Grate v. Grzetich

• Decision Date: 03 May 2007
• Docket Number: No. 3-06-0553.,3-06-0553.
• Parties: Sue GRATE, Not Individually, But as Guardian of the Estate of Catherine Grzetich, a Disabled Person, Plaintiff-Appellant, v. Edward GRZETICH and Claire Grzetich, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

867 N.E.2d 577

Sue GRATE, Not Individually, But as Guardian of the Estate of Catherine Grzetich, a Disabled Person, Plaintiff-Appellant, v. Edward GRZETICH and Claire Grzetich, Defendants-Appellees.

No. 3-06-0553.

Appellate Court of Illinois, Third District.

May 3, 2007.

John V. Schrock (argued), Sabuco, Beck, Hansen, Schrock & Bertani, P.C., Joliet, for Sue Grate.

Bruce L. Zumstein (argued), Bonds, Zumstein, Konzelman & Heffernan, Joliet, for Edward Grzetich.

Justice SCHMIDT delivered the opinion of the court:

Plaintiff, Sue Grate, as the guardian of the estate of Catherine Grzetich, filed a claim against defendant Edward Grzetich alleging he breached his fiduciary duties while serving as trustee of a certain testamentary trust. A judgment was entered against Edward, finding he converted monies of the trust for personal use. The judgment also ordered half of Edward's attorney fees to be paid from the trust. Plaintiff appeals, claiming it was error to order the trust to pay Edward's attorney fees given the fact that he was found to have converted more than $30,000 of trust money for personal use.

BACKGROUND

John Grzetich died testate on July 17, 1980. Pursuant to John's will, his four sons, Edward, Joseph, Nicholas, and John, were appointed as co-trustees of a testamentary trust established for the care and support of his daughter, Catherine Grzetich. Over the years, three of the original four trustees died, leaving Edward the sole testamentary trustee.

Sue Grate was appointed guardian of the estate and person of Catherine on March 16, 2005. On behalf of her ward, she filed a complaint on May 3, 2005, against Edward as the sole trustee of the trust, charging him with failing to care properly for the beneficiary of the testamentary trust. The complaint also: (1) sought a constructive trust on funds that plaintiff alleged were held by Edward and Edward's wife in their individual names; (2) claimed those funds should have been deposited in a testamentary trust account by Edward as trustee not as an individual; (3) charged Edward with a breach of his fiduciary duty; (4) asked the court for an accounting of the testamentary trust; and (5) sought the removal of Edward as trustee.

At trial, the plaintiff presented a list of more than 200 checks written by Edward to himself, to his wife, or to third parties from February 18, 1998, through October 28, 2004. These checks benefitted Edward personally and totaled $31,592.39. The plaintiff also presented a summary of trust finances from 1980 through calendar year 2004 and while doing so, claimed that Edward failed to account for $90,294.09 of trust assets. As such, the plaintiff claimed Edward should reimburse the trust for that amount.

Edward admitted receiving money from the trust and claimed he was entitled to certain payments because he had advanced expenses or personally paid bills for the trust equal to $20,713.50. Furthermore, he claimed he was entitled to receive trustee compensation of $1,200 per year for the 25 years he had served as trustee for his disabled sister. He presented to the trial court a flow chart of income received, expenses paid, and disbursements for the benefit of his sister covering a period from 1982 through December 31, 2005. The flow chart included estimates of expenses for utility bills, food, medical bills, prescription drugs, and house insurance payments from 1982 through 2000. The chart indicated that Edward was unable to account for $19,782.08 in trust money for the 24 years from 1982 through 2005, the time he served as trustee. Edward asked the court to allow him trustee fees for the unaccounted balance.

At trial, Edward also presented a schedule of assets received by the trust upon the death of his father and compared it to a list of assets held by the trust as of May 2006. Following the death of Edward's father, the trust had $123,930.03 on hand. In May of 2006, the trust held funds or investments of $341,564.53. During the time Edward served as trustee, the trust increased its asset value by $217,634.50.

Following trial, the trial court ruled that Edward spent $38,592 of funds from the trust "on personal expenses." As such, the trial court ruled that Edward must reimburse the trust for that amount. The trial court further found that since Edward breached his fiduciary duties owed to the beneficiary of the trust, he was not entitled to compensation as the trustee. Furthermore, the trial court ordered Edward to pay 50% of the attorney fees ($14,858.75) incurred by plaintiff in prosecuting this action. Finally, the trial court ordered the trust to pay 50% of Edward's attorney fees ($11,194.71) incurred defending the action. Plaintiff appeals, claiming it was error to order the trust to pay 50% of Edward's attorney fees. There is no cross-appeal.

ANALYSIS

Plaintiff claims that, as a matter of law, a trustee who is found to have converted trust funds for personal use cannot have any portion of his attorney fees that were incurred in defending a suit brought by or on behalf of a beneficiary to recover the converted funds paid from the trust. The plaintiff phrases this issue as a matter of law and, therefore, argues our standard of review is de novo. Defendant disagrees, claiming that the decision to award a trustee's attorney fees is discretionary and, therefore, we should review the trial court's award under an abuse of discretion standard. Defendant submits that the plaintiff, as appellant, has provided us with an insufficient...