Nos. 49875, 49876. Appeals from the Appellate Court for the
First District; heard in that court on appeal from the Circuit
Court of Cook County, the Hon. Nathan M. Cohen, Judge, presiding.
No. 50207. Appeal from the Appellate Court for the Fourth
District; heard in that court on appeal from the Circuit Court of
Sangamon County, the Hon. Jack A. Alfeld, Judge, presiding.
MR. JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:
Edward F. Casey of Casey & Casey, of Springfield, for appellant John F. Havey.
Anthony J. Manuele, of Springfield, for appellee Frances B. Patton.
These consolidated cases involve the validity of inter vivos transfers of property by one spouse against the marital rights of the surviving spouse in the property transferred.
Johnson v. La Grange State Bank, cause Nos. 49875 and 49876, concerns an inter vivos trust created by Eleanor Johnson for the ultimate benefit of several relatives and various charities. The second case, Havey v. Patton, involves savings accounts created by Myra Havey in which she named her sister-in-law as joint tenant. The plaintiff in each case is the surviving husband. Each has claimed his respective statutory share in the assets transferred.
In the Johnson case, plaintiff, H. Franklin Johnson, and Eleanor Johnson had been married in 1937 and for more than 36 years enjoyed a happy marriage. The plaintiff, who had accumulated an estate in excess of $2,000,000, was very generous towards his wife and quite frequently gave her substantial gifts of money and securities. Mrs. Johnson relied on her husband's business acumen and followed his advice in making investments, as well as in managing the accumulated gifts which he gave her. The trial court found, and it is not disputed, that there was no estrangement or feeling of antipathy of one spouse toward the other.
In 1966, Mrs. Johnson learned that she had cancer; she later learned that her life expectancy was less than five years. Prior to 1969 the Johnsons, who had no children, had simple reciprocal wills which provided that in the event of the death of either of them, the survivor would receive the decedent's entire estate. On February 5, 1969, the Johnsons executed new wills in which Johnson provided that his wife's relatives would receive 20% of his estate if his wife did not survive him, and Mrs. Johnson provided that her entire estate was left to her family if Johnson did not survive her.
In the summer of 1970, Mrs. Johnson executed a new will and again in February of 1972, seven months before her death, she executed another will and simultaneously executed a revocable inter vivos trust in which she placed in trust substantially all of her assets. The will, by the residuary clause, poured the balance of her estate into the inter vivos trust. By the terms of the trust, Mrs. Johnson named herself trustee of certain properties (stocks, bonds, etc.). The entire income of the trust was to be paid to her during her lifetime, and she reserved the power to invade the principal of the trust, as she in her discretion saw fit. She retained broad powers to invest, reinvest, divide, and distribute the trust property and likewise retained the power to alter, amend or modify the trust provisions in any manner. The La Grange State Bank was designated as successor trustee to act upon her death or disability. The trust instrument provided the method of determining when she would be considered disabled. Upon her death, the successor trustee was to distribute assets of the trust to Mrs. Johnson's mother, sister, niece, and certain named charities. The trust document included a provision whereby her husband, plaintiff, was to receive so much of the income and principal to meet any emergency situation for his reasonable support, medical, and burial expenses. The trustee, however, was advised to consider other sources available to him and the needs of Mrs. Johnson's mother and sister before making any such emergency payments.
In 1972, Mrs. Johnson moved to Florida, where she lived until her death in September 1972. Her will was admitted to probate in Florida on October 19, 1973. During the pendency of the Florida proceeding, the plaintiff instituted an action in the circuit court of Cook County against the trustee and the trust beneficiaries to set aside the inter vivos trust established by his wife, insofar as it deprived him of his marital rights in the property held in trust. Plaintiff sought to impose a constructive trust on the trust assets to the extent of his claim. In count I of his three-count amended complaint he alleged that, as the surviving spouse, the trust was illusory and fraudulent as to him and that he was therefore entitled to receive a statutory one-half share of the original corpus of the trust. Count II alleged that the decedent established the trust with the intention of defeating plaintiff's marital interest in the settlor's personal estate. Count III alleged that the decedent acted in an intentional, deliberate, and fraudulent manner for the purpose of denying plaintiff his statutory share of the decedent's estate. The court allowed defendants' motion to dismiss counts I and II of the amended complaint, but allowed count III to stand. Trial was held without a jury. At the conclusion of the plaintiff's case, judgment was entered for the defendants. The trial court also found no support for the plaintiff's contentions that decedent's actions were fraudulent and held that the plaintiff's allegations were made in bad faith and without reasonable cause, and assessed attorney's fees and costs against the plaintiff. Plaintiff appealed from both orders.
The First District Appellate Court reversed the trial court (50 Ill. App.3d 830), holding that an inter vivos trust may not defeat the marital rights of a settlor's surviving spouse where the settlor effectively retains ultimate control of the trust assets. Also, since the appellate court sustained the plaintiff's cause of action, the trial court's judgment assessing attorney's fees and expenses against the plaintiff as a sanction under section 41 of the Civil Practice Act (Ill. Rev. Stat. 1973, ch. 110, par. 41) was accordingly reversed.
The second case in this appeal, Havey v. Patton, cause No. 50207, involves certain joint accounts created by the decedent, Myra Havey. Myra Havey and Paul Havey were married for more than 35 years at the time of Mrs. Havey's death in 1972. They had been living apart and had experienced marital difficulties. In July 1972, she converted a savings account standing in her name at a bank to a joint account with defendant Frances B. Patton, her sister-in-law, and likewise opened a joint savings account with this defendant at a savings and loan association and purchased a jointly held certificate of deposit in another savings association. She also created a joint tenancy in some real estate which is not involved in this appeal. Defendant Patton never contributed any funds to the accounts, nor did she have the power to withdraw from the accounts except to pay Mrs. Havey's bills. The record discloses, moreover, that Mrs. Havey created the accounts at a time when she knew she was terminally ill, and that the accounts were intended by Mrs. Havey to give her property to defendant Patton and keep it from her husband after her death.
Mrs. Havey executed her will in 1972. She named defendant Patton as executor and ordered her estate to be divided between defendant Patton and Paul Havey. The fourth paragraph of her will provided as follows:
"I have set up certain accounts in joint tenancy with the right of survivorship which are to pass by operation of law and are not to be made part of my estate in probate."
Mrs. Havey's probate estate totaled approximately $4,000, which was not enough to cover the expenses incurred by the last illness, funeral expenses, and cost of administration. The joint accounts held with defendant Patton, however, contained $47,509.77.
Paul Havey renounced his wife's will. He died during the administration of the estate; subsequently his executor, John F. Havey, filed this action for declaratory judgment alleging that the aforementioned creation of joint accounts by Mrs. Havey fraudulently deprived Paul Havey of his marital rights in the property. The trial court rejected this contention and entered judgment for defendant Patton.
The Fourth District Appellate Court, with one justice dissenting, affirmed the decision of the trial court, holding that there was sufficient donative intent on behalf of the decedent to sustain a gift of the joint accounts to defendant Patton. (52 Ill. App.3d 897, 901.) The court noted that the fact that the accounts were created for the express purpose of depriving Paul Havey of his interest in the property did not support his contention that as to him the decedent's intent was fraudulent.
Before considering the main issue in these cases, there is a preliminary matter concerning the Florida proceeding in Johnson v. La Grange State Bank. The guardian ad litem, in its brief and again in oral argument, has intimated that the decision of the Florida court forbidding plaintiff's attempt to renounce his wife's will in Florida is binding on this court and precludes us from reaching the merits of plaintiff's contention concerning the inter vivos trust. We do not agree. The judgment of the Florida circuit court, affirmed on appeal, cannot be construed as impinging on the jurisdiction of the courts> of this State to consider the validity of an inter vivos trust where the interests affected are wholly within this State. As our appellate court properly noted, the trust was created in this State, the corpus has remained here, the plaintiff was domiciled here at the time of the decedent's death, and the principal defendants are located in this State (50 Ill. App.3d 830, 835).
In our view, the decision of the Florida court, which has significance as a matter of probate law, is entirely ancillary to the threshold question presented for our consideration, i.e., whether the assets of such an inter vivos trust may be properly insulated from the testator's probate estate insofar as her surviving spouse is concerned. Since an inter vivos trust is at issue in this case, we agree with the appellate court that the plaintiff's apparent failure to renounce the will in Florida ...