www.loubar.org 16 Louisville Bar Briefs Proper Jurisdiction of Courts Continues to Plague Trust Cases John R. Cummins and Cara Alexiou A recent Kentucky Court of Appeals decision once again demonstrated how difficult it can be in Kentucky to choose the proper court for filing cases involving trust disputes and the removal of trustees. While district courts exercise original jurisdiction over most trust disputes, a party can move the dispute to circuit court by filing a circuit court action related to the same trust. If a party misses the deadline to move the action to circuit court, the district court becomes the court of exclusive jurisdiction over the trust dispute. In a recent Kentucky Court of Appeals case, Brinker v. Molloy et.al., 71 K.L.S. 1, at 27 (opinion not final), the court clarified jurisdictional distinction under the Kentucky Uniform Trust Code (UTC). Here, the beneficiaries of a trust filed an action in state district court seeking an ac- counting by the trustee for the trust administration and for the removal of the trustee. The district court ordered that the trustee provide an accounting, but he failed to do so. Two years later, the same district court entered an order directing the final distribution of the trust, following the passing of the trust’s life beneficiary. Under Kentucky Law, the circuit court has appellate review of district court decisions. So, here the beneficiaries timely appealed to the circuit court the district court’s order directing the final distribution of the trust. The circuit court then remanded the case to the district court to compel the trust accounting that the beneficiaries had sought, yet expressly retained jurisdiction over the other causes of action related to the trust on the basis that they were “adversarial” in nature. After this order was entered, the district court entered another “handwritten, perfunc- tory” order denying all motions and directing the final distribution of the trust to the remainder beneficiaries, including the trustee personally. The beneficiaries then filed a motion for summary judgment with the circuit court on their various claims regarding the trustee’s alleged misconduct in carrying out his official duties, including breach of fiduciary duty, negligence and fraud. The circuit court granted the beneficiaries’ motion and scheduled a trial to determine the dam- ages owed by the trustee. At this point, the trustee sought a writ of prohibition on the grounds that the circuit court did not have jurisdiction of the case when it entered its summary judgment order against him. The Court of Appeals sided with the trustee on this jurisdictional ground. While a party in a trust matter has the right under the UTC to move the litigation to circuit court within 20 days after receipt of notice of the district court proceeding, this was not done here. In fact, the beneficiaries themselves had originally filed the action in district court. Once the 20-day deadline had passed, the circuit court could only exercise appellate review of the district court’s decisions. The Court of Appeals noted that there was no basis for the circuit court to maintain jurisdiction over the trust claims. While a district court may lose jurisdiction in cer- tain probate matters once they become “adversarial,” the Court of Appeals emphasized that trust disputes are separate and distinct from probate matters. The Kentucky UTC conferred jurisdiction on trust matters, including adversarial ones, upon the district court, subject only to the removal to circuit court within 20 days after notice of the district court proceeding. According to the opinion, the Kentucky statute conferring jurisdiction on the circuit court regarding adversarial matters only applies to estates, and not to trusts. On this basis, the Court of Appeals ordered the circuit court to remand the entire matter to the district court for the proper resolution of all claims. If you have a trust dispute in Kentucky, it’s important to consider these jurisdictional issues carefully from the outset of the claim. This is not the first case where the choice of court in a trust matter has been contested and then appealed to the Kentucky appeals court for resolution, and doubtless will not be the last. The fine line between the exclusive and concurrent jurisdiction of the district and circuit Courts to settle trust disputes under the Kentucky UTC lies at the heart of the matter. Partner John R. Cummins and Senior Managing Associate Cara Alexiou are based in Dentons’ Louisville office. John is a member of the firm’s Trusts, Estates and Wealth Preservation group, and Cara is a member of the firm’s Commercial Litigation group. n
