The New Jersey Uniform Trust Code – Part 10C: Duties, Defenses and Liabilities of Trustees, Including Limitations of Actions for Trustee Liability |

Eimi Figlio

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08.26.2016

Posted in Hot Trends: Developing Case Law | By Estate & Trust Group

The New Jersey Uniform Trust Code – Part 10C: Duties, Defenses and Liabilities of Trustees, Including Limitations of Actions for Trustee Liability

C. Remedies and Damages for Breach of Trust

Remedies/Damages for Breach of Trust: Restatement and NJ Common Law

Under the Second Restatement, “[t]he beneficiary of a trust can maintain a suit (a) to compel the trustee to perform his duties as trustee; (b) to enjoin the trustee from committing a breach of trust; (c) to compel the trustee to redress a breach of trust; (d) to appoint a receiver to take possession of the trust property and administer the trust; [and] (e) to remove the trustee.” Restatement (Second) of Trusts § 199. Absent certain specific circumstances, the remedies for a breach of trust are exclusively equitable. Id. at § 197 (1959); Restatement (Third) of Trusts § 95 (Tentative Draft No. 5) (2003). Legal remedies are only available in the following circumstances:

(1) If the trustee is under a duty to pay money immediately and unconditionally to the beneficiary, the beneficiary can maintain an action at law against the trustee to enforce payment; or

(2) If the trustee of a chattel is under a duty to transfer it immediately and unconditionally to the beneficiary and in breach of trust fails to transfer it, the beneficiary can maintain an action at law against him.

Restatement (Second) of Trusts § 198 (1959).

Under New Jersey law, the same common law approach to remedies for breach of trust would apply. See, e.g., Commercial Trust Co. of N.J. v. Barnard, 27 N.J. 332 (1958); In re Herr, 22 N.J. 276 (1956); In re Koretzky, 8 N.J. 506 (1951); Fawcett v. Cooper Hosp., 131 N.J. Eq. 181 (E. & A. 1942); In re Bayles, 108 N.J. Super. 446, 453 (App. Div. 1970); Branch v. White, 99 N.J. Super. 295 (App. Div 1968) certif. denied, 51 N.J. 464 (1968); Mackenzie v. Reg’l Principals Ass’n, 377 N.J. Super. 252, 264 (Ch. Div. 2004); Societa Operaia Di Mutuo Soccorso Villalba v. Di Maria, 40 N.J. Super. 344, 349 (Ch. Div. 1956) (all citing the common law, including the Restatement).

Remedies and Damages for Breach of Trust: NJ UTC

Under the NJ UTC, where a trustee has violated a duty owed to a beneficiary, the court may:

(1) compel the trustee to perform the trustee’s duties;

(2) enjoin the trustee from committing a breach of trust;

(3) compel the trustee to redress a breach of trust by paying money, restoring property, or other means;

(4) order a trustee to account;

(5) appoint a special fiduciary to take possession of the trust property and administer the trust;

(6) suspend the trustee;

(7) remove the trustee as provided in N.J.S.A. § 3B:31-51

(8) reduce or deny compensation to the trustee;

(9) subject to N.J.S.A. § 3B:31-57, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or

(10) order any other appropriate relief.

N.J.S.A. § 3B:31-71.

These remedies track the model UTC and generally are designed in accordance with those in the Second Restatement. See Unif. Trust Code § 1001 (amended 2005). Thus, NJ UTC more or less codifies the common law in the strictly delineated fashion with which the UTC codified Restatement concepts.

The NJ UTC also provides for damages for breach of trust. Under N.J.S.A. § 3B:31-72(a), a trustee who commits a breach is liable to the beneficiaries for the greater of “the amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or … the profit the trustee made by reason of the breach.” Moreover, where there is more than one trustee, N.J.S.A. § 3B:31-72(b) addresses the potential allocation of liability and contribution among the trustees.