Karris v. Keybank National Ass'n

2024 IL App (1st) 231471-U
Appellate Court of Illinois·Decided August 15, 2024·No. 1-23-1471·Unpublished

Opinion

2024 IL App (1st) 231471-U Order filed: August 15, 2024

FIRST DISTRICT

FOURTH DIVISION

No. 1-23-1471

NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

IN THE

APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT

HOLLY SOFIA KARRIS, individually and ) Appeal from the as parent and next friend of Zoe Karris Koch, ) Circuit Court of a minor, and Yannick Karris Koch, a minor, ) Cook County and as representative of the August 7, 1997 ) Nicholas A. Karris Declaration Of Trust, )

) No. 2019 L 013888

Plaintiff-Appellant, )

)

v. )

)

KEYBANK NATIONAL ASSOCIATION, ) MARY ANN KARRIS and NICK KARRIS, JR., ) Honorable ) Thomas Donnelly,

Defendants-Appellees. ) Judge, presiding.

PRESIDING JUSTICE ROCHFORD delivered the judgment of the court.

Justices Hoffman and Martin concurred in the judgment.

ORDER

¶1 Held: We reversed the dismissal of plaintiff’s third amended complaint on res judicata grounds and remanded for further proceedings.

¶2 Plaintiff, Holly Sofia Karris, individually and as parent and next friend of Zoe Karris Koch, a minor, and Yannick Karris Koch, a minor, and as representative of the August 7, 1997, Nicholas A. Karris Declaration of Trust, filed an 11-count, third amended complaint in the circuit court of

Cook County against defendants KeyBank National Association (KeyBank), Mary Ann Karris, and Nick Karris, Jr. The counts alleged breach of trust, breach of fiduciary duty, fraud, conversion, and tortious interference with an inheritance expectancy. The Cook County circuit court granted defendants’ motion to dismiss the third amended complaint pursuant to section 2-619(a)(4) of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(4) (West 2022)) on res judicata grounds because the claims asserted by plaintiff already had been litigated to final judgments in the DuPage County circuit court. Plaintiff appeals the dismissal order. We reverse and remand.

¶3 Nicholas A. Karris, Sr. (Karris Sr.), a resident of DuPage County, died on December 1, 2012, and was survived by his wife, Mary Ann Karris (Mary Ann), and two adult children, Nicholas Karris, Jr. (Nick) and Holly Karris (Holly). Karris Sr.’s last will appointed Mary Ann as the sole executor of his estate and left his estate to the Nicholas A. Karris Trust dated August 7, 1997 (1997 Trust). Mary Ann and KeyBank are co-trustees of the 1997 Trust, which is administered from offices located in Chicago. The 1997 Trust created sub-trusts: Marital Trust A, Marital Trust B, and two residuary trusts. Mary Ann is the beneficiary of the marital trusts; Holly and Nick are the remainder beneficiaries. Mary Ann, Holly, and Nick are the beneficiaries of the residuary trusts.

¶4 The marital trusts provide for mandatory net income distributions to Mary Ann, while the residuary trusts provide for income and principal distributions pursuant to a “best interests” standard. The size of the estate is vast. At the beginning of 2016, the estate consisted of over 30 commercial and residential properties, over 30 different limited liability corporations and was valued in excess of $300 million.

¶5 During Karris Sr.’s life, the 1997 Trust owned membership interests in Water Tower Capital Partners LLC (WTCP), which, in turn, owned a 99-year ground lease under a commercial

property located at 679 North Michigan Avenue in Chicago. We refer to this commercial property as the Apple property because 679 North Michigan Avenue was under lease to Apple, Inc. for its flagship retail store. The Apple property made up over 99% of Marital Trust A and was appraised at $42 million in 2014.

¶6 On December 26, 2014, KeyBank transferred the Apple property from Marital Trust A to Mary Ann. On December 29, 2014, Mary Ann sold the Apple property in equal halves to two new trusts, the Holly S. Karris Gift Trust and the Nicholas P. Karris Gift Trust, for $2,145,000 in cash and a $19,300,00 promissory note from each trust. Mary Ann subsequently assigned her interest in the promissory notes to two additional trusts created in August 2015: the Holly S. Karris Promissory Note Trust and the Nicholas P. Karris Promissory Note Trust. According to Holly, the transfer of the Apple property to Mary Ann and the subsequent creation of the four new trusts were not contemplated by Karris Sr. in either his will or the 1997 Trust.

¶7 On April 13, 2016, Holly filed an amended petition in the circuit court of DuPage County to remove KeyBank as co-trustee of the 1997 Trust for violating its fiduciary duties and acting in opposition to Karris Sr.’s intent. Specifically, Holly complained that KeyBank breached its fiduciary duties as co-trustee by: failing to timely transfer assets from Karris Sr.’s estate to the 1997 Trust; treating Holly differently from Mary Ann with respect to discretionary distributions from the residuary trusts; proposing a “sham” sale of certain properties; transferring the Apple property to Mary Ann and creating the four new trusts; and relinquishing control of major decisions related to estate properties to Nick and failing to provide information about the estate to Holly.

¶8 Following an evidentiary hearing, the DuPage County circuit court issued a written decision on August 26, 2016. First, the court found that KeyBank did not breach any fiduciary

duties by taking 18 months to transfer assets from Karris Sr.’s estate to the 1997 trust. The court stated:

“Here, it is clear, and both parties acknowledge, that the estate of Mr. Karris is extensive and complex. KeyBank was appointed in September of 2014 and it was at that time *** required to ascertain the terms of the trust and what properties could potentially be involved in the transfer. Absent any real evidence that KeyBank was acting improperly or not in good faith, and given this estate’s size and complexity, the court finds that 18 months is not an unreasonable amount of time to make such examinations and perform its due diligence.”

¶9 Second, the court found that Holly was not treated unfairly with respect to discretionary distributions. The court stated: “Here, there has not been sufficient evidence to prove that KeyBank committed fraud, abuse of discretion, or bad faith when making these distributions and the court finds no breach of duty on the part of KeyBank regarding this matter.”

¶ 10 Third, the court found that KeyBank did not engage in a sham sale of properties, stating:

“Although Holly claims she will be harmed by the sale of [certain assets] and is being treated unfairly, the court is not so convinced. *** [T]he actions taken by KeyBank are clearly manifested in the 1997 Trust, particularly in sections 10.1(a), 10.1(b), 10.1(c), and 10.1(g). All these sections allow the trustee to manage the properties in a way to maximize their value with the intent to benefit the beneficiaries. KeyBank has a duty to maximize the value of the properties and KeyBank feels the procedure it has laid out does just this. It is within KeyBank’s discretion as co-trustee to sell and manage the properties as it sees fit and the court will not substitute that discretion absent some form of malfeasance.”

¶ 11 Fourth, the court found that KeyBank did not fail to provide information about the estate to Holly, stating:

“Holly has received financial information regarding the trust, including an annual accounting and monthly statements, even on trusts which she has no present right to receive income. *** As to the allegations of failing to provide information to Holly, the court finds that there was no breach of fiduciary duty committed by KeyBank.”

¶ 12 The court further found that Nick’s management of the estate properties was proper:

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