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Smith v. Stover

OCTOBER 9, 1957.




Appeal from the Circuit Court of Stephenson county; the Hon. HARRY E. WHEAT, Judge, presiding. Reversed and remanded with instructions.


By the provisions of his will, Daniel C. Stover created a testamentary trust, designated three trustees to administer the same and fixed their compensation. Following his death on January 17, 1908, his will was duly admitted to probate by the Probate Court of Stephenson county. Its validity was contested and sustained as disclosed by a reference to Altemeier v. Harris, 403 Ill. 345, 347. On April 27, 1916, the surviving trustees invoked the jurisdiction of the Circuit Court of Stephenson county and filed therein their complaint asking the court to take jurisdiction of the trust and for other relief. A decree was thereafter entered granting the requested relief and the trust is being administered under the direction of that court. In 1923 the trustees filed their bill to construe certain provisions of the will and thereafter the decree of the chancellor was affirmed by the Supreme Court (Smith v. Thomas, 317 Ill. 150).

On June 4, 1928, the then trustees filed their petition reciting, among other things, that the will of Daniel C. Stover provided that each trustee should receive $1,200 per year for services as trustee and averring that the character of the services they were requested to render were unusual and extraordinary and praying that the reasonable and just value of their services be ascertained, fixed and ordered paid by the court. Upon a hearing, an order was entered directing that each trustee receive an annual salary of $4,000. This order was thereafter reversed by this court (Smith v. Stover, 262 Ill. App. 440).

Upon the mandate of this court being filed in the circuit court, a supplemental petition by the trustees was filed on January 23, 1932, which averred, among other things, that since the decision of this court, Mary S. Thomas and Porter C. Stover, children of Daniel C. Stover, deceased, and principal beneficiaries under said trust, together with other beneficiaries, have executed in writing their requests that the court allow to each trustee for their services as trustees the sum of $4,000 exclusive of general office expense, traveling expenses, and clerk hire, beginning May 1, 1928, and continuing until the further order of the court. Answers were thereafter filed, and upon a hearing an order was entered finding that after the administration and settlement of the estate of Daniel C. Stover and after the payment of all claims and cost of administration of his estate the net amount of the estate which came into the hands of the original trustees was $614,774.76 and that the property of the estate was of such kind and character that it required a comparatively small amount of time, labor and attention from the trustees; that due to the careful management and conservation of the assets of the estate the value thereof had increased to $2,250,432.28 as of January 1, 1932; that the supervision of these assets required more than four times as much time, labor and attention than was necessary to be devoted in the management of the investments of the original trust estate; that the trustees were then supervising the management of forty-eight farms and in order to keep in constant touch with these farms and other farms upon which loans had been made by the trustees, it was necessary for the trustees to make numerous trips to these farms located in Stephenson and adjoining counties in Illinois and in the states of South Dakota, North Dakota, Iowa, Nebraska, Minnesota and Montana. This order found that $715,268.86 of the assets of the estate were invested in bonds of seventy-four separate and distinct issues. It made further extensive findings and concluded by ordering that "for the reasons hereinbefore set forth, the compensation of each of said trustees be and the same is hereby increased to the sum of $4,000 per annum over and above general office expense, traveling expenses and clerk hire, beginning May 1, 1928, and continuing until the further order of this court." This order was not appealed from and has in no way been modified or altered.

On November 10, 1955, the trustees filed in the circuit court their sixty-five page verified report of receipts and expenditures from September 30, 1952, to September 30, 1955. This report disclosed that at the beginning of the period the trustees had on hand $17,075.36 and received from all sources during the three-year period the sum of $944,650.94, making a total of $961,726.30, and disbursed during the same period $916,243.96, leaving a balance of receipts above disbursements at the close of the period of $45,482.34, which was deposited in the State Bank of Freeport. In addition to this amount the report showed that the trustees had to their credit in the Northern Trust Company of Chicago $293.62 and in the First National Bank of Chicago $803.76, increasing the total amount on hand to $46,579.72. Accompanying this report was a notice directed to the surviving grandchildren and beneficiaries of the trust to the effect that this report would remain on file in the clerk's office, subject to inspection until December 12, 1955, at which time the trustees would move the court to confirm all matters referred to therein and enter an order approving said report.

Among the disbursements disclosed by the report of the trustees are (a) sixteen payments of $203 each, beginning with October 1952 and continuing each month through December 1953. These disbursements aggregate $3,248. There are also twenty payments of $204 each, beginning with January 1954 and continuing each month through August 1955, which aggregate $4,080. All of these disbursements were made to trustee Knowlton for secretarial services and total $7,238 for the thirty-six months covered by the report. (b) The payment to William Kness of $100 in 1952, designated on the report as Fahrney-Knipple farm management fee, also nine separate items of $100 each, paid in 1953, 1954 and 1955 to Kness; three of these are designated as Peugh-Weed farm management fee, three are designated as Fahrney-Knipple farm management fee and the other three are designated as Wolfensberger farm management fee. These ten payments aggregate $1,000. (c) The payment of $243.52, of which amount $206.77 was expended for moving bonds to Chicago for safekeeping, $12.27 paid for exchange and $24.88 paid to trustee Knowlton for use of car and inspecting farms. (d) The payment of $1,978.05 for safekeeping fees. (e) The payment to the State Bank of Freeport of $75 each month for rent until January 1, 1954. The payment to said bank of $93 each month for rent during 1954 and the further payment for rent each month during the year 1955 to said bank of $108. These items aggregate $3,213. (f) The payment of various itemized amounts for office stationery and supplies aggregating $704.32. (g) The payment of various itemized amounts aggregating $356.55 for telephone service and electricity. (h) The retention each month of various sums by the trustees for their services during the three-year period, which, with the amount withheld for taxes, aggregate $35,666.65.

To the approval of this report, Stover C. Winger, a grandson of Daniel C. Stover and a beneficiary, filed his verified objections. These objections were to the form of the report, to inaccurate arithmetical computations, to the several disbursements aggregating $14,823.44 by the trustees referred to in the foregoing paragraph and indicated by letters (a) to (g) inclusive and to the retention by the trustees of $35,666.65 for their services. The objections to the several items of expense aggregating $14,823.44 were that all of these items are normally included in the services, facilities and supervision furnished by trustees and for which they are compensated as trustees. The objections to the allowance of $35,666.65 to the trustees for their services were that the report does not describe the nature of the services or the time expended by the trustees and recites that the customary charge of banks, trust companies and qualified trustees for services of the nature performed by the trustees during this accounting period are substantially less than the fees taken by these trustees and if the condition of the trust and the services rendered by the trustees be taken into consideration their fees are exorbitant and grossly excessive.

Thereafter, by leave of court, the trustees filed an amendment to their report in which they stated that they did so in order to rectify certain typographical errors, explain some of the charges made, and to obviate certain of the objections filed by Stover C. Winger. In this amendment, the trustees stated in explanation of disbursement (a) that trustee Knowlton was paid $200 per month for services as secretary and that out of this amount he paid for stenographic services. As to disbursement (b), the amendment stated that William Kness of Lanark, Illinois, was paid $1,000 for assisting in the management of three Illinois farms, his charge being $100 per year for each farm. As to disbursement (c), the trustees stated that these sums were expended for collection charges made by banks and attorneys and for mileage charged in inspecting properties. As to disbursement (d), the trustees stated that this charge represents fees paid the First National Bank of Chicago for safekeeping negotiable assets. As to disbursement (e), the trustees stated that the same office rent had been paid by the trustees since 1916 and that no objection had ever been made to that item. As to disbursements (f) and (g), the trustees stated that the charges for trustees' stationery, office supplies, telephone service and electricity were the normal expenses of the trustees and had never before been objected to.

This amendment to the report of the trustees set out the findings and order entered in the administration of this trust on April 29, 1932, above referred to, and averred that said order has remained continuously in force and effect since the entry thereof; that M.B. Antrim, one of the present trustees, was specifically mentioned in said decree of April 29, 1932, and that said successor trustees, Kenneth H. Knowlton and Robert N. Seeley, whose appointments have been approved by the court, accepted the trusteeship of said estate in conjunction with said M.B. Antrim and have performed the duties and responsibilities of said trusteeship from the date of their several appointments up to and including the present time with the understanding that the compensation of each, over and above general office expense, traveling expense and clerk hire, would be $4,000 each per annum.

This amendment then continued: "These Successor Trustees further represent that the value of the assets of said Trust, as hereinabove set forth, has, in accordance with said audit for the year ending December 31, 1955, made by Albert T. Bacon & Co., increased to $2,317,454.09, over and above the expenses of said Trust, including said sum of $4,000 per annum paid to each of said Trustees, plus general office expense, traveling expense and clerk hire, and the amounts paid to the beneficiaries of the Trust under orders of this Court.

"These Successor Trustees, further answering said objections, represent to the Court that at the time of the entry of said decree by this Court on April 29, 1932, Ethel S. Altemeier was one of the Trustees of said trust estate and also performed the clerical work involved in the supervision and management of said trust estate, for which service she was paid, up to the time of her death, the sum of $200.00 per month as secretary of said Trustees in addition to said sum of $4,000.00 per annum paid to her as compensation for work and responsibilities involved in acting as one of said Trustees and that Kenneth H. Knowlton has, since he became one of the Successor Trustees of said estate, acted in the capacity of clerk or secretary to said Successor Trustees and has been paid the sum of $200.00 per month (less withholding and social security deductions) for services as such clerk or secretary in addition to the sum of $4,000.00 per annum, in accordance with said decree of April 29, 1932, and that he is entitled, under said decree, to such payments."

In their amendment to their report the trustees then insisted that by simply filing objections to their report the objector could not question the reasonableness of the amount retained by the trustees for their services or have determined any question about general office expense, traveling expense and clerk hire, inasmuch as these questions were determined in a direct proceeding brought by the trustees which culminated in the order of April 29, 1932. The trustees denied that any of the items objected to were customarily paid or assumed by trustees of trust estate and called attention to the fact that since the entry of the order on April 29, 1932, the amount received as compensation for services of all kinds and character by people in every walk of life has greatly increased and that living expenses have very materially increased, and the purchasing value of the dollar has decreased to approximately one-half of what it was worth in 1932 and insisted that these facts should be taken into consideration by this court in this case in determining whether the charges made by said successor trustees for their services as set forth in their report were proper charges. The trustees then denied that their work is largely of a routine character and denied that any substantial part of the management of the real estate and collection of income are done by others than the trustees.

The record further discloses that thereafter a motion was filed by the objector to strike portions of the trustees' answer to his objections. This motion was heard and denied and the trustees were then granted leave to file a supplemental amendment to their report, to which the objector filed a "reply." This "reply" reiterates the position of the objector that the trustees' fees are excessive, stating that they amounted to nearly 35 per cent of the net income of the estate and more than 16 per cent of the gross income during the reporting period. This "reply" renews objector's objection to the allowance of $14,823.44 for secretarial services, management fees, safekeeping fees, office rent, stationery, telephone and electricity.

The record further discloses that on May 4, 1956, the trustees filed a further instrument designated as an answer to new matters set up in the objector's "reply." This answer again sets forth a portion of the decree of April 29, 1932, and insists that the trustees' fees and additional payments by the trustees, as set forth in their report, are in accordance with the provisions of that decree. To this further answer of the trustees, the objector, on May 13, 1956, filed, by leave of court, a pleading designated, "Objector's reply and motion to strike the answer of successor trustees." In this pleading the objector denied that the payments for secretarial services and the other enumerated expenses of the trustees were just and proper charges and avers that they should not be paid in addition to trustees' fees, denies that the 1932 decree has anything to do with the compensation of the trustees for the current period, denies that the objector is estopped from questioning the propriety or reasonableness of the fees which the ...

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