Farkas v. Williams
| Decision Date | 16 February 1955 |
| Docket Number | No. 33389,33389 |
| Citation | 125 N.E.2d 600,5 Ill.2d 417 |
| Parties | Regina FARKAS et al., Adm'rs, Appellees, v. Richard J. WILLIAMS et al., Appellants. |
| Court | Illinois Supreme Court |
Levinson, Becker & Peebles, Jacob Stagman, Chicago (Don M. Peebles, Halbert O. Crews, Erwin H. Greenberg, Chicago, of counsel), for appellants.
Milton M. Hermann, M. J. Weiss, Albert S. Light, Chicago, for appellees.
This is an appeal from a decision of the Appellate Court, First District, which affirmed a decree of the circuit court of Cook County finding that certain declarations of trust executed by Albert B. Farkas and naming Richard J. Williams as beneficiary were invalid and that Regina Farkas and Victor Farkas, as coadministrators of the estate of said Albert B. Farkas, were the owners of the property referred to in said trust instruments, being certain shares of capital stock of Investors Mutual, Inc.
Said coadministrators, herein referred to as plaintiffs, filed a complaint in the circuit count of Cook County for a declaratory decree and other relief against said Richard J. Williams and Investors Mutual, Inc., herein referred to as defendants. The plaintiffs asked the court to declare their legal rights, as coadministrators, in four stock certificates issued by Investors Mutual Inc. in the name of 'Albert B. Farkas, as trustee for Richard J. Williams' and which were issued pursuant to written declarations of trust. The decree of the circuit court found that said declarations were testamentary in character, and not having been executed with the formalities of a will, were invalid, and directed that the stock be awarded to the plaintiffs as an asset of the estate of said Albert B. Farkas. Upon appeal to the Appellate Court, the decree was affirmed. See 3 Ill.App.2d 248, 121 N.E.2d 344. We allowed defendants' petition for leave to appeal.
Albert B. Farkas died intestate at the age of sixty-seven years, a resident of Chicago, leaving as his only heirs-at-law brothers, sisters, a nephew and a niece. Although retired at the time of his death, he had for many years practiced veterinary medicine and operated a verterinarian establishment in Chicago. During a considerable portion of that time, he employed the defendant Williams, who was not related to him.
On four occasions (December 8, 1948; February 7, 1949; February 14, 1950; and March 1, 1950) Farkas purchased stock of Investors Mutual, Inc. At the time of each purchase he executed a written application to Investors Mutuals, Inc., instructing them to issue the stock in his name 'as trustee for Richard J. Williams.' Investors Mutual, Inc., by its agent, accepted each of these applications in writing by signature on the face of the application. Coincident with the execution of these applications, Farkas signed separate declarations of trust, all of which were identical except as to dates. The terms of said trust instruments are as follows:
'(1) During my lifetime all cash dividends are to be paid to me individually for my own personal account and use; provided, however, that any such additional stock purchased under an authorized reinvestment of cash dividends shall become a part of and subject to this trust.
'(3) During my lifetime I reserve the right, as trustee, to vote, sell, redeem, exchange or otherwise deal in or with the stock subject hereto, but upon any sale or redemption of said stock or any part thereof, the trust hereby declared shall terminate as to the stock sold or redeemed, and I shall be entitled to retain the proceeds of sale or redemption for my own personal account and use.
'(5) In the event this trust shall be revoked or otherwise terminated, said stock and all rights and privileges thereunder shall belong to and be exercised by me in my individual capacity.
'(6) The Company shall not be liable for the validity or existence of any trust created by me, and any payment or other consideration made or given by the Company to me as trustee or otherwise, in connection with said stock or any cash dividends thereon, or in the event of my death prior to revocation, to the beneficiary, shall to the extent of such payment fully release and discharge the Company from liability with respect to said stock or any cash dividends thereon.'
The applications and declarations of trust were delivered to Investors Mutual, Inc., and held by the company until Farkas's death. The stock certificates were issued in the name of Farkas as 'trustee for Richard J. Williams' and were discovered in a safety-deposit box of Farkas after his death, along with other securities, some of which were in the name of Williams alone.
The sole question presented on this appeal is whether the instruments entitled 'Declaration of Trust-Revocable' and executed by Farkas created valid inter vivos trusts of the stock of Investors Mutual, Inc. The plaintiffs contend that said stock is free and clear from any trust or beneficial interest in the defendant Williams, for the reason that said purported trust instruments were attempted testamentary dispositions and invalid for want of compliance with the statute on wills. The defendants, on the other hand, insist that said instruments created valid inter vivos trusts and were not testamentary in character.
It is conceded that the instruments were not executed in such a way as to satisfy the requirements of the statute on wills; hence, our inquiry is limited to whether said trust instruments created valid inter vivos trusts effective to give the purported beneficiary, Williams, title to the stock in question after the death of the settlor-trustee, Farkas. To make this determination we must consider: (1) whether upon execution of the so-called trust instruments defendant Williams acquired an interest in the subject matter of the trusts, the stock of defendant Investors Mutual, Inc., (2) whether Farkas, as settlor-trustee, retained such control over the subject matter of the trusts as to render said trust instruments attempted testamentary dispositions.
First, upon execution of these trust instruments did defendant Williams presently acquire an interest in the subject matter of the intended trusts?
If no interest passed to Williams before the death of Farkas, the intended trusts are testamentary and hence invalid for failure to comply with the statute on wills. Oswald v. Caldwell, 225 Ill. 224, 80 N.E. 131; Troup v. Hunter, 300 Ill. 110, 133 N.E. 56; Restatement of the Law of Trusts, section 56.
But considering the terms of these instruments we believe Farkas did intend to presently give Williams an interest in the property referred to. For it may be said, at the very least, that upon his executing one of these instruments, he showed an intention to presently part with some of the incidents of ownership in the stock. Immediately after the execution of each of these instruments, he could not deal with the stock therein referred to the same as if he owned the property absolutely, but only in accordance with the terms of the instrument. He purported to set himself up as trustee of the stock for the benefit of Williams, and the stock was registered in his name as trustee for Williams. Thus assuming to act as trustee, he is held to have intended to take on those obligations which are expressly set out in the instrument, as well as those fiduciary obligations implied by law. In addition, he manifested an intention to bind himself to having this property pass upon his death to Williams, unless he changed the beneficiary or revoked the trust, and then such change of beneficiary or revocation was not to be effective as to Investors Mutual, Inc., unless and until written notice thereof in such form as the company prescribed was delivered to them at Minneapolis, Minnesota. An absolute owner can dispose of his property, either in his lifetime or by will, in any way he sees fit without notifying or securing approval from anyone and without being held to the duties of a fiduciary in so doing.
It seems to follow that what incidents of ownership Farkas intended to relinquish, in a sense he intended Williams to acquire. That is, Williams was to be the beneficiary to whom Farkas was to be obligated, and unless Farkas revoked the instrument in the manner therein set out or the instrument was otherwise terminated in a manner therein provided for, upon Farkas's death Williams was to become absolute owner of the turst property. It is...
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