CITIZENS NAT. BANK v. KIDS HOPE UNITED INC.

• Decision Date: 17 December 2009
• Docket Number: No. 107787.,107787.
• Citation: CITIZENS NAT. BANK v. KIDS HOPE UNITED INC., 922 N.E.2d 1093, 235 Ill.2d 565 (Ill. 2009)
• Parties: The CITIZENS NATIONAL BANK OF PARIS, as Trustee of the La Fern L. Blackman Trust, and as Trustee of the Ettoile Davis Trust, Appellant, v. KIDS HOPE UNITED, INC., an Illinois Not-for-Profit Corporation, Appellee (Lisa Madigan, Attorney General of the State of Illinois, Intervenor-Appellee).
• Court: Illinois Supreme Court

922 N.E.2d 1093

235 Ill.2d 565

The CITIZENS NATIONAL BANK OF PARIS, as Trustee of the La Fern L. Blackman Trust, and as Trustee of the Ettoile Davis Trust, Appellant, v. KIDS HOPE UNITED, INC., an Illinois Not-for-Profit Corporation, Appellee (Lisa Madigan, Attorney General of the State of Illinois, Intervenor-Appellee).

No. 107787.

Supreme Court of Illinois.

December 17, 2009.

Richard M. Kash, Jr., of Fruin & Kash, Paris, for appellant.

David C. Nelson and E. Lee Waite II, of Dilsaver & Nelson, Mattoon, for appellee.

Lisa Madigan, Attorney General, Springfield (Michael A. Scodro, Solicitor General, and Richard S. Huszagh, Ann Chalstrom, Assistant Attorneys General, Chicago, of counsel), for intervenor-appellee.

OPINION

Justice FREEMAN delivered the judgment of the court, with opinion.

Petitioner Citizens National Bank of Paris (the Bank), as trustee of two charitable trusts that benefitted the Edgar County Children's Home (ECCH), petitioned the circuit court of Edgar County for instructions following the merger of ECCH with a similar charitable entity to form Kids Hope United—Hudelson Region (Kids Hope). In its petition, the Bank sought a determination that, as a result of the merger, the gifts to ECCH had lapsed. The Bank and respondent Kids Hope submitted an agreed statement of facts and filed cross-motions for summary judgment. The circuit court granted the Bank's motion, denied Kids Hope's motion, and directed the Bank to proceed in accordance with the alternate distribution provisions pertaining to each trust. Kids Hope appealed, and a divided appellate court reversed. 386 Ill.App.3d 1084, 325 Ill.Dec. 687, 898 N.E.2d 734. We allowed the Bank's petition for leave to appeal. 210 Ill.2d R. 315. For the reasons set forth below, we affirm the judgment of the appellate court.

I. BACKGROUND

La Fern L. Blackman died on July 11, 1967. Her will, dated July 23, 1961, provided that, after the death of her sister, Ettoile Davis, the Bank would hold her farmland in trust and pay 75% of the income from the farmland to ECCH and the other 25% to the trustees of the Embarrass Cemetery in Edgar County. The will further provided: "In the event either or both of the aforesaid organizations should cease to operate or exist, then said bank as trustee is to distribute said portion or portions of said net income to such charitable organization or organizations as it deems worthy of said money."

Ettoile Davis, Blackman's sister, died on April 27, 1971. Her will, dated December 4, 1968, directed the Bank to hold her farmland in trust and give 75% of the net income to ECCH and the other 25% to the trustees of the Embarrass Cemetery. The will further provided: "In the event either of the aforesaid organizations shall cease to function in its present capacity, then the part of the trust fund which would have gone to this organization shall be divided equally between the FIRST METHODIST CHURCH OF PARIS MEMORIAL FOUNDATION, INC., THE EDGAR COUNTY CHAPTER OF THE AMERICAN CANCER SOCIETY, and THE EDGAR COUNTY HEART ASSOCIATION."

ECCH was incorporated in Illinois in 1898. Its charter stated it was formed to "establish an institution for the education of dependent children of Edgar County, Illinois, and for the custody and maintenance of such children and to provide permanent homes for them in approved private families." In 1900, ECCH erected a building for this purpose on Eads Avenue in Paris, Illinois.

In 1980, ECCH amended its articles of incorporation to allow it to become a residential placement resource for children throughout Illinois and to receive state funding. As a result of the amendment, ECCH's object was to:

"provide services to children and youth in the fields of health, welfare and education in the State of Illinois, including multi-treatment and educational programs for emotionally handicapped boys and girls of all races in residential treatment centers, day treatment services, counseling services to family, and such other related and auxiliary services as are necessary or desirable from time to time to accomplish these purposes; and to own or lease property, establish and maintain residential treatment centers, homes, schools and other facilities required."

ECCH created a not-for-profit corporation, the Children's Home Endowment Fund (the Fund), to hold its property and finances. In 1993, various pieces of property, including the property on Eads Avenue, were transferred into the Fund.

On July 1, 2003, ECCH merged with the Hudelson Baptist Children's Home (Hudelson) pursuant to a merger agreement between the two not-for-profit corporations. The agreement provided that, "effective July 1, 2003 * * * ECCH will dissolve as an entity and merge all its assets and programs into Hudelson," and that ECCH's employees would become Hudelson's employees. In the agreement, Hudelson "guaranteed that ECCH's mission of working with children in Edgar and the surrounding counties will be continued for as long as it is financially feasible to do so."

In 2004 the real estate held by the Fund was transferred to Hudelson, which changed its name, in 2005, to Kids Hope. The Eads Avenue facility was closed, and in June 2006 was sold to the Paris school district.

According to the parties' agreed statement of facts, Kids Hope "has families in Edgar County who serve as approved foster homes." Kids Hope also offers services to minors in abuse and neglect cases in Edgar County, and its representatives appear in Edgar County juvenile court.

In December 2006 the Bank, as trustee of the Blackman and Davis trusts, filed a petition for instructions in the Edgar County circuit court. In count I, relating to the Blackman trust, the Bank noted the 2003 merger of ECCH with Hudelson, now Kids Hope, and stated that it believed ECCH had "ceased to exist." The Bank asked the court to determine whether this was the case and, if so, where the income payable to ECCH should be distributed under the cy pres doctrine. In count II, concerning the Davis trust, the Bank again stated it believed that ECCH had "ceased to exist." The Bank asked the circuit court to determine whether this was true and, if so, to approve the distribution of 75% of the trust's net income to the alternate beneficiaries named in the Davis will.¹

The Bank and Kids Hope submitted an agreed statement of facts and filed cross-motions for summary judgment.² The circuit court granted the Bank's motion and denied Kids Hope's motion. With regard to the Blackman trust, the court found that ECCH had "ceased to exist" as a result of the merger with Hudelson. Relying on section 11.50(a)(2) of the Business Corporation Act (805 ILCS 5/11.50(a)(2) (West 2006)),³ the court reasoned that because the merger agreement identified Hudelson, not ECCH, as the surviving corporation, ECCH "ceased to exist." The court further found, with regard to the Davis trust, that ECCH "ceased to function as it did at the time of the testator's death when it dissolved on July 1, 2003 and when the building that had housed Edgar County children since 1900 closed." The court directed the Bank, as trustee of the Blackman and Davis trusts, to proceed in accordance with Ms. Blackman's and Ms. Davis' successor beneficiary provisions. The court's order included language pursuant to Rule 304(a) (210 Ill.2d R. 304(a)) stating there was no just reason for delaying enforcement or appeal regarding counts I and II involving the Blackman and Davis trusts.

Kids Hope filed a timely postjudgment motion. Following a hearing, the circuit court denied the motion.

A divided appellate court reversed the granting of summary judgment with regard to both trusts, and remanded for further proceedings concerning the Davis trust. 386 Ill.App.3d 1084, 325 Ill.Dec. 687, 898 N.E.2d 734. With regard to the Blackman trust, the appellate court rejected the circuit court's conclusion that ECCH ceased to exist, within the meaning of the will's language, solely as a result of its merger with Hudelson. On the contrary, the appellate court observed that a charity does not "cease to exist" for purposes of receiving a bequest unless the new corporation with which the original charitable organization merged is no longer suited to carry out the purposes of the bequest. 386 Ill.App.3d at 1091, 325 Ill. Dec. 687, 898 N.E.2d 734. With regard to the Davis trust, the appellate court held that the agreed statement of facts did not support the circuit court's grant of summary judgment on either of the two grounds specified: that ECCH ceased to function in its present capacity (1) when it entered into the merger in 2003, and (2) when the building on Eads Avenue subsequently closed. 386 Ill.App.3d at 1093, 325 Ill.Dec. 687, 898 N.E.2d 734.

The dissent argued that the circuit court's judgment should be affirmed. The dissent agreed with the circuit court that, as a result of the merger, ECCH ceased to exist. According to the dissent, ECCH "no longer functioned as it did when Davis made her gift, and it no longer operated or existed as it did when Blackman made her gift." 386 Ill.App.3d at 1096, 325 Ill.Dec. 687, 898 N.E.2d 734 (Knecht, J., dissenting).

II. ANALYSIS

The granting of summary judgment is reviewed de novo. Murray v. Chicago Youth Center, 224 Ill.2d 213, 228, 309 Ill.Dec. 310, 864 N.E.2d 176 (2007). Summary judgment is proper where the pleadings, depositions, admissions, and affidavits on file, viewed in the light most favorable to the nonmoving party, reveal that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2006); State Farm Mutual Automobile Insurance Co. v. Illinois Farmers Insurance Co., 226 Ill.2d 395, 400, 314 Ill.Dec. 809, 875 N.E.2d 1096 (2007).

Where, as here, the evidence before the circuit court is "documentary in nature," no deference is owed to the circuit court's findings. Addison Insurance Co. v. Fay, 232 Ill.2d 446, 453, 328 Ill.Dec. 858...