Court Opinion

ID: 2748193
Source: CourtListenerOpinion
Date Created: 2014-11-05 16:05:43.437367+00
Date Added: 2024-06-11T10:16:22.018175
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                            FOURTH DISTRICT
                             July Term 2014

                       KATHLEEN G. KOZINSKI,
               as Trustee and as Personal Representative,
                               Appellant,

                                    v.

                  AMY STABENOW and NORA FAUL,
                           Appellees.

                             No. 4D14-1056

                           [November 5, 2014]

  Appeal of a non-final order from the Circuit Court for the Fifteenth
Judicial Circuit, Palm Beach County; Krista Marx, Judge; L.T. Case No.
502013CP001771XXXXNB.

   Beverly A. Pohl of Broad and Cassel, Fort Lauderdale and Gary E.
Lehman of Broad and Cassel, Miami, for appellant.

  Edward Downey and Lee McElroy IV of Downey & Downey, P.A., Palm
Beach Gardens, for appellees.

CONNER, J.

   Appellant, Kathleen Kozinski, appeals the entry of a non-final order
denying her motion to dismiss the Appellees’ petition for lack of personal
jurisdiction. Kozinski argues that the trial court erred in denying her
motion to dismiss because she was never served with formal notice that
she might be subject to personal liability. Specifically, Kozinski argues
that the remedy of “surcharge” sought in the Appellees’ petition against
her individually constituted an adversary proceeding requiring service by
formal notice under the Florida Probate Rules in order for the probate
court to have personal jurisdiction over her individually, as opposed to
personal jurisdiction over her as personal representative or trustee. We
agree and reverse.

                       Facts and Trial Proceedings

   Kozinski, an attorney, serves as the trustee of a trust created by her
mother, E.W.H. After E.W.H. died, Kozinski filed a notice of trust, which
noted that the trust would be liable to E.W.H.’s creditors to the extent her
estate was insufficient to pay them.           Thereafter, a petition for
administration of E.W.H.’s estate was filed as a separate case. Kozinski
was appointed as personal representative of the estate. Subsequently, the
two cases were consolidated. Appellees Stabenow and Faul, E.W.H.’s two
other daughters, are beneficiaries under the will and the trust. Kozinski
is also a beneficiary under the will and the trust.

   Pursuant to sections 733.6175 and 736.0206, Florida Statutes (2014),
the appellees filed a petition to review the compensation of Kozinski as
personal representative and as trustee, as well as fees paid to Kozinski’s
law firm and the law firm of Broad and Cassel. In the petition, the
appellees also objected to accountings based on the payment of the fees.
The appellees claimed Kozinski had paid excessive fees from the estate and
trust assets.     The appellees asked the court to determine the
reasonableness of the compensation and also “to enter such surcharge or
disgorgement orders as are warranted,” along with fees and other relief.
(emphasis added).

   The appellees’ petition for review was not formally served upon
Kozinski, but was sent via e-mail service to her counsel. In response,
Kozinski filed a motion to dismiss the petition for lack of personal
jurisdiction, arguing, among other things, that the appellees failed to
invoke the court’s personal jurisdiction over her where they sought
surcharge and disgorgement against her in her individual capacity.

    At the hearing on the motion, Kozinski argued that a surcharge action,
which is based on a breach of fiduciary duty, was an adversary proceeding
which required formal notice or a complaint served under the Florida Rules
of Civil Procedure in order to obtain personal jurisdiction over Kozinski
individually. See Fla. Prob. R. 5.025(a), (d). The appellees disagreed and
argued that the petition was not an adversary proceeding and did not
require formal notice. The appellees maintained that the remedy of a
“refund” which is provided for under sections 733.6175 and 736.0206 was
indistinguishable from a “surcharge,” and asserted that the court already
had jurisdiction over Kozinski as personal representative and trustee by
virtue of her initial pleadings. The trial court denied the motion to dismiss,
but granted a stay pending this appeal.

                             Appellate Analysis

   “The denial of a motion to dismiss for lack of personal jurisdiction is
reviewed de novo.” Kent v. Marmorstein, 120 So. 3d 604, 605 (Fla. 4th

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DCA 2013).

   The appellees filed their petition in a probate case pursuant to section
733.6175 (Proceedings for review of employment of agents and
compensation of personal representatives and employees of estate) and
section 736.0206 (Proceedings for review of employment of agents and
review of compensation of trustee and employees of trust). §§ 736.0206,
733.6175, Fla. Stat. Both statutes provide that “[a]ny person who is
determined to have received excessive compensation [from a trust or
estate] for services rendered may be ordered to make appropriate refunds.”
§§ 733.6175(3), 736.0206(3), Fla. Stat. (emphasis added).

  The issue on appeal is whether a proceeding filed in a probate case
pursuant to those statutory sections requires service by formal notice
under the Florida Probate Rules.

    Section 736.0206(1), Florida Statutes, allows for the review of fees paid
to a trustee or the trustee’s agents in general. Subsection (2) of the statute
allows for the review to be filed in with the settlor’s probate proceeding. §
736.0206(2), Fla. Stat. If the fee review proceeding is filed in a probate
proceeding, the Florida Probate Rules regarding formal notice apply. §
736.0206(6), Fla. Stat. If the fee review proceeding is not filed in the
settlor’s probate proceeding, the Florida Rules of Civil Procedure and
service of process procedure under Chapter 48, Florida Statutes, apply.
See §§ 736.0201(1), 736.02025, Fla. Stat. (2014).

    Resolution of the issue of whether a proceeding for the review of fees
paid to a personal representative or the personal representative’s agents
requires service by formal notice depends on whether the proceeding is
considered an “adversary proceeding” under the Florida Probate Rules.1
The issue of whether such a proceeding is considered an adversary
proceeding, in turn, depends on whether a “refund” ordered pursuant to
either statute is tantamount to a “surcharge,” as that term is used in the
Florida Probate Rules and the case law. Section 733.6175 makes no
reference to “surcharge.”2 However, as discussed below, the case law in
Florida clearly indicates that a fee dispute arising under section 733.6175
is, in essence, a surcharge proceeding.

   Florida Probate Rule 5.025(a) specifically provides that a proceeding to
“surcharge a personal representative” is an adversary proceeding. Fla.

1 Florida Probate Rule 5.025 provides three mechanisms for treating a proceeding
as an “adversary proceeding.” The only mechanism at issue in this appeal is the
one provided for in Rule 5.025(a) (specific proceedings).
2 Likewise, section 736.0206 makes no reference to “surcharge.”

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Prob. R. 5.025(a). The rule provides the same regarding guardians and
guardianship proceedings. Thus, case law discussing the principles of
“surcharge” in the guardianship context are useful in analyzing the
principles of “surcharge” in the probate context. We also note that Chapter
744 governing guardianship proceedings has similar provisions for review
of fees as found in section 733.6175. See § 744.108, Fla. Stat. (2014).

    “A ‘surcharge’ is the amount that a court may charge a fiduciary that
has breached its duty.” Reed v. Long, 111 So. 3d 237, 238 (Fla. 4th DCA
2013) (citing Merkle v. Guardianship of Jacoby, 862 So. 2d 906, 907 (Fla.
2d DCA 2003)). We also wrote in Reed that “[t]he purpose of such an
award is to make the [ ] estate whole when the [fiduciary]’s actions cause
loss or damage to the [estate].” Id. at 239 (citations omitted). Moreover,
in the context of trust proceedings, the Fifth District has said that “[a]
surcharge action seeks to impose personal liability on a fiduciary for
breach of trust through either intentional or negligent conduct.” Miller v.
Miller, 89 So. 3d 962, 962 n.1 (Fla. 5th DCA 2012). It is clear under the
case law that a surcharge proceeding can be pursued when a fiduciary
pays excessive fees to himself, herself, or agents of the fiduciary. In re
Estate of Winston v. Winston, 610 So. 1323, 1325 (Fla. 4th DCA 1992) (“It
follows without the necessity of citation of authority that the personal
representative is subject to surcharge for any improper or excessive
payments [of fees].”).

   The case which most strongly equates a petition for review of fees
pursuant to section 733.6175 with a surcharge is Beck v. Beck, 383 So.
2d 268 (Fla. 3d DCA 1980). In Beck, the Third District said that “[the
appellee]’s challenge to payment of that compensation invoked Section
733.6175, Florida Statutes (1977), which placed the burden of proof as to
the propriety, reasonableness and necessity of such payments upon the
personal representative.” Id. at 271 (emphasis added). The court went on
to hold that “[t]he record amply reflects the propriety of the surcharge
against [the appellant-personal representative] for payments he made with
funds from [the appellee]’s share of the estate for . . . overpayment of
attorneys’ fees.” Id. at 272 (emphasis added); see also Merkle, 862 So. 2d
at 907 (holding that the order directing a refund of fees paid to the
guardian “was tantamount to an order surcharging the guardian”).3

3In In re Estate of Winston, we said that because a personal representative could
be subject to surcharge for the payment of excessive fees, a personal
representative has the right to file a petition for review of fees pursuant to section
733.6175, Florida Statutes, but we did not equate a petition for review of fees
with a petition for surcharge for the obvious reason that it was the fiduciary who
brought the review proceeding. 610 So. 2d at 1325.

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    “A personal representative is a fiduciary who shall observe the
standards of care applicable to trustees.” § 733.602(1), Fla. Stat. (2014);
see also § 733.609(1), Fla. Stat. (2014) (“A personal representative’s
fiduciary duty is the same as the fiduciary duty of a trustee of an express
trust, and a personal representative is liable to interested persons for
damage or loss resulting from the breach of this duty.”); State v. Lahurd,
632 So. 2d 1101, 1104 (Fla. 4th DCA 1994) (“The personal representative,
like a trustee, is a fiduciary in handling the estate for the beneficiaries. As
such, he or she is to observe the standard of care in dealing with the estate
as a prudent trustee exercises in dealing with property of the trust.”)
(citations omitted). A trustee is required to seek only reasonable fees for
his or her services and the trustee’s agents. See §§ 736.0105(1), (2)(b);
736.0801; 736.0802(1), (7)(b), (8), Fla. Stat. (2014).

   “Issues of liability as between the estate and the personal representative
individually may be determined in a proceeding for accounting, surcharge,
or indemnification, or other appropriate proceeding.” § 733.619(4), Fla.
Stat. (2014) (emphasis added). In In re Estate of Pearce, 507 So. 2d 729
(Fla. 4th DCA 1987), we said:

      Inasmuch as section 733.609 likens the role of a personal
      representative to that of a trustee of an express trust, we find
      it helpful to see what is the usual law respecting surcharge,
      which is payment by a trustee . . . out of the trustee’s own
      funds for breach of trust.”

Id. at 731 (emphasis added).

   Accordingly, we hold that a proceeding seeking an order or judgment
imposing a refund or surcharge against a fiduciary or a fiduciary’s agent,
individually, and the immediate return of money to a trust, probate, or
guardianship estate as a result of a breach of fiduciary duty (charging
excessive fees) is tantamount to a judgment for damages, requiring
personal service on the fiduciary as an individual, and not in any
representative capacity.4

  We thus reject appellees’ contention that their petition for review of fees
pursuant to sections 733.6175 or 736.0206 seeking an immediate refund

4Even if the order or judgment is construed to be a sanction, the result would be
the same. Taylor v. Mercedes, 760 So. 2d 282 (Fla. 4th DCA 2000) (treating an
order directing a guardian to reimburse the guardianship from the guardian’s
personal funds to be in the nature of a sanction and holding that the failure to
give the guardian formal notice that such a sanction would be imposed required
reversal).

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of money to the probate or trust estate does not initiate an adversary
proceeding subject to the notice requirements of the Florida Probate
Rules.5 We hold that, absent a written waiver, formal notice served on the
respondent individually, and not in a representative capacity, is required
for a proceeding to surcharge a personal representative, as well as for a
petition filed in a probate case pursuant to sections 733.6175 or 736.0206
seeking to require the fiduciary to return to the estate the overpayment of
compensation paid to the fiduciary or agent. With regard to notice and
procedure in such adversary proceedings, Florida Probate Rule 5.025(d)(1)
explicitly states that in adversary proceedings, a “[p]etitioner must serve
formal notice.” Fla. Prob. R. 5.025(d)(1) (emphasis added).

    Kozinski was not served individually with formal notice of the petition
for review of fees, and she did not waive in writing her right to receive such
notice. Because personal jurisdiction over Kozinski in her individual
capacity was not properly obtained, the trial court’s order denying
Kozinski’s motion to dismiss is reversed without prejudice.

    Reversed and remanded.

LEVINE and KLINGENSMITH, JJ., concur.

                              *         *         *

    Not final until disposition of timely filed motion for rehearing.

5 Neither section 733.6175 nor section 736.0206 prescribes a time period as to
when the refund is to be paid. Arguably, the court has the discretion to order
the refund against future compensation payable to the fiduciary. We do not
address whether formal notice is required in a situation in which a refund is used
as an offset of the amount of the overpayment against future compensation.

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