellee, Southeast First Bank of Jacksonville.

No Appearance for appellee Margot C. Valcarce.

SHARP, Judge.

John R. Fraser and his four children are the present living beneficiaries of a testamentary trust established by Adelene Fraser, John's mother. They are appealing a partial final summary judgment ¹ on Count I of their amended complaint denying them any relief against the Southeast First Bank of Jacksonville and Margot C. Valcarce, the former trustees of the trust. The trial court held that the beneficiaries' suit against the trustees for various failings in the administration and management of the trust was barred by principles of res judicata because the trustees had sought and obtained judicial settlement or approval of their accountings, for the periods of time involved in this suit--July 5, 1968 to April 30, 1976. ² Under the facts and circumstances shown in this record, we conclude the trial court was correct in dismissing Count I of their amended complaint.

The Fraser trust was established in 1965 upon the death of Mrs. Fraser. Its primary assets were all of the stock in Fountain of Youth Properties, Inc., a corporation which owned and operated a tourist attraction by that name in St. Augustine, Florida. Under the terms of the trust, Walter Fraser (John's father) and John were each to receive one-half of the net income of the trust during their lifetimes. One half of the principal could be invaded for Walter's necessary support, care or medical and hospital needs. The trustees could also pay additional sums for John's childrens' support, education and welfare. Upon Walter's death, the net income was to be paid to John or used for his children. On John's death, the trust was to be distributed to his children.

The problems in giving effect to this testamentary plan were, first, resolving a dispute over the ownership of the stock and, second, working out a method of paying income to trust beneficiaries in a situation where the trust itself had no income. The corporation, whose stock was held in trust, was the income producer. These problems were resolved by a judicial compromise which was amended from time to time. Under this arrangement the trustees operated and managed the corporation and paid Walter and John twelve thousand dollars ($12,000) per year (each), calling Walter's share a "pension" and John's share a "salary." After Walter's death in 1972, John's receipts increased somewhat, and trust funds were distributed for his childrens' education and benefit.

The trustees filed six annual accountings covering the fiscal years ending April 30, 1969 through April 30, 1974. These accountings were filed pursuant to section 737.12, Florida Statutes (1973). ³ Notice of these accountings was given to the beneficiaries, including the guardian ad litem for the Fraser children, who were minors. Pursuant to section 737.13 of the Florida Statutes (1973), the notice said the trustees were seeking "approval of all annual accounts then on file not previously approved." Pursuant to section 737.14 of the Florida Statutes (1973) the beneficiaries had to file their objections to the accountings within sixty days of service of the notice. No objections were filed. On January 6, 1975, the court approved the first through sixth annual accountings. Similarly, the seventh annual accounting was filed, notice was given, and court approval was obtained on October 17, 1975.

On January 1, 1976, a new law went into effect as part of the Revision of Florida's Probate Code. The new law, section 737.407, Florida Statutes (1979), ⁴ dropped the concept of required, court approved annual accountings. ⁵ To facilitate the transition from the old to the new law, trustees of trusts being administered under the prior law were required to submit a "Final Accounting" for approval by the court within one year from January 1, 1976. ⁶ In an effort to comply with the transition law, the trustees filed an eighth accounting covering the fiscal year ending April 30, 1976 on July 3, 1977. John filed objections to this accounting, but he withdrew them. After notice to the Fraser beneficiaries, the court approved the accounts on November 10, 1977. The court's order said the accounts were approved and the trust was discharged from its supervision, pursuant to Chapter 737 of the Florida Statutes.

Ultimately, the trustees obtained approval for accounting periods subsequent to those involved in this suit. They resigned and were released from liability from any acts relating to the post-1976 accounts. As stated above, the later accountings are not involved in this suit.

The issue involved in this case is whether the court orders approving the prior annual or periodic accounts filed by the trustees bar or estop the appellants from bringing this suit. The Frasers argue that the old law ⁷ made a distinction between the conclusive effect of a court order approving a final accounting in contrast with one approving a periodic or annual accounting. The statute covering final accountings said:

Prior to the final distribution of the trust, the trustee shall file a final account in the same form as an annual account, and give notice thereof to all beneficiaries .... If the court finds that the trustee has properly administered the trust, an order shall be entered approving the final account and all unapproved annual accounts and directing distribution; and upon filing of proper receipts showing distribution as directed, an order shall be entered finally discharging the trustee and the sureties on his bond, which order shall be conclusive, subject only to the right of appeal.

§ 737.16, Fla.Stat. (1973). Admittedly a final accounting pursuant to this law did not take place in this case because the trust continued past the repeal date of section 737.16.

The section applicable to periodic or annual accountings provided:

If notice of the filing of an annual account has been given or waived, the court may, after the time for filing objections has expired, or at the hearing on any objections, enter an appropriate order on such account and on all unapproved annual accounts previously filed.

§ 737.15, Fla.Stat. (1973). Although section 737.15, unlike section 737.16, did not expressly state the court order was "conclusive," its notice and service requirements, and the provision of a sixty day time period in which to file an objection, ⁸ clearly show some binding or conclusive effect was intended.

Because we have been unable to find any Florida case in point, we adopt the view, which the later statute ⁹ promulgates, ¹⁰ that there should be no distinction made between whether or not an accounting is periodic, annual or final for purposes of giving res judicata or a conclusive effect to a court order approving it. ¹¹ In the early decision of Gadsden v. Jones, 1 Fla. 332 (1847) the Florida Supreme Court considered the effect of an executor's final discharge. It held a final discharge by the county court barred a creditor's subsequent suit against him for failure to pay a claim. ¹² The court relied on a statute which barred such claims after five years following discharge. It said:

One of the primary rules laid down by the sages of the law for the construction of Statutes is, that "there are three facts to be considered in the construction of all remedial statutes; the old law, the mischief, and the remedy,"--that is, how the common law stood at the time of making the act, what the mischief was for which the case did not provide, and the remedy the Parliament hath provided to cure the mischief. (Citation omitted).

Id. at 340-41. The court said the old law was that an executor could never be discharged from his duties and the mischief was he remained, theoretically, forever liable. The evil was that no competent person of substance wished to undertake such an office. And the remedy was to secure a speedy and certain release for executors from their duties.

The mischief and evil sought to be remedied in the trust accounting context is similar to that of probate, except the need for the conclusive effect for periodic accountings is perhaps even greater for trusts because they may continue for much longer periods of time. As the court said in In Re Van Deusen's Will, 24 Misc.2d 611, 196 N.Y.S.2d 737 (Sur.Ct.1960):

The application of any other Rule [than res judicata], in our judgment, would result in a maelstorm of uncertainty, lack of judicial finality and ultimate chaos. Without some safeguards, no fiduciary could ever rest secure after his supposed acquittance. Hence we cannot conceive the prior accounts, and the decrees settling them, as constituting useless gestures which may be lightly brushed aside at the caprice of interested parties years after persons involved and records required are no longer available to dispute attacks made on them.

Id. 196 N.Y.S.2d at 743.

Most jurisdictions ¹³ conclude that a judicial settlement of a trustee's accounts, as to persons who receive notice and are subject to the court's jurisdiction, ¹⁴ bars subsequent litigation seeking to raise defaults or defects with the matters shown or disclosed in the accountings. ¹⁵ It is a modified kind of res judicata, based in part on statute and in part on case law. ¹⁶ It is different from the traditional concept of res judicata because, assuming there is due notice to all beneficiaries, courts say...