audrey carter as trustee of the marital trust and as its income beneficiary breached her fiduciary duties to the appellant tiffany carter who was the remainder beneficiary of the of the marital trust principle by putting her own interests ahead of tiffany's interests but the facts of this case are pretty straightforward luthor carter created the marital when he did that he named his second wife audrey carter as the income beneficiary of the trust he named his only child by his first wife tiffany carter as the remainder beneficiary he also identified and named audrey carter as the trustee of the marital trust mr carter is not the  mother in two thousand and three luther carter passed away in the mail trust was funded with approximately two million dollars what's important for purposes of this appeal is that the marital trust in article four provides for the distributions of the marital trust and what it says in section four point one is that the trustee shall pay all of the income to audrey carter that's fair point one four point two says that  how much money was put into the separate and family trusts there was a problem when mr carter died he had approximately four million dollars in his estate two million went into the marital trust a million went into the g s t trust and another million i think went into the family trust in those two other trust were primarily for tiffany to control is their right or that we trustee has to give the benefit of those to trust those who are primarily for her benefit that's correct why is that improper for audrey doin by invading the principal with that investment strategy and that's precisely what happened here with i will there were two million dollars in the merrill trust when it started miss carter from the very beginning decided to invest the merrill  trust in tax free unisa paid by us i am not an investment expert but it's my understanding that you would be hard pressed to find an investment vehicle that would pay you more tax free income than a tax satisfy you it would satisfy it going forward but i will tell you that when she invested in two thousand and three municipal bonds the stock market was clipping along and everyone was making a lot of money in two thousand and seven when the financial landscape of our world  l i don't mean it may have not worked out very well i suppose so since he went bankrupt if i recall i read that somewhere so what they would have put tiffany correct it could have hurt tiffany very easily yes suppose she bought battalion backs of her own at six percent right now i'm told i don't know your stuff i heard on the radio but suppose she went out today and invested like it you get to pitch a quest that no four point four percent that's kind of low i'm not please invest in something don't get more return how about italian would that be a but the principle would always remain stagnant in fact it would lose value she knew it would lose value because i know but the trust instrument does say that miss carter has fiduciary obligations to the remainder beneficiary and when you engage in that investment strategy that you know will damage you know will damage oh beneficial interest in the trust you can't do that and i would point out i would in our fit in her answer to the complaint welcome back up i want to be clear about something because this is this is i think an important but subtle point when evaluating whether someone has violated their fiduciary duties under the proven investable you don't necessarily look at the results because the results can be nebulous like italian bonds or that you look at the conduct the conduct the that the reason why she's liable for breach for the sugar to conduct here that gives rise to liability is her knowing that her investment strategy was going to damage tiffany and she would like and going back well first you admit the term and that the purpose of this trust the marital trust called the marital trust which wouldn't necessarily involve autrey was to make sure that audrey had a source of income for the rest of her life stepmo stepdaughter not in a case of first impression quite the opposite is unhappy with that in an unambiguous trust how is it then that we should rule read it any other way than the  loyalty they didn't write out any of that so you can reconcile the non diversification clause with her for do share your views in this way miss carter is free to invest in whatever she wants if she wants to sink all our eggs in one basket she can do that but she can't do it if to do it means she's going to violate her fiduciary duty to any other beneficiary and when you know that you're going to invest in a way that's going to invade principle and diminish the value of that principle from that merrill trust then you're violating your and i will point out in our answer miss carter invested with a very myopic view of what her duties were in in paragraph eighteen of the answer she says second second sentence this is at a thirty eight of the record the interests of a vested current beneficiary of a marital trust as to income oh always takes precedence over a remainder interest that's an incredible statement  won in their case in doing so this court said affirmed the trial court's finding as the trial court properly noted however nothing in the trust document itself requires the trustee to produce a certain level of income for the beneficiary or to maximize investment potential of the trust assets moreover the put in investor rule is intended to be a quote a test of conduct and not a resulting performance site plaintiff's claims focus soley on the resulting performance of martin's investments as trustee not trustees are acting in a wholly unreasonable in arbitrary manner which is what you would have to show i suggest to you that is a standard to review in an invidious trust that the trustee was if you know wholly unreasonable in arbitrary manner washington that's the cooper case in washington adopted very closely the proven investor rule that illinois has i will tell you candidly that there are not any cases in illinois the deal with this tension that exists between a non diversification clause and the fiduciary duties that a income beneficiary has to a remainder beneficiary and in that case in washington the cooper case that we cite the court sad but by investing eighty seven percent that there was a therefore ation was at a six percent rate the rate of return was only two percent so there's a four percent decrease in the principal and they said you can't do that but he's read and i read it and i not to attack that with this case i would i probably would agree with you but that's not this case and i would suggest that this case is unusual i don't think you're going to be necessarily changing the landscape of trust law this case is unusual in the sense the trustee willingly admits that she put her provide income for her during her life it absolutely was that was the stated intent right of any remainder to the child upon her that principal of that trust and you pay yourself meaning out of it and you you abide by your duty of impartiality and loyalty and you can not harm my daughter and her interest in that remainder principle by investing in such a way that you know will damage and diminish that i agree with you there's no guarantee but when she gets that principle that it's going to have a value of two million dollars in today's world ok but there's nothing in the trust that guarantees or says that what the trust does say in an ambiguous terms is that she's a ok and when you're fiduciary you can't knowingly engage in conduct or investing strategy is going to harm your beneficiary but what what what if if you say that she can do that then what does what fiduciary duty does miss carter ha for her in other ways where she's getting some at all to ask me questions ok well i'm doing it rhetorical i'm sorry just because she is providing for her other ways ok doesn't mean that mrs carter that can say or a court should say well she's got two million dollars over here so forget how she value of whatever year that is it could be tomorrow it could be thirty years in thirty years from now it's safe to say that two million dollars we were substantially less than they are in two thousand and eleven dollars just as two thousand and eleven dollars are worth less than they were fifteen years ago that's how this works so are we going to see some point that the principle is protected that somehow we're going to impose a requirement that there be an inflation hedge imposed imposed upon all trustees income trustees interest income beneficiaries to protect remainder beneficiaries that is not likely i agree with you just to scrimp again the the focus here is not on the end result it's not whether she lost three hundred pounds and lost five hundred thousand  lie that what we should be looking in fact we should be looking at the kind of the kind the prude investor rule suggests that that's exactly what you do but you look at the conduct in the context of both the language of the trust which is the really determinative a benchmark of in effectively any way she chooses in almost without almost any limitation including that they can be in investment vehicles that are not typically trust investment vehicles but if this language was not here a corporate trustee for most certainly would not be able to invest in some of the things perhaps that my dream guy has invested in but based upon this language and especially for her personally here she has almost unlimited ability to invest trust proceeds or trust assets for the benefit of at this point herself this is the right time income excuse me for interrupting does there ever come to a p divergence in investments that broad reason investment in a in the investment of the principal would somehow serve both the income interests and the principle interest if there's no divergence here it right now the month when the markets were in turmoil during the two thousand and seven two thousand eight hundred investment was basically risk averse it maintained its face value she at that in the in the same period of time generated six hundred thousand dollars of tax free interest income as i believe may be just display line for her what happened to the principal the principal reading didn't really good till billion and she still has two million so let's say it loses twenty five percent isn't it time to say well what are we doing with two million here in  anyone could make it in this at this point in time predicting the future is what all of us wish we could do there's no way to predict at what point that would come because the did investment decisions that she's charged with making as any trustee in this position would be charged with making require a certain level of common sense and also a certain level if you will of our effect oppressions we're not talking about results as approved investor rule clearly states we're talking about reasonableness we're talking about a real commonsense approach here if all of the equity markets were surging in the bond market was was collapsing it would be in good news carders own interest to find other investment vehicles which might ensure that the growth would provide her with good ends that would make up for the lost interest income but it's a very fluid situation and the real key here is that as as squad pointed out and the read today that what tiffany kind of is asking this court to do is effectively rewrite illinois law and impose on the trustee here on the actually the duty to prefer the contingent conflict in an arbitrator and in kind of an arbitrary restaurant fashion i'm really not sure the reason i don't think that in this kind of a trust the interest can ever be in conflict under these circumstances is that the lifetime of marital beneficiary has a right to on the investment strategy or is this and so my question to those in such a situation if you assume for the moment that your opponent is correct and that the investment strategy chosen by your own is was actually preserve the principle in ways that other investment vehicles would not have done but the principle today is basically two million dollars and it is this court that pointed out  in question mr chase but the trust document does not require or does and does not impose on the trustee any duty to ensure that the principle is preserved from inflation that would be as he said he's complaining about the fact that that's not two million three hundred thousand dollars or two million two hundred thousand dollars that somehow the inflation was not incorporated in the investment strategy and therefore my client has somehow mis managed the trust clearly we disagree and we don't believe that that is either the that was they were the suckers intent nor is that the intent of illinois trust law in situations such as this did the  y judge novak articulated her decision that didn't become a factor for her although for purposes of liability avoid rico under that language would we would contend even if they were that if her investment decisions were determined to around the contentions about all broad reach contact that it was somehow tainted and that there was some component of bad faith there in fact there wouldn't be any rye ability if there wasn't so i think implicit effectively in judge decision was a determination that there was not bad faith that in fact i reacted in good faith and therefore there was no liability for her conduct thank you thank you briefly i want to read to you the first sentence of section five of the prudent vest rule which was not written out of the marital trust and which is incorporated into a section eleven and it says the trustee has a duty to pursue investment strategy that considers both the reason the protection of income and safety of capital consistent with the trustees duty of impartiality and the purposes of the trust i don't know how we can say that miss carter discharged any fiduciary duty to miss to tiffany carter when we all agree that she has fiduciary obligations when miss carter deliberately invested in a strategy she knew that would not preserve the safety of the capital and she wasn't being impartial she clearly put her own interests ahead of audrey and when we get into this issue about well how much should it diminish how much would have increased how the reason right that bit but they don't she quit the long fight she got eighty thousand dollars a good intro or i understand that and that's precisely why in the law we don't look at performance the results we look at conduct i bring you back to that again if impartiality and when she did when she decided to put her own interest which she readily admits to ahead of tiffany's she all those things fell into place ok the trust but the principle is not going to keep up with the rate of inflation in the value is going to diminish she had a duty to be impartial she had a duty to be loyal she had fidelity duties to tiffany everyone agrees on that if they need anything they mean you don't harm your beneficiary one of the purposes of a truss interment is to prevent litigation isn't that so that making it again it difficult for overreaching a remainder beneficiaries or outsiders or lawyers whoever may be to come in and then somehow prevail or even make a strong argument that they should prevail where the money would have to be paid attorney's fees are the corpus isn't meet what the major principles of trust documents it's revenge litigation is it not die i understand i gree with you and i understand your policy argument but let me suggest this it will and i didn't like it how it works now though insurance would seem to me in my mistake and that would be the natural reaction what is likely to occur if we write that we asked i respectfully disagree with you for a couple reasons number one i think it'll be the rare case where a trustee will boldly asserting knowledge that she put her interests ahead of another beneficiary when she couldn't do that because she had fiduciary duties to both and you have to treat them equally this is an unusual case because she has and they're testing the waters i think for this purpose they're understand and in and in criminal as defense and there's prosecutors and understand in civil generally there's a kind of r and b defense bar is there in a trust bar is very a division between you know income beneficiary people who represent trustee regardless of whether she's an income beneficiary there or just the trust she is the trustee and so she has those obligations and i don't know what they mean if they don't mean you can't deliberately harm someone and so the fact that it doesn't say in here hey you need to provide a hedge against insurance in the mail trust or you need to invest in this or you need to vest that you can't provide for all those contingencies which is why you look at conduct which is why you have these fiduciary duties and you look at them in those contexts and if the duty of impartiality