Eitel v. PNC Bank, N.A.

• Decision Date: 24 November 2020
• Docket Number: Civil Action No. 3:20-cv-12-RGJ
• Parties: MARY EITEL Plaintiff v. PNC BANK, N.A. ET AL Defendants
• Court: U.S. District Court — Western District of Kentucky

MARY EITEL Plaintiff v. PNC BANK, N.A. ET AL Defendants

Civil Action No. 3:20-cv-12-RGJ

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION

November 24, 2020

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MEMORANDUM OPINION & ORDER

Plaintiff Mary Eitel ("Plaintiff") moves to amend her Complaint. [DE 90]. Defendants PNC Bank, N.A. ("PNC"), South State Bank, N.A. ("South State Bank"), Marilyn Casey Eitel ("Marilyn Eitel"), Wells Fargo & Company, Wachovia Bank, N.A., and First Union Corporation (collectively "Wells Fargo Defendants"), and Wiley Ellis ("Ellis"), individually and on behalf of Ellis, Painter, Ratterree & Adams, LLP ("the Firm"), responded. [DE 91, 92, 93, 94, 95]. Plaintiff replied. [DE 99]. In addition, before Plaintiff filed the present Motion to Amend, various Defendants moved to dismiss, including Defendant Michael E. Cofield.¹ [DE 23, 37, 41, 43, 44, and 45]. Plaintiff responded [DE 66]. For the reasons below, the Motion to Amend [DE 90] is GRANTED and the motions to dismiss are DENIED [DE 23, 37, 41, 43, 44, and 45].

I. BACKGROUND

Plaintiff alleges that Defendants have denied her rightful trust benefits in three trusts created by her paternal grandparents.

1. The testamentary trusts - Senior's Trust Under Will and Bernice's Trust Under Will

The first trust at issue was created by Plaintiff's paternal grandfather, Paul T. Eitel, Sr. ("Senior"): the 1968 Paul T. Eitel, Sr. Trust Under Will ("Senior's Trust Under Will") [DE 23-2;DE 90-1 at 1255]. The second trust was created by Plaintiff's paternal grandmother, Berenice L. Eitel ("Bernice"): the 1977 Bernice L. Eitel Trust Under Will ("Bernice's Trust Under Will") [DE 23-3; DE 90-1 at 1257]. Both Senior's Trust Under Will and Bernice's Trust Under Will paid income to Plaintiff's father, Paul T. Eitel, Jr. ("Junior"), during his lifetime. These trusts permitted discretionary distributions of trust principal to Junior for his health, maintenance, and welfare. Upon Junior's death, each testamentary trust distributed remaining assets equally ("per stirpes") to Junior's then-living children.

2. The inter-vivos trust - Senior's Trust Under Agreement

The third trust is an inter-vivos trust created by Senior: the 1963 Paul T. Eitel, Sr. Trust Agreement ("Senior's Trust Under Agreement") [DE 23-4; DE 90-1 at 1245]. Senior's Trust Under Agreement paid income to Plaintiff's grandmother, Berenice, during her lifetime. [Id.] Upon Berenice's death, the trust required the remaining principal be divided equally into separate trusts for the benefit of Senior's then-living children "and their families." [Id.] At the time of Berenice's death in 1977, Senior had two surviving children: Junior and Helen Rollins. Plaintiff was twenty years old for when Berenice died. [DE 90-1 at 1249].

Senior's Trust Under Agreement required that the income of the trust created for Junior's benefit be paid to him during his lifetime. [DE 90-1 at 1255]. Like Senior's Trust Under Will and Bernice's Trust Under Will above, Senior's Trust Under Agreement also entitled the trustee to use "some portion of the fund or funds for the education . . . or the maintenance in health and reasonable comfort of the income beneficiary," including Junior. [Id.] The parties dispute what should happen under this trust upon Junior's death. Plaintiff argues that upon Junior's death theassets of the trust are to be distributed to Junior's then-living issue.² South State Bank argues that upon the death of Junior, his then-living spouse, Marilyn, was to continue to receive income and upon her death, the assets of his trust were to be distributed "per stirpes" to the then-living "issue" of Junior.

3. The Present Federal Lawsuit

Plaintiff filed a pro se complaint in this Court on January 8, 2020 claiming Racketeering, Fraud, Breach of Fiduciary Duty, Civil Conspiracy/Aiding and Abetting, Tortious Interference with an Inheritance, and Professional Negligence. [DE 1]. South State Bank moved to dismiss. [DE 23]. Less than two months later, Plaintiff then filed an Amended Complaint pro se without seeking consent of the other parties or leave of the Court.³ [DE 34]. The Wells Fargo Defendants moved to dismiss [DE 37, DE 41], and motions to dismiss were filed by PNC Bank [DE 43], South State Bank and Savannah Bank and Trust [DE 44], and Michael E. Cofield [DE 45]. Eitel engaged counsel to represent her and now seeks to amend her complaint a second time ("Proposed SecondAmended Complaint"). [DE 90]. Eitel's Proposed Second Amended Complaint is sixty-four pages long. [DE 90-1].⁴

The complete factual allegations of Plaintiff's claims are discussed below in relation to the claims. Among many complaints, the chief claim is that the various trustees permitted encroachments by Junior of the three trusts' principal that were unnecessary or improper and designed to transfer money from the trusts to Junior's wife, Marylin, and to fund a trust for Marilyn. [DE 90-1 at 1267, 1281].

4. The Probate Matters relating to Senior's Trust Under Will and Bernice's Trust Under Will

South State Bank, as trustee, filed two proceedings in Kentucky state probate court to modify the testamentary trusts in 2016: In re: Paul T. Eitel, Sr. Trust U/W FBO Paul T. Eitel, Jr., Jefferson District Court (Probate), Case No. 16-P-004454 ("Probate Case 4454") and In re: Berenice L. Eitel Trust U/W FBO Paul T. Eitel, Jr., Jefferson District Court (Probate), Case No. 16-P-004453 ("Probate Case 4453"). After Junior died in November 2018, South State Bank moved the probate court in those proceedings to settle the trusts' accounts and make final distributions to Plaintiff and her brother, Paul T. Eitel, III. After filing her Complaint in this case, Plaintiff objected to South State Bank's proposed final distributions and accountings in theseKentucky probate proceedings. [DE 23-1 at 125; 23-7, Objection in Probate Case 4454]. In Probate Cases 4453 and 4454, South State Bank alleged that Plaintiff objected to the proposals for final distribution and the accountings [DE 23-5; DE 23-6], but South State Bank did not attach a copy of the actual objections, only its Motions to Resolve Objections filed in the probate matters. South State Bank did however attach Plaintiff's Response to its Motions to Resolve Objections in Probate Case 4454, which states the objections Plaintiff's then-counsel filed about the Trustee's proposed final distribution, accounting, and trustee's report:

• The $60,491.94 encroachment for the benefit of [Junior] [DE 23-7 at 204];

• Payment of legal fees incurred by Junior to modify and redraft the trust to add an Investment Direction Advisor so that he could move the trust from South State Bank to Charles Schwab Bank [DE 23-7 at 204];

• Payment of $14,000 of Junior's legal fees from the principal of the trust, the balance being allocated between Bernice's Trust Under Will and the Paul T. Eitel Irrevocable Trust U/A FBO Paul T. Eitel, Jr. [DE 23-7 at 204-05];

• $220,539 encroachments for 2017 [DE 23-7 at 205];

• Continuing assessment of investment management fees, which continue to be charged after the terminating event and which Plaintiff asserted should be refunded [DE 23-7];

• Failure to provide copies of Trustee's minutes of the meetings, reviews, and decision process in permitting principal encroachments to Junior [DE 23-7 at 205];

• Failure to document any renewal of Junior's requests for principal encroachments [DE 23-7 at 206];

• The Trustee failed to exercise requisite care and due diligence to properly account for the assets in the proposed final distribution [DE 23-7 at 206];

• Failure to prove documents to support encroachments [DE 23-7];

• Investment performance during the last five years and projections showing that combined fair market values for both Senior's Trust Under Will and Bernice's Trust Under Will should have been $2,358,011 rather than $1,255,746, if the Trustee had properly invested the assets [DE 23-7 at 207];• Substantial and ongoing principal encroachments to Junior for $453,831 since January 1, 2014 through December 31, 2018 for Senior's Trust Under Will [DE 23-7 at 207-08] with no supporting documentation;

• The trustee breached its duty of impartiality under KRS 386B.8-030 by systemically dissipating the assets of the trust through principal encroachments [DE 23-7 at 208];

• The amount of the Trustee's partial distribution of only $175,883 and holdback amount that was 25% of the total trust assets [DE 23-7 at 209].

It is unclear from the filings whether the above represents all or just some of the objections that Plaintiff filed in Probate Case 4454. South State Bank did not attach a copy of the objections that Plaintiff filed in Probate Case 4453.

After Plaintiff filed the present lawsuit in this Court, the Jefferson District Court issued orders tendered by South State Bank in Probate Case 4454 and Probate Case 4453 overruling Plaintiff's objections, approving South State Bank's accounts, and approving South State Bank's proposal for final distribution for Senior's Trust Under Will and Bernice's Trust Under Will. [DE 44-6 at 989-995]. The probate court orders also stated that South State Bank "properly administered [each] Trust according to its terms and satisfied its fiduciary duties to the Trust beneficiaries" including to Plaintiff. [DE 44-6 at 989, 992]. Plaintiff moved the Jefferson District Court to vacate these orders partly arguing that this federal action required they be stayed [DE 44-9],⁵ but the Jefferson District Court denied Plaintiff's motion. [DE 44-10]. These two cases are now on appeal at the Jefferson Circuit Court, 20-CV-000044 and 20-CV-000045. a. The Probate Matter related to Senior's Trust Under Agreement

After Plaintiff sued Defendants in this Court, South State Bank initiated a probate proceeding in Jefferson District Court to dissolve Senior's Trust Under Agreement because the assets fell under a certain threshold: Estate of Paul T. Eitel, Jefferson District Court (Probate), Case No. 20-P-00615 ("Probate Case...