IMPOSING PERSONAL LIABILITY ON A TRUSTEE FOR BREACH OF FIDUCIARY DUTY WITH A SURCHARGE ACTION
“We count on the space of trust that confidentiality provides. When someone breaches that trust, we are all worse off for it.” Hillary Clinton
When a trustee is appointed, the trust instrument and Florida Statutes direct and authorize the trustee to perform their fiduciary duties as a trustee. Florida Statute 736.0401 and 736.0402. What can be done if the trustee or successor trustee breaches their fiduciary duties as trustee? The elements of a cause of action against the trustee for breach of fiduciary duty are: 1) the existence of a duty; 2) breach of that duty; and 3) damages flowing from the breach of that duty. Crusselle v. Mong, 59 So.3d 1178 (Fla. 5th DCA 2011).
Florida Statute 736.1002 lists damages for breach of trust for which a trustee may be liable. If there is an absence of breach of trust, then the trustee is not liable to a beneficiary for a loss or depreciation in the value of the trust property, or for not having made a profit. Florida Statute 736.1003. The language of the trust document should be reviewed by competent counsel to determine if and when the trustee has breached their fiduciary duty as trustee.
Florida Statute 736.1001 lists remedies for breach of trust, but if it is believed that the trustee has breached their fiduciary duty as trustee, a surcharge action may be filed against the trustee seeking to impose personal liability on a fiduciary for breach of trust through either intentional or negligent conduct. Black’s Law Dictionary 1441 (6th Ed. 1990); Harding v. Rosoff, 951 So.2d 912 (Fla. 4th DCA 2007). A “surcharge” is defined as a charge against a fiduciary to compensate a beneficiary for the breach of fiduciary duty. Id. A surcharge is also defined as the amount that a court may charge a fiduciary that has breached their fiduciary duty. Merkle v. Guardianship of Jacoby, 862 So.2d 906 (Fla. 2nd DCA 2003).
A surcharge action may be warranted if the trustee or successor trustee breached their fiduciary duty to administer the trust, and/or breached their duty of loyalty, impartiality, prudent administration, and control and protection of the trust property. Florida Statutes 736.0801, 736.0802, 736.0803, 736.0804, 736.0809.
If the trustee or successor trustee wrongfully invaded the principal of the trust for their own personal benefit, this creates a conflict of interest between the trust’s beneficiaries and the trustee’s fiduciary duty, and a beneficiary of the trust can retain competent counsel to render the transaction voidable and institute a surcharge action against the trustee. Florida Statute 736.0802(2); Brigham v. Brigham, 11 So.3d 374 (Fla. 3rd DCA 2009); J.P. Morgan Trust Company, N.A. v. Siegel, 965 So.2d 1193 (Fla. 4th DCA 2007); Keye v. Gautier, 684 So.2d 210 (Fla. 3rd DCA 1996).
The trustee or successor trustee is a fiduciary and has a duty to refrain from self-dealing, the duty of loyalty, and the overall duty to not take unfair advantage, and must act in the best interest of the trust’s beneficiaries. Capital Bank v. MVB, Inc., 644 So.2d 515 (Fla. 3rd DCA 1994). A trustee has the duty to administer a trust diligently for the benefit of the beneficiaries of the trust. Friedman v. Friedman, 11 So.3d 374 (Fla. 3rd DCA 2009); Brigham v. Brigham, 11 So.3d 374 (Fla. 3rd DCA 2009). The trustee should not use trust funds for his own benefit and, as a result of this action, placing these funds unnecessarily at risk. Keye v. Gautier, 684 So.2d 210 (Fla. 3rd DCA 1996); Crawford v. Crawford, 129 Fla. 746, 176 So. 838 (Fla. 1937); Jungbluth v. American Bank & Trust Co, 101 Fla. 289, 134 So. 618 (Fla. 1931); Bailey v. Leatherman, 615 So.2d 810 (Fla. 3rd DCA 1993); Barnhart v. Hovde, 490 So.2d 1271 (Fla. 5th DCA), review denied 510 So.2d 543 (Fla. 1986); Centrust Savings Bank v. Barnett Banks Trust Co., 483 So.2d 867 (Fla. 5th DCA 1986); Shriner v. Dyer, 462 So.2d 1122 (Fla. 4th DCA 1984).
In the event you believe a trustee or successor trustee has breached their fiduciary duty which resulted in damages flowing from the breach of fiduciary duty, it is imperative that you contact competent counsel to review the trust document and any amendments to the trust document and to seek the appropriate relief, including but not limited to filing a surcharge action against the trustee to impose personal liability upon the trustee, to compensate the beneficiaries for the breach of fiduciary duty, and to ensure that the trust assets are preserved and properly maintained.