Kerns v. Beam
| Decision Date | 31 May 2018 |
| Docket Number | Civil Action No. 3:15-cv-212-DJH-DW |
| Parties | RICHARD KERNS, et al., Plaintiffs, v. WANDA BEAM, et al., Defendants. |
| Court | U.S. District Court — Western District of Kentucky |
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Plaintiffs are the remainder beneficiaries of a trust created by the late Thomas Kerns. Plaintiffs bring this action against Wanda Beam, attorney-in-fact for Lila Kerns, who is the life beneficiary of the trust; and Town & Country Bank and Trust Company, the trustee, alleging misuse of trust funds. (Docket No. 16) They assert claims for conversion and unjust enrichment against Beam and seek to impose a constructive trust on certain funds in her possession.1 (Id.) They claim that Town & Country breached its fiduciary duty, and they seek remedies including disgorgement, accounting, and trustee removal. (Id.) Beam requests summary judgment on all of Plaintiffs' claims. (D.N. 49) Town & Country requests summary judgment on all of Plaintiffs' claims, except the claim for accounting. (D.N. 51) Plaintiffs seek summary judgment on all of their claims against Defendants.2 (D.N. 50) The Court heard oral argument on October27, 2017. (D.N. 67) For the reasons discussed below, Beam's motion will be granted; Town & Country's motion will be granted; and Plaintiffs' motion will be denied.
In 1987, Thomas Kerns created the Trust at issue in this case. (See D.N. 51-2) When Thomas Kerns died in 1988, the Trust was divided into three separate trusts: Trust A-1, Trust A-2, and Trust B. (See id., PageID # 663-66) Thomas Kerns was married to Lila Kerns when he created the Trust. (Id., PageID # 661) The Trust provided that Lila Kerns was to receive the income of Trusts A and B during her lifetime. (Id., PageID # 665) The Trust further provided that "[t]he trustee may in its discretion pay to my wife, or use for her benefit, so much or all of the principal of Trust A or Trust B as the trustee from time to time determines to be required or desirable for her support, welfare[,] and best interests." (Id.) Finally, the Trust provided that "[t]he trustee need not consider the interests of any other beneficiary in making distributions to my wife or for her benefit." (Id.) Plaintiffs, the children and grandchildren of Thomas Kerns, are the only remainder beneficiaries of Trusts A-2 and B. (D.N. 50-2, PageID # 408-09; D.N. 57-1, PageID # 1161-62) They stand to take equal shares of what is left of those trusts at the time of Lila Kerns's death. (Id.) Lila Kerns now suffers from severe amnesia disorder and dementia. (D.N. 51-7, PageID # 734-35) She has required caregiver services around the clock since January 2013. (Id., PageID # 726)
Thomas Kerns declared himself trustee of the Trust. (D.N. 50-2, PageID # 403) Upon Thomas Kerns's death, Patricia Blanchard became trustee. (Id., PageID # 416) Merrill Lynchthen took over as trustee in 2010. (See D.N. 51-3, PageID # 682) During Merrill Lynch's tenure as trustee, it paid trust income to Lila Kerns and made other disbursements for her benefit from trust principal. (D.N. 51-7, PageID # 718, 723; D.N. 51-8, PageID # 747) Generally, Merrill Lynch allocated one-third of these other disbursements to Trust A-1 and two-thirds to Trust A-2. (See D.N. 51-9, PageID # 756; D.N. 51-7, PageID # 723)
Wanda Beam, Lila Kerns's niece and attorney-in-fact (D.N. 51-7, PageID # 714, 736), met with Town & Country in November 2012 to discuss the possibility of the bank becoming trustee. (D.N. 50-8, PageID # 472) During this meeting, Town & Country considered setting up a conference call with Plaintiffs to discuss removing Merrill Lynch as trustee. (See id., PageID # 472-73) That conference call never took place, however. (See id., PageID # 473) Town & Country also contemplated trying to get all of the beneficiaries to agree to move the Trust but determined that the terms of the Trust might not require agreement. (See D.N. 50-30, PageID # 608)
The Trust gave Lila Kerns the right to withdraw the principal of Trust A-1 at any time. (D.N. 51-2, PageID # 666) An employee of Town & Country suggested that it would be in Lila Kerns's best interest to make Trust A-1 an investment management account (IMA) in accordance with the terms of the Trust. (D.N. 50-8, PageID # 474) Lila Kerns exercised her right to withdraw the principal of Trust A-1 in a signed letter dated July 25, 2013. (D.N. 51-7, PageID # 737) Upon transfer of the trust funds from Merrill Lynch to Town & Country, the assets previously held in Trust A-1 were placed into an IMA for Lila Kerns. (D.N. 51-4, PageID # 691) At that point, Trust A-1 effectively ceased to exist. (See D.N. 51-8, PageID # 742)
By the time Town & Country took over as trustee in October 2013 (D.N. 51-4, PageID # 691, 695), bank officers suspected that Merrill Lynch had favored the remainder beneficiaries(Plaintiffs) over Lila Kerns in its administration of the Trust. (D.N. 50-8, PageID # 472, 474) One plaintiff, Richard Kerns, stated in his deposition that he learned that the Trust was being moved to Town & Country from someone at Merrill Lynch. (D.N. 50-9, PageID # 479) Town & Country began sending account statements to Plaintiffs upon becoming trustee. (D.N. 56-3, PageID # 1088; see D.N. 56-8, PageID # 1112) Richard Kerns admitted in his deposition that he started receiving monthly statements from Town & Country either as soon as, or within a month or two of, the bank taking over as trustee. (D.N. 50-9, PageID # 479) As trustee, Town & Country was responsible for managing Trusts A-2 and B. (See D.N. 51-8, PageID # 742, 748)
In December 2013, Beam emailed Town & Country to confirm that bills she sent for Lila Kerns were not being paid out of the funds formerly in Trust A-1 (D.N. 57-14, PageID # 1303), which were then contained in Lila Kerns's IMA (D.N. 51-4, PageID # 691). Town & Country responded that in fact one-third of caregiver expenses were paid out of the IMA, with the remaining two-thirds paid out of Trust A-2. (D.N. 57-14, PageID # 1302; D.N. 50-15, PageID # 535) In January 2014, Town & Country started paying all of Lila Kerns's caregiver expenses from Trusts A-2 and B. (D.N. 51-8, PageID # 748; D.N. 51-4, PageID # 691) Town & Country changed the disbursement arrangement so that all of Lila Kerns's caregiver expenses would be paid with trust funds as opposed to the funds in the IMA.3 (See D.N. 51-8, PageID # 747-48; D.N. 51-4, PageID # 691) Merrill Lynch had also paid all of Lila Kerns's caregiver expenses with trust funds. (See D.N. 51-8, PageID # 748)
Town & Country withdrew $7,929 from Trust A-2 to pay the mortgage on Lila Kerns's house in Bardstown. (D.N. 49-3, PageID # 252) Beam lived in the house from May 2014 toApril 2015 without paying rent. (See D.N. 51-7, PageID # 731-33; see also D.N. 57-23, PageID # 1335) During that time, Beam cleaned the house and prepared it for sale. (D.N. 51-7, PageID # 732; see D.N. 57-23, PageID # 1335) Later, Beam took $45,000 from Lila Kerns's IMA, which contained the proceeds from the sale of the Bardstown house, claiming it was payment for services she provided to Lila Kerns. (See D.N. 50-25, PageID # 572; D.N. 51-1, PageID # 635; D.N. 57, PageID # 1149-50) On July 28, 2014, Town & Country sent Beam and Lila Kerns a letter purportedly confirming an agreement that Beam would repay Trust A-2 for the mortgage payments it funded while she lived in the house rent-free. (D.N. 57-23, PageID # 1335-36) However, Beam never signed the agreement that was attached to that letter or any other agreement to reimburse the Trust. (See D.N. 57-12, PageID # 1286-89)
In November 2013, Town & Country paid Tracy Humphrey $8,000 from Trust A-2. (D.N. 51-8, PageID # 745, 751) The payment covered back pay for caregiver services Humphrey provided to Lila Kerns. (Id.) Prior to making this disbursement, Town & Country reviewed time sheets signed by Beam and Humphrey, communicated with RMS4 to confirm that RMS had not already paid Humphrey, and reviewed statements from Merrill Lynch to ensure that Merrill Lynch had not already paid caregivers for the relevant hours. (Id., PageID # 745) Humphrey had been arrested in August 2013. (D.N. 57-16, PageID # 1307-09) When Town & Country learned of this, it reviewed the time sheet for that period but was unable to conclude that Humphrey had been paid for time that she did not spend working. (See D.N. 51-8, PageID # 745-46) Town & Country discussed the matter further with Beam, who explained that Humphrey initially received payment for the hours following her arrest but that whichevercaregiver covered her shift during that time received the money in the end. (See id., PageID # 746; D.N. 51-7, PageID # 729)
Neola Greenwell, Lila Kerns's sister and Beam's mother, was also paid trust funds for caregiver services rendered to Lila Kerns. (D.N. 51-8, PageID # 746) According to Beam, however, Greenwell was "not doing well medically" and "in really bad health." (D.N. 57-4, PageID # 1196; D.N. 57-17, PageID # 1312) Town & Country later explained that Greenwell was "a pass through for work actually performed by someone else." (D.N. 57-18, PageID # 1315) Laddie Joseph Tackett, Town & Country's assistant trust officer, clarified in his deposition that the money was paid to Paychex, a third-party paycheck provider, and that Greenwell was added to the payroll by Beam after she informed the bank that she needed to hire another caregiver until she found a new assisted-living home for Lila Kerns. (D.N. 51-8, PageID # 741, 746) Tackett testified that he told Beam to contact Paychex if she was going to add another caregiver and that he did not know at the time that the person she planned to add was Greenwell. (Id., PageID # 746)
As of September 2016, Plaintiffs' remainder interest in Trusts A-2 and B has decreased from $1,609,716 to $1,532,808 since Town & Country took over as trustee.5 (See D.N. 51-4, PageID # 692-93)
Plaintiffs' claims arise out of Defendants'...
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