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Florida Fiduciary Must Be Served With Formal Notice In Individual Capacity For Surcharge

In Kozinski_v._Stabenow, the appellate court addressed the issue of personal jurisdiction over a personal representative and trustee in her individual capacity in a Florida probate proceeding.  Kozinski serves as trustee of trust created by Kozinski’s mother, and is also the personal representative of her mother’s estate.  Kozinski’s sisters, appellees Stabenow and Faul, along with Kozinski, are beneficiaries of their mother’s estate and trust.  Stabenow and Faul filed a petition to review the compensation paid to Kozinski as personal representative and trustee, as well as fees paid to Kozinski’s law firm and the law firm of Broad and Cassel.  Stabenow and Faul claimed that the fees were excessive.  Stabenow and Faul 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.”

The petition to review was not formally served upon Kozinski, but was sent via e-mail service to Kozinski’s counsel. Kozinski filed a motion to dismiss the petition for lack of personal jurisdiction, arguing that Stabenow and Faul failed to invoke the court’s personal jurisdiction over her where they sought surcharge and disgorgement against her in her individual capacity, because they never served her in her individual capacity via formal notice or a complaint.

The argument at the trial court turned on whether or not a surcharge action is an adversary proceeding, requiring formal notice under Florida Probate Rule 5.025 or a complaint served under the Florida Rules of Civil Procedure in order to obtain personal jurisdiction over Kozinski individually.  Kozinski argued that it was, while Appellees argued it was not.  The trial court agreed with Appellees, finding that formal notice was not required.

The appellate court disagreed with the trial court, holding that a proceeding filed 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) requires formal notice under the Florida Probate Rules.

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.  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.”  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. 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, 610 So. 2d 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 appellate court held 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.”

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

The takeaway from this case is that it is important to ask what kind of relief is being sought.  If you are seeking to have funds returned personally from a fiduciary, this amounts to a surcharge action and the fiduciary must be served with formal notice or a complaint in their individual capacity.  

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Broward County (Ft. Lauderdale)

Natasha M. Dalton

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Matthew Weidner

Sarasota County

Dawn Bates-Buchanan

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Nicole Quattrocchi

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Long H. Duong

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Philip W. Gunthert

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Katina Pantazis

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Matthew Weidner

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Gregory J. Nussbickel

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Niuris Bezanilla

Hillsborough County (Tampa)

R. Todd Burbine

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Heather Caeners

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Jon L. Martin

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Scott Kuhn

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Matthew Weidner

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Lesly Vaillancourt