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Peck v. Froehlich

August 9, 2006


Appeal from Circuit Court of Macon County No. 04L167. Honorable Katherine M. McCarthy, Judge Presiding.

The opinion of the court was delivered by: Justice Cook

Published opinion

This appeal involves two trusts created by the settlor, Marjorie Sims, for the purpose of providing for her health, support, and maintenance during her lifetime. The trustee (and residuary beneficiary) of one of the trusts seeks reimbursement from the trustee (and residuary beneficiary) of the other trust, for one-half of the amounts paid for the settlor's extraordinary caretaking expenses. The circuit court entered summary judgment denying reimbursement. We reverse and remand.


The settlor, Marjorie Sims, created a revocable living trust, the "Illinois Trust," on August 6, 1987. This trust included essentially all the assets she owned, including her accounts in Arizona banks. Sims spent her winters in Arizona. The Illinois Trust was amended several times in the early 1990s and finally on November 10, 1999. Sims created a second trust, the "Arizona Trust," on September 25, 1991. The Arizona Trust was intended to include only Sims' Arizona bank accounts. The Arizona Trust was irrevocable (although it could be amended by a successor trustee to carry out its purposes) and was intended to protect Sims' Arizona bank accounts from her creditors.

The two trusts expressed a similar purpose, to provide for Sims' health, support, and maintenance for her lifetime. After her death, most of the residue of the Illinois Trust was to be paid over to the plaintiff, James B. Peck, Sr., and most of the residue of the Arizona Trust was to be paid over to defendant, David E. Froehlich. Thirty percent of the residue of the Arizona Trust was to be paid over to defendant Fairhavens Christian Home. Plaintiff and defendant Froehlich had been employed by Sims' husband in his lumber business and were to him the sons he never had. They were closer to Sims than any of her relatives.

Section 2 of the Arizona Trust states Sims' "primary desire that all of my needs shall be met, even if the trust estate is thereby entirely depleted." The trustee was directed to provide for those needs as follows:

"Trustee shall first distribute to me, or for my benefit, for my lifetime, so much of the net income and principal of the trust as trustee believes necessary to pro- vide for my health, support[,] and maintenance. In making such payments to me or for my benefit, trustee shall at all times exercise discretion in favor of making such payments."

A similar provision is found in the Illinois Trust. There is no question that the funds for which reimbursement is sought were "necessary to provide for [the settlor's] health, support[,] and maintenance." It is also clear that expenses for health, support, and maintenance were to be divided between the two trusts. It would be illogical for the same expenses to be paid twice, or not at all. When two funds are established for payment of the same expenses, the payments must be coordinated between the two funds.

Sims restated her intent to coordinate the two trusts in her November 10, 1999, amendment to her Illinois Trust: "It is further my intent that at such time as I shall incur expenses for my care beyond the ordinary expenses of living in my home *** that such expenses shall be shared equally between this trust and the [Arizona Trust]." The 1999 amendment also clarified that the Arizona Trust included only the Arizona Bank accounts listed on a schedule attached to that trust, even though those accounts were arguably a part of the Illinois Trust. Other assets were said to be a part of the Illinois Trust even though they arguably were included in the Arizona Trust. Sims noted that "each trust may attempt to state a comprehensive plan for all of my assets," but of course that was not possible.

In the 1999 amendment, Sims noted her close relationship with plaintiff and defendant and stated: "I do not want the gifts to either of them to be impaired by the entire burden of my care and maintenance or of taxes imposed upon my estate, but I want the burden of my care to be shared equally and the estate taxes to be shared proportionately." Sims had a stroke in November 2000 and required 24-hour care from that date. Plaintiff and defendant became successor trustees of their respective trusts in the spring of 2001. Plaintiff sent quarterly bills to defendant for one-half of Sims' extraordinary caretaking expenses, but all requests for payment were refused. On February 8, 2001, defendant sent Sims a letter, advising that as long as she had sufficient monthly income, she should not deplete the assets in the Arizona Trust: "This will avoid unnecessary tax consequences, allow for future growth of the trust and protect your future financial security in the event of unforeseen circumstances." Denying reimbursement would also increase defendant's residuary share.

Sims died June 10, 2004. Plaintiff filed this action on October 28, 2004. On November 4, 2005, the circuit court entered summary judgment in favor of defendant, concluding that defendant had complete and total discretion as trustee in making or not making disbursements from the trust. "Under the terms of the Arizona Trust, it is not relevant whether the [d]efendant [t]rustee properly exercised his discretion in making or not making disbursements from that Trust." The court held that Sims' intent is clear from the language of the Arizona Trust and consequently extrinsic evidence is not proper, and the 1999 amendment to the Illinois Trust cannot be considered for purposes of determining Sims' intent. The court held that the Arizona Trust is an irrevocable trust and Sims retained no right to alter or modify that trust. Plaintiff appeals.


A. Standard of Review

Summary judgment is proper if, when viewed in the light most favorable to the nonmoving party, the pleadings, depositions, admissions, and affidavits on file demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2004). We review the circuit court's grant of summary judgment de novo. Illinois State Chamber of Commerce v. Filan, 216 Ill. 2d 653, 661, 837 N.E.2d 922, 928 (2005). We also review a trial court's construction of a trust instrument de novo. Brown v. Ryan, 338 Ill. App. 3d 864, 871, 788 N.E.2d 1183, 1189 (2003). The construction of an unambiguous ...

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