Chicago Bank of Commerce v. McPherson

• Decision Date: 06 July 1931
• Docket Number: No. 2414.,2414.
• Citation: 2 F. Supp. 110
• Parties: CHICAGO BANK OF COMMERCE v. McPHERSON et al.
• Court: U.S. District Court — Western District of Michigan

2 F. Supp. 110

CHICAGO BANK OF COMMERCE v. McPHERSON et al.

No. 2414.

District Court, W. D. Michigan, S. D.

July 6, 1931.

Altheimer & Mayer, of Chicago, Ill., for plaintiff.

Norris, McPherson, Harrington & Waer, of Grand Rapids, Mich., for defendants.

RAYMOND, District Judge.

By the bill of complaint filed herein the plaintiff, who sues as a grantee of Abbie F. Brundage and Reginald S. Ruggles, seeks a decree whereby certain trusts established by the last will and testament of Charles F. Ruggles shall be declared null and void. The bill of complaint sets forth that the legal heirs of testator are Harry F. Ruggles, Abbie F. Brundage, and Reginald S. Ruggles. Defendants are the executors and trustees under the last will and testament of Ruggles. It is alleged that plaintiff, as trustee, is the owner of an undivided two-thirds interest in the estate as tenant in common with Harry A. Ruggles who is not made a party. The prayer of the bill of complaint is, in substance, that two attempted trusts provided for in the will shall be decreed to be void and that all of the property and estate of the testator shall be decreed to descend as intestate property to the heirs at law of Ruggles.

The original will was executed March 31, 1926, four codicils being later executed bearing date respectively April 6, 1929, May 24, 1929, November 26, 1929, and March 31, 1930. The will and codicils were offered for probate in the probate court of Manistee county, Mich.; objections to the probate thereof were filed by Abbie F. Brundage and Reginald S. Ruggles on alleged grounds of mental incapacity, undue influence, and invalid execution; and after a hearing the will and codicils were admitted to probate on January 23, 1931. On January 20, 1931, Abbie F. Brundage and Reginald S. Ruggles executed conveyances to Arthur Bevan, of Chicago, of all of their right, title, and interest in and to all of the property comprising the estate of testator, excepting a $10,000 legacy to Abbie F. Brundage. On January 24, 1931, Bevan executed a conveyance to the Chicago Bank of Commerce as trustee, covering the same property; the conveyance being made under the provisions of a trust agreement dated January 24, 1931, and known as "Trust No. 103."

In general, it is the claim of the plaintiffs that the trusts attempted to be created by subparagraphs (f) and (g) of paragraph 2 of the will here under consideration are void.

Subdivision (f) of paragraph 2 attempts to create a trust fund of $100,000, to be set aside by the trustees from the residue of the estate after payment of certain bequests, which fund, "with the income thereon, shall be used by said trustees in their discretion to provide from time to time, as may be required, financial assistance to such of my friends as may be in need of financial assistance or relief. I leave to the discretion of my trustees, who are familiar with my wishes, the determination of the persons entitled to assistance from said fund and the amount of assistance to be given. In the distribution of said fund my trustees are authorized to treat any person who has at any time been employed by me as a proper beneficiary of said fund. Any part of such fund and of the income accumulated thereon that may remain undisbursed when the survivor of said trustees John H. Rademaker and Charles McPherson shall cease to act as a trustee, shall revert to and become a part of the residue of my estate to be held for charitable, benevolent and educational purposes as hereinafter provided. If this provision of my will shall for any reason be invalid, said fund shall become a part of the residue of my estate to be held in trust for charitable, benevolent and educational purposes as hereinafter provided."

Paragraph 2 (g) of the will as modified by paragraph III of the fourth codicil is as follows: "I direct that the provisions of my will shall be so changed that the Trustees of the trust estate therein provided for shall have the right and power, in their discretion, to disburse the principal of said trust estate, as well as the net income thereof, for such charitable, benevolent, educational and public welfare uses as said Trustees shall select, in such amounts, upon such terms and for such purposes as said Trustees, without discrimination because of race, nationality or religious belief shall decide to be most worthy. It is my desire and intent that said trust estate and the income thereof shall be devoted to charitable, benevolent, educational and public welfare uses in the state of Michigan, and that the Trustees may in their discretion organize a Michigan corporation to hold said trust estate and disburse the proceeds and income thereof for such purposes. It is my desire and intent that the reasonable needs and requirements of the inhabitants of Manistee County and of the charitable, benevolent, educational and public welfare institutions serving the inhabitants of said county shall at all times be given preference over the like needs and requirements of other persons and institutions in the disbursement of said trust estate and the income thereof."

Other portions of the will as modified by the codicils, and which are of importance in considering the questions involved, are appended hereto.

By the codicil of April 6, 1929, the appointment of John H. Rademaker as executor and trustee was revoked and Ewald J. Pfeifer was named as coexecutor and cotrustee in place of Rademaker.

Charles F. Ruggles died August 21, 1930, leaving an estate consisting of real and personal property, the inventory and appraisal of which discloses a value of approximately $4,195,000. The will, after providing for the payment of debts, the completion of certain contracts, and the payment of $240,000 in the form of specific bequests, provides for the trust funds here under consideration. It appears probable that the trust fund of the residuary estate will amount to several millions of dollars.

The first question presented is one of jurisdiction, it being contended by the defendants that the transfer by Abbie F. Brundage and Reginald S. Ruggles of their interest in the estate of testator is wholly void as contrary to the public policy of the state of Michigan, and that the transfers to plaintiff confer upon it no such title or interest in the property of the testator as will entitle plaintiff to maintain its bill of complaint. It appears from the provisions of trust agreement No. 103, under which plaintiff holds title to that portion of the estate here in suit, that the attorneys in event of recovery will be entitled to about 47 per cent. of the proceeds and avails of this litigation. It is said that this is a violation of the principles of law prohibiting champerty and in violation of section 13593 of the Compiled Laws of Michigan of 1929, which provides: "No attorney or counselor shall, directly or indirectly, buy, or be in any manner interested in buying, any bond, promissory note, bill of exchange, book debt or other thing in action, with the intent and for the purpose of bringing any suit thereon."

It has been recently decided that the defense of champerty does not exist in the state of Michigan except as specified in Compiled Laws 1929, § 13600. See National Adjusting Ass'n v. Dallavo, 253 Mich. 239, 234 N. W. 485; also Wildey v. Crane, 63 Mich. 720, 30 N. W. 327. There is here no evidence to bring the case within the provisions of section 13593. Defendants rely strongly upon the case of In re Vanden Bosch's Estate, 207 Mich. 89, 173 N. W. 332, which decides that disinherited heirs have no standing in court to contest the probate of a will. There is a substantial difference between the issues upon the contest of a will and those raised by a bill to have trust provisions in a will declared void on behalf of those interested as heirs in an estate. No question is raised of the failure of plaintiff to make the resident heir of Ruggles a party to the suit. It seems clear upon the authority of Waterman v. Canal-Louisiana Bank & Trust Co., Executor, 215 U. S. 33, 30 S. Ct. 10, 54 L. Ed. 80; Ingersoll v. Coram, 211 U. S. 335, 29 S. Ct. 92, 53 L. Ed. 208, and Brown v. Fletcher, 235 U. S. 589, 35 S. Ct. 154, 59 L. Ed. 374, that this court has jurisdiction to determine whether the attempted trusts set up in the will here in question are valid.

With reference to the $100,000 trust fund attempted to be created by subdivision (f) of paragraph 2, the invalidity of which is urged by plaintiff, it is unnecessary to determine this question if it shall appear that the trust created in subdivision (g) paragraph 2 of the will is valid, because the clause of the will establishing this trust fund expressly provides that if for any reason this provision of the will be found invalid "said fund shall become a part of the residue of my estate to be held in trust for charitable, benevolent and educational purposes as hereinafter provided." In the view which the court takes of the validity of subparagraph (g), it is not important to consider the validity of this trust.

The most important question presented is whether the trust attempted to be created in subparagraph (g) is void. The various grounds upon which invalidity is urged by the plaintiff may be classified as follows:

1. The subject-matter and the objects of the attempted charitable trust are so uncertain and the beneficiaries thereof are so indefinite that a court of equity cannot enforce the provisions thereof, and therefore the trust is not within the scope of the Michigan statutes validating charitable trusts.

2. That benevolent, educational, and public welfare purposes are not necessarily charitable within the doctrine of charitable trusts, and that it is possible that under the provisions of the will a substantial part or all of the trust fund may be devoted to uses not charitable within the doctrine of charitable trusts, and that this consideration renders the attempted trust void.

3. That the discretionary...