Saturday, June 6, 2009

Trustee-Removal Anytime - No Limitations Bar

UNLIKE CAUSE OF ACTION FOR BREACH OF FIDUCIARY DUTY, SUIT TO REMOVE TRUSTEE NOT GOVERNED BY 4-YEAR STATUTE OF LIMITATIONS, TEXAS HIGH COURT SAYS.

Ditta v. Conte, No. 07-1026 (Tex. Jun. 5, 2009) (Willett) (statute of limitations does not apply to suit to remove trustee; but suit for breach of fiduciary duty is subject to four-year SoL)

FROM THE OPINION BY JUSTICE DON R. WILLET:

The court of appeals held that this trustee-removal suit was barred by the four-year statute of limitations applicable to breach-of-fiduciary-duty suits. We disagree and hold that no statutory limitations period restricts a court’s discretion to remove a trustee. A limitations period, while applicable to suits seeking damages for breach of fiduciary duty, has no place in suits that seek removal rather than recovery. Accordingly, we reverse the court of appeals’ judgment that the case was time-barred and remand to that court for further proceedings.

* * *

Here, the probate court found that Susan, in her role as trustee, committed a breach of trust, and that her role as trustee was compromised due to her indebtedness to the Trust and her tenuous relationship with Joseph Jr. and Doris. These findings indicate that the potential for injury to the Trust would remain as long as Susan continued in her role as trustee; therefore, we hold that Ditta’s claim for Susan’s removal was not time-barred. Unlike Ford, Ditta is not merely attempting to recast a potentially time-barred claim (breach of fiduciary duty) as a claim for equitable relief (removal of Susan as trustee).

The remedy Ditta seeks in this action is removal of Susan as trustee, not monetary or other relief. While removal actions are sometimes premised on a trustee’s prior behavior, they exist to prevent the trustee from engaging in further behavior that could potentially harm the trust. Any prior breaches or conflicts on the part of the trustee indicate that the trustee could repeat her behavior and harm the trust in the future. At the very least, such prior conduct might lead a court to conclude that the special relationship of trust and confidence remains compromised. Like cloud-on-title cases, as long as potential harm to the trust remains, an action to remove the trustee should be allowed to proceed.We therefore hold that a trustee removal action, regardless of the underlying grounds on which it is brought, is not subject to a limitations analysis.[27]

However, limitations periods continue to dictate when claims for fiduciary breaches must be brought. While the four-year limitations period proscribes whether an interested person can obtain monetary recovery from a trustee’s fiduciary breach, it does not affect whether the interested person can seek that trustee’s removal. To hold otherwise would allow trustees who previously harmed the trust relationship to remain in their fiduciary roles, regardless of their past transgressions.

Conclusion

No statute of limitations period applies in a trustee-removal suit.

Trusts are fiduciary relationships, and as such, their nature and character often change throughout the years of administration, as the Trust here did.

Because the court of appeals decided this case on the limitations issue, it did not reach issues relating to the merits of Ditta’s removal action, the reformation of the Trust, or the appointment of Frost Bank as successor trustee. Accordingly, we reverse the court of appeals’ judgment and remand the case to that court for consideration of those issues.

LOUIS M. DITTA, GUARDIAN OF THE ESTATE OF DORIS L. CONTE, AN INCAPACITATED PERSON v. SUSAN C. CONTE AND JOSEPH P. CONTE, JR.; from Harris County; 1st district (01-05-00603-CV, ___ SW3d ___, 08-31-07)motion to strike petitioner's appendix to brief on the merits dismissed as mootThe Court reverses the court of appeals' judgment and remands the case to that court.Justice Willett delivered the opinion of the Court.

1 comment:

Andrew said...

I have been in search of such interesting Articles..

___________________
Andrew
Instant loans at an attractive low rates