Rubinson v. Rubinson
| Decision Date | 27 July 1993 |
| Docket Number | 1-91-2509,Nos. 1-91-1378,s. 1-91-1378 |
| Parties | , 190 Ill.Dec. 10 Karen Sydney RUBINSON, Plaintiff-Appellee, Cross-Appellant, v. Adolph A. RUBINSON and William Rubinson as Co-Trustees of the Fannie Rubinson Memorial Trusts, (Trust A) a/k/a the Karen Sydney Rubinson Trust, Defendants-Appellants, Cross-Appellees. |
| Court | United States Appellate Court of Illinois |
Beermann, Swerdlove, Woloshin, Barezky, Becker, Genin & London, Chicago, for defendants-appellants, cross-appellees (Howard A. London, of counsel).
Holleb & Coff, Chicago, for plaintiff-appellee, cross-appellant (Jeffrey H. Hornstein, of counsel; Elliot L. Evans, New York City, of counsel, on the brief).
This appeal arises from the trial court's grant of summary judgment in favor of plaintiff after it determined that defendants, as co-trustees of a trust, breached their duty to plaintiff, a beneficiary of that trust. It premised its decision on an amendment to the trust, effected by defendants, which divested plaintiff of her beneficial interest therein. Defendants appeal from that judgment and from the court's denial of their cross-motion for summary judgment. Plaintiff also cross-appeals from the court's denial of her motion to surcharge defendants for $40,000 in attorney fees paid out of trust assets to cover costs incurred in the defense of this action, the court having held that it had discretion to allow such payments from trust assets and that the amount incurred was not unreasonable.
On January 24, 1990, plaintiff Karen Sydney Rubinson filed an action in equity against defendants Adolph Rubinson and William Rubinson in their capacities as trustees of the Fannie Rubinson Trust (Trust), created in 1954 by defendant Adolph Rubinson, who was its settlor as well as the drafter of the instrument. Under its terms as originally drafted, plaintiff was a beneficiary along with her brother, Kenneth Rubinson. The Trust also named additional limited beneficiaries, namely defendant William Rubinson, his wife, and any educational or charitable institution chosen by the trustees. Defendants were successor co-trustees, duly appointed under the terms of the trust by Morris and Walter Rubinson, who served as the original trustees. The trust was initially funded with a $1000 face-amount debenture paying 4.80% per annum due in 1987. 1
A recital in the Trust stated:
"In compliance with the request of FANNIE RUBINSON to use the property * * * to express her love for her grandchildren and children in any manner considered suitable by [the trustees] * * *."
In paragraph 4 of the Declaration of Trust, the trustees were directed to accumulate income for the six years immediately following its formation, after which the trustees had complete and unfettered discretion with regard to the payment of monies out of the Trust. They could pay any amount or any part of the principal or income of the trust to the beneficiaries, or if they chose, they could make no disbursements at all. The trust included a provision which suggested some factors the trustees could look to when deciding if and how much to pay to the beneficiaries; however, since these factors were merely precatory, they neither diminished nor augmented the trustees' discretionary authority over payments to be made to the beneficiaries.
[250 Ill.App.3d 209] Paragraph 6 of the declaration authorized the trustees to make any amendment or include any provision which could have been incorporated in the original Declaration of Trust, and the exercise of this power was restricted only by the following limitations:
"(1) No amendment shall be made or shall be valid which shall permit the Trust to continue beyond the lives of the survivors of Karen and Kenneth Rubinson plus a period of 20 years.
(2) No amendment shall be made or shall be valid which shall provide that the beneficiaries of the Trust as amended shall be Morris Rubinson, Walter Rubinson, Adolph Allen Rubinson or his wife Helen Pollack Rubinson, nor that any TRUSTEE shall be a beneficiary of the Trust.
(3) No amendment shall be made or shall be valid if at the time it is made it increases the taxes to be paid by the TRUSTEES of by the beneficiaries as compared with the taxes to be paid under the terms of the Trust as of the date immediately preceding the effective date of the amendment. The opinion of an attorney selected by the TRUSTEES to advise upon such question shall be conclusive as to the validity of the proposed amendment even though an amendment adopted by the TRUSTEES with such advice shall subsequently be questioned in a final decision by an administrative agency or a court of competent jurisdiction shall subsequently hold contrary to such opinion.
(4) No amendment shall be made or shall be valid which shall impose upon persons other than the TRUSTEES or beneficiaries, taxes based upon the income of Trust Fund or upon transfer of Trust Fund to the beneficiaries. In the event such taxes are assessed against, or claimed by the taxing authorities from, persons other than the TRUSTEES or beneficiaries and paid by such other persons, the TRUSTEES shall make such other persons whole."
Prior to the amendment at issue in the instant action, the original trustees had twice exercised their amendatory power. The first such amendment, in October 1955, divided the corpus of the trust into equal parts for as many grandchildren as would become beneficiaries in the future. The second, made in July 1962, included the children of William Rubinson as additional limited beneficiaries.
At some point after the Trust was created in 1954, a breach occurred in the personal relationship of defendant trustee Adolph Rubinson and his daughter, plaintiff Karen Sydney Rubinson; and although the record before us is not clear as to what happened, the event or events appear to have been sufficiently severe to cause Adolph to cease speaking with and apparently disown plaintiff sometime in or around 1964. It also appears that plaintiff stopped receiving disbursements from the Trust at about that time as well.
In a November 1988 letter to defendant William Rubinson, plaintiff's uncle, she expressed a renewed interest in the Trust. She informed him that she had recently discovered documents concerning the Trust and asked her uncle to update her on its status and to send her a copy of the instrument. When William did not comply with this request or with similar ones made later, plaintiff retained an attorney who, on July 18, 1989, formally demanded by letter that Adolph provide all pertinent trust documents and an accounting. Adolph at first denied that plaintiff was entitled to any of the information sought, but after further correspondence, he relented and provided the requested information. Among the documents provided to plaintiff, Adolph included a document entitled "Fannie Rubinson Memorial Trust, Trust A, Declaration of Trust, May 21, 1985" and another entitled "Memorandum of Formal Action of Trustees--May 21, 1985."
The effect of these two documents was to divest plaintiff of her beneficial interest in the Trust of 1954, and to turn that trust into a charitable one, endowing scholarships at various schools of the University of Chicago. In the memorandum, defendants invoked the amendatory power of the original trust in order to validate their action and stated that in keeping with what they described as the original purpose of the 1954 trust, they would endow research into the cause of and remedies for the weakening of family values, finding this to be the nearest approximation of what Fannie Rubinson would want.
Although these two instruments were dated May 21, 1985, plaintiff alleged that they were not actually prepared until after she made inquiries as to the trust. In his affidavit in support of defendants' motion for summary judgment, Adolph admitted that the documents were not prepared or executed until late 1989 (consistent with plaintiff's allegation). He further stated that he and his brother had agreed in 1985 to the substance of the transaction, but that it was not memorialized until 1989.
Plaintiff's verified complaint in equity requested the court to set aside defendants' purported transfer of assets from the 1954 trust to the one created by the Declaration of Trust dated May 21, 1985; to remove defendants from their position as trustees and appoint a successor trustee; and to order an accounting. In defendants' motion for summary judgment, they asserted that under the Trust agreement, they had the authority to amend the trust as they did as a matter of law. Plaintiff cross-moved for summary judgment. The court accepted memoranda in support of the motions and heard argument on December 28, 1990.
The court found first that William could serve as a trustee even though he was also a beneficiary. Next, the court determined that under the 1954 trust, the trustees did not have the power to replace that with a new one naming different beneficiaries and for a new purpose. It accordingly held that the attempt to do so by defendants constituted an abuse of discretion and a breach of trust, necessitating their removal as trustees. The court issued its order on January 4, 1991, which, along with granting plaintiff's motion for summary judgment and denying defendants', restored the Trust to its original status; ordered William and Adolph to retransfer all the assets of the trust to it; appointed the Northern Trust Company as successor trustee; and enjoined William and Adolph from transferring any assets or acting pursuant to the Trust declaration dated May 16, 1985. It also ordered William and Adolph to provide a full accounting to plaintiff. Lastly, the court allowed defendants to petition for recompense from Trust assets the attorney fees expended in defense of this action.
On January 28, 1991, defendants' attorney submitted a petition for fees where...
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