Siegel v. Novak

• Decision Date: 18 January 2006
• Docket Number: No. 4D04-3435.,No. 4D05-430.,4D04-3435.,4D05-430.
• Citation: 920 So.2d 89
• Parties: Daniel G. SIEGEL, individually, and SIMON B. SIEGEL, individually, and as Trustee of trusts created under Articles Fifth and Sixth u/a Dorothy H. Rautbord, deceased, Appellants, v. Judith S. NOVAK, as Co-Personal Representative of the Estate of Dorothy H. Rautbord, deceased, and individually; and JP Morgan Trust Company, N.A., as Co-Personal Representative of the Estate of Dorothy H. Rautbord, deceased, Appellees.
• Court: Florida District Court of Appeals

Page 89

920 So.2d 89

Daniel G. SIEGEL, individually, and SIMON B. SIEGEL, individually, and as Trustee of trusts created under Articles Fifth and Sixth u/a Dorothy H. Rautbord, deceased, Appellants, v. Judith S. NOVAK, as Co-Personal Representative of the Estate of Dorothy H. Rautbord, deceased, and individually; and JP Morgan Trust Company, N.A., as Co-Personal Representative of the Estate of Dorothy H. Rautbord, deceased, Appellees.

No. 4D04-3435.

No. 4D05-430.

District Court of Appeal of Florida, Fourth District.

January 18, 2006.

Rehearing Denied February 23, 2006.

Richard A. Goetz and Glenn M. Mednick of Hodgson Russ LLP, Boca Raton, for appellants.

James G. Pressly, Jr., of Pressly & Pressly, P.A., West Palm Beach, for appellee Judith S. Novak.

Arnold L. Berman, Stephen T. Maher, William D. McEachern, and Vincent E. Miller of Shutts & Bowen LLP, West Palm Beach, for appellee JP Morgan Trust Company, N.A.

GROSS, J.

This consolidated appeal involves two aspects of decedent Dorothy H. Rautbord's estate plan: 1) Case No. 4D04-3435 involves the petition to remove the co-personal representatives of Rautbord's estate, and 2) Case No. 4D05-430 concerns a challenge to disbursements made by the trustee of a revocable trust established by Rautbord. We hold that under New York law and the facts of this case, the decedent's sons have standing to challenge disbursements made by the trustee prior to Mrs. Rautbord's death. Therefore, we reverse the final judgment approving the accounting sought with respect to the trust. We affirm the trial court's dismissal of the attempt to remove the co-personal representatives of the estate.

Rautbord died on February 28, 2002. She was survived by three children: appellants Daniel and Simon Siegel and appellee Judith Novak.

On May 30, 1990, Rautbord executed a will that was subsequently amended by a second codicil dated July 11, 1990. The second codicil made her daughter, Judith, and appellee, JP Morgan Trust Company, co-personal representatives of her estate.¹

Prior to the execution of her will, in March, 1990, Rautbord executed an Amended and Restated (Revocable) Agreement of Trust with JP Morgan Chase Bank as trustee. The trust directed that upon Mrs. Rautbord's death "[a]ll property which is directed to be disposed of pursuant to this Article shall be divided into and set aside in a sufficient number of equal shares to provide one (1) such share for each of the settlor's children [the Siegels and Novak], who survives the settlor, and one (1) such share for the issue of each of [the Siegels and Novak] who predeceases the settlor." A March, 1991 amendment to the trust described the disposition of trust property during Mrs. Rautbord's lifetime:

During the life of the Settlor [Mrs. Rautbord], the Trustee shall hold, manage, invest and reinvest the trust property, collect the income therefrom, and pay to or apply for the benefit of the Settlor, at any time or from time to time, so much or all of the net income and principal thereof as the Trustee, in its sole discretion, shall deem appropriate or advisable for the support, maintenance, health, comfort or general welfare of the Settlor. Any net income not so paid or applied shall be added to principal annually.

The trust was amended five times. Originally, the trust situs was Florida and the trust was to be construed under Florida law. A July 11, 1995 amendment provided that the trust was to be governed by the laws of the State of New York and gave the trustee the power to transfer the situs and assets of the trust to any other state, at the trustee's discretion. The trust also provided in pertinent part:

This Agreement shall be binding upon the personal representatives, successor, and assigns of the parties hereto. The settlor may from time to time, by duly acknowledged, written instrument delivered to the corporate Trustee during the Settlor's lifetime, amend, modify, or revoke, in whole or in part, this Agreement and any trust created hereunder; provided, however, that the foregoing powers of amendment, modification and revocation shall be personal to the Settlor and shall not vest in or be exercisable by any person or corporation acting in any fiduciary or like relationship to the Settlor (including, without limitation, the Settlor's attorney-in-fact, the Settlor's guardian (or like representative)), or any trustee in bankruptcy or receiver for the Settlor. . . . Except as otherwise provided in this Agreement, this Agreement and all trusts created hereunder shall upon the Settlor's death become irrevocable and not subject to amendment, modification, or revocation thereafter.

(Emphasis added). JP Morgan Chase Bank transferred the assets and situs of the trust from New York back to Florida on March 6, 2003. Thus, during the time period at issue in the trust appeal, case number 4D05-430, the situs of the trust was New York pursuant to the July 11, 1995 amendment.

After creating the March, 1990 trust, Rautbord executed a durable power of attorney making her daughter, Judith Novak, her attorney-in-fact and giving her authority to, inter alia:

(13) make any gift, either outright or in trust, to any individual (including my Attorney-in-fact) or any charitable organization, provided that such gift either (i) shall be reasonably consistent with any pattern of my giving or with my estate plan or (ii) shall not exceed the annual exclusion available from time to time for federal gift tax purpose. . . .

(18) [t]o create a revocable trust with such trustee or trustees (including my Attorney-in-Fact) as my Attorney-in-Fact may select which creates a trust requiring that (a) all income and principal shall be paid to me or any guardian (or like representative) for me or applied for my benefit in such amounts as I or my Attorney-in-Fact shall or as the trustee or trustees thereof shall determine, (b) on my death any remaining income shall be paid to my estate.

The document stated that the power of attorney did not include the authority "(6) [t]o amend, modify or revoke, in whole or in part, or withdraw any of the principal of, any trust over which I have reserved or have been granted such power [other than a trust created pursuant to the authority granted in paragraph 18 above.]"

While Rautbord was still alive, Novak made large withdrawals from the trust through the power of attorney, by signing a series of revocation letters. As trustee, JP Morgan Chase Bank approved all of these withdrawals.

In a 2001 letter, JP Morgan Chase Bank recognized that there may have been a problem with some of Novak's withdrawals, and that "Mrs. Rautbord [was] in her nineties [and] quite frail [.]" The letter went on to note that after "Mrs. Rautbord became incapacitated," Novak, through her power of attorney status, requested principal funds from the trust by signing a series of revocation letters. The Bank observed that the trust instrument "specifically stated" that revocation powers "be personal to the settlor and shall not be vested in or be exercisable by any persons... including, without limitation, the settlor's attorney-in-fact." The Bank concluded that the revocation letters "on file to support the principal distributions made during the period November 16, 1995 through June 26, 2001" were "questionable" for the purpose of authorizing principal distributions. The Bank indicated its intention to "ratify the principal distributions."

In March, 2003, JP Morgan Chase Bank filed a two count complaint seeking, inter alia, a "judicial accounting pursuant to Chapter 737, Florida Statutes," whereby the Bank sought a discharge from liability "for any and all Trustee actions during the period of Accounting." The Bank attached an 89-page accounting to the complaint. The complaint identified the brothers Siegel as defendants who were "interested persons and beneficiaries under the Trust."

The Siegels filed an Answer and Affirmative Defenses. Their affirmative defenses complained that the accounting attached to the complaint did not "contain sufficient information detailing the various distributions" to allow them "to determine the propriety of such distributions." Also, they alleged that some distributions may not have been made for the purposes specified in the trust—for the "support, maintenance, health, comfort or general welfare of" Mrs. Rautbord.

In November, 2003, the trial court granted the Bank's motion for partial summary judgment. The court ruled that the Siegels had no standing to challenge any distributions made prior to their mother's death on February 28, 2002. The court reasoned that before Mrs. Rautbord's death, the trust was revocable, so that the brothers Siegel had "no present interest in the trust during the time that the decedent was alive." After the court entered a final judgment approving the accounting, the Siegels filed this appeal.²

The first issue we address is whether the Siegels' standing to object to the trust accounting should be decided under New York or Florida law. We agree with JP Morgan Chase Bank that New York law applies.³

"In a choice of law context, Florida maintains the traditional distinction between substantive and procedural matters." BDO Seidman, LLP v. British Car Auctions, Inc., 802 So.2d 366, 371 (Fla. 4th DCA 2001) (Gross, J., concurring) (citing Prestige Rent-A-Car, Inc. v. Advantage Car Rental & Sales, Inc., 656 So.2d 541, 544 n. 2 (Fla. 5th DCA 1995); Aerovias Nacionales De Colombia, S.A. v. Tellez, 596 So.2d 1193, 1195 (Fla. 3d DCA 1992); Guirlinger v. Goldome Realty Credit Corp., 593 So.2d 1135, 1136 n. 1 (Fla. 1st DCA 1992)). "As the forum state in this case, Florida law determines whether [the issue of standing] is substantive or procedural for choice of law purposes." See BDO Seidman, 802 So.2d at 371 (Gross, J., concurring) (citing Fahs v. Martin, 224 F.2d 387, 397, 401 n. 6 (5th Cir.1955); Smithco Eng'g, Inc. v. Int'l Fabricators, Inc., 775 P.2d 1011, 1017-18 (Wyo.1989)). Generally,...