Limitations period in trust instrument bars claims against trustee for breach of fiduciary duty.
William C. Alden created a trust in 1973 for the benefit of his second wife, Nancy, their two children together, and William’s three children from a prior marriage. Nancy and two independent trustees served as trustees of the trust. Under the trust terms, during Nancy’s lifetime the trustees had discretion to distribute income and principal to Nancy and the children for their “comfort, support, education, and happiness.” Distributions to Nancy could be made only by the independent trustees. The trust instrument also required that the trustees provide an annual accounting to the beneficiaries and any objection to an item on an accounting had to be made within 60 days or the objection would be deemed to have been waived by the beneficiary.
In 1982, Nancy purchased a two-thirds interest in land in Williamstown, Massachusetts. The trust owned the other one-third interest in the property. In 1993, Nancy sent a letter to all five children stating that she desired that the trust distribute the remaining one-third interest to her. In 2000, Nancy made a formal request to the independent trustees for the distribution of the one-third interest in the property. The independent trustees approved the request and the property was distributed to Nancy. That same year, Nancy purchased a life insurance policy and the independent trustees approved an increase in her monthly distributions from the trust to cover the premiums.
In 1999, one of the independent trustees resigned for health reasons. Nancy’s attorney recommended a local accountant as successor trustee and the accountant was appointed by a court order as successor trustee.
In 2006, Nancy sued to remove and replace the two independent trustees. Two of William’s children from a prior marriage, Todd and Julia, objected and filed counterclaims alleging that Nancy breached her fiduciary duty by purchasing the Williamstown property and accepting distributions from the trust of the interest in the property and the extra funds to pay insurance premiums, and committed fraud in the appointment of the accountant as successor independent trustee. The trial court granted Nancy’s motion for summary judgment and Todd and Julia appealed.
On appeal, the Vermont Supreme Court affirmed the judgment of the trial court on the grounds that: (1) the claim that Nancy breached her fiduciary duties by purchasing the two-thirds interest in the Williamstown property was barred by the applicable six-year statute of limitations, with the limitations period starting on their receipt of Nancy’s letter stating her intention to obtain the remaining one-third interest in the trust; (2) the claims regarding Nancy’s receipt of distributions from the trust were also time-barred because they were reflected on the annual accountings prepared by the trustees, Todd and Julia each received copies of the accountings, and they failed to object within the 60 day period in the trust agreement; and (3) the fact that accountant appointed as successor independent trustee was not sufficient to show that he lacked independence.