Court Opinion

ID: 9632964
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:29:23.514228+00
Date Added: 2024-06-11T18:08:25.585094
License: Public Domain

Dissenting Opinion by
Justice SCHRODER.
This case turns on the trustee’s duties and obligations, if any, to a settlor and to the beneficiaries, after the trust is revoked. It is black letter law that upon the execution of a trust, the person accepting the position of trustee has a duty to execute the trust according to the intent of the settlor. Hurst v. First Ky. Trust Co., 560 S.W.2d 819, 822 (Ky.1978) (explaining that a trustee’s distribution of the trust property in a way that violated the settlor’s intent was a violation of the trustee’s duty as a fiduciary); see also KRS 886.452(l)(a). The trustee also owes a duty of utmost fidelity to the beneficiaries, of the trust. Wiggins v. PNC Bank, Kentucky, Inc., 988 S.W.2d 498, 501 (Ky.App.1998) and KRS 386.705. This includes a duty to inform beneficiaries of the trust and its administration. KRS 386.715. The trustee’s duty to inform the beneficiaries about the trust exists whether the beneficiaries’ interest are vested or contingent. Day v. Walker, 445 S.W.2d 422, 424 (Ky.1969). Because Ollie, the settlor, retained a power to revoke the trust, the trustee had a duty to the settlor as a remainderman, if said power of revocation was exercised, to wind up the trust and surrender its possessions to the settlor. See generally KRS 386.810(1), (3); and Beeler v. Fidelity & Columbia Trust Co., 293 Ky. 361, 169 S.W.2d 16 (1943); see also KRS 386.450(2) (beneficiary includes a remainder beneficiary).
In the case sub judice, Ollie, the settlor, revoked (or attempted to revoke) the trust. Bank One, the trustee, had a duty to return the trust property (res) to the settlor if the revocation was validly exercised. KRS 386.810(1). If the trustee had a serious question about undue influence, fraud, or other irregularities, the trustee could defend the trust, and defend it in its own name. KRS 386.810(3)(y). It was not necessary to have the beneficiaries file suit — although either or both had standing to do so. KRS 386.675. Here, the trastee returned the property, closed the trust account, and then notified the former beneficiaries of their lost interest and the possible irregularities, such as undue influence. This is more than “sour grapes.” I agree with the Court of Appeals that the timing is important because at the time of notification, the trustee had already made a decision to honor the revocation, had already closed out the trust account, and entered into a subsequent contract with the new trustee to manage the assets. Having decided to honor the revocation, the trustee’s duties were to the settlor, to wind up the trust and return the property, which it did. When the trust ceased, so *706did any further duty of notification to the former beneficiaries. Granted, under KRS 386.675, the former beneficiaries still have standing to contest the revocation, but that does not create an obligation on a former trustee to volunteer further notices (even though all of this information is available through discovery).
At this point, the question becomes whether the former settlor has a cause of action against a former trustee who volunteers information to former beneficiaries. Again, I agree with the Court of Appeals that the information may have potentially been confidential information, but there are numerous questions of fact and law that are unanswered. In such a case, summary judgment was improper and the matter must be vacated and sent back for trial. Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky.1991). I would affirm the Court of Appeals.