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St. Martin's Episcopal Church v. PRUDENTIAL-BACHE SECURITIES, INC.
Citations: 613 So. 2d 108; 1993 Fla. App. LEXIS 597; 1993 WL 13420Docket: 91-3540
Court: District Court of Appeal of Florida; January 26, 1993; Florida; State Appellate Court
St. Martin's Episcopal Church, as the beneficiary of an express trust, initiated a lawsuit against Prudential-Bache Securities, Inc. for negligence and improper trading of securities, despite having no direct interactions with the dealer. The trustee, shortly after being appointed, had invested trust funds in a Prudential-Bache account and was employed by the dealer at that time. After the trustee's death during the litigation, his estate was substituted as a defendant, and the beneficiary settled with the estate, leading to the dismissal of claims against it. The trial court subsequently granted summary judgment for Prudential-Bache, ruling that the beneficiary lacked standing to sue alone post-settlement. However, the appellate court disagreed, asserting that the beneficiary sufficiently alleged Prudential-Bache's breach of duty in managing its employee, the trustee, who engaged in fraudulent trading practices known as "churning." The court emphasized that standing is influenced by Florida Rule of Civil Procedure 1.210(a), which allows various parties, including trust beneficiaries, to sue without joining the trustee. The rule is interpreted as expansive, allowing beneficiaries to pursue claims independently. Additionally, the court noted that previous rulings affirm the right of trust beneficiaries to enforce the trust, and it rejected the trial court's reliance on section 737.405, Florida Statutes, regarding standing. The statute aims to protect third parties who receive trust property without knowledge of any defects in the grantor's authority or trust powers. The court finds little relevance between this statute and a claim against a securities dealer for allegedly colluding with a trustee to churn a trust investment account for unwarranted commissions, suggesting the beneficiary has sufficient grounds to present evidence for its claims. The trial court's dismissal of the case was based on a perceived lack of standing from the beneficiary, rather than insufficient evidence. The appellant does not argue that specific Florida statutes prevent the settlement with the trustee's estate from affecting the beneficiary's right to pursue claims against the dealer. The dealer is alleged to be a joint tortfeasor with the employee-trustee, and there is no contention that the trustee is an indispensable party in the suit. The court distinguishes between constitutional standing and prudential standing, emphasizing that standing relates to the interest in the outcome of the litigation rather than the merits of the claim. The excerpt also notes that third parties dealing with a trustee can assume the existence and proper exercise of trust powers without inquiry, provided they lack actual knowledge of any overreach by the trustee.