The Alabama Supreme Court recently held in Tender Care Veterinary Hospital, Inc. v. First Tuskegee Bank, No. 1131078 (Nov. 26, 2014), that standard breach-of-fiduciary duty and fraud claims asserted against a bank are subject to a two-year statute of limitations, which begins to run when the aggrieved party is injured and discovers or should have discovered its injury.

Tender Care Veterinary Hospital, Inc. (“TCVH”) received a loan from First Tuskegee Bank to construct a veterinary clinic and animal hospital. TCVH asserted that First Tuskegee conditioned the loan on TCVH’s agreement to employ PJ Construction and Service, Inc. as the general contractor on the project. TCVH’s president testified that First Tuskegee’s president had assured her that PJ Construction would “do a good job.” First Tuskegee denied that TCVH was required to use PJ Construction as its general contractor in order to receive the loan, and emphasized that the loan agreement made no mention of PJ Construction.

Shortly after construction began, TCVH became concerned about the quality and timeliness of PJ Construction’s performance on the project, which was to be completed in approximately April 2005. Unhappy with the construction, TCVH refused to authorize First Tuskegee to disburse full amounts requested by PJ Construction for work completed, leading to PJ Construction’s cessation of work and eventual abandonment of the project in July 2005. TCVH received approval from First Tuskegee to act as its own general contractor, and thereafter supervised construction and managed subcontractors until the veterinary clinic and animal hospital was completed. However, the business was unprofitable, and TCVH filed a petition for bankruptcy protection in 2007—approximately one year after opening.

In January 2008, First Tuskegee sued TCVH’s owners seeking a judgment based on the personal guaranty agreements they executed in connection with the TCVH loans.  Later that year, First Tuskegee obtained a judgment in the amount of $1,623,285. In April 2009, TCVH moved for and was granted an injunction prohibiting First Tuskegee from selling the TCVH property at a foreclosure sale to allow TCVH 30 additional days to pay off its loans. But the court later permitted First Tuskegee to foreclose on the property after TCVH ultimately failed to pay.

Two years later TCVH obtained leave to amend its complaint to add breach-of-fiduciary-duty and fraud claims against First Tuskegee. TCVH alleged that it was injured by First Tuskegee’s insistence that TCVH use PJ Construction as the general contractor on the project although PJ Construction was not licensed as a general contractor in Alabama and its work product was below what one would expect from a properly licensed general contractor.

After the trial court reinstated the case to its active docket, First Tuskegee moved for summary judgment, arguing that both of TCVH’s claims were time-barred. Specifically, First Tuskegee argued that TCVH’s claims were subject to a two-year statute of limitations and noted that TCVH’s president stated in her deposition that she first learned that PJ Construction was not a licensed general contractor in July 2005 when she took steps to collect on its surety bond; however, TCVH did not initiate action against First Tuskegee until April 2009. The trial court granted First Tuskegee’s motion for summary judgment, finding that TCVH’s claims were time-barred.

On appeal, TCVH argued that its breach-of-fiduciary-duty claim did not accrue until their relationship turned adversarial in early 2009, when First Tuskegee initiated foreclosure proceedings, and that its fraud claim did not accrue until November 2008, which TCVH asserted was when it actually learned that PJ Construction was not a licensed general contractor. The Alabama Supreme Court affirmed, distinguishing TCVH’s breach-of fiduciary-duty claim from fiduciary duty claims involving a trust, where the statute of limitations does not begin running until termination of the trust relationship. In cases alleging a breach-of-fiduciary-duty claim not involving a trust, the statute of limitations begins running when the aggrieved party is damaged and when the party becomes aware of the relevant facts. Here, TCVH’s president acknowledged in her deposition that TCVH was aware of PJ Construction’s allegedly poor quality of work and lack of licensing as a general contractor in July 2005. Because TCVH did not initiate its action against First Tuskegee until April 2009, it claims were barred by the two-year statute of limitations.