May 2015

IMO the Thomas Lawrence Reeves Irrevocable Trust Under Agreement Dated February 26, 1997 C.A. No. 8071-ML (April 29, 2015)

In this case, the beneficiaries of an irrevocable trust, who also are individual co-trustees of the trust (the “Beneficiaries”), contended that the corporate co-trustee mismanaged the trust over a period of fifteen or more years by unilaterally making investments without the authorization of the individual trustees, failing to implement any investment strategy for the trust, and charging excessive fees. The corporate trustee sought to resign from the trust, but first it filed a petition seeking a court order stating that all of the Beneficiaries’ claims are barred by laches or the statute of limitations.

The record was undisputed that the individual trustees frequently complained to the corporate trustee about the issues they now contend support their claims. In emails and letters dating back to 2004, the individual trustees complained that the corporate trustee invested without authorization, failed to consult the individual trustees or develop investment objectives or an investment strategy, and charged excessive fees. Despite consulting counsel, other trust companies, and the corporate trustee about these issues, the individual trustees took no action until they filed their counterclaims in 2013. Master LeGrow, in her final report in this case, granted summary judgment to the Petitioner (the corporate co-trustee) because she found that the Beneficiaries delayed unreasonably and that, as a result, their claims are time barred.

The Master explained that there are two applicable statutes of limitations in this case: (1) 12 Del. C. § 8106, which bars personal tort claims arising three years after the date of the action, and (2) 12 Del. C. § 3585, which precludes a claim for breach of trust that occurs: “(1) two years after the date the beneficiary was sent a report that adequately disclosed the facts constituting a claim; …. [] A report adequately discloses the facts constituting a claim if it provides sufficient information so that the beneficiary knows of the claim or reasonably should have inquired into its existence.” The Master concluded that the Beneficiaries’ claims are time-barred under both statutes.

Factually distinguishing other precedent (namely McNeil and Voltsun/Landy), the Master stated that “[h]ere, the record shows the individual trustees did not repose any trust in the corporate trustee and repeatedly complained about the corporate trustee’s actions, but nonetheless took no action to pursue their claims. It is unclear what else, short of self-flagellation, [the corporate co-trustee] could have done to put [the Beneficiaries] on notice of their claims.”

The Master also explained why the “continuing wrong” doctrine didn’t fit here. The Beneficiaries had alleged that the wrong-doing began from the inception of the trust at issue and because it has not yet been corrected, it qualified as a continuing wrong. The continuing wrong doctrine is a legal theory that applies when a series of related wrongful acts are “so inexorably intertwined that there is ... one continuing wrong.” (citation omitted). But the Master held that “the failure to remedy a wrong does not mean that the wrong is continuing.” (citation omitted). She further explained that “[a]lthough uncorrected wrongs remain wrongful until remedied, they do not fit within the narrow category of acts which are considered continuing wrongs. To accept this interpretation of the doctrine would frustrate the purpose behind requiring parties to bring timely claims and bring nearly every claim within the category of a continuing wrong.”