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Rosenthal v. First Nat. Bank of Chicago

JUNE 9, 1967.

MARIE-LOUISE ROSENTHAL, PLAINTIFF-APPELLEE,

v.

THE FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE OF THE PHILIP TRUST, CREATED UNDER THE WILL OF MOISE DREYFUS, DECEASED, AND KNOWN AS TRUST NO. 33705; MICHAEL REESE HOSPITAL AND MEDICAL CENTER; THE FIRST NATIONAL BANK OF CHICAGO, AS EXECUTOR OF THE WILL OF PHILIP S. DREYFUS, DECEASED; THE FIRST NATIONAL BANK OF CHICAGO, AS EXECUTOR OF THE WILL OF CAROLYN S. DREYFUS, DECEASED; PHYLLIS S. DREYFUS, A MINOR UNDER CALIFORNIA LAW, AND DIANE E. DREYFUS, A MINOR, DEFENDANTS; PHYLLIS S. DREYFUS AND DIANE E. DREYFUS, A MINOR, UNDER THE LAWS OF THE STATE OF CALIFORNIA, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County, Chancery Division; the Hon. DANIEL A. COVELLI, Judge, presiding. Affirmed in part; reversed in part with directions.

MR. JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT.

Petition of appellant denied July 10, 1967.

Petition of guardian ad litem denied July 10, 1967.

Five separate appeals are taken from a summary judgment construing the will of Moise Dreyfus (hereinafter referred to as "testator").

Testator was survived by his widow (Carolyn) and two children (Philip S. Dreyfus and Marie-Louise Rosenthal). In his will testator bequeathed specific sums to various beneficiaries (including $2,500 to each of his grandchildren living at the date of his death) and in addition placed the residue of his estate into two trusts, designated as the "Marie-Louise Trust" and the "Philip Trust." Under the terms of testator's will, his widow was to receive an annual income of $2,500 from each trust during her lifetime and was also entitled to additional amounts of income in the discretion of the trustees. The balance of the income was to be paid over and delivered to Marie-Louise and Philip during their respective lives. The will further provides (paragraph 7) that:

[I]f my said son Philip S. Dreyfus and my said daughter Marie-Louise Rosenthal, or either of them, shall die prior to the date of the death of my wife, then such balance, if any, shall, until the date of the death of my said wife, be paid over and delivered to such persons and in such proportions as said Philip . . . and said Marie-Louise . . . may by their respective last wills and testaments validly appoint. . . .

Paragraph 7 also provides that upon agreement of a majority of the trustees they could "pay over to said Philip S. Dreyfus and/or said Marie-Louise Rosenthal, respectively, part or all of the principal of their respective trusts." In accordance with this power, Marie-Louise received that principal attributable to the "Marie-Louise Trust" on June 1, 1938.

Paragraph 8 of the testator's will grants to Carolyn a testamentary power to order distribution of the corpus and accumulated income of the trust by specifically providing that:

I hereby give to my said wife Carolyn S. Dreyfus the right to direct in and by her Last Will and Testament that the principal and accumulated income of said Philip Trust and of said Marie-Louise Trust, or either of them, shall forthwith, upon the death of said Carolyn S. Dreyfus, be distributed to said Philip S. Dreyfus and said Marie-Louise Rosenthal, respectively, or either of them.

Another paragraph of testator's will, paragraph 9, provides in relevant part:

In the event that my said wife shall predecease me or in the event that my said wife shall survive me and shall fail to direct the distribution upon her death of said trusts, or either of them, then my said Trustees shall thereafter hold and dispose of the trust or trusts not so directed to be distributed, in the following manner, to-wit:

(a) During each and every year ensuing subsequent thereto and prior to the death of said Philip S. Dreyfus, the income of the Philip Trust shall be distributed quarterly or oftener in the discretion of said Trustees to said Philip S. Dreyfus, together with so much of the principal thereof as in the sole discretion of said Trustees they may deem it advisable or expedient so to distribute. Upon the death of said Philip S. Dreyfus, the principal, or so much thereof as may at such time remain in the hands, custody and control of said Trustees, together with any accumulated income, shall be divided and distributed as said Philip S. Dreyfus may by his Last Will and Testament validly appoint, and in default of appointment, to the lawful issue of said Philip S. Dreyfus surviving at the date of his death, share and share alike, per stirpes and not per capita.

Testator died on March 6, 1937. His son, Philip, married on June 1, 1942, and was divorced on October 25, 1955. Two children were born of that marriage: Phyllis, born August 8, 1943, and Diane, born July 23, 1946. *fn1 Philip died on January 19, 1961, as the result of an automobile accident. Among the various bequests in his will, Philip gave $1,000 to each of his children if they survived him and also exercised his alleged power of appointment over the Philip Trust in favor of Michael Reese Hospital. *fn2 Carolyn Dreyfus, testator's widow, died testate on May 26, 1963. In her will was a provision that it was her desire, in accordance with the wishes of Philip Dreyfus, that the Philip Trust be distributed to Michael Reese Hospital; that a question "has been raised whether Philip's will has achieved this purpose"; and that, therefore, if she had a valid power of appointment over the trust she exercised it in favor of Marie-Louise Rosenthal with the desire that the latter donate it to Michael Reese Hospital. *fn3 Carolyn also stated in her will that she has made no provision in her will for Phyllis and Diane Dreyfus because she had made gifts to them during her lifetime.

On October 25, 1963, Marie-Louise Rosenthal filed a complaint in which she requested the court to determine that Carolyn Dreyfus possessed and validly exercised the power of appointment, as aforesaid. The First National Bank of Chicago, as executor under the will of Carolyn Dreyfus, filed an answer in which it was stated that the court should determine Philip's power to have been validly exercised. In the alternative, the answer was in agreement with plaintiff's complaint. The First National Bank of Chicago, as executor under the will of Philip Dreyfus, filed an answer to the complaint and in addition filed a counterclaim in which it requested the court to determine that Philip Dreyfus possessed a power of appointment which he validly exercised in favor of Michael Reese Hospital. The hospital, named as a defendant in plaintiff's action, filed a counterclaim praying that it be adjudged the recipient of the funds in accordance with the provisions of Philip's will. The First National Bank of Chicago, as trustee of the Philip Trust under the testator's will, filed a counterclaim in which it stated that the proper recipient of the trust principal was in doubt, and requested the court to determine the proper recipient thereof. Defendants Phyllis and Diane Dreyfus filed answers to the various complaints and counterclaims and in addition filed a counterclaim in which they asserted that: Philip possessed no power of appointment because he did not survive Carolyn; Carolyn was not empowered to appoint the Philip Trust to Marie-Louise Rosenthal, and therefore her purported exercise of the power was invalid; that therefore there was a default of appointment and they are entitled to the Philip Trust in accordance with paragraph 9(a) of Moise Dreyfus' will.

Each party (except for The First National Bank as Trustee of the Philip Trust) moved for summary judgment. Phyllis and Diane Dreyfus filed an additional affidavit in support of their motion which was properly stricken by the court. In that affidavit they asserted that Philip and Carolyn had made other gifts to Michael Reese Hospital through living trusts established in 1935 and 1937. None of the gifts referred to in the affidavit came from the testator's estate nor are those trusts involved in this case. The issues in this case concern the interpretation of testator's will construed in light of his intention; therefore, the acts of Carolyn and Philip subsequent to the execution of testator's will can have no bearing on testator's intention.

The court granted the motion of Marie-Louise and found in relevant part that Philip Dreyfus did not have a power of appointment since he predeceased Carolyn; and that Carolyn had a power of appointment which she validly exercised in favor of Marie-Louise Rosenthal. Among others, Phyllis and Diane Dreyfus, Michael Reese Hospital, and The First National Bank of Chicago as executor of the will of Philip Dreyfus, appeal from the granting of that judgment and from the denial of their respective motions.

Appellants, Phyllis and Diane Dreyfus, contend that the existence of Philip's power of appointment was dependent upon his surviving Carolyn, and therefore his appointment to Michael Reese was invalid; that Carolyn had the testamentary power only to direct the acceleration and distribution of either or both of the trusts and did not have the power to cross-appoint the principal of the Philip Trust to Marie-Louise Rosenthal; that therefore her purported appointment was invalid; that therefore there was a default in appointment and appellants are entitled to the estate in accordance with paragraph 9(a) of testator's will as aforequoted.

Appellant, Michael Reese Hospital, contends that Carolyn had the primary power of appointment over the property but that she exercised it conditionally, and thus the purported exercise was of no effect; that Philip possessed a testamentary power which was not dependent upon his surviving Carolyn, but rather it was dependent upon Carolyn's failure to exercise her power; and that upon Carolyn's default of appointment, the disposition of the trust estate under Philip's will became operative to effect a bequest of the property to Michael Reese Hospital.

Appellee, Marie-Louise Rosenthal, contends that under paragraph 8 of testator's will it was testator's intention that Carolyn possess the power to appoint to her the principal and accumulated income attributable to the Philip Trust. In support of her contention she relies primarily upon the words "or either of them" in paragraph 8 as aforequoted.

We shall first determine whether it was the intention of the testator, Moise Dreyfus, that Carolyn have the testamentary power to cross-appoint the Philip Trust to Marie-Louise Rosenthal. To determine the testator's intention his entire will must be examined. Testator, in paragraph 6, established two entirely separate and distinct trusts; one called the "Philip Trust" and the other the "Marie-Louise Trust." In paragraph 7 of his will testator provided that if either Philip or Marie-Louise should predecease Carolyn, the respective decedent's share of the income during the life of Carolyn shall be paid over and delivered to his or her appointee. The will further provides, in paragraph 9(a), that upon the happening of certain conditions the principal and accumulated income of the Philip Trust would descend to the living issue of Philip Dreyfus after the latter's death; and in a separate paragraph, 9(b), the testator provided that the principal and accumulated income of the Marie-Louise Trust would, after the death of Marie-Louise and upon the happening of certain conditions, descend to her living issue. Thus, throughout testator's will the two trusts remained separate and distinct. Moreover, in paragraph 8 testator granted to Carolyn the testamentary power only to "direct" that the trust "be distributed." Nowhere did he grant to Carolyn the power to "appoint," although he specifically used the word "appoint" when referring to powers of appointment in paragraphs 7, 9(a) and 9(b), respectively.

Absent evidence to the contrary, it is presumed that the testator intended to treat his children alike. In re Laughlin's Estate, 354 Pa 43, 46 A.2d 477. Under the appellee's construction of paragraph 8, Carolyn was empowered at her death to appoint the Philip Trust to her (Marie-Louise) and thereby deprive Philip of any further interest in the trust even though Philip might survive Carolyn. (In accordance with paragraph 7 of testator's will, in 1938 the Marie-Louise Trust had been terminated and she received the proceeds thereof.) There is no evidence in the record that Moise Dreyfus favored either of his children over the other; nor is there evidence that testator intended that one of his children should, at the whim of his wife upon her death, be deprived of his or her interest in the trust. Testator, in using the words "or either of them" in paragraph 8, intended merely to establish that upon her death Carolyn need not act with regard to both trusts, but could direct distribution of one trust and not the other. In paragraph 9 testator used the words "or either of them" clearly in anticipation that Carolyn might wish to direct distribution of one trust and not the other. These same words were used by the testator in paragraph 7 when he referred to "Philip S. Dreyfus and my said daughter Marie-Louise Rosenthal, or either of them." Additionally, the use of the word "respectively" in paragraph 8 adds nothing in support of appellee's argument, and is a word used for grammatical accuracy when referring to more than one person or object.

Therefore, after a thorough examination of the will of Moise Dreyfus, we find that Carolyn Dreyfus was granted the testamentary power only to direct distribution of the Marie-Louise Trust to Marie-Louise Rosenthal and to direct distribution of the Philip Trust to Philip Dreyfus, and not to cross-appoint the Philip Trust to Marie-Louise Rosenthal.

It having been established that Carolyn did not have the power to cross-appoint the Philip Trust to Marie-Louise Rosenthal, Phyllis and Diane Dreyfus now contend that the existence of Philip's power of appointment was contingent upon his surviving Carolyn; that since Philip predeceased Carolyn there has been a default in appointment; and that therefore they are entitled to the trust estate in accordance with paragraph 9(a) of the testator's will which provides that in default of appointment by Philip, his issue (these appellants) would inherit. Paradoxically, they argue that the existence of Philip's power, which is granted to him in paragraph 9(a), is subject to certain alleged conditions precedent as set forth in the preamble to that subsection; but that their gift in default of appointment, also set forth in 9(a) immediately subsequent to the grant of Philip's power, is not subject to those identical alleged conditions precedent.

Paragraph 9(a) sets forth the testator's desired disposition of the trust estate and is preceded ...


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