Drewry et al v. Keltz
Filing
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MEMORANDUM Opinion and Order. For the foregoing reasons, Plaintiffs' motion for injunctive relief and accounting 33 is granted. Within 30 days, Marshall Keltz shall provide to Plaintiffs an accounting of his receipts and disbursements on be half of the Trust and a statement of Trust assets from October 19, 2009 to the present. Keltz has not requested that Plaintiffs be required to post bond pursuant to Fed. R. Civ. P. 65(c), and the Court finds that no bond is required because Keltz ha s not identified any harm if he were wrongly required to provide an accounting. This matter is set for a status hearing on 4/16/2013 at 09:00 AM. for the parties to advise the Court on the status of Keltz's compliance with this order and to discuss whether any further proceedings are necessary. Signed by the Honorable Thomas M. Durkin on 3/6/2013:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Jacob Page Drewry and Anna Downey,
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Plaintiffs,
v.
Marshall Keltz, Individually and as
Trustee of the William P. Drewry Trust,
Dated December 20, 1988,
Defendant.
No. 11 C 1323
Judge Thomas M. Durkin
MEMORANDUM OPINION AND ORDER
Plaintiffs Jacob Page Drewry and Anna Downey filed this action against
Marshall Keltz, successor trustee of the William P. Drewry Trust, both individually
and in his capacity as trustee. Before the Court is Plaintiffs’ Motion for Injunctive
Relief and Accounting. R. 33. For the reasons explained below, Plaintiffs’ Motion for
Injunctive Relief and Accounting is granted.
Background
William P. Drewry (“William”) established the William P. Drewry Trust (the
“Trust”) on December 20, 1988. William acted as the sole trustee of the Trust until
his death on October 19, 2009. 1 After William’s death, his partner, Marshall Keltz,
became the successor trustee of the Trust.
William amended the “Trust Agreement” several times before his death. At the
time of his death, the operative Trust Agreement was the Fourth Amended and
Restatement of the William P. Drewry Declaration of Trust Dated December 20,
1988, which was executed on January 25, 2008. R. 1 at Ex. 1.
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In addition to his trustee duties, Keltz is also a named beneficiary of the
Trust. The Trust Agreement provides that Keltz would receive a $100,000 payment
immediately after William’s death, Trust Agreement at Art. II, § 2, and also
provides that “[t]he Trustee shall pay to or for the benefit of [Keltz] so much of the
income and principal from the remaining balance of the trust assets, during
[Keltz’s] lifetime as the Trustee deems necessary for [Keltz’s] health, maintenance,
and support in the Trustee’s sole discretion.” Id. at Art. II, § 3.
The Trust Agreement then provides that after Keltz’s death,
the Trustee shall allocate fifty percent (50%) of the rest
and residue of the remaining trust estate to create
thirteen (13) equal shares as follows:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Guy H. Drewry, IV;
Anna Christine Drewry;
John Northington Drewry;
Michael Gardner Drewry;
Jacob Page Drewry;
Anna Christine Downey;
Laura Downey East;
Richard L. Downey, Jr.;
Patricia Kathleen Downey;
Audrey Garner McCulloch;
Claire Louise McCulloch;
Amy Sara Cardella; and
Ira Sean Keltz.
The Trustee shall distribute said shares as soon as
practical following the death of both [Keltz] and [William].
In the event a beneficiary named in this Section
predeceases [Keltz] or [William], the share created for
that deceased beneficiary shall be reallocated to the
deceased beneficiary’s descendants, per stirpes. In the
event a named beneficiary predeceases [Keltz] or
[William] and leaves no descendants surviving him or her,
then the share created for said deceased beneficiary shall
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be reallocated in equal shares
beneficiaries under this article.
to
the
remaining
Id. at Art. III, § 1. The trustee is directed to distribute the remaining fifty percent to
several charitable organizations. Id. at Art. III, § 2.
On February 24, 2011, Jacob Page Drewry and Anna Downey, two of the
beneficiaries named in Article III, Section 1 of the Trust Agreement, filed this action
to obtain an accounting. 2 The action is based on Article V, Section 2 of the Trust
Agreement, which provides that “[e]ach Successor Trustee shall render an account
of his/her receipt and disbursements and a statement of assets to each adult vested
beneficiary.” Since William’s death on October 19, 2009, despite requests to do so,
Keltz has not provided an accounting to the other named Trust beneficiaries.
Analysis
To obtain a preliminary injunction, “a party must show that it has (1) no
adequate remedy at law and will suffer irreparable harm if a preliminary injunction
is denied, and (2) some likelihood of success on the merits.” Ezell v. City of Chicago,
651 F.3d 684, 694 (7th Cir. 2011). “If the moving party meets these threshold
requirements, the district court weighs the factors against one another, assessing
whether the balance of harms favors the moving party or whether the harm to the
nonmoving party or the public is sufficiently weighty that the injunction should be
denied.” Id. Moreover, “[i]f the plaintiff does show some likelihood of success, the
court must then determine how likely that success is. . . . The more likely the
Plaintiffs also sought to oust Keltz as trustee. In its January 31, 2012
Memorandum Opinion and Order, R. 16, the Court (Judge Dow) dismissed that
claim because it falls under the probate court’s jurisdiction.
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plaintiff is to win, the less heavily need the balance of harms weigh in his favor; the
less likely he is to win, the more need it weigh in his favor.” Roland Mach. Co. v.
Dresser Indus., Inc., 749 F.2d 380, 387 (7th Cir. 1984).
The Court therefore begins with Plaintiffs’ likelihood of success on the merits.
Under the terms of the Trust Agreement, Plaintiffs are entitled to an accounting if
they are “adult vested beneficiaries.” Trust Agreement at Art. V, § 2. The parties
dispute whether Plaintiffs’ interests in the Trust are “vested.” Keltz currently has a
life interest in the Trust that covers expenses that the trustee (also Keltz) deems
necessary for his health, maintenance, and support. Plaintiffs only receive their
share of the remainder of the Trust after Keltz’s death.
The Court looks to Illinois law to resolve this issue. See Trust Agreement at
Art. IX (providing that the Trust Agreement shall be governed by and interpreted
under Illinois law). “Illinois favors the vesting of estates generally unless a different
intention is manifested by the grantor.” First Galesburg Nat’l Bank & Trust Co. v.
Robinson, 500 N.E.2d 995, 996 (Ill. App. Ct. 1986) (citing Barker v. Walker, 85
N.E.2d 748, 751 (Ill. 1949)). As a general rule,
[a] remainder is vested if there is a person in being
ascertained and ready to take who has a present right of
future enjoyment, one which is not dependent upon any
uncertain event or contingency. A contingent remainder is
one limited to take effect either to an uncertain person or
upon an uncertain event.
Dauer v. Butera, 642 N.E.2d 848, 850 (Ill. App. Ct. 1994) (citations omitted). See
also Dyslin v. Wolf, 96 N.E.2d 485, 490 (Ill. 1950) (“[W]henever the person who is to
succeed to the estate in remainder is in being and is ascertained, and the event
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which by express limitation will terminate the preceding estate is certain to
happen, the remainder is vested.”).
In Dauer, the court explained that “[d]eath is an event which is certain to
occur, and thus the Illinois Supreme Court and this court have repeatedly held that
a bequest merely postponed until after the death of a life tenant is a vested
remainder.” 642 N.E.2d at 851 (citing McDonough Cnty. Orphanage v. Burnhart,
125 N.E.2d 625, 633 (Ill. 1955); Dyslin, 96 N.E.2d 485; Fleshner v. Fleshner, 39
N.E.2d 9, 11 (Ill. 1941); Oak Park Trust & Savings Bank v. Baumann, 438 N.E.2d
1354, 1358 (Ill. App. Ct. 1982)). For example, in Oak Park Trust, 438 N.E.2d at
1355, much like William here, the decedent set up a trust providing that the trustee
would pay costs deemed “necessary and desirable for [the] medical care, comfortable
maintenance and welfare” of her husband and son, and that after her husband’s
death, the trust’s assets would be distributed to her son. The court held that the
son’s remainder interest was fully vested: “the phrase ‘upon death’ does not imply
the creation of a conditional interest. Such language merely postpones the
enjoyment of an interest which vests immediately.” Id. at 1358.
The same is true here. Plaintiffs Jacob Page Drewry and Anna Downey are in
being and are ascertained—they are listed by name along with 11 other individuals
in Article III, Section 1 of the Trust Agreement. The fact that they have to wait
until Keltz’s death in order to receive their remainder distributions from the Trust
does not render their interests contingent.
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Keltz provides no authority to the contrary. Indeed, Keltz does not offer any
argument that Plaintiffs’ interests in the Trust are not “vested” under Illinois law.
Instead, Keltz merely argues that when William revised the Trust Agreement for
the last time in 2008, he changed the parties who have a right to an accounting
from “each adult beneficiary” to “each adult vested beneficiary.” R. 19 at 6-7
(emphasis in original). But as discussed above, Plaintiffs are vested beneficiaries
under Illinois law. As a result, this revision to the Trust Agreement does not help
Keltz. Keltz also argues that if the Trust Agreement is silent, the Court should turn
to the Illinois Trust and Trustees Act, 760 ILCS 5/1 et seq., to determine which
parties have a right to an accounting. But again, the Trust Agreement is not silent;
it provides that “adult vested beneficiaries” are entitled to an accounting, and
Plaintiffs are adult vested beneficiaries under Illinois law.
Finally, Keltz argues that even if Plaintiffs are “adult vested beneficiaries”
entitled to an accounting, their lawsuit is foreclosed by Article V, Section 3 of the
Trust Agreement, which provides that “[n]o Trustee wherever serving shall be
required to give bond or surety or be appointed by or account for the administration
of any trust to any court.” Keltz therefore argues that the Trust Agreement
“explicitly denies the right of any beneficiary to seek an accounting involving court
supervision.” R. 19 at 6. The limited relief sought by Plaintiffs here does not conflict
with Article V, Section 3. Plaintiffs merely seek to compel Keltz to comply with the
terms of the Trust Agreement and provide them with the required accounting.
Apart from requiring Keltz to provide an accounting to Plaintiffs, this Court would
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not supervise Keltz’s administration of the Trust nor require Keltz to “account for
the administration of [the] trust to [the] court.” Moreover, if Keltz were correct that
Article V, Section 3 precluded any and all actions seeking an accounting, there
would be no remedy for the right established in Section 2. The Court declines to
interpret the Trust Agreement in such an inconsistent and illogical manner.
Plaintiffs are therefore almost certain to prevail on the merits of their claim
for an accounting. Plaintiffs are vested beneficiaries under Illinois law, and Article
V, Section 2 of the Trust Agreement expressly provides that “[e]ach Successor
Trustee shall render an account of his/her receipt and disbursements and a
statement of assets to each adult vested beneficiary.” Because Plaintiffs are almost
certain to prevail on the merits, they do not have to make as strong a showing that
the balance of harms weighs in their favor. Nonetheless, the Court finds that
Plaintiffs have established irreparable harm and that the balance of harms weighs
in favor of granting a preliminary injunction at this time.
Keltz argues that there is no irreparable harm because Plaintiffs’ potential
injuries are purely economic. Although the availability of money damages generally
cuts against granting an injunction, courts have recognized irreparable harm where
potential dissipation of assets threatens a plaintiff’s ability to be made whole. See,
e.g., SEC v. Lauer, 52 F.3d 667, 671 (7th Cir. 1995); Dexia Credit Local v. Rogan,
No. 02 C 8288, 2008 U.S. Dist. LEXIS 91149, at *24 (N.D. Ill. Nov. 10, 2008). If
Keltz is dissipating Trust assets, a claim for money damages, potentially years
down the road, would be a hollow remedy. Keltz suggests that Plaintiffs can only
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speculate that he is dissipating Trust assets, but that is the entire point of an
accounting. William died more than three years ago and Keltz has yet to provide an
accounting to the other Trust beneficiaries, as the Trust Agreement expressly
requires. 3
Keltz also argues that Plaintiffs’ delay in filing this action—15 months after
William’s death—defeats their claim of irreparable harm. The Court disagrees. As
Plaintiffs note, they first attempted to resolve this dispute without litigation and
then filed a prior action against Keltz in state court. Moreover, the concerns raised
by Plaintiffs in this action would not have arisen immediately upon William’s death.
To the contrary, the accounting sought by Plaintiffs relates to how Keltz has been
administering the Trust since he took over as trustee in late 2009. This is an
ongoing issue that would understandably raise increasing concerns as Keltz refused
to provide the accounting required by the Trust Agreement.
On the other side of the scale, Keltz does not identify any harm, irreparable
or otherwise, if he were required to provide an accounting. As a result, the
balancing tips decidedly towards granting a preliminary injunction. Indeed, the
burden on Keltz is minimal. And although Keltz complains about a “mandatory”
injunction that would require affirmative steps on his part, Keltz himself accepted
the duty to provide accountings when he assumed his position as successor trustee
Plaintiffs do have grounds for suspicion. First, of course, Keltz has refused to
provide an accounting as the Trust Agreement requires. Second, in 1997, the State
of Michigan revoked Keltz’s license to practice law after he failed to return client
funds, among other violations. See Attorney Discipline Board Notice of Revocation
and Restitution, Marshall Keltz, Case Nos. 96-271-GA; 97-5-FA.
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and the fiduciary duties that go along with it. 4 Those duties are especially
important because of the potential conflicts arising from Keltz’s dual roles as both
the trustee and the beneficiary receiving payments from the Trust that he deems
necessary for his own health, maintenance, and support.
Conclusion
For the foregoing reasons, Plaintiffs’ Motion for Injunctive Relief and
Accounting, R. 33, is granted. Within 30 days, Marshall Keltz shall provide to
Plaintiffs an accounting of his receipts and disbursements on behalf of the Trust
and a statement of Trust assets from October 19, 2009 to the present. Keltz has not
requested that Plaintiffs be required to post bond pursuant to Fed. R. Civ. P. 65(c),
and the Court finds that no bond is required because Keltz has not identified any
harm if he were wrongly required to provide an accounting.
This matter is set for a status hearing on April 16, 2013 at 9:00 a.m. for the
parties to advise the Court on the status of Keltz’s compliance with this order and to
discuss whether any further proceedings are necessary.
ENTERED:
_______________________________
Honorable Thomas M. Durkin
United States District Judge
Dated: March 6, 2013
Keltz did not have to accept the position; under Article V, Section 1 of the Trust
Agreement, he could have refused and left those duties to Harris Trust & Savings
Bank or William’s niece, Patricia D. McCulloch.
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