EMIL PETER, III V. HON. SUSAN SCHULTZ GIBSON, JUDGE, JEFFERSON CIRCUIT
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RENDERED : DECEMBER 16, 2010
TO BE PUBLISHED
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EMIL PETER, III
V.
APPELLANT
ON APPEAL FROM COURT OF APPEALS
CASE NO . 2009-CA-001151-OA
JEFFERSON CIRCUIT COURT NO . 07-CI-005111
HON . SUSAN SCHULTZ GIBSON, JUDGE,
JEFFERSON CIRCUIT COURT
APPELLEES
AND
EMIL PETER IV, REAL PARTY IN INTEREST
OPINION OF THE COURT BY JUSTICE VENTERS
_
AFFIRMING
Appellant, Emil Peter III, seeks a writ of prohibition against the Jefferson
Circuit Court to bar an accounting of funds held by him for the benefit of
Appellee and Real Party in Interest, Emil Peter IV. Appellant argues that since
the funds in question were part of a bequest made pursuant to the Uniform
Transfers to Minors Act (hereinafter "UTMA"), the Jefferson Circuit Court does
not have subject matter jurisdiction over this matter . The Court of Appeals
denied the writ of prohibition finding that the General Assembly's grant of
original jurisdiction to the district court over matters involving the UTMA did
not extend to parties, like Appellee, who are no longer minors. For the reasons
set forth below, we affirm the Court of Appeals.
FACTUAL AND PROCEDURAL BACKGROUND
In 1983, Appellee's grandmother, Decedent, Allyne M. Peter, bequeathed
to Appellee all of the benefits due her estate from her employee pension plan.
Since Appellee at the time was a minor, pursuant to the UTMA, Appellant, who
was the Decedent's son and Appellee's father, was named custodian of the
custodial property. The initial amount of the bequest totaled $86,409 .46 .
According to an affidavit filed by Appellee in the underlying case, he only
had a general understanding that his grandmother had left him some money .
Appellant provided Appellee with very little information regarding the bequest,
but did give Appellee several distributions from the custodial property which
were described to Appellee as "gifts ." When Appellee turned eighteen,
Appellant failed to give the remaining custodial property to Appellee as was
required by KRS 385.202(l) . Appellee eventually learned of the size of the
initial bequest through a review of public records. Surprised by the size of the
bequest in comparison to the small distributions he received, Appellee brought
an accounting action against Appellant in Jefferson Circuit Court.
The circuit court initially dismissed the accounting action for lack of
subject-matter jurisdiction, due to the UTMA's exclusive grant of jurisdiction to
district court. However, upon Appellee's motion to amend, alter, or vacate its
dismissal order, the circuit court changed its position and held that since
Appellee was no longer a minor, the circuit court had subject matter
jurisdiction . Appellant then sought a writ of prohibition against the Jefferson
Circuit Court which was denied by the Court of Appeals . He now appeals that
denial to this Court as a matter of right.
APPELLANT IS NOT ENTITLED TO A WRIT OF PROHIBITION BECAUSE THE
GENERAL ASSEMBLY DID NOT GIVE JURISDICTION TO THE DISTRICT
COURT OVER AN ACCOUNTING ACTION FILED BY AN ADULT
Appellant argues that he is entitled to a writ of prohibition because the
district court has exclusive jurisdiction over any case dealing with the UTMA,
and thus the Jefferson Circuit Court is acting outside of its jurisdiction by
hearing Appellee's accounting action . We disagree .
A writ of prohibition "is an `extraordinary remedy' that Kentucky courts
`have always been cautious and conservative both in entertaining petitions for
and in granting such relief."' Newell Enterprises, Inc. v. Bowling, 158 S .W.3d
750, 754 (Ky. 2005) (quoting Bender v. Eaton, 343 S .W.2d 799, 800 (Ky. 1961)) .
A writ of prohibition may be granted upon a showing that (1) the
lower court is proceeding or is about to proceed outside of its
jurisdiction and there is no remedy through an application to an
intermediate court; or (2) that the lower court is acting or is about
to act erroneously, although within its jurisdiction, and there
exists no adequate remedy by appeal or otherwise and great
injustice and irreparable injury will result if the petition is not
granted .
Hoskins v. Maricle, 150 S.W .3d 1, 10 (Ky . 2004) .
Kentucky Constitution § 113(6) expressly provides that "[t)he district
court shall be a court of limited jurisdiction and shall exercise original
jurisdiction as may be provided by the General Assembly ." "Accordingly, in
order to resolve the issue at bar, we must look to the appropriate statutes" to
see what jurisdiction was granted to the district courts . McElroy v. Taylor, 977
S .W.2d 929, 931 (Ky. 1998) .
Clearly, the General Assembly gave district courts original jurisdiction for
UTMA disputes . See KRS 385 :012(5) ("'Court' means District Court.") In
Privett v. Clendenin, 52 S.W. 3d 530, 532 (Ky. 2001), we recognized that the
General Assembly gave district courts exclusive jurisdiction to order a
custodian to make an accounting under the UTMA through KRS 385.192 .
However, KRS 385 .192 allows only the following persons "to petition the
district court for an accounting" under the UTMA:
"
"
"
"
a minor who has attained the age of 14 years;
the minor's guardian of the person or legal representative;
an adult member of the minor's family;
a transferor (of the custodial property) or a transferor's legal
representative .
KRS 385 .012 (11) defines a "minor" as "an individual who has not attained the
age of eighteen (18) years ." Thus, from its plain language, KRS 385.192 applies
only to minors or one petitioning for an accounting of custodial property on
behalf of a minor. An accounting action under KRS 385 .192 cannot therefore
apply to custodial property which was (or should have been) released to an
adult beneficiary per KRS 385.202(l), because the beneficiary would no longer
be a minor . Our ruling in Privett does not contradict this conclusion, because
in that case the beneficial owners of the custodial property were still minors,
the claimant on their behalf was an adult member of their family, and the
UTMA custodianship was ongoing. Privett, 52 S .W .3d at 532 . Thus, in Privett
the accounting action fell within the purview of KRS 385.192 .
In this matter, Appellee was over twenty-nine years old when he brought
this accounting action . Appellee was clearly no longer a minor, and he was
entitled to have the custodial property turned over to him once he turned
eighteen-years-old . KRS 385 .202(l) . A beneficial owner of custodial property
who once was, but no longer is, "a minor" would have no more right to seek an
accounting under KRS 385.192 than a person who once was, but no longer is,
a legal representative or guardian of a minor. The UTMA gives no authority to
the district court to order an accounting based upon a petitioner's past status.
The proper court for an adult, such as Appellee, to file an accounting action
like the one in this matter, is the circuit court.
In seeking the accounting here, Appellee did not invoke the provisions of
KRS 385 .192 . Instead, he brought a conventional suit in the circuit court for
an equitable accounting of the sort that has long been available in the courts of
equity in this Commonwealth . See Neal v. Keel's Ex'rs, 20 Ky. 162 (4 T.B .
Mon. 162) (1826) :
It is true that the common law gave in certain cases an action of
account . . . . But this antiquated action at common law has been
supplanted by the more beneficial powers of a court of equity,
whereby not only the production of books, and an account can be
compelled, but also an answer under oath can be required, and a
decree had.
See also 1A C .J .S . Accounting § 6 (2010) :
The right to an equitable accounting arises generally from the
defendant's possession of money or property, which, because of
some particular relationship with the plaintiff, the defendant is
obliged to surrender. Accounting has also been termed a species
of disclosure, predicated upon the plaintiffs legal inability to
determine how much money, if any, is due .
Therefore, an
equitable accounting may be ordered where the plaintiff is unable
to determine how much, if any, money is due from the defendant.
(internal citations omitted .)
The Court of Appeals opinion correctly observed that "[a]s a general rule, an
accounting is an equitable remedy. Conley v. Hall, 395 S.W .2d 575, 578 (Ky.
1965) . Since circuit courts have general subject-matter jurisdiction over suits
in equity, see Ky. Const. §§ 109 8v 112(5) ; KRS 23A.010; Hisle v. LexingtonFayette Urban County Government, 258 S .W.3d 422, 432 (Ky. App . 2008), a
request for an accounting was properly brought in circuit court."
We also note that since Appellant failed to relinquish the custodial
property to Appellee as required by KRS 385 .202, a constructive trust was
created . "[A] court exercising its equitable power may impress a constructive
trust upon one who obtains legal title, `not only by fraud or by violation of
confidence or of fiduciary relationship, but in any other unconscientious
manner, so that he cannot equitably retain the property which really belongs to
another[ .]"' Keeney v: Keeney, 223 S .W.3d 843, 849 (Ky. App. 2007) (quoting
Scott v. Scott, 183 Ky. 604, 210 S.W . 175, 176 (1919)) . At the minor's
eighteenth birthday (or his death), the rights and remedies of the interested
parties, as well as the subject matter jurisdiction of the respective courts, are
governed by the law of constructive trusts, not KRS Chapter 385 (the UTMA) .
The remedy available is precisely the one invoked by Appellee - an equitable
action in circuit court for an accounting.
Appellant argues that the language of KRS 385 .192(3) gives the district
court the jurisdiction to entertain an adult beneficiary's action to compel an
accounting by the custodian after the expiration of the custodianship.
However, as previously stated, the language of KRS 385 .192 limits the
accounting action to the time in which the beneficiaries are minors, and
provides no clear action for beneficiaries after they become adults.
Additionally, the General Assembly's failure to explicitly provide a remedy for
the failure to transfer custodial property under KRS 385 .202 once the
beneficiary becomes an adult, coupled with the limitation of KRS 385 .192 to
minors, is a clear indication that it intended to leave the conventional, common
law remedies intact.
Most Chapter 385 custodianships are created, serve out their purpose,
and expire with absolutely no court involvement. The role of the district court
is extremely limited . A custodianship under KRS Chapter 385 fundamentally
differs from fiduciary relationships subject to the district court's jurisdiction,
such as the executor or administrator of a decedent's estate, the guardian or
conservator of a minor's estate, the guardian for a disabled adult, or the
curator for a convict . For example, unlike the court's statutory oversight of
those fiduciaries:
a custodianship under KRS Chapter 385 is created and the
custodian is appointed by a private contractual arrangement with
no formal or informal court process, and no involvement of the
court;
the court administers no oath to a custodian named under KRS
Chapter 385;
"
except in the extremely limited circumstances set out in KRS
385 .182, the appointment of a successor custodian is done with no
court approval and requires no court involvement;
"
the court has no authority to require bond of the custodian except
upon the petition of a specifically designated interested party. KRS
385.182(6) ;
"
the custodian files no inventory, periodic settlement, or final
settlement with the court;
"
a custodian under KRS Chapter 385 may resign at any time
without filing a settlement or obtaining court approval;
"
the custodianship terminates by operation of KRS 385.202,
without formal court proceedings, ceremony, court order or court
approval.
The fact that the district court has virtually no responsibility or authority
with respect to an existing custodianship further supports our conclusion that
the General Assembly did not intend to extend the district court's subject
matter jurisdiction to include an accounting of an expired custodianship,
especially when doing so supplants the conventional jurisdiction of the courts
of equity over such matters that has existed since before the birth of the
Commonwealth .
Thus, for the foregoing reasons, the Court of Appeals opinion denying
Appellant's writ of prohibition is affirmed.
Minton, C.J., Abramson, Cunningham, and Scott, JJ., concur. Noble, J.,
dissents by separate opinion, in which Schroder, J ., joins .
NOBLE, J., DISSENTING : Because the district court has exclusive
jurisdiction over the Uniform Transfer to Minors Act, I would reverse the Court
of Appeals and remand for entry of the writ.
Though a writ of prohibition is an extraordinary remedy, which this
Court hesitates to grant, the remedy is available against a court that is clearly
acting beyond its jurisdiction. Hoskins v. Maricle, 150 S.W.3d 1, 10 (Ky. 2004) .
Thus, to determine whether to grant this writ, this Court must evaluate
whether the Jefferson Circuit Court had jurisdiction over Appellee's accounting
action .
Kentucky has codified the UTMA in KRS Chapter 385 and has vested
exclusive jurisdiction under the act in the Commonwealth's district courts. See
KRS 385 .012(5) ("Court," under the act, "means District Court") ; Privett v.
Clendenin, 52 S .W.3d 530, 532 (Ky . 2001) ("[D]istrict courts have exclusive
subject-matter jurisdiction over claims brought under the UTMA.") . The UTMA
provides a structure for a bequest, such as the instant one, to be given to a
minor but with a custodian who is appointed to take control of and deal with
the property until the minor reaches the age of majority . See KRS 385 .022 .202 .
The bequest to Appellee was explicitly given under the UTMA and
Appellant was named as the custodian. It is, therefore, unquestionable that
the UTMA's provisions applied to the bequest when it was given and as long as
Appellee remained a minor. See KRS 385 .212 . The only issue is whether the
UTMA covers this matter now that Appellee has become an adult.
In its opinion, the Court of Appeals focused on interpreting KRS
385 .192(l) . That section provides for accounting actions against the custodian
of a bequest, by "[a] minor who has attained the age of fourteen (14) years ."
KRS 385 .192(1) . The Court of Appeals questioned whom "a minor" refers to in
this provision . Is it anyone who was "a minor" when he or she received the gift,
or is it only one who is still "a minor" at the time he or she seeks accounting?
I believe, however, that KRS 385 .202 controls. That statute provides that
"[t]he custodian shall transfer in an appropriate manner the custodial property
to the minor or to the minor's estate upon . . . [t]he minor's attainment of age
eighteen . . . or . . . [t]he minor's death." KRS 385 .202 . This is the section of
the UTMA that Appellant has violated. He was required by this provision to
transfer the custodial property at the time Appellee attained eighteen years of
age . Thus, the only question is whether KRS 385.202 provides a remedy to a
now adult beneficiary where the custodian has failed to fulfill his obligation .
That section does not itself explicitly provide for relief by litigation or
otherwise . Nonetheless, upon reading the Act as a whole, we conclude that the
right provided in KRS 385.202 carries with it a statutory remedy. A proceeding
to vindicate the right in KRS 385.202, by way of an accounting, is recognized
by KRS 385.192(3), which states, "The court, in'a proceeding under KRS
385 .032 to 385 .222 or in any other proceeding, may require or permit the
custodian or the custodian's legal representative to account." In describing "a
proceeding under KRS 385 .032 to 385 .222," the statute clearly contemplates
an action brought to assert any right created or recognized by any of the
covered sections . The statute also clearly allows for an accounting. KRS
385 .202 is, of course, within the set of sections covered by KRS 385 .193(3) .
Appellee can, therefore, bring an action under KRS 385.202 and KRS
185 .192(3) to seek an accounting from the custodian. Although Appellant no
longer has any entitlement with regard to the custodial property, he is still a
"custodian" under the UTMA's broad definition . "`Custodian" means a person
so designated" in a transfer under the UTMA." KRS 385 .012(7) . Both parties
agree that Appellant was so designated .
To enforce his right to the custodial property, Appellee may sue under
KRS 385 .202 and KRS 385.192(3) for an accounting from Appellant over his
handling of the property . Because Appellee's cause of action arises under the
UTMA, it is under the exclusive jurisdiction of district court. See Privett, 52
S .W.3d at 532 . As a result, Jefferson Circuit Court lacks subject-matter
jurisdiction over such a cause of action.
I thus agree with Appellant with regard to the jurisdiction of the
Jefferson Circuit Court. However, for the exact reasons just announced,
Appellant's paradoxical theory that jurisdiction is also lacking in Jefferson
District Court, because Appellee is no longer a minor, is resoundingly rejected.
Even though Appellee is an adult, the Act provides a remedy to vindicate his
right under KRS 385 .202 .
Schroder, J., joins this dissenting opinion .
COUNSEL FOR APPELLANT:
Harry Bernard O'Donnell IV
The Nolan Building
21.00 Gardiner Lane
Suite 321
Louisville, Kentucky 40205-2.949
APPELLEE :
Honorable Susan Schultz Gibson
Judge, Jefferson Circuit Court
9th Floor Judicial Center
700 West Jefferson Street
Louisville, Kentucky 40202
COUNSEL FOR APPELLEE AND REAL PARTY IN INTEREST, EMIL PETER IV:
Matthew Faurest Coogle
Ackerson 8v Yann, PLLC
401 West Main Street, Suite 1200
One Riverfront Plaza
Louisville, Kentucky 40202
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