Bruce v. North Carolina Nat. Bank

• Citation: 62 N.C.App. 724,303 S.E.2d 561
• Decision Date: 21 June 1983
• Docket Number: No. 8225SC646,8225SC646
• Parties: Mary Buys BRUCE v. NORTH CAROLINA NATIONAL BANK (Two Cases).
• Court: Court of Appeal of North Carolina (US)

Page 561

303 S.E.2d 561

62 N.C.App. 724

Mary Buys BRUCE v. NORTH CAROLINA NATIONAL BANK (Two Cases).

No. 8225SC646.

Court of Appeals of North Carolina.

June 21, 1983.

Ted G. West and David S. Lackey, and Edward H. Blair, Jr., Lenoir, for plaintiff-appellant.

Moore & Van Allen by George R. Hodges, Charlotte and John Aldridge, Raleigh, Todd, Vanderbloemen & Respess by Bruce W. Vanderbloemen, Lenoir, for defendant-appellee.

BRASWELL, Judge.

The issue presented by this appeal is whether plaintiff's action is barred by G.S. 1-52(1), the three-year statute of limitations governing actions "upon a contract, obligation or liability arising out of a contract."

The essential facts are not in dispute. In 1967 plaintiff's husband died leaving a will which established a marital trust for the benefit of plaintiff. NCNB was named trustee of this trust. The marital trust assets consisted primarily of stock in two closely-held furniture companies, which were merged in 1968 into U.S. Industries, Inc. (USI), a public company traded on the New York Stock Exchange.

In 1969 plaintiff, who also held USI stock in her own name, established an inter vivos trust funded entirely by USI stock. NCNB was named trustee of the inter vivos trust. Since both trusts were revocable by plaintiff and therefore under her control, NCNB treated them as one for investment purposes. There was a total of 200,007 shares of USI stock in the trusts by the end of 1973. By November 1974 NCNB had diversified out of the concentration in USI by trading 141,777 shares, 71% of all USI stock in the two trusts.

In November 1974 NCNB recommended to plaintiff that the remaining USI stock be sold. Plaintiff consented to this sale in writing but requested that 6,000 shares be retained in the marital trust. Pursuant to her request, in November and December 1974 NCNB sold all of the USI stock in the inter vivos trust and all but 6,000 shares of the USI stock in the marital trust.

Plaintiff terminated both trusts in February and March 1978. In January 1980 plaintiff instituted this action alleging that NCNB breached its fiduciary duties by failing to liquidate or diversify the poor quality USI stock.

Plaintiff argues in her brief that the statute of limitations began to run in 1978 when the trusts were terminated and that, therefore, the action was filed within the three-year statute of limitations, G.S. 1-52(1), for actions "upon a contract, obligation or liability arising out of a contract." Plaintiff also contends that since the inter vivos trust was under seal, the applicable statute of limitations for an action on that trust is ten years, pursuant to G.S. 1-47(2). We disagree and hold that the cause of action accrued when NCNB sold virtually all the stock in December 1974 and that therefore the Superior Court properly concluded that the action was barred by the three-year statute of limitations.

In her argument concerning the three-year statute of limitations, plaintiff relies on Teachey v. Gurley, 214 N.C. 288, 199 S.E. 83 (1938), in which the court held that the three-year statute of limitations applied to actions based on breach of an express or implied trust based on a contract.

"Where there is an express trust based on contract, express or implied, the statute of limitations has no application and no length of time is a bar unless and until there has been (1) a repudiation or disavowal of the trust, or (2) a demand and refusal, or (3) the trust has been terminated by death, or (4) has been closed.... The reason for the rule is that the possession of the trustee is presumed to be the possession of the cestui que trust. As long as the relation of trustee and cestui que trust is admitted to exist, and there is no assertion of adverse claim or ownership by the trustee, no refusal on demand to comply with the terms of the trust, and no repudiation or disavowal of the trust, no cause of action rests in the cestui que trust. The cause of action arises when and only when there has been some assertion of adverse claim or ownership, or a refusal to comply upon demand, or a disavowal or repudiation of the trust." [Citations omitted.]

Id. at 293, 199 S.E. at 87.

Based on the above-quoted passage, plaintiff asserts that the cause of action in her case arose at the time the trusts were terminated, which was less than two years prior to institution of this action.

We agree, however, with defendant that the more recent case of Tyson v. N.C.N.B., 305 N.C. 136, 286 S.E.2d 561 (1982), is dispositive of this appeal. In Tyson the plaintiff sued the executor/trustee seeking damages for breach of fiduciary duty for its failure to exercise reasonable care in marshalling the assets of the estate. In his opinion, Justice Carlton, writing for the court, stated that "[o]ur research reveals that the issue of which statute of limitations...