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In Re Estate of Phillips

MARCH 1, 1972.

IN RE ESTATE OF DON R. PHILLIPS, DECEASED — (EDNA S. PHILLIPS, PLAINTIFF-APPELLEE,

v.

EVAN MALLON, DEFENDANT-APPELLANT.)



APPEAL from the Circuit Court of McHenry County; the Hon. JAMES H. COONEY, Judge, presiding.

MR. JUSTICE THOMAS J. MORAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied March 30, 1972.

The defendant appeals from an order by which he was removed as administrator with will annexed of the estate of Don R. Phillips.

The issue on appeal is whether defendant had a conflict of interests with the estate sufficient to constitute "other good cause" for removal under the Probate Act, Ill. Rev. Stat. 1969, ch. 3, par. 276(a) (10).

There was an interdependent relationship of decedent's will to an inter vivos trust of which he was grantor, and a corporation founded by him and his wife. The residuary clause of the will left the remainder of the estate to the Don R. Phillips Trust. The corpus of that trust was composed primarily of the stock of Don R. Phillips, Inc.; its primary beneficiary, plaintiff, widow of the decedent. After decedent's death, defendant became one of the four successor trustees of the Don R. Phillips Trust. Defendant was also an officer of Don R. Phillips, Inc., and one of its five directors, as were two other trustees — Henry Levin and Charles F. Meyers. These men, among others, were contingent beneficiaries under the terms of the trust.

The executor named under the will declined to act and plaintiff, in a petition filed on August 18, 1969, nominated defendant as administrator with will annexed. Defendant was so appointed on August 25, 1969.

Subsequent to the death of Don R. Phillips, plaintiff was given $5,000 from corporate funds. The vouchers for this disbursement refer to the sum as a "widow's award," although during the course of administration, plaintiff and defendant differed as to whether the money was paid in lieu of a "widow's award" from estate assets. This disagreement appears to have been the immediate motivation for plaintiff's filing of the petition for removal which alleged mismanagement and conflict of interests on the part of defendant.

On July 27, 1971, the trial court removed defendant as administrator with will annexed, and entered an order which found, in parts relevant, that:

1) Although plaintiff had not waived her right to a widow's award from estate assets, defendant was not culpable for his failure to apply for such award;

2) Failure of defendant to file his accounting within the statutory limit was not sufficient cause for removal;

3) While payment of partial fees and specific legacies without prior court approval was a matter warranting criticism, it was not, in itself, sufficient basis for removal;

4) Defendant had a conflict of interests which prevented him from objectively carrying out his responsibilities because of his conflicting capacities as administrator with will annexed, a trustee of the Don R. Phillips Trust, and former director of Don R. Phillips, Inc.

On appeal defendant argues that there was no basis for his removal as legal representative, asserting that his failure to apply for a widow's award is not a subject of this appeal, that he has not "in other respects mismanaged the estate," and that his status as a contingent beneficiary of the Don R. Phillips Trust was not a sufficient conflict of interests to justify removal. While these were grounds alleged in plaintiff's petition for removal, the order of the trial court exonerated defendant of any culpability in these areas.

• 1 Defendant also contends that he does not have a conflict of interests which did or may interfere with the proper administration of the estate, arguing that the trial court's decision was baseless since he did not personally benefit from his administration and since his accounting was approved by the court. These factors, however, are not relevant to the finding that defendant had a conflict of interests resulting from his holding incompatible offices. The findings do not bring defendant's fidelity into question. The court, in approving the administrator's account, sanctioned only those acts reported by defendant. It could not evaluate any possible omissions arising from a conflict.

The findings of the trial court reveal a situation in which defendant, because of his concurrent fiduciary obligations to the estate, the corporation, and the trust, was rendered incapable of objectively determining his duty and acting in the best interest of the estate. In response to questions by plaintiff's attorney, ...


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