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Gregory v. First Nat'l Bk. & Trust Co.

OPINION FILED JUNE 9, 1980.

FLORENCE C. GREGORY, PLAINTIFF-APPELLANT AND CROSS-APPELLEE,

v.

FIRST NATIONAL BANK AND TRUST COMPANY, TRUSTEE, DEFENDANT-APPELLEE AND CROSS-APPELLANT.



APPEAL from the Circuit Court of Winnebago County; the Hon. ROBERT C. GILL, Judge, presiding.

MR. JUSTICE VAN DEUSEN DELIVERED THE OPINION OF THE COURT:

Plaintiff, Florence C. Gregory, filed suit in equity against defendant First National Bank of Rockford as trustee under an agreement with Howard C. Gregory (husband of plaintiff), dated February 23, 1965, known as Trust "B". The complaint charged various breaches of trust and unreasonable and excessive fees. Defendant bank denied the allegation of breaches of trust and alleged that its fees were usual, customary and reasonable. After a bench trial, the trial judge entered its order: Paragraph 1 approved the annual fee of the bank of $3,376.14 for the year ending February 23, 1975; paragraph 2 granted judgment for plaintiff in the amount of $333.52 for failure of trustee to apportion its fee for the year ending February 23, 1974, and charging plaintiff with the 1973 personal property taxes less credits; paragraph 3 denied plaintiff's claim for damages because of trustee's unauthorized sale of stock subscription rights; paragraph 4 granted judgment in favor of plaintiff and awarded her $2,115.56 as compensation for interest paid on funds borrowed in order to pay inheritance taxes when defendant bank delayed in delivering any part of the principal of trust "B"; paragraph 5 awarded the defendant bank a reasonable distribution fee of $4,500. Post-trial motions were denied, and plaintiff appeals from paragraphs 1, 3 and 5 of the court's order and defendant cross-appeals from paragraphs 2, 4 and 5 of said order.

On February 23, 1965, Howard C. Gregory established two trusts with the defendant bank. We are concerned here only with trust "B" which had a value, at its inception, of approximately $500,000, with a sizable amount of the corpus concentrated in the stock of J.L. Clark, a company with which Howard Gregory had been associated. According to the trust's provisions, Howard Gregory retained the income from the trust for life and upon his death the income was to be paid to his wife, the plaintiff. Mr. Gregory also retained the right to revoke the trust or appoint the principal thereof to himself, but only with the written consent of plaintiff. The trust further provided that, upon the death of Howard Gregory, plaintiff would receive the power to appoint all or a part of the trust estate to herself or to others.

Article VII of the trust provided that the defendant was to receive reasonable compensation. The trust also provided that, during the lifetimes of Howard C. Gregory and the plaintiff, the defendant would have purely ministerial functions with regard to the administration of the trust. Upon the death of both Gregorys, the trust granted defendant the authority to assume all normal and customary powers of the trustee.

On July 12, 1972, Howard Gregory was granted a divorce from plaintiff and the divorce decree eliminated all rights of plaintiff in the trust. Plaintiff appealed the divorce decree and on November 3, 1972, an order staying the enforcement of the divorce decree was entered. On February 2, 1974, while the divorce case was still pending on appeal, Howard Gregory died and the executor of his estate was substituted as a party in his place. On December 12, 1974, this court reversed the divorce decree, holding that neither party was entitled to a divorce. After petitions for rehearing and for leave to appeal to the supreme court were denied, the mandate of this court reversing the divorce decree was filed in the trial court on April 24, 1975.

Upon the death of Howard Gregory, the defendant assumed active management and control of the trust pending the outcome of the divorce litigation. For this period of time, February 23, 1974, through February 23, 1975, the defendant charged a fee of $3,376.14, which was based on a percentage of the value of the trust assets, at that time worth approximately $1.2 million, less one-third, due to the large concentration in a single stock. The percentage was computed according to a set fee schedule established by the bank.

Subsequent to the mandate of this court reversing the divorce decree, the defendant made several distributions of trust income over an extended period of time but did not distribute any principal from the trust until December 19, 1975, at which time sums in excess of $889,000 were tendered to plaintiff. Also subsequent to the reversal of the divorce decree, plaintiff tendered a letter of direction and appointment to the bank revoking the trust but defendant took no action in response to it. On March 26, 1975, after the supreme court denied leave to appeal, plaintiff sent a second letter of direction and appointment to defendant bank.

Plaintiff's initial contention is that the defendant violated the terms of the trust in assuming active control thereof prior to the death of the plaintiff. Article IV of the trust agreement essentially states that the defendant bank should not assume active control of the trust until and upon the death of both Howard and Florence Gregory. Thus, plaintiff contends that defendant violated explicit terms of the trust, when it assumed active management and control of the trust after Howard Gregory's death, and therefore it should not be compensated.

Prior to the entry of the divorce decree, plaintiff had full power over the trust upon the death of her husband, and during her husband's life, her consent was required to revoke the trust. The divorce decree effectively eliminated all rights which she possessed in the trust; however, the enforcement of this decree was subsequently stayed on November 3, 1972.

• 1, 2 It is well established that a stay of enforcement or a supersedeas suspends the efficacy of a judgment and preserves that status quo pending a determination of the appeal. It restrains an appellee from affirmative action to enforce his judgment but it does not impair the validity or effect of the judgment itself. (Nemanich v. Long Grove Country Club Estates, Inc. (1970), 119 Ill. App.2d 169, 177.) Clearly, the stay would not authorize what the judgment or decree prohibits the appellant from doing. People ex rel. Finn v. David (1927), 328 Ill. 230, 234; see also Western United Dairy Co. v. Miller (1963), 40 Ill. App.2d 403, 411-12.

• 3, 4 In the instant case, the stay of enforcement effectively prevented Howard Gregory from revoking the trust without the consent of his wife, although he attempted to do so nevertheless. However, the stay did not reverse the decree itself; consequently, plaintiff did not have any affirmative right to assert her interest in the trust upon the death of her husband. Under the unusual circumstances created by the death of Mr. Gregory and the contested divorce decree, it was necessary that someone assume active management of the trust pending the outcome of the appeal. Defendant did so upon the advice of counsel, although proper procedure would have dictated that it seek permission and supervision of the court. Under these circumstances, it appears that the trial court would have authorized the defendant to assume active management of the trust pursuant to the terms of the trust, and in granting the bank a fee, the court did, in effect, review and approve the bank's conduct in so acting. We cannot say that the court erred in implicitly approving such conduct on the part of the defendant or finding that a fee was allowable to the defendant for such services.

Plaintiff next contests the reasonableness of the $3,376.14 administrative fee assessed in the year subsequent to Mr. Gregory's death. Article VII of the trust provided that the defendant was to receive reasonable compensation. Plaintiff argues that the fee was based solely on a percentage of the value of the securities without regard to the value of services rendered. It does seem clear from the evidence that the defendant bank did initially compute its fee on the basis of a fee schedule using a percentage of the value of the assets, then deducted one-third because of the large block of J.L. Clark stock.

This court made clear, in the case of In re Estate of Kottrasch (1978), 63 Ill. App.3d 370, 374, that fee schedules, based on the value of an estate without regard to the actual value of services rendered, cannot be used as a primary basis for fixing reasonable compensation to be paid to executors under the statute. The element of time expended by the party requesting the fee has been regarded as one factor of importance. (In re Estate of Kottrasch (1978), 63 Ill. App.3d 370, 373; cf. Fiorito v. Jones (1978), 72 Ill.2d 73, 88-89.) In light of In re Kottrasch, a prudent executor or trustee should keep time records. This does not mean, however, that where such records have not been kept, particularly at a time when reliance on fee schedules was quite common, that the failure to keep time records should deny a trustee or executor his fee. For example, in In re Estate of Brown (1978), 58 Ill. App.3d 697, 710, the court found that the use of a fee schedule, as an aid in formulating claimed fees, was not improper where it was manifest that the requested fee was based primarily upon the value of the services provided by the executor rather than the schedule. In the case of In re Estate of Kottrasch, no evidence, other than the fee schedule, was introduced with respect to the reasonable value of the services performed. This court, in In re Kottrasch, outlined the standards which should be applied in the determination of reasonable compensation to be granted any executor and such standards are equally applicable in determining the reasonable compensation to be awarded in this case. The court stated:

"However, a determination of the `reasonable compensation' to be allowed any executor of an estate is a matter peculiarly within the broad discretion of the probate court. (In re Estate of Bonnett (1977), 52 Ill. App.3d 393, 398, 367 N.E.2d 524, 528; In re Estate of Brown (1978), 58 Ill. App.3d 697, 706, 374 N.E.2d 699, 706.) There is no clear-cut rule to aid the probate court in ascertaining what a reasonable fee should be; it is a determination which must be based on the facts and circumstances of the particular case being considered. (In re Estate of Brown (1978), 58 Ill. App.3d 697, 706, 374 N.E.2d 699, 706-07.) The factors to be weighed by the probate court in making this determination include the size of the estate, the complexity of its administration, the skills used, the opinion testimony of those familiar with that particular type of work (In re Estate of Venturelli (1977), 54 Ill. App.3d 997, 1004, 370 N.E.2d 290, 295), the time required and the diligence, good faith and reasonable prudence of the one requesting the fee (In re Estate of Brown (1978), 58 Ill. App.3d 697, 706-07, 374 N.E.2d 699, 707). In order to reverse the allowance of an executor's ...


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