Statute Of Limitations For Tort Arising Out Of Breach Of Contract Accrues At The Time Of The Breach
IN RE: MARCHFIRST (December 21, 2009)
CIT Communications Finance Corp. leased telephone equipment to marchFIRST beginning in 2000. After marchFIRST filed for bankruptcy in 2001, CIT sought the return of its equipment. The Trustee denied that marchFIRST held any CIT property. In 2002, CIT filed an administrative claim, asserting that the Trustee breached his fiduciary duty. In May of 2007, CIT filed a lawsuit against the Trustee for breach of fiduciary duty. The bankruptcy court, and the district court, both agreed that the suit was barred by the statute of limitations. CIT appeals.
In their opinion, Judges Bauer and Sykes and District Judge Simon affirmed. Everyone agreed that the claims were governed by the five-year statute of limitations -- they did not agree on when the claim accrued. The Court cited the general rule that tort claims accrue when a party sustains an injury but added that Illinois recognizes the discovery rule. That principle extends the time of accrual until the time when a party both knows he is injured and that the injury was wrongfully caused. Here, CIT begin demanding its equipment back as early as July of 2001 and the Trustee refused to return it as early as November of 2001. CIT was on notice of its injury and its claim. Even if the Trustee's breach of his fiduciary duty continued into the five-year period before the filing of the complaint, this is not the type of tort where a limitations period begins to run only after the cessation of the tortious conduct. When a tort arises out of a breach of contract, the statute begins to run at the time of the breach or its discovery.
