Zack v. Mook ( 2019 )

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as
precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
2019 IL App (3d) 190077-UOrder filed November 21, 2019
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
2019
BRENDA G. ZACK, Individually and as Co- ) Appeal from the Circuit Court
Trustee of the JUNE R. LACKEY AND ) of the 21st Judicial Circuit,
ROBERT C. LACKEY TRUSTS TRUST, ) Kankakee County, Illinois,
)
Plaintiff-Counterdefendant-Appellant, )
)
v. ) Appeal No. 3-19-0077
) Circuit No. 16-CH-105
SUZETTE R. MOOK, Individually and as Co- )
Trustee of the JUNE R. LACKEY AND )
ROBERT C. LACKEY TRUSTS TRUST, )
) Honorable Adrienne W. Albrecht,
Defendant-Counterplaintiff-Appellee. ) Judge, Presiding.
____________________________________________________________________________
PRESIDING JUSTICE SCHMIDT delivered the judgment of the court.
Justices Lytton and O’Brien concurred in the judgment.
ORDER
¶1 Held: The trial court did not (1) err in its interpretation of a trust provision that
vested upon the death of the settlor or (2) abuse its discretion in declining to
remove a co-trustee following breaches of her fiduciary duty that did not
result in either misappropriation of the trust’s funds or failure to fulfill her
duties as trustee.
¶2 Robert and June Lackey, both deceased, established trusts for the benefit of their children
and grandchildren. Only the interpretation of June’s trust is at issue here. Both trusts named
plaintiff, Brenda G. Zack, and defendant, Suzette R. Mook, as co-trustees. Both plaintiff and
defendant are Robert and June’s daughters. Robert and June’s other daughter, Aloha, predeceased
them. Robert and June named Aloha’s children, in particular Jeremy Travelstead, as beneficiaries
in her place. Robert died in April 2009. June followed in October 2009. Six years later, in
November 2015, Jeremy died. Plaintiff and defendant disagreed over the proper distribution of
Jeremy’s share following his death. Plaintiff argued that June intended the distributions to pass to
her descendants, such that Jeremy’s share should go to his children. Defendant, looking at the
language of the trust instrument, believed the correct interpretation required Jeremy’s share to pass
to his estate. Amid these events, defendant ran into conflicts with other beneficiaries. Defendant
took these matters to court; she received judgments in her favor. Plaintiff filed a motion seeking
defendant’s removal as co-trustee for alleged breaches of her fiduciary duties. Defendant filed an
interpleader seeking a court determination as to who was entitled to Jeremy’s share. The court
agreed with defendant’s interpretation of the provision. It did not find that defendant’s behavior
warranted her removal as co-trustee. We affirm.
¶3 I. FACTS
¶4 In 1997, Robert and June Lackey won the lottery. They chose to take a payout of their
winnings over a period of time that ultimately extended beyond their own lives. They set up living
trusts with plaintiff and defendant as co-trustees in order to facilitate the orderly handling of the
proceeds. Robert and June were the lifetime beneficiaries of the trusts. After their deaths, the
beneficiaries of the trust would be their children and grandchildren. The trusts called for the net
proceeds to be paid out to the named children and grandchildren upon the death of the last
surviving spouse.
-2-
¶5 First, Robert passed away in early 2009. In May 2009, June amended her trust to include
the following:
“ARTICLE VI: Upon the death of June R. Lackey, the Co-Trustees named
shall distribute any undistributed income and all of the remaining trust
principal into three equal shares:
A. One share thereof to Settlor’s daughter [plaintiff], or if she is not
living, to her descendants who are then living in equal shares, per stirpes.
B. One share thereof to Settlor’s daughter [defendant], or if she is
not living, to her descendants who are then living in equal shares, per
stirpes.
C. One share thereof to the children of Aloha M. Travelstead, the
decesased child of Settlor, said children being Edwin L. [sic] Travelstead,
Jr., Jeremy S. Travelstead, Shannon R. Oddera, and Chad A. Travelstead.
In the event any of those children, being my grandchildren, are deceased,
the share which he or she would have received shall pass to his or her
descendants per stirpes and not per capita.”
Robert’s trust called for similar distribution except it included a fourth daughter, Robin Johnson.
June intentionally excluded Robin from her trust. In October 2009, June passed away.
¶6 Jeremy passed away in 2015, six years after Robert and June but before all the proceeds of
June’s trust were distributed. Plaintiff and defendant argued over the correct distribution of
Jeremy’s share.
-3-
¶7 Plaintiff maintained the correct interpretation of the trust resulted in Jeremy’s share passing
to his children rather than to his estate. She contended this was June’s clear intention as stated in
the trust document that the funds remain within the lineal descendants of the Lackey family.
¶8 Defendant believed plaintiff was mistaken. She argued that Jeremy’s interest vested at the
time of June’s death. Six years elapsed between June’s and Jeremy’s passing. She noted that June’s
trust did not provide that, should a beneficiary die during the time of distribution, his share would
pass to his descendants. The only survivorship provision related to a beneficiary who passed before
June.
¶9 In addition to this disagreement, defendant conflicted with plaintiff and other beneficiaries.
One conflict resulted in a substantial judgment in defendant’s favor. Plaintiff filed this action to
remove defendant as trustee. Defendant, in turn, filed an interpleader asking the trial court to
determine the distribution of Jeremy’s share of the trust proceeds.
¶ 10 In September 2018, the court held a trial to address these claims. Defendant admitted that
she conflicted with the other beneficiaries. In 2011, she secured a court judgment against Robin,
who committed fraud by signing defendant’s name to a check. As a result of this judgment,
defendant refused to disburse the 2016 trust lottery income to said beneficiary. She withheld this
payment for 12 months before ultimately making the distribution. Defendant pursued legal action
against Shannon but the court in that case ruled that the matter was not ripe for litigation. Defendant
also quarreled with plaintiff over clearing out June’s home upon her death.
¶ 11 The trial court found defendant had, at times, delayed payments to beneficiaries and held
on to the funds in order to assert her own claims against them and induce certain behaviors.
Defendant had an “exaggerated” understanding of her power as a trustee. The court found that she
did not misappropriate any funds or fail to fulfill her responsibilities as a trustee. The trust
-4-
administration was nearly complete when this action came before the court. The court did not find
the circumstances gave rise to a breach sufficient to remove defendant as co-trustee. With regard
to Jeremy’s share of the trust, the court found that based on the language of the trust instrument,
his interest vested upon the date of June’s death. Therefore, Jeremy’s estate was entitled to his
beneficial interest in the trust.
¶ 12 II. ANALYSIS
¶ 13 Plaintiff contends the trial court erred in two ways. First, the trial court ignored June’s
intention when it found Jeremy’s interest should pass to his estate rather than to his children.
Second, the trial court abused its discretion in failing to remove defendant as co-trustee after
finding that she breached her fiduciary duty.
¶ 14 A. Trust Provision Interpretation
¶ 15 Illinois law presumes that the settlor of a trust created the instrument in conformity and
with knowledge of the law. Chicago Title & Trust Co. v. Vance, 175 Ill. App. 3d 600, 604 (1988).
“General rules of construction of written instruments apply to the construction of trust instruments,
whether they are contracts, deeds, or wills.” Storkan v. Ziska, 406 Ill. 259, 263 (1950). When a
court construes a trust, the challenge is to ascertain the settlor’s intent and give it effect. Harris
Trust & Savings Bank v. Beach, 118 Ill. 2d 1, 4 (1987). “When the language of the document is
clear and unambiguous, a court should not modify or create new terms.” Ruby v. Ruby, 2012 IL
App (1st) 103210, ¶ 19. “However, where the language of a trust is ambiguous and the settlor’s
intent cannot be determined, a trial court may rely on extrinsic evidence to aid construction.” Id.Language is ambiguous when it is reasonably susceptible to more than one meaning. Thompson v.
Gordon, 241 Ill. 2d 428, 441 (2011). Both parties agree that we, as the reviewing court, conduct
de novo review of the trial court’s conclusions of law in interpreting the trust document. Eychaner
-5-
v. Gross, 202 Ill. 2d 228, 252 (2002). De novo review requires us to perform the same analysis the
trial judge would perform. In re Estate of Agin, 2016 IL App (1st) 152362, ¶ 17.
¶ 16 Both parties attempt to distinguish Agin in their favor. In Agin, the decedent had an interest
in a land trust created by his settlor-uncle who predeceased him. Id. ¶ 5. The trust language at issue
stated “[i]n the event of death of said [settlor-uncle] prior to termination of this trust or prior to
other disposition of his interest hereunder, then all interest of said [settlor-uncle] shall immediately
pass and vest, as follows, per stirpes.” Id. ¶ 7. The decedent’s wife believed the interest should
pass to the decedent’s estate, as the decedent’s interest vested upon his settlor-uncle’s death. Id. ¶
5. The decedent’s children believed the interest should pass to them, focusing on the per stirpes
language to indicate the settlor-uncle’s intent to keep the interest with the decedent’s descendants.
Id. The probate court declared that, upon the settlor-uncle’s death, the decedent’s interest vested;
the interest belonged to the decedent’s estate. Id. ¶ 9. The reviewing court stated:
“[t]he disagreement over the language of the trust appears to center
on the timing of the vesting of decedent’s interest in the trust. [The children]
argue that we must look to the status of the beneficiaries at the time that the
property held in the trust was sold, while the probate court looked to the
status of the beneficiaries at the time of [settlor-uncle’s] death. We agree
with the probate court’s interpretation.” Id. ¶ 22.
¶ 17 The children’s focus on the phrase “per stirpes” was misplaced. The reviewing court
explained “the term designates the method of determining how the estate will be divided among
those entitled to take—it has no application in determining who those entitled to share in the estate
are.” Id. ¶ 24.
-6-
¶ 18 We agree with the trial court here and the reviewing court in Agin. The trust language here
is unambiguous. It clearly states that those entitled to take were to be determined at the time of
June’s death. Jeremy’s interest vested upon June’s death. His estate is entitled to receive the
proceeds of the trust. “A remainder interest is vested if there is a present capacity to take effect in
possession if the life tenant dies.” Northern Trust Co. v. North, 73 Ill. App. 2d 469, 486 (1966).
Jeremy received the benefit of the trust for six years following June’s death. His interest was fully
alienable, descendible, and divisible. Jeremy had six years’ time to plan for the disposition of his
interest in the event of his death. Plaintiff’s feelings on where she believes the trust proceeds go
are irrelevant here. The court cannot contradict the plain meaning of the provision. The trial court
did not err in its interpretation of the trust as a matter of law.
¶ 19 B. Whether the Court Erred in Declining to Remove Defendant as Co-Trustee
¶ 20 A trial court’s finding that a trustee has exercised the requisite degree of care will not be
overturned unless it is against the manifest weight of the evidence. Durdle v. Durdle, 141 Ill. App.
3d 12, 15 (1986). Absent an abuse of discretion, we will not overturn the trial court’s decision
whether to remove a trustee. Id.¶ 21 Plaintiff cites In the Matter of the Estate of Hawley, 183 Ill. App. 3d 107 (1989), to support
her contention that the trial court abused its discretion in failing to remove defendant as co-trustee
despite its findings that she breached her fiduciary duties. In Hawley, the decedent named his
nephew, Richard, to serve as executor of his testamentary trust. Id. at 108. The trust included real
property, which Richard directed to be sold at auction. Id. Richard and his son purchased the land,
which Richard then rented out to his son. Id. The decedent’s wife brought the underlying action to
have Richard removed. Id. The trial court entered an order removing Richard as trustee after
finding he did not act in the best interest of the trust income beneficiary by buying the real property
-7-
and renting it to his son. Id. The reviewing court noted the well-settled principle that a trustee may
not engage in self-dealing with the trust or “place h[er]self in a position where [her] interests
conflict with those of the trust beneficiaries.” Id. at 109. The court found that Richard had placed
himself in a position where his responsibility to the income beneficiary could be compromised. Id.
at 110. The lower court did not abuse its discretion in removing Richard as the trustee. Id.¶ 22 Plaintiff also cites Durdle, in which a beneficiary contended the trustee was in conflict for
failing to report certain income and fees. Durdle, 141 Ill. App 3d at 14. After an evidentiary
hearing, the circuit court declined to remove the trustee. Id. at 15. Although the reviewing court
reversed the lower court’s findings that the trustee’s account was proper, it did not find that the
circuit court abused its discretion in declining to remove the trustee. Id.¶ 23 These cases demonstrate that the abuse of discretion standard of review is highly
deferential to the lower court’s decision. “An abuse of discretion occurs where no reasonable
person would agree with the position adopted by the trial court.” Schwartz v. Cortelloni, 177 Ill.
2d 166, 176 (1997). “[A] trial court cannot be said to have abused its discretion if reasonable
persons could differ as to its decision.” In re Adoption of D., 317 Ill. App. 3d 155, 160 (2000).
Additionally, removal is an extreme remedy; a court should remove a trustee only if the trustee
endangers the trust and removal is necessary to preserve it. Durdle, 141 Ill. App. 3d at 15.
¶ 24 Here, the court did not abuse its discretion in declining to remove defendant as trustee.
Defendant never misappropriated the trust funds or failed to fulfill her responsibilities to the trust.
The only instance of her refusing to make a disbursement was regarding the claim currently before
the court. Ultimately, defendant’s interpretation of the trust language was correct. Her withholding
was justified. There is no evidence of ongoing conflicts between defendant and any of the
beneficiaries. Any legal matters have been put to rest. We cannot say that no reasonable person
-8-
would agree with the trial court’s decision to keep defendant as a co-trustee. The court did not
abuse its discretion in making that decision.
¶ 25 III. CONCLUSION
¶ 26 For the foregoing reasons, we affirm the judgment of the circuit court of Kankakee County.
¶ 27 Affirmed.
-9-