Trust and Estate disputes often involve parties or entities in different
states. A trust beneficiary may live in North Carolina while the trust
she or he has an interest in is located and administered elsewhere. When
conflicts arise in such multi-state scenarios, the interesting and sometimes
challenging questions about which state's laws apply to different
aspects of the dispute can have substantial implications for the parties.
Attorneys recognize such dilemmas as conflict of law or choice of law questions.
As a general proposition, when confronted with choice of law issues courts
will apply the substantive law of the state where the cause of action
arose and the procedural rules of the state where a plaintiff files his
or her lawsuit. Historically, statutes of limitation have been viewed
as procedural rules. As such, conflict of law questions involving statutes
of limitations have usually been governed by the limitations statutes
of the state where the lawsuit was filed. However, there have been decisions
handed down in several states in recent years where courts have viewed
statutes of limitations as more substantive than procedural. As a result,
some states have applied statutes of limitations of the state where the
suit arose rather than those of the state where the suit is filed.
A recent decision by the North Carolina Court of Appeals confirms that,
at least for the moment, North Carolina is not part of this trend. In
Martin Marietta Materials, Inc. v. Bondhu, LLC, the North Carolina Court of Appeals affirmed that North Carolina still
views statutes of limitations as a procedural matter in choice of law
inquiries. The opinion was filed in Wake County, North Carolina, but involved
a dispute over property tax payments rising out of jointly owned real
property in Virginia. The Plaintiff had paid the property taxes on the
jointly owned property for many years without contribution from the Defendant.
Apparently, the Plaintiff grew weary of bearing the tax burden on its
own and sued the Defendant for the share of property taxes that should
have been paid by the Defendant.
The Defendant did not dispute that the Plaintiff had paid all of the property
taxes. Rather, the Defendant argued that the Plaintiff had waited too
long to pursue a legal claim. Applying the old logic of "you snooze
you lose," the Defendant suggested that the Plaintiff's claims
were barred by the statute of limitations.
The Court of Appeals recognized that since the lawsuit dealt with the responsibility
for payment of property taxes on a piece of property in Virginia, the
law of the Commonwealth of Virginia governed the Plaintiff's claim
for relief. However, the Court noted that in North Carolina, statutes
of limitation are clearly procedural. Therefore, the Court held it must
apply North Carolina's statutes of limitations to the Plaintiff's
This determination is not the end of the inquiry when considering which
statute of limitations applies in potential suit. The Court's decision
reminds us that determining which statute of limitations to apply requires
counsel to first identify the nature of the substantive claims under the
law of the state where the claim arose. Once those claims have been identified,
you then apply the North Carolina statute of limitations for such claims.
With North Carolina limitations periods ranging from three to ten years,
the nature of the claim can have a significant impact on the question
of whether or not a suit is timely.
The Court of Appeals decision reminds practitioners of several important
considerations when dealing with a Trust or Estate dispute that crosses
state lines. First and foremost, counsel should give careful thought and
consideration to the various claims that a client may have under the substantive
laws of the state where the claim arose. For example, if dealing with
trust beneficiaries who live in North Carolina and a trust which is located
and administered in New York, Florida or some other state, counsel needs
to understand what breach of fiduciary duty, requests for an accounting,
conversion, constructive fraud and other potential claims look like in
those states. Counsel should determine if the other states recognize claims
that aren't typically seen in North Carolina. Once counsel has determined
the nature of the substantive claims, the next step is to determine North
Carolina's limitations periods for such claims. That analysis should
in turn tell counsel whether or not there will any limitations-based challenges
to the claims set forth in their complaint.
Stephen J. Grabenstein is a principal with The Van Winkle Law Firm, where he focuses his practice on
trust and estate disputes,
will contests, and fiduciary-related claims. A talented litigator, he has handled complex
commercial actions, wrongful death and personal injury claims. He also
represents families involved in guardianship proceedings. In addition,
Grabenstein is a
certified mediator and in that role has helped parties negotiate and settle a wide variety of cases.