Louis Steinmetz signed a personal guaranty of a $350,000 loan made to an LLC. The LLC defaulted on the loan. Steinmetz is a beneficiary of a multimillion dollar spendthrift trust that provides no distributions will be made to him if the distribution would be available to his creditors.
Wells Fargo Bank, N.A. is the trustee of the trust. Steinmetz defaults on his guaranty, and Wells Fargo refuses to make distributions to him from the trust. The lender sues Wells Fargo, seeking a ruling that sections 736.0501-.0507, Florida Statutes (2012), which recognize the enforceability of spendthrift trusts, violate article I, section 21 of the Florida Constitution by preventing access to courts. The lender contends that these statutes abolished a “common law” right “to execute a monetary judgment against any beneficial interest held by a debtor,” without providing a reasonable alternative or demonstrating an overpowering public necessity for the statute.
However, these statutes did not abolish a common law right – spendthrift trusts had been enforced under Florida common law even before the statutes were enacted. Thus, the creditor challenges were dismissed, and the spendthrift provisions provided the anticipated protection.
ROBERT ZLATKISS AND LINDA ZLATKISS v. ALL AMERICA TEAM CONCEPTS, LLC, ET AL., 5th District. Case No. 5D12-3324. Opinion filed May 31, 2013.Follow @RubinOnTax Tweet