Court Opinion

ID: 7029047
Source: CourtListenerOpinion
Date Created: 2022-07-24 06:28:15.002576+00
Date Added: 2024-06-11T16:10:53.151005
License: Public Domain

JUSTICE O’MALLEY, specially concurring: I write separately because I do not share the majority’s view that there is some difference between a professional standard of care (as articulated in Advincula) and an ordinary standard of care that takes professional standing into account (based on language in Advincula describing the rationale for a professional standard of care). See 391 Ill. App. 3d at 889 (citing Advincula for an “ordinarily prudent person” standard that incorporates professional status). Instead of dissecting the majority analysis point by point, I think it easier to spell out completely my analysis of this case. Plaintiffs Mary Claire Collins (case No. 2 — 07—0451) and Megan Collins Lieberman (case No. 2 — 07—0452) appeal from the trial court’s order striking their objections to the accounts filed by defendant Northern Trust Company, the co-guardian along with Mary Claire of the estates of her two children, Joseph Collins Lieberman and Megan Collins Lieberman, on the ground that the objections failed to state a claim for the breach of defendant’s duty to properly invest the children’s funds. On appeal, plaintiffs argue that the trial court applied the wrong standard of care to defendant’s investment decisions and that, under the correct standard of care, their objections state a cognizable claim against the accounts. For the reasons that follow, I would reverse the judgment of the trial court and remand for further proceedings. Plaintiffs’ amended objections, which were in all relevant respects identical for both accounts, asserted that defendant was “a corporate fiduciary which [held] itself out as having particular experience and expertise with the investment and management of funds for guardianship estates” but nevertheless invested substantial portions of the children’s estates “in a short-term investment fund which generated a paltry return of about 1% after-tax and after guardian fees.” The objections further alleged that “there was no excuse for holding these assets in such short-term investments” because the children “had sufficient income and other assets” to meet their needs. Plaintiffs argued that “[a] prudent investor” would have invested in more long-term assets with higher rates of return, and they asked that defendant be assessed a surcharge for the lost income suffered by the estates. The trial court later granted defendant’s motions to strike the objections pursuant to section 2 — 615 of the Code of Civil Procedure (Code) (735 ILCS 5/2 — 615 (West 2006)) for their failure to state a claim. In a lengthy written opinion, the trial court reasoned that, where a guardian invests a ward’s assets in one of the types of investments specifically authorized by the Probate Act of 1975 (Probate Act) (755 ILCS 5/1 — 1 et seq. (West 2006)), the guardian cannot be held liable for resulting losses to the estate “except in instances of bad faith, fraud or acts or omissions constituting gross neglect of the estate that are so unreasonable they cannot be characterized as mere errors in judgment,” a standard that plaintiffs’ objections failed to meet. Plaintiffs timely appeal. I agree with the majority that the trial court’s imposition of a standard of bad faith, fraud, or gross neglect was error. On appeal, the parties again dispute the proper standard of care to be applied to defendant’s investment decisions. Defendant argues that, absent some allegation of bad faith or fraud, the Probate Act shields a guardian from liability for its decisions to invest in any of the types of investments specifically listed in the statute, while plaintiffs assert that Illinois law allows guardians to be liable for their investment decisions where they fail to meet a “prudent person” standard. Plaintiffs alternatively contend that Illinois law imposes an even more stringent “prudent investor” standard on the investment decisions of those who hold themselves out as having particular experience and expertise in investing, even if it does not impose such a strict standard on guardians generally. The parties present us with a question of law, which courts review de novo. In re Marriage of Crook, 211 Ill. 2d 437, 442 (2004) (questions of law are reviewed de novo). I begin by determining the standard of care applicable to guardians’ investment decisions generally. Our case law has long held that “[a] guardian is bound to use ordinary prudence in managing his or her ward’s estate and is liable for losses incurred through culpable indifference and negligence.” In re Estate of Dyniewicz, 271 Ill. App. 3d 616, 627 (1995); see also Kingsbury v. Powers, 131 Ill. 182, 189 (1889) (“A guardian is required to observe that care and diligence in the performance of his duties that a good and conscientious business man exercises in his own affairs, under like circumstances”);1 Parsons v. Estate of Wambaugh, 110 Ill. App. 3d 374, 377 (1982) (“the defendant as guardian had the duty to manage the ward’s property with the same degree of vigilance, diligence and prudence as a reasonable man would use in managing his or her own property”). In spite of the above authority, defendant argues that the Probate Act changed the common-law “prudent person” standard for guardians’ management of their wards’ estates by shielding guardians from liability for their investments so long as they invest in any of the assets specifically named in the statute. 2 Defendant presents us with an issue of statutory construction. The fundamental rule of statutory construction is to give effect to the intent of the legislature, and the best evidence of legislative intent is the language of a statute, which must be ascribed its plain and ordinary meaning. King v. First Capital Financial Services Corp., 215 Ill. 2d 1, 26 (2005). I therefore begin with the language of the Probate Act. Section 21 — 2 of the Probate Act provides as follows: “(a) It is the duty of the representative to invest the ward’s money. A representative is chargeable with interest at a rate equal to the rate on 90-day United States Treasury Bills upon any money that the representative wrongfully or negligently allows to remain uninvested after it might have been invested. Reasonable sums of money retained uninvested by the representative in order to pay for the current or imminent expenses of the ward shall not be considered wrongfully or negligently uninvested. *** (c) A representative may invest only in the types of property specified in Sections 21 — 2.01 through 21 — 2.15.” 755 ILCS 5/21 — 2 (West 2006). Sections 21 — 2.01 through 21 — 2.15 list 15 specific types of investments. Two of those sections refer to the standard of care applicable to a representative electing to purchase the named investments: the sections allowing investment in common trust funds (755 ILCS 5/21— 2.13 (West 2006)) and mutual funds (755 ILCS 5/21 — 2.14 (West 2006)) indicate that those assets may be purchased “provided that the investment *** meets the standard of the prudent investor rule for the investment of trust funds.” The remaining sections contain no reference to any standard of care. A court’s function is to interpret the law as enacted by the legislature, “ ‘not to annex new provisions or substitute different ones, or read into a statute exceptions, limitations, or conditions which depart from its plain meaning.’ ” In re Estate of Swiecicki, 106 Ill. 2d 111, 120 (1985), quoting Belfield v. Coop, 8 Ill. 2d 293, 307 (1956). “When a statute is enacted which covers an area formerly covered by common law, such statute should be construed as adopting the common law unless there is clear and specific language showing that a change in the common law was intended by the legislature.” Proud v. W.S. Bills & Sons, Inc., 119 Ill. App. 2d 33, 45 (1970); see Swiecicki, 106 Ill. 2d at 120 (agreeing with appellate court’s application of the rule from Proud to the Probate Act). The plain language of the Probate Act does not contain the type of clear and specific language necessary to supplant the common-law rule that guardians may be held liable for failing to exercise ordinary prudence in favor of a new rule that guardians are immunized from liability so long as they invest in the statutorily enumerated asset types. The Probate Act says that a guardian “may invest only in the types of property specified” in the statute (755 ILCS 5/21 — 2(c) (West 2006)); it makes no reference to any immunity or protection for guardians. In fact, the operative feature of Article 21 of the Probate Act is not that it confers rights to a guardian, but that it restricts a guardian’s investment actions. Cf. Swiecicki, 106 Ill. 2d at 120-21 (holding that a guardian could be liable for investing in assets not enumerated in the Probate Act because the Probate Act did not “expressly allow” the investment). Defendant also offers that we must interpret the Probate Act as immunizing guardians’ investment decisions because a contrary ruling would require that guardians “aggressively invest to maximize return *** to the extent of any funds not needed for annual budgetary expense,” a requirement that defendant argues would have the “potentially ruinous” effect of encouraging unnecessary risk-taking in guardianship investments. Neither I nor the majority share defendant’s apprehension. A rule that requires a guardian to observe ordinary prudence in investing in the statutorily enumerated assets does not require or encourage unnecessary risk-taking: it actually discourages such imprudence. Defendant’s proposed rule, on the other hand, might lead to absurd results, because it would remove any requirement that a guardian’s investments be prudent so long as they involve a statutorily enumerated asset. Under defendant’s rule, a guardian could set aside funds to meet the current needs of the ward and invest the balance of an estate in a single asset with high risk, such as stock (755 ILCS 5/21 — 2.12 (West 2006)), without any regard for the wisdom of the allocation. The application of a standard of care to a guardian’s selection of investments from the statutory list serves an important purpose, and defendant has supplied us with no authority or convincing reason to depart from the “prudent person” standard of care recited in our case law. For their part, plaintiffs agree that, at the very least, a “prudent person” standard should govern a guardian’s investment decisions under the Probate Act. However, plaintiffs argue that the Probate Act takes the standard one step further, to require that guardians’ investment decisions comport with an elevated “prudent investor” standard. Just as with defendant’s argument that the Probate Act changes the common law by providing immunity to guardians, plaintiffs’ argument that the Probate Act changes the common law by providing for an elevated standard of care can succeed only if they can point to some clear and specific statutory language evincing the legislature’s intent to change the law. The Probate Act includes no such language. Indeed, the most definitive clue the language of the Probate Act provides on this issue actually undercuts plaintiffs’ argument. Sections 21 — 2.13 and 21 — 2.14, which allow a guardian to invest in common trust funds and mutual funds, allow those investments only where they comport with “the prudent investor rule for the investment of trust funds.” 755 ILCS 5/21 — 2.13, 21 — 2.14 (West 2006). These references tell me two things. First, the fact that the legislature expressly invoked the prudent-investor rule for two specific types of guardians’ investments, but made no reference to it in the sections describing the remaining guardians’ investments, indicates a legislative intent to apply the prudent-investor rule to guardians only with respect to those two investment types. Second, the legislature’s description of the prudent-investor rule as the “prudent investor rule for the investment of trust funds” (emphasis added) implies that the rule is normally associated with trusts only, and thus not with guardianships. Further, the legislature’s invocation, and extensive description, of the prudent-investor standard in the Trusts and Trustees Act (see 760 ILCS 5/5(a) (West 2006)), along with its failure even to reference that standard in the Probate Act (aside from the two references just discussed), also indicates that the legislature did not intend to invoke the prudent-investor standard in the Probate Act generally. Aside from the above references to the prudent-investor rule, the only remaining portion of Article 21 of the Probate Act that could be interpreted to refer to a standard of care is section 21 — 2, which provides for liability for the representative who fails to invest a ward’s funds, but it premises that liability on a showing that the guardian “wrongfully or negligently” failed to invest, without mention of the standard of care to be applied to reach those determinations. See 755 ILCS 5/21 — 2 (West 2006). From this statutory language, I see no clear legislative intent to overturn the common-law prudent-person standard in favor of a more stringent prudent-investor standard. Based on the above discussion, I would conclude that the Probate Act neither immunizes guardians’ investment decisions nor imposes a heightened prudent-investor standard on those decisions. Instead, I would interpret the Probate Act as leaving in place the common-law prudent-person standard of care that generally governs guardians’ management of their wards’ estates. However, defendant’s status as a guardian is not the only basis that plaintiffs offer for imposing a heightened standard of care on its investment decisions. Plaintiffs also urge that defendant be held to a stricter standard because, as stated in plaintiffs’ objections, defendant “holds itself out as having particular experience and expertise with the investment and management of funds for guardianship estates.” In pressing this argument, plaintiffs ask that we adopt, and apply to guardians, section 174 of the Restatement (Second) of Trusts, which provides that, “if the trustee has or procures his appointment as trustee by representing that he has greater skill than that of a man of ordinary prudence, he is under a duty to exercise such skill.” Restatement (Second) of Trusts §174, at 379 (1959). However, plaintiffs direct us to no authority applying the Restatement (Second) of Trusts to a guardian in this way. Instead, plaintiffs cite two cases involving executor-trustees (see In re Estate of Estes, 134 Ariz. 70, 654 P.2d 4 (1982); In re Sulenger’s Estate, 2 Ariz. App. 326, 408 E2d 846 (1965)), one case that referenced the Restatement (Second) of Trusts after noting that state statute imposed a higher duty of care (Estate of Baldwin, 442 A.2d 529 (Me. 1982)), and one guardian case purporting to adopt and apply section 174 of the Restatement (Second) of Trusts but actually holding that the guardian “breached its duty to exercise common prudence, skill, and caution” (In re Estate of Scharlach, 809 A.2d 376 (Fa. Super. 2002)). I would conclude that adopting and applying section 174 of the Restatement (Second) of Trusts is inadvisable here, because plaintiffs’ argument is already governed by more established common-law principles. Section 299A of the Restatement (Second) of Torts provides that “one who undertakes to render services in the practice of a profession or trade is required to exercise the skill and knowledge normally possessed by members of that profession or trade in good standing in similar communities.” Restatement (Second) of Torts §299A, at 73 (1965). In Advincula v. United Blood Services, 176 Ill. 2d 1 (1996), our supreme court adopted this professional standard of care and noted that it “is utilized to measure the conduct of a wide variety of both medical and nonmedical professions.” Advincula, 176 Ill. 2d at 22-24. The supreme court then favorably cited cases in which a professional standard of care had been applied to attorneys, physicians, podiatric practitioners, dentists, accountants, and social workers. Advincula, 176 Ill. 2d at 23-24.3 If the professional standard of care extends to these professions, it extends likewise to professional guardians or investors such as defendant is alleged to be. See also Erlich v. First National Bank of Princeton, 208 N.J. Super. 264, 505 A.2d 220 (1984) (holding professional investor to a professional standard of care requiring it to “give prudent advice”). I acknowledge that there is at least some Illinois authority indicating that professional and nonprofessional fiduciaries should be held to the same standard of care. In In re Estate of Lindberg, 69 Ill. App. 3d 714, 721 (1979), the court dismissed a professional-nonprofessional distinction as follows: “Petitioners’ first contention is that the Bank, as a professional fiduciary which has held itself out as having greater than average expertise, must be judged by that higher standard. While the acts of an executor must be judged in the context in which he acted [citation], in Illinois a corporate executor is held to no higher standard than an individual executor. (In re Estate of Venturelli (1977), 54 Ill. App. 3d 997, 1002 ***.)” In re Estate of Lindberg, 69 Ill. App. 3d at 721. (Venturelli, the case upon which Lindberg relied, stated that “[t]he corporate executor is held to no higher standard than the individual executor,” without citation to authority and without further discussion. Venturelli, 54 Ill. App. 3d at 1002.) The above passage from Lind-berg conflates two ideas: the idea that a corporate fiduciary should be held to a higher standard of care than an individual fiduciary, and the idea that a professional fiduciary should be held to a higher standard than a nonprofessional. See In re Estate of Pirie, 141 Ill. App. 3d 750, 758 n.l (1986) (raising the above criticisms oí Lindberg and Venturelli). In light of the authority from other states imposing a higher standard of care on professional fiduciaries versus nonprofessional fiduciaries (see Pirie, 141 Ill. App. 3d at 758 n.l (collecting authorities)), and in light of our supreme court’s broad adoption of the professional standard of care in Advincula, I would conclude that the above passage from Lindberg does not accurately reflect Illinois law. Instead, I would conclude that Illinois law imposes a heightened standard of care on those who hold themselves out as professionals in a particular field, and I would hold that the Probate Act incorporates by its silence the common-law professional standard of care just as it incorporates the ordinary standard of care for guardians’ decisions generally. Because plaintiffs have alleged that defendant held itself out as having expertise in the investment and management of guardianship estates, I would apply the professional standard of care to plaintiffs’ objections to defendant’s investment and management of the estates. Having determined the proper standard of care to apply to defendant’s investment decisions, I next consider whether, under that standard of care, plaintiffs’ objections should have been stricken pursuant to section 2 — 615 of the Code. A section 2 — 615 motion to dismiss challenges the legal sufficiency of a complaint based on defects apparent on its face. Marshall v. Burger King Corp., 222 Ill. 2d 422, 429 (2006); see 755 ILCS 5/1 — 6 (West 2006) (Code applies to proceedings under the Probate Act). In considering the propriety of a dismissal pursuant to section 2 — 615, we must accept as true all well-pleaded facts and all reasonable inferences that may be drawn from those facts, and we must construe the allegations in the light most favorable to the nonmoving party. Marshall, 222 Ill. 2d at 429. Plaintiffs allege that defendant invested an unduly large portion of the guardians’ estates in short-term, low-return investments when a prudent investor would have chosen more long-term investments with greater return. I conclude that this objection, taken as true, successfully alleges a breach of defendant’s professional duty of care. However, I caution that this is not to say that a breach of an investor’s duty may be established by a showing, based on hindsight, that the investor could have earned a greater return or that another investor might have performed better. As defendant notes, an investor or guardian cannot be charged with perfect foresight of the changes in value of all possible investments. Instead, I would hold that plaintiffs have successfully alleged that a prudent professional investor in defendant’s position, even without the gift of foresight, would not have invested the estates as defendant did. For that reason, I would reverse the decision of the trial court dismissing plaintiffs’ objections and remand the cause for further proceedings under the professional standard of care that I described herein.  The passage from Kingsbury refers to the care and diligence of a “business man” engaged in like affairs, instead of the care and diligence of a reasonable man. However, after the quoted sentence, the supreme court in Kings-bury went on to describe a guardian’s liability in terms of whether the guardian made errors that he would have avoided “by the exercise of ordinary prudence and caution.” Kingsbury, 131 Ill. at 189.1 therefore interpret Kings-bury as imposing the same “prudent person” standard articulated in the remaining cases cited above.   Defendant presses this argument at great length in its brief, to the point that it obfuscates, and even almost fails to (but eventually does in passing) acknowledge, plaintiffs’ true argument, that the problem here is the mix of investments defendant chose within the statutorily permitted investments. At oral argument, defendant pressed this argument exclusively and avoided addressing plaintiffs’ true argument.   Prior to the decision in Advincula, there had been a conflict in the appellate court cases regarding whether the professional standard of care should apply to social workers. Compare Borah v. Biris, 130 Ill. App. 3d 140, 145-46 (1985) (adopting the professional standard of care for social workers), with Martino v. Family Service Agency of Adams County, 112 Ill. App. 3d 593, 595-97 (1982) (declining to apply professional standard of care to social workers). By favorably citing Borak, Advincula resolved this conflict.