2018 Ohio 661
Ohio Ct. App.2018Background
- RSA (Ross Sinclaire & Associates, LLC) purchased distressed multifamily-housing revenue bonds secured by the Squirrel Run apartments, which had long been in default and declining condition.
- Trustee Huntington National Bank (HNB), through trustee administrator Candada Moore, repeatedly issued notices of default and attempted refinancing efforts from 2001–2009; appraisals and notices reflected deteriorating value and unsuccessful refinancing.
- RSA (through employee Philip Lucas) bought bonds in 2006 and continued purchases after HNB filed a foreclosure complaint in April 2009; RSA inspected the property in 2007–2008 and communicated with Trustee Moore.
- A receiver was appointed and the property sold in 2012 for $1.6 million; RSA received a partial distribution but sued HNB alleging breach of fiduciary duty and breach of trust for failing to timely foreclose and preserve trust assets.
- HNB moved for summary judgment arguing RSA’s claims were time-barred under the four-year statute of limitations because the claims accrued when RSA knew or should have known of the breach (no later than 2008–April 2009).
- Trial court granted summary judgment for HNB; the appellate court affirmed, holding accrual occurred when RSA had actual or constructive knowledge and the delayed-damages rule did not defer accrual until the 2012 sale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did causes of action for breach of fiduciary duty / breach of trust accrue? | Accrual occurred when HNB ended its trusteeship by selling the trust res and distributing proceeds (2012). | Accrual occurred when RSA knew or should have known of trustee misconduct (by 2008 or at latest April 2009). | Accrual occurs when beneficiary knew or should have known; RSA knew/should have known by 2008–April 2009, so claims time-barred. |
| Does the delayed-damages rule postpone accrual until actual loss (sale in 2012)? | Yes — damages were not realized until the foreclosure sale, so accrual should wait. | No — the breach and injury occurred when trustee failed to act; statute begins to run when beneficiary knew or should have known. | Delayed-damages rule inapplicable; accrual is tied to knowledge, not to later realization of full loss. |
| Did Trustee Moore’s notices/communications fraudulently or sufficiently mislead RSA to delay accrual? | Trustee’s notices and direct statements misled RSA about refinancing prospects and property value, causing reasonable belief bonds remained sound. | Notices disclosed defaults, failed refinancing, and Lucas’s inspections/communications show RSA had actual or constructive knowledge. | Isolated/ambiguous statements did not legally delay accrual; the record shows adequate notice such that accrual was not postponed. |
| Was summary judgment improper because genuine factual disputes exist about when RSA knew? | Yes — disputes about what Lucas was told and what he knew prevent summary judgment. | No — Lucas’s deposition and contemporaneous notices establish at least constructive knowledge by 2008, permitting judgment as a matter of law. | Summary judgment proper: viewing evidence most favorably to RSA, reasonable minds only conclude accrual by 2008/April 2009, so claims barred. |
Key Cases Cited
- Cundall v. U.S. Bank, 122 Ohio St.3d 188, 2009-Ohio-2523 (Ohio 2009) (beneficiary’s cause accrues when beneficiary knows or should have known of trustee breach; constructive knowledge suffices)
- Flowers v. Walker, 63 Ohio St.3d 546 (Ohio 1992) (constructive knowledge of facts, not legal significance, starts statute of limitations)
- Strock v. Pressnell, 38 Ohio St.3d 207 (Ohio 1988) (elements of breach of fiduciary duty claim)
- Flagstar Bank v. Airline Union’s Mtge. Co., 128 Ohio St.3d 529, 2011-Ohio-1961 (Ohio 2011) (discussion of delayed-damages rule and accrual timing)