Court of Appeals Addresses Statute of Limitation for Financial Exploitation Claim
The “statute of limitation” is the deadline by which a person must file a lawsuit. Unless some exception applies, if a person fails to file a complaint or petition within the applicable deadline, the claim will be barred, unless some exception applies.
So, what are the relevant deadlines? When do the deadlines start running? We will answer those and other questions below.
Arizona’s Typical Statutes of Limitation
Arizona’s statutes of limitation vary widely depending on the type of claim being asserted. For example, claims based on the violation of a statute generally have to be filed within one year. On the other hand, a person generally has six years to bring a claim based on the breach of a written contract.
For claims against government officials or entities, typically, a party must present an official “notice of claim” within six months and then file a lawsuit within one year.
Arizona also has various special rules for when the deadlines start and stop running. Generally, Arizona follows the “discovery rule” for determining when a claim accrues (a person has a right to bring a claim). The period to bring a claim (the statute of limitation) begins running when the claim accrues.
“Under the discovery rule, … a cause of action does not accrue until the plaintiff knows or with reasonable diligence should know the facts underlying the cause [of action].” Doe v. Roe, 191 Ariz. 313, ¶ 29, 955 P.2d 951, 960 (App. 1998); see also Walk v. Ring, 202 Ariz. 310, 316, ¶ 22, 44 P.3d 990, 996 (2002); Little v. State, 225 Ariz. 466, ¶ 9, 240 P.3d 861, 864 (App. 2010). In other words, “the plaintiff must at least possess a minimum requisite of knowledge sufficient to identify that a wrong occurred and caused injury.” Doe, 191 Ariz. 313, ¶ 32, 955 P.2d at 961.
In summary, an injured person must have sufficient information to comprehend that they were injured by someone, such that they would be on notice to investigate whether their injury was caused by a violation of some law or the “fault” of someone. The injured party must also suffer some tangible quantifiable injury. Only then will the limitation period generally begin running.
There are numerous nuances, special rules and exceptions that may apply. For example, in probate litigation, we often deal with claims on behalf of individuals who have various mental impairments. The limitation period does not run on claims for a person who is a minor (under 18 years old) or of unsound mind. Specifically, pursuant to A.R.S. § 12-502
If a person entitled to bring an action other than those set forth in article 2 of this chapter is at the time the cause of action accrues either under eighteen years of age or of unsound mind, the period of such disability shall not be deemed a portion of the period limited for commencement of the action. Such person shall have the same time after removal of the disability which is allowed to others.
Again, there are numerous special rules, considerations and exceptions that are often relevant in analyzing whether a claim was timely asserted. Consult an experienced attorney if you have any questions. Let us know if you have any questions.
The Statute of Limitation for Financial Exploitation Claims
Arizona’s Adult Protective Services Act is designed to protect Arizona’s large population of vulnerable adults from abuse, neglect or financial exploitation. It is a remedial statute that must be interpreted broadly to protect Arizona’s vulnerable and/or incapacitated adults.
The Act includes numerous important provisions, one of which is a very favorable statute of limitation. Specifically, A.R.S. § 46-455(K),
The initiation of civil proceedings pursuant to this section shall be commenced within two years after actual discovery of the cause of action.
The phrase “actual discovery of the cause of action” is not defined in the Arizona Act or anywhere else in Arizona law. So, we were excited to learn that Division 2 of the Arizona Court of Appeals decided a matter involving the statute of limitation for financial exploitation claims.
In Re Norvelle
On August 10, 2021, the Court of Appeals issued its decision in the case of In Re Norvelle. Unfortunately, that case gives us very little guidance.
There, Sisters sued their Brother for allegedly financially exploiting their Father. Father had suffered a stroke in 2012. Due to Father’s impairments, Brother moved in with Father to assist him until Father died in 2016. The parties seem to have agreed that Father was a vulnerable adult, entitled to protection of Arizona’s Adult Protective Services Act.
In 2017, Brother’s attorney sent Sisters a letter informing them of the status of the Father’s trust, disclosing that it only held assets worth about $196,000 and that other unidentified assets were transferred outside of the trust. The value of the trust was substantially less than what Sisters expected.
Sisters were concerned that Brother had taken financial advantage of Father. So, in July 2017, Sister’s attorney sent a letter to Brother’s attorney detailing their concerns and demanding further disclosure of information and documents. Crucially, “[Brother’s counsel responded in a letter dated August 24, 2017. It set forth the details of all Father’s assets, including the amounts of each account and insurance policy, and what had been transferred to [Brother] upon Father’s death. Sisters concede that they received this letter, but they did not respond.”
Thereafter, Brother evenly distributed the balance of the trust assets among the beneficiaries. Brother also undertook to distribute the assets that he received outside of trust among all of the beneficiaries and made appropriate distributions to most beneficiaries, but stopped making payments to one of them when the Sisters started legal proceedings against Brother.
Later, in January 2019, after all of the lump sum payments had been made, Sister’s counsel again wrote to Brother’s counsel, “repeating their concerns and demanding an accounting and distribution schedule for Father’s remaining assets.” Brother’s counsel responded that there would be no additional payments since all assets had been distributed.
On July 15, 2019, Sisters filed a “Petition for Leave to File a Financial Exploitation Claim.” Sisters had to request permission to file their complaint for financial exploitation because they did not have automatic standing to do so without the Court’s advance permission. Read more about standing.
On October 8, 2019, the Court granted Sister’s Petition for Leave. They filed their Complaint on December 5, 2019.
Presumably after they conducted some discovery, in September 2020, Brother asked the trial court to summarily dismiss Sister’s Complaint arguing that it was filed beyond Arizona’s two-year statute of limitation. Although Sisters responded to that motion, they did not oppose Brother’s statement of facts. They also failed to provide any evidence showing that there was a disputed fact requiring trial as to whether they “actually discovered the cause of action” more than two years before they filed their Complaint.
The trial court agreed with Brother and dismissed the Complaint. The court found that the August 24, 2017 letter from Brother’s counsel started the running of the two-year period. The trial court made two “adjustments” before concluding that the two-year period began running no later than September 1, 2017:
First, the court added mailing time following the date that the August 24, 2017 letter was mailed. As such, the court found that the two year period started running on September 1, 2017.
Second, the trial court “equitably excluded” from the calculation of the period a total of 47 days from July 15, 2019 (when Sisters filed their Petition for Leave) and October 8, 20219 (the date that the court granted that Petition and gave Sisters permission to file their Complaint).
As such, the court found that the statute of limitation expired on November 25, 2019. However, Sisters did not file their Complaint until December 5, 2019, after the limitation period expired. Therefore, the court dismissed the Sisters’ Complaint. Sisters appealed.
First, Sisters argued that there was a disputed question over when Sisters had “actual knowledge” of their claim, such that the court was required to hold a trial. However, at the hearing on summary judgment, the court “expressly asked Sisters’ counsel to confirm that the August 2017 letter was ‘the triggering date for [the] statute because at that point you knew everything you needed to know.'” The Sisters’ attorney agreed.
Given the Sisters’ agreement that they had actual knowledge of
their causes of action when they received the August 2017 letter, the trial court concluded that they had “sufficient notice of the basis of their claim not later than August 31, 2017.”
Second, Sisters argued that they initiated their lawsuit by filing their Petition for Leave in July 2019, within the two year period. The trial court and Court of Appeals rejected that argument.
A claim for financial exploitation is asserted through a civil action. A.R.S. §§ 46-455(K) and 46-456(B). In turn, civil actions are governed by the Arizona Rules of Civil Procedure. The Rules provide that Civil actions are initiated by the filing of a complaint with the court.
So, the filing of Sisters’ Petition for Leave did not constitute the initiation of a civil action. The filing date of the Complaint, not the Petition, was the relevant date to determine whether Sisters filed within the two year statute of limitation. Sisters filed their Complaint after the adjusted two year period expired. As such, the Court of Appeals affirmed the trial court and found in favor of Brother.
Unfortunately, the Court of Appeals did not delineate, in general, what information will constitute “actual discovery of the cause of action” to trigger the statute of limitation. The Court just found that the information Sisters received was sufficient to be actual discovery in that case.
Our Probate Litigation Firm is Here to Help
The Norvelle opinion is a memorandum decision, so it has limited precedential effect. But, it still provides some helpful takeaways:
- If you are or you represent the trustee, personal representative or other person being accused of exploitation, providing full disclosure, like Brother, may trigger the running of the limitation period.
- The date of filing a complaint for exploitation, not the date of filing a petition for leave, will likely be the date for the court to determine whether the claim was timely filed.
- If you have a basis to do so, fully respond to any motion and provide a proper list of contested facts and supporting evidence.
If you have any questions about claims for financial exploitation or abuse/neglect of vulnerable adults in Arizona, including the statutes of limitaton, please don’t hesitate to contact us. Our experienced caring attorneys are here to help.