PATRICIA HARDY STILES, individually and as a beneficiary under the Edith K. Dahlberg Trust, Plaintiff,
EDWARD J. WHALEN, Defendant.
MEMORANDUM OPINION AND ORDER
GARY FEINERMAN, District Judge.
Patricia Stiles initiated this suit by filing a complaint and then an amended complaint against the Edith K. Dahlberg Trust, James Hardy in his representative capacity as trustee, and Edward Whalen in his representative capacity as trustee and also in his individual capacity. Docs. 1, 13. After questions were raised regarding subject matter jurisdiction and the possible failure to join necessary and indispensable parties, Doc. 25, Stiles sought and was granted leave to file a second amended complaint, Doc. 35, which is greatly scaled down in terms of claims and requests for relief, and which names only Whalen as a defendant, Doc. 36. Whalen has moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(b)(7). Doc. 37. The motion is denied.
In considering a facial challenge to subject matter jurisdiction under Rule 12(b)(1) or a motion to dismiss under Rules 12(b)(6) or 12(b)(7), the court assumes the truth of the complaint's factual allegations, though not its legal conclusions. See Munson v. Gaetz, 673 F.3d 630, 632 (7th Cir. 2012) (Rule 12(b)(6)); Apex Digital Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009) (Rule 12(b)(1)); Davis Cos. v. Emerald Casinos, Inc., 268 F.3d 477, 479 n.2 (7th Cir. 2001) (Rule 12(b)(7)). The court must also consider "documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice, " along with additional facts set forth in the plaintiff's brief opposing dismissal, so long as those facts "are consistent with the pleadings." Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012). The following facts are set forth as favorably to Stiles as those materials allow. See Gomez v. Randle, 680 F.3d 859, 864 (7th Cir. 2012).
A. The Trusts and Wills
Stiles's grandmother, Pauline Kraft, was the beneficiary of and possessed assignment power over a trust created by her deceased husband ("Kraft Trust"). Doc. 36-2 at 1-14. Kraft's will assigned her residuary estate to the Kraft Trust, named two trustees, and instructed them to make various distributions. Doc. 36-2 at 5-6. Kraft's will provided that upon the death of her only child, Edith Dahlberg, the trustees were to "divide the trust estate into equal shares" for each of Dahlberg's then-living children. Doc. 36 at ¶ 2; Doc. 36-2 at 5. Dahlberg had three children: Stiles, Hardy, and Susan Macon. Doc. 36 at ¶¶ 9, 11-12. Dahlberg eventually became co-trustee of the Kraft Trust, but in 2009 her health had deteriorated and Whalen replaced her. Id. at ¶ 3; Doc. 36-2 at 16-17.
In the meantime, Dahlberg created the Edith K. Dahlberg Trust ("Dahlberg Trust"), of which Dahlberg was the beneficiary and named trustee. Doc. 36 at ¶ 4; Doc. 36-3 at 1. Whalen and Hardy were to become co-trustees upon Dahlberg's death, Doc. 36 at ¶ 4; Doc. 36-3 at 11, but Dahlberg relinquished her status as trustee and assigned that power to Whalen and Hardy in 2009. Doc. 36 at ¶ 7; Doc. 36-4 at 13. The trust provided for the following distributions, among others, to be made upon Dahlberg's death: $300, 000 to each child; $100, 000 to the American Baptist Assembly, Green Lake Center, of Green Lake, Wisconsin ("Assembly"); and $250, 000 to Lawrence University. Doc. 36 at ¶ 4; Doc. 36-3 at 4. The trust further provided for the following distributions of real property "[a]s soon as it is practical to do so" after Dahlberg's death: Macon was to receive "Kraftwood Lot One and Kraftwood Lot Three"; Hardy was to receive "Kraftwood Lot Two"; and Stiles was to receive the "Kentucky Horse Farm." Doc. 36 at ¶ 4; Doc. 36-3 at 5. In the event the properties had unequal market values, the trust provided for cash payments "so that the total distribution[s] to [the] children... [were] equal." Doc. 36 at ¶ 4; Doc. 36-3 at 5.
Dahlberg executed her final will in 2000; Hardy and Whalen were the executors. Doc. 36 at ¶ 6; Doc. 36-4 at 7. The will allocated Dahlberg's personal property equally among her children and assigned the residuary estate to the Dahlberg Trust. Doc. 36 at ¶ 6; Doc. 36-4 at 7.
B. Relevant Events
Dahlberg had "a medical event" in May 2007 that rendered her incapable of managing her affairs. Doc. 36 at ¶ 20. Prior to May 2007, Dahlberg had named Hardy and Whalen her attorneys-in-fact in an Illinois Statutory Short Form Power of Attorney for Property form. Id. at ¶ 5; Doc. 36-4 at 1. The power of attorney became "effective on [Dahlberg's] incapacity to be determined by written certification of a physician familiar with [her] condition that [she is] unable to transact ordinary business." Doc. 36 at ¶ 5 (emphasis omitted); Doc. 36-4 at 2 (emphasis omitted). No physician ever made that determination. Doc. 36 at ¶ 5. Dahlberg completed a second Illinois Statutory Short Form Power of Attorney for Property form in 2007 after the medical event, Doc. 36 at ¶ 8; Doc. 36-4 at 14, but Stiles alleges that she was not legally competent to do so. Doc. 36 at ¶ 8.
After the medical event, Hardy began to control Dahlberg's funds. Hardy opened an account in his name, into which he began depositing funds from the Dahlberg Trust that belonged to Dahlberg. Id. at ¶ 24; Doc. 36-4 at 24-28. Hardy also distributed approximately $9, 000 belonging to either the Dahlberg Trust or Dahlberg to three charities not named in the trust. Doc. 36 at ¶ 24. Hardy also made interest-free loans from the Dahlberg Trust to Macon and himself for $144, 621.21 and $55, 000, respectively. Id. at ¶ 22; Doc. 36-4 at 19-20. Whalen either was or should have been aware of this conduct. Doc. 36 at ¶ 32.
After Dalhberg died in March 2012, Whalen distributed $300, 000 to each of Dahlberg's children, minus portions of what the Dahlberg Trust had loaned to Macon and Hardy, although Macon still owes $94, 616.21 on her loan. Doc. 36 at ¶¶ 23, 25; Doc. 36-4 at 22. Whalen intends to distribute the bequests set forth in the Dahlberg Trust to Lawrence University and the Assembly; Stiles objects to these distributions on the ground that Lawrence University and the Assembly already received adequate distributions from the trust after Dahlberg's incapacitation but before her death. Doc. 36 at ¶¶ 15-16, 26. With respect to the real property, Whalen employed unqualified appraisers that undervalued the Kraftwood properties (which had been bequeathed to Macon and Hardy) and accurately appraised the Kentucky Horse Farm (which had been bequeathed to Stiles); this had the effect of reducing or eliminating the "true up" money that would have been due to Stiles under the trust. Id. at ¶¶ 30-31. In addition, Whalen refused to transfer to her title to the horse farm. Id. at ¶ 34.
Whalen received fees for his work as trustee of the Kraft and Dahlberg Trusts. Id. at ¶ 29. At one point, Whalen sought $400, 000 in fees from the Dahlberg Trust, but he "changed" that calculation after Stiles's counsel objected. Id. at ¶ 27. Whalen wrongfully received some fees before acting as trustee and wrongfully collected fees after his appointment ...