NC Illinois Trust Co. v. Madigan

• Citation: 351 Ill.App.3d 311,286 Ill.Dec. 23,812 N.E.2d 1038
• Decision Date: 12 July 2004
• Docket Number: No. 4-03-0738.,4-03-0738.
• Parties: NC ILLINOIS TRUST COMPANY, n/k/a National City Bank of Michigan/Illinois, as Trustee Under the Will of Earl M. Bane, Deceased, Petitioner-Appellant and Cross-Appellee, v. Honorable Lisa MADIGAN, Attorney General of the State of Illinois, Respondent-Appellee and Cross-Appellant (The Board of Trustees of the University of Illinois; Loyola University of Chicago; The University of Chicago; and Northwestern University, Intervenors-Appellees and Cross-Appellants).
• Court: United States Appellate Court of Illinois

812 N.E.2d 1038

351 Ill.App.3d 311

286 Ill.Dec. 23

NC ILLINOIS TRUST COMPANY, n/k/a National City Bank of Michigan/Illinois, as Trustee Under the Will of Earl M. Bane, Deceased, Petitioner-Appellant and Cross-Appellee, v. Honorable Lisa MADIGAN, Attorney General of the State of Illinois, Respondent-Appellee and Cross-Appellant (The Board of Trustees of the University of Illinois; Loyola University of Chicago; The University of Chicago; and Northwestern University, Intervenors-Appellees and Cross-Appellants).

No. 4-03-0738.

Appellate Court of Illinois, Fourth District.

July 12, 2004.

Jeffrey G. Sorenson (argued), Timothy J. Howard, Howard % Howard Attorneys, P.C., Peoria, for National City Bank of Michigan.

Merrick C. Hayes, Hayes, Hammer, Miles, Cox & Ginzkey, Bloomington, for Board of Trustees University of Ill.

Lisa Madigan, Attorney General, Gary S. Feinerman, Solicitor General, Richard S. Huszagh, Assistant Attorney General (argued), Chicago, for Lisa Madigan.

Justice COOK delivered the opinion of the court:

Earl M. Bane died in 1974. His will directed that his assets be put into a trust to care for his wife during her life and that the residue be used to provide for medical research. Bane's wife predeceased him, and on his death the Earl M. Bane Charitable Trust (trust) was established. The trust, administered by a predecessor to petitioner National City Bank of Michigan/Illinois (National City), made annual distributions to the four universities that are parties to this action (intervenors).

In 1999, National City filed a petition to reform the trust so as to avoid federal excise taxes. The Attorney General of Illinois and the intervenors (respondents) filed a counter-petition seeking to terminate the trust and distribute its assets to the intervenors. The circuit court found that Bane had not intended to created a perpetual charitable trust. On July 19, 2001, the court ordered that the trust be terminated and the assets distributed to the intervenors.

On August 17, 2001, National City filed a motion for reconsideration, which the circuit court denied on November 16, 2001. Before filing the motion, National City had consulted with attorney Jerold Horn about whether to appeal. On December 12, 2001, National City filed an appeal from the court's judgment terminating the trust. National City also filed a motion to stay enforcement of the judgment pending appeal, which the circuit court granted. This court affirmed the circuit court's judgment. NC Illinois Trust Co. v. Ryan, No. 4-01-1109 (December 16, 2002) (unpublished order under Supreme Court Rule 23).

Following the appeal, National City filed a petition in the circuit court, seeking (1) $29,562.68 in attorney fees incurred in the appeal, (2) $10,600 for the fees of attorney Horn, and (3) $27,154.20 in compensation for administering the trust during the appeal. A tax filing reveals that at the time of this petition, National City had already paid Horn $7,790 of his $10,600 fee out of trust assets. Respondents opposed National City's requests and also sought to recover the $7,790 already paid to Horn.

The circuit court denied National City's petition for fees but refused to require it to return the $7,790. Respondents moved to modify the judgment to account for the $7,790, but the court denied the motion. National City appealed the denial of its petition for fees, and respondents cross-appealed the court's denial of the motion to modify the judgment.

We first consider whether the circuit court erred in denying National City attorney fees incurred in prosecuting its first appeal. We conclude that it did not. The costs of litigating a case to construe a will are generally paid by the estate, assuming there was an honest difference of opinion about the testator's intent. In re Estate of Smith, 68 Ill.App.3d 30, 32, 24 Ill.Dec. 451, 385 N.E.2d 363, 365 (1979). This rule, however, applies only in the trial court; one unsatisfied with the judgment appeals at his own risk and cost. Glaser v. Chicago Title & Trust Co., 401 Ill. 387, 393, 82 N.E.2d 446, 449 (1948); Landmark Trust Co. v. Aitken, 224 Ill. App.3d 843, 858, 167 Ill.Dec. 461, 587 N.E.2d 1076, 1086 (1992) (Fifth District). The parties devote much of their argument to discussion of whether the rule in Glaser governs this case. Whether a circuit court applied the correct legal standard is a question of law that we review de novo. In re Marriage of Sobol, 342 Ill.App.3d 623, 627, 277 Ill.Dec. 468, 796 N.E.2d 183, 186 (2003)

.

The Glaser case concerned the will of Jacob Franks. Glaser, 401 Ill. at 388, 82 N.E.2d at 446. The beneficiaries under Jacob's will included his daughter Josephine and his son Jack. Jack died soon after his father did and Jack's will created a trust that would hold assets inherited from Jacob. When Josephine sued to construe Jacob's will, the trustees under Jack's will contested the suit and then appealed the judgment. Jack's trustees were successful in getting the trial court's judgment reversed and on remand sought attorney fees for their appeal from the corpus of Jacob's trust estate. The supreme court disallowed the petition for fees. The court stated:

"Where there is ambiguity in a will the interested parties may not be able to safely and properly proceed under it until there has been a judicial determination of its meaning. When the will has been construed by a court having jurisdiction of the subject matter and the parties, its decree affords authority to all interested persons for the administration thereunder according to its terms unless it be modified or set aside by a court of superior jurisdiction. The construction placed upon a will by the lower court may not be satisfactory to some of the parties and they may be able to have it changed on appeal, but, should they feel disposed to litigate beyond the court of original jurisdiction, this they must do at their own risk and costs." Glaser, 401 Ill. at 393, 82 N.E.2d at 448-49.

This case was in essence one to construe Earl Bane's will; and if that were the whole story, it would be a straight-forward application of Glaser to say that National City was free to appeal the circuit court's decision if it did so at its own risk and costs. Here, however, the court's interpretation of the will (finding no intent to establish a charitable trust) came after the trust was in operation for 22 years. We nevertheless agree with the trial court that under the somewhat unusual circumstances of this case, Glaser should apply.

Although the Glaser case dealt with a will construction, the rule applies to certain situations involving trusts as well. Glaser itself relied on Sherman v. Leman, 137 Ill. 94, 27 N.E. 57 (1891), in which a trustee appealed an order removing him from his position. The order was affirmed on appeal, and the trustee then sought to recover his costs for prosecuting the appeal. The court stated that "[the trustee] undoubtedly had the right to appeal, but the exercise of that right involved considerations affecting him personally, only, and not such as materially affected the trust estate, and he exercised it as do all persons litigating for their own interests — at his peril." Sherman, 137 Ill. at 99, 27 N.E. at 58. In our case, it is worth noting that the beneficiaries of the charitable trust sought to have it terminated. The Attorney General, who represents the ultimate beneficiary of any charitable bequest — the State (see In re Estate of Laas, 171 Ill.App.3d 916, 920-21, 121 Ill.Dec. 782, 525 N.E.2d 1089, 1092 (1988)) — also was in favor of distributing the assets. National City was therefore the only party interested in perpetuating the trust, and it could be said that its appeal involved considerations of interest primarily to itself.

National City attempts to avoid the Glaser rule on the basis that the order appealed here materially affected the trust estate, and as trustee, National City had a reasonable basis to appeal. The problem with the argument is that the same was true in Glaser itself. There, the trustees of Jack's estate appealed the trial court's decision and were even successful in having it reversed, yet were not allowed to recover their fees. This case differs from Glaser in that the trust here was created (erroneously, it turns out) under Bane's will, whereas the trust in Glaser was formed under Jack's will, one step removed from the will at issue in the case. Glaser, 401 Ill. at 388, 82 N.E.2d at 446. That difference is insufficient to avoid application of the rule in Glaser, because National City is still a party dissatisfied with the construction of a will.

National City also argues that applying that rule in this case will dampen the vigor with which trustees protect the trusts they administer because they will not be able to count on recovering their fees incurred on appeal. National City points out that when a court decree dissolves a testamentary trust, the trustee has a right to appeal, citing Peoples Bank of Bloomington v. Trogdon, 276 Ill.App. 373, 385-86, 1934 WL 574 (1934) (Third District), and argues that a trustee is obligated to try to maintain the trust if possible, citing Stein v. LaSalle National Bank, 328 Ill.App. 3, 5, 65 N.E.2d 216, 217 (1946) (First District).

We note that the cases cited for these propositions predate the decision in Glaser. If National City is correct in its characterization of a trustee's duty to defend the integrity of a trust, then that duty has existed alongside the Glaser rule for well over 50 years with no apparent reduction in the vigor of trustees.

On the other hand, it is not clear that a trustee's duty to appeal is as all encompassing as National City suggests. National City has provided only limited authority for the claim that it had a duty to appeal here. The Stein case involved an agreement among the beneficiaries of a spendthrift trust to terminate the trust. Stein, 328 Ill.App. at 5, 65 N.E.2d at 217. A spendthrift trust...