In re: RUBY KANFER, a Disabled Adult, LAWRENCE KANFER and RUTH KANFER, Coexecutors Under the Last Will and Testament of Ruby Kanfer, Deceased, Plaintiffs-Appellants,
BUSEY TRUST COMPANY, Former Guardian of the Estate of Ruby Kanfer, a Disabled Adult, Defendant-Appellee.
In an action arising from a dispute over defendant trust company’s management of the estate of a disabled adult, the trial court properly found that res judicata barred any recovery for various management fees, the hourly charges for a contractor’s work on one condominium and the alleged investment losses due to the trust company’s failure to implement the investment model the company generally used for an estate of the size being managed; however, the dismissal of plaintiffs’ claim for defendant’s failure to properly maintain the estate’s Illinois and Florida properties was reversed and the cause was remanded for further proceedings.
Appeal from the Circuit Court of Champaign County, No. 05-P-52; the Hon. Brian L. McPheters, Judge, presiding.
Robert A. Stuart, Jr. (argued) and Emmet A. Fairfield, both of Brown, Hay & Stephens, LLP, of Springfield, for appellants.
Edward M. Wagner and Tamara K. Hackmann (argued), both of Heyl, Royster, Voelker & Allen, of Urbana, for appellee.
Justices Pope and Holder White concurred in the judgment and opinion.
¶1 Plaintiffs, Lawrence Kanfer and Ruth Kanfer, are the coexecutors of Ruby Kanfer's will. She was their mother. During the final 2 1/2 years of her life, Main Street Bank and Trust Company (Main Street) and, later, its successor, Busey Trust Company (Busey), were the guardians of her estate. Plaintiffs seek to surcharge Busey for mismanaging the estate. On Busey's motion (735 ILCS 5/2-619.1 (West 2012)), the trial court struck some of the paragraphs of the second amended petition for surcharge. The court made a finding pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010), and plaintiffs appeal.
¶2 We affirm the trial court's judgment in part and reverse it in part, and we remand this case for further proceedings. We agree that section 24-11(b) of the Probate Act of 1975 (Probate Act) (755 ILCS 5/24-11(b) (West 2012)) and res judicata bar plaintiffs from recovering management fees, the hourly charges for work a contractor did on a condominium in Champaign, and losses from the failure to implement an investment model. Plaintiffs are not barred, however, from recovering any losses that resulted from failing to keep Ruby Kanfer's condominiums in adequate repair.
¶3 I. BACKGROUND
¶4 A. The Appointments of Guardians
¶5 On February 23, 2005, Lawrence Kanfer petitioned the trial court to appoint him as Ruby Kanfer's personal guardian and to appoint Main Street as the guardian of the estate. He alleged that Ruby Kanfer had been diagnosed with depression, memory disturbance, and diabetes and that she had deteriorated mentally and physically to the point that she no longer could use sound judgment regarding her personal care, medical needs, and financial affairs.
¶6 On February 28, 2005, the trial court appointed an attorney, Andrew Bequette, as guardian ad litem.
¶7 On March 2, 2005, Ruth Kanfer filed a counterpetition to be appointed the guardian of Ruby Kanfer's person and estate.
¶8 On March 2, 2005, the trial court appointed Lawrence Kanfer as the temporary guardian of the person of Ruby Kanfer and Main Street as the temporary guardian of her estate. Main Street accepted the appointment.
¶9 On March 17, 2005, Ruby Kanfer and an attorney, Arthur M. Lerner, petitioned that the trial court "confirm and allow Ruby Kanfer to employ Lerner Law Offices as her attorney to defend her" in this matter. On March 22, 2005, the court authorized the hiring of Lerner as Ruby Kanfer's attorney while keeping in force the appointment of Bequette as the guardian ad litem.
¶10 On May 9, 2005, the trial court appointed Lawrence Kanfer as the permanent guardian of Ruby Kanfer's person.
¶11 On May 10, 2005, the trial court entered an "Interim Order for Guardianship of the Estate, " in which the court found that although Ruby Kanfer still was disabled by moderate dementia, it was in her best interest "that she be allowed to continue to trade securities on a limited basis." Therefore, the court authorized Main Street to "set up a trading account for Ruby Kanfer at Wachovia with a beginning balance of $100, 000.00." Ruby Kanfer was to be allowed to "use the funds within this account to make securities trades as she wishe[d], " but she would not be allowed to make withdrawals from the account without further court order. Main Street would have no fiduciary duty with respect to the account. For the time being, until the court made a final decision as to who was to be the permanent guardian of Ruby Kanfer's person, the court prohibited Main Street, without the prior approval of all parties, from moving any of her funds from the institutions where they currently were located. (Even though, on May 9, 2005, the court appointed Lawrence Kanfer as the permanent guardian of Ruby Kanfer's person, apparently the permanency of his appointment was in question.) Main Street could, however, move funds into different accounts within the same institutions.
¶12 On May 19, 2005, Ruby Kanfer, through her attorney, Lerner, moved to set aside the order appointing Lawrence Kanfer as the permanent guardian of her person.
¶13 On July 13, 2005, the trial court found that Ruby Kanfer was "not totally lacking in the capacity to make or communicate responsible decisions regarding the care of her person." The court further found it was in Ruby Kanfer's best interest that Ruth Kanfer be appointed the guardian of her person. Therefore, the court revoked its order appointing Lawrence Kanfer as the guardian of the person, and the court appointed Ruth Kanfer as the limited guardian of the person, ordering her to "exercise her statutory power of guardianship only to the extent necessitated by [Ruby] Kanfer's actual mental, physical and adaptive limitations." At its conclusion, the order added: "The appointment of the GAL is to continue until further order as is the attorney-client relationship between the ward and Mr. Lerner." Joseph Pavia later replaced Lerner as Ruby Kanfer's personal attorney.
¶14 On September 23, 2005, in view of the appointment of Ruth Kanfer as the permanent guardian of Ruby Kanfer's person, Main Street filed a motion to lift the restrictions on its authority as guardian of the estate. Main Street explained that "[t]he Ward [was] anxious to move funds which exceeded FDIC [(Federal Deposit Insurance Corporation)] limits from banks and to have additional funds added to her Court authorized trading account" and that, without the full powers of a guardian of the estate, Main Street was unable to "respond to the requests of the Ward or to adequately manage her Estate."
¶15 In a hearing on October 27, 2005, attended by Bequette, Ruth Kanfer, Lawrence Kanfer, and the attorneys for Ruth, Ruby, and Lawrence Kanfer, the trial court granted Main Street's motion, lifting the restrictions on its authority as guardian of the estate.
¶16 The trial court directed Main Street to continue charging an hourly fee for its work until all of Ruby Kanfer's assets were consolidated at Main Street. After the consolidation, Main Street would be paid monthly in the amount of ".85% of assets managed with all additional work being charged hourly. Additional work [would] include but not be limited to work associated with the real property of the Ward, the Frederick Kanfer Estate, work investigating the stock certificates, bonds, and disclaimed certificates of deposit found in the inventory of the safe deposit box at Main Street Bank & Trust and any additional meetings, phone calls, and/or other services provided to the account."
¶17 In addition, the docket entry for October 27, 2005, reads: "By agreement the estate guardian is relieve[d] of the burden at this time of making any inspections of the ward's property in Florida. No written order required."
¶18 B. The Approved Accounts
¶19 1. The First Accounting
¶20 On May 3, 2006, Busey, the successor of Main Street, filed a "Petition To Approve [the] Annual Accounting" for the period of March 1, 2005, to March 31, 2006. The petition notes: "The Annual Report and Accounting reflects the numerous accounts and holdings in this Estate[, ] and since the assets have not yet been combined in one wealth management account, it contains Exhibits showing the status of accounts at different banks." This account, which was more than 400 pages long, listed the disbursements and receipts and identified all of Ruby Kanfer's assets, including bank accounts, stocks, and bonds.
¶21 In a verified narrative prefacing the account, Kathleen Moore, a trust officer, explained that Busey had maintained many of Ruby Kanfer's assets in liquid form "in case it became necessary to fund the trusts" that Ruby Kanfer's deceased husband, Fred Kanfer, had created.
¶22 In its brief, Busey describes the hundreds of pages of documentation attached to Moore's narrative, a description that plaintiffs do not appear to dispute:
"Attached to Moore's narrative were documents identifying: (1) the Initial Balances of Kanfer's accounts at various banking institutions; (2) the Estate Summary as of March 31, 2006 (including the identity of banks where funds were located and the type of asset held (i.e. checking account, savings account, [individual retirement account (IRA)], bonds)); (3) disbursements paid from, deposits into, and interest earned on, various accounts by account and date; (4) appraisals of coins and jewelry; (5) inventory of stock certificates in Ruby's safe deposit box #18; (6) account holdings as of March 31, 2006; (7) statement of transactions, by date; (8) monthly account statements from TD Waterhouse, showing investment by stock and market value; (9) monthly account statements from Wachovia Securities, showing investment by stock and market value; and (10) the blue book value for Ruby's 1999 Chevrolet Malibu."
¶23 On May 4, 2006, Busey served a copy of the petition and accounting on Bequette as well as on the attorneys for Ruth, Lawrence, and Ruby Kanfer. On May 11, 2006, Busey served upon them a notice of hearing. The notice informed them that the hearing on the account was scheduled for May 26, 2006.
¶24 The trial court held the scheduled hearing. Finding that the account "show[ed] Mrs. Kanfer's original and current assets, holdings, and expenditures made on her behalf, " the court approved the account, without objection by any party. Bequette and the attorneys for Ruth, Lawrence, and Ruby Kanfer added their signatures to the court's order, approving it as to form.
¶25 2. The Second Accounting
¶26 On January 29, 2007, Busey filed its second accounting, which covered the period of April 1, 2006, to December 31, 2006. Busey served a copy of the accounting, over 300 pages long, on Bequette, on the attorneys for Ruth and Lawrence Kanfer, and on Ruby Kanfer personally. (On November 15, 2006, the trial court granted Pavia permission to withdraw from representing Ruby Kanfer. An attorney named Weaver replaced Pavia, and on December 18, 2006, to quote from the docket entry for that date, "[s]tipulation for the withdraw[al] of Mr. Weaver as counsel for Ms. Kanfer [was] entered." The court directed that until it ordered otherwise, all notices were to be sent to Ruby Kanfer personally at her Urbana address.)
¶27 On March 29, 2007, Busey served a notice of hearing on Bequette, on the attorneys for Ruth and Lawrence Kanfer, and on Ruby Kanfer. The notice informed them that a hearing on the second account was scheduled for April 10, 2007.
¶28 As before, Moore prefaced the account with a verified narrative. She explained that during 2006 Busey succeeded in transferring and consolidating most of Ruby Kanfer's accounts into the "Main Street Wealth Management Account." Because her accounts held "over 340 equity positions, " evaluating the individual investments would be time-consuming. Busey decided "not [to] start this process until the consolidation was completed in order to have the work be part of the percentage fee that [was] charged, rather than billed at an hourly rate." As before, Busey was holding a greater than normal amount of Ruby Kanfer's assets in cash because of the possibility that the Fred Kanfer trusts would have to be funded.
¶29 Again, we quote from Busey's brief for a description of the documentation attached to Moore's narrative, a description that plaintiffs do not appear to dispute:
"Attached to Moore's narrative were documents identifying: (1) the Estate Summary as filed May 25, 2006 (including the identity of banks where funds were located and the type of asset held (i.e. checking account, savings account, IRA, bonds)); (2) the Estate Summary as of December 31, 2006 (including the identity of banks where funds were located and the type of asset held); (3) disbursements paid from, deposits into, and interest earned on, various accounts by account and date; (4) account statement for account #1025000015 as of December 31, 2006; (5) statement of transaction for account #31 00 4827 06 4; (6) asset schedule between July 1, 2006 and December 31, 2006 in account 1025000015; (7) account statement for account #1060001119 as of December 31, 2006; (8) statement of transactions, by date for account 14 01 4827 06 8; (9) asset schedule between July 1, 2006 and December 31, 2006 in account 10600001119; (10) credit union account and interest from that account; (11) monthly account statements from TD Waterhouse, showing investment by stock and market value; (12) account statements from Wachovia Securities, showing investment by stock and market value; and (13) the blue book value for Ruby's 1999 Chevrolet Malibu."
¶30 On April 10, 2007, the trial court held the scheduled hearing on the second accounting. Bequette, Lawrence Kanfer, Ruby Kanfer, and the attorneys for Lawrence and Ruth Kanfer attended the hearing. Finding that "[t]he Report show[ed] Ms. Kanfer's original and current asset holdings and expenditures made on her behalf, " the court approved the report. Bequette was the only person who signed the court's order under the language "Approved as to Form." Next to his signature, he wrote: "Mrs. Kanfer objected after I discussed it with her. I do not object."
¶31 Ruby Kanfer died on November 7, 2007, whereupon the guardianships ended (see In re Estate of Gebis, 186 Ill.2d 188, 193 (1999)).
¶32 3. The Final Accounting
¶33 On December 10, 2007, Busey filed its final accounting.
¶34 C. The Petitions for Fees
¶35 From May 2005 to June 2007, Busey periodically petitioned the trial court for permission to collect its attorney fees, guardianship fees, and costs from the ward's estate. Specifically, Busey filed the following petitions.
¶36 On May 11, 2005, Busey's attorney filed a petition for fees and costs in the amount of $10, 620.25. On June 1, 2005, the trial court held a hearing on this petition. Bequette and the attorneys for Ruth, Lawrence, and Ruby Kanfer attended the hearing. No one objected to the petition, and the court approved it.
¶37 On July 22, 2005, Busey's attorney filed a petition for attorney fees and costs in the amount of $6, 948 and for guardianship fees and costs in the amount of $9, 295, which included the hourly fees that a contractor, Philip Hoggatt, had been charging for making repairs to Ruby Kanfer's condominium in Champaign. On August 5, 2005, the trial court held a hearing on this petition. Bequette and the attorneys for Ruth, Lawrence, and Ruby Kanfer attended the hearing. No one objected to this petition, and the court approved it.
¶38 On September 15, 2005, Busey's attorney filed a petition for attorney fees and costs in the amount of $2, 409.50 and for guardianship fees and costs in the amount of $5, 683.75, which again included the expense of Hoggatt's work. On October 27, 2005, the trial court held a hearing on this petition. Bequette as well as Ruth Kanfer, Lawrence Kanfer, Ruby Kanfer, and their attorneys attended the hearing. No one objected to the petition, and the court approved it.
¶39 On October 25, 2005, Busey's attorney filed a supplemental petition for attorney fees and costs and a supplemental petition for guardian fees and costs. He served these supplemental petitions on Bequette as well as on the attorneys for Ruth, Lawrence, and Ruby Kanfer. On November 10, 2005, the trial court entered an order granting these petitions. This order noted that in the hearing of October 27, 2005, the court reserved ruling on the supplemental petitions and gave the ...