In Ward v. Standford, a father and a mother set up an irrevocable trust in the 1970s and transferred many assets to it. 443 S.W.3d 334 (Tex. App.—Dallas 2014, pet. filed). In the 1980s, the father and his company borrowed money from the trust and issued a note. The father and his company defaulted, and the trustees sued to enforce the note. The trustees and father settled in the mid-1990s, and they entered into a renewal note with a principal amount of $2 million that was due in January of 2000. In 1998, the father had missed several interest payments, and the trustees discussed whether to file suit again. The trustees decided to not file suit at that time and communicated that to the beneficiary. Ultimately, the father defaulted on the interest payments and the underlying principal payment. The trustees never sued the father to enforce the debt. In 2008, the beneficiary, a son, discovered that the father denied making the renewal note and that the trustees never pursued claims thereon. The beneficiary sued the trustees for breach of fiduciary duty and later added the father for aiding same. The trial court dismissed the claims due to limitations, and the son appealed.
The court of appeals held that a cause of action generally accrues when: 1) a wrongful act 2) causes some legal injury. In this case, there were two separate claims and two different accrual dates: 1) the father’s failure to pay interest and principal payments under the note, and 2) the trustees failure to pursue the note claim. As the two-million dollar principal payment was due on February 1, 2000, the Trust’s claim for that payment was extinguished via a six-year limitations period on February 1, 2006. At a different time, the Son’s claims against the Trustees accrued for not pursuing the Trust’s claim against the Father. Those claims would accrue, at the earliest, when the “wrongful acts” occurred. The court held: “just as the question of whether a party breached a fiduciary duty is generally treated as a fact question, we conclude the date on which the Trustees’ inaction can be said to cross the line into a breach of their fiduciary obligations to appellant remains a fact question.” Id. In other words, at what point did the trustees’ inaction become a “wrongful act”? The court of appeals held that a jury must determine that issue and remanded for trial. This case is currently pending in the Texas Supreme Court.
INTERESTING NOTE: Normally, when a wrongful act occurs is not a fact issue in a breach of fiduciary duty case, e.g., the trustee took money on a certain date. Most claims involve affirmative acts, and there may be an issue on when the beneficiary should have discovered the bad act or when the bad act caused some legal injury. This is an interesting case because it involves the trustee’s failure to act and when that failure to act rises to a level of a breach of duty. The court of appeals held that there was a fact issue as to when an act of omission rises to the level of a “wrongful act.”