Chicago Trust Co. v. Brierton
2022 IL App (1st) 210741
| Ill. App. Ct. | 2022Background
- John Sr. and Jeanne Brierton created the Brierton Family Trust (1996); the trust owned 100% of Picture Ranch, LLC, which in turn owned a Colorado manufactured-home community.
- After both settlors died, Chicago Trust Company (successor trustee) sold the community, paid the mortgage, and sought to distribute the trust’s LLC-related proceeds to beneficiaries per the trust’s schedule of contingent beneficiaries.
- Beneficiaries John Thomas Brierton and Thomas David Brierton argued the LLC was in liquidation under Colorado law and that new membership interests could not be issued, so proceeds should be distributed under the residuary clause; they counterclaimed (declaratory relief and breach of the LLC operating agreement).
- Trial court and this court (affirmed in a Rule 23 order) previously held the trust’s terms governed distribution and sided with the trustee.
- Trustee then petitioned to enforce the trust’s in terrorem clause, seeking to reduce John and Thomas’s shares to $1 each for contesting the distribution; the trial court applied the clause and effectively disinherited them.
- On appeal the First District reversed, holding defendants’ pleadings raised a lawful dispute about which part of the beneficiary schedule applied (and Colorado law), not an attack on the trust distributions that would trigger the in terrorem clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trust's in terrorem clause disinherits John and Thomas for their prior litigation conduct | Trustee: defendants opposed/attacked the trust’s distribution and therefore triggered the clause, reducing their share to $1 | Defendants: they did not contest the trust or its distributions but raised a legal challenge (Colorado law/LLC liquidation and operating agreement); clause enforcement would violate public policy | Reversed: clause does not apply — defendants’ pleadings challenged which part of the schedule applied and raised nonfrivolous legal issues, not an attack on distributions; in terrorem clauses are strictly construed |
Key Cases Cited
- Harris Trust & Savings Bank v. Donovan, 145 Ill.2d 166 (1991) (trust construction follows settlor intent and plain meaning)
- Oglesby v. Springfield Marine Bank, 25 Ill.2d 280 (1962) (don’t apply a purely lexical approach to in terrorem clauses; consider circumstances)
- In re Estate of Mank, 298 Ill. App.3d 821 (1998) (application of forfeiture clauses must account for public policy and factual context)
- In re Estate of Wojtalewicz, 93 Ill. App.3d 1061 (1981) (no-contest conditions are valid but construed very strictly)
- Clark v. Bentley, 398 Ill. 535 (1947) (equity disfavors forfeitures; interpret conditions reasonably in favor of beneficiaries)