No. 3--06--0553
Filed May 3, 2007. IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2007
SUE GRATE, Not Individually, ) Appeal from the Circuit Court But as Guardian of the Estate ) of the 12th Judicial Circuit, of Catherine Grzetich, a ) Will County, Illinois Disabled Person, ) ) Plaintiff-Appellant, ) ) v. ) No. 05--CH--874 ) EDWARD GRZETICH and CLAIRE ) GRZETICH, ) ) Honorable Herman Haase, Defendants-Appellees. ) Judge, Presiding.
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.
2 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
3 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.
4 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
record to allow us to determine whether the trial court abused
its discretion. Defendant also argues that there is "no per se
rule that a trustee who has breached his duty is barred from
having the trust pay his attorney fees." We disagree.
Defendant submits that section 4 of the Trust and Trustees
Act (Act) indicates that a trustee has the power to appoint
attorneys and to pay reasonable compensation to such appointees
and that section 7 of the Act provides that the trustee shall be
reimbursed for all proper expenses incurred in the management and
protection of the trust assets. 760 ILCS 5/4, 7 (West 2004).
5 These sections, defendant argues, provide the statutory authority
upon which a judge may award a trustee attorney fees. Under
Illinois law, a party may not be awarded attorney fees unless the
fees are specifically authorized by statute or provided for by
contract between the parties. Quick & Reilly, Inc. V. Zielinski,
306 Ill. App. 3d 93, 713 N.E.2d 739 (1999). Whether a court or
administrative agency has the authority to grant attorney fees as
an available remedy is a question of law that we review de novo.
Alvarado v. Industrial Comm'n, 216 Ill. 2d 547, 837 N.E.2d 909
(2005). Furthermore, whether a party may recover attorney fees
and costs pursuant to any specific act is a question of law.
Johnson v. Thomas, 342 Ill. App. 3d 382,
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No. 3--06--0553
Filed May 3, 2007. IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2007
SUE GRATE, Not Individually, ) Appeal from the Circuit Court But as Guardian of the Estate ) of the 12th Judicial Circuit, of Catherine Grzetich, a ) Will County, Illinois Disabled Person, ) ) Plaintiff-Appellant, ) ) v. ) No. 05--CH--874 ) EDWARD GRZETICH and CLAIRE ) GRZETICH, ) ) Honorable Herman Haase, Defendants-Appellees. ) Judge, Presiding.
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.
2 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
3 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.
4 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
record to allow us to determine whether the trial court abused
its discretion. Defendant also argues that there is "no per se
rule that a trustee who has breached his duty is barred from
having the trust pay his attorney fees." We disagree.
Defendant submits that section 4 of the Trust and Trustees
Act (Act) indicates that a trustee has the power to appoint
attorneys and to pay reasonable compensation to such appointees
and that section 7 of the Act provides that the trustee shall be
reimbursed for all proper expenses incurred in the management and
protection of the trust assets. 760 ILCS 5/4, 7 (West 2004).
5 These sections, defendant argues, provide the statutory authority
upon which a judge may award a trustee attorney fees. Under
Illinois law, a party may not be awarded attorney fees unless the
fees are specifically authorized by statute or provided for by
contract between the parties. Quick & Reilly, Inc. V. Zielinski,
306 Ill. App. 3d 93, 713 N.E.2d 739 (1999). Whether a court or
administrative agency has the authority to grant attorney fees as
an available remedy is a question of law that we review de novo.
Alvarado v. Industrial Comm'n, 216 Ill. 2d 547, 837 N.E.2d 909
(2005). Furthermore, whether a party may recover attorney fees
and costs pursuant to any specific act is a question of law.
Johnson v. Thomas, 342 Ill. App. 3d 382, 794 N.E.2d 919 (2003).
When a court with proper authority to award attorney fees
exercises its authority, we review the decision to award attorney
fees under an abuse of discretion standard. Advocate Health &
Hospitals Corp. v. Heber, 355 Ill. App. 3d 1076, 824 N.E.2d 655
(2005).
The plaintiff contends that the trial court simply had no
authority to order half of the trustee's attorney fees paid from
the trust once it found that the trustee breached his fiduciary
duty. This is a question of law and, as such, we review it de
novo.
6 It has long been held that "[t]he law is well settled that
trustees cannot reimburse themselves from the trust estate for
their attorney fees, unless those fees were incurred in the
management and preservation of the trust estate." Ellis v. King,
336 Ill. App. 298, 307, 83 N.E.2d 367, 371 (1949). Furthermore,
in Northern Trust Co. v. Heuer, 202 Ill. App. 3d 1066, 560 N.E.2d
961 (1990), the court unequivocally held that an award of
attorney fees to a trustee who breached his fiduciary duty to a
beneficiary "constituted an abuse of discretion." Northern Trust
Co. v. Heuer, 202 Ill. App. 3d 1066, 1072, 560 N.E.2d 961, 965
(1990). The record before us sufficiently supports the trial
court's finding (a finding defendant does not appeal) that the
defendant converted $38,592 of trust assets for personal use.
Therefore, as a matter of well settled law, he was not entitled
to have attorney fees incurred during a suit to recover those
funds reimbursed from the trust estate. The trustee did not
incur the attorney fees while protecting the trust's assets. We
find, therefore, that the trial court erred in awarding the half
of the trustee's attorney fees paid for from the corpus of the
trust.
CONCLUSION
For the foregoing reasons, the judgment of the circuit court
7 of Will County awarding defendant one-half of his attorney fees
to be paid by the trust is reversed.
Reversed.
HOLDRIDGE and WRIGHT, JJ., concur.