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BUSINESS TORTS, TRUSTS, STATUTE OF LIMITATIONS, AND ATTORNEY FEES - LADD V. STOCKHAM

Ladd v. Stockham, [Ms. 1140365, Mar. 25, 2016] __ So. 3d __ (Ala. 2016). The two-year statute of limitations for breach of fiduciary duty begins to run when the fiduciary relationship terminates. Virginia Ladd was the beneficiary of trusts that held stock in SVI Corporation (formerly Stockham Valve and Fittings, Inc.). Herbert Stockham was on the board of directors of SVI and was co-trustee on two of the trusts. At a stockholder’s meeting to approve the sale of the assets of SVI, an attorney for the board of directors stated that the proceeds from the proposed sale would allow SVI to redeem SVI’s preferred stock in full. The sale was approved and occurred, but SVI retained some assets and some obligations, and its winding down period continued approximately eight years. Herbert Stockham resigned as co-trustee of the trusts in November 2008. Ladd sued Herbert; Wells Fargo, the corporate co-trustee; and others on July 21, 2012, alleging direct and derivative causes of action. The circuit court applied the general two-year statute of limitations of § 6-2-38(l), but the Supreme Court holds that the two-year limitation period of § 19-3B-1005 applies; this is part of the Alabama Uniform Trust Code, which was adopted effective January 1, 2007. Under either statute, the triggering dates for the statute of limitation were more than two years before Ladd filed her complaint. Ladd also argued that the running of the statute was tolled by § 6-2-3 for fraudulent concealment, but the Court affirms the circuit court’s ruling that SVI provided information regarding its financial condition that she alleges Herbert Stockham concealed.

On a cross-appeal, the Supreme Court holds that the circuit court exceeded its discretion in denying a request for costs and attorney fees by Herbert Stockham’s personal representative (he died during the litigation). The rule is that “denying a trustee reimbursement for expenses incurred while pursuing ... the successful defense of the claims against it would ‘diminish the compensation to which [the trustee] is entitled and which was a part of the inducement to [the trustee’s] acceptance of the burden of [the trustee’s] duties.’” Thus a trustee is entitled “to reimbursement of costs, including attorney fees, when the trustee successfully defends himself against a breach-of-fiduciary-duty claim brought by a beneficiary of the trust.” Even though the trust was terminated before Ladd sued Herbert Stockham, he was still entitled to costs and attorney fees for his defense of his actions as trustee. Justices Shaw and Murdock wrote separately on the costs and fees issue, discussing pertinent statutes and rules.

Related Documents: 3-25-16 Ladd

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