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In Re Estate of Brown





APPEAL from the Circuit Court of Cook County; the Hon. JOHN J. HOGAN, Judge, presiding.


This appeal is taken from the circuit court's award of executor's and attorneys' fees for services rendered in the probate of Corra E. Brown's estate. Mrs. Brown's will named the Northern Trust Company (hereinafter Northern Trust) as sole executor, and the Northern Trust retained the law firm of Keck, Cushman, Mahin and Cate (hereinafter attorneys) to act as its legal counsel in the settlement of the Brown estate. In its final account Northern Trust stated that the executor's commission and the attorneys' fees amounted to $33,000 and $33,800 respectively. Addison L. Elliott and Richard A. Elliott (hereinafter objectors), beneficiaries under Corra Brown's will, filed objections to this account, and Addison Elliott also petitioned the court to remove the Northern Trust as executor, claiming that Northern Trust had breached its fiduciary duty to the beneficiaries. After an evidentiary hearing, the trial court held that the requested fees were reasonable, and it dismissed the petition to remove the executor. The objectors appeal, reasserting their contentions: (1) that the fees awarded to the executor and to its attorneys were excessive; and (2) that the Northern Trust breached its fiduciary duty to Mrs. Brown's heirs.

Corra Brown died on March 23, 1970. The value of her gross estate was ascertained to be $1,614,255. Her will was admitted to probate on May 19, 1970, and letters testamentary were issued to the Northern Trust on that date.

On October 17, 1973, the Northern Trust filed its first account showing partial payment of its executor's fee and the fees of its attorneys, each in the amount of $22,000. Both objectors consented to the approval of this account. The second account was filed on June 21, 1974, and once again both objectors gave their consent. However, it was alleged that the first and second accounts were submitted directly to the beneficiaries without notice to their attorney of record.

On November 17, 1975, the attorney for the objectors sent a letter to Northern Trust in which he asked the executor to itemize the services of its attorneys. On November 26 this attorney received a written notification that Northern Trust would file its final account on December 8, 1975. However, this communication did not contain an itemized list of legal services. On December 1, 1975, the objectors' attorney sent a second letter in which he requested that a representative of Northern Trust appear in his office for a deposition to discover what legal services had been rendered to the Brown estate.

The deposition of the executor's representative was taken on December 5, 1975. She testified that the fees of both the attorneys and the executor were determined by the value of the estate, and that, because of this fact, she was unable to document the amount of time expended on the estate by the attorneys.

On December 8 the Northern Trust presented its final account to the trial court. Addison Elliott and Richard Elliott then filed their objections to this account. On the same day a representative of the executor informed Addison Elliott that there could be no final distribution of the principal from the estate to the two testamentary trusts, established by Mrs. Brown's will for his benefit, until the litigation contesting the approval of Northern Trust's final account was resolved. However, this representative offered to make an immediate distribution of the income balance in Elliott's trust account. This offer was refused by Elliott. Allegedly $107,912.42 remained in Mrs. Brown's estate on December 8, 1975.

On December 30, 1975, the petition seeking the removal of the Northern Trust as executor was filed. On January 20, 1976, Northern Trust and its attorneys petitioned for additional fees for answering the beneficiaries' objections to the final account and for responding to Addison Elliott's petition to remove the executor. Northern Trust requested an additional $4,500, and its attorneys sought $6,000.

On February 23, 1976, the trial court, in response to a petition by the Northern Trust, entered an order directing the executor to distribute the income received by the estate pursuant to the terms of Corra Brown's will but to retain all principal assets of the estate as of December 8, 1975, until further order of court.

The hearing on the objections to the executor's final account commenced on April 12, 1976. However, the objectors did not proffer any testimony during this hearing. They limited their presentation to the cross-examination of the executor's witnesses and to the introduction of certain exhibits into evidence. The following testimony was elicited from petitioners' witnesses:

Arlindo S. Cate, a senior partner who had been in charge of probate, estate planning and trust practice at Keck, Cushman, Mahin and Cate for the past 12 years, testified that the law firm considered the following factors in determining what legal fees to charge for the probate of an estate: (1) the responsibility which is assumed by the lawyer and the law firm "to do a good quality, thorough job"; (2) the time required and the difficulty of the questions involved; and (3) the size of the estate and sufficiency of the assets. Cate stated that he would also look to the Chicago Bar Association schedule of fees, which was in effect at the time of Mrs. Brown's death, as a guideline in estimating an appropriate fee.

In projecting attorneys' fees in 1971 for the Federal estate tax return the senior attorney testified that he took the figure of $36,285 which was in accord with the bar schedule for an estate valued at $1,614,255 and reduced it by $2500 which was previously paid to the attorneys for similar work performed in connection with Corra Brown's conservatorship estate.

This witness also asserted that there were several unusual problems connected with the probate of the Brown estate. In support of this assertion he called attention to the fact that Addison Elliott was unavailable at the time of Mrs. Brown's death because he was somewhere in Mexico; that an injunction arising out of divorce proceedings between Addison and his wife prohibited the payment of funds from the estate; that certain real estate owned by the testator had building code violations; that this condition necessitated "dispossession" of such property by the executor; and that a decision had to be made whether to value Mrs. Brown's "deep discount" United States Treasury Bonds (hereinafter "flower bonds") at market value or at par value because there was pending litigation concerning the proper method of evaluating such bonds for Illinois inheritance tax purposes.

However, on cross-examination Cate conceded that he did not recall the number of hours spent by him or the firm on the building code violations, the dispossession and transfer of possession of the real estate or on the problem concerning the valuation of the "flower bonds," but he said that the law firm kept daily time records which would reveal such information. Lastly, the witness admitted that at the time he was told that Addison Elliott was missing in Mexico, Richard Elliott provided him with a correct address where Addison was subsequently contacted; that he was uncertain whether his firm spent any time in court regarding the injunction; that it was his belief that Northern Trust had dispossessed itself of the dilapidated property before the City of Chicago filed its action for building code violations; and that his law firm did not participate in any of the pending litigation concerning the issue of "flower bond" valuation.

Joseph W. Townsend, who had been associated with Keck, Cushman, Mahin and Cate for eight years, testified that he expended 550 hours on the probate of Corra Brown's estate. This attorney stated that there were numerous legal problems involved in the estate including construction of the family tree and proof of heirship. Additionally, the attorney who drafted Mrs. Brown's will was deceased, his law firm was no longer in existence, and consequently the witnesses to the will had to be located. In order to reach these individuals, Townsend went through the telephone book and called persons with a last name similar to that of the witnesses. He found one of the witnesses to the will, and this person directed him to the other two witnesses.

Petitioners' witness also referred to the injunction restraining the executor from making distributions from the estate of Addison Elliott and stated that this created problems in distributing income to the various beneficiaries under Mrs. Brown's will. According to Townsend, even if the parties to the divorce action had agreed to the terms of the injunction, as suggested by the objectors, such agreement would not have lessened the problem of administration of the estate because it would not have changed the executor's obligations and duties.

Regarding the building code violations, he stated that he monitored the proceedings until the time when the Northern Trust was dismissed as a defendant.

The witness further testified that the law firm drafted the documents necessary to obtain return of the over-deposit of Illinois inheritance taxes; that distributions of bequests to the children of the two objectors were made by depositing funds in savings accounts payable to the minors subject to further order of court; and that he reviewed the fiduciary income tax returns for the years 1970 and 1971. The 1970 return required several alternative computations before the most advantageous method, in terms of tax savings for the estate, was discovered.

On cross-examination Townsend stated that depositing funds in a minor's account, subject to further order of court, is the standard method of avoiding the opening of a minor's estate, and that withdrawals can then be made pursuant to the court's order. The witness also said that Richard Elliott furnished the law firm with an accurate address for Addison Elliott sometime after the opening conference, and he admitted that heirship was given in its entirety by Richard Elliott; that the objectors' attorney handled all the proceedings involving the building code violations; that the actual draft of the Federal estate tax return was prepared by the Northern Trust and sent to the law firm for approval; that he could not recall whether he made or suggested any changes in this return after reviewing it; and that he had no legal memorandum to show for his time spent on the "flower bond" issue. Although this witness testified that he devoted over three months to the question of dispossessing the executor of a single piece of real estate, he further conceded that his total work product consisted of two one-page, preprinted legal forms, and that he did not incorporate any of his conferences concerning dispossession into a legal brief. When asked whether it was conceivable that he could have expended over 175 hours on the inheritance tax, Federal estate tax and other tax problems, Townsend indicated that the time records did not break down into a specific allocation of time for each subject considered. However, he stated that his time records did contain a notation as to the primary matters handled each day.

A third attorney associated with the Keck firm testified that she first became involved in the Brown estate in 1972; that the majority of the required work had been completed by that time; and that the estate was being kept open because of the question concerning the proper valuation of the estate's "flower bonds" for Illinois inheritance tax purposes. This witness further stated that the firm's attorneys spent 796 1/4 hours on the estate between March 25, 1970, and December 5, 1975; that this amount of time was documented in the law firm's time records kept by its bookkeeping department; and that 708 1/2 hours represented the work of four attorneys each of whom had more than 10 years experience in probate matters. The relevant time records were then introduced into evidence.

On cross-examination this witness testified that she did not know how many hours the law firm had expended on the problem regarding the withdrawal of a minor's account when the minor reached majority. However, she stated that she expended approximately five hours ...

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