Leoris v. Chi. Title Land Tr. Co.

MEMORANDUM OPINION AND ORDER

JOHN J. THARP, JR. UNITED STATES DISTRICT JUDGE

Plaintiff Drake James Leoris, Jr. brought suit seeking a declaratory judgment that he is the sole beneficiary of Illinois Land Trust No. 50677T. He named as defendants Jean M. Leoris, the putative co-beneficiary, and Chicago Title Land Trust Company, the trustee.^[1] In the alternative, Leoris, Jr. has sought an accounting for Jean's share of the trust property expenses. Accordingly, Jean counterclaimed seeking, first, a declaratory judgement that her beneficial interest is valid, and second, damages for Leoris, Jr.'s conversion of the trust property. Both parties have moved for summary judgement on their declaratory claims. For the reasons discussed below, both motions are denied.

BACKGROUND

On December 2, 1977, Drake Leoris, Sr., the plaintiff's late father, executed Trust Agreement No. 50677T (the “Trust Agreement”). Compl. ¶¶ 1, 4, ECF No. 1. The agreement named Leoris, Sr. as the sole beneficiary and First National Bank of Skokie as the trustee of a land trust comprising a two-story building located at 622 Laurel Avenue, Highland Park, Illinois.

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Id. ¶ 4. Subsequently, Chicago Title Land Trust Company became, and remains, the successor trustee. Id. ¶ 2.

By its terms, the Trust Agreement conveys legal and equitable title of the trust property to the trustee while reserving with the beneficiary the rights to direct the trustee in its dealings with the title, to manage and control the property, and to receive any rental or dispositional proceeds. Compl. Ex. A, ECF No. 1. The agreement deems these rights to be personal property and permits their assignment as such. Id. Two subsequent assignments by Leoris, Sr. give rise to this controversy.

On September 16, 1998, Leoris, Sr. lodged an assignment with the trustee naming his son, Leoris, Jr., as a beneficiary in joint tenancy. Compl. Ex. B, ECF No. 1. The assignment included the power of direction, thereby obliging the trustee to act, as provided in the Trust Agreement, “upon the written direction of Drake Leoris and Drake James Leoris, Jr.” Id.

Years later, on March 27, 2008, Leoris, Sr. lodged a second assignment with the trustee, assigning to his wife (and Leoris, Jr.'s stepmother), Jean, a fifty percent interest in the trust. Compl. Ex. C, ECF No. 1. This assignment also included the power of direction. Id. Leoris, Jr. received a certified copy of the assignment on or about May 7, 2008. Compl. ¶ 14, ECF No. 1. Leoris, Jr. now seeks to void this assignment.

Following Leoris, Sr.'s 1998 assignment to Leoris, Jr., both father and son jointly managed the trust property, which consists of first-floor office space and two second-floor apartments. Leoris, Jr. Suppl. Aff. ¶ 2, ECF No. 55. Leoris, Sr. and Leoris, Jr. used the first-floor office space to benefit their respective real estate brokerage and legal practices. Answer to Countercl. ¶ 12, ECF No. 43. The second-floor apartments were leased to residential tenants. Id. This arrangement remained until July 13, 2005, when Leoris, Sr. underwent a craniotomy to

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remove a non-malignant brain tumor. Compl. ¶ 12, ECF No. 1. After the surgery, Leoris, Sr.'s involvement with the trust property declined. Drenk Aff. ¶¶ 5-6, ECF No. 56-2.

In Leoris, Sr.'s post-surgery absence, Leoris Jr. assumed all managerial duties of the trust property. See Compl. ¶¶ 23-24, 26, ECF No. 1; Answer to Countercl. ¶ 15, ECF No. 46. The 2008 assignment to Jean did not change this. Nor did it induce Leoris, Jr. to discontinue remitting fifty percent of the rental proceeds to his father. Compl. ¶ 25, ECF No. 1.

Instead, Leoris, Jr. entertained the prospect of undoing Jean's assignment. On or about May 9, 2008, Leoris, Jr. questioned Leoris, Sr. regarding the assignment to Jean. Leoris, Jr. Aff. ¶ 9, ECF No. 56-1. According to Leoris, Jr., his father could not recall signing it, characterized it as a mistake, and expressed an intent to correct it. Id. Then, in December 2010, Leoris, Jr. gave his father a form assignment to have him obtain from Jean the authorization necessary to reassign her interest in the trust property back to Leoris, Sr. Id. ¶ 10. Although on several occasions between 2011 and 2015 Leoris, Sr. purportedly proclaimed to be seeking Jean's authorization, authorization was never received. Id. ¶ 11. Leoris, Jr.'s effort to have Jean reassign her interest ceased in the fall of 2015 when Leoris, Sr. told his son that Jean had refused. Id. ¶ 12.

Leoris, Sr. passed away on October 6, 2017, at ninety-five years of age. Compl. ¶ 17, ECF No. 1. On October 31, 2017, for the first time, Jean demanded from Leoris, Jr. her share of the trust property's rental proceeds. Leoris, Jr. Aff. ¶ 14, ECF No. 47. This demand precipitated the present suit.

On March 26, 2018, Leoris, Jr. sued Jean seeking a declaratory judgment voiding the 2008 assignment, and in the alternative, an accounting for Jean's share of the trust property expenses.^[2] He advances two grounds on which the assignment to Jean is invalid: (1) the

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assignment violates the Trust Agreement, the Illinois Land Trust Fiduciary Duties Act, and the Illinois Uniform Partnership Act; and (2) Leoris, Sr. lacked capacity to execute Jean's assignment or was coerced into doing so. Only the first claim has been presented for summary judgement. Similarly, Jean moves for summary judgement on her counterclaim seeking declaration that the 2008 assignment is valid.

DISCUSSION

I. Leoris, Jr.'s Declaratory Claim

Leoris, Jr. advances three theories to argue that Jean's assignment is invalid: (1) the assignment violates the Trust Agreement itself, (2) the assignment violates the Illinois Land Trust Fiduciary Duties Act, and (3) the assignment violates the Illinois Uniform Partnership Act. Jean disputes the merits of these arguments but also asserts that Leoris, Jr.'s suit is untimely. The Court will start with that issue.

A. Jean's Statute of Limitations Defense

1. Application of Section 13-205

Under Illinois law, the statute of limitations for the breach of a written contract is ten years. 735 Ill. Comp. Stat. 5/13-206. For “injuries done to property, real or personal . . . and all civil actions not otherwise provided for, ” it is five years. 735 Ill. Comp. Stat. 5/13-205. Leoris, Jr. argues that the relevant trust documents in this case are akin to a written contract, and therefore, the ten-year statute of limitations should apply. Because Leoris, Jr. filed his complaint on the day prior to the ten-year anniversary of the challenged assignment, presumably only the five-year statute of limitations would bar it.

Leoris, Jr. cites C-B Realty & Trading Corp. v. Chicago & North Western Railway Co. as his only support for application of the ten-year statute of limitations to this case. 289 Ill.App.3d 892, 682 N.E.2d 1136 (Ill. App. 1975).

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C-B Realty sheds no light on this dispute, however; that case involved the interpretation of what was indisputably a written contract, so the court did not grapple with the legal issue Leoris, Jr. presents. Id. at 896, 682 N.E.2d at 1140. Here, the Court is concerned with whether an action relating to an extracontractual legal interest which arose by virtue of written trust instruments constitutes an “action on a written contract.” 735 Ill. Comp. Stat. 5/13-206.

“[T]he fact that the origin of a cause of action may ultimately be traced to a writing has never been sufficient, standing alone, to automatically warrant application of the period of limitations governing written contracts.” Armstrong v. Guigler, 174 Ill.2d 281, 290, 673 N.E.2d 290, 295 (1996). Rather, the nature of the plaintiff's injury determines the appropriate statute of limitations. Doe A. v. Diocese of Dallas, 234 Ill.2d 393, 413, 917 N.E.2d 475, 487 (2009). For instance, section 13-206 applies when the gravamen of the complaint rests on the nonperformance of a contractual obligation, but when a party claims an injury that arises by operation of the law, the action is no longer contractual in nature. Armstrong, 174 Ill.2d at 291, 673 N.E.2d at 295.

Here, Leoris, Jr. is not alleging the nonperformance of a contractual obligation. Instead, he argues his beneficial interest in the trust is infringed by the operation of Jean's assignment. In general, the beneficial interest of an Illinois land trust is considered a personal property interest of the beneficiary. In re Estate of Alpert, 95 Ill.2d 377, 382, 447 N.E.2d 796, 798 (1983). Leoris, Jr.'s interest is no exception. See Compl. Ex. A, ECF No. 1. (Per the Trust Agreement, “the interest of any beneficiary . . . shall be deemed to be personal property . . . .”). Thus, Jean's claim to fifty percent of the beneficial interest of the trust, pursuant to an allegedly invalid assignment, would infringe Leoris, Jr.'s personal property rights as the otherwise sole beneficiary. And

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because section 13-205 applies to claims of “injury done to property, real or personal, ” the five-year statute of limitations applies to Leoris, Jr.'s claim. 735 Ill. Comp. Stat. 5/13-205; see Toushin v. Ruggiero, 2015 IL App (1st) 143151, ¶ 46, 38 N.E.3d 130, 142 (holding section 13-205 applied to allegations that defendant's actions prevented the plaintiff from receiving the benefits of owning a percentage of the beneficial interest in a land trust).

2. Waiver of Defense

Given that section 13-205's five-year statute of limitations applies to Leoris, Jr.'s claim, the Court turns to whether Jean properly raised the limitations defense. Leoris, Jr. argues that Jean's statute of limitations defense is waived because she did not include it in her answer but raised it for the first time in her motion...