Cluck v. Mecom, 401 S.W.3d 110 (Tex. App.—Houston [14th Dist.] 2011, pet. denied).

 

Trusts

Breach of Fiduciary Duty 

 

Beneficiaries (children) sued Trustee (father) alleging the he breached fiduciary duties in administering the settlor’s (the children’s grandfather) trust.  The trial court granted summary judgment in favor of Trustee and Beneficiaries appealed.

 

Evidence

 

The appellate court reviewed the record and determined that there was plenty of evidence raising material issues of fact which precluded the trial court from rendering a no-evidence summary judgment.  The court pointed to a laundry list of deposition questions which addressed Trustee’s self-dealing.  Trustee consistently answered inquires with answers such as “I’m not sure,” “I can’t remember,” and “I don’t recall.”  The court also rejected Trustee’s assertion that he deferred to the judgment of other professionals and that such deferral justified his inability to prove the fairness of the self-dealing transactions.

 

Statute of Limitations

 

The court also addressed Trustee’s claim that even if he had breached his duties, Beneficiaries were aware of the conduct so long ago that the statute of limitations on their claims would have run.  The court began its discussion by recognizing that the statute of limitations for breach of fiduciary duty is four years under Civil Practice & Remedies Code § 16.004(a)(5) and that the discovery rule is applicable.  Trustee alleged that the time period began to run at the latest in 1998 based on various conversations and a letter.  The court explained that the date on which Beneficiaries knew or should have known of the breach is a fact question unless reasonable minds could not differ on when the period began to run under the facts.  The court held that Trustee did not prove as a matter of law that Beneficiaries knew about the breach in 1998.  Accordingly, the trial court’s summary judgment for Trustee was improper.

 

Moral:  Trustees should not self-deal and will have a difficult time justifying the self-dealing by not remembering what they did or by telling Beneficiaries to consult with the trustee’s advisors.  In addition, a court will be reluctant to determine that the statute of limitations has run on a breach of fiduciary claim unless it is clear from the facts that the beneficiaries were aware of the breach and did not take timely action to pursue their claim.



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