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Stuart v. Continental Ill. Nat'l Bank

OPINION FILED OCTOBER 5, 1977.

ELIZABETH B. STUART ET AL., APPELLANTS,

v.

CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO ET AL., APPELLEES.



Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Francis T. Delaney, Judge, presiding.

MR. JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 23, 1977.

This appeal involves a dispute between a corporate co-trustee and two individual co-trustees concerning the disposition of a large charitable trust fund created by the will of Harold L. Stuart. The individual co-trustees, the sisters of the late Harold L. Stuart (hereinafter referred to as the Stuart sisters), brought the original complaint together with a co-plaintiff, the Illinois Institute of Technology (hereinafter referred to as IIT), against the corporate co-trustee, the Continental Illinois National Bank and Trust Company (hereinafter referred to as the Continental Bank). The dispute arose because the individual co-trustees and the corporate trustee were unable to agree upon a plan of distribution. Additionally, 27 charitable organizations, which were named in the plans of distribution submitted by the co-trustees, were granted leave to intervene in the lower court. The circuit court of Cook County essentially adopted the plan of distribution submitted by the corporate co-trustee in preference to the scheme of distribution advanced by the individual co-trustees. The circuit court's judgment was affirmed in all respects by the appellate court. (Northern Trust Co. v. Continental Illinois National Bank & Trust Co. (1976), 43 Ill. App.3d 169.) We granted leave to appeal pursuant to our Rule 315(a) (58 Ill.2d R. 315(a)) and now affirm the decision of the appellate court in part, and reverse that decision in part.

The facts involved in the present appeal are lengthy and complex. A full statement of the facts is included in the opinion of the appellate court, and we shall set out only those facts necessary for an understanding of our disposition of this case.

Harold L. Stuart died on June 30, 1966. He was unmarried and was survived by his two unmarried sisters. He was a renowned financier and investment banker and was the president and sole stockholder of the investment banking firm of Halsey, Stuart and Co., Inc. All parties agree that Harold Stuart was devoted to the city of Chicago, and that his lifelong desire was to build the city into a financial center. The testator left a multimillion dollar estate which presently is valued in excess of $26 million.

Harold Stuart's will was executed on April 23, 1964. It named the Continental Bank and his two sisters as co-executors and co-trustees. The will provided for the creation of two $1 million trust funds to provide life estates for each sister with the remainders to charity. The remainder of his estate was to be distributed to qualified charitable organizations. The will did not mention specific charities, but rather vested the discretion to select charitable beneficiaries in the co-trustees. Under the will, the trustees were to select these charities within 5 years of the testator's death.

The testator's will was solicited for the Continental Bank by David M. Kennedy, who was then the chairman of the board of the bank. Kennedy recommended a senior partner of the law firm which represented the bank to draft the will, and the testator had this attorney prepare the will. Kennedy testified that he spoke with the attorney while the will was being drafted and asked that co-executors and co-trustees be named in addition to the Continental Bank. The testator was 82 years of age at the time the will was drafted, and shared a home with his two sisters in Chicago.

The trial court heard conflicting testimony concerning the testator's intentions from the time the will was executed until his death. This testimony is more fully recounted in the appellate court's opinion than shall be set forth here. In essence, however, the testimony of several bank officers was that the testator had no specific plan of distribution in mind and that he had expressed the desire that the bank be primarily responsible for the selection of the particular charities to take from his estate. The testimony of co-trustee Elizabeth Stuart was to the contrary. She testified that the testator frequently discussed his will with her and her sister, and told them that in the event of a disagreement between the two sisters the bank would cast the deciding vote. Elizabeth Stuart further testified that the testator had orally apprised her and her sister of the charities to which gifts should be made. She stated that the testator had determined that three-quarters of his estate should be donated to IIT to construct and endow a school of finance and management. The other individual co-trustee, Harriet Stuart, did not testify at the trial.

The Continental Bank and the Stuart sisters qualified as co-executors on August 29, 1966. The testimony of the bank officer responsible for the administration of the estate indicated that the bank was inundated with requests from charitable organizations once the provisions of the will became publicly known. Approximately seven months after the testator's death, Harriet Stuart contacted IIT to receive information concerning its programs. She later requested and received additional information that her brother had attended Lewis Institute for five semesters between 1896 and 1900. Lewis Institute merged with Armour Institute in 1940 to form IIT. In May of 1968, Harriet Stuart contacted IIT and informed officials there that she and her sister desired to make a substantial grant to the institution. She requested a proposal concerning the possibility of establishing a school of management and finance. IIT prepared such a proposal and submitted it to the sisters. The proposal originally requested $7.5 million to fund the school, but this figure was subsequently raised to $8.5 million.

On October 10, 1968, the Stuart sisters filed a "Statement of Intent" with the bank in which they formally directed that IIT receive $8.5 million to establish the Harold Leonard Stuart School of Management and Finance. The officials at the Continental Bank considered the amount of this grant inappropriate. After meeting with representatives of IIT, the bank agreed to a reduced proposal in the amount of $5 million on April 3, 1969, and this amount was subsequently disbursed to IIT. The Continental Bank and the sisters also were able to reach agreement concerning grants to the Society of Cincinnati and the Kenilworth Historical Society. The gifts to each organization were sponsored by the Stuart sisters and not the bank. Elizabeth Stuart testified that the testator had instructed her and her sister that these organizations should take under the will. A distribution of $250,000 was also made to the Chicago Foundation for Cultural Development on January 26, 1968. This distribution was made with the prior understanding that the money would be transferred to the New Chicago Foundation. As the propriety of this distribution is a central issue in this appeal, we shall set forth the salient facts surrounding the transaction in our discussion of that issue.

In the circuit court, a great deal of testimony was heard concerning the conduct of the co-trustees during the time following the testator's death until the institution of the lawsuit on October 7, 1970. Essentially, the evidence showed that the Stuart sisters and the Continental Bank were never in complete agreement as to either the identities of the charitable beneficiaries or the manner in which they would be selected. The bank was from the outset interested in distributing the estate to a large number of charities and preferred to develop a total plan for distribution. The Stuart sisters, on the other hand, were interested only in considering those charities which they asserted to have been the choices of their brother. The sisters also preferred to consider bequests to only one charity at a time. The sisters also declined to attend personal meetings with bank representatives, and, generally, did not feel that the bank should have any significant voice in the selection process.

This was the approximate state of affairs on October 7, 1970, when the Stuart sisters and IIT filed suit. The complaint requested a judgment providing for an additional grant to IIT to the extent of three-fourths of the estate, and also sought entry of a judgment providing that all further disputes between co-trustees should be resolved by the decision of the individual co-trustees. On this same date, the Continental Bank proposed a revised plan of distribution in a letter to the Stuart sisters. Under the plan, grants were to be made to a number of charities and an additional $3.5 million was designated for IIT.

In its answer to the complaint, the bank set forth its total plan of distribution and requested that the trust be distributed in that manner. The answer also stated that the disagreement between the co-trustees was that the bank proposed a total gift of $8.5 million to IIT, whereas the Stuart sisters wanted that institution to receive three-quarters of the estate.

On June 15, 1971, the bank, by letter to the Stuart sisters, made its final proposal. This proposal adhered to the selections of charitable beneficiaries contained in the letter of October 7, 1970, with the exception that the bank no longer proposed an additional gift to IIT. The letter stated that agreement had been reached on four proposals: $5 million to IIT; $600,000 to the Kenilworth Historical Society; $550,000 to the Society of Cincinnati; and $250,000 to the Chicago Foundation for Cultural Development. The bank then proposed that the remaining funds be distributed in the following manner:

"1. Make specific dollar commitments to the following institutions:

a. The University of Chicago $1,000,000 b. Northwestern University 1,000,000 c. Loyola University of Chicago 1,000,000 d. DePaul University 1,000,000 e. Chicago Historical Society 500,000 f. Blackburn College 300,000 g. The Art Institute of Chicago 1,000,000 h. Chicago Symphony Orchestra 1,000,000 i. Field Museum of Natural History 1,000,000 j. Mercy Hospital 250,000 k. Michael Reese Hospital 250,000 l. Presbyterian-St. Luke's Hospital 250,000 m. Children's Memorial Hospital 250,000

2. Make fractional share commitments to the following institutions each to receive the dollar amount indicated or 1/9th of the remainder of the Trust (i.e., excluding specific dollar amount gifts), whichever is smaller, when such remainder is finally determined:

a. Lyric Opera $200,000 b. Union League Foundation for Boys Clubs 150,000 c. Chicago Boys Club 100,000 d. Central YMCA Community College and High School 100,000 e. The Salvation Army-Chicago Chapter 100,000 f. The American Red Cross-Chicago Chapter 100,000 g. The Boy Scouts of America-Chicago Chapter 50,000 h. The Girl Scouts of America-Chicago Chapter 50,000 i. The Rehabilitation Institute of Chicago 25,000

3. Any amount remaining after these gifts will be allocated in equal shares among the following:

Museum of Science and Industry Chicago Educational TV Lake Forest College Berea College Union College Rockford College

provided, however, that if the amount remaining to be allocated to this group number 3 shall exceed $300,000, each of this group shall receive $50,000 and the residual amount shall be allocated among the institutions listed in groups numbers 1 and 2 on a proportionate basis. (Each institution listed in groups numbers 1 and 2 shall receive that part of the amount in excess of $300,000 as bears the same proportion to such excess amount as does the dollar amount specified for that institution under the terms of group number 1 or 2 bears to the total dollar amount specified for all the institutions under groups numbers 1 and 2.)"

The bank incorporated this plan into its amended answer of June 22, 1971.

The Stuart sisters responded to this proposal in a letter dated June 22, 1971. In the letter, the sisters specifically denied that they had approved a gift to the Chicago Foundation for Cultural Development, and stated that they did not even have knowledge of the gift until it was disclosed in the bank's pleadings. The sisters acknowledged their agreement to the other three completed gifts listed in the bank's letter and then set forth their plan for final distribution:

"Accordingly, our definitive plan for the distribution of the remainder of the Harold L. Stuart Estate is to make immediate specific dollar commitments as follows:

Illinois Institute of Technology $4,000,000 Art Institute of Chicago 5,000,000 Kenilworth Historical Society 30,000

The gift of $5,000,000 to the Art Institute, however, is to be reduced (but not below $2,500,000) to the extent necessary to give Illinois Institute of Technology at least 75% of the total amount of the estate passing to all charities, disregarding for this purpose what Illinois Institute may receive from the trusts created for us under our brother's will.

If any funds remain after making the foregoing distributions, they are to be given to Illinois Institute of Technology to provide additional endowment for the Harold ...


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