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Litvak v. Black

Court of Appeals of Illinois, First District, Sixth Division

November 22, 2019

KATHERINE LITVAK, Plaintiff-Appellee,
v.
BERNARD S. BLACK and SAMUEL BLACK, as Trustees of the Supplemental Needs Trust for the Benefit of Joanne Black, Dated December 19, 1997; BERNARD S. BLACK and SAMUEL BLACK, as Trustees of the Irrevocable Trust for the Benefit of the Issue of Renata Black, Dated December 19, 1997; and BERNARD S. BLACK and SAMUEL BLACK, as Trustees of the Joanne Black 2013 Trust Agreement, Dated March 22, 2013, Defendants-Appellees, (Jeanette Goodwin, as Court-Appointed Successor Conservator for Joanne Black, Intervenor-Appellant).

          Appeal from the Circuit Court of Cook County. No. 17 L 9743 Honorable James E. Snyder, Judge Presiding.

          Attorneys for Appellant: Peter Stasiewicz, of Arcturus Law Firm, of Chicago, for Intervenor-Appellant.

          Attorneys for Appellee: Eugene E. Murphy Jr., David F. Hyde, and Daniel J. Scheeringa, of Murphy Law Group, LLC, of Chicago, for appellee Katherine Litvak.

          No brief filed for other appellees.

          PRESIDING JUSTICE MIKVA delivered the judgment of the court, with opinion. Justices Cunningham and Connors concurred in the judgment and opinion.

          OPINION

          MIKVA, PRESIDING JUSTICE

         ¶ 1 Unsatisfied with his deceased mother's decision to leave significant assets to his sister, Joanne Black, who suffers from a long-standing mental illness, Bernard S. Black devised a scheme to gain control of Joanne's finances as her court-appointed conservator. Letting the Colorado probate court that appointed him to that position believe he would deposit certain payable-on-death assets left directly to Joanne into a trust their mother had established for Joanne's continued care, Mr. Black instead caused the bulk of those funds to pass through his mother's estate, where one-third of them-over $1 million-was redirected to a trust established for the benefit of Mr. Black and his children, with only the remaining two-thirds going to Joanne.

         ¶ 2 When informed of these events, the Colorado court ordered a forensic accounting, held a multiday evidentiary hearing, and ultimately concluded that Mr. Black had misled the court, breached his fiduciary duties, and committed civil theft. Mr. Black was enjoined from accessing any trust funds belonging to his sister and ordered to pay statutory damages of three times the amount he stole from her. Mr. Black thus found himself unable-though not for want of trying- to access the funds held in two trusts established for Joanne's benefit or in the third trust, set up for the benefit of Mr. Black and his children, to which funds intended for Joanne had been redirected.

         ¶ 3 It is then that Mr. Black's wife, plaintiff Katherine Litvak, initiated this lawsuit, in which she asserts that all three trusts are jointly and severally indebted to her for hundreds of thousands of dollars. Ms. Litvak failed to notify Joanne's cousin, Anthony Dain, who served as co-trustee for two of the trusts, or Jeanette Goodwin, Joanne's new court-appointed conservator, of this lawsuit. One week after the suit was filed, Ms. Litvak, Mr. Black, and Mr. Black's son Samuel (also a trustee) asked the circuit court to enter an agreed judgment against the trusts for the full amount of the claim. Upon learning of these events, Ms. Goodwin sought to intervene and vacate the judgment. The circuit court granted her request with respect to the two trusts for which Joanne was a beneficiary but allowed the judgment to stand as to the third trust because that trust benefitted only Mr. Black and his children.

         ¶ 4 For the reasons that follow, we affirm in part and reverse in part. We conclude that it was an abuse of discretion not to vacate the agreed judgment in its entirety.

         ¶ 5 I. BACKGROUND

         ¶ 6 The relevant events preceding the filing of this litigation were set out quite recently by this court in an opinion affirming the denial of Mr. Black's motion to vacate the filing of a foreign money judgment: i.e., the Colorado court's award of treble damages in favor of Joanne and against Mr. Black. Those facts bear repeating here:

"Defendant and his sister Joanne Black are the children of the late Renata Black, who died in May 2012. Renata's will provided that her estate assets would be divided into two trusts. Two-thirds of Renata's estate would be distributed to a 'Supplemental Needs Trust' for the benefit of Joanne, who had been diagnosed with schizophrenia. One-third of Renata's estate would be distributed to a trust for defendant [Mr. Black] and his children. Defendant was appointed as the executor of Renata's estate, the bulk of which consisted of accounts holding nearly $3.5 million. Defendant discovered that, before Renata's death, she designated Joanne as the payable-on-death beneficiary of some of Renata's accounts, resulting in the assets in those accounts passing directly to Joanne rather than to the Supplemental Needs Trust.
At the time of Renata's death, Joanne was homeless in Colorado. In December 2012, defendant initiated a proceeding in the Denver Probate Court seeking appointment as conservator of Joanne's estate because her 'mental illness interferes with her ability to manage her assets and income.' The probate court appointed an attorney and a guardian ad litem for Joanne and subsequently appointed defendant as Joanne's conservator. According to defendant, Joanne's attorney and the guardian ad litem both expressly consented to defendant's request that, as conservator, he be permitted to disclaim Joanne's interest in Renata's payable-on-death accounts. After a hearing, the probate court specifically authorized defendant '[t]o disclaim [Joanne's] interest as beneficiary under all payable on death or transferable on death accounts *** owned by *** Renata.' Defendant executed the disclaimer, which resulted in the assets in the payable-on-death accounts flowing through Renata's will, with two-thirds going to Joanne's Supplemental Needs Trust and one-third going to the trust for the benefit of defendant and his children [the Issue Trust].
In February 2015, Joanne's counsel filed a motion in the probate court seeking to void the disclaimer. The motion asserted that defendant breached his fiduciary duties to Joanne by failing to disclose the effect of the disclaimer on Joanne's interest in the nearly $3.5 million in assets from Renata's accounts. At a status conference on the motion, the probate court ordered an independent accounting of Joanne's assets, scheduled an evidentiary hearing, and 'advised the parties that it would consider whether "disgorgement or unwinding of fiduciary actions" was appropriate.' [Citation.] On the day before the evidentiary hearing, the guardian ad litem filed a motion alleging that defendant's conduct amounted to civil theft under Colorado law and requested that the probate court award treble damages pursuant to Colorado's civil theft statute. [Citation.] After the evidentiary hearing, the probate court concluded that defendant breached his fiduciary duties to Joanne while serving as the conservator of Joanne's estate by converting roughly $1.5 million of her assets for his own benefit. The probate court found that plaintiff was required to ...

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