Daste v. Doris

1

2024 IL App (3d) 230082-U

FERRELL DASTE, as Executor of the Estate of JOHN S. WOLD, Deceased and THOMAS G. WOLD, Individually and as Trustees of the Children's Trust, Plaintiffs-Appellees, v. ERROL S. DORIS, SR., Individually and as Co-Trustee of the E. Thomas Wold Declaration Of Trust, Defendant-Appellant, And JAMES WOLD, Beneficiary-Appellee.

No. 3-23-0082

Court of Appeals of Illinois, Third District

March 14, 2024

This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from the Circuit Court of the 18th Judicial Circuit, Du Page County, Illinois, Circuit No. 20-CH-361 Honorable Bonnie M Wheaton, Judge, Presiding.

JUSTICE BRENNAN delivered the judgment of the court. Justices Peterson and Albrecht concurred in the judgment.

ORDER

BRENNAN JUSTICE

¶ 1 Held: The trial court erred when, following a motion for summary judgment for an accounting, it held the trustee personally liable for a $250,000 distribution to the

Trust's beneficiary and for $73,187 in attorney fees paid for out of the Trust, at least some of which were incurred in the closing of the estate and the proper administration of the Trust as opposed to in defense of the trustee's alleged malfeasance. The trial court did not err in ordering the trustee to repay $174,000 in Trust funds that the trustee had paid to himself (and then to his company) in partial satisfaction of a personal loan from the trustee to the beneficiary, nor in ordering the trustee to repay $62,600 in Trust funds that the trustee had paid to his company as an alleged Trust investment. We remand for further proceedings on the $250,000 and $73,187 transactions as well as the question of trustee fees. Affirmed in part, reversed in part and remanded.

¶ 2 This case concerns appellant-defendant's, Errol Doris's, actions as co-trustee of the E. Thomas Wold Irrevocable Trust (the Trust). Following the death of the co-trustee and beneficiary of the Trust, Lola M. Parton Wold (E. Thomas's second wife of more than 30 years), Doris was to wind-up the Trust and disperse the funds to the respective trusts of plaintiffs, Thomas Wold, John Wold, and James Wold (E. Thomas's three adult children born of his first marriage).^[1] During the wind-up period, Doris disclosed to plaintiffs certain actions he had taken as trustee that prompted them to file a four-count complaint in chancery court against him, including an action for accounting and breach of fiduciary duty. Following a motion for summary judgment, the trial court entered a $575,000 money judgment against Doris personally, representing the total amount of the objected-to transactions. We have jurisdiction over Doris's appeal pursuant to Illinois Supreme Court Rule 304(b)(1) (eff. March 8, 2016) (judgments entered in the administration of an estate, guardianship, or similar proceeding that finally determines the rights or status of a party are immediately appealable without a special finding). See In re Estate of Lee, 2017 IL App (3d) 150651, ¶ 23 (relying on Rule 304(b)(1) to provide jurisdiction to review, inter alia, the trial court's order to provide a trust accounting and a trust distribution). For the reasons that follow, we reverse in part, holding that plaintiffs did not establish as a matter of law that certain of the challenged transactions-distributions to the Trust's beneficiary and for payment of attorney fees-constituted self-dealing so as to shift the burden of proof to Doris to show that those transactions were fair, made in good faith, and/or permitted by the terms of the Trust. However, we affirm the trial court's order that Doris be held personally liable and essentially repay Trust funds distributed to Doris himself (and then to his company) in partial repayment of a personal loan and additional Trust funds distributed to Doris's company as an alleged investment. We remand for further proceedings on the first two transactions. We also remand for the trial court to address trustee fees to determine whether, in light of our partial reversal, Doris is entitled to any trustee fees. Affirmed in part, reversed in part, and remanded.

¶ 3 I. BACKGROUND

¶ 4 On December 27, 2015, E. Thomas Wold passed away. Doris and Lola served as co executors of the estate, which went through probate in the circuit court of Cook County. On October 19, 2017, the probate court discharged the co-executors, and the residue of the estate was distributed to the Trust. Paragraph 12, section 11 of the Trust provided that, following E. Thomas's death, Lola and Doris would succeed him as co-trustees. Other relevant provisions of the Trust were as follows.

¶ 5 Paragraph 6, sections 2A and 3A provided that the Trust's income was payable to Lola. Further, the trustee could distribute to Lola "such sums from [the] principal as [he] deems advisable from time to time for her health and support and maintenance in reasonable comfort, considering her needs, income, and other means of support from all sources known to the trustee, and any other circumstances or factors that the trustee deems pertinent."

¶ 6 Paragraph 12, section 6 addresses certain trustee powers. It provides that the trustee has the power to manage, invest, or sell trust property. Paragraph 12, section 7 "expressly authorizes" the trustee to retain or acquire as a Trust investment any interest in the "family business interests" such as, inter alia, Belcom North America, LLC, or any subsidiary of the same.

¶ 7 Paragraph 12, section 11 addresses conflicts of interest. It provides that co-trustees shall have jointly all the powers given to the trustee, except that no trustee shall have or participate in the exercise of any discretion to determine the propriety or amount of payments or distributions of income or principal to himself or herself or to any person to whom he or she is legally obligated.

¶ 8 Paragraph 12, section 8 provides that the trustee is entitled to reasonable compensation. It also addresses the trustee's duty to account and exonerates the trustee from liability. As to accounting, it provides that the trustee shall render an account of its receipts and disbursements and a statement of assets at least annually "to each adult beneficiary then entitled to receive or have the benefit of income from the trust." As to exoneration, it provides that "no individual trustee shall be liable for any loss or damage incurred by any trust or beneficiary, unless such loss or damage occurs or is caused by willful default, willful misconduct, or gross negligence of that trustee."

¶ 9 The Trust's major assets were interests in two separate trusts, Norfolk Realty Trust (Norfolk) and Eustice, LLC, each of which were real estate investment trusts. The Trust was merely a partial owner in both Norfolk and Eustice. As is relevant here, Norfolk's major asset was a commercial real estate property. The Trust's interest in Norfolk was valued at approximately $445,000. The Trust's interest in Eustice was estimated to be between $1.3 and $1.7 million at different points in the case.

¶ 10 On April 7, 2020, plaintiffs filed a four-count complaint against Doris, including: (1) an action for accounting; (2) breach of fiduciary duty; (3) removal of trustee; and (4) tortious interference with expectancy. As to Count I, an action for accounting, plaintiffs alleged that Lola received income distributions from the trust between the close of the estate (October 19, 2017) and her death (June 10, 2019). When Lola died, mindful that the assets of the Trust were to be distributed in equal shares to the three Children's Trusts, John Wold sought information from Doris regarding the status of the Trust and its assets. On September 25, 2019, John and Doris met with counsel for each trust present. At this meeting, Doris stated that the Trust had paid approximately $62,000 over his term as trustee as investments to Doris's companies (later identified as, inter alia, Belcom).^[2] Doris also stated that he liquidated the Trust's $445,000 interest in Norfolk. Doris continued that, from the liquidation, he distributed approximately $250,000 to Lola for health expenses and $174,000 to himself (and later to Belcom), representing a partial repayment of a 2004, $750,000 personal loan that he had made to E. Thomas and/or Lola.^[3]

¶ 11 Plaintiffs alleged that, "as the remainder beneficiaries of the Trust, [we] are entitled to the accounting [of the Trust] from [Doris] as Trustee." They sought: (1) an accounting from October 19, 2017, to the present; (2) all documentation pertaining to the accounting, especially those documents necessary to support the aforementioned payments, i.e., the $62,000 to Belcom, the $250,000 to Lola, and the $174,000 to Doris (and later to Belcom); and (3) leave to file objections to such accounting and for judgment against Doris in the amount of any deficiencies the court may find.

¶ 12 As to Count II, breach of fiduciary duty, plaintiffs alleged that Doris breached his fiduciary duty to carry out the trust according to its terms and instead acted in his own interest. Specifically, they argued that Doris breached his fiduciary duty when he: (1) transferred $250,000 to Lola without verification as to Lola's need for these funds (2) transferred approximately $174,000 to himself and/or his company; and (3) transferred approximately $62,000 to Belcom. They further argued that, in taking these actions, Doris: (1) failed to "take into account the interests of the remainder beneficiaries of the Trust"; and (2) failed to keep adequate records to support his administration of the Trust. They continued that, as a result of these breaches, the Trust was depleted of over $500,000 in principal assets that would have otherwise...