On December 20, 2008, National City Bank and PNC Bank filed a complaint for declaratory judgment against the beneficiaries of three testamentary trusts for which the banks were serving as trustees, alleging that the trustees had been deprived of reasonable compensation for their services. In support of their claim, the trustees cited the repeal of Kansas statute KRS 386.180 that had previously provided fixed percentages for the compensation for testamentary trustees.
The beneficiaries moved for summary judgment alleging that: (1) under quasi-contract principles the trustees were not relieved of obligations they knowingly accepted simply due to the later repeal of the statute (an equitable estoppel argument); (2) other Kentucky statutes demonstrated a legislative intent to treat testamentary trusts differently from inter vivos trusts; and (3) all necessary parties had not been joined to the action. The trustees also moved for summary judgment and the trial court granted summary judgment in favor of the trustees.
On appeal, the Kentucky Court of Appeals affirmed the trial court on the grounds that: (1) the plain language of the repeal statute and the lack of provisions in place of KRS 386.180 indicated that the legislature intended to remove any form of statutorily imposed guidelines regulating the fee habits of trustees of testamentary trusts; (2) the trustees of testamentary trusts are entitled to apply a reasonable fee commensurate with the performance of their duties; and (3) the repeal was likely an attempt by the legislature to diminish the divide in treatment between inter vivos trusts and testamentary trusts.
The court rejected the beneficiaries’ arguments, holding that: (1) a justiciable issue existed because the parties had to take some action with regard to payment; (2) quasicontract theories were inapplicable where no written contract was the subject of dispute; (3) no law exists requiring that private parties abide forever by the law that existed at the inception of their relationship; and (4) all necessary parties were present in the action under the doctrine of virtual representation.