Frequently when individuals attempt to file a claim attacking the validity of a Trust or Amendment to Trust, they do not have the proper amount of information to determine the Trust value and, more importantly, whether the assets are being depleted. This is obviously a major concern as, regardless of the outcome of the action, should the Trust assets be depleted, the remedy available to the Plaintiff is obviously significantly limited. Therefore, in order to prevent further depletion of the assets, particularly until the facts regarding the assets of the Trust are obtained, an attempt to freeze the assets within the Trust is generally an option to be considered immediately after filing the action.
The question arises, under what circumstances will the Court freeze the assets within a Trust pursuant to a movant’s request to do so? A request for the Court to freeze trust assets is a request for injunctive relief and is generally accomplished through emergency motion. It may be brought pursuant to Florida Statutes 736.08165, 736.1001, and 736.0201, which are part of the Trust Code. The Courts have held that the requirements for establishing the right to preliminary injunctive relief are (a) the likelihood of irreparable harm and the unavailability of an adequate remedy at law (b) the substantial likelihood of success on the merits, (c) that the threatened injury to the movant outweighs any possible harm to the Trust (usually interpreted as otherwise no adequate remedy at law) (d) that the issuance of the injunction will not disserve the public interest. Sanchez v. Solomon, 508 So. 2d. 1264 (Fla. 3rd. DCA 1987)
The Courts have indicated that the trial courts may exercise broad discretion in granting, denying, dissolving, or modifying injunctions, and may do so unless a clear abuse of discretion is demonstrated. The Injunctive Relief sought has been held to be appropriate in instances where the property (“Res”) of the Trust is to be protected. N.I. Industries USA, INC. v Attorney’s Title, 6 So.3d 627 (Fla. 4th DCA 2009). In many instances, an attempt to freeze the assets will take place when the assets are held by a fiduciary and a party is seeking a determination of their rightful owner. The Court in Sanchez held that in this situation it is proper to freeze assets. The Courts look to the facts of each matter and apply the four-prong test.
Generally, the first prong is satisfied by showing that the Trust has been and will continue to be mismanaged and/or the depletion will cause harm to the ultimate beneficiaries, usually the Plaintiffs. Evidence that assets will be dissipated in the absence of a requested injunction usually satisfies the requirement of immediate and irreparable harm. The second prong is usually satisfied by the Court’s inherent and broad jurisdiction, even if the ultimate ownership is in dispute and unresolved. The Sanchez court affirmed this view. Regarding the third prong, although a civil action may have been initiated, without an Order freezing the assets, many times there will be nothing to prevent the Trust from continuing mismanagement during the pendency of the proceeding. This fact is usually considered by the Court and dictates the lack of an otherwise adequate remedy at law. Finally, The Court has recognized the importance of maintaining the status quo when Trust assets are concerned and have held that the public’s interest in maintaining the status quo during proceedings outweighs the fiduciary’s interest, particularly if there has been a showing of prior mismanaged funds.
It is ultimately the decision of the Plaintiff in a trust action whether to move to have the assets of the Trust frozen during the pendency of the action. However, when there is evidence of mismanagement, fraud, or a breach of a fiduciary by the Trustee, it is usually the safest course of action. Although the burden is on the movant to satisfy the requirements, the Court has generally leaned in favor of protecting the assets during the pendency of the proceeding.
