Trust and Estate Law

Jennifer Codding
Strategic Litigator and Senior Counsel
Massey Law Group Tampa, FL

No. 2018-0309

June 14, 2019

Affirmed

  • Issue: Whether an alleged qualified beneficiary under a trust had standing under the special interest doctrine to petition for the appointment of an independent trustee to the trust.

The Second Church of Christ, Scientist, Melbourne (Australia) (“SC”) appealed an order of the Circuit Court denying it standing to request affirmative relief and enforce certain charitable trusts created by the will of Mary Baker Eddy (Eddy).

Eddy founded the Church of Christian Science and, upon her death, founded two trusts. Litigation stemmed from when SC, an alleged qualified beneficiary of one of the trusts, sought to review, and potentially object to, an annual accounting. The trustees objected, and SC responded by arguing it had standing under the special interest doctrine. The trial court, applying Blasko, held SC failed to demonstrate it had standing. SC filed for reconsideration, which the trial court denied, and this appeal followed.

On appeal, SC argued that the trial court adopted the correct test but misapplied the factors. Particularly, SC argued that under Blasko, as a potential beneficiary, it had a “special interest” in the trust to justify standing, and that the trial court improperly reached its decision without development of a factual records, while also faulting SC for not developing sufficient facts. The trustees and Director of Charitable Trusts (DCT) agreed that Blasko was the correct test but maintained the trial court properly determined the SC lacked special interest standing. The Court found that it was proper to apply Blasko with a balancing test of the factors, meaning if some factors were present the Court could balance them against each other to reach a decision.

Blasko consists of five factors: (1) the extraordinary nature of the acts complained of and the remedy sought, (2) presence of bad faith, (3) attorney general’s availability and effectiveness, (4) nature of the benefitted class and its relationship to charity, and (5) subjective factors and social desirability.

As to (1), SC argued that the trial court erred by focusing on the requested relief, rather than the extraordinary nature of the acts alleged by SC; and failed to recognize that the bad acts committed by the trustees were extraordinary while the requested remedy was not. The Court held that SC failed to demonstrate that the trial court’s failure to consider extraordinary acts is sufficient, by itself to constitute reversible error. Further, the Court noted that the trial court had already taken steps to address the alleged bad acts and held that the disruption of daily operations of the trust could expose the charity to vexatious litigation. Accordingly, the Court held that this factor weighed against standing.

As to (2), SC alleged the trustees acted in bad faith in distributing funds and in submitting non-independently prepared unaudited financial statements. The Court held that the SC’s assertion of mismanagement may have demonstrated misconduct, but it did not demonstrate fraud or bad faith. Accordingly, the Court held that this factor was neutral and neither weighed for or against standing.

As to (3), the SC argued that the DCT had not been effective in policing the trustee’s misconduct. Under this factor, the Court looked at whether the attorney general was able to enforce the trust or whether the lack of enforcement was due to a conflict of interest, ineffectiveness, or lack of resources. The Court found that although the DCT’s performance had been mixed and arguably deficient, the DCT had been an active participant, had acknowledged the embedded conflict with the trustees, and suggested measures to mitigate the conflict. Accordingly, the Court found that this factor did not weigh in favor of granting standing to SC.

As to (4), SC argued it is part of a defined class of entities that bears a special relationship to the charity in that it is a branch church with a unique connection with the Mother Church. The Court found that the use of trust monies as set forth in the trust was broad, which dispelled any notion that distribution of the income was limited to a small, identifiable class. Because SC was not part of a small, well-defined class, the Court found this factor weighed against standing.

As to (5), SC argued that it is socially desirable to grant it standing. Blasko describes this factor as a catch-all applying to those cases where there seems to have been an egregious wrong which would otherwise go uncorrected. The Court found that although there remained concern with the embedded conflict, it did not find SC’s claim of well positioning to monitor and enforce due to its status as a branch church with knowledge of the religion to weigh heavily in determination of standing. Accordingly, this factor did not support standing.

After consideration of all factors, the Court found that SC had not demonstrated a special interest in the trust sufficient to grant it standing.

 

Pierce Atwood, of Portsmouth (Michele E. Kenney on the brief), DLA Piper, of Wilmington, Delaware (Stuart Brown on the brief and orally), and Foehl & Eyre, of Glenside, Pennsylvania (Robert B. Eyre on the brief), for the SC of Christ, Scientist, Melbourne (Australia). Upton & Hatfield, of Concord (Russell F. Hilliard, James F. Raymond, and Michael P. Courtney on the brief, and Mr. Hilliard orally), for the Trustees of the Clause VI Trust and Clause VIII Trust. Gordon J. MacDonald, attorney general (Thomas J. Donovan, director of charitable trusts, and Charles D. Shockley, assistant director of charitable trusts, on the brief, and Mr. Donovan orally), for the Attorney General, Director of Charitable Trusts.