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Payne v. River Forest State Bk. & T. Co.

OPINION FILED FEBRUARY 28, 1980.

EARL PAYNE, PLAINTIFF-APPELLANT,

v.

THE RIVER FOREST STATE BANK & TRUST COMPANY, EX'R OF THE ESTATE OF EMILY T. PAYNE, DECEASED, ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding.

MR. PRESIDING JUSTICE LINN DELIVERED THE OPINION OF THE COURT:

Plaintiff, Earl Payne, filed suit in the circuit court of Cook County against the defendant land trustee, River Forest State Bank and Trust Company (the bank), and the defendant land trust beneficiary, Katy Pat Johansson, to set aside the inter vivos land trust established by his deceased wife. Plaintiff alleged that the creation of the trust resulted in a fraud upon his marital rights. By his action, plaintiff sought to impose a constructive trust on the trust res to the extent of his statutory share as surviving spouse. Ill. Rev. Stat. 1977, ch. 110 1/2, par. 2-8.

Defendant Johansson's section 45 motion (Ill. Rev. Stat. 1977, ch. 110, par. 45) to dismiss plaintiff's complaint for failure to state a cause of action was allowed by the trial court. Plaintiff appeals. We affirm.

The allegations of the complaint disclose that on September 30, 1952, Emily Payne established a land trust with the River Forest State Bank and Trust Company as trustee. By the terms of the land trust agreement, the bank as trustee agreed to hold title to certain real estate. Emily Payne, as settlor, reserved to herself for life, the right to the earnings, avails, and proceeds of the real estate. She further reserved the right to amend or revoke the trust, and the right to direct the bank trustee's actions with respect to the real estate.

Two years after her marriage to plaintiff, Emily Payne modified the trust agreement granting plaintiff a remainder interest of one-half of the beneficial ownership. Several years later, Emily Payne amended the trust agreement to reduce plaintiff's remainder beneficial interest to one-third. In 1963, by further amendment, Emily Payne designated her daughter, Patricia Johansson, as remainder beneficiary of the entire trust property.

Thereafter, on April 4, 1968, plaintiff and Emily Payne were appointed legal guardians of the two natural grandchildren of Emily Payne. Two days later, Emily Payne amended the land trust agreement to provide that her grandchildren, Katy Pat Johansson and Norman Johansson, would be the sole equal beneficiaries of the remainder interest. On May 12, 1975, Emily Payne again amended the land trust agreement, giving Katy Pat Johansson the entire remainder interest.

On May 17, 1975, Emily Payne executed her will naming Katy Pat Johansson sole legatee. On June 24, 1977, after Emily Payne's death, plaintiff renounced her will and claimed his statutory share in her estate. Plaintiff subsequently filed the instant action seeking to set aside the land trust agreement, alleging in his complaint: (1) that the fair market value of the real estate held in trust is $130,000 and represents substantially the total assets of Emily Payne's estate; and (2) that Emily Payne amended the land trust agreement to defeat his statutory share as surviving spouse. On motion of defendants, plaintiff's complaint was dismissed by the trial court for failure to state a cause of action and plaintiff appeals.

OPINION

• 1 Initially, we note that in general, under Illinois law, an owner of property has an absolute right to dispose of his property during his lifetime in any manner he sees fit. He may do so even though the transfer is for the precise purpose of minimizing or defeating the statutory marital interest of his spouse in the property transferred or conveyed. (Johnson v. La Grange State Bank (1978), 73 Ill.2d 342, 357, 383 N.E.2d 185, 192; Hoeffner v. Hoeffner (1945), 389 Ill. 253, 59 N.E.2d 684; Blakenship v. Hall (1908), 233 Ill. 116, 84 N.E. 192.) The transfer or conveyance is not subject to attack by his surviving spouse unless the transaction is a sham and colorable or illusory and tantamount to a fraud on his marital rights. Johnson v. La Grange State Bank (1978), 73 Ill.2d 342, 358, 383 N.E.2d 185, 192; Holmes v. Mims (1953), 1 Ill.2d 274, 115 N.E.2d 790.

Recently, the Illinois legislature affirmed this principle by enacting Public Act 80-737, approved and effective September 16, 1977 (Ill. Rev. Stat. 1977, ch. 110 1/2, pars. 601, 602), which provides:

"§ 1. An otherwise valid transfer of property, in trust or otherwise, by a decedent during his or her lifetime, shall not, in the absence of an intent to defraud, be invalid, in whole or in part, on the ground that it is illusory because the decedent retained any power or right with respect to the property.

§ 2. This act takes effect upon becoming a law and applies to savings account trusts established on or after its effective date, and as to all other transfers this Act is declaratory of existing law." (Emphasis added.)

Accordingly, under this statute, to prove that a transfer of property is invalid on the grounds that it is colorable or illusory, intent to defraud must be established. See also Johnson v. La Grange State Bank (1978), 73 Ill.2d 342, 358-59, 383 N.E.2d 185, 192.

• 2 In Johnson v. La Grange State Bank (1978), 73 Ill.2d 342, 359, 383 N.E.2d 185, 193, the supreme court noted that intent to defraud the surviving spouse of his marital rights does not carry with it the traditional meaning of fraud but rather is found in the nature of the transfer itself. While a surviving spouse's marital rights can be defeated by an actual transfer, a purported transfer in which the owner does not intend to convey a present interest but intends to retain total and complete ownership, indicates an intent to ...


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