By Andrea Rahman, Hewitt Law & Mediation LLC
The administration of estates and trusts with assets that include a business can often last for years. The personal representative of an estate or trustee of a trust must be mindful of both the statute of limitations for any cause of action that may be brought against the estate/trust and any cause of action that may be brought on behalf of an estate/trust.
For example, when a trust has an ownership interest in a business, the trustee may discover wrongdoing by one or more directors of that business that gives rise to a cause of action. The discovery rule tolls the statute of limitation on such a claim until the injured party discovers the wrongdoing or should have discovered the misconduct by exercising reasonable diligence. For example, if an accountant performed the alleged misconduct, the statute of limitations is one year after the wrongdoing “is discovered or should have been discovered by the exercise of reasonable diligence.” I.C. § 25-2.1-15-2.
Determining the discovery date by a trustee is a fact-intensive exercise that can be complicated if the individuals from whom the trustee is receiving information about the business are covering up the wrongdoing. A trustee may discover that a director colluded with the accountant to misrepresent the company’s financial statements to the shareholder, i.e. the trust. The discovery rule may be helpful in tolling the statute of limitations, but the Indiana Supreme Court has recently adopted another doctrine to help in these situations.
On June 17, 2021, the Indiana Supreme Court adopted the equitable tolling doctrine of adverse domination in the case City of Marion v. London Witte Grp., LLC, 169 N.E.3d 382 (Ind. 2021). “Adverse domination is an equitable doctrine that tolls statutes of limitations for claims by corporations against its officers, directors, lawyers and accountants for so long as the corporation is controlled by those acting against its interests.” City of Marion v. London Witte Grp., LLC, 169 N.E.3d 382, 390–91 (Ind. 2021) (quoting Clark v. Milam, 192 W.Va. 398, 452 S.E.2d 714, 718 (1994)). You can read the full opinion here.
If you would like to submit content or write an article for the Estate Planning & Administration Section, please email Kara Sikorski at ksikorski@indybar.org.
Subscribe to Estate Planning & Administration Section news here!
member center
