Murphy v. Richert

KATHLEEN WHITE MURPHY, CO-ADMINISTRATOR OFTHE ESTATE OF ANNA M. WHITE, ET AL., Plaintiffs, v. ELIZABETH K. RICHERT, Defendant.

No. 15 CV 8185

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

May 27, 2021

Magistrate Judge McShain

MEMORANDUM OPINION AND ORDER

This breach-of-fiduciary-duty and indemnification case arises out of a long-running and bitterly contested family dispute over the assets of the Robert L. Richert Trust (the Robert Trust) and which version of the trust instrument is authentic.

Plaintiffs Kathleen White Murphy and Thomas White are the co-administrators of the estate of their deceased mother Anna M. White, who was a named beneficiary of the Robert Trust. Defendant Elizabeth Richert, the plaintiffs' cousin and the niece of Anna White and Robert Richert, is the trustee of the Robert Trust. She is also an attorney who has been licensed to practice law in Florida since 1992. [449] 27.¹ After a nearly successful settlement conference, multiple rounds of motion practice, and lengthy delays due to defendant's medical condition and the COVID-19 pandemic, this case proceeded to a bench trial over nine days inSeptember, October, and November 2020 on two narrow claims: (1) plaintiffs' claim that defendant breached her fiduciary duty to Anna White by creating a counterfeit version of the Robert Trust that purported to distribute to defendant an additional forty-seven percent of the Robert Trust's assets to which she was not entitled under the genuine trust instrument; and (2) defendant's counterclaim that a contract between defendant and Anna White known as the Receipt and Release requires plaintiffs to indemnify her for the fees and costs she incurred in this case.

The Court has considered the evidence presented at trial, the parties' proposed findings of fact and conclusions of law [328, 329], and the parties' post-trial briefs and motions [447, 459, 460, 462]. The Court finds that plaintiffs proved by a preponderance of the evidence that defendant breached her fiduciary duty to Anna White by (1) creating a counterfeit version of the Robert Trust that purported to distribute to defendant an additional forty-seven percent of the trust assets to which she was not entitled, and (2) failing to distribute to Anna White, in accordance with the genuine version of the Robert Trust, her share of the forty-seven percent of the trust assets that defendant attempted to control via the counterfeit trust document. The Court then finds that the Receipt and Release, which also purports to extinguish any claim Anna had against defendant respecting the distribution of her share of the trust assets, does not bar plaintiffs' claim because (1) there was no consideration for Anna White's promise to release her claims against defendant, and (2) the release is ineffective because it is undisputed that Anna White was unaware that there were multiple versions of the Robert Trust and that the competing versions of the trustdocuments might form the basis for a claim against defendant. Finally, the Court finds that plaintiffs proved by clear and convincing evidence that defendant's breach of fiduciary duty was reprehensible and conducted with an evil mind, such that an award of punitive damages on a 1:1 ratio with plaintiffs' compensatory damages is warranted under Arizona law, which governs plaintiffs' entitlement to punitive damages.

With respect to defendant's counterclaim, the Court finds that (1) defendant failed to prove by a preponderance of the evidence that Anna White intended the indemnification provision to apply to a claim brought by Anna, as opposed to a third party, against defendant; and (2) in any event, the Receipt and Release is unenforceable because there was no consideration for Anna's promise to indemnify defendant.

Civil Rule 52 provides that, "[i]n an action tried on the facts without a jury . . . the court must find the facts specially and state its conclusions of law separately." Fed. R. Civ. P. 52(a)(1). Thus, "[w]hen a federal judge is the trier of fact, [she] unlike a jury, is required to explain the grounds of h[er] decision." Arpin v. United States, 521 F.3d 769, 776 (7th Cir. 2008). Rule 52(a) also requires that, "[w]hen the issue is the amount of damages," the Court "must indicate the reasoning process that connects the evidence to the conclusion[.]" Jutzi-Johnson v. United States, 263 F.3d 753, 758 (7th Cir. 2001).

Below the Court describes the case's lengthy background, summarizes the Court's important pretrial rulings and the relevant evidence presented at trial, andsets forth the findings of fact and conclusions of law that support the Court's judgment and award of damages to plaintiffs.

Background

This case began in July 2015, when Anna White, then 91 years old, filed a petition for production of deed and accounting against defendant in the Circuit Court of Lake County, Illinois. [1-1]. Defendant subsequently removed the case to this Court based on diversity jurisdiction. [1].²

In brief, Anna's petition sought an order requiring defendant to transfer title to Anna's residence in Buffalo Grove, Illinois from defendant, who held title to the Buffalo Grove home in her capacity as trustee of the Robert Trust, to Anna. [1-1] 3-4. The petition also sought an accounting of the Robert Trust and an order dissolving the Receipt and Release, which purported to extinguish Anna's claim to further distributions from the Robert Trust.

I. The Robert Trust

Robert L. Richert was Anna White's brother and the uncle of both plaintiffs and defendant. [280] 4, ¶ 1.³ Robert, who resided in Carefree, Arizona, created the Robert L. Richert Revocable Trust on June 12, 2008. [Id.] 4, ¶¶ 2-3. The trust namedRobert as the settlor, trustee, and beneficiary of the trust and defendant as successor trustee. [PX 26] 30; see also [id.] 37; [PX 29] 59.

In September 2009, Robert underwent surgery at the Mayo Clinic in Phoenix for non-small cell carcinoma and became incapacitated. [449] 94; [PX 34] FIDELITY 0090. To become trustee during Robert's incapacitation, defendant submitted a Trustee Certification Form to Fidelity Investments, where Robert had established a trust account. [449] 94, 96-102; [PX 34] FIDELITY 0083-0088, 0090. The Certification Form, which was accompanied by a letter from Robert's doctors stating that he was unlikely to recover, instructed Fidelity to recognize defendant as trustee of the Robert Trust. [PX 34] FIDELITY 0083, 0088. This paperwork was signed by defendant and notarized on September 21, 2009, and it was faxed to a Fidelity branch in Arizona. [Id.] FIDELITY 0083, 0091. Although defendant testified she had no recollection of signing or submitting this paperwork to Fidelity, [449] 96-102, the Court finds that she did so in order to be recognized as the Robert Trust's successor trustee after Robert became incapacitated.

Robert died on November 9, 2009. [280] 4, ¶ 4.

A. The Robert Trust's Assets

At the time of Robert's death, the Robert Trust held title to Robert's home in Carefree and $611,814.45 in the Fidelity account. [280] 4, ¶ 9. The parties stipulatedthat, between November 17, 2009 and January 15, 2010, defendant wrote eight checks on the Robert Trust's Fidelity account for a total of $622,364.91:⁴

Date

Check No.

Payee

Amount

Nov. 17, 2009

1076

Cash

$13,407.50

Nov. 25, 2009

1077

Cash

$3,178.57

Dec. 28, 2009

1051

Cash

$30,000.00

Dec. 31, 2009

1078

Cash

$8,646.47

Jan. 7, 2010

1079

Anna White

$30,000.00

Jan. 15, 2010

1080

Cash

$10,000.00

Jan. 15, 2010

1081

Anna White

$124,823.09

Jan. 15, 2010

1082

Cash

$402,309.28

[280] 5, ¶¶ 18-23.

It is undisputed that defendant made out six of the checks-totaling $467,541.82-to cash. Despite disposing of nearly a half-million dollars (and slightly more than seventy-five percent of the trust's cash assets) in this fashion, defendant testified that she could not remember how the $467,541.82 had been spent. [450] 68-72. Nor did defendant testify why she had made these checks out to cash, as opposed to a specific payee. Defendant did testify that she initially deposited this money intoa Chase bank account that "belonged to [her] uncle" and to which she added her name, [458] 17, but she produced no banking records to corroborate this claim. Two other checks, totaling $154,823.09, were made out to Anna White, and the parties stipulated that those checks were deposited into Anna's bank account. [280] 5, ¶¶ 16, 28. The Court accordingly finds that Anna White received $154,823.09 from the Robert Trust account.

On February 18, 2010, defendant closed out the Robert Trust account by writing a final check in the amount of $94.26 to cash. [280] 5, ¶ 24; [PX 30] 7; see also [PX 19] (showing zero balance for Robert Trust's Fidelity account as of February 28, 2010). Defendant testified that she acted with Anna White's knowledge when she closed the Fidelity account, and that she closed the account because she "was paying expenses for the estate, and Fidelity had a monthly check limit." [458] 17.

B. The Robert Trust Documents

During discovery, the parties produced three versions of the Robert Trust: Version A [PX 26] 5-33, Version B [PX 26] 37-63, and Version C [PX 29]. As the Court explained in its prior order granting in part and denying in part defendant's motion for summary judgment, Versions A and B are identical except that (1) Version A has two post-it notes, written by defendant, attached to page 4 of the trust instrument, [PX 26] 10; and (2) the word "FAXED" appears on the first page of Version B, and the date September 21, 2019, the time "17:06", a fax number with the Arizona area code 480, and the word "KINKOS" appears on each page of Version B, [id.] 37-63. See Whitev. Richert, No. 15 CV 8185, 2018 WL 4101512, at *2 (N.D. Ill. Aug. 28, 2018) (White III).

In Versions A and B of the Robert Trust, paragraph 5.4.1 provides that:

If the Settlor's residence is part of the trust estate or is owned by the

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