Dunn v. Patterson ( 2009 )

No. 3--07--0881
(Consolidated with No. 3--08--0350)
Filed November 18, 2009
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2009
CHARLES W. DUNN and CHARLOTTE ) Appeal from the Circuit Court
E. DUNN, ) of the 12th Judicial Circuit
) Will County, Illinois
Plaintiffs-Appellees, )
)
v. ) No. 07--MR--399
)
LAWRENCE F. PATTERSON, )
) Honorable Barbara Petrungaro,
Defendant-Appellant. ) Judge, Presiding.
JUSTICE SCHMIDT delivered the opinion of the court:
Plaintiffs, Charles and Charlotte Dunn, brought a
declaratory judgment action against defendant, Lawrence
Patterson, the attorney who prepared an estate plan for them.
The circuit court of Will County entered judgment on the
pleadings, finding, as a matter of law, that provisions in
certain estate planning documents prepared by defendant were
contrary to public policy and void. The trial court thereafter
awarded attorney fees constituting a Supreme Court Rule 137 (155
Ill. 2d R. 137) sanction against defendant in the amount of
$5,393.75.
Patterson appeals, arguing: (1) the trial court erred in
finding the provisions requiring his consent, or alternatively,
an order of the court to amend or revoke the estate planning
documents to be contrary to public policy; and (2) the trial
court abused its discretion by awarding Rule 137 sanctions. We
reverse and remand.
BACKGROUND
Charles and Charlotte Dunn hired defendant, attorney
Lawrence Patterson, to, inter alia, prepare certain estate
planning documents for them. Patterson prepared the following
documents, all dated June 12, 2006: (1) Charles W. Dunn and
Charlotte E. Dunn joint declaration of trust; (2) living will
declaration of Charles W. Dunn; (3) living will declaration of
Charlotte E. Dunn; (4) limited durable power of attorney of
Charles W. Dunn; and (5) limited durable power of attorney of
Charlotte E. Dunn.
Each of these documents contained a qualified amendment and
revocation provision, which provided that any amendment or
revocation of the documents may only be executed with the written
consent of Patterson or by order of the court. The twelfth
paragraph of the "Joint Declaration of Trust (Conditionally
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Amendable and Revocable)" provides:
"QUALIFIED RIGHT TO AMEND AND/OR REVOKE. Charles W.
Dunn and Charlotte D. Dunn acting jointly or the
survivor of them, may, at any time or times, amend or
revoke this Joint Declaration of Trust, in whole or in
part, by instrument in writing (other than a Will)
delivered to the acting Trustee; subject however to
the receipt of the written consent of Attorney LAWRENCE
F. PATTERSON, whose signature on said written consent
form is Medallion Certified (whether Attorney Lawrence
F. Patterson is then acting as the Attorney at Law for
either one or both of us, or has been discharged as
said Attorney for either one or both of us, orally or
in writing) or, in the alternative, receipt of the
written consent of a Court having jurisdiction, upon
Petition filed by said Attorney or by any other
interested person." (Emphasis in original.)
Both Charles and Charlotte Dunn's limited durable power of
attorney (health care) and living wills contain the following
provision:
"Qualified Amendment and Revocation. SECTION 1. Any
provisions in the Laws of the State of Illinois or
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in this instrument to the contrary notwithstanding,
I hereby reserve the power to amend or revoke this
Power of Attorney at any time and in any manner
while I have the legal capacity to do so, subject
however, to my receipt of the written consent to
said amendment or revocation of Attorney LAWRENCE
F. PATTERSON, whose signature on said written consent
form is Medallion Certified (whether Attorney LAWRENCE
F. PATTERSON is then acting as the Attorney at Law for
either one or both of us, or has been discharged as
said Attorney for either one or both of us, orally or
in writing) or, in the alternative, without [sic] the
consent of a Court having jurisdiction, upon Petition
filed by said attorney or by any other interested
person." (Emphasis in original.)
Each power of attorney and living will is signed by Charles
or Charlotte Dunn, and each page containing the aforementioned
provision is initialed by Charles or Charlotte Dunn. According
to Patterson, the "qualified amendment and revocation provision"
is something that he routinely inserts in his clients' estate
planning documents to prevent elder abuse.
On November 14, 2006, Patterson received a letter from
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attorney Timothy J. McJoynt, informing Patterson that he had been
retained by the Dunns to modify the estate plan that Patterson
had previously drafted. McJoynt explained that the Dunns no
longer wanted their ability to revoke or amend their estate
planning documents to be contingent on Patterson's approval and,
therefore, wished to remove his name from the documents and make
other minor amendments.
Patterson responded by letter, stating it was necessary for
the Dunns to personally meet with him to discuss this matter.
Patterson's letter, in pertinent part, provided as follows:
"For my clients to make any changes in their plan
it is necessary for both of them to discuss those
changes with me and for me to then determine whether
the changes are consistent with the interests and
protections embodied in the original plan."
He continued by stating that if his clients are unwilling to meet
with him, their only other alternative was to petition the court
for leave to amend.
On April 27, 2007, the Dunns brought suit seeking a
declaratory judgment against Patterson. The Dunns requested the
court to declare, among other things, that they had an absolute
right to revoke and amend the estate planning documents and that
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Rule 1.2(a) of the Rules of Professional Conduct (134 Ill. 2d R.
1.2(a)) required Patterson to abide by their directions.
Patterson was named as a defendant.
In Patterson's answer to the action, he admitted some basic
factual allegations, but responded that he had no knowledge
sufficient to form a belief as to the truth or falsity of a
number of allegations in the plaintiffs' complaint, including
that plaintiffs desired to revoke various estate planning
documents and powers of attorney. In addition to his answer,
Patterson filed an affirmative defense, alleging that the estate
planning documents contained a clause prohibiting the plaintiffs
from amending or revoking the documents without the written
consent of Patterson, whether or not he has been discharged as
the plaintiffs' attorney, or, alternatively, upon order of the
court.
The answer also stated that Patterson met personally with
the Dunns to review the final draft of all the documents in
issue, including the amendment and revocation provisions.
Exhibit No. 7 to the answer is a letter dated July 14, 2006, from
Patterson to the plaintiffs enclosing the original executed
estate plan documents. The letter states, in part, that the
joint declaration of trust, powers of attorney for healthcare,
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and living will are only "conditionally amendable or revocable in
order to ensure that your express intentions will not be
unwittingly changed if you enter into a deteriorating mental
state which compromises your ability to fully understand the
consequences of your decisions at that time."
Defendant alleges that he asked plaintiffs to personally
confirm that he was terminated with respect to estate planning
and trust funding. Exhibit No. 11 is the letter dated February
6, 2007, to the Dunns from Patterson requesting that they execute
a formal notice of termination. No response was received from
plaintiffs.
In another attempt to gauge whether he should consent to the
change in the documents, Patterson served a notice of discovery
deposition for Charles and Charlotte Dunn upon McJoynt and a
notice to produce on the Dunns. When Patterson received no
response to his discovery requests, he filed a motion for
discovery sanctions pursuant to Supreme Court Rule 219 (210 Ill.
2d R. 219).
The plaintiffs filed a motion for judgment on the pleadings,
alleging that no genuine issue of material fact existed in the
cause. In their motion, the plaintiffs argued that the cause
presented a straightforward issue of law: "is an attorney
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obligated to follow the direction of his or her client, even if
the attorney deems the clients' actions unwise, ill-conceived, or
imprudent?" Plaintiffs argued that pursuant to Rule 1.2(a) of
the Rules of Professional Conduct, an attorney is obligated to
abide by his client's decision so long as the direction given by
the client is not contrary to law, unethical, or otherwise in
violation of an ethical or legal obligation. Because plaintiffs
did not request that Patterson act in a way that was unethical,
contrary to law, or otherwise improper, plaintiffs argued that
judgment on the pleadings was proper.
In his response to the motion for judgment on the pleadings,
Patterson argued that issues of fact existed as to whether the
Dunns were and/or are the clients of attorney Timothy J. McJoynt.
Patterson denied that "an attorney does not have the right to
disregard a client's express wishes and instead substitute his or
her own judgment and wisdom as to the client's personal affairs."
Patterson continued, citing text of Rules 1.14(a) and (b) of
the Rules of Professional Conduct (134 Ill. 2d Rs. 1.14(a), (b))
to be in support of his position, due to his alleged belief that
Charlotte Dunn may been impaired in her ability to make
adequately considered decisions. Thus, Patterson claimed to
invoke his responsibility under Rule 1.14 to maintain a normal
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lawyer-client relationship and take protective action because he
reasonably believed that Charlotte could not adequately act in
her own interest.
When the parties appeared for oral argument, Patterson again
expressed that he had no evidence that McJoynt or attorney Frank
Andreano represented plaintiffs. He stated that he needed
further verification because the pleadings were unverified.
McJoynt provided no verification other than the letter he sent,
and the plaintiffs failed to respond to his letter requesting
further verification or his request for discovery depositions.
The discovery sanctions motion was struck without prejudice
because a Supreme Court Rule 201(k) (210 Ill. 2d R. 201(k))
conference had not been held. The court granted the plaintiffs'
motion for judgment on the pleadings and held that the qualified
revocation or amendment provision requiring Patterson's approval
was contrary to public policy because it ignored the provisions
of Supreme Court Rule of Professional Conduct 1.2.
The plaintiffs petitioned the court for assessment of fees
under Illinois Supreme Court Rule 137. Plaintiffs argued that a
reasonable attorney would not have adopted and forwarded the
arguments presented by defendant in the instant case. Said
motion was granted, and plaintiffs were awarded attorney fees and
9
costs in the amount of $5,393.75. Patterson appeals.
ANALYSIS
I. Qualified Amendment and Revocation Provision
Patterson first argues that the trial court erred in
granting judgment on the pleadings and finding the revocation and
amendment provisions in the estate plan documents to be void as
contrary to public policy. He contends that the provisions
requiring the consent of the attorney who prepared the documents,
or, in the alternative, an order from the court are valid and
proper means for the settlors to limit their own future ability
to amend or revoke the trust documents.
The standard of review of a judgment on the pleadings is de
novo. Gillen v. State Farm Mutual Automobile Insurance Co., 349
Ill. App. 3d 779, 782, 812 N.E.2d 595, 598 (2004). Further, an
appellate court reviews a trial court's construction of a trust
instrument de novo. Peck v. Froehlich, 367 Ill. App. 3d 225,
227-28, 853 N.E.2d 927, 931 (2006).
We note at the outset that the plaintiffs challenge
Patterson's standing on review. Plaintiffs do not dispute
Patterson's standing to appeal the imposition of the Rule 137
sanctions. However, plaintiffs assert that Patterson has no
standing to appeal the trial court's holding that the amendment
10
and revocation provisions were void.
We find this contention to be inconsistent with the fact
that plaintiffs named Patterson as the defendant in this suit and
obtained a judgment against him. For a party to have standing,
the party must suffer some injury in fact to a legally cognizable
interest and must have sustained, or be in danger of immediately
sustaining, a direct injury. Department of Transportation v.
Anderson, 384 Ill. App. 3d 309, 313-14, 892 N.E.2d 116, 121
(2008). The entry of a judgment itself constitutes legally
cognizable damages. Schal Bovis, Inc. v. Casualty Insurance Co.,
314 Ill. App. 3d 562, 568, 732 N.E.2d 1082, 1088 (1999).
Furthermore, at least at the outset, Patterson is identified as
plaintiffs' fiduciary in the documents at issue. Thus, Patterson
has standing in this appeal to seek both reversal of the judgment
and reversal of the imposition of sanctions.
Patterson first argues that the consent provisions in the
estate planning documents were merely third-party consent
provisions, which are completely legal in Illinois. The
Restatement (Third) of Trusts recognizes that consent by a third
party to amendment or revocation is a proper and valid measure.
Section 63(1) provides, "the settlor of an inter vivos trust has
power to revoke or modify the trust to the extent that the terms
11
of the trust *** so provide." Restatement (Third) of Trusts
§63(1) at 442 (2003), Comment j on section 63(3), entitled,
"Power to Revoke or Modify with Another's Consent" states, "If
the settlor reserves a power to revoke or modify the trust with
the consent of [another], such as the trustee, [a beneficiary],
or a third party, the power normally cannot be exercised without
that consent." Restatement (Third) of Trusts §63(3), Comment j,
at 448 (2003). The comment explains that a court may intervene
if the person whose concurrence is required improperly withholds
or grants the consent, such as where the person acts in bad faith
or from an improper motive. Restatement (Third) of Trusts §63
(2003).
Plaintiffs stipulate that such limitations are permissible
and appropriate. However, plaintiffs contend that such
limitations are not permissible when the consent required is that
of the drafting attorney, whether or not said attorney is still
representing the parties. This is so, say the plaintiffs,
because that attorney's behavior is held to different standards
than those that apply to a lay third party, that is, the Rules of
Professional Conduct.
Plaintiffs argue that public policy requires lawyers. under
Rule 1.2, to follow the direction of their clients, so long as
12
the client is not asking the attorney to do anything unethical or
illegal. This is due to the fact that clients should be able to
have confidence their lawyer will handle their important, and
often very personal, legal matters pursuant to the clients'
direction. Thus, plaintiffs contend that Patterson's position,
as the plaintiffs' attorney, required him to provide independent
professional judgment. Plaintiffs contend that an attorney's
duty is to identify the person(s) who will act on behalf of
elderly clients if they become disabled, and it is patently
improper for an attorney to draft estate planning documents that
places himself or herself in such a role. See Sherman v.
Klopfer, 32 Ill. App. 3d 519, 336 N.E.2d 219 (1975) (attorney who
drafted various documents for aunt breached attorney-client
relationship by failing to give aunt sufficient control of the
business so as to permit her to sell its assets and refusing to
consent to sale of the business).
Sherman, however, can be distinguished from the case at bar
in two important ways. In Sherman, the court found that the
attorney failed to adequately inform his client of information
necessary for her to understand her ownership interest in the
business. Moreover, the attorney in Sherman was a partner with
the client in the business and, therefore, stood to benefit from
13
the dealing. Sherman, 32 Ill. App. 3d at 534-35. In the instant
case, there is no evidence that Patterson misled the plaintiffs
in any way. He testified that he informed them of the amendment
and revocation clause and that they both signed and initialed
next to the provision in the documents. Additionally, there is
no evidence that Patterson stood to personally benefit from
refusing to consent to the amendment of the plaintiffs' estate
planning documents.
Given that third-party consent is a recognized method of
protecting settlors and principals from making changes based on
mental incompetency or undue influence, Patterson argues that an
attorney may appropriately serve as the third party who is to
give such consent. Patterson contends that such a designation is
actually consistent with the broad fiduciary duties an attorney
owes his or her client, and with the attorney-client
relationship, which is based on duties of loyalty and trust. We
agree.
Out here in the cornfields of Illinois and, we suspect,
sometimes in the large metropolitan areas of Illinois, one's
lawyer is often his or her most trusted friend and advisor with
respect to major life decisions. Where, as here, the lawyer is
given no financial stake in an estate by virtue of his capacity
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as a fiduciary, we see no reason why the family lawyer cannot act
in such capacity simply because he is drafting a trust document.
Plaintiffs argue that a lawyer should not be able to limit how
his clients spend their money or distribute their assets as long
as it is not illegal. First of all, these documents do not give
the fiduciary such broad powers. Secondly, every time a lawyer
drafts an irrevocable trust for a client, he is limiting his
client's future decisions regarding the distribution of his or
her estate. However, this is done with the client's permission.
Patterson directs us to the single focus of the Rules of
Professional Conduct: the client's best interests. Patterson
argues that the amendment and revocation provisions are not
inconsistent with the right of a client to discharge his or her
attorney. He states that even assuming he was discharged as
plaintiffs' attorney, his only role at that point was to then
consider whether the trust documents and powers of attorney
should be amended and to give or deny such consent on a good-
faith basis. Thus, the ability of the plaintiffs to discharge
Patterson as their attorney was not limited. Again, we agree.
The revocation provisions executed by the plaintiffs are not
inconsistent with the duty of an attorney to follow his clients'
instructions under Rule 1.2 of the Rules of Professional Conduct.
15
Patterson followed the explicit instructions of his clients as
expressed by them in the estate planning documents. There is no
allegation that the plaintiffs did not execute or comprehend the
estate plan documents. Alternatively, if we assume Patterson was
terminated as their attorney, he was not acting as their attorney
when he declined to consent to the revocation of the trust and,
therefore, did not violate his duty to follow his clients' wishes
when he declined to consent.
Moreover, Patterson contends that he sought to meet with the
plaintiffs before agreeing to grant or deny consent, but that
through their new attorney, they refused to meet with him.
Attorney McJoynt represented in his letter to Patterson that the
plaintiffs were competent. However, a statement by a third party
alone is not enough for Patterson, whether or not he was the
plaintiffs' attorney, to fulfill his duties to act in their best
interest before offering his consent. Thus, a meeting with the
plaintiffs, at a minimum, was necessary so that Patterson could
assess competency and any possible undue influence, in order to
make a good-faith determination as to whether the amendment was
in the best interest of the plaintiffs.
Furthermore, there is no evidence or even suggestion that
Patterson personally benefitted from or had any financial
16
interest in the estate plan. Patterson testified that he did not
have any relationship with possible beneficiaries of the trust
and, therefore, unlike a family member, had no reason to favor or
disfavor certain changes based on who, other than the plaintiffs,
may benefit from them.
In conclusion, we do not believe that the trust documents
authored by Patterson violate public policy or the Rules of
Professional Conduct. The duty of a fiduciary is consistent with
the role of attorney and counselor and represents its highest
ideals. Plaintiffs point out that Rule 1.2 requires lawyers to
follow the directions of their clients, so long as the client is
not asking the attorney to do anything unethical or illegal. The
trust documents required Patterson to use the utmost good faith
in either granting or withholding consent to a change in the
documents. If he refused to consent, plaintiffs could seek
authority for a change from a court. In fact, plaintiffs could
have gone directly to a court without ever seeking Patterson's
consent. If Patterson unreasonably withheld his consent to a
change, there is an obvious remedy for that breach of fiduciary
duty. We know of no cases that would hold that the Rules of
Professional Conduct require an attorney to follow self-
destructive directions of an incompetent client. Patterson
17
agreed to act as fiduciary for the plaintiffs and to try to
ensure that as they aged, they did not unwittingly make
detrimental changes to their trust documents. At least at this
stage, there is no reason to believe that he has done anything
but keep that promise. Through their new attorneys, plaintiffs
have refused to even meet with Patterson.
We note that Patterson has put himself in a tough and
expensive position here. If he had agreed to the requested
change without first reasonably ascertaining that the plaintiffs
were competent to make the change and that they were not subject
to undue influence, and had the plaintiffs then been duped out of
their assets, Patterson might very well have been called to
answer as to why he consented to the change without having
ascertained the plaintiffs' competency and the absence of undue
influence. We routinely see cases in the court where people take
advantage of the elderly, take them to see a lawyer of their
choice with the end result being that the elderly person's assets
are stolen by the one asserting undue influence. The sad fact is
that the elderly are particularly susceptible to being taken
advantage of and, clearly, the provision in question was tailored
to try to reduce that risk for the plaintiffs. The documents
provided that if the plaintiffs did not want to seek the consent
18
of Patterson, they could have asked the court to authorize the
change. However, the court did not take any evidence as to
whether the change ought to be granted vis-a-vis the plaintiffs'
welfare. Rather, it simply held that the provision requiring
Patterson's consent was against public policy, a violation of the
Rules of Professional Conduct and therefore void. For the
reasons set forth above, we find that it is not void. This
ruling by the trial court is reversed and the matter is remanded
for further proceedings.
II. Sanctions
Patterson next argues that the Supreme Court Rule 137
sanctions award should be reversed. A ruling on Rule 137
sanctions should not be overturned unless the trial court has
abused its discretion. Dismuke v. Rand Cook Auto Sales, Inc.,
378 Ill. App. 3d 214, 217, 882 N.E.2d 607, 610 (2007).
Supreme Court Rule 137 provides in part:
"The signature of an attorney or party
constitutes a certificate by him that he
has read the pleading, motion or other
paper; that to the best of his knowledge,
information, and belief formed after
reasonable inquiry it is well grounded in
19
fact and is warranted by existing law or
a good-faith argument for the extension,
modification, or reversal of existing law,
and that it is not interposed for any
improper purpose, such as to harass or to
cause unnecessary delay or needless increase
in the cost of litigation." 155 Ill. 2d
R. 137.
The purpose of this rule is to prevent parties from abusing
the judicial process with actions unsupported by fact or law, not
to punish litigants and their attorneys merely because they were
unsuccessful in the litigation. Dismuke v. Rand Cook Auto Sales,
Inc., 378 Ill. App. 3d at 217. In a determination of whether to
impose sanctions, it is not sufficient that the party honestly
believed his or her case was well grounded in fact or law.
Whitmer v. Munson, 335 Ill. App. 3d 501, 514, 781 N.E.2d 618, 628
(2002). Rather, an objective standard is to be employed in
evaluating what was reasonable under the circumstances. Baker v.
Daniel S. Berger, Ltd., 323 Ill. App. 3d 956, 963, 753 N.E.2d
463, 469 (2001).
In the case at bar, Patterson argues that he declined to
consent to the amendment in good faith, given that he had no
20
information regarding whether the proposed amendments were in the
plaintiffs' best interest. Further, Patterson states that he had
no personal interest or ability to benefit from the estate.
Plaintiffs contend that Patterson's conduct simply did not
comport with the actions of a reasonable and prudent attorney.
At the outset, plaintiffs argue that it is oppressive and
unreasonable to suggest that clients need to verify anything with
their former attorney. To suggest that an attorney needs to
prove he or she "really" represents a client is ludicrous, and if
every attorney took such a position the court system would grind
to a halt. Finally, plaintiffs argue that a reasonable and
prudent attorney would not have opposed a request to consent to
an amendment or fought this in the courtroom. We disagree.
There was nothing unreasonable about Patterson's conduct in
this case. As explained above, we find that the qualified
amendment and revocation clause at issue did not violate public
policy. Further, Patterson attempted to visit with the
plaintiffs in order to determine whether there were any
competence/undue influence issues involved. A reasonable and
prudent fiduciary, whether a lay person or attorney, would not
consent to an amendment to these trust documents without first
determining what was in the plaintiffs' best interest. A letter
21
from an attorney alone is not sufficient evidence for a fiduciary
to make a good-faith decision regarding competency and undue
influence. To so hold would render meaningless any attempts to
protect oneself from the possibility of future harm resulting
from diminished mental faculties.
In plain English, it is undisputed that Patterson consulted
with the plaintiffs regarding several estate planning documents.
After consulting with Patterson, the plaintiffs recognized that
with their advancing age, there was a probability of diminished
mental faculties and therefore susceptibly to undue influence or
unsound decisions. They were apparently happy with the documents
when they were written and on advice of counsel agreed to
provisions which indicated that before they changed the
documents, they had to seek the consent of either: (a) their
fiduciary (Patterson); or (b) a court of competent jurisdiction.
Patterson agreed to act as the fiduciary and, in so doing, he
promised to use the utmost good faith with respect to granting or
withholding such consent. This is clearly implicit in the
documents. We see nothing in Patterson's conduct other than an
attempt by a lawyer, at no small expense to himself, to keep a
promise he made to either his clients or former clients. We in
no way mean or intend to impugn the integrity of plaintiffs' new
22
attorneys. However, that being said, it was not unreasonable for
Patterson to withhold his consent when the only thing he had was
a lawyer's letter stating the plaintiffs want to make this
change. Every attempt Patterson made to consult with the
plaintiffs personally was thwarted. We do not find Patterson's
conduct sanctionable. Rather, we find it admirable and
consistent with the highest ideals of the bar. In light of the
obvious expense to Patterson, we will leave it to other estate
planners whether they wish to use this particular method of
estate planning.
For the reasons set forth above, we find that the trial
court abused its discretion in awarding sanctions against
Patterson. That award of sanctions is reversed.
CONCLUSION
For the foregoing reasons the judgment of the circuit court
of Will County is reversed and this matter is remanded for
further proceedings consistent with this opinion.
Reversed and remanded.
O'BRIEN, P.J., and CARTER, J., concur.
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