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Spencer v. Di Cola

Court of Appeals of Illinois, First District, Fourth Division

May 1, 2014

LYLE SPENCER, JR., as Beneficiary of the Lyle M. Spencer Trust, Plaintiff-Appellant,
v.
JOAN DI COLA, as Successor Trustee of the Lyle M. Spencer Trust, Defendant-Appellee (Loren Spencer, a Minor, Lyle Spencer III, a Minor, and Melissa Spencer, a Minor, as Beneficiaries of the Lyle M. Spencer Trust, Plaintiffs; Emily Spencer and Julia Spencer, as Beneficiaries of the Lyle M. Spencer Trust, and the Spencer Foundation, an Illinois Not-For-Profit Corporation, Defendants).--LYLE SPENCER, JR., as Beneficiary of the Lyle M. Spencer Trust, Plaintiff-Appellant,
v.
JOAN DI COLA, as Successor Trustee of the Lyle M. Spencer Trust, Defendant-Appellee (Loren Spencer, a Minor, Lyle Spencer III, a Minor, and Melissa Spencer, a Minor, as Beneficiaries of the Lyle M. Spencer Trust, Plaintiffs; Emily Spencer and Julia Spencer, as Beneficiaries of the Lyle M. Spencer Trust, and the Spencer Foundation, an Illinois Not-For-Profit Corporation, Defendants)

Rehearing denied August 18, 2014.

Modified upon denial of rehearing August 21, 2014.

Page 2

Appeal from the Circuit Court of Cook County, No. 09-CH-41964; the Hon. LeRoy K. Martin, Jr., Judge, presiding.

SYLLABUS

The trial court properly entered summary judgment for the individual trustee of a family trust in a beneficiary's action seeking the appointment of a different trustee, since the trust's terms did not grant such authority to the beneficiaries and the agreements entered into by the beneficiaries were ineffective to achieve that goal; furthermore, the individual trustee was properly awarded attorney fees for defending the challenge on behalf of the interests of the beneficiaries as a whole.

Kerry R. Peck, Timothy J. Ritchey, and Jesse A. Footlik, all of Peck, Bloom, LLC, of Chicago, for appellant.

Nancy G. Lischer and Peter D. Sullivan, both of Hinshaw & Culbertson LLP, of Chicago, for appellee.

JUSTICE LAVIN delivered the judgment of the court, with opinion. Justices Fitzgerald Smith and Epstein concurred in the judgment and opinion.

OPINION

Page 3

LAVIN, J.

[¶1] In the matter before us, we confront an appeal by beneficiaries of a trust, who claim that they ought to be able to appoint a corporate trustee to effectively replace an individual trustee, without any proof of cause for removal, in a manner that they suggest is consistent with the trust's terms. The original trust documents provided for both an individual trustee and a corporate trustee. Many years before the action triggering this appeal was filed, however, the original corporate trustee filed suit asking to be removed because of a perceived conflict between the corporate trustee, the appointed individual trustee and several beneficiaries (No. 82 CH 436). In the 1982 order that granted this request, the trial court specifically found that the relevant will creating the trust did not " require the appointment of a successor corporate trustee." Two years later, pursuant to petition, the trial court reformed a trust provision to grant the adult beneficiaries the power to appoint successor trustees (No. 84 CH 2159). More than two decades later, disputes arose concerning the amount of distributions by the individual successor trustee, which led the beneficiaries to file the present action (No. 09 CH 41964). The beneficiaries, led by plaintiff Lyle Spencer, Jr., initially wanted to remove the trustee but ultimately changed course, asserting that they were merely attempting to appoint a corporate trustee, notwithstanding the 1982 action. The beneficiaries also executed documents attempting to appoint a " successor" or " substitute" corporate trustee. After cross-motions for summary judgment were filed, the trial court denied the beneficiaries relief. This appeal followed.

[¶2] I. BACKGROUND

[¶3] We recite only those facts necessary to resolve the issues raised on appeal. Lyle M. Spencer, Sr. (the Settlor), died in 1968, leaving an estate in excess of $75 million. The portion of his estate relevant to this appeal consisted of a family trust, which left $3 million to his four male children, Lyle Spencer, Jr. (Lyle), Steven Spencer, Richard Spencer and David Spencer, as well as their descendants. The trust was primarily oriented toward education and housing, with the possibility of assisting in the start up of businesses. In addition, the trust language empowered these individual and corporate trustees with great discretion, including the ability to make unequal distributions to the beneficiaries. As originally drafted, the trust appointed Harlowe E. Bowes as the individual trustee and Harris Trust and Savings Bank or its corporate successor (Harris) as the corporate trustee. Article VIII(a) of the trust provided, in pertinent part, as follows:

" If at any time no individual hereunder is acting as Trustee, then such individual as shall be designated by a majority of

Page 4

the partners of Sidley & Austin or of any successor to the law practice of said firm, shall act as successor individual Trustee."

Thus, the original trust contemplated that an individual successor would be appointed if no individual was acting as trustee. We note that the trust did not specifically provide for the appointment of a corporate successor trustee in the event that no corporation was acting as trustee.

[¶4] Moreover, article VIII(e) stated as follows:

" The Trustees shall have power to appoint any bank or trust company wherever located as substitute Trustee of any trust, if and as often as the Trustees deem it advantageous; to give the substitute Trustee such titles, powers and discretions as the Trustees deem advisable; to remove a substitute Trustee; to accept the resignation of a substitute Trustee; and to give a full release and discharge to a substitute Trustee, conclusive and binding on all beneficiaries hereunder, by approving its accounts. A substitute Trustee, upon its resignation or removal, shall transfer all trust property in its possession as the Trustees direct. The Trustees' power to appoint and remove substitute Trustees may be exercised in their discretion and shall be exercised if directed in writing by a majority in interest of the beneficiaries of the trust."

Thus, this provision grants a sitting trustee several distinct powers, one of which must be exercised at the appropriate direction of the beneficiaries. We further note that while article VIII(e) provided that a substitute trustee could be removed, no provision in article VIII expressly provided that the sitting trustee could be removed by the beneficiaries. Cf. Mucci v. Stobbs, 281 Ill.App. 3d 22, 24, 31, 666 N.E.2d 50, 216 Ill.Dec. 882 (1996) (the trust expressly provided the beneficiary the right to " remove" any sitting trustee); see also George G. Bogert et al., The Law of Trusts and Trustees § 520, at 27 (3d ed. 2000) (" If no provision for removal is made in the trust instrument or in the statutes of the state, neither the settlor, the beneficiary, nor a co-trustee has the power of removal." ).

[¶5] More than a decade later in 1982, after approximately $1.2 million had been distributed from the original trust, Harris filed suit asking to resign as the corporate trustee because of disputes between Harris on one side and Murray and the Settlor's children on the other (No. 82 CH 436). Harris wanted to deny distribution requests that Murray wanted to grant. Murray also requested the court to order that he be the sole trustee, which drew no objection from Lyle or the other beneficiaries. Murray argued that the trust documents envisioned the possibility that there would not be any need for a corporate trustee and, more specifically, that there was no " requirement that there always be a corporate trustee." The trial court agreed and ordered that Murray be the sole trustee of the family trust.

[¶6] Two years later, Murray asked the trial court to split the family trust into three individual trusts to reflect the differing interests of the Settlor's three remaining sons, including Lyle, and their descendants (No. 84 CH 2159). All three adult beneficiaries and Murray himself were in agreement on the various changes. Notable to this appeal, Murray also asked to modify article VIII(a) because Sidley & Austin, which had originally been charged with naming successor individual trustees, did not wish to remain in that role. Murray, after consulting with each of the ...


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