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NC Illinois Trust Co v. Madigan
State: Illinois
Court: 4th District Appellate
Docket No: 4-03-0738 Rel
Case Date: 07/12/2004

NO. 4-03-0738

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

  

NC ILLINOIS TRUST COMPANY, n/k/a
NATIONAL CITY BANK OF MICHIGAN/ILLINOIS,
as Trustee Under the Will of Earl M.
Bane, Deceased,
                      Petitioner-Appellant and
                      Cross-Appellee,
                       v.
HONORABLE LISA MADIGAN, Attorney
General of the State of Illinois,
                      Respondent-Appellee and
                      Cross-Appellant,
                      and
THE BOARD OF TRUSTEES OF THE UNIVERSITY
OF ILLINOIS; LOYOLA UNIVERSITY OF
CHICAGO; THE UNIVERSITY OF CHICAGO; and
NORTHWESTERN UNIVERSITY,
                      Intervenors-Appellees and
                      Corss-Appellants.
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Appeal from
Circuit Court of
McLean County
No. 99CH71











Honorable
G. Michael Prall,
Judge Presiding.


JUSTICE COOK delivered the opinion of the court:

Earl M. Bane died in 1974. His will directed that hisassets be put into a trust to care for his wife during her life andthat the residue be used to provide for medical research. Bane'swife predeceased him, and on his death the Earl M. Bane CharitableTrust (trust) was established. The trust, administered by a predecessor to petitioner National City Bank of Michigan/Illinois (National City), made annual distributions to the four universities thatare parties to this action (intervenors).

In 1999, National City filed a petition to reform thetrust so as to avoid federal excise taxes. The Attorney General ofIllinois and the intervenors (respondents) filed a counter-petitionseeking to terminate the trust and distribute its assets to theintervenors. The circuit court found that Bane had not intended tocreated a perpetual charitable trust. On July 19, 2001, the courtordered that the trust be terminated and the assets distributed tothe intervenors.

On August 17, 2001, National City filed a motion forreconsideration, which the circuit court denied on November 16, 2001. Before filing the motion, National City had consulted with attorneyJerold Horn about whether to appeal. On December 12, 2001, NationalCity filed an appeal from the court's judgment terminating the trust. National City also filed a motion to stay enforcement of the judgmentpending appeal, which the circuit court granted. This court affirmedthe circuit court's judgment. NC Illinois Trust Co. v. Ryan, No. 4-01-1109 (December 16, 2002) (unpublished order under Supreme CourtRule 23).

Following the appeal, National City filed a petition inthe circuit court, seeking (1) $29,562.68 in attorney fees incurredin the appeal, (2) $10,600 for the fees of attorney Horn, and (3)$27,154.20 in compensation for administering the trust during theappeal. A tax filing reveals that at the time of this petition,National City had already paid Horn $7,790 of his $10,600 fee out oftrust assets. Respondents opposed National City's requests and alsosought to recover the $7,790 already paid to Horn.

The circuit court denied National City's petition for feesbut refused to require it to return the $7,790. Respondents moved tomodify the judgment to account for the $7,790, but the court deniedthe motion. National City appealed the denial of its petition forfees, and respondents cross-appealed the court's denial of the motionto modify the judgment.

We first consider whether the circuit court erred indenying National City attorney fees incurred in prosecuting its firstappeal. We conclude that it did not. The costs of litigating a caseto construe a will are generally paid by the estate, assuming therewas an honest difference of opinion about the testator's intent. Inre Estate of Smith, 68 Ill. App. 3d 30, 32, 385 N.E.2d 363, 365(1979). This rule, however, applies only in the trial court; oneunsatisfied with the judgment appeals at his own risk and cost. Glaser v. Chicago Title & Trust Co., 401 Ill. 387, 393, 82 N.E.2d446, 449 (1948); Landmark Trust Co. v. Aitken, 224 Ill. App. 3d 843,858, 587 N.E.2d 1076, 1086 (1992) (Fifth District). The partiesdevote much of their argument to discussion of whether the rule inGlaser governs this case. Whether a circuit court applied thecorrect legal standard is a question of law that we review de novo. In re Marriage of Sobol, 342 Ill. App. 3d 623, 627, 796 N.E.2d 183,186 (2003).

The Glaser case concerned the will of Jacob Franks. Glaser, 401 Ill. at 388, 82 N.E.2d at 446. The beneficiaries underJacob's will included his daughter Josephine and his son Jack. Jackdied soon after his father did and Jack's will created a trust thatwould hold assets inherited from Jacob. When Josephine sued toconstrue Jacob's will, the trustees under Jack's will contested thesuit and then appealed the judgment. Jack's trustees were successfulin getting the trial court's judgment reversed and on remand soughtattorney fees for their appeal from the corpus of Jacob's trustestate. The supreme court disallowed the petition for fees. Thecourt stated:

"Where there is ambiguity in a will the interested parties may not be able to safely andproperly proceed under it until there has beena judicial determination of its meaning. Whenthe will has been construed by a court havingjurisdiction of the subject matter and the parties, its decree affords authority to all interested persons for the administration thereunder according to its terms unless it be modified or set aside by a court of superior jurisdiction. The construction placed upon a willby the lower court may not be satisfactory tosome of the parties and they may be able tohave it changed on appeal, but, should theyfeel disposed to litigate beyond the court oforiginal jurisdiction, this they must do attheir own risk and costs." Glaser, 401 Ill. at393, 82 N.E.2d at 448-49.

This case was in essence one to construe Earl Bane's will;and if that were the whole story, it would be a straightforwardapplication of Glaser to say that National City was free to appealthe circuit court's decision if it did so at its own risk and costs. Here, however, the court's interpretation of the will (finding nointent to establish a charitable trust) came after the trust was inoperation for 22 years. We nevertheless agree with the trial courtthat under the somewhat unusual circumstances of this case, Glasershould apply.

Although the Glaser case dealt with a will construction,the rule applies to certain situations involving trusts as well. Glaser itself relied on Sherman v. Leman, 137 Ill. 94, 27 N.E. 57(1891), in which a trustee appealed an order removing him from hisposition. The order was affirmed on appeal, and the trustee thensought to recover his costs for prosecuting the appeal. The courtstated that "[the trustee] undoubtedly had the right to appeal, butthe exercise of that right involved considerations affecting himpersonally, only, and not such as materially affected the trustestate, and he exercised it as do all persons litigating for theirown interests--at his peril." Sherman, 137 Ill. at 99, 27 N.E. at58. In our case, it is worth noting that the beneficiaries of thecharitable trust sought to have it terminated. The Attorney General,who represents the ultimate beneficiary of any charitable bequest--the State (see In re Estate of Laas, 171 Ill. App. 3d 916, 920-21,525 N.E.2d 1089, 1092 (1988))--also was in favor of distributing theassets. National City was therefore the only party interested inperpetuating the trust, and it could be said that its appeal involvedconsiderations of interest primarily to itself.

National City attempts to avoid the Glaser rule on thebasis that the order appealed here materially affected the trustestate, and as trustee, National City had a reasonable basis toappeal. The problem with the argument is that the same was true inGlaser itself. There, the trustees of Jack's estate appealed thetrial court's decision and were even successful in having it reversed, yet were not allowed to recover their fees. This casediffers from Glaser in that the trust here was created (erroneously,it turns out) under Bane's will, whereas the trust in Glaser wasformed under Jack's will, one step removed from the will at issue inthe case. Glaser, 401 Ill. at 388, 82 N.E.2d at 446. That difference is insufficient to avoid application of the rule in Glaser,because National City is still a party dissatisfied with the construction of a will.

National City also argues that applying that rule in thiscase will dampen the vigor with which trustees protect the truststhey administer because they will not be able to count on recoveringtheir fees incurred on appeal. National City points out that when acourt decree dissolves a testamentary trust, the trustee has a rightto appeal, citing Peoples Bank of Bloomington v. Trogdon, 276 Ill.App. 373, 385-36 (1934) (Third District), and argues that a trusteeis obligated to try to maintain the trust if possible, citing Steinv. LaSalle National Bank, 328 Ill. App. 3, 5, 65 N.E.2d 216, 217(1946) (First District).

We note that the cases cited for these propositionspredate the decision in Glaser. If National City is correct in itscharacterization of a trustee's duty to defend the integrity of atrust, then that duty has existed alongside the Glaser rule for wellover 50 years with no apparent reduction in the vigor of trustees.

On the other hand, it is not clear that a trustee's dutyto appeal is as all encompassing as National City suggests. NationalCity has provided only limited authority for the claim that it had aduty to appeal here. The Stein case involved an agreement among thebeneficiaries of a spendthrift trust to terminate the trust. Stein,328 Ill. App. at 5, 65 N.E.2d at 217. A spendthrift trust exists inlarge part to protect the beneficiaries from themselves by limitingtheir access to the trust corpus, whereas a charitable trust isdesigned to advance a certain social good or even to benefit societyat large. The trustee's duty to appeal a trust's termination maywell vary depending on the type of trust involved. In Stein, moreover, there was no question of whether the trust should exist, butonly of whether the beneficiaries should be able to thwart itsfunction by terminating it. Stein, 328 Ill. App. at 6, 65 N.E.2d at218. That is very different from this case, in which the questionaddressed by the trial court was not the termination of a valid trustbut whether the trust should have been formed to begin with.

National City's brief also misquotes a California case,Estate of Bunn v. Bank of America National Trust & Savings Ass'n, 33Cal. 2d 897, 899, 206 P.2d 635, 636 (1949), which it claims held thata trustee "'has the right and duty to appeal from an order or judgment affecting the existence, modification[,] or termination of atrust.'" (Emphasis added.) The emphasized language quoted by National City, however, does not appear in the case cited, or for thatmatter in any case of which we are aware. In Bunn, as in this case,the trial court determined that the decedent's will had not intendedto create a charitable trust. Bunn, 33 Cal. 2d at 898, 206 P.2d at636. The issue on appeal was whether the trustee had standing toappeal, not whether it had a duty to do so. Bunn, 33 Cal. 2d at 899,206 P.2d at 637.

In any event, even if we were to assume that National Cityhad a duty to appeal the trial court's judgment in this case, wewould still conclude that Glaser should apply. What National Cityfails to acknowledge is that any money it receives from Bane's estateis money that cannot be used to further his wishes as expressed inhis will. When a trustee in a case like this brings a reasonable butunsuccessful appeal, we see no reason why the cost of that appealshould be allocated to the estate instead of to the trustee. Although we are not prepared to conclude that Glaser or related caseswould foreclose the circuit court's power to award fees in thepresence of extraordinary circumstances, no such circumstances existin this case. The circuit court was correct when it refused to awardNational City attorney fees incurred on appeal.

Despite the circuit court's decision not to award NationalCity attorney fees for its appeal, it denied respondents' request torequire National City to refund $7,790 that it had already paid toJerold Horn. This was error. The circuit court decided that thesefees related to the posttrial motion phase of the trial and not tothe appeal. As Horn's affidavit regarding these fees makes clear,however, he was consulted for his opinion on whether National Cityshould appeal the order terminating the trust. If Glaser applies tothis case, as we hold that it does, then these fees should have beendenied. National City should not have been allowed to use money fromthe trust to pay Horn.

The final issue we must address is whether National Cityshould receive compensation for administering the trust during thependency of the first appeal. National City points to section 7 ofthe Trusts and Trustees Act, which provides that "[t]he trustee shallbe reimbursed for all proper expenses incurred in the management andprotection of the trust and shall be entitled to reasonable compensation for services rendered." 760 ILCS 5/7 (West 2002). NationalCity believes that because the stay of the circuit court's judgmentkept the trust intact, albeit temporarily, the court was compelledunder this statutory section to compensate National City's efforts. We disagree.

National City argues that a stay of enforcement preservesthe status quo. But the case cited by National City for this rulegoes on to say that a stay "restrains an appellee from affirmativeaction to enforce his judgment but it does not impair the validity oreffect of the judgment itself. [Citation.] Clearly, the stay wouldnot authorize what the judgment or decree prohibits the appellantfrom doing. [Citations.]" Gregory v. First National Bank & TrustCo., 84 Ill. App. 3d 957, 960, 406 N.E.2d 583, 586 (1980) (SecondDistrict).

Here, if National City had not sought a stay, the trustwould have been dissolved immediately and National City could certainly not have received compensation for administering it thereafter. The stay had the effect of postponing this occurrence butshould not be allowed to impair the ultimate effect of the judgment. To accept National City's argument and allow it compensation wouldremove yet more money from the trust that the judgment was meant todissolve. We conclude that the mere fact that the judgment wasstayed does not require that National City receive the compensationit seeks.

For the foregoing reasons, we affirm the circuit court'sjudgment denying attorney fees and trust administration costs toNational City. We grant respondents' cross-appeal, and thereforereverse the circuit court's decision allowing National City to keepthe $7,790 paid to Jerold Horn for his services in the appeal.

Affirmed in part and reversed in part; cause remanded.

STEIGMANN and MYERSCOUGH, JJ., concur.

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