Request By:
Hon. John C. Darsie
General Counsel
University of Kentucky
Lexington, Kentucky 40506-0032
Opinion
Opinion By: David L. Armstrong, Attorney General; Paul E. Reilender, Jr., Assistant Attorney General
You have written this office requesting an opinion on behalf of the Board of Trustees of the Mining and Minerals Trust Fund created pursuant to the provisions of KRS 164A.800. The provisions creating the trust fund were enacted by the 1982 General Assembly. Specifically, you ask:
"May the Board of Trustees of the Mining and Minerals Trust Fund advance, from monies currently in the Fund, the sums necessary to design a building on the University campus to house the school of mines and minerals? "
At the outset, it is assumed for purposes of this opinion that there are sufficient monies in the trust fund to pay for the architectural design plans contemplated in your letter, and that such funds are separate and apart from the 1984 General Assembly appropriations bill, Chapter 418 of the 1984 Kentucky Acts, the legality of which is currently in litigation.
It is the opinion of this office that monies from the trust fund can be expended for the stated purpose, and that it is not necessary to utilize the "advance" or borrowing theory expressed in your letter, as a way of making the expenditure.
The mining and minerals trust fund is under the control and direction of a board of trustees. KRS 164A.805(1). This board of trustees is empowered to make decisions regarding disbursal of the trust funds consistent with the provisions of KRS 164A.800 to 164A.840.
The use of the trust fund is set forth in KRS 164A.820(1) as follows:
"The fund shall be used to defray the costs of the Kentucky geological survey, mining and minerals research, mining and minerals related public service, and debt service to retire revenue bonds issued to defray the costs of constructing and equipping any mining and minerals building authorized by the general assembly for construction on the University of Kentucky campus. The eligible costs include research and public service expenditures in mining administrative costs for the Kentucky geological survey. Idle funds shall be invested as provided by law for funds of the University of Kentucky. Investment earnings shall be deposited in the fund. Indirect costs shall not be paid to the University of Kentucky from the fund but payment of direct costs is not prohibited."
In connection with the construction of a mines and minerals building on the University of Kentucky campus, KRS 164A.830 provides that the University of Kentucky may issue revenue bonds for such construction.
Based on the above-cited statutes, it is clear that the General Assembly intends that a mines and minerals building be constructed on the University of Kentucky campus. Therefore, the statute should be construed so as to give effect to the Legislature's intention. Cf. City of Vanceburg v. Plummer, 275 Ky. 713, 122 S.W.2d 772 (1939); Fiscal Court Com'rs of Jefferson County v. Jefferson County Judge Executive, Ky. App., 614 S.W.2d 954 (1981).
Obviously, from a practical standpoint, there must be architectural design plans before the building can be constructed. Also, there is a legal requirement that a building of the type contemplated in your letter be designed by a licensed architect(s). KRS 323.033. As such, an expenditure for architectural design plans is certainly a necessary, proper and legitimate expenditure of public monies.
One of two legal bases can be used to justify an expenditure from the trust fund by the Board of Trustees for design plans.
The first basis derives from the language of KRS 164A.820(1), which provides in pertinent part:
. . ."Indirect costs shall not be paid to the University of Kentucky from the fund but payment of direct costs is not prohibited. " (Emphasis added).
As was mentioned earlier, KRS 164A.830, gives the University of Kentucky authority to issue revenue bonds for the construction of a building to house the school of mines and minerals. As the bond issuer, the University of Kentucky will inevitably incur certain costs or expenses related directly to getting the building project launched. One of these direct costs may be the payment of architectural fees for design of the building. If a direct cost for architectural fees related to the building project is incurred by the University, the literal language of KRS 164A.820(1), provides that an expenditure can be made from the trust fund by the Board of Trustees to the University to reimburse the University for such costs.
The other legal basis which allows for an expenditure of trust fund monies by the Board of Trustees for architectural design fees comes from an application of trust law principles relating to the duties and powers of trustees.
In general terms, a trustee acts as a fiduciary, and must therefore act as a "prudent man" and in good faith and exercise due diligence in carrying out his responsibilities. KRS 386.800(3); Alexander v. Hicks, Ky., 488 S.W.2d 336 (1972). Also, generally speaking, a trustee has whatever powers as are given by the terms of the trust and whatever powers that are necessary to effectuate the objects of the trust. In Scott, Abridgement of the Law of Trusts, Sec. 186, p. 365 (1960), the powers of a trustee were described as follows:
"A trustee has such powers as are specifically conferred by the terms of the trust and such powers as are necessary or appropriate for the carrying out of the purposes of the trust and are not forbidden by the terms of the trust. The expression 'terms of the trust' is here used in the broad sense in which it is used in the Restatement of Trusts and throughout this book; it is not limited to express provisions of the trust instrument, but includes whatever may be gathered as to the intention of the settlor from the trust instrument as interpreted in the light of all the circumstances, and any other indication of the intention of the settlor which is admissible in evidence.
The extent of the powers conferred upon the trustee does not depend only on the language used by the settlor in creating the trust but may depend also upon the purposes for which the trust is created."
See also KRS 386.805(1) and KRS 386.810. Thus, based on the above, in determining what powers the trustee has, not only should one look to the express powers of the trustee set forth in the trust instrument, but one should also look to the intention of the settlor, and the ultimate purpose(s) for which the trust was created. Cf. Vansant v. Spillman, 193 Ky. 788, 237 S.W. 379 (1922); Collopy v. Dorman, 250 Ky. 513; 63 S.W.2d 610 (1933).
An application of the principles discussed above to the matter at hand would allow the Board of Trustees itself to make a direct expenditure of trust fund monies for the preparation of architectural design plans.
In reading the provisions of the Mining and Minerals Trust, KRS 164A.800 et seq., it becomes apparent that the creator of the trust, the General Assembly, intended, as one of the purposes of the trust fund, that a mining and minerals building be constructed on the University of Kentucky campus. Such intent can also be seen in: Chapter 398, Part II, F, Section 35 and Part V, F, section 8 ggg, of the 1982 Kentucky Acts; and Chapter 418, Part V, F, Section 7, of the 1984 Kentucky Acts. Although there is not a specific express power given to the Board of Trustees to make an expenditure of trust fund monies for the purpose contemplated, such a power exists by implication so as to carry out the intentions of the creator of the trust and to effectuate one of the objects and purposes of the Mining and Minerals Trust Fund. Further, a decision by the Board of Trustees to make an expenditure for architectural design plans would be consistent with the provisions and overall purpose of KRS 164A.800 to 164A.840. KRS 164A.805(3).
Based on the foregoing, it is the opinion of this office that an expenditure of Mining and Minerals Trust Fund monies by the Board of Trustees can be made for the purpose contemplated in your letter.