In Gilmore v. Rotan, a testamentary trust’s beneficiaries sued the trustees in 2015 for making a transfer of trust property in 2003 that was evidenced by a deed filed in 2010. No. 11-16-00253-CV, 2018 Tex. App. LEXIS 7705 (Tex. App.—Eastland September 20, 2018, no pet. history). The beneficiaries claimed that the trustees engaged in self-dealing when they transferred the real property. The beneficiaries acknowledged that they each received $76,693.55 from the estate of the primary beneficiary after her death and knew of the probate proceedings. The trustees filed a motion for summary judgment on multiple grounds, and the trial court granted that motion. The beneficiaries appealed.
The court of appeals affirmed the judgment on the statute of limitations ground. The court noted that a claim for breach of fiduciary duty is subject to a four-year statute of limitations. The trustees, as summary judgment movants, had the burden to conclusively establish that the statute of limitations applied. The court of appeals held that they did so if “they (1) conclusively established that the cause of action accrued before the commencement of the statute of limitations period and (2) negate the discovery rule, if it applies, by proving as a matter of law that there is no genuine issue of material fact about when Appellees discovered, or in the exercise of reasonable diligence should have discovered, the nature of their injury.” Id.
The evidence claim accrued when the property was transferred, which was earlier than four years before suit. The issue in the appeal was the application, if any, of the discovery rule. The court described the discovery rule as follows:
The discovery rule is an exception that may defer accrual of a claim. The discovery rule has been applied in limited categories of cases to defer accrual of a cause of action until the plaintiff knew or, in the exercise of reasonable diligence, should have known of the facts giving rise to a cause of action. The discovery rule operates as a “very limited exception” to limitations, deferring accrual in cases in which the plaintiff’s injury was “both inherently undiscoverable and objectively verifiable.” The discovery rule has often been applied to a claim for a breach of fiduciary duty. In explaining why the discovery rule applies to a claim for breach of fiduciary duty, the Texas Supreme Court noted that “a person to whom a fiduciary duty is owed is either unable to inquire into the fiduciary’s actions or unaware of the need to do so.” Thus, “a person to whom a fiduciary duty is owed is relieved of the responsibility of diligent inquiry into the fiduciary’s conduct, so long as that relationship exists.” However, once “the fact of misconduct becomes apparent it can no longer be ignored, regardless of the nature of the relationship.” Thus, claims for breach of fiduciary duty generally accrue when the claimant knows or in the exercise of ordinary diligence should know of the wrongful act and resulting injury.
The trustees argued that the beneficiaries had both constructive notice and actual notice of the conveyance when the deed was filed in 2010. The trustees based their assertion of actual notice on an excerpt of the deposition of one of the beneficiaries wherein he testified that he had checked the land records in 2010, he knew in 2010 that the challenged deed had been recorded, and that he told the other beneficiaries about it in 2010. The court held that this was sufficient evidence to support actual knowledge of the conveyance in 2010.
The beneficiaries also asserted that the deed was not sufficient notice because they did not realize in 2010 that the conveyance affected an interest they owned. The court disagreed, stating that “Persons interested in an estate admitted to probate are charged with notice of the contents of the probate records.” The court concluded:
Thus, Appellants had constructive notice of their beneficial interest in the real property when Harry Dean Rotan’s will was admitted to probate. Constructive notice creates an irrebuttable presumption of actual notice. Accordingly, the summary judgment evidence establishes that Appellants had notice of their alleged injury in 2010. Since the applicable statute of limitations is four years for a claim for breach of fiduciary duty, Appellants’ suit filed in 2015 was not timely.
Id. The court affirmed the summary judgment on the statute-of-limitations ground.