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Northwestern University v. Mcloraine

OPINION FILED AUGUST 3, 1982.

NORTHWESTERN UNIVERSITY, PLAINTIFF-APPELLEE,

v.

HELEN MCLORAINE ET AL., TRUSTEES, ET AL., DEFENDANTS-APPELLANTS. — HELEN MCLORAINE ET AL., TRUSTEES, PLAINTIFFS-APPELLANTS,

v.

DAYTON CEMETERY ASSOCIATION ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Anthony J. Scotillo, Judge, presiding.

JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:

This consolidated appeal, arising out of related cases in the circuit court, presents us with one question for decision: did the settlor of a revocable inter vivos trust validly amend that trust prior to her death?

Plaintiff Northwestern University filed a complaint seeking construction of a trust, an injunction, and an accounting. After a bench trial, the circuit court issued a judgment order granting the relief sought in the complaint. Defendants Helen McLoraine and Paul F. Cook, trustees, and various charitable organizations appeal in case No. 81-2362.

Subsequently, trustees Helen McLoraine and Paul F. Cook filed a complaint seeking construction of another provision of the same trust. After a bench trial, the circuit court entered a judgment order adverse to the trustees. The trustees appeal in case No. 82-151.

The facts in these cases are virtually uncontested. Mabel Greene Myers (Mrs. Myers), in 1961, created a living trust known as the Myers Trust. It was first amended in 1962. In 1968 and 1973, it was amended by completely restating it. The 1973 trust was in effect at the time of Mrs. Myers' death in 1979. Its assets at the time of her death were worth approximately $1 million.

The 1961 trust indenture consisted of the following relevant provisions. Article First conveyed the properties listed in exhibit A to the trust. Exhibit A, listing various properties, was appended to the trust indenture. Article Second provided for the distribution, during the donor's life, of $200 per month to Ethel Seixas and $1,000 per year to the Pioneer Fund, a not-for-profit corporation. Article Second provided for certain specific bequests upon the death of the donor, per an exhibit B attached. (No copy of an exhibit B is contained in the record on appeal, and apparently none exists today.) The residue was to be distributed to the Pioneer Fund, or, alternatively, to Otterbein College and the University of Chicago. Article Ninth provided that the trust was revocable during the life of the donor, and further provided:

"The Donor further reserves the right to alter, change, or modify any of the provisions of this Indenture in any respect and to any extent at any time by an instrument in writing signed by her and delivered during the Donor's life to the Trustees then acting hereunder * * *."

The indenture was signed by the settlor, the two trustees, three witnesses, and was notarized.

Mrs. Myers amended the trust in 1962 by executing a formal instrument, signed by her and delivered to the trustees. The signatures of the trustees acknowledged this delivery. This amendment specified that payments to Ethel Seixas and the Pioneer Fund be made from principal if net income was insufficient for such purposes.

The trust was fully amended by Mrs. Myers in 1968 by completely restating it. Article Third provided for, upon termination of the trust, specific bequests to the individuals listed in exhibit 1. The residue was to be paid to Otterbein College. Article Ninth, dealing with alteration, remained unchanged from the 1961 indenture. This restatement was executed with the same formalities as the original indenture.

The trust was again completely restated in 1973. Mrs. Myers and Helen McLoraine, her daughter, were again co-trustees. Article First again stated that the property conveyed by the donor to the trust was described in exhibit A. This exhibit was appended to the indenture. Article Third again provided for the termination of the trust estate. An annuity paying $250 per month was to be purchased for Ethel Seixas. Specific bequests were to be made to those persons listed in exhibit 1. The residue was to be divided equally among the charitable organizations listed in exhibit 2. Article Ninth, regarding alteration, remained unchanged from the 1961 and 1968 indentures. Again, all the formalities of execution were observed.

When the 1973 indenture was executed, it had appended to it exhibit 1 and exhibit 2. Exhibit 1 was a list of over 40 names of individuals, with amounts ranging from $5,000 to $25,000 listed beside their names. Exhibit 2 was a list of eight charitable organizations: Arthritis Foundation, Illinois Chapter; Mid America Hearing Research Foundation; National Right to Work Foundation; Planned Parenthood; Americans United; Lyric Opera; Field Museum; and Otterbein College. Mrs. McLoraine, as co-trustee, received a copy of the indenture without exhibits 1 and 2.

After Mrs. Myer's death, her daughter, co-trustee Helen McLoraine, found the 1973 indenture in Mrs. Myers' safe deposit box at the First National Bank of Chicago. No one but Mrs. Myers had access to the box. The original exhibits 1 and 2 were not then attached to the indenture. A revised exhibit 1, containing several changes, was stapled to the indenture. The revised exhibit 1 had been prepared by Walter Bacon, Mrs. Myers' attorney, at least a year after the 1973 indenture was executed. There was no substitute exhibit 2. There was, attached by paper clip to the indenture at the point in Article Third, paragraph 5 where it described that the residue went to the charitable organizations listed in exhibit 2, a small, unsigned slip of paper with the following words typed on it:

"shall be given to the Arthritis Section, Department of Medicine of Northwestern University Medical School for the purpose of research.

Arthritis-Connective Tissue Diseases."

This note was typed on Mrs. Myers' typewriter.

The original exhibits 1 and 2 were found by Mrs. McLoraine in the office that Mrs. Myers maintained at her apartment. Mrs. McLoraine had never received a copy of the original exhibits, nor of the subsequent exhibits.

Approximately one month prior to Mrs. Myers' death, she and Mrs. McLoraine participated in the Pioneer Fund's gift of $500,000 to Northwestern University Medical School, Arthritis and Connective Tissue Section. Both women were on the board of the Pioneer Fund; Mrs. Myers contributed about $18,000 toward the gift, while Mrs. McLoraine supplied the balance. At this time, Mrs. Myers stated to Mrs. McLoraine, "Now I know what to do with the residue and remainder." Mrs. McLoraine understood her to be referring to the Myers Trust. Mrs. McLoraine testified that in the year prior to February 21, 1979, Mrs. Myers discussed with her certain possible changes in some of the individual beneficiaries of the Myers Trust.

After Mrs. Myers' death, Paul F. Cook replaced her as a trustee of the Myers Trust. Cook and Mrs. McLoraine, as co-trustees, sent a letter to all the charitable beneficiaries listed in original exhibit 2 and to Northwestern University advising them of all the relevant facts. Subsequently, the trustees concluded that no amendment to the 1973 indenture had ...


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