Appellate court reverses award of attorneys’ fees against trustee for breach of trust and remands to determine if trustee’s conduct justifies the award.

Ruth Stafford created a trust that provided for the distribution on her death in 2009 of 15% of the trust assets to “Evanston Hospital and Glenbrook Hospital.” Edward Graham was trustee of the trust following Ruth’s death. NorthShore University Health System is a tax-exempt healthcare system whose facilities include Evanston Hospital and Glenbrook Hospital.  

In connection with the distribution of the trust assets, the trustee requested that NorthShore execute a release to indemnify the trustee personally and as trustee.

NorthShore requested that the trustee provide a copy of the pertinent portion of the trust evidencing its interest in the trust and an accounting of the trust’s assets. The trustee further requested that NorthShore substantiate that it was the proper party to receive the bequest to Evanston Hospital and Glenbrook Hospital. NorthShore complied with this request by providing documentation showing name changes and change in corporate ownership. The Illinois Attorney General’s office also opined that it was clear that NorthShore was the entity legally entitled to the distribution. The trustee refused to make the distribution to NorthShore and indicated that the distribution to Evanston Hospital and Glenbrook Hospital may be void or may have lapsed.

NorthShore sued to compel the trustee to make the distribution and provide an accounting and information, and alleged breach of fiduciary duty. On the parties’ cross-motions for summary judgment, the trial court granted NorthShore’s motion for summary judgment and found that (1) NorthShore was the proper beneficiary of the bequest because the two hospitals were operating at the same locations as they were at the time Stafford created her trust and (2) the trustee breached his fiduciary duties by not recognizing NorthShore as a trust beneficiary, failing to account and provide information, and wasting trust assets. The court awarded NorthShore its attorneys’ fees and costs from Graham personally.  

On appeal, the Illinois Appellate Court reversed the trial court award of fees against Graham personally on the grounds that: (1) Illinois courts disfavor assessing fees against a losing party and will not do so unless payment of such fees is provided in an agreement between the parties or by statute; (2) the Illinois statute on intentional misuse of charitable assets did not apply; (3) the award of attorneys’ fees against Graham personally was punitive; and (4) a punitive damages award is not proper unless the record indicated that Graham’s conduct was willful or if there were other aggravating factors existing in the case. The court remanded the case to the trial court to determine whether Graham acted willfully or whether aggravating factors were present to justify punitive damages against Graham.