Lefkowitz v. Schwartz: Constructive Trust Denied for Creditors Claims

The opinion can be found here by double clicking

The pdf of the opinion can be found below

Background: Arlene Schwartz loaned $260,000 to her son-in-law, Usher L. Brown (Decedent), and her daughter Lauren in 2011 to buy a Utah condominium, owned through Blu Utah, LLC. After Decedent and Lauren divorced in 2014, their marital settlement agreement (MSA) required Decedent to repay Schwartz, but he never executed a formal note. In 2016, Decedent secretly sold the condo for $404,229.70, deposited the proceeds into Blu Utah’s account, and used $110,000 as a down payment for another property. He continued monthly payments to Schwartz without disclosing the sale, then died in September 2016. Ivan M. Lefkowitz, Decedent’s estate planner and personal representative (PR), transferred the proceeds into the estate and retrieved part of the down payment, while the IRS and Schwartz filed claims against the estate.

Legal Action: Schwartz filed a $192,413 claim in probate for the unpaid loan, which Lefkowitz objected to, prompting her to file an independent action under Florida Statute § 733.705(5). She alleged breach of contract and sought a constructive trust over the sale proceeds, claiming beneficial ownership. The trial court granted summary judgment for Schwartz on the breach of contract claim against Decedent and imposed a constructive trust, finding Decedent’s secret sale fraudulent or a breach of the MSA, and ruled the estate, Lefkowitz, and his firm SUFL held the funds with knowledge, subject to the trust.

Appeal: Lefkowitz and SUFL appealed, arguing the trial court erred in imposing the constructive trust. The Fifth District reversed, holding:

1. Estate Property: The condo proceeds were properly part of Decedent’s estate. Schwartz’s claim was a debt (a “liability of the decedent” under § 731.201), not a true ownership dispute, despite her constructive trust argument. Pre-Probate Code “trust exceptions” allowing equitable claims like constructive trusts outside probate were largely eradicated, surviving only for express trusts or clear ownership by another—neither applied here.
2. Probate Code Limits: Under § 733.705(5), an independent action can establish a claim’s validity but cannot prioritize it over other creditors or authorize execution against estate assets—powers reserved for probate court under § 733.706. By imposing a constructive trust, the trial court improperly removed assets from the estate and elevated Schwartz’s claim, exceeding its authority.

Outcome: The court reversed the judgment and remanded for proceedings consistent with the Probate Code, treating Schwartz as a creditor subject to its distribution scheme, not a trust beneficiary. This ensured her claim would be handled alongside others, like the IRS’s $305,896.81 tax claim, without undue preference.