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Bar News - September 16, 2011


SOL Problems under Billewicz v. Ransmeier Resolved

By:

Senate Bill 50, which becomes effective September 11, 2011, is the legislature’s latest contribution, in our race with Delaware and South Dakota to be the most attractive situs for the administration of trusts. From a litigation perspective, its amendment of the statutes of limitations of the Uniform Trust Code (the "UTC") is especially important in light of the Supreme Court’s interpretation of RSA 564-B:10-1005 in Billewicz v. Ransmeier, 161 N.H. 145 (2010). The Court in that case construed the statute to apply retrospectively and, perhaps unintentionally, potentially exposed trustees to claims for actions arising many years before. Senate Bill 50 largely closes the door to such open-ended liability.

In Billewicz, a trustee who had resigned with probate court approval effective July 1, 2003 was sued by the successor trustee and beneficiaries brought almost five years later on February 25, 2008. An important issue in the case was whether the limitations period of RSA 508:4 or of the UTC, which had been enacted after the trustee resigned and before suit was filed, governed. RSA 508:4 sets forth the general three-year limitations period governing personal actions and provides for a discovery rule. RSA 564-B:10-1005 provides:
(a) A beneficiary may not commence a proceeding against a trustee for breach of trust more than one year after the date the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding.

(b) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.

(c) If subsection (a) does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within 3 years after the first to occur of:

(1) the removal, resignation, or death of the trustee;

(2) the termination of the beneficiary’s interest in the trust; or

(3) the termination of the trust.
RSA 564-B:10-1005 (emphasis added). The statute, thus, establishes two limitations periods: one year from the date of a report of the trustee disclosing the existence of a claim and the limitations period; and, if the one year period did not apply, then three years from the date of removal, resignation, or death of the trustee or termination of the beneficiary’s interest or of the trust. The trustee argued and the Probate Court found that the UTC limitations period applied retrospectively and that the claims therefore became barred three years after his resignation.

The Supreme Court affirmed, finding that RSA 564-B:10-1005(c) applies retrospectively, relying principally on the common law presumption that a statute which is remedial or affecting only procedural rights is to be applied retrospectively, id. at 152, citing Eldridge v. Eldridge, 136 N.H. 611, 613 (1993), and RSA 564-B:11-1104(a)(2), which provides that the UTC "applies to all judicial proceedings concerning trusts commenced on or after its effective date." Id. For trustees such as the defendant in Billewicz who resigned before the effective date of the UTC, the retrospective application of RSA 564-B:10-1005 is not problematic. For those trustees, the court’s decision establishes a clear date by which claims must be brought. Indeed, the retrospective application works well for any action governed by the three year period of RSA 564-B:10-1005(c), which runs from the removal, resignation, or death of the trustee or termination of the beneficiary’s interest or of the trust.

The difficulty with Billewicz arises from the likely extension of its holding to retrospective application of the one year limitations period of RSA 564-B:10-1005(a). This period runs from the date the trustee discloses to a beneficiary in a report "the existence of a potential claim for breach of trust and… the time allowed for commencing a proceeding." Before enactment of the UTC, no law provided for or encouraged a trustee to disclose limitations periods. Trustees did not do this, which means that, if RSA 564-B:10-1005(a) applies retrospectively, actionable claims remain viable until one year after such notice is given. Since the reasoning advanced in Billewicz would appear to apply with equal strength to retrospective application of the UTC’s one year period, distinguishing the case would likely be difficult for trustees.

Senate Bill 50 largely resolves this problem by adding the following underscored provision to RSA 564-B:10-1005(c):
(c) If subsection (a) does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within 3 years after the first to occur of:

(1) the removal, resignation, or death of the trustee;

(2) the termination of the beneficiary’s interest in the trust;

(3) the termination of the trust; or

(4) the date on which the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust.
Senate Bill 50 (emphasis in original). The statute, thus, will bar claims after three years of a report from a trustee "that adequately disclosed the existence of a potential claim for breach of trust." Such a report would trigger the limitations period under either the current (the UTC) or prior (RSA 508:4) law. With the gap between them narrowed, retrospective application of RSA 564-B:10-1005(a) should not expose trustees to the risks of open ended liability portended by Billewicz.

Ralph F. Holmes is a director at McLane, Graf, Raulerson & Middleton in Manchester. He may be reached at ralph.holmes@mclane.com

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