JARVIS (KATHERINE COMBS), ET AL. VS. NATIONAL CITY, ET AL.
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RENDERED: FEBRUARY 4, 2011; 10:00 A.M.
TO BE PUBLISHED
MODIFIED: FEBRUARY 11, 2011; 10:00 A.M.
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-002258-MR
KATHERINE COMBS JARVIS
AND HUGH J. CAPERTON
v.
APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE AUDRA ECKERLE, JUDGE
ACTION NO. 08-CI-013731
NATIONAL CITY AND
PNC BANK NATIONAL ASSOCIATION
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, NICKELL AND THOMPSON, JUDGES.
NICKELL, JUDGE: Katherine Combs Jarvis and Hugh J. Caperton appeal the
award of summary judgment to National City and PNC Bank National Association.
The narrow question before the Court is whether the repeal of KRS1 386.180 in
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Kentucky Revised Statutes.
2008, eliminating limits on the compensation charged by testamentary trustees, is
effective with respect to trusts which predate the repealed statute. The banks argue
the repeal of the statute means they are now free to charge reasonable commissions
on all testamentary trusts, just as they do on inter vivos trusts. Jarvis and Caperton,
beneficiaries of trusts2 established years ago, argue the commission ceilings
expressed in KRS 386.180 at the time the trusts were created remain in effect.
In a well-reasoned and thorough opinion and order, which we adopt as
our own and set forth in full, the trial court granted summary judgment to the
banks. We affirm.
OPINION AND ORDER
This matter stands submitted upon the motion of
Plaintiffs, National City and PNC Bank National
Association (hereinafter, “Plaintiffs”), for summary
judgment. The Defendants, Katherine Combs Jarvis and
Hugh Caperton (hereinafter, “Defendants”), filed a
written response, to which Plaintiffs replied. After
having carefully considered and thoroughly reviewed the
motion, the documents in the Court’s file and the
applicable law, the Court will grant Plaintiffs’ motion.
OPINION
On December 30, 2008, Plaintiffs filed a Verified
Complaint for Declaratory Judgment against Defendants
pursuant to KRS 418.040, et seq. The Complaint states
that Plaintiffs serve as testamentary trustees of the
Katherine Lovern Craft Trust, the John Riley Craft Trust
and the Hugh J. Caperton Trust. Defendants are
beneficiaries of the trusts.
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The wills establishing the trusts contain no agreement or reference to trustee fees.
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Plaintiffs’ primary allegation is that the banks, as
trustees, have been deprived of a “reasonable
commission” for their services. Until recently, KRS
386.180 governed trustee commissions and provided that
testamentary trustees were entitled to an annual
commission of up to 6% of the income from the trust,
plus 0.3% of the value of the trust principal. In lieu of
the annual principal fee, the fiduciary had the option of
taking a commission not to exceed 6% of the fair value of
the principal distribution at the time of termination of the
trust. Under KRS 386.180, a trustee was only entitled to
additional compensation for the performance of unusual
or extraordinary services.
House Bill 615 effectively repealed KRS 386.180
on July 17, 2008. In the wake of that action, there have
been no rulings to determine how to calculate
compensation for trustees. This Opinion may be the first
on the issue.
Plaintiffs argue that the General Assembly’s
reason for repealing KRS 386.180 was to abolish the
ceiling on compensation for trustees of testamentary
trusts. A trustee’s fee for overseeing a non-testamentary,
or inter vivos, trust has historically not been capped.
Trustees of inter vivos trusts retain a “reasonable fee” for
their services, and Plaintiffs assert they are entitled to
same.
Defendants assert there is no justiciable issue and
that under quasi-contract principles, Plaintiffs are not
relieved of the obligations they knowingly accepted
simply because of the repeal. Defendants’ second
argument regarding quasi-contract theory is more akin to
an equitable estoppel claim in that they assert the
Plaintiffs should not be allowed to represent that they
will receive a certain amount of compensation and then
later change their position to obtain a greater fee.
Defendants further argue that various statutes (i.e., - KRS
395.105, 386.655, 395.326, 396.610, etc.) illustrate how
the legislature intended to treat testamentary trusts
different from inter vivos trusts. Last, Defendant asserts
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that all necessary parties have not been joined in this
action.
As set forth in Civil Rule 56, summary judgment is
granted when there is “no genuine issue as to any
material fact” and “the moving party is entitled to a
judgment as a matter of law.” In determining whether to
grant a motion for summary judgment, this Court is to
view the record “in a light most favorable to the party
opposing the motion . . . and all doubts are to be resolved
in his favor.” Steelvest, Inc. v. Scansteel Service Center,
Inc., 807 S.W.2d 476, 480 (Ky. 1991). “A party
opposing a properly supported summary judgment
motion cannot defeat it without presenting at least some
affirmative evidence showing that there is a genuine
issue of material fact for trial.” Id. at 482. Thus, “[t]he
party opposing summary judgment cannot rely on their
own claims or arguments without significant evidence in
order to prevent a summary judgment.” Wymer v. JH
Properties, Inc., 50 S.W.3d 195, 199 (Ky. 2001).
When construing statutes, Courts are guided by
KRS 446.080, which provides as follows: “All statutes
of this state shall be liberally construed with a view to
promote their objects and carry out the intent of the
legislature.” “Thus, the cardinal rule of statutory
construction is that the intention of the legislature should
be ascertained and given effect.” MPM Financial Group
[, Inc.] v. Morton, 289 S.W.3d 193, 197 (Ky. 2009)
(citation omitted).
Generally, a repeal is intended to replace old law
with new law. Martin v. High Splint Coal Co., 103
S.W.2d 711, 718 (Ky. 1937). Here, there is no new law
or savings clause to interpret. Section 4 of HB 615
states, “The following KRS section is repealed: 386.180
Compensation of trustees of estates.” The plain language
of the repeal indicates that the legislature intended to
remove any form of statutorily imposed guidelines
regulating the fee habits of trustees of testamentary trusts.
Otherwise, the legislature would have drafted and
enacted a new law establishing how the fees should be
calculated. Therefore, in the absence of a statute
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directing otherwise, the Court can only conclude that
trustees of testamentary trusts are entitled to collect a
“reasonable fee” commensurate with the performance of
their duties.
Trustees of testamentary trusts are subject to the
strict procedural requirements of probate court, so the
two different kinds of trustees are often afforded different
treatment under the law. House Bill 615 is likely the
legislature’s attempt to diminish the divide.
Contrary to Defendants’ argument, the Court finds
that the issue of whether Plaintiffs are entitled to apply a
reasonable fee to trusts where the banks had previously
elected to take a “termination fee” under KRS 386.180 is
a justiciable issue. Combs v. Matthews, 364 S.W.2d 647,
648 (Ky. 1963). Established case law provides that a
justiciable controversy is presented when “the advanced
determination of which would eliminate or minimize the
risk of wrong action by any of the parties.” Id. The
parties here must take some action with regard to
payment. This Court’s opinion is thus not merely
advisory.
Defendants’ second argument regarding quasicontract, while creative, is unsupported by case law.
Defendants cite Robinson’s Executor v. Robinson, 179
S.W.2d 886 (Ky. 1944), which involved an executor’s
compensation. That case is irrelevant as KRS 395.105
governs how much an executor is owed for the
performance of his duties. Defendants’ reliance on
Kentucky Association of Counties All Lines Fund Trust v.
McClendon, 157 S.W.3d 626 (Ky., 2005) is also
misplaced. That case does not involve any form of
written instrument, and is therefore inapposite to the
matter at hand. Further, while all parties must operate
pursuant to existing law, such a mandate does not
translate into an unwritten contract between private
parties to abide forever to the law that existed at the
inception of their relationship. There is no legal basis for
the Court to create and impose such a fictional contract.
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Finally, the Court finds that all necessary parties
are present in this action. It is undisputed that
Defendants are the trust beneficiaries under the first
estate, and any descendants would be contingent
remaindermen. Under the doctrine of virtual
representation, Defendants are entitled to represent the
interests of all contingent remaindermen beneficiaries.
See Carroll v. First National Bank & Trust Co. of
Lexington, 227 S.W.2d 410, 411 (Ky. 1950); see also
Hermann v. Parsons, 78 S.W. 125 ([Ky.] 1904).
Plaintiffs tendered the affidavits of Cynthia
Maddox, Senior Vice President and Trust Director at
PNC Wealth Management, and copies of the
testamentary documents at issue. Ms. Maddox’s affidavit
states that managing a testamentary trust can often be
time consuming and complicated. Defendants have
offered no affirmative evidence countering these
assertions. Construing the facts in a light most favorable
to the Defendants, there are no genuine issues of fact to
preclude summary judgment. Plaintiffs have shown that
the issue involved is purely one of law, and they are
entitled to summary judgment as a matter of law in the
form of a declaration.
ORDER
Wherefore, IT IS HEREBY ORDERED that the
motion of Plaintiffs, National City and PNC Bank
National Association, for summary judgment should be
and hereby is granted. The Court hereby declares that for
serving as trustees of testamentary trusts, Plaintiffs may
hereinafter charge a reasonable fee, generally
commensurate with the fee that would be charged for
similar nontestamentary trusts, and in the limited
instances of testamentary trusts that are or have been
subject to a termination fee, the testamentary trustees’
determination of reasonable fees may also take into
consideration the fees charged or deferred, prior to the
repeal of KRS 386.180, so that the total fee they receive
during the administration of a trust is reasonable.
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The Opinion and Order of the Jefferson Circuit Court, entered on
November 6, 2009, is AFFIRMED.
CLAYTON, JUDGE, CONCURS.
THOMPSON, JUDGE, DISSENTS AND FILES SEPARATE
OPINION.
THOMPSON, JUDGE, DISSENTING: Respectfully, I dissent and
express several grounds for my disagreement.
This action was commenced pursuant to KRS 418.040. Because an
action for declaratory judgment did not exist at common law, it is permitted as a
result of statutory law pursuant to which a declaration of rights can only be sought
where an actual controversy exists. KRS 418.040.
To justify an action for declaratory relief there must be a
real or justiciable controversy involving specific rights of
the parties. HealthAmerica Corp. of Kentucky v.
Humana Health Plan, Inc., Ky., 697 S.W.2d 946, 948
(1985). A justiciable controversy does not include
questions “which may never arise or which are merely
advisory, or are academic, hypothetical, incidental or
remote, or which will not be decisive of any present
controversy.” Dravo v. Liberty Nat'l Bank & Trust Co.,
Ky., 267 S.W.2d 95, 97 (1954). “A mere difference of
opinion is not an actual controversy ....” Jefferson
County v. Chilton, 236 Ky. 614, 33 S.W.2d 601, 605
(1930) (citations omitted).
Curry v. Coyne, 992 S.W.2d 858, 860 (Ky.App. 1998).
The sparse record lacks evidence that an actual controversy exists
between the parties. There is no description or record of the probate activity and,
therefore, no claim or support for the fee that the banks intend to charge, whether
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the banks intend to request fees retroactively, or that fees are disputed. Further,
there is no evidence of the agreement entered into by the banks and the
beneficiaries in the probate court at the time the banks accepted administration of
the trusts. Thus, it cannot be determined if an actual controversy exists as to the
amount of fees claimed by the banks.
Although the banks alleged an actual controversy in their complaint,
the banks did not state its nature with specificity. Without service of process upon
them, the beneficiaries answered the complaint admitting that an actual
controversy existed. No further evidence as to the controversy was submitted. The
first motion for summary judgment was not supported by an affidavit stating facts
establishing an actual controversy and the only affidavit in the record, filed by
Cynthia Maddox, vice-president and director of PNC Wealth Management, reads
as a memorandum of law rather than a sworn statement of facts establishing an
actual controversy. Further, the wills attached to the affidavit were not verified by
a stamp in the will book at the county clerk’s office or by probate court stamp.
My examination of the record reveals there is no actual controversy
between these parties and the request for declaratory judgment is one made only to
obtain an advisory opinion regarding the repeal of KRS 386.180. Essentially, the
action is the equivalent of a class action litigation resulting in the opportunity for
every probate trustee to apply for retroactive fees for the administration of trusts
within this state.
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Although counsel for each party has high legal principles, ethics and
high legal competence, I am astounded that the majority reaches such a farreaching decision based on the facts and circumstances presented. The following
question dominates my thinking: Are the beneficiaries adequate representatives of
every trust beneficiary in Kentucky? I ask the question because there is no
indication why the beneficiaries who live in two different states but are represented
by the same attorney and who were not served with process agreed to litigate the
controversy. Because of the circumstances under which this case is before the
Court, I believe it should not serve as establishing the law applicable to all trustees’
fees.
Even if my initial conclusion that there is no actual controversy
between the parties is untenable, I disagree with the majority’s conclusion that the
General Assembly intended the repeal of KRS 386.180 to be retroactive. It is a
basic premise of statutory construction that it is the role of the courts to effectuate
the legislative intent. White v. Commonwealth, 32 S.W.3d 83 (Ky.App. 2000).
Regarding the retroactive application of legislative action, KRS 446.080(3) states:
“No statute shall be construed to be retroactive, unless expressly so declared.”
House Bill 615, which repealed KRS 386.180, was passed on April
15, 2008, the year the General Assembly “stopped the clock at midnight” so that a
budget could be passed and no mention was made that the repeal applied
retroactively during the hearing before the House or Senate Judiciary Committees.
The silent legislative record is particularly significant because KRS 386.180 was
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not merely remedial in nature but it imposed substantive rights and duties upon the
trustees and beneficiaries.
Throughout the lifetimes of the three trusts involved in this litigation,
the trustees’ compensation was governed by KRS 386.180. Under the statute, once
the trustees made an election, the election became irrevocable. First Security
National Bank v. des Cognets, 563 S.W.2d 476 (Ky.App. 1978). Yet, the majority
allows the banks to recover fees for decades prior to the repeal of KRS 386.180, a
direct interference with the vested rights of the beneficiaries to bind the banks to
the compensation agreed to by their acceptance of their positions as trustees.
For the reasons stated, I dissent.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Homer Parrent, III
Louisville, Kentucky
Virginia Hamilton Snell
Louisville, Kentucky
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