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Martin Ruby, Michelle Ruby, Bennett Ruby, Patricia v. Bernice Ruby

February 17, 2012

MARTIN RUBY, MICHELLE RUBY, BENNETT RUBY, PATRICIA RUBY, MARCY BAIM, HOWARD BAIM, AND GARY BAIM, PLAINTIFFS-APPELLANTS AND CROSS-APPELLEES,
v.
BERNICE RUBY, INDIVIDUALLY AND AS TRUSTEE OF THE IRWIN RUBY TRUST,
DEFENDANT-APPELLEE AND CROSS-APPELLANT.



Appeal from the Circuit Court of Cook County. No. 07 CH 30152 The Honorable Daniel A. Riley, Judge Presiding.

The opinion of the court was delivered by: Justice Lampkin

JUSTICE LAMPKIN delivered the judgment of the court, with opinion.

Presiding Justice Robert E. Gordon and Justice Palmer concurred in the judgment and opinion.

OPINION

¶ 1 This case involves a dispute over the proceeds of a trust. Plaintiffs, Martin Ruby, Michelle Ruby, Bennett Ruby, Patricia Ruby, Marcy Baim, Dr. Howard Baim, and Gary Baim, appeal the trial court's order granting in part summary judgment in favor of defendant, Bernice Ruby, and against plaintiffs. Plaintiffs contend the trial court erred in finding that the gift at issue had adeemed. Plaintiffs further contend the trial court erred in denying their cross-motion for summary judgment regarding the enforceability of an in terrorem clause in the trust and that defendant was not entitled to the assets in the trust account. Defendant cross-appeals the trial court's denial of her motion for partial summary judgment on the latter issues. Based on the following, we affirm in part and reverse in part, and remand this cause for further proceedings.

¶ 2 FACTS

¶ 3 In the 1980s, defendant and her brother, Irwin Ruby, set up a joint tenancy brokerage account ending in number 1962. Irwin managed the account with the help of Richard Lazer, a stockbroker at David A. Noyes & Company. The account was carried under Irwin's social security number. Defendant and Irwin lived together in a condominium that they purchased in 1980. Neither was married or had any children. In 2002, due to a change in clearing houses at the brokerage firm, Irwin and defendant signed an agreement related to the joint tenancy account known as a medallion agreement. At that time, the account was given the number ending in 1159.

¶ 4 In 2002, Irwin and defendant hired Howard Gopman, an attorney, for their individual estate planning purposes. In July 2004, Irwin created a trust. Irwin was the named trustee and defendant was the successor trustee. The clause at issue, article fourth, section 1, of the trust, named plaintiffs as the beneficiaries of the contents of the account ending in 1159. Article fourth, section 2, of the trust called for the distribution of specified dollar amounts to specified individuals totaling $215,000. Article fourth, section 3, of the trust called for the distribution of specified dollar amounts to specified charities totaling $40,000. Article fifth called for the distribution of the condominium to two of the plaintiffs as tenants in common pursuant to the terms of article twenty-fifth. Article twenty-fifth called for defendant to receive a life estate in the residence with all expenses paid by the trust. Article seventh detailed the administration and distribution of the trust estate. Specifically, article seventh, section 1, stated: "Upon my death, the trust shall place the remaining trust estate into one trust for my sister, BERNICE RUBY. Such trust shall be disposed as hereinafter provided." Article seventh, section 2, called for the distribution to "any beneficiary *** such portions or all of the principal" as he or she requested from time to time. Article seventh, section 3, further provided: "During the life of the beneficiary, the trustee may in the trustee's discretion pay to or use for the benefit of such beneficiary or his or her descendants so much or all of the income and principal of such trust as the trustee from time to time determines to be required or desirable for the education and best interests of the beneficiary and his or her descendants, adding any income not so paid to the principal." Article twenty-eighth provided an in terrorem clause such that any beneficiary that contested the validity of the trust, sought to prevent the implementation of the trust, or who initiated proceedings to construe any provision of the trust and "such proceedings [were] deemed to be without merit by any court" forfeited his right to the benefits of the trust.

¶ 5 In August 2004, Irwin transferred all of the assets from the joint tenancy account ending in 1159 into a newly created trust account ending in 5122. At that time, the assets totaled $1,205,932.23. Irwin also transferred the deed to the condominium into the trust. Although defendant alleges on appeal that she was unaware of the transfers, defendant admitted in her deposition that she and Irwin had deeded the condominium into the trust account on September 28, 2004, and that she signed the deed. Defendant said Gopman never explained it to her and that she knew she signed something for the title. According to the deposition testimony of Lazer, the new account was necessary because the brokerage firm required a new account when title changed. Irwin received monthly account statements.

¶ 6 Irwin died on January 7, 2006. At the time of his death, there were no assets in the account ending in 1159. The assets in the trust account ending in 5122, however, totaled approximately $1,436,000. Gary was the executor of Irwin's will and, for some time after Irwin died, there was confusion as to whether he was a cotrustee. According to his deposition testimony, Gary assisted defendant following Irwin's death. The pair opened a bank account under both of their names with the intention of distributing Irwin's assets according to his wishes. Gary testified that the new account was initially opened with funds from Irwin's savings. At some point, it became clear that defendant was the successor trustee. Defendant sent a letter to plaintiffs in April 2006 advising them that they each were to receive 25% of the assets in the account ending in 1159. However, when defendant had dispersed all of the funds in the newly created account, she informed Gary that "there was not enough cash, she'd like to liquidate some stocks. And that [he] should check with [Howard, Marty, and Bennett]." Plaintiffs agreed. Defendant made the distributions named in article fourth, section 2, to the specified individuals, including $10,000 each to the children of Howard Baim and Gary Baim, and to the charities named in article fourth, section 3, for a grand total of $255,000.

¶ 7 In April 2006, defendant withdrew $103,000 from the trust to pay for her attorneys and some beneficiaries of the trust. In May 2006, defendant withdrew $121,261.65 from the trust. During her deposition, defendant could not recall how the money was spent, but speculated that she used it to pay for Irwin's funeral. In February 2007, defendant withdrew $180,000 and could not recall how it was used.*fn1 In October 2007, defendant withdrew $90,000 that she thought "most of" was used to pay her lawyers.*fn2 Defendant testified at her deposition that she withdrew the money from the trust account and transferred it into a Chase account that she referred to as the "condo account." Historically, according to defendant, the dividends from the joint tenancy account were used for condominium expenses. After Irwin's death, defendant continued to deposit the dividend checks into the "condo account."

¶ 8 On February 8, 2007, defendant's attorney sent a letter to plaintiffs enclosing a check for $30,000. In her deposition, defendant stated that the account ending in 1159 was closed and, therefore, plaintiffs could not receive the 25% called for in the trust. As a result, defendant "thought [she] should give them something," so she gifted $30,000. Plaintiffs, through their attorney, sent a letter to Gopman dated April 20, 2007, inquiring "if and when [plaintiffs] will receive an accounting of the Trust and whether they should expect to receive a copy of a Trust Income Tax Return and a Form K-1." The letter went on to say that "there is no desire on the part of any of my clients to cause any disruption in Bernice Ruby's financial affairs. They merely wish to know the status of the Trust and its assets."

¶ 9 On October 19, 2007, plaintiffs filed a complaint for declaratory relief and request for a mandatory injunction. On December 22, 2008, defendant filed an amended counterclaim seeking: (1) reformation of the trust; (2) a finding that the gift in article fourth, section 1, had adeemed and that the in terrorem clause effectively revoked the gift; (3) a declaratory judgment for the condominium to be conveyed out of the trust and to her; and (4) a finding that she was entitled to one half of the property in the trust account. Defendant filed a motion for summary judgment claiming that she was entitled to at least one half of the assets in the trust account. Plaintiffs filed a cross-motion for partial summary judgment claiming defendant was not entitled to the assets in the trust account. On January 26, 2010, the trial court denied the parties' motions and cross-motions for summary judgment.

¶ 10 On February 25, 2010, defendant filed a motion for partial summary judgment pursuant to section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005 (West 2006)) requesting a declaration that the gift in article fourth, section 1, had adeemed and that the in terrorem clause applied. On April 16, 2010, plaintiffs filed a response and a cross-motion for summary judgment. On September 28, 2010, the trial court granted partial summary judgment to defendant, finding that the gift in article fourth, section 1, had adeemed. The trial court, however, denied partial summary judgment to defendant, finding that the in terrorem clause was not applicable. The trial court's September 28, 2010, order contained language pursuant to Illinois Supreme Court Rule 304(a) (eff. Jan. 1, 2006), such that the order was "final and appealable and there was no just cause to delay enforcement or appeal."

¶ 11 Plaintiffs appeal the January 26, 2010, order and the September 28, 2010, order. Defendant cross-appealsthe trial court's September 28, 2010, order denying, in part, defendant's motion for summary judgment seeking to enforce the in terrorem clause.

¶ 12 ANALYSIS

¶ 13 Summary judgment is proper where the pleadings, affidavits, depositions, admissions, and exhibits, when viewed in a light most favorable to the nonmoving party, demonstrate that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2006); Bank of America, N.A. v. Carpenter, 401 Ill. App. 3d 788, 795, 929 N.E.2d 570 (2010). Where the parties file cross-motions for summary judgment, as they did here, they concede there are no genuine issues of material fact and invite the court to decide the ...


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