Settlement agreement that discharged corporate co-trustee, without naming a replacement as required by the trust terms, rejected as an improper trust modification.
Robert Bellamy created an inter vivos trust and named his wife, two adult daughters, his accountant, and Northern Trust as successor co-trustees upon his death. Robert died in 2006. In 2009, one of his adult daughters filed a petition seeking to remove Robert’s accountant as co-trustee for breach of fiduciary duty. While that petition was pending, Robert’s wife, Northern Trust, and the accountant voted to adopt several proposals that were opposed by the two adult daughters. In 2010, the adult daughters and the accountant entered into a settlement agreement that permitted the accountant to resign without liability for any breach of fiduciary duty. This settlement agreement was opposed by Robert’s wife.
In 2011, the adult daughters and Northern Trust entered into a settlement agreement discharging Northern Trust as co-trustee and providing that Merrill Lynch would act as custodian of the trust assets. The daughters filed a petition for court approval of the agreement, which the wife opposed. The wife filed a counter-petition seeking to remove Northern Trust and replace it with a successor corporate trustee because the trust terms required the appointment of a corporate co-trustee. As part of her counter-petition, the wife claimed that Northern Trust breached its fiduciary duties by entering into the settlement agreement.
The trial court approved the settlement agreement, approved Northern Trust’s resignation, and released Northern Trust from liability. The trial court also dismissed the wife’s counter-petition with prejudice. The wife appealed arguing that the trial court erred in removing the clear requirement for a corporate trustee.
On appeal, the Florida Court of Appeals reversed the trial court and reinstated Northern Trust as co-trustee on the grounds that: (1) the trust terms specifically prohibited court modification of the trust under the relevant Florida statutes; (2) the requirement of a corporate co-trustee was intended by the settlor as essential to the trust’s administration.