## Facts

- Robert W. Cox died in 2001; his estate plan created a family trust for his widow’s lifetime benefit and a bypass trust for the couple’s four children.
- Arthur F. McCormick, an attorney who drafted the estate plan, became trustee; his son and their law firm also provided legal services to the trusts.
- The trusts’ sole asset was roughly 100 acres in Lynnfield, Massachusetts, operated as a nine-hole golf course.
- In 2002, McCormick obtained an appraisal valuing the property at $2.5 million as of the date of death; that figure was used for estate tax reporting and trust administration.
- Trial evidence showed McCormick explored development and rezoning options around the same time, suggesting awareness of substantial development potential inconsistent with the low valuation.
- The Town of Lynnfield later offered to buy the property for $12 million for residential development; the transaction closed in 2005.
- Because the low reported basis created significant tax exposure, McCormick implemented a § 1031 like-kind exchange into a Florida shopping center, generating over $2.1 million in transaction-related expenses charged to the trusts.
- Between 2002 and 2005, McCormick did not provide required annual accountings and did not disclose the magnitude of the disparity between the valuation used and the later sale value.
- McCormick directed the closing agent to pay him approximately $1.5 million from sale proceeds as trustee compensation without beneficiary authorization; the probate court later found the trustee and attorney fees charged were substantially unreasonable and inadequately supported.

## Issues

1. Whether competent, substantial evidence supported findings that the trustee, his son, and their law firm breached fiduciary duties (including loyalty, prudence, disclosure, and accounting) in valuing, administering, and selling the trust property and in charging fees.
2. Whether the probate court properly exercised its authority to remove the trustee and to impose remedies including surcharge for expenses tied to the breach and disgorgement of unreasonable trustee and attorney fees.

## Decision

- The Florida Third District Court of Appeal affirmed the probate court’s final judgment in all respects.
- The court upheld removal of McCormick as trustee based on the trial court’s findings of breach and conflict.
- The court upheld a surcharge of $2,146,812 for expenses found attributable to the undervaluation and resulting transaction strategy.
- The court upheld disgorgement of approximately $1,348,000 in trustee and attorney fees found unreasonable and unsupported, as well as related interest reflected in a total award exceeding $5.3 million.

## Legal Principles

- A trustee must administer a trust with loyalty and prudence, avoid self-dealing, and act in the beneficiaries’ best interests.
- A trustee must keep beneficiaries reasonably informed and provide required accountings; material information about asset value and major transactions must be disclosed.
- A trustee who also serves as counsel may be held liable for fiduciary breaches committed in either capacity, including misconduct tied to compensation and conflicted decision-making.
- A court may remove a trustee for breach of trust or unfitness when continued service is inconsistent with beneficiaries’ interests.
- A surcharge is an equitable remedy to restore the trust estate to the position it would have occupied absent the breach, including shifting breach-caused expenses from beneficiaries to the breaching fiduciary.
- Courts may deny, reduce, or require repayment of trustee or attorney compensation when fees are unreasonable or arise from disloyal or imprudent administration.

## Conclusion

The appellate court affirmed findings that the trustee-attorney and his firm breached fiduciary duties through undervaluation, nondisclosure, failure to account, and self-interested fee conduct, and it upheld removal, surcharge of breach-caused expenses, and disgorgement of unreasonable fees to restore the trusts and protect beneficiaries.


McCormick v. Cox, 118 So. 3d 980 (Fla. 3d DCA 2013)