Hatcher v. Hatcher
158 N.E.3d 326
Ill. App. Ct.2020Background:
- In 1992 the testator created a testamentary trust (effective at his 1992 death) to last 20 years, appointing his son James as trustee and naming James’s wife Cynthia and James’s three daughters as beneficiaries.
- The trust granted the trustee sole discretion to "pay so much of the net income of the trust estate as he shall in his sole discretion determine" and authority to "encroach upon the principal" for beneficiaries "as in his sole discretion he shall determine," listing "sickness, accident or otherwise, and for educational purposes."
- During the trust term James distributed $311,682.25 of income and $97,012 of principal to Cynthia, deposited into a joint James–Cynthia account; no distributions were made to the granddaughters.
- Plaintiffs (the granddaughters) sued asserting multiple claims; relevant here they alleged unjust enrichment against Cynthia (and James) because trust funds were paid solely to Cynthia and used for James’s personal benefit.
- The trial court held James had unfettered discretion under the unambiguous trust language (so no breach for impartiality/loyalty) but did find breaches for failure to account and for self-dealing relating to an LLC; the court entered judgment for Cynthia’s estate on the unjust enrichment claim.
- On appeal the court affirmed: it construed the trust as granting broad discretion (including to make no distributions) and rejected plaintiffs’ arguments (including that "otherwise" was limited by punctuation) that Cynthia was unjustly enriched.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cynthia was unjustly enriched by trustee distributions | Plaintiffs: James abused discretion by paying all income/principal to Cynthia and used funds for personal benefit, so Cynthia was unjustly enriched | Cynthia (estate): Trust granted trustee sole discretion; plaintiffs cannot show Cynthia unjustly retained a benefit or that they had a superior claim | Held for defendant: trust language gave James authority to make distributions (including none); plaintiffs failed to prove unjust enrichment |
| Whether the trustee’s power to encroach on principal was limited by the phrase "sickness, accident or otherwise" (serial comma issue) | Plaintiffs: "otherwise" modifies only "accident" (due to lack of serial comma), so encroachment was limited to sickness/accident/education | Cynthia: "otherwise" stands alone and grants broader encroachment authority | Held for defendant: "otherwise" is not so limited; trustee had broad encroachment power in his sole discretion |
Key Cases Cited
- HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 131 Ill.2d 145 (Illinois 1989) (elements and theory of unjust enrichment; third-party benefit categories)
- Peck v. Froehlich, 367 Ill. App. 3d 225 (Ill. App. Ct. 2006) (trustee discretion must be read with settlor’s purposes; abuse depends on granted discretion)
- Rubinson v. Rubinson, 250 Ill. App. 3d 206 (Ill. App. Ct. 1993) (broad trustee discretion can permit divesting beneficiary despite settlor's stated sentiments)
- Princeton Excess & Surplus Lines Ins. Co. v. Hub City Enters., Inc., 418 F. Supp. 3d 1060 (M.D. Fla. 2019) (observations on serial (Oxford) comma usage and its interpretive limits)