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Estate Planning & Probate Law FLASHPOINTS August 2020

Elizabeth A. Garlovsky & Carrie A. Zuniga, Lesser Lutrey Pasquesi & Howe LLP, Lake Forest
847-235-6745 | E-mail Elizabeth A. Garlovsky | 847-295-8800 | E-mail Carrie A. Zuniga

Second District: Notice Required Before Transferring Land Out of Trust

In Ashby v. Pinnow, 2020 IL App (2d) 190765, the plaintiff and the defendants were siblings and cotrustees of their parents’ trust, as well as equal beneficiaries. The plaintiff brought an action to quiet title to the subject real estate, to partition the real estate pursuant to the terms of the trust, and for breach of fiduciary duty against his siblings.

The parties’ parents placed their family home and the five acres of land on which the home sat into a trust. 2020 IL App (2d) 190765 at ¶3. The trust provided that upon the survivor’s death, their three children would become the cotrustees of the trust and the beneficiaries. Specifically, the balance of the trust estate “shall be distributed to their children . . . in equal shares.” Id. Additionally, the trust provided that it complied with §10 of the Trusts and Trustees Act, 760 ILCS 5/1, et seq. Id.

After their mother died in 2006, the defendants executed two trustee’s deeds, one that conveyed one third of the real estate to the plaintiff and the other that conveyed two thirds of the real estate to the defendants. 2020 IL App (2d) 190765 at ¶5. The property transferred to the plaintiff was vacant land with a taxable value of $20,000 while the two-thirds property transferred to the defendants contained the family home and had a taxable value of approximately $62,000. Id. The deeds were recorded on September 28, 2010. Id.

The plaintiff filed his complaint on August 22, 2018, alleging in part that he did not receive notice that the defendants had conveyed the real estate to him and themselves, noting that he was homeless between 2008 and early 2012. 2020 IL App (2d) 190765 at ¶7. Instead, he learned of the conveyances from an attorney in June 2018. Id.

The defendants moved to dismiss the plaintiff’s amended complaint on the basis that the Trusts and Trustees Act gave a majority of the trustees the right to convey property without providing notice to the remaining trustee and that the breach-of-fiduciary-duty claim was time-barred. 2020 IL App (2d) 190765 at ¶8. The trial court agreed and granted the defendants’ motion to dismiss because the two trustees were not required to provide notice to the plaintiff of the conveyance. 2020 IL App (2d) 190765 at ¶9. Moreover, the plaintiff was on notice of a potential breach of fiduciary duty when the deeds were recorded in 2010. The defendant timely appealed. Id.

On appeal, the court first considered Count I of the plaintiff’s complaint, which sought to quiet title to the real estate, although it noted that Count II was essentially the same analysis. 2020 IL App (2d) 190765 at ¶30. The plaintiff alleged that the conveyances required his approval and defendants violated the terms of the trust when the real estate was not divided into equal shares. 2020 IL App (2d) 190765 at ¶13. In order to successfully quiet title to ownership of real property, the plaintiff must be in possession of the property. 2020 IL App (2d) 190765 at ¶14, citing Nowakdnowski v. Sobeziak, 270 Ill. 622, 110 N.E. 809, 810 (1915). However, if the plaintiff can establish grounds for equitable relief, such as fraud or mistake, then the plaintiff can successfully quiet title even if the property is occupied by someone else. 2020 IL App (2d) 190765 at ¶14, citing McGookey v. Winter, 381 Ill. 516, 46 N.E.2d 84, 90 (1943).

The Second District found a genuine issue of material fact because the plaintiff was seeking equitable relief due to the defendants not providing him with notice of the conveyance and not conveying the real estate in equal shares as required by the trust. 2020 IL App (2d) 190765 at ¶15. Section 10 of the Trusts and Trustees Act provided that if there are three or more trustees of a trust, “a majority of the trustees are competent to act in all cases after prior written notice to, or written waiver of notice by, each other trustee.” 2020 IL App (2d) 190765 at ¶16, citing 760 ILCS 5/10 (West 2018). In interpreting the statute, the appellate court found that the defendants were required to provide written notice to the plaintiff before conveying the property out of the trust. 2020 IL App (2d) 190765 at ¶18.

The defendants argued that §10 of the Trusts and Trustees Act was not mandatory, but rather directory; therefore, the plaintiff must show how he was prejudiced by their actions. 2020 IL App (2d) 190765 at ¶21. The defendants further asserted that the plaintiff could not demonstrate that because any prejudice he suffered was a result of his failure to fulfill his duties as cotrustee of the trust. Id. The court explained that the mandatory-directory argument fails because it only applies to governmental actions. 2020 IL App (2d) 190765 at ¶22, citing People v. Geiler, 2016 IL 119095, ¶16, 57 N.E.3d 1221, 405 Ill.Dec. 123. Whether the defendants’ actions prejudiced the plaintiff is a factual argument that precludes dismissal of the complaint. 2020 IL App (2d) 190765 at ¶22.

The defendants argued that because the plaintiff did not perform his duties as cotrustee, he could not complain about how the defendants performed their duties. 2020 IL App (2d) 190765 at ¶25. However, in order for the defendants to prove “unclean hands” by the plaintiff, they would need to put forth evidence of fraud, bad faith, or lack of fair dealing. 2020 IL App (2d) 190765 at ¶26, citing Brown v. Ryan, 338 Ill.App.3d 864, 788 N.E.2d 1183, 1192, 273 Ill.Dec. 307 (2003). Here, the defendants presented no such evidence and whether any evidence exists is an issue of material fact that cannot be resolved by a motion to dismiss. 2020 IL App (2d) 190765 at ¶27.

Finally, the court addressed the dismissal of the plaintiff’s breach-of-fiduciary-duty count as time-barred. A breach-of-fiduciary-duty claim must be brought within five years after the action occurred. 2020 IL App (2d) 190765 at ¶34, citing 735 ILCS 5/13-205. The limitation period is extended if the action was fraudulently concealed. In the case of fraudulent concealment, a breach-of-fiduciary-duty action must be brought within five years of discovery that the plaintiff has a cause of action. 2020 IL App (2d) 190765 at ¶34, citing DeLuna v. Burciaga, 223 Ill.2d 49, 857 N.E.2d 229, 240, 306 Ill.Dec. 136 (2006). In order to prove fraudulent concealment, the plaintiff must show: “(1) concealment of a material fact, (2) intent to induce a false belief where there exists a duty to speak, (3) that the other party could not have discovered the truth through reasonable inquiry and relied upon the silence as an indication that the concealed fact did not exist, (4) that the other party would have acted differently had it known of the concealed information, and (5) that its reliance resulted in its injury.” 2020 IL App (2d) 190765 at ¶34, citing Vandenberg v. Brunswick Corp., 2017 IL App (1st) 170181, ¶31, 90 N.E.3d 1048, 418 Ill.Dec. 559.

The alleged breach of fiduciary duty occurred when the deeds were recorded on September 28, 2020, that conveyed the property in a way that provided the plaintiff with an unequal share. 2020 IL App (2d) 190765 at ¶35. The plaintiff admittedly did not file his complaint within five years of that date; however, he contended that the defendants’ failure to provide him with written notice in compliance with the Trusts and Trustees Act constituted fraudulent concealment. Id. Ultimately, the court found that the plaintiff’s claim for breach of fiduciary duty was not timely filed because he could have discovered the improper action through reasonable inquiry since the deeds were recorded with the county recorder of deeds. 2020 IL App (2d) 190765 at ¶36. Because the filing of the deeds is a matter of public record, it could not possibly be fraudulent concealment. Id. While the determination of the point in which the statute of limitations begins to run is generally an issue of fact, if it appears that only one conclusion can be reached, it is a matter for the court. 2020 IL App (2d) 190765 at ¶34, citing Rasgaitis v. Waterstone Financial Group, Inc., 2013 IL App (2d) 111112, ¶30, 985 N.E.2d 621, 368 Ill.Dec. 814.

First District: Rule 304(b)(1) Not Basis for Appellate Court to Exercise Jurisdiction Over Interlocutory Appeal

Rocco and Jennifer Salviola were married for 28 years when Rocco filed his petition for dissolution of marriage in October 2017. In re Marriage of Salviola, 2020 IL App (1st) 182185, ¶6. On April 6, 2018, Jennifer filed a two-count emergency petition for injunctive relief alleging that Rocco had transferred virtually all of the marital assets into his revocable trust. 2020 IL App (1st) 182185 at ¶8. Jennifer’s petition requested that the court require Rocco to revoke his latest amendment to his revocable trust, executed on June 27, 2017, which removed her as successor trustee and beneficiary of the trust. Id. In the alternative, Jennifer requested that the court reinstate her as successor trustee to Rocco’s trust and name her as beneficiary to the trust while requiring Rocco to replace all funds removed from the marital estate since June 27, 2017. Id. Allegedly, Rocco had transferred 99 percent of the parties’ liquid assets, which were worth over $60 million, into his revocable trust without Jennifer’s knowledge. 2020 IL App (1st) 182185 at ¶10. Ultimately, this allegation was redacted because it was not included in Jennifer’s affidavit attached to the petition and the trust estate of Rocco’s revocable trust remained within the reach of the divorce court in allocating assets as part of the dissolution. 2020 IL App (1st) 182185 at ¶18.

The second count of Jennifer’s petition asked the court to issue a temporary restraining order restraining Rocco from making any further changes to his estate plan or financial accounts and to prevent him from transferring or otherwise dissipating the assets in his revocable trust. 2020 IL App (1st) 182185 at ¶12. Jennifer’s petition contended that she (1) had an ascertainable right that needed protection, (2) would suffer irreparable harm if Rocco died while the divorce was still pending because his trust would become irrevocable, and (3) had a substantial likelihood of success because the property held in Rocco’s trust was marital property. 2020 IL App (1st) 182185 at ¶13.

At hearing, the trial court determined that the matter was not an emergency, and thereafter Rocco moved to strike and dismiss the emergency injunction motion. 2020 IL App (1st) 182185 at ¶¶15 – 16. Rocco argued that under In re Marriage of Centioli, 335 Ill.App.3d 650, 781 N.E.2d 611, 269 Ill.Dec. 814 (2002), he could not be enjoined from making beneficiary changes to his trust while the dissolution proceedings were pending because Jennifer’s interest was a mere expectancy interest rather than a present property interest. 2020 IL App (1st) 182185 at ¶16. The trial court agreed and granted Rocco’s motion to strike and dismiss the emergency motion for an injunction, in part on May 1, 2018. 2020 IL App (1st) 182185 at ¶19. As to Jennifer’s request that Rocco return any funds removed from the marital estate and transferred into his revocable trust since June 27, 2017, the court gave Jennifer leave to file an amended petition for injunctive relief as her current petition did not plead sufficient facts. Id.

Jennifer timely filed her amended emergency petition for injunction asking the court to order the return of any funds transferred to Rocco’s revocable trust after June 27, 2017, and to enjoin further transfers. 2020 IL App (1st) 182185 at ¶20. Rocco moved the court to dismiss the motion and it remained pending when the subject appeal was taken. 2020 IL App (1st) 182185 at ¶21. Thereafter, Jennifer moved the court to reconsider the dismissal of her claim for an injunction as to removing her as successor trustee and beneficiary and claimed that Centioli did not apply. 2020 IL App (1st) 182185 at ¶22. Rocco argued, in part, that Jennifer had abandoned her claim to any of the assets in his trust prior to June 27, 2017. 2020 IL App (1st) 182185 at ¶23. Ultimately, the trial court denied Jennifer’s motion to reconsider on September 17, 2018. 2020 IL App (1st) 182185 at ¶25.

On October 10, 2018, after her motion to reconsider was denied, Jennifer moved the trial court for a finding pursuant to Illinois Supreme Court Rule 304(a) that there was not just reason to delay an appeal of the trial court’s orders. 2020 IL App (1st) 182185 at ¶26. On October 11, 2018, Jennifer subsequently filed a notice of appeal for the same orders pursuant to Rule 307(a)(1), which allows an appeal for an interlocutory order when a trial court refuses an injunction. 2020 IL App (1st) 182185 at ¶27. Additionally, Jennifer filed a motion requesting a stay for the time to file the docketing statement and brief while she waited for the trial court to rule on her motion for a Rule 304(a) finding. 2020 IL App (1st) 182185 at ¶29.

Rocco filed a motion to dismiss on the basis that the court lacked jurisdiction because (1) the orders were neither final nor appealable and (2) her Rule 307 appeal was untimely and she could not invoke Rule 304(a) to save her untimely interlocutory appeal. 2020 IL App (1st) 182185 at ¶30. Thereafter, on November 1, 2018, Jennifer filed a motion for leave to amend her docketing statement to add Rule 304(b)(1) as an additional jurisdictional basis. 2020 IL App (1st) 182185 at ¶31. Rule 304(b)(1) allows the appeal of an order in the administration of an estate that finally determines the right or status of a party. Id.

S.Ct. Rule 307 permits appeals of certain interlocutory orders before entry of a final judgment (Salsitz v. Kreiss, 198 Ill.2d 1, 761 N.E.2d 724, 730, 260 Ill.Dec. 541 (2001)), if the appeal is “perfected within 30 days from the entry of the interlocutory order” (S.Ct. Rule 307(a)). 2020 IL App (1st) 182185 at ¶38. The deadline for Jennifer to file an appeal of the May 1, 2018, order was May 31, 2018, but she did not file the notice of appeal until October 11, 2018. Id. Moreover, Jennifer’s motion to reconsider the May 1, 2018, order did not toll the time to file an appeal. 2020 IL App (1st) 182185 at ¶39.

In the alternative, Jennifer argued that Rule 304(b)(1) authorizes the appeal of an order “entered in the administration of an estate, guardianship, or similar proceeding which finally determines a right or status of a party” without a Rule 304(a) finding. 2020 IL App (1st) 182185 at ¶40, citing S.Ct. Rule 304(b)(1). The court held that the plain language of Rule 304(b)(1) clearly does not apply to Jennifer’s appeal. 2020 IL App (1st) 182185 at ¶40. The court further confirmed the narrow scope of Rule 304(b)(1) when reviewing the Committee Comments to Rule 304(b)(1), which explains that it applies to orders “final in character” that are entered in “comprehensive proceedings that include other matters”; for example, orders admitting or refusing to admit a will to probate or allowing or disallowing a claim. 2020 IL App (1st) 182185 at ¶41, citing Committee Comments, Rule 304 (Sept. 1988). The court further explained that “Rule 304(b)(1) is designed to prevent multiple lawsuits and piecemeal appeals, while encouraging efficiency and granting certainty as to specific issues during the often lengthy process of estate administration.” 2020 IL App (1st) 182185 at ¶41, quoting In re Estate of Thorp, 282 Ill.App.3d 612, 669 N.E.2d 359, 362, 218 Ill.Dec. 416 (4th Dist. 1996).

Here, a preliminary injunction in a dissolution proceeding does not fall within the purview of Rule 304(b)(1) as the divorce court was not involved in the trust administration. 2020 IL App (1st) 182185 at ¶42. The trial court denied Jennifer’s motion for a Rule 304(a) finding on November 16, 2018. 2020 IL App (1st) 182185 at ¶33.

For more information about estate planning and probate, see ASSET PROTECTION PLANNING (IICLE®, 2018). Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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