{ "id": 3528851, "name": "THE DEPARTMENT OF MENTAL HEALTH AND DEVELOPMENTAL DISABILITIES, Petitioner-Appellee, v. KEVIN E. PHILLIPS, Trustee, et al., Respondents-Appellants", "name_abbreviation": "Department of Mental Health & Developmental Disabilities v. Phillips", "decision_date": "1985-05-07", "docket_number": "No. 84-1641", "first_page": "337", "last_page": "343", "citations": [ { "type": "official", "cite": "133 Ill. App. 3d 337" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "241 N.E.2d 492", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "101 Ill. App. 2d 135", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 2901052 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/101/0135-01" ] }, { "cite": "106 N.E.2d 857", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1968, "opinion_index": 0 }, { "cite": "347 Ill. App. 233", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 5092296 ], "year": 1968, "opinion_index": 0, "case_paths": [ "/ill-app/347/0233-01" ] }, { "cite": "151 N.E.2d 398", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "18 Ill. App. 2d 163", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5188115 ], "weight": 2, "pin_cites": [ { "page": "173" } ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/18/0163-01" ] }, { "cite": "70 N.E.2d 585", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "395 Ill. 544", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2469024 ], "opinion_index": 0, "case_paths": [ "/ill/395/0544-01" ] }, { "cite": "449 N.E.2d 1024", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "114 Ill. App. 3d 760", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3591740 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/114/0760-01" ] }, { "cite": "29 Ill. 201", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2453351 ], "weight": 2, "year": 1983, "pin_cites": [ { "page": "230" } ], "opinion_index": 0, "case_paths": [ "/ill/29/0201-01" ] }, { "cite": "432 N.E.2d 1086", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 3, "opinion_index": 0 }, { "cite": "104 Ill. App. 3d 461", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5473767 ], "weight": 3, "opinion_index": 0, "case_paths": [ "/ill-app-3d/104/0461-01" ] } ], "analysis": { "cardinality": 719, "char_count": 14878, "ocr_confidence": 0.762, "pagerank": { "raw": 6.22383782585142e-08, "percentile": 0.3849089271227782 }, "sha256": "c81e356f481e5336a101b9dce904540a661f22f9766c90dbbe83ade03b81dfcd", "simhash": "1:143ebafb9f09503c", "word_count": 2385 }, "last_updated": "2023-07-14T17:42:49.711724+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "THE DEPARTMENT OF MENTAL HEALTH AND DEVELOPMENTAL DISABILITIES, Petitioner-Appellee, v. KEVIN E. PHILLIPS, Trustee, et al., Respondents-Appellants." ], "opinions": [ { "text": "JUSTICE BUCKLEY\ndelivered the opinion of the court:\nThis appeal arises out of an action brought by the Illinois Department of Mental Health and Developmental Disabilities (the Department) against the trustee of a discretionary spendthrift trust. The Department sought reimbursement for the cost of services provided to the trust\u2019s beneficiary, a mentally handicapped young adult residing at the Waukegan Developmental Center. On cross-motions for summary judgment, the trial court entered judgment in favor of the Department, holding that the trustee had abused his discretion in failing to reimburse the Department. The trial court further denied the trustee\u2019s alternative motion for reformation of the trust and ordered payment from the trust for the services provided at State expense. We reverse and remand for further proceedings.\nThe record reveals that in February 1974 Sue Phillips established an inter vivos trust for the benefit of her 18-year-old son, Steven. Steven is severely retarded and has required institutional care since birth. He is currently a resident at the Waukegan Developmental Center, having resided there since his 21st birthday in November 1976. Steven\u2019s brother, Kevin Phillips, was appointed trustee of the trust.\nPursuant to the terms of the trust, the trustee was given \u201csole and absolute discretion\u201d to expend the trust\u2019s income or corpus \u201cas the trustee deems necessary and advisable for the beneficiary\u2019s education (including college or a professional education), maintenance, medical care, support, general welfare and comfortable living.\u201d The trust also contains an express spendthrift provision prohibiting the voluntary or involuntary assignment or alienation of the income or corpus to claims of creditors or legal process. The trust further provides that upon Steven\u2019s death the trust assets are to be distributed to the then living issue of Steven\u2019s father per stirpes. Those remaindermen are presently Steven\u2019s two brothers and his two minor nephews.\nThe trust assets are currently valued at less than $75,000. The trustee has never made any distributions of the trust\u2019s principal or income to Steven but has reinvested all the income for Steven\u2019s benefit. Steven has no assets or source of income other than his interest in the trust.\nIn June 1983, the Department initiated this action by filing a petition for service charges against the trustee and Steven. The Department sought reimbursement for the cost of services provided Steven as an in-patient at the Waukegan Developmental Center since 1976. In its petition, the Department alleged that $73,474.40 was due for the period from November 4, 1976, through April 30, 1983, with $948 per month accruing thereafter.\nThe Department alleged that the trustee\u2019s failure to pay the Department was an abuse of discretion and contrary to the terms of the trust and that the trust is part of Steven\u2019s \u201cestate\u201d subject to the Department\u2019s surcharge pursuant to section 5 \u2014 105 of the Illinois Mental Health Code. (Ill. Rev. Stat. 1983, ch. 911/2, par. 5 \u2014 105.) The trustee answered the petition, denying that reimbursement should be made and that he abused his discretion. Alternatively, the trustee sought reformation of the trust\u2019s language to expressly prohibit use of the trust\u2019s assets for reimbursement to the Department for Steven\u2019s primary support and to provide that the trust could only be used as supplementary support for Steven\u2019s needs other than those provided by public aid.\nBecause there were no material factual disputes, the parties filed cross-motions for summary judgment and judgment on the pleadings. The trial court denied the trustee\u2019s motion and granted the Department\u2019s cross-motion for summary judgment, specifically basing its decision on this court\u2019s opinion in Department of Mental Health & Developmental Disabilities v. First National Bank (1982), 104 Ill. App. 3d 461, 432 N.E.2d 1086. The order granting summary judgment was stayed, however, pending a ruling on the trustee\u2019s alternative petition for reformation of the trust.\nIn support of the alternative petition, the trustee submitted an affidavit by Sue Phillips reaffirming that at the time she established the trust her intent was to provide a source of funds supplementary to public aid. The trial court denied the alternative petition, reasoning as follows:\n\u201cThe revisions suggested, and I have read them, are not merely those necessary to refine the language of the original trust instrument. The suggested revisions do not clear up ambiguities, because I believe there are no ambiguities in the original document, and the revision does not serve to fill a void in the instructions to the Trustee. On the contrary, these revisions to my view, constitute an entirely new remake of the trust instrument. The revisions constitute a total and complete abandonment of the initially stated trust purpose, and postulate a substitution of an entirely new scheme of things. The revisions totally distort the original trust purpose.\u201d\nThe trial court also expressed some concern in its ruling that the trustee might not be acting in Steven\u2019s best interests since the trustee was a potential remainderman of the trust. In a motion for reconsideration, the trustee, on behalf of himself and the other contingent remainderman, offered to waive all remainder interest in the trust in favor of the Department. Further, the trustee proposed that a mutually agreeable third party be substituted to act as trustee of the trust as reformed. The trial court denied the motion for reconsideration, acknowledging that it had misperceived the trustee\u2019s motives but still believed \u201cthe trust is clear and unambiguous, and that being the case, it must be followed in those terms by the Court.\u201d\nOn appeal, respondents contend that the trial court erred in denying reformation of the trust in a manner consistent with the settlor\u2019s intent and necessary to preserve the trust. Respondents argue that the trust was drafted with reference to the then existing law, which would not have given the State a right of reimbursement from a discretionary spendthrift trust; that the settlor\u2019s intent was clearly not to reimburse the State but rather to provide a source of funds for Steven in the event he needed additional support or medical care which the State was unable or unwilling to provide; that this court\u2019s decision in Department of Mental Health & Developmental Disabilities v. First National Bank (1982), 104 Ill. App. 3d 461, 432 N.E.2d 1086, represents an unforeseen change of law which frustrates the settlor\u2019s original intent in creating the trust by permitting the State to reach the assets of a discretionary spendthrift trust for reimbursement; and that reformation should therefore be permitted in order to give effect to the settlor\u2019s original intent and to preserve the trust. We agree.\nIt is well settled in Illinois that the provisions of a trust can be modified in order to carry out the intentions of the settlor if unforeseen events occur which would otherwise frustrate the settlor\u2019s purpose. (See Curtiss v. Brown (1862), 29 Ill. 201; American State Bank v. Kupfer (1983), 114 Ill. App. 3d 760, 449 N.E.2d 1024.) The power to do so, however, is exercised with great caution and only in extreme cases. (Stough v. Branch (1946), 395 Ill. 544, 70 N.E.2d 585.) The rationale for permitting trust modification was advanced over a century ago by our supreme court in Curtiss, which held:\n\u201cExigencies often arise not contemplated by the party creating the trust, and which, had they been anticipated, would undoubtedly have been provided for, where the aid of the court of chancery must be invoked to grant relief imperatively required; and in such cases the court must, as far as may be, occupy the place of the party creating the trust, and do with the fund what he would have dictated had he anticipated the emergency. *** From very necessity a power must exist somewhere in the community to grant relief in such cases of absolute necessity, and under our system of jurisprudence, that power is vested in the court of chancery.\u201d 29 Ill. 201, 230.\nSimilarly, in Thorne v. Continental National Bank & Trust Co. (1958), 18 Ill. App. 2d 163, 151 N.E.2d 398, this court affirmed a chancery court\u2019s reformation of a testamentary trust where it was apparent that the beneficiaries would suffer absent a reformation. Relying on Curtiss and its progeny, the Thorne court reiterated the circumstances which permit modification of a trust:\n\u201c[(!)] facts showing that conditions have arisen or exigencies developed which could not have been foreseen by the donor, and [(2)] that as a result of such unforeseen conditions, the beneficiaries will suffer loss [citation], and [(3)] that the main object of the party creating the trust is best served by the court\u2019s action and the intent of the creator of the trust actually carried out [citation].\u201d 18 Ill. App. 2d 163,173.\nWe believe all the requisite elements for trust reformation are present here. The purpose of the trust, to provide Steven with care that the Department is unwilling or unable to provide, will be totally thwarted if the Department\u2019s reimbursement claim is allowed. Moreover, the allowance of that claim results from this court\u2019s decision in Department of Mental Health & Developmental Disabilities v. First National Bank (1982), 104 Ill. App. 3d 461, 432 N.E.2d 1086, where we held for the first time that the State could reach a beneficiary\u2019s interest in a discretionary spendthrift trust for the cost of services provided. The trial court agreed that First National Bank constituted a change of law but concluded it was not unforeseen, reasoning as follows:\n\u201cParagraph 15 of the Trust states \u2018All questions of interpretation of this document shall be governed by the laws of Illinois.\u2019 This provision seems to refute any suggestion that change in law should justify a change in Trust terms, as being unexpected or unforeseeable. Contrary, it seems to me, to be the more reasonable interpretation of that language; that this Trust will continue as drafted, notwithstanding changes in Illinois law, as they may come down during the life of the Trust instrument.\u201d\nWhile we agree that changes in the law may have been contemplated, it cannot be said that the settlor anticipated a change in the law which would totally frustrate the very purpose the trust was to serve. The Department also does not dispute the fact that the reimbursement it seeks will totally exhaust the trust assets, thereby leaving Steven without any funds for the rest of his life.\nThe Department cites Chicago Title & Trust Co. v. Schwab (1952), 347 Ill. App. 233, 106 N.E.2d 857, and Howard v. Chapman (1968), 101 Ill. App. 2d 135, 241 N.E.2d 492, for the proposition that changes in the law do not warrant trust modification. However, in both these cases, trust beneficiaries sought modification of a trust in order to limit or avoid income tax liability. Since our tax laws are subject to virtually constant revision, the courts reasoned that a trust settlor should be presumed to have known that the tax law might be changed at any time in the future. Accordingly, such a change in the law could hardly be considered an unforeseeable event justifying trust modification. Also, tax law changes will not ordinarily frustrate a settlor\u2019s purpose in forming the trust.\nIn the present case, .the Department does not dispute that First National Bank was a case of first impression, representing a change in the law regarding discretionary spendthrift trusts. At the time Steven\u2019s trust was executed, nearly eight years before First National Bank, Sue Phillips could not have known that the trust she was creating could be used to reimburse the Department. The trust gave the trustee \u201csole and absolute discretion\u201d in expending the income or corpus of the trust for Steven\u2019s benefit. The settlor also included a spendthrift pro-vision in the trust to protect the trust\u2019s assets from creditors\u2019 claims. Both of these provisions are consistent with the settlor\u2019s desire to establish a source of funds for her handicapped son in the event his needs exceeded those the Department was willing to provide. In short, Sue Phillips took every reasonable step to insure that such a fund would be available to her son and free from the claims of all creditors, based upon the law as it existed at the time the trust was executed. From the above, it is clear that this court\u2019s decision in First National Bank represents an unforeseen contingency which -will result in a complete loss to the trust beneficiary and a total thwarting of the settlor\u2019s intent. Trust modification is therefore proper.\nPublic policy considerations favoring Department reimbursement do not require a contrary result. This is not a case where the settlor is responsible for the beneficiary\u2019s support and wishes to have the State shoulder that burden, even though the trust\u2019s assets can cover the costs. Rather, Steven is a young adult and his mother and family are not liable for his support. Here, the mother\u2019s desire to provide a fund for her son\u2019s education and care in the event that the Department is unable or unwilling to provide such services is perfectly understandable. A change in the law subsequent to the creation of this trust should not be permitted to totally frustrate the legitimate objectives of this settlor.\nIn view of the foregoing, we hold that trust modification is appropriate in this case based on an unforeseen change of law in First National Bank which will totally deplete the trust assets and completely vitiate the settlor\u2019s intent. However, we agree with the trial court to this extent \u2014 the proposed trust modifications are exceedingly expansive and go well beyond the changes necessitated by this court\u2019s decision in First National Bank. On remand, we believe that the original trust language should be retained as much as possible and that the trust should only be modified to more clearly reflect the settlor\u2019s intent of providing a fund \u201cfor the beneficiary\u2019s education (including college or a professional education), maintenance, medical care, support, general welfare, and comfortable living,\u201d but only to the extent that the Department is unwilling or unable to provide such services.\nReversed and remanded for further proceedings.\nCAMPBELL and O\u2019CONNOR, JJ., concur.", "type": "majority", "author": "JUSTICE BUCKLEY" } ], "attorneys": [ "Lee Ann Watson and David K. Schmitt, both of Katten, Muchin, Zavis, Pearl & Caller, of Chicago, for appellants.", "Neil F. Hartigan, Attorney General, of Springfield (Jill Wine-Banks, Solicitor General, and Kathryn A. Spalding, Assistant Attorney General, of Chicago, of counsel), for appellee." ], "corrections": "", "head_matter": "THE DEPARTMENT OF MENTAL HEALTH AND DEVELOPMENTAL DISABILITIES, Petitioner-Appellee, v. KEVIN E. PHILLIPS, Trustee, et al., Respondents-Appellants.\nFirst District (1st Division)\nNo. 84-1641\nOpinion filed May 7, 1985.\nLee Ann Watson and David K. Schmitt, both of Katten, Muchin, Zavis, Pearl & Caller, of Chicago, for appellants.\nNeil F. Hartigan, Attorney General, of Springfield (Jill Wine-Banks, Solicitor General, and Kathryn A. Spalding, Assistant Attorney General, of Chicago, of counsel), for appellee." }, "file_name": "0337-01", "first_page_order": 359, "last_page_order": 365 }