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Personal Lawsuits by a Trustee

Posted on Sep 23, 2016 by admin in blog news

Question: Can a Trustee bring a lawsuit against a party that dealt with the Trust, and who subsequently breached its tract with the trust.

Answer: No, the trustee has no contractual relationships with the third party.

Sentinel Trust Co. v. Universal Bonding Ins. Co., 316 F.3d 213 (3d Cir. N.J. 2003)

In this case, a Trust had an agreement with a 3rd party. This 3rd party breached the agreement, thus causing the trust to incur a financial loss. As a result of this loss, the Trustee was removed, never got paid its fee and was forced to incur legal fees while defending its fiduciary activities on behalf of the beneficiaries of the Trust.

Once the dust settled, the Trustee brought a personal lawsuit against the third party, on the premise that the 3rd party’s breach caused the trustee a personal financial loss.

Court rules that the trustee cannot maintain a breach of contract claim against a party with whom the trust had a contract because the trustee’s role is only that of agency, but it as a party is not privy to a contract in which the Trust is a party.

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