In the Matter of the Trust Created Under the Last Will and Testament of Marion A. Peeples, Deceased, Johnson County Community Foundation as Successor Trustee of the Marion A. Peeples Foundation Charitable Trust, Appellant-Petitioner
Appeal from the Johnson Superior Court. The Honorable Kevin M. Barton, Judge. Trial Court Cause No. SE79-23.
ATTORNEY FOR APPELLANT: Daniel J. Paul, Williams Barrett & Wilkowski, LLP, Greenwood, Indiana.
ATTORNEYS FOR APPELLEE, INDIANA ATTORNEY GENERAL: Gregory F. Zoeller, Attorney General of Indiana; Frances Barrow, Aaron T. Craft, Deputy Attorneys General, Indianapolis, Indiana.
Bradford, Judge. Vaidik, C.J., and Kirsch, J., concur.
[¶1] After Marion Peeples and his wife Eve passed away, the trust provided for in their wills was established (" The Trust" ). The Trust provided for the award of scholarships to Indiana high school graduates, preferably from Franklin High School, who wished to pursue post-secondary education in certain fields. Union Bank & Trust was initially the trustee of the Trust, and, through mergers and acquisitions, JPMorgan Chase Bank, N.A. (collectively, " the Bank" ), took over.
[¶2] In 2013, the Johnson County Community Foundation (" JCCF" ), which had been managing the scholarship program for the Bank since 2000, petitioned the trial court to be appointed trustee for the Trust. The trial court granted JCCF's petition in an order that limited JCCF's fee to 1.5% of trust assets per year and required it to receive court approval before engaging the service of certain third-parties under certain circumstances. JCCF now appeals, contending that the trial court abused its discretion in imposing restrictions on its administration of the Trust. The Attorney General of Indiana appears on behalf of the Trust beneficiaries and argues that JCCF's arguments are not ripe for appellate review. JCCF counters that the Attorney General's arguments were not properly preserved. Because we conclude that (1) the Attorney General's arguments were properly preserved, (2) JCCF's arguments are ripe, and (3) the trial court did not abuse its discretion in imposing restrictions on JCCF's administration of the Trust, we affirm.
Facts and Procedural History
[¶3] On February 28, 1962, Marion Peeples and his wife Eva Peeples each executed a last will and testament. The wills included provisions for the establishment of the " Marion A. Peeples and Eva S. Peeples Foundation Trust," or the Trust. Appellant's App. p. 35. The Trust established separate scholarship funds for male and female students. The female scholarship was established for Franklin College for the benefit of graduates of any Indiana high school (preferably Franklin Community High School) interested in pursuing nursing or dietetics (preferably at Franklin College). The male scholarship fund was established for Franklin Community High School for the benefit of graduates of that high school who are seeking " training in teaching in the field of industrial arts" (preferably at Franklin College). Appellant's App. p. 37. The language creating the Trust grants the trustee the power to " employ such attorneys, auditors, accountants, or other assistants, as are, in the judgment of the Trustee, necessary, and to pay their compensation from the Trust Property." Appellant's App. p. 42. Between 2001 and 2014, $1,049,583.00 was distributed to scholarship recipients.
[¶4] On July 11, 1971, Marion died, followed by Eva on October 5, 1978. On March 29, 1979, the Bank petitioned Johnson Superior Court to docket the Trust, which petition the trial court granted on April 2, 1979. In 2000, the Bank approached JCCF to manage the scholarships. Until 2005, the Bank paid JCCF $30,000.00 per year to manage the scholarship programs and $20,000.00 per year after.
[¶5] On March 26, 2013, JCCF filed a petition of proposed successor trustee to appoint successor trustee (" the Petition" ) and the Bank made filings indicating its desire to resign as trustee. At the time, the balance of the Trust was $1,292,662.65. On May 31, 2013, the Indiana Attorney General, on behalf of the beneficiaries of the Trust, indicated that it had no objection to the appointment of JCCF as the successor trustee.
[¶6] On June 3, 2013, the trial court held a hearing on the Petition, at which no party other than JCCF appeared and presented evidence. JCCF President Gail Richards testified and was cross-examined by counsel for Franklin College. Richards testified on cross-examination that JCCF had never administered a trust before and that the fees JCCF were seeking were 1.5% of the balance of the Trust.
[¶7] On October 18, 2013, the trial court issued its order accepting the Bank's resignation as trustee of the Trust, appointing JCCF trustee, and approving the Bank's accounts for 2011 and 2012. The order provides as follows:
The Court being duly advised in the premises, now FINDS AND ORDERS as follows:
1. The above cause of action came before the Court for hearing on the Verified Petition of Trustee to Appoint Successor Trustee And Verified Petition Of Proposed Successor Trustee To Appoint Successor Trustee. Testimony was presented to the Court by Gail Richards, Director.
2. J.P. Morgan Chase Bank, N.A filed it's [ sic passim ] Trustee's Statement of Account for 2011 and 2012. By Notice of Opportunity To File Objection to Trustee's Accounts the Court provided all interested parties with notice and opportunity to file objection to the Trustee's Statement of Account for 2011 and 2012. No objections were filed.
3. By Attorney General's Response, the Attorney General stated that no objection was made to the Verified Petition
of Trustee to Appoint Successor Trustee And Verified Petition Of Proposed Successor Trustee To Appoint Successor Trustee.
4. From the evidence submitted to the Court, J.P. Morgan Chase Bank is now administering the Trust from a trust officer out of state. J.P. Morgan Chase Bank has submitted it's resignation as trustee because it deems the size of the trust insufficient to effectively manage.
5. Request is made for the Johnson County Community Foundation to be appointed as Successor Trustee of the Peeples Trust. Johnson County Community Foundation has expertise in the management of investments for charitable and benevolent purposes as a community foundation. The Johnson County Community Foundation has expertise in financial management. However, the Johnson County Community Foundation has not previously acted as trustee for a benevolent trust.
6. From the testimony presented at [the] hearing, the Court identifies two matters of concern: trustee fees and identification of trust recipients.
7. As to trustee fees, it was disclosed that J.P. Morgan Chase Bank had contracted with the Johnson County Community Foundation to fulfil local trustee duties, including encouraging applicants for the trust, screening applicants and determining who should receive disbursements from the trust. A fee was initially charged in the amount of $30,000.00 but was subsequently reduced to $20,000.00 after J.P. Morgan Chase Bank assumed the duty of making distributions from the trust to the educational institutions of the selected trust recipients. J.P. Morgan Chase Bank did not request court approval to utilize the services of the Johnson County Community Foundation in fulfilling it's duties as Trustee. Inasmuch as J.P. Morgan Chase Bank was authorized to charge for it's services a[t] it's usual and customary rates for trust services, it was contemplated that the fees assessed were for all aspects in serving as trustee. The accountings filed by J.P. Morgan Chase Bank show that the effective annual charge by J.P. Morgan Chase Bank in serving as trustee was 1.2% of the trust assets. After including the additional amount charged by the Johnson County Community Foundation, the effective annual charge for trustee services rises to 2.7% of the trust assets. The trustee fees constitute approximately 64% of the amount disbursed to the trust recipients. The court finds that the fees charged in relation to the amounts disbursed to be excessive.
However, the Court is also mindful that the banking landscape has changed considerably from the time when the Peeples Trust was created. The locally based trust company has largely been relegated to history.
8. A concern was also noted regarding identification of students to apply for disbursements from the trust. Ms. Richards testified that the Foundation had placed notice of opportunity to apply for benefits under the trust with other community foundations. The trust states a clear preference to benefit students attending Franklin Community High School. The Court makes clear that the terms of the trust need to be closely followed.
9. The Court determines as follows:
A. The resignation of J.P. Morgan Chase Bank, N.A. as the Trustee of the Marion A. Peeples and Eva S. Peeples Trust is granted.
B. The petition for appointment of the Johnson County Community Foundation
as successor trustee of the Marion A. Peeples and Eva S. Peeples Trust is granted subject to the terms herein set forth.
C. The fees charged by J.P. Morgan Chase Bank, N.A., including the amount paid to the Johnson County Community Foundation, for 2011 and 2012 are reserved for consideration. J.P. Morgan Chase Bank, N.A. shall tender within forty-five (45) days of the date of this Order, the rate structure used by J.P. Morgan Chase Bank, N.A. in assessing trustee fees and the authority for incurring additional charges for trustee duties above the rate structure either by the terms of trust or by statute. J.P. Morgan Chase Bank, N.A. may submit to the Court the rate structure for other similar trust institutions in support of the fee petition.
D. The fees charged by Johnson County Community Foundation in serving as Trustee shall be limited to one and one-half percent (1 1/2 %) of the Trust assets annually, although payment for services may be made on a quarterly or monthly basis. Any request for payment of fees in addition to such amount shall be supported by time records that support the additional fee or financial report regarding administrative expenses in administering assets.
E. If any third party is to be engage[d] to provide services to the Peeples Trust that is not included within the said one and one-half percent (1 1/2 %) annual administrative fee, prior Court approval shall be required before the third party is engaged to provided [ sic ] services. The Johnson County Community [Foundation is specifically directed to make no ...