LIMITATIONS ON PROCEEDINGS AGAINST TRUSTEES: CORYA, WOODWARD AND FLA. STAT. §736.1008
The Florida Trust Code contains a section titled “limitations on proceedings against trustees” that is a limitation of actions and accrual of claims statute specifically applicable to claims for breach of fiduciary duty in the context of trusts. Specifically, Fla. Stat. §736.1008 provides, in pertinent part, as follows (emphasis and commentary added for clarification):
(1) Except as provided in subsection (2), all claims by a beneficiary against a trustee for breach of trust are barred as provided in chapter 95 as to:
(a) All matters adequately disclosed in a trust disclosure document issued by the trustee, with the limitations period beginning on the date of receipt of adequate disclosure.
NOTE: (1)(a) provides that IF there is adequate disclosure in a trust disclosure document, THEN the 4-year statute of limitations (“SOL”) in Chapter 95 applies BUT the claim does not accrue until the date the beneficiary receives adequate disclosure.
(b) All matters not adequately disclosed in a trust disclosure document if the trustee has issued a final trust accounting AND has given written notice to the beneficiary of the availability of the trust records for examination and that any claims with respect to matters not adequately disclosed may be barred unless an action is commenced within the applicable limitations period provided in chapter 95. The limitations period begins on the date of receipt of the final trust accounting and notice.
NOTE: (1)(b) provides that even if there is inadequate disclosure in a trust disclosure document, that IF the trustee has 1) issued a final trust accounting AND 2) given written notice that records are available AND 3) given written notice that a 4-year SOL is running, THEN the claim does not accrue until the date the beneficiary receives the final trust accounting.
(2) Unless sooner barred by adjudication, consent, or limitations, a beneficiary is barred from bringing an action against a trustee for breach of trust with respect to a matter that was adequately disclosed in a trust disclosure document unless a proceeding to assert the claim is commenced within 6 months after receipt from the trustee of the trust disclosure document or a limitation notice that applies to that disclosure document, whichever is received later.
NOTE: (2) provides the trustee with a mechanism to shorten the SOL from 4 years to 6 months; however, in order to avail himself of that shortened period, the trustee must provide adequate disclosure in a trust disclosure document, as defined elsewhere in the Florida Trust Code, and must inform the beneficiary of the shortened SOL. In this instance, the claim does not accrue until the date the beneficiary receives the trust disclosure document with the limitations notice.
(3) When a trustee has not issued a final trust accounting OR has not given written notice to the beneficiary of the availability of the trust records for examination and that claims with respect to matters not adequately disclosed may be barred, a claim against the trustee for breach of trust based on a matter not adequately disclosed in a trust disclosure document is barred as provided in chapter 95 and accrues when the beneficiary has actual knowledge of:
(a) The facts upon which the claim is based if such actual knowledge is established by clear and convincing evidence; or
(b) The trustee’s repudiation of the trust or adverse possession of trust assets.
NOTE: (3) provides that when the trustee has not done anything he is supposed to do (no accountings and no notice), the 4-year SOL still applies HOWEVER the claim does not accrue – in other words the clock does not start ticking – until the beneficiary has actual knowledge of the conduct giving rise to the action. Actual knowledge, of course, is a factual issue that must be established by clear and convincing evidence.
Accordingly, the Florida Legislature has created an exception to the four-year statute of limitations set forth in chapter 95, Florida Statutes, for when a cause of action for breach of fiduciary duty accrues.
In Corya v. Sanders, 155 So.3d 1279 (Fla. 4th DCA 2015), the trust beneficiary sued the trustee (his mother) for an accounting claiming – and the trustee admitted – that he had never been served with an accounting. The beneficiary argued that his claim for breach of fiduciary duty did not accrue until he had actual knowledge of the breach. (Failure to account is a breach of trust or breach of fiduciary duty. Fla. Stat. §736.1001(1)). Applying the §736.1008 to the facts of Corya, sub-section (3) applied to the beneficiary because he received no accounting and no written disclosure from the trustee. The issue then was when the beneficiary had actual knowledge of the breach of trust and that date, once established through clear and convincing evidence, would trigger the accrual of the action.
The fly in the ointment in Corya was that the beneficiary asserted his ignorance of the law (i.e. he did not know he was entitled to an accounting) delayed the accrual of the action. This Fourth DCA rejected that argument and held that the beneficiary’s “failure to know the law or consult with an attorney is not a lack of actual knowledge of the facts that [no accountings were given to him].” Corya at 1286. Additionally, the lower tribunal found that the trustee periodically showed the beneficiary – remember this was a mother showing her son – statements for the trusts and discussed the trusts with him, but that the beneficiary was not interested in viewing the information. This Court observed that “[b]ecause an action for accounting seeking to enforce a breach of trust or fiduciary duty entitles a beneficiary to damages, the application of §95.11(6) bars an action seeking an accounting from a trustee more than four years before the action is filed.” Id. At 1285. Without any evidence to support application of the delayed discovery rule, this Court held that the 4-year SOL applied to the facts in Corya. Importantly, this Court’s holding in Corya was expressly limited to the facts of that case:
We thus conclude, on the facts of this case, that statutory laches under section §95.11(6) limits the right to an accounting, where no accounting has been done, to no more than four years before filing an action for an accounting against the trustee of an irrevocable trust. Id at 1286.
In essence, the Corya beneficiary sat on his rights, refused disclosure from the trustee, and then sued for 30 years’ of accountings when he claims to have first consulted with an attorney and learned of his statutory right to the information previously offered to him. The beneficiary in Corya failed to demonstrate through clear and convincing evidence that he did not have actual knowledge of the breach that would allow delayed accrual of the action under §736.1008(3). The beneficiary in Corya alleged delayed knowledge of the law, which the Court rejected as insufficient to trigger the delayed accrual date.
The Fourth District recently decided Woodward v. Woodward, — So.3d — (Fla. 4th DCA 2016), a case argued and won by Adrian Philip Thomas, P.A., which held that the time period in which a trust beneficiary could bring an action against a trustee ran from the date that the beneficiary became aware of the trustee’s conduct giving rise to a claim for breach. In Woodward, the trustee served a final accounting with a limitations notice shortening the time for filing suit to six (6) months. The final accounting disclosed for the first time that ten years earlier the trustee had terminated the trust and distributed the assets to two new trusts of which the trust beneficiary was no longer a beneficiary (in other words, he was a beneficiary under the old trust but not the new trusts). The trustee argued to the lower court that the breach happened ten years earlier and the beneficiary had actual knowledge of the breach so statutory laches should bar his action. Under the facts in Woodward, the issue of whether the beneficiary had actual knowledge of the breach was irrelevant to the accrual analysis under §736.1008(2).
The Woodward trustee did, in fact, serve a final accounting with a limitations notice which triggered the 6-month limitations period. Service of the final accounting was the triggering event to start the accrual of the action under §736.1008(2) and the beneficiary brought his action timely. In Corya, the beneficiary had not received a final accounting or any written notice, so §736.1008(3) controlled and the statutory laches analysis was appropriate. The beneficiary incorrectly plead that he did not have actual notice of his rights rather than actual notice of the breach, which the Court rejected as being insufficient to trigger a delayed accrual of the action. Conversely, in Woodward, the trustee served a final accounting and a limitations notice, which triggered §736.1008(2) and the shorter 6-month limitations period. The beneficiary timely-filed his action. The issue of when the beneficiary had actual knowledge of the breach was not relevant because §736.1008(3) was not the operative section in Woodward. The Fourth District correctly applied Fla. Stat. §736.1008(2) to the facts in Woodward, which precluded the trustee from raising the defense of statutory laches at trial because the issue of when the beneficiary had actual knowledge of the breach was irrelevant. The final accounting and limitations notice was the triggering event and the beneficiary filed his action within the shortened 6-month limitations period.