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Aurora Nat'l Bk. v. Old Second Nat'l Bk.

OPINION FILED APRIL 21, 1978.

AURORA NATIONAL BANK ET AL., PLAINTIFFS-APPELLANTS,

v.

OLD SECOND NATIONAL BANK, EX'R UNDER THE WILL OF EDNA D. DAVIDSON, DECEASED, ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Kane County; the Hon. JOHN S. PAGE, Judge, presiding.

MR. JUSTICE GUILD DELIVERED THE OPINION OF THE COURT:

Glenn Davidson executed a will on March 20, 1960, and died on September 26, 1964. The will named his wife, Edna D. Davidson, and his son, Glenn G. Davidson, as co-executors and was probated in the Probate Court of Kane County by the co-executors named. Under the provisions of that will the Aurora National Bank and Glenn G. Davidson acted as co-trustees of the marital trust. They, in turn, have filed the instant declaratory judgment action to construe the provision of the Glenn Davidson will, hereinafter set forth, and also the subsequent will of Edna D. Davidson. Named as defendants in this suit were the executor and all beneficiaries under the will of Edna D. Davidson.

Certain appellees have filed a motion to dismiss the appeal herein on the grounds that the co-trustees, as stakeholders, are merely seeking direction of the court, and as such, they should not be allowed to appeal merely because they disagree with the findings of the trial court. We have ordered this motion taken with the case.

We find that this issue is determined by In re Estate of Gerbing (1975), 61 Ill.2d 503, 337 N.E.2d 29. In that case suit was brought for construction of the will therein by the executor in his capacity as executor and individually as a legatee or devisee. The executor then individually appealed from the finding of the trial court. The supreme court found that as an executor desiring a correct decision in the case he would have the right to perfect an appeal for the purpose of securing a proper construction of the will. However, the appeal in Gerbing was brought by the appellant in his individual capacity only. The court, while observing that the better procedure would be for him to have been temporarily replaced as executor until the conflicting issues were resolved, nonetheless went on to hold that as he had appealed individually, he had the right to have the decision of the trial court passed upon by a court of review.

• 1 The appellant, co-trustee Glenn G. Davidson, in the case before us has not appealed as an individual. Under these circumstances, having an interest personally, but theoretically appearing as co-trustee only seeking declaratory relief, his postion is fraught with conflicts of interest. The complaint herein seeks construction of the Glenn Davidson will and Glenn G. Davidson is one of the two beneficiaries in that will. As such he is more properly a party defendant than plaintiff, as is evidenced in that part of the complaint seeking construction of the Edna D. Davidson will, where all the beneficiaries are in fact made parties defendant. We, therefore, find that the motion for the dismissal of the appeal as to the co-trustee Glenn G. Davidson should be granted. However, this does not affect our right and duty to pass upon the appeal properly filed by the other co-trustee, the Aurora National Bank.

While there are other issues raised in this appeal, the basic issue presented in this declaratory judgment action is the interpretation of paragraph Fifth (A) of the will of Glenn Davidson which, in pertinent part, reads as follows:

"FIFTH: I give, devise and bequeath to my wife, EDNA D. DAVIDSON, and to my Son, GLENN G. DAVIDSON, as Co-Trustees, in trust nevertheless, One-half of my adjusted gross estate as may be determined by the Federal Tax Authority, less any joint-tenancy property, any life insurance, and any other property directly bequeathed to her under Paragraph Third and Fourth hereof, which may be included in said gross estate; such Trust to be known as my Marital Trust, for the following uses and purposes:

(A) To pay the net income of the trust, at least annually, to my Wife, EDNA D. DAVIDSON, so long as she shall live, at which time the principal of this trust shall be paid to such person, or persons, as she may by Last Will and Testament appoint; or if she make no appointment, then after her death, to my Son, GLENN G. DAVIDSON; and in case of his death prior to the death of my Wife, and she shall make no appointment, the principal shall be paid to his surviving descendants then living * * *."

Primarily, the question presented is the interpretation of this provision which sets up a marital trust for Glenn Davidson's wife Edna as long as she shall live, and then provides "at which time" the principal shall be paid to such persons "as she may by Last Will and Testament appoint." Edna Davidson, recognized this power of appointment in her last will and testament, executed on July 10, 1968, wherein she distributed the proceeds of the marital trust to various people with the residue over, if any, to the residuary beneficiary, Rev. Roy W. Lundquist. Mrs. Davidson died on October 31, 1974. The trial court found that the true and proper construction of the Glenn Davidson will was,

"* * * to pay the net income of the trust, at least annually, to my wife, Edna D. Davidson, so long as she shall live, and at her death, the principal of this trust shall be paid to such person or persons as she may by Last Will and Testament appoint." (Emphasis added.)

In addition, the court found that the aforesaid power of appointment was validly exercised by Edna D. Davidson under her last will and testament and that the said power of appointment, whereby she distributed the marital trust assets, was effective as of the date of her death. The court further found that by reason of the manner in which she exercised the power of appointment, there was a merger of her assets with those over which she had power of appointment, and the latter, therefore, were probate assets of her estate.

The Aurora National Bank, as co-trustee under the marital trust, created by the will of Glenn Davidson, contends: (1) that the court erred in construing the words "at which time" in paragraph Fifth of Glenn Davidson's will to mean "and at her death"; (2) that the court erred in holding that the Glenn Davidson assets were probate assets in the Edna D. Davidson estate; (3) that the court erred in holding that the bequest to one Catherine Herrs in the sum of $5000 lapsed due to her death and therefore passed under the residuary clause of the Edna D. Davidson will to the residuary beneficiary, Roy W. Lundquist; and (4) that the court erred in ordering an accounting by the Aurora National Bank and Glenn G. Davidson, co-trustees of the marital trust created by the will of Glenn Davidson.

At the outset it is to be noted that this error of the scrivenor may well be the omission of the words "and upon her death" prior to the words "at which time the principal of this trust shall be paid to such person, or persons, as she may * * * appoint." The co-trustee argues that it may well be that Glenn Davidson, the father and husband, "designed that his wife Edna's efforts to pass his property by her appointments would fail, and that his son Glenn G. Davidson would then attain the rest of his father's estate." (It is to be noted that Glenn G. Davidson is a stepson of Edna Davidson.) This is a strained contention at best.

In paragraph Sixth of his will, Glenn Davidson set up a "residuary trust" whereby Edna Davidson and Glenn G. Davidson, the co-trustees, were "to pay the net income of the trust, at least annually, to my wife, Edna D. Davidson, so long as she shall live, at which time the principal of this trust shall be paid to my son, Glenn G. Davidson * * *." It can thus be seen that Glenn Davidson used the same wording which is attacked in this suit in the other portion of the will which the co-trustee apparently assumes is valid. Further, as pointed out by the appellees herein, Glenn G. Davidson, as co-executor of the Glenn Davidson will, took advantage of the marital deduction provisions of the Internal Revenue Code. (26 U.S.C.A. § 2056 (1967).) Specifically, section 2056(b)(5) provides that for a marital trust to constitute a marital deduction for the purposes of Federal estate tax it must be that the

"* * * surviving spouse is entitled for life to all of the income from the entire interest * * *.

This paragraph shall apply only if such power in the surviving spouse to appoint the entire interest, or such specific portion thereof, whether exercisable by will or during life, is ...


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