Ferguson v. Heath

1

2024 IL App (3d) 230681-U

MATTHEW FERGUSON, Plaintiff and Counterdefendant-Appellant, v. DOUGLAS JOHN HEATH, Individually and as Trustee of the John F. Heath and Mary M. Heath Trust, and CAROLYN MARIE YOUNG Defendants-Appellees

Douglas John Heath, Individually and as Trustee of the John F. Heath and Mary M. Heath Trust, Defendant and Counterplaintiff- Appellee

No. 3-23-0681

Court of Appeals of Illinois, Third District

November 18, 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 13th Judicial Circuit, Grundy County, Illinois, Circuit No. 20-CH-26 Honorable Sheldon R Sobol, Judge, Presiding.

JUSTICE BRENNAN delivered the judgment of the court. Justices Holdridge and Davenport concurred in the judgment.

ORDER

BRENNAN JUSTICE

¶ 1 Held: The trial court's finding that defendant did not act in bad faith was not against the manifest weight of the evidence. The trial court did not abuse its discretion when it awarded defendant trustee fees, denied plaintiff's attorney fees and costs, and denied removal of defendant as trustee. Plaintiff failed to develop his argument regarding the sale of the residence and, therefore, forfeited the argument. Affirmed.

¶ 2 Plaintiff, Matthew Ferguson, appeals the trial court's finding following a bench trial that, although defendant, Douglas Heath, breached his fiduciary duty as trustee when he failed to pay rent while living at 2010 East Pine Bluff Road in Morris (the residence), a trust asset, he did not do so in bad faith. Plaintiff challenges the trial court's award of trustee fees and denial of plaintiff's request to remove defendant as trustee. Plaintiff further argues that he is entitled to reasonable attorney fees and costs and that the residence should be sold. For the reasons set forth below, we affirm the trial court's judgment.^[1]

¶ 3 I. BACKGROUND

¶ 4 John and Mary Heath (settlors) had three children: Carolyn, Priscilla, and defendant. Priscilla died in 2008 and had two children, Jacob and plaintiff. Jacob died in 2017.

¶ 5 The subject of this appeal is a revocable living trust created by the settlors, the purpose of which was to provide financial support to its beneficiaries. The operative documents are the John F. Heath and Mary M. Heath Declaration of Trust Dated April 6, 1991 (Declaration), and the First Amendment to the John F. Heath and Mary M. Heath Declaration of Trust Dated April 6, 1991 (Amendment). The Amendment is dated May 5, 2009. The trust became irrevocable upon the death of the first settlor, at which time two separate trusts were to be created: a marital trust and a family trust. The family trust (the Trust) is the subject of this appeal.

¶ 6 At the inception of the revocable living trust, the settlors were named as co-trustees. Upon the death of the first settlor, the surviving settlor was to become the sole trustee. Defendant was appointed as successor trustee upon "the death, disability, or resignation" of both settlors. The relevant provisions of the Declaration are as follows.

¶ 7 Article IV, section 3, as amended, provided that, upon the death of the surviving settlor, the family trust was to be divided into three shares: one-third to defendant, one-third to Carolyn, and one-third to plaintiff and Jacob to share equally. The Trust provided that plaintiff and Jacob's share was to be held in a separate trust, and Walter Ferguson, plaintiff's father, was appointed as trustee of said trust. Walter was granted the authority to name a successor trustee. Because Jacob did not have children when he died, plaintiff is entitled to Jacob's share.

¶ 8 Article V, section 4, vested various powers in the trustee, including, in pertinent part, as follows:

"The Trustee shall hold, manage, care for, and protect the Trust Estate and shall have the following powers and, except to the extent inconsistent herewith, those now or hereafter conferred by law:

* * *

(e) To lease trust property for any period of time though commencing in the future or extending beyond the term of the trust;

* * *

(g) To sell at public or private sale, contract to sell, convey, exchange, transfer, and otherwise deal with the trust property and any reinvestments thereof from time to time for such price and upon such terms as the Trustee sees fit;

* * * (j) To divide or distribute the trust estate in cash or in kind, or partly in each, or in undivided interests or in different assets or disproportionate interests in assets; to value the trust property for such purposes; and to sell any property in order to make division or distribution;

(k) To deal with, purchase assets from, or make loans to, the fiduciary of any trust made by the Settlors or any member of the Settlors' family or a trust or estate in which any beneficiary under this Trust has an interest, though a Trustee hereunder is such fiduciary, and to retain any property so purchased;

* * *

(o) To collect the rents and earnings from and with respect to any real estate which is in possession of the Trustee, to keep in tenantable repair the buildings and fixtures located thereon, to make all reasonable expenditures necessary to preserve the real estate, ***;

(p) To pay all expenses incurred in the administration of the trusts hereby created, including, but not by way of limitation, *** compensation to the Trustee ***." (Emphases added.)

Article V, section 5, provides that the trustee "shall receive fair compensation for its services."

¶ 9 As for termination of the Trust, Article V, section 6, provides that, in the event the Trust's market value becomes $25,000 or less, the trustee may, in his discretion, terminate the Trust and distribute the Trust assets. Article V, section 7, provides that any property still held by the Trust more than 21 years after the death of the last beneficiary who was alive at the death of the first settlor to die "shall immediately be distributed" to those entitled to said property.

¶ 10 The following facts are derived from the evidence presented at trial. The settlors originally lived in the residence, and defendant lived in an apartment in Joliet. In 2010, due to the settlors' ailing health, defendant moved into the residence to help care for them. During this time, defendant did not pay rent to the settlors or the Trust. John passed away on August 9, 2011, at which point Mary became the sole trustee of the Trust, but she suffered from dementia and required extensive care. On August 23, 2011, Mary executed her resignation, and defendant accepted the assignment as trustee. Defendant took care of the residence, cooked Mary's meals, did her laundry, transported her to appointments, managed her finances, and maintained her bookkeeping. In 2012, Mary suffered a major heart attack, at which time defendant also became responsible for administering her medication and for her personal hygiene. She required 24/7 assistance. Mary died on May 15, 2014.

¶ 11 The primary assets of the Trust at the time of Mary's death were the residence and a 110- acre farm. Following Mary's death, defendant leased the farm, paid taxes, maintained insurance, and handled the general upkeep for both properties.

¶ 12 The farm was an irregular property that was bisected by a curved roadway, was in a floodplain along the Mazon River, and required an easement through the neighboring Robinson farm to access the southern portion of the property. In an effort to settle the Trust, defendant began marketing the farm for sale in 2016, which proved to be a complicated process. After obtaining a survey and learning of the farm's irregularities, defendant determined that a public auction would not be the most successful way to sell the property. At that time, Pete Kodat was farming the land pursuant to a lease, and defendant elected to let him farm for another year before selling. Thereafter, defendant sought offers from nearby farmers and was initially met with offers to either purchase smaller portions of the farm or to purchase the farm at a discounted price, which defendant rejected. Eventually, the Robinson family expressed interest in the farm, and defendant negotiated a contract to sell the entire property for approximately $120,000 more than its appraised fair market value. The sale closed at the end of 2017, resulting in each beneficiary receiving a distribution of $200,000.

¶ 13 Defendant then turned his efforts to the residence, where he continued to live without paying rent. In exchange for an agreement to forego trustee fees, defendant had the residence appraised and requested that the other beneficiaries assign to him their one-third interest in the property. Carolyn agreed to do so. Defendant negotiated his offer with Walter, as trustee of plaintiff's share, and subsequently with plaintiff, after Walter resigned and appointed plaintiff as successor trustee. Ultimately, the parties were unable to reach an agreement, and defendant continued to live in the residence without paying rent. Defendant also paid the utilities from the Trust and took a personal loan of $1600 from the Trust. As of the time of trial, defendant had reimbursed the Trust for the utilities and personal loan.

¶ 14 In addition to his work regarding the farm, residence, and general administration of the Trust, defendant completed a variety of other tasks benefiting the Trust. For example, at the time of Mary's death, Trent Sparrow, the settlors' nephew, owed the Trust approximately $41,000 for repayment of a loan. Sparrow consistently failed to make payments, so defendant had to routinely contact him to collect the money. As of the time of trial, defendant had collected the full amount due to the Trust. Defendant also...