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Merchants Nat. Bank v. Weinold

DECEMBER 20, 1956.

MERCHANTS NATIONAL BANK OF AURORA, TRUSTEE UNDER TRUST NO. 401, PLAINTIFF,

v.

MARGARET BIRD WEINOLD, AND MARTHA ELLIS WAGNER, DEFENDANTS. MARGARET BIRD WEINOLD, CERTAIN DEFENDANT-APPELLANT,

v.

MARTHA ELLIS WAGNER, CERTAIN DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Kane county; the Hon. RUSSELL W. KEENEY, Judge, presiding. Reversed and remanded with directions.

JUSTICE CROW DELIVERED THE OPINION OF THE COURT.

This is a complaint by The Merchants National Bank of Aurora, as trustee under a trust agreement executed by Winifred B. Colby, as settlor, and the bank, as trustee, against Margaret Bird Weinold and Martha Ellis Wagner, defendants. In its complaint, the bank asked that a determination be made as to the rights and interests in the trust assets of the defendants, the present ostensible beneficiaries under the trust agreement, by reason of the death of Winifred B. Colby, the settlor, and as to what effect, if any, the Last Will and Testament of Winifred B. Colby had upon the trust assets at the time of her death, and as to whether the will of the settlor revoked the trust agreement. The complaint also asked that the bank's appointment as trustee be confirmed, and its acts ratified, and there were attached copies of the trust agreement, the settlor's will, and the trustee's final account for the period December 19, 1952-March 30, 1954.

The answer of the defendant Margaret Bird Weinold, appellant, in substance, admitted the factual allegations of the complaint, and alleged the trust agreement created a valid inter vivos trust, not testamentary in character, and that the trust estate should be distributed pursuant to the terms of the trust agreement, upon the decease of the settlor, that the settlor created a completely executed trust, which was never revoked, cancelled, or amended, that the trustee at all times after creation of the trust held the trust assets as trustee, that the trust was in full force and effect upon the decease of the settlor, and that the distribution by the bank, as trustee, to itself as executor was wrongful and contrary to the terms of the trust agreement, and that she is entitled to one-half of the trust assets.

The answer of the defendant, Martha Ellis Wagner, appellee, in substance, admitted the factual allegations of the complaint and alleged that the trust agreement attempted to effect a testamentary disposition of the trust estate without complying with the statute on wills, and therefore the trust was invalid and terminated at the death of Winifred B. Colby, and the trust assets were a part of her estate to pass in accordance with her will, primarily because of the settlor's reserved right to revoke or modify the trust agreement, and because the trust was to terminate on the death of Maude B. Ellis, or the settlor if Maude B. Ellis was not then living, at which time distribution was to be made to the defendants' beneficiaries.

The question raised by the complaint of the bank, as trustee, so far as decided by the trial court and now before us, is whether the trust agreement, admittedly not having been executed with the formalities of a will, was valid as an inter vivos trust to effect a valid distribution of the trust assets in accordance with the terms of the trust agreement after the death of the settlor, or was testamentary in character and hence invalid and did not control the distribution of the trust assets upon the settlor's decease. The further matter referred to in the complaint as to whether the will revoked the trust agreement was not decided below and is not before us.

On motion of the defendant Martha Ellis Wagner for a summary judgment, on the pleadings, the trial court entered a decree finding that the trust agreement, not having been executed pursuant to the statute on wills, and being testamentary in character as to the disposition at the settlor's decease, was invalid as a testamentary disposition, and ordered that the bank, as trustee, deliver all of the assets of the trust in its possession to itself as executor of the estate of Winifred B. Colby, deceased, the decree reciting that the settlor reserved absolute control of the trustee, the right to revoke, cancel, amend, increase or decrease the trust estate, thereby preventing the defendants' beneficiaries from any control or exerting any interest in the trust estate during the settlor's lifetime, that it was the settlor's intention the beneficiaries should receive an interest only upon her decease, and that the interests of the defendants' beneficiaries were to take effect only upon the decease of the settlor.

From that part of the decree finding that the trust agreement was testamentary in character, and, not having been executed as a will, therefore void, and ordering the bank, as trustee, to turn over to itself, as executor, all the assets of the trust at the date of death of Winifred B. Colby, the defendant Margaret Bird Weinold has appealed.

No dispute exists as to the facts in the present proceeding, — they being sufficiently set forth in the complaint and other pleadings, and there being no evidence. The facts, as so disclosed by the pleadings, are that on December 19, 1935, Winifred B. Colby executed and delivered this trust agreement with and to The Merchants National Bank of Aurora, as trustee, and at the same time deposited certain securities, constituting the initial corpus, with the trustee, creating a trust known as "Trust No. 401." The trust agreement gave the trustee the usual powers and duties to receive, hold, protect, manage and control the trust assets, and to invest and reinvest the principal and proceeds, collect the same and the income, to sell, assign, lease, exchange, encumber, etc. the trust estate, to sell, alter, etc. the investments, collect dividends, etc. until the final and complete distribution and payment, pay all expenses of the trust, and retain a reasonable trustee's compensation. The trustee was also to receive any other property which might be devised, bequeathed, granted, conveyed, or assigned to it by the settlor or any other person, to be held pursuant to the terms of the agreement. The trustee was to pay all of the net income to the settlor, Winifred B. Colby, during her life, and to augment the payments of net income by the payment of principal to her from the trust estate to such extent as the settlor might at any time, or from time to time, in writing, direct, and if she were unable to so direct then to such extent as necessary and proper for her adequate care. Upon the death of the settlor the trustee was to retain the trust estate, as then constituted, with all the trustee's rights and duties thereinbefore given, and, commencing with the death of the settlor, to pay the net income to Maude B. Ellis, a sister of the settlor, for her life, and if the income should not be adequate for her comfortable support, then to augment such by payment from the principal to such extent as should, in its discretion, be adequate. Upon the death of Maude B. Ellis, or upon the death of the settlor, if Maude B. Ellis should not then be living, the trust should terminate and the trustee should thereupon pay, transfer, and deliver the trust estate, as then constituted, one-half to Margaret Bird and one-half to Martha Ellis.

The settlor reserved the right of modifying or changing the trust agreement at any time or in any manner, to revoke the same, to withdraw from the trustee any or all of the trust estate at any time or from time to time, to increase or decrease the amount of the trust estate, and to change, alter, amend, or cancel the trust agreement, without the consent of the beneficiaries or the trustee, provided, however, that the settlor should exercise such right in writing.

The agreement recites that the settlor does hereby sell, assign, set over, transfer, and deliver all of her right, title, and interest to the trustee in and to the property and securities described in Exhibit A annexed, which property and any other as may be received is the trust estate.

It further provided that no assignment or order by any party having any beneficial interest, either actual or by way of anticipation of any part of the principal or income shall be valid, and that the trustee might resign by giving 30 days' written notice to the settlor or, if she be deceased, to the surviving beneficiaries.

The trust agreement is a formal instrument of some 8 typewritten pages, in which Winifred B. Colby is called the settlor and the bank is called the trustee, the legend "#401" is in the margin opposite the first paragraph, it is executed under seal, states that it is binding upon the parties, their heirs, executors, administrators, and assigns, is executed on behalf of the bank-trustee by its president and trust officer, and Exhibit A attached is a listing of various securities, the settlor's and the trust officer's initials appearing at several different places in the margin of that Exhibit A.

From and after the execution of the trust agreement on December 19, 1935, the bank, as trustee, continued to act in fact under and pursuant to the terms thereof until the death of Winifred B. Colby, the settlor, on January 11, 1954, and it made annual accountings from December 19, 1935 to March 30, 1954. Maude B. Ellis, the sister of the settlor, predeceased the settlor. Margaret Bird, one of the named beneficiaries in the trust agreement, is now by marriage Margaret Bird Weinold and Martha Ellis, the other named beneficiary, is now by marriage Martha Ellis Wagner. The settlor died testate, and her will was admitted to probate. After several preliminary bequests, the residue of the estate was devised and bequeathed to Martha Ellis Wagner. The Merchants National Bank of Aurora, the trustee under the trust agreement, was also nominated, and duly qualified, as executor of the will. Thereafter the bank, as trustee, turned over to itself, as executor, all of the trust assets in its possession at the death of Winifred B. Colby.

It is conceded that the trust agreement was not executed as a will should be or in such a way as to satisfy the requirements of the statute on wills, and hence if it be testamentary in character it is necessarily invalid. But if it be not testamentary in character and be instead a valid inter vivos trust it is ...


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