## Facts

- Real-estate developers acquired three tracts of Florida land and created land trusts for the parcels, then sold shares of beneficial interests to members of the public.
- When title to the parcels was transferred into the trusts, the developers kept portions of each parcel for themselves (the “retained land”), rather than conveying all acreage to the trusts.
- The SEC later brought a federal action alleging securities-law violations and sought to have the retained land returned to the trusts.
- In the federal proceedings, Flagship Bank of Orlando was appointed successor trustee and receiver, and it was substituted as the plaintiff in related trust litigation.
- Property taxes on the retained land were not paid, resulting in tax certificates and a scheduled tax deed sale under Florida law.
- Flagship sought to stop the tax deed sale, but the request to stay the sale was denied.
- The federal court authorized Flagship to redeem the tax certificates to preserve the retained land for the trusts.
- Flagship did not redeem the tax certificates, and the retained land was sold to third parties at the tax deed sale.
- Reinman, Harrell, Silberhorn, Moule & Graham, P.A., and another successor trustee (Hugh M. Palmer) later replaced Flagship in the trust administration.
- The federal court ultimately determined that the trusts were entitled to the retained land; because it had been lost through the tax deed sale, the court entered a damages award against Flagship measured by the market value of the land at the time of trial.
- Flagship appealed, disputing both the scope of its duty as trustee/receiver and the valuation date used to calculate damages.

## Issues

1. Whether a trustee/receiver has a fiduciary duty—apart from any express trust-instrument language—to take reasonable steps to preserve property claimed for the trust (including redeeming tax certificates) to prevent loss by tax deed sale.
2. If the trustee breached that duty without bad faith, whether damages should be measured by the land’s market value at the time of the tax deed sale rather than at the time of trial.

## Decision

- The court held that Flagship, as trustee/receiver, had a duty to act reasonably to preserve property claimed for the trusts and could not avoid responsibility by pointing to silence in the trust instrument.
- The court agreed that Flagship breached its duty by failing to redeem the tax certificates after receiving authority to do so and after learning of the imminent tax deed sale.
- The court rejected the trial-date valuation measure on this record and held that, absent bad faith, damages should be based on the market value of the land at the time it was lost at the tax deed sale (not the higher value at the time of trial).
- The court modified/reversed the damages component accordingly and remanded for recalculation consistent with the proper valuation date.

## Legal Principles

- A trustee’s fiduciary obligations include a general duty of prudent administration and reasonable care to preserve and protect trust property; these duties are not limited to items expressly listed in the trust instrument.
- A trustee/receiver who has notice of tax delinquency and the ability to protect trust property (including authority to redeem tax certificates) must take reasonable steps to prevent loss of the property through a tax deed sale.
- When a trustee breaches the duty of preservation through negligence but without bad faith or disloyal intent, the usual surcharge measure is the value of the property at the time of loss (often with appropriate additional amounts such as interest), not later appreciation.
- A later valuation (such as trial-date value) is generally associated with bad-faith conduct or other circumstances justifying recovery beyond the value at the time the trust asset was lost.

## Conclusion

The Fifth District held that Flagship, as trustee/receiver, had a fiduciary duty to protect land claimed for the trusts from loss by tax deed sale and breached that duty by failing to redeem tax certificates after being authorized to do so. However, because the breach was not found to be in bad faith, the court limited damages to the market value of the lost land at the time of the tax deed sale rather than the higher market value at trial, and remanded for recalculation of damages on that basis.


Flagship Bank of Orlando v. Reinman, Harrell, Silberhorn, Moule & Graham, P.A., 503 So. 2d 913 (1987)