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Jarvis v. National City

Supreme Court of Kentucky

September 26, 2013

Katherine Combs JARVIS and Hugh J. Caperton, Appellants
v.
NATIONAL CITY and PNC Bank National Association, Appellees.

Page 149

[Copyrighted Material Omitted]

Page 150

Homer Parrent, III, Parrent & Oyler, Counsel for Appellants.

Virginia Hamilton Snell, Turney Powers Berry, Wyatt, Tarrant & Combs, LLP, Counsel for Appellees.

OPINION

MINTON, Chief Justice.

Katherine Combs Jarvis and Hugh J. Caperton are the beneficiaries of testamentary trusts managed by trustees National City and PNC Bank.[1] Throughout the life of these trusts, Kentucky Revised Statutes (KRS) 386.180 mandated that testamentary trustees make a choice of compensation between either an annual fee or a fee at the termination of the trust. And these trusts present each of those statutory fee options. The Caperton Trust, managed by PNC Bank, operates under a termination-fee compensation option; and the Jarvis Trusts, managed by National City, apparently operate under an annual-fee option.

The General Assembly repealed KRS 386.180 in 2008, eliminating the rigid statutory structure for testamentary trustee compensation. So the Trustees immediately brought a declaratory judgment action in the trial court seeking a judicial determination of whether the repeal of the statute affects trustee compensation for trusts like the Caperton Trust and the Jarvis Trusts that were in existence for

Page 151

many years before the repeal of the statute.

The trial court ruled that the Trustees were not bound by the constraints of the former statute. The Beneficiaries appealed and the Court of Appeals summarily upheld the trial court, adopting the trial court's opinion as its own.

We granted discretionary review. Because we conclude that the repeal of KRS 386.180 was complete and unlimited, we affirm the Court of Appeals. Trustees of testamentary trusts may collect reasonable fees on trusts that predate the repeal of KRS 386.180.

I. FACTUAL AND PROCEDURAL BACKGROUND.

The facts of this case are undisputed. At issue are three distinct testamentary trusts, the Katherine Lovern Craf Trust, the John Riley Craf Trust, and the Hugh J. Caperton Trust.

A. The Jarvis Trusts.

Katherine Combs Jarvis is the beneficiary of two of the testamentary trusts at issue.[2] The Katherine Lovern Craf Trust was created in Craf's will, executed in 1998. The terms of the trust direct the trustee to remit the net income of the trust to Jarvis or apply the net income for her benefit for the duration of her life. At Jarvis's death, the trust is to terminate; and any remainder is to be distributed to Jarvis's daughter, Katherine Christina Jarvis. The trust lists National City as the trustee but has no term or language relating to compensation for any services rendered in fulfilling that role.

Jarvis is also the beneficiary of the John Riley Craf Trust created in John Riley Craf's will, executed in 1992. Again, the trust is to be managed by National City; but the trust is silent with regard to how National City is to be compensated. The John Riley Craf trust mirrors the Katherine Lovern Craf trust because it also directs the trustee to distribute the net income of the trust to Jarvis for the duration of her life. At Jarvis's death, the remainder is to be distributed to Jarvis's daughter.

National City accepted the appointment of trustee in November of 1999, following the acquisition of First Kentucky Trust Company, the actual listed trustee in each of the Jarvis trusts. Apparently, from statements of counsel at oral argument, National City has opted for an annual fee against the principal of the trust as its compensation for the management of the Jarvis trusts.

B. The Caperton Trust.

Hugh J. Caperton is the beneficiary of a testamentary trust created by the will of his father, who died in 1944.[3] The terms of the trust direct the trustee to distribute the whole net income to Caperton for the duration of his life. The trust is to terminate upon Caperton's death; and the principal is to be distributed, per stirpes, to Caperton's then living descendants, if any. If Caperton dies without living descendants, the remaining principal is to be distributed, per stirpes, to the ...


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