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Vail v. First of America Trust Company

December 20, 1999

IN THE MATTER OF THE ESTATE OF BETTY ANN VAIL, DECEASED, THOMAS R. MCMILLEN, PETITIONER-APPELLANT,
V.
FIRST OF AMERICA TRUST COMPANY, N/K/A NC ILLINOIS TRUST COMPANY; RADCLIFFE COLLEGE; HARVARD UNIVERSITY; MENNINGER FOUNDATION; DECATUR MEMORIAL HOSPITAL; AND MILLIKIN UNIVERSITY, RESPONDENTS-APPELLEES.
IN THE MATTER OF THE ESTATE OF BETTY ANN VAIL, DECEASED, THOMAS R. MCMILLEN, PETITIONER-APPELLANT,
V.
FIRST OF AMERICA TRUST COMPANY, N/K/A NC ILLINOIS TRUST COMPANY; RADCLIFFE COLLEGE; HARVARD UNIVERSITY; MENNINGER FOUNDATION; DECATUR MEMORIAL HOSPITAL; AND MILLIKIN UNIVERSITY, RESPONDENTS-APPELLEES.



Appeal from Circuit Court of Macon County No. 93P386 Honorable Warren A. Sappington, Judge Presiding. Appeal from Circuit Court of Macon County No. 93P386 Honorable Theodore E. Paine, Judge Presiding.

The opinion of the court was delivered by: Justice McCULLOUGH

JUSTICE McCULLOUGH delivered the opinion of the court:

In these consolidated appeals pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), petitioner Thomas R. McMillen appeals from a variety of orders entered in the circuit court of Macon County in the administration of the estate of Betty Ann Vail, deceased. The orders appealed include in essence the approval of a number of accounts and overruling of the objections thereto. Petitioner was one of a number of residuary legatees named in the will of Betty Ann Vail, who died on November 2, 1993. The executor of the estate is NC Illinois Trust Company (NC), successor of First of America Trust Company. NC is also the trustee of the two inter vivos trusts created by Vail. Petitioner is not a beneficiary of either trust. The following beneficiaries of the trusts have also filed appellees' briefs in this case: Radcliffe College, Menninger Foundation, Decatur Memorial Hospital, and Millikin University.

The issues on appeal are whether (1) the trial court erred in finding that the executor was not required to distribute a substantial portion of the estate within two years of the letters being issued and interest did not accrue from that date; and (2) the order approving the accounts of the executor is against the manifest weight of the evidence because (a) the executor and its wholly owned affiliate benefitted from the investment of funds of the estate, (b) the attorneys for the executor are not entitled to receive any fees from the estate while they are representing the conflicting interests of the trustees, and (c) the executor's account should be audited. We affirm. The parties and this court are familiar with the facts of this case. Only those facts necessary to an understanding of this court's disposition will be discussed.

The estate was opened on November 24, 1993. On May 23, 1994, petitioner filed a pro se contest to the will and trusts, in which other heirs joined. The trial court dismissed the contests of the will and trusts, and this court affirmed the dismissal. In re Estate of Vail, 282 Ill. App. 3d 1120, 707 N.E.2d 303 (1996) (unpublished order under Supreme Court Rule 23). The petition for leave to appeal to the Illinois Supreme Court was denied. In re Estate of Vail, 171 Ill. 2d 566, 677 N.E.2d 965 (1997). This court's mandate issued March 21, 1997, and was filed in the circuit court on March 24, 1997. On September 3, 1997, the executor filed an interim accounting and proposed distribution schedule. Petitioner filed exceptions to the first, second, and third current accounts and the interim accounting and proposed distribution, in part demanding interest for the executor's failure to distribute in a timely fashion.

Petitioner argues that "a substantial partial distribution to the residual beneficiaries" should have been made from the estate by November 23, 1995, or, in the alternative, March 21, 1997, the date this court issued its mandate following the first appeal. As relevant to this case, section 24-10 of the Probate Act of 1975 (Probate Act) authorizes charging the estate representative 10% interest per year on the fair market value of all the personal estate that has come into its possession or control and has not been properly paid out or distributed at the expiration of two years after the issuance of letters of office unless good cause has been shown for the failure to distribute. 755 ILCS 5/24-10 (West 1996).

In this case, the trial court found there was good cause for the executor's failure to distribute at an earlier time. In reviewing a probate court's determination, all reasonable presumptions are made in favor of the trial court, the appellant has the burden to affirmatively show the errors alleged, and the judgment will not be reversed unless the findings are clearly and palpably contrary to the manifest weight of the evidence. In re Estate of Kirk, 292 Ill. App. 3d 914, 919, 686 N.E.2d 1246, 1249 (1997).

Petitioner took the will contest to the Illinois Supreme Court. Had the will been declared invalid, a distribution under the will would be improper. If the will and trusts were overturned, the probate court would have to determine who would be heirs of the intestate estate and the amounts of their distributive shares, in spite of petitioner's contention that the interests of the beneficiaries would not have been less.

Seven months following the issuance of the mandate, the executor filed an interim accounting and distribution schedule. The interim accounting set the value of the estate at $944,921.04. Three current accounts had previously been filed. Petitioner filed exceptions to the three current accounts and the interim accounting and distribution schedule. The 10% interest issue was the seventh and final issue included in his exceptions. This further delayed distribution. Petitioner and other beneficiaries whom petitioner represented filed additional motions. When Judge John Davis overruled the objections and exceptions and approved the accounts and distribution schedule, petitioner sought to have Judge Davis removed from the case. When Judge Warren Sappington was assigned, the prior orders were vacated and had to be reconsidered. All of this was the result of actions taken by petitioner. The probate court could reasonably find that on this record there were inferences establishing good cause for not distributing assets of the estate earlier. This finding is not contrary to the manifest weight of the evidence. See In re Estate of Lindberg, 49 Ill. App. 3d 154, 156, 364 N.E.2d 555, 556-57 (1977); In re Estate of Kapraun, 21 Ill. App. 2d 231, 246-48, 157 N.E.2d 700, 707-08 (1959).

According to the first current account filed February 17, 1995, estate assets had been invested in the Parkstone Prime Obligations Money Market Fund since June 6, 1994. Petitioner acknowledges that the relationship between the executor and the investment company was fully disclosed in the first three current accounts. The executor has the authority to invest the estate corpus in any form of investment specified in sections 21-1.01 through 21-1.07 of the Probate Act. 755 ILCS 5/21-1 (West 1996). That includes money market funds. 755 ILCS 5/21-1.07 (West 1994). At the time this estate was opened, section 21- 1.07 of the Probate Act did not expressly prohibit investment in money market funds managed by affiliates of the corporate executor.

Effective August 17, 1995, section 21-1.07 of the Probate Act was amended by Public Act 89-344 (Pub. Act 89-344, §5, eff. August 17, 1995 (1995 Ill. Laws 3570, 3570)) to read as follows:

"Interests in any open-end or closed-end management type investment company or investment trust (hereafter referred to as a 'mutual fund') registered under the Investment Company Act of 1940, the investments of which are not restricted to the investments otherwise authorized for representatives in Sections 21-1.01 through 21-1.06 of this Act, including without limitation a mutual fund that receives services from or pays fees to the representative or its affiliate, provided that the investment in the mutual fund or funds meets the standard of the prudent investor rule for the investment of trust funds. A representative or its affiliate is not required to reduce or waive its compensation for services provided in connection with the investment and administration of the estate because the representative invests, reinvests, or retains estate assets in a mutual fund for which it or its affiliate provides services and receives compensation, if the total compensation paid by the estate as fees of the representative and mutual fund fees, including any advisory or management fees, is reasonable. However, a representative may receive fees equal to the amount of those fees that would be paid to any other party under Securities and Exchange Commission Rule 12b-1." 755 ILCS 5/21-1.07 (West 1996).

This amendment authorized investment in mutual funds not restricted to money market funds.

Petitioner is not contending that the return on the investment was inadequate, the management fee was excessive, or that investing in money market funds with management fees should be avoided. His only complaint is that an affiliated corporation received the management fee, characterizing the ...


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