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Burnet v. First Nat. Bank

JANUARY 16, 1957.

JULIE GOSMAN BURNET, AS EXECUTRIX OF THE LAST WILL OF ANNA BURNET HARDIN, DECEASED, APPELLANT,

v.

FIRST NATIONAL BANK OF CHICAGO, ET AL., APPELLEES.



Appeal from the Circuit Court of Cook county; the Hon. JULIUS H. MINER, Judge, presiding. Affirmed.

PRESIDING JUSTICE FEINBERG DELIVERED THE OPINION OF THE COURT.

Rehearing denied February 6, 1957.

Plaintiff, as executrix of the last will of Anna Burnet Hardin, deceased, filed her complaint, as amended, attacking the validity of two inter vivos trusts, which shall for convenience be referred to as trust No. 3639 and trust No. 20673, created by her husband, John H. Hardin. It is alleged that trusts No. 3639 and No. 20673 were created by instruments in writing dated March 11, 1924, and November 1, 1938, respectively. It is further alleged that in creating said trusts, Hardin used and deposited in said trusts the separate property, money and securities belonging to his wife. The complaint prays that an implied trust be impressed upon the property in said two trusts, and the trustees presently in possession be declared trustees for Anna Hardin, her heirs, executors and assigns; that an accounting be had and the present trustees of said trust be compelled to pay over to plaintiff what may be found to be the money and property in their hands belonging to her in her representative capacity; and that judgment be entered for plaintiff for any balance that may be due.

The chancellor heard this cause upon the complaint and answers, testimony adduced in open court, as well as certain stipulations of fact. A decree dismissing the complaint for want of equity was entered, from which decree plaintiff appeals. The record is voluminous, consisting of over 2400 pages and over 250 exhibits.

Plaintiff contends (1) that the two trusts were inter vivos trusts, in which the donor reserved virtually absolute control and the power of revocation; (2) that Mrs. Hardin's separate property was by her authority in writing placed in the custody and control of her husband, and that he was her fiduciary in the management and disposition of her said property; (3) that such of her property as is traceable to the two trusts created by him belongs to her estate, and that the present trustees are in duty bound to account therefor; (4) that at the time of his death, he and his wife were domiciled in California, and under the California statute, upon his death she became vested with a one-half interest in his personal property; and (5) that the trusts, though absolute in form, were merely colorable and illusory, constitute a fraud upon the marital rights of Mrs. Hardin, and cannot be employed to divest her of her statutory marital rights, any more than a will could.

In order to better understand these contentions, we deem it necessary to detail the salient facts, which reveal the background of the donor and his wife, and their relationship with Harry L. Wells and Northwestern University long prior to and at the time of the creation of said trust, which we think have a material bearing upon the donor's intention in creating said trusts.

The relevant facts are virtually undisputed. There appears in the record a series of stipulations of fact, identified as stipulations A, B, C and D, to which we shall make reference.

Trust No. 3639 named the First Trust and Savings Bank of Chicago (later merged with the First National Bank of Chicago) as trustee. The trust property consisted entirely of insurance policies upon the life of John Hardin. It provided that any proceeds realized from the conversion or expiration of said policies could be invested and reinvested by the trustee. The entire net income from said trust was to be paid to Anna, his wife, during her lifetime, and in the event she predeceased him, upon his death the trust should terminate and be distributed as therein provided. John Hardin reserved to himself the power to revoke, modify or alter, in whole or in part, the said trust instrument. It was stipulated that at no time was any premium upon the policies paid from the trust but was paid by him.

Trust No. 20673 named the First National Bank of Chicago and the donor Hardin co-trustees, and Harry L. Wells as successor trustee to Hardin in the event of his death, resignation or inability to act. A schedule of the securities placed in said trust was attached to the trust agreement.

In this trust agreement, Hardin reserved to himself broad powers of revocation, amendment and removal of the corporate trustee. The net income of the trust was payable to Hardin, the donor, during his lifetime, and upon his death to his wife Anna. Upon her death, the net income was payable to his sister, Gertrude Hardin, during her lifetime, if she survived the donor and his wife. Upon the death of Gertrude, the trustees "shall" divide said trust estate into two equal shares, one share to go to Northwestern University of Evanston, Illinois, and the other half to be divided into two equal portions, designated as Share "A" and Share "B." The income and distribution from said Shares "A" and "B" were to be made in accordance with the provisions therein set forth. The trust property was to be managed by said co-trustees.

Pursuant to the reservation of power to amend, Hardin, the donor, executed several amendments. On October 19, 1939, the donor amended the trust agreement, in which he gave the corporate trustee the right to make any sale or investment of the property comprising the trust, upon the written approval of Conrad Poppenhusen, the donor's attorney, and no sale or investment made upon such approval need require the approval of Hardin, the donor, as co-trustee.

On March 14, 1940, he again amended the trust agreement, by directing the bank to pay to Mrs. Hardin $100 a month out of the net income of said trust, and to credit her checking account at said bank.

On July 13, 1949, he again amended the trust agreement, in which he provided that in the event Mrs. Hardin survives the donor, the trust estate should be divided into two equal shares, designated as "A" and "B," Share "A" to be held in trust as a separate trust for the benefit of Mrs. Hardin, subject to her power of testamentary disposition. In the event of Mrs. Hardin's death without the exercise of the power of appointment and testamentary disposition, then Share "A" should be payable to Northwestern University and Share "B" for the benefit of those named therein. The trustees were to exercise their discretion as between Shares "A" and "B" in such manner as would provide for the "maximum marital deduction under the present Internal Revenue Code."

On October 18, 1949, the donor further amended the trust agreement and therein cancelled the provision in the amendment of July 13, 1949, which gave Anna Hardin the power of appointment and testamentary disposition. This cancellation came after the wife had, by a codicil to her will, disclaimed any intention to exercise the power of appointment.

On November 25, 1951, the donor further amended the trust agreement by making certain specific bequests to be payable to the parties therein named, and providing that the trust "shall," upon his death, pay the net income ...


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