In re Estate of Muppavarapu

SUPREME COURT CASES

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State: Illinois

Court: 3rd District Appellate

Docket No: 3-04-0969 Rel

Case Date: 08/31/2005

No. 3--04--0969

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2005

IN THE MATTER OF THE ESTATE OF:
PRASAD L. MUPPAVARAPU, Deceased,

PADMAJA RAECHARLA, individually
and as co-trustee under the
Muppavarapu Family Trust,

Plaintiff-Appellant,

SRINIVAS RAO KUDARAVALLI, in
his capacities as Executor of
the Estate of Prasad L.
Muppavarapu, and as Co-Trustee
of the Muppavarapu Family Trust,
and CHITTARANJAN MALIPEDDI, in
his capacity as Co-Trustee of
the Muppavarapu Family Trust,

Defendants-Appellees.

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Appeal from the Circuit Court
of the 14th Judicial Circuit,
Rock Island County, Illinois,

No. 99-P-242

Honorable
Mark A. VandeWiele,
Judge Presiding

JUSTICE BARRY delivered the opinion of the court:

This appeal arises from an order of the circuit court of Rock Island County granting summary judgment in favor of defendants on two counts of plaintiff's complaint. Plaintiff appeals. We reverse and remand.

I. FACTS

Prasad L. Muppavarapu (Decedent), died on April 19, 1999. Decedent's will created a testamentary trust naming his wife, Padmaja Raecharla, plaintiff herein, as a co-trustee, Srinivas Rao Kudaravalli (Sri), decedent's nephew, as executor of the will and as a co-trustee and, Chittaranjan Mallipeddi (CM), the husband of decedent's niece, as a co-trustee. The trust stated that it was established to provide for the medical care and education of plaintiff and decedent's nieces and nephews. The trustees were to serve without compensation according to the terms of the trust. In July 1999, plaintiff and CM signed an agreement to give Sri authority to make all investment and financial decisions for the testamentary trust. Two years later, on July 25, 2001, plaintiff withdrew this authority in a letter to Sri and CM.

Plaintiff filed a three-count complaint against Sri and CM. Plaintiff was awarded summary judgment as to Count I and it is not the subject of this appeal. Count II was brought against Sri and CM alleging that they breached their fiduciary duties by failing to choose investments that would permit for payments for educational and medical needs of the beneficiaries, and by making investments that caused significant depreciation of the trust. It sought recovery of the loss of value of the corpus, an order for payment of plaintiff's medical and educational expenses, and removal of co-defendants as trustees. Count III alleged breach of fiduciary duty by defendants and self-dealing by Sri in that Sri, with the cooperation of CM, borrowed $400,000 from the trust and was guilty of self-dealing. Plaintiff sought recovery of the borrowed funds and removal of defendants as trustees.

Plaintiff served defendants with interrogatories and requested oral depositions on July 14, 2004. Defendants filed their motion for summary judgment on counts II and III on July 16, 2004 alleging that, as to count II, plaintiff could not show bad faith. As to Count III, they alleged that the funds had been repaid with interest (at 3