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In re Will of Gleeson - 5 Ill. App. 2d 61, 124 N.E.2d 624 (1955)

Rule:

A trustee must maintain a high level of conduct and owes to those whose property he controls undivided loyalty. A trustee cannot deal in his individual capacity with the trust property.

Facts:

Petitioner executor was appointed trustee in the testatrix's will and the residuary estate, which included a farm. Respondent children were the trust beneficiaries. The testatrix leased the farmland to the trustee and another person as a partnership. The partnership leased the testatrix's farm on a cash and crop-share basis for the 1951 crop year, and held over the lease for the 1952 crop year until March 1, 1953, when the farm was rented to another tenant. The testatrix died in February 1952, just before the 1952 crop year began. The rent consisted of a cash rent per acre and a share of the crops. Petitioner's appointment as trustee was confirmed by the circuit court in April, 1953, and he filed his first semi-annual report in July, 1953. The beneficiaries objected to the report, claiming that the trustee failed to properly account for farm profits. The circuit court overruled the beneficiaries' objections and they appealed.

Issue:

Did the trustee establish sufficient reason to support self-dealing with respect to trust property?

Answer:

No.

Conclusion:

It was undisputed that the trustee leased a portion of the real estate to himself as a partner and that the trustee received a profit from the farm. The trustee violated the rule that a trustee could not deal with trust property in an individual capacity and receive a profit. The court rejected the argument that the trustee fell within an exception to that rule because of his good faith attempt to farm the land after tenants could not be found for the 1952 crop year. First, there was no showing that the trustee tried to find a satisfactory tenant. Second, the good faith and honesty of the trustee even where the trust sustained no loss did not take the trustee outside of the rule. Finally, instead of conferring with the beneficiaries regarding the lease following the testatrix's death, the trustee should have decided whether to continue as tenant or accept appointment as trustee; he chose to proceed as a trustee and violated the rule against self-interest.

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