Grove v. Morton Cmty. Bank

2022 IL App (3d) 210177

205 N.E.3d 862

461 Ill.Dec. 774

Janet GROVE, AS Co-Successor TRUSTEE and on Behalf OF the MARY E. CULLINAN IRREVOCABLE TRUST DATED JUNE 29, 1990, and as Co-Trustee and on Behalf of the Elizabeth A. Mathers Declaration of Trust Dated August 29, 2002, and Thomas Mathers, in His Capacity as The Sole Noncontingent Remainder Beneficiary of the Mary E. Cullinan Irrevocable Trust Dated June 29, 1990, and as the Sole Current Beneficiary of the Elizabeth A. Mathers Declaration of Trust Dated August 29, 2002, Plaintiffs-Appellants,

v.MORTON COMMUNITY BANK, an Illinois State Banking Corporation With Trust Powers; Michael Cullinan ; Allen Cullinan; Alison Cullinan Unkovich; Maureen Cullinan Bennett; Kathleen Cullinan Brill; JPMorgan Chase Bank, N.A.; and First State Trust Company, Defendants

(Morton Community Bank, Defendant-Appellee).

No. 3-21-0177

Appellate Court of Illinois, Third District.

Filed March 9, 2022

Timothy J. Cassidy, of Cassidy & Mueller P.C., of Peoria, and Kevin D. Evans, of Evans Law PLLC, of Greenwood Village, Colorado, for appellants.

Timothy D. Gronewold, Jeffrey G. Sorenson, and Noah A. Menold, of Howard & Howard Attorneys PLLC, of Peoria, for appellee.

JUSTICE HAUPTMAN delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs, Janet Grove, as co-successor trustee of the Mary E. Cullinan Irrevocable Trust (Cullinan Trust) and co-trustee of the Elizabeth A. Mathers Declaration of Trust (Mathers Trust), and Thomas Mathers, as sole noncontingent remainder beneficiary of the Cullinan Trust and sole beneficiary of the Mathers Trust, filed a first amended complaint against defendant, Morton Community Bank, and others. Plaintiffs alleged that, inter alia , defendant breached its fiduciary duty as successor trustee of the Cullinan Trust. Defendant filed a motion to dismiss the first amended complaint under section 2-619.1 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-619.1 (West 2020) ), which the circuit court partially granted as to the breach of fiduciary duty claim. Plaintiffs appeal. For the following reasons, we affirm in part and reverse in part.

¶ 2 I. BACKGROUND

¶ 3 On June 29, 1990, Mary E. Cullinan created the Cullinan Trust for the benefit of her daughter, Elizabeth Mathers (Libby). Libby was the sole lifetime beneficiary of the Cullinan Trust. JPMorgan Chase Bank, N.A. (JPMorgan), was successor trustee of the Cullinan Trust from 2004 until its resignation in mid-2015. After JPMorgan's resignation, defendant acted as successor trustee of the Cullinan Trust for a one-year period between mid-2015 and mid-2016.

¶ 4 Relevantly, section 5.04(C) of article V of the Cullinan Trust, relating to successor trustees, provides: "No successor shall have any responsibility for any act or default of any predecessor or have any notice of or responsibility to inquire about any prior administration. Each successor may accept the records of each predecessor as conclusive of the proper amount, nature and allocation of the trust estate." Further, at the time of JPMorgan's resignation as successor trustee of the Cullinan Trust, Libby and defendant signed a release of liability pertaining to JPMorgan's trust administration and defendant's obligations as successor trustee. The release of liability, dated July 28, 2015, stated that JPMorgan would forego its right to a judicial accounting of the Cullinan Trust. The release of liability also indicated Libby and defendant "desire[d] to avoid the expense and delay of a judicial settlement of the account of JPMorgan."

¶ 5 Further, the release of liability represented the following: (1) Libby retained or had ample opportunity to retain legal counsel, (2) Libby and defendant released and discharged JPMorgan as trustee of the Cullinan Trust for all liability relating to its trust administration, investment of trust assets, and delivery of trust assets to defendant, (3) Libby directed defendant to accept the accounts rendered by and received from JPMorgan as a full and complete release and discharge of JPMorgan, without incurring any liability, (4) Libby agreed defendant was relieved of any duty to review the acts of JPMorgan as trustee or bring any claim or action against JPMorgan, (5) Libby directed defendant to refrain from making any claim or bringing any action against JPMorgan, on behalf of the Cullinan Trust, for its trust administration or investment of trust assets, unless caused by theft or fraud, (6) Libby released defendant from all liability relating to JPMorgan's acts or failures to act as trustee of the Cullinan Trust, (7) Libby indemnified defendant from all claims of liability, loss, expense, or cost arising from JPMorgan's act or failure to act as trustee of the Cullinan Trust, and (8) Libby indemnified defendant's action or refrain from action in accepting the accounts rendered by and received from JPMorgan as a full and complete release and discharge of JPMorgan. Attached to the release of liability was JPMorgan's resignation as successor trustee, which indicated the resignation was effective upon its receipt of the release of liability and the beneficiaries’ acknowledgement of the resignation.

¶ 6 Also on July 28, 2015, Libby and her only child, Thomas, who is the sole noncontingent remainder beneficiary of the Cullinan Trust, executed a consent, approval, and release agreement. The consent, approval, and release agreement represented the following: (1) Libby and Thomas were given the opportunity to have certain documents related to the sale of shares reviewed by legal counsel and were fully aware of the related legal consequences, (2) Libby and Thomas consented to, approved, and authorized the execution of the above-described release of liability, and (3) Libby and Thomas released defendant from all claims or actions, etc., related to defendant's action with respect to JPMorgan's acts or omissions as predecessor trustee.

¶ 7 The Cullinan Trust was to terminate upon Libby's death, which occurred on December 14, 2019. At that time, the terms of the Cullinan Trust provided, "the Trustee shall distribute [the Cullinan Trust] to such one or more members of a group consisting exclusively of [Mary's] descendants in such amounts and portions and subject to such trusts, terms and conditions as *** [Libby] may appoint by Will." Libby's will named the trustee of the Mathers Trust as the sole beneficiary of the Cullinan Trust. Thomas is the sole beneficiary of the Mathers Trust.

¶ 8 On December 30, 2019, plaintiffs initiated this lawsuit against, among others, defendant, as the former successor trustee of the Cullinan Trust. On August 17, 2020, plaintiffs filed a first amended complaint. In count III of the first amended complaint, plaintiffs alleged defendant breached its fiduciary duty by releasing JPMorgan of liability for its trust administration. Plaintiffs alleged defendant, in contravention of its fiduciary duty, granted JPMorgan a blanket release of liability without seeking "a judicial accounting[ ] or investigating whether JPMorgan *** acted appropriately as Trustee." Further, Libby and Thomas allegedly signed the release of liability and the consent, approval, and release agreement without being informed of JPMorgan's breaches of fiduciary duty, which related to, among other things, JPMorgan's improper distribution of over $14 million in trust assets and investments and its loss of eight to nine years of trust records. Plaintiffs alleged that, if the release of liability was enforceable, then defendant could be liable for the millions of dollars in damages caused by JPMorgan's administration of the Cullinan Trust.

¶ 9 On September 15, 2020, defendant filed a motion to dismiss plaintiffs’ first amended complaint under section 2-619.1 of the Code. Initially, defendant argued that Grove, as co-trustee of the Mathers Trust, was the only plaintiff with standing in this case. Further, with respect to count III of plaintiffs’ first amended complaint, defendant argued that, under the Illinois Trust Code ( 760 ILCS 3/101 et seq. (West 2020)), a successor trustee has no duty to inquire into the activities of a predecessor trustee and is not liable for any act of a predecessor trustee. Defendant also argued JPMorgan's release of liability and the consent, approval, and release agreement relieved defendant of liability. According to defendant, a review of those agreements demonstrates that defendant, when releasing JPMorgan of liability, was acting at the specific direction of Libby and Thomas. By signing those legal agreements, Libby and Thomas allegedly "led [defendant] reasonably to believe *** [they] w[ere] aware of the relevant information and rights." For these reasons, among others, defendant requested a dismissal of plaintiffs’ first amended complaint.

¶ 10 On October 16, 2020, plaintiffs filed a response to defendant's motion to dismiss their first amended complaint. Plaintiffs argued that Grove and Thomas each had standing in this case. Grove, as co-successor trustee of the Cullinan Trust, arguably had standing because the trust assets remained in the Cullinan Trust and there was no timing requirement for the distribution of those assets into the Mathers Trust. Thomas, as sole noncontingent remainder beneficiary of the Cullinan Trust and sole beneficiary of the Mathers Trust, arguably had standing because the trust assets would eventually be distributed from the Cullinan Trust into the Mathers Trust.

¶ 11 Further, with respect to defendant's alleged breach of fiduciary duty, plaintiffs conceded that defendant ordinarily would not be liable for JPMorgan's acts or omissions as predecessor trustee of the Cullinan Trust. However, plaintiffs argued, after defendant blindly released JPMorgan of liability, "without any inquiry or determination of the impact on or the harm to the [Cullinan] Trust and the [Cullinan] Trust beneficiaries, or any attempt to determine whether a release was appropriate," defendant became liable for the damages...