U.S. Trust, Bank of America, N.A. v. First National Bank & Trust
2014 Ark. App. 160
| Ark. Ct. App. | 2014Background
- Douglas Kemp created a revocable inter vivos trust in 1961 (amended 1972); trustee later became Bank of America (BA). The trust directed distribution according to Kemp’s will or, if intestate, to his heirs at law. Kemp died intestate in 2008 with no readily ascertainable heirs.
- A special administrator (First National Bank & Trust of Mountain Home, FNB) opened Kemp’s probate estate and sought turnover of the trust assets; BA had earlier filed a petition in Craighead County seeking termination of the trust and distribution to located heirs.
- More than a year after BA’s Craighead filing, FNB moved in the Randolph County probate court to require BA to turn over trust assets and to account; the probate court concluded the express trust failed on Kemp’s death and a resulting trust arose in favor of Kemp’s estate.
- The probate court ordered BA to pay the trust assets to the estate (BA paid $813,030.39), to file a full probate accounting, and to reimburse the estate $48,931.78 for fees BA charged the trust after learning the estate was opened. The court later awarded attorney’s fees to certain heirs and to the administrator.
- BA appealed, arguing lack of probate-court jurisdiction over the trust res, error in findings on the accounting and reimbursement, and lack of authority to award attorney’s fees to heirs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trust res became estate property on settlor’s death | Estate/FNB: resulting trust arose when express trust failed; assets are estate property | BA: trust assets remained non-estate and probate lacked jurisdiction to transfer them | Held: Yes — resulting trust arose; trust res became estate assets and probate court could determine this |
| Whether Randolph probate court had jurisdiction to require BA to account and turn over assets given BA’s prior Craighead filing | FNB: probate may determine estate property and require accounting | BA: Craighead action concerning the trust precluded Randolph from exercising control | Held: Randolph could determine that assets were estate property; but Craighead (first-filed) had exclusive authority over administration/expenses of the trust under concurrent-jurisdiction rule |
| Whether BA must reimburse the estate for fees and expenses charged after it learned the estate was opened | FNB/heirs: fees charged after notice were improper and must be repaid | BA: fees were legitimate trust administration expenses; accounting was sufficient | Held: Trial court erred to the extent it decided propriety of those expenses — that issue was within Craighead court’s exclusive control; reversal as to reimbursement determination |
| Whether probate court could award attorney’s fees to heirs for challenging BA’s accounting | Heirs: fees proper as sanction under probate accounting statute | BA: probate statute and precedent limit fee awards to personal representatives; court lacked authority | Held: Reversed — no statutory authority to award attorney’s fees to individual beneficiaries in these circumstances; award to heirs vacated (fee to administrator upheld and not challenged) |
Key Cases Cited
- O’Neal v. Warmack, 250 Ark. 685 (1971) (resulting trust arises when express inter vivos trust fails)
- Foster v. Hill, 372 Ark. 263 (2008) (first court to rightfully exercise concurrent jurisdiction acquires control)
- Hilbum v. First State Bank, 259 Ark. 569 (1976) (probate courts are courts of limited jurisdiction; powers strictly construed)
- Carlson v. Carlson, 224 Ark. 284 (1955) (probate courts authorized to determine what property belongs to an estate)
- Swaffar v. Swaffar, 327 Ark. 235 (1997) (probate courts generally lack authority to award attorney’s fees to individual beneficiaries)