To the extent that a successor trustee must pursue claims against the predecessor trustee, when does the clock start ticking for the successor to bring those claims? The answer to that question likely ends up being state specific, but in Robert K. Ward Living Trust v. Peck, we get some guidance under North Carolina law, including some clarification on whether the “continuing wrong doctrine” applies to breach of trust claims against a trustee.
Bradley N. Schultz was the successor trustee of the Robert K. Ward Living Trust. John J. Peck was the predecessor to Schultz. Five years and one month after he became successor trustee, Schultz filed a complaint against his predecessor alleging that the predecessor improperly encumbered trust properties both before and after his resignation as trustee. The predecessor raised the statute of limitations as a defense, and the trial court dismissed the claims against the predecessor. The appellate court affirmed.
North Carolina General Statute § 36C-10-1005 clearly provides that:
No proceeding against a trustee for breach of trust may be commenced more than five years after the first to occur of: (i) the removal, resignation, or death of the trustee; (ii) the termination of the beneficiary’s interest in the trust; or (iii) the termination of the trust.
The action filed by Schultz against Peck was filed more than five years after Peck resigned as trustee and more than five years after Schultz knew or should have known of the alleged violations of Peck’s duties.
Schultz raised several “creative arguments” why the five year statute of limitations did not apply here, including a claim that the continuing wrong doctrine applied. Under the continuing wrong doctrine, a statute of limitations does not begin to run until the violative act ceases. Schultz did not cite – and the appellate court could not find a case – which applied the continuing wrong doctrine to permit a claim against a trustee for breach of trust more than 5 years after his or her resignation, removal, or death; more than 5 years after the termination of the beneficiary’s interest in the trust; or more than 5 years after the termination of the trust. Indeed, there could be no “continuing wrong” by Peck after his resignation as trustee – after his resignation, he was no longer trustee and no act taken by him after his resignation, wrongful or not, was a continuation of any conduct he may have begun as trustee.
