Opinion ID: 1267684
Heading Depth: 1
Heading Rank: 1

Heading: limitation period and laches

Text: Wiglesworth and the co-trustees argue that Taylor's entire claim is barred by the two-year statute of limitations contained in § 11(e) of the Act. This section provided: A receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as the Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitation fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy. Wiglesworth and the co-trustees rely principally upon Herget v. Central Nat. Bank & Trust Co., 324 U.S. 4, 8-9, 65 S.Ct. 505, 507-508, 89 L.Ed. 656 (1945). Herget, however, is inapposite. Herget and § 11(e) deal only with those claims or rights of action which existed at the time of the filing of the petition in bankruptcy, and were thus inherited by the bankruptcy trustee from the debtor. Here, we are not concerned with Wiglesworth's pre-petition rights to trust distributions, but rather with Taylor's rights to post -petition distributions. Section 11(e) does not affect rights of action which accrue to a bankruptcy trustee after the filing of the petition in bankruptcy. See Berman v. Provencher, 614 F.2d 823, 825 (1st Cir.1980); United States v. Paul Hardeman, Inc., 260 F.Supp. 723, 726 (M.D.Fla.1966); Burnham v. Todd, 139 F.2d 338, 342-43 (5th Cir.1943); Tuffy v. Nichols, 120 F.2d 906, 909 (2d Cir.1941); Stanolind Oil & Gas Co. v. Logan, 92 F.2d 28, 31 (5th Cir.1937). The last three cases construe predecessor statutes which are different in language, but similar in substance to § 11(e). Accordingly, we conclude that the two-year period prescribed in § 11(e) does not bar Taylor's claim. Nevertheless, Wiglesworth and the co-trustees contend that Taylor's claim is barred by an undisclosed state statute of limitations, or laches. According to them, upon the co-trustees' first post-petition distribution to Wiglesworth more than six years before Taylor filed this suit, a single right of action accrued to Taylor under state law to sue for all future trust distributions of income and corpus. We do not agree. Under Virginia law, rights of action generally do not arise upon future periodic obligations until they are due, even though there has been a default in the performance of one of the earlier periodic obligations. See Jones v. Morris Plan Bank, 168 Va. 284, 290, 191 S.E. 608, 609 (1937) (installment payments on note); see also, 18 S. Williston, A Treatise on the Law of Contracts § 2026C (3d ed. 1978 & Supp. 1989) [hereinafter S. Williston]. Therefore, because the testamentary trust provided for periodic distributions, Taylor had no right to sue for future trust distributions until they were payable, even though there may have been a default in an earlier payment. Moreover, in the absence of his denial or repudiation of the trust, which must be communicated to the beneficiary, a fiduciary cannot assert the bar of the statute of limitations or laches against the trust beneficiary. Patterson v. Hewitt, 195 U.S. 309, 317-18, 25 S.Ct. 35, 36-37, 49 L.Ed. 214 (1904); Bacon v. Rives, 106 U.S. 99, 107, 1 S.Ct. 3, 9, 27 L.Ed. 69 (1882); Broaddus v. Gresham, 181 Va. 725, 734, 26 S.E.2d 33, 36-37 (1943); Russell's Ex'rs v. Passmore, 127 Va. 475, 511, 103 S.E. 652, 664 (1920). Therefore, because Taylor is vested with title to Wiglesworth's bankruptcy assets under § 70(a) [2] , Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 737, 51 S.Ct. 270, 271, 75 L.Ed. 645 (1931), and the co-trustees gave him no notice of their alleged denial or repudiation of the testamentary trust, the co-trustees cannot assert the defense of laches or a statute of limitations against Taylor. [3] Wiglesworth is not subject to the fiduciary limitation discussed above; nevertheless, the trial court held that he could not assert the defense of laches against Taylor, because Wiglesworth came into court with unclean hands. Because application of that doctrine depends upon the facts of a particular case, see, e.g., Whitlow v. Mountain Trust Bank, 215 Va. 149, 153, 207 S.E.2d 837, 841 (1974), it is appropriately left to the sound discretion of the fact finder. See City of Norfolk v. Kohler, 234 Va. 341, 346, 362 S.E.2d 894, 897 (1987). Given: (1) Wiglesworth's vague description of his trust interest which was listed in his bankruptcy petition; (2) his duty to turn over to Taylor all of the bankruptcy assets which he possessed, see Maggio v. Zeitz, 333 U.S. 56, 61, 68 S.Ct. 401, 404, 92 L.Ed. 476 (1948), as well as his knowledge that Taylor was claiming an interest in his share of the trust; and (3) his failure to notify Taylor of the income he received after he filed his bankruptcy petition, we cannot say that the trial court abused its discretion in invoking the unclean hands doctrine.