Kevin A. McKim v. Mary K. McKim ( 2023 )

RENDERED: MARCH 10, 2023; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0643-MR
KEVIN A. MCKIM AND THERESA
SMITH APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE JESSICA E. GREEN, JUDGE
ACTION NO. 21-CI-000103
MARY K. MCKIM; KAYLA M.
MCKIM; AND MADISON E. MCKIM APPELLEES
OPINION
AFFIRMING
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BEFORE: THOMPSON, CHIEF JUDGE; DIXON AND LAMBERT, JUDGES.
DIXON, JUDGE: Kevin A. McKim and Theresa Smith appeal the order of the
Jefferson Circuit Court, entered May 26, 2021, dismissing the underlying action to
invalidate the modification of the Kevin A. McKim Gift Trust (hereinafter “Trust”)
and for other related relief. After careful review of the briefs, record, and law, we
affirm.
BACKGROUND FACTS AND PROCEDURAL HISTORY
Kevin and Mary K. McKim were married in 1992, and Kayla M.
McKim and Madison E. McKim are their daughters. In 2005, Kevin established an
irrevocable trust for the benefit of Mary, his children, and his future grandchildren.
The original trust instrument names Mary as trustee and charges her with using
income from Trust property to provide, as she deems advisable, for the
beneficiaries’ “support in their accustomed manners of living and for their
maintenance, health[,] and education.” Trust article 2.1(a). Presently, only Mary,
Kayla, and Madison are beneficiaries to the Trust. Under articles 2.4 and 3.4 of the
original trust instrument, the Trust terminates in favor of separate trusts for Kevin’s
children, with Theresa Smith as trustee, upon either the McKims’ divorce or
Mary’s death. Kevin contends that, in effect, Mary would be removed as both
trustee and beneficiary.
In December 2018, Kevin filed for divorce; that case is still pending.
On July 16, 2020, Mary executed a trust decanting modification agreement
pursuant to KRS1 386.175. The modified agreement removed the provisions that
would terminate the Trust upon the McKims’ divorce – permitting Mary to retain
her status as both trustee and beneficiary – and removed and replaced Theresa as a
named successor trustee.
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Kentucky Revised Statutes.
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On January 7, 2021, Kevin filed the underlying complaint which was
amended on February 15, 2021, to include Theresa as a plaintiff. Therein, Kevin:
(1) sought a declaration that the modification agreement is invalid and the terms of
the original trust instrument remain in effect, (2) asserted Mary breached her
fiduciary duties, resulting in damage to Appellants, the Trust, and its beneficiaries,
and (3) alleged various violations of Kentucky trust statutes. Pursuant to CR2
12.02(f), Mary moved to dismiss, arguing: (1) Appellants lacked standing; (2) the
claims should have been raised in district, not circuit, court;3 and (3) Kevin’s
claims are barred by equitable estoppel. After briefing and oral arguments, the
court granted the motion on all grounds, and this appeal followed.
STANDARD OF REVIEW
CR 12.02(f) authorizes judgment in favor of a defendant for a
plaintiff’s “failure to state a claim upon which relief can be granted[.]” When
considering a motion to dismiss, the court should view the pleadings “in a light
most favorable to the plaintiff and accept all allegations in the complaint as true.”
Cotton v. Nat’l Collegiate Athletic Ass’n, 587 S.W.3d 356, 361 (Ky. App. 2019)
(quoting Mims v. Western-Southern Agency, Inc., 226 S.W.3d 833, 835 (Ky. App.
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Kentucky Rules of Civil Procedure.
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Appellants concede that the removal of a trustee is the sole provenance of the district court, but
they nonetheless contend this isolated error did not preclude the circuit court from acquiring
subject matter jurisdiction over their remaining claims.
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2007)). “Since a motion to dismiss for failure to state a claim upon which relief
may be granted is a pure question of law, a reviewing court owes no deference to a
trial court’s determination; instead, an appellate court reviews the issue de novo.”
Id. (quoting Fox v. Grayson, 317 S.W.3d 1, 7 (Ky. 2010)).
LEGAL ANALYSIS
Appellants first challenge the court’s determination that they do not
have standing. Pursuant to § 112(5) of the Kentucky Constitution, which limits the
court’s jurisdiction to “justiciable causes,” a plaintiff must have constitutional
standing to initiate a lawsuit in the Commonwealth. Commonwealth, Cabinet for
Health and Family Servs., Dep’t for Medicaid Servs. v. Sexton, ex rel. Appalachian
Reg’l Healthcare, Inc., 566 S.W.3d 185, 196 (Ky. 2018). To satisfy this
requirement, the plaintiff must demonstrate an injury, caused by the defendant, that
is capable of being redressed by the court. Id. Moreover, the injury must be
concrete and particularized, as well as actual or imminent. Id. (citing
Massachusetts v. E.P.A., 549 U.S. 497, 517, 12 S. Ct. 1438, 167 L. Ed. 2d 248(2007)). With these principles in mind, we will address Appellants’ arguments, in
turn.
Kevin’s claimed injury is that, by permitting Mary to remain as trustee
even upon their divorce, the modification agreement exposes him to a perpetual tax
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burden4 that the initial trust instrument was explicitly designed to avoid. In
support, Kevin cites City of Louisville v. Stock Yards Bank & Trust Co., 843
S.W.2d 327 (Ky. 1992), wherein the Court held that increased economic outlays
resulting from the trustees’ alleged mismanagement of funds was a sufficiently
cognizable injury to support standing for the grantor, even though the trustees had
exclusive title to the trust assets by statute. Reasoning that Kevin’s continuing
duty to pay taxes was distinguishable from the future duty imposed in City of
Louisville, the court rejected Kevin’s contention. As we agree Kevin does not have
a requisite injury to support standing, we affirm, albeit on different grounds. See
Fischer v. Fischer, 348 S.W.3d 582, 591-92 (Ky. 2011) (citing Kentucky Farm
Bureau Mut. Ins. Co. v. Shelter Mut. Ins. Co., 326 S.W.3d 803, 812 n.3 (Ky. 2010)
wherein the court held that we are permitted to affirm on any grounds supported by
the record).
Accepting arguendo that an increased tax burden is a sufficiently
particularized injury, the harm must also be actual or imminent. Here, Kevin
admits the triggering event – the dissolution of the parties’ marriage – has yet to
occur, and it is not claimed that Kevin has incurred any undue taxation.
Accordingly, we must determine whether this unrealized injury is sufficiently
4
Specifically, Kevin states that, by virtue of sections 672(e) and 674 of the Internal Revenue
Code, he is required to pay income taxes incurred by the Trust so long as Mary remains trustee.
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imminent to confer standing. Relying on the Court’s interpretation of the term in
Overstreet v. Mayberry, 603 S.W.3d 244, 252 (Ky. 2020), Kevin maintains his
injury qualifies as such given that the dissolution is reaching its conclusion and the
modification agreement has already removed the tax saving measures.
In Overstreet the Court explained:
For an injury to be concrete, it must actually exist. And
while an injury may be threatened or imminent, the
concept of imminence cannot be stretched beyond its
purpose, which is to ensure that the alleged injury is not
too speculative for [constitutional standing] purposes –
that the injury is certainly impending. Thus, the United
States Supreme Court has repeatedly reiterated that
threatened injury must be certainly impending to
constitute injury in fact and that allegations of possible
future injury are not sufficient.
Id. (internal quotation marks and citations omitted) (emphasis in original).
Though Kevin insists a decree dissolving his marriage – thereby
causing his injury – is imminent, the fact that two years have elapsed since the
underlying petition was filed, and the dissolution action is unresolved with no date
certain to conclude, plainly stretches the definition of word. Furthermore, it is
conceivable that a decree will not be entered for a myriad of reasons; or that, prior
thereto, the trust agreement will be further modified to prevent the feared tax
liability, as Mary purports to have done during the pendency of this appeal; or the
remaining triggering event may occur nullifying the entire conflict. Hence, we
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conclude Kevin has failed to demonstrate that the injury is certainly impending;
thus, the court’s determination that he lacked standing is not erroneous.
As for Theresa, her claim to standing arises from her status as a
named successor trustee in the original trust instrument and the plain language of
the Uniform Trust Code (“UTC”), codified at KRS 386B.1-010 - 386B.11-050.
Specifically, KRS 386B.4-100(2) provides that “[a] proceeding to approve or
disapprove a proposed modification or termination under [various provisions of the
code] may be commenced by a trustee[.]” “Trustee” is defined by the UTC as
including “an original, additional, and successor trustee, and a cotrustee.” KRS
386B.1-010(21). Additionally, a “court may intervene in the administration of a
trust to the extent its jurisdiction is invoked by an interested person or as provided
by law.” KRS 386B.2-010(1).
Mary disagrees, arguing that any standing Theresa – as a mere
contingent successor trustee – may have held was lost when she was duly replaced
prior to the occurrence of the condition for her appointment. Furthermore, Mary
asserts that Theresa’s reliance on the UTC is misplaced as no authority supports
her interpretation, and the modification was made pursuant to the decanting statute,
KRS 386.175, which is not a part of the UTC.
The UTC was enacted in 2014, and there is little by way of judicial
guidance. We acknowledge that Theresa’s argument has some appeal under a
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plain reading of the text. However, the law is clear that statutory standing is not a
substitute for constitutional standing (see Sexton, 566 S.W.3d at 191), and because
we conclude that Theresa has failed to demonstrate the latter, we must affirm.
Here, accepting arguendo that Theresa’s removal as a future trustee is
a concrete injury, the harm is neither actual nor imminent. Per sections 3.3 and 3.4
of the original trust instrument, Theresa would be appointed trustee if: (1) any
trustee ceases to act during Mary’s lifetime and Mary does not appoint another, (2)
the children are under 35 years of age and the McKims have divorced, or (3) the
children are under 35 years of age and Mary is deceased. Though Theresa asserted
in her petition that she “should be serving as trustee at this time or in the
immediate future,” it is undisputed that none of the prerequisites for her
appointment occurred either at the time of filing or in the intervening two years
since. For the reasons addressed above, we conclude there is an insufficient basis
to accept that one of the conditions is certainly impending. Consequently, we
agree with the trial court that Theresa has also failed to establish her standing to
bring the underlying action.
Our conclusion is not undermined by Theresa’s citation to Matter of
Trust of Hildebrandt, 388 P.3d 918 (Kan. Ct. App. 2017), and Megiel-Rollo v.
Regiel, 162 So.3d 1088 (Fla. Dist. Ct. App. 2015). While Theresa asserts that
these courts, under identical provisions of the UTC, held that successor trustees
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had standing to challenge a trust modification and to seek reformation of a trust,
these cases are not binding on this Court and, more importantly, they are
distinguishable. In Hildebrandt, the party at issue had a present claim of
entitlement to appointment as trustee, the condition necessary therefor having
already occurred, and the litigation was to settle who the proper trustee was. In
Regiel, the appealing party was the current trustee. As stated above, Theresa has
neither a claim for appointment nor is she the present trustee.
We are, likewise, unpersuaded by Theresa’s general assertion that
“courts routinely recognize the standing of parties with contingent interest in a
trust to challenge the trust’s administration” as a basis to find standing in this
matter. Though Theresa refers us to Betty G. Weldon Revocable Trust ex rel.
Vivion v. Weldon ex rel. Weldon, 231 S.W.3d 158 (Mo. Ct. App. 2007), in support
of her position, this reliance is misplaced. At issue in Weldon was the standing of
residuary beneficiaries, and the court therein affirmatively concluded that the
appealed judgment affected the litigants’ personal interest in the corpus of the trust.
Conversely, as a mere future trustee, Theresa does not have a comparable interest.
As we have upheld the court’s determinations that Appellants lack
standing, we need not reach the merits of their remaining claims on appeal.
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CONCLUSION
Therefore, and for the foregoing reasons, the order of the Jefferson
Circuit Court is AFFIRMED.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEES:
Clark C. Johnson Daniel M. Oyler
Burt A. Stinson Edward H. Bartenstein
Louisville, Kentucky Louisville, Kentucky
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