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Timothy Herlehy and Michael Herlehy v. Marie v. Bistersky Trust Dated May 5

December 23, 2010

TIMOTHY HERLEHY AND MICHAEL HERLEHY, PLAINTIFFS-APPELLANTS,
v.
MARIE V. BISTERSKY TRUST DATED MAY 5, 1989, AND ATG TRUST COMPANY, AS TRUSTEE, THE ALZHEIMERS DISEASE AND RELATED DISORDERS ASSOCIATION, AMERICAN HEART ASSOCIATION, THE RESPIRATORY HEALTH ASSOCIATION OF METROPOLITAN CHICAGO (F/K/A THE AMERICAN LUNG ASSOCIATION OF METROPOLITAN CHICAGO), CATHOLIC CHARITIES OF THE ARCHDIOCESE OF CHICAGO, AMERICAN CANCER SOCIETY ILLINOIS DIVISION, THE ILLINOIS ATTORNEY GENERAL , AND FIRST NATIONAL BANK OF LAGRANGE, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 05 CH 15199 Honorable Kathleen M. Pantle Judge Presiding.

The opinion of the court was delivered by: Justice Robert E. Gordon

JUSTICE ROBERT E. GORDON delivered the judgment of the court, with opinion Justices Cahill and McBride concurred in the judgment and opinion.

OPINION

These consolidated appeals arise from an action for construction of a trust agreement, breach of a fiduciary duty by a trustee, First National Bank of LaGrange (LaGrange Bank), and a claim of unjust enrichment on behalf of the trust agreement's residuary beneficiaries, The Alzheimer's Disease and Related Disorders Association, The American Heart Association, The Respiratory Health Association of Metropolitan Chicago,*fn1 Catholic Charities of the Archdiocese of Chicago, and American Cancer Society (collectively, the Charities).

Plaintiffs Timothy Herlehy (Timothy) and Michael Herlehy (Michael) filed a second amended complaint alleging that their deceased great-aunt, Marie V. Bistersky (Marie) intended to amend her trust before her death leaving them with a larger share of her trust assets. Plaintiffs allege that LaGrange Bank breached its fiduciary duty by failing to amend Marie's trust agreement pursuant to her directions and, as a result, the Charities will be unjustly enriched to plaintiffs' detriment.

The trial court granted LaGrange Bank's motion to dismiss with prejudice pursuant to section 2-619(a)(9) of the Illinois Code of Civil Procedure (Code), 735 ILCS 5/2-619(a)(9) (West 2006), finding that LaGrange Bank had no duty to amend Marie's trust. The trial court also granted the Charities' motion for summary judgment pursuant to section 2-1005 of the Code, 735 ILCS 5/2-1005 (West 2006), and denied plaintiffs' cross-motion for summary judgment, finding that there was no valid amendment to Marie's trust and, as a result, the Charities were entitled to their equal portions in the trust's residuary assets. The trial court further denied plaintiffs' motion for reimbursement of attorney fees and found that it lacked jurisdiction over LaGrange Bank's motion for reimbursement for its attorney fees.

In this consolidated appeal, plaintiffs appeal claiming the trial court erred in: (1) grantingLaGrange Bank's motion to dismiss; (2) granting the Charities motion for summary judgment; and (3) denying their motion for reimbursement for its attorney fees. LaGrange Bank also appeals claiming that the trial court erred in finding that it lacked jurisdiction to consider LaGrange Bank's motion for reimbursement of its attorney fees. We affirm.

BACKGROUND

Timothy originally filed a verified "Complaint for Construction of the Marie V. Bistersky Trust," (original complaint) and alleged as follows: On May 5, 1989, Marie established a written trust agreement, identifying herself as settlor and First Illinois Bank of LaGrange as trustee. Marie's husband predeceased her and she did not have or adopt any children.

Marie amended her trust agreement six times within 10 years. In each amendment, Marie amended the specific beneficiaries and the amount of money they were to receive. She also amended the names of the charities that would receive the residue of the trust. Marie filed her sixth amendment on December 9, 1999, with Bank One Trust Company, NA (Bank One), which was the successor trustee at that time. That amendment provided, in pertinent part, as follows:

"THIRD

SECTION 1: Upon the death of the settlor the trustee shall distribute the trust estate as follows:

(a) Five Thousand Dollars ($5,000.00) to RHONDA BALLA ***;

(b) Fifteen Thousand Dollars ($15,000.00) to VICTORIA WANDOLEWSKI, ***;

(c) Fifteen Thousand Dollars ($15,000.00) to BONNIE STOLARCZYK, ***;

(d) Twenty Thousand Dollars ($20,000.00) to RICHARD BOGACZ ***;

(e) Twenty Thousand Dollars ($20,000.00) to JOSEPH BOGACZ ***;

(f) Two Hundred Thousand Dollars ($200,000.00) to the settlor's grandnephew, TIMOTHY J. HERLEHY ***;

(g) Two Hundred Thousand Dollars ($200,000.00) to the settlor's grandnephew, MICHAEL HERLEHY ***;

(h) The balance of the trust estate shall be distributed in equal shares to the following five (5) charities:

1) ALZHEIMER'S DISEASE AND RELATED DISORDERS ASSOCIATION ***;

2) AMERICAN HEART ASSOCIATION ***;

3) THE AMERICAN LUNG ASSOCIATION OF METROPOLITAN CHICAGO ***;

4) CATHOLIC CHARITIES OF THE ARCHDIOCESE OF CHICAGO ***;

5) AMERICAN CANCER SOCIETY ***;"

In formulating an amendment to the trust, the trust agreement provided as follows: "SEVENTH: The settlor may at any time or times amend or revoke this agreement in whole or in part by [an] instrument in writing (other than a will) delivered to the trustee. *** "

In a discovery deposition, Timothy testified that Rhonda Balla was Marie's grand-niece and Richard and Joseph Bogacz were Marie's nephews. He further testified that Victoria Wandolewski was a close friend of Marie, and Bonnie Stolarczyk was Marie's friend and accountant.

In 2001, Marie was 89 years old and moved to an assisted living facility in LaGrange. Timothy testified that he had a close relationship with Marie, assisted her in relocating to the assisted living facility, with daily tasks, and drove her to her doctor's office. Timothy had a master's degree in finance and, at Marie's request, he reviewed the allocation of her trust assets, and Marie granted him power of attorney to manage her health care needs.

He testified that following her move to the assisted living facility, Marie told him that she did not believe that her trust reflected her wishes and that Bank One's trust officer, Patrice Grant, was not acting in her best interests. Timothy discovered that 90 percent of Marie's trust assets were invested in stock and told a manager of Bank One's trust department that such a high stock allocation was too risky for a settlor of Marie's age. Timothy also discovered that due to favorable stock market conditions during the 1990s, Marie's trust investments had increased in value to $1,800,000.*fn2 He further discovered that due to unfavorable market conditions in the years of 2000 and 2001, the value of the stock decreased in value to approximately $1,200,000.00 by mid-2001. Timothy testified that Marie was not aware of the value fluctuation in her trust's investments.

Timothy testified that in August of 2001, he and Michael each received a $100,000 gift from Marie. At that time, Marie had also executed an "amendment to the restatement" of the trust with the assistance of Charles Jardine (Jardine), who had been her attorney since she first executed her trust agreement. The amendment reduced the gifts to Timothy and Michael in Marie's trust from $200,000 to $100,000 each.

Additional changes to specific bequests in the amendment included replacing Rhonda Balla with Carmon Keith, who was Marie's "caretaker." Marie signed and delivered the amendment on August 9, 2001 to Bank One.

Timothy testified that Marie continued to express her dissatisfaction with Bank One as her trustee and expressed dissatisfaction with Jardine as her attorney, and told Timothy that she desired to replace them both. She asked Timothy to help her transfer her trust from Bank One to LaGrange Bank, which had been chosen for its proximity to Marie's assisted living facility. Timothy testified that he contacted William Boylan (Boylan), an attorney he knew, for his assistance in formulating the transfer.

Boylan testified in a discovery deposition that he met with Marie to discuss her trust. Boylan testified that he had examined Marie's trust agreement and informed her that because her assets had grown in value in the previous years the majority of her trust assets would be distributed through the residuary clause to the Charities. Boylan testified that Marie told him that such a result was not her intent, that she wanted only a "leftover" portion of the trust assets to pass to the Charities and the stock investments to "go to Tim." Boylan also informed Timothy that the majority of Marie's trust assets would be distributed through the residuary clause to the Charities and Marie again expressed to Boylan, in Timothy's presence, that the trust agreement did not reflect her intent.

Christopher Joyce (Joyce), an executive vice-president and trust officer of LaGrange Bank, testified in a discovery deposition that he met with Marie and Timothy on January 10, 2002. At that meeting, Joyce testified that Marie explained to him that she wanted the stock investments be distributed to Timothy. He also testified that Timothy informed him that Boylan would be drafting an amendment to Marie's trust to transfer the trust from Bank One to LaGrange Bank.

Joyce and Boylan both testified in their discovery depositions that they formulated a plan of action, with Marie's oral approval, whereby they would first remove Bank One as trustee, appoint LaGrange Bank as successor trustee and initiate the transfer of Marie's trust assets to LaGrange Bank. Second, they would discuss with Marie her concerns regarding her trust agreement and her investments. Third, they agreed that after all the assets were transferred to LaGrange Bank, any amendments to Marie's trust agreement would then be drafted to reflect her intentions.

Joyce testified that in February he received a document entitled "second amendment to the restatement" (second amendment) to Marie's trust agreement from Boylan. In addition to appointing LaGrange Bank as successor trustee, the second amendment also provided that, after Marie's death and prior to full and final distribution of the trust's assets, any acting trustee could be removed by Timothy. The second amendment was dated February 11, 2002 and signed by Marie. Joyce signed the second amendment on behalf of LaGrange Bank accepting appointment as successor trustee.

Joyce testified LaGrange Bank received Marie's trust assets from Bank One at the end of March 2002, and that the delay in transferring the trust assets was caused by Bank One. Joyce further testified that LaGrange received the remaining non-stock assets from Bank One in July of 2002, which included an insurance policy and "EE" bonds.

Joyce further testified that LaGrange hired Feldman Securities Group, an investment advisory firm, to perform an analysis of Marie's trust assets and present its recommendation for reallocating her investments. On May 13, 2002, the vice president of Feldman Securities Group, Brian McNamara, stated in an affidavit that he sent LaGrange an investment recommendation form (Feldman investment form) that he prepared concerning Marie's trust assets. McNamara further stated in his affidavit that he received Marie's investment information and placed his recommendations in the Feldman investment form, although he never met with Marie. He further stated that he was not an attorney and was not asked to prepare a trust amendment for Marie. McNamara also testified in a discovery deposition that Feldman Securities does not prepare trust amendments. The following day, Joyce brought the completed Feldman investment form to Marie for her review, and Marie signed and approved the form.

The Feldman investment form listed the amount of cash, bonds, and stocks that Marie had invested in her trust. It also listed McNamara's proposed reallocation of those investments. The Feldman investment form further included a "comments" section which stated: "We understand this trust is for the benefit of [Marie]. These assets will eventually go to her nephews." Stamped ...


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