Conversion claim was time-barred due to plaintiffs’ constructive notice of claim.

Where plaintiffs could have discovered in October 2009 that funds had been transferred out of an account payable to them upon decedent’s death and into an account payable to defendant, the conversion claim filed in 2019 was time-barred.

In Kidd v. Lewis, No. E2021-01156-COA-R3-CV, 2022 WL 2866006 (Tenn. Ct. App. July 21, 2022), plaintiffs were the adult daughters of decedent and defendant was the widow of decedent. During the later years of decedent’s life, he suffered from Alzheimer’s and his competency was disputed.

Decedent’s brother Don had a springing power of attorney (POA) for decedent. After decedent sold property in 2009, Don used this POA to move $300,000 from decedent and defendant’s joint account to an account naming decedent as the sole owner and listing plaintiffs as the payable-on-death beneficiaries, as Don believed this was what decedent wanted. Decedent and defendant were on vacation when this transfer was made. Upon returning from vacation, decedent discovered the transfer and revoked the POA. Decedent transferred the money back into an account owned jointly with defendant and listing defendant as the payable-on-death beneficiary, and he used a large portion of the money to purchase an annuity with defendant listed as the sole beneficiary.

At trial, Don testified that he kept plaintiff daughters apprised of all financial happenings with decedent. He stated that he went to the bank on October 5, 2009, after decedent had transferred the money back into a joint account with defendant, and got a copy of decedent’s bank records. One of the two plaintiff daughters also testified at trial that she got a phone call from decedent on October 5, 2009, in which decedent stated that he had taken her and Don “off” his power of attorney. There was also testimony that Don and plaintiff consulted with an attorney at this time.

Decedent died in 2017, and plaintiffs filed this suit for conversion in 2019. Plaintiffs alleged that defendant converted the funds that had been in the account set up by Don payable to them upon decedent’s death. Defendant argued that plaintiffs knew about the alleged conversion in October 2009 and that the claim was therefore time-barred, but the trial court found that the statute of limitations did not begin to run until after the father’s death. On appeal, this ruling was reversed.

Conversion is subject to a three-year statute of limitations. (Tenn. Code Ann. § 28-3-105). In its analysis, the Court of Appeals ruled that plaintiffs had constructive notice of their claim in October 2009. The Court noted that “[o]nce a plaintiff gains information sufficient to alert a reasonable person of the need to investigate the injury, the limitations period begins to run.” (internal citation and quotations omitted). Looking to the facts of this case, the Court explained that Don had a bank record showing that the money had been moved to a different account as of October 5, 2009; that Don testified that he kept plaintiffs apprised of the situation; and that Don and at least one plaintiff consulted an attorney on October 28, 2009. The Court wrote:

[T]he evidence preponderates against the Trial Court’s finding that ‘the change of beneficiaries was beyond that which was discoverable by Plaintiffs.’ On October 5, 2009, the change of beneficiaries was, in fact, discoverable, Don had a document reflecting the change. …As Don stated at trial, he ‘kept plaintiffs involved in what was going on.’ Moreover, a lack of actual knowledge on plaintiffs’ part of the change in payable-on-death beneficiary is not dispositive. The salient point is that the change was discoverable by Plaintiffs upon due investigation. For example, while nothing in the record indicates that Plaintiffs simply asked their father about a change of beneficiaries, they certainly could have. Under the modern discovery rule…, Plaintiffs were on constructive notice of their claim by October 5, 2009.

Because plaintiffs had constructive notice of their claim in 2009, the Court ruled that the conversion claim should have been barred by the three-year statute of limitations.

This case is a reminder that actual notice is not always necessary to begin the running of the limitations period. Constructive notice may trigger the statute of limitations, and plaintiffs’ apparent decision to not inquire further about the possible conversion in 2009 in this case did not protect their claim from being deemed time-barred.

This opinion was released 2 months after oral arguments in this case.

Note:  Chapter 22, Section 4 and Chapter 65, Section 4 of Day on Torts: Leading Cases in Tennessee Tort Law has been updated to include this decision.

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