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.
Statute of Limitations: Where the Suit Arose vs. Where the Suit Was Filed
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.
Martin Marietta Materials, Inc. v. Bondhu, LLC
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 substantive claims.
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.
About the Author:
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.