Hodam v. Jordan

• Decision Date: 13 January 1949
• Docket Number: No. 778-D.,778-D.
• Citation: 82 F. Supp. 183
• Parties: HODAM v. JORDAN et al.
• Court: U.S. District Court — Eastern District of Illinois

82 F. Supp. 183

HODAM v. JORDAN et al.

No. 778-D.

United States District Court E. D. Illinois.

January 13, 1949.

Henry I. Green, of Urbana, Ill., for plaintiff.

Busch & Harrington, of Champaign, Ill., for defendants.

LINDLEY, Chief Judge.

Andrew Jordan died June 28, 1901, leaving his last will and testament, executed July 5, 1898, and duly admitted to probate July 25, 1901, wherein he devised his real and personal estate to James A. Jordan and Charles A. Jordan, two of his sons, executors, "in trust," with power to lease, borrow money upon and mortgage the property, "the title to be held and vested in trust," "for the purpose of paying the entire encumbrance on said lands," "from the income," "as soon as convenient." Out of the rents and profits the trustees were to pay also taxes, insurance and cost of repairs, and to the testator's widow, "suitable sums" for her "comfort."

By the fifth paragraph the testator directed that, after payment of the encumbrances, the trustees should continue to pay the taxes, insurance and repairs and, then, "divide the income * * * among my children share and share alike, and in case of the death of any one of my children, the same to be paid to the heirs * * * share and share alike."

The Sixth paragraph provided that, after the death of three named children and payment of all encumbrances, "I hereby devise (my estate) to my said grandchildren and to the heirs of Charles A. Jordan and James A. Jordan," his two other children, "the heirs of each taking the share of such deceased parent, that is, such share as such deceased parent would take had not this will been made, share and share alike, it being my intention by this will that at that time and not before, the title to said real estate shall vest in the heirs of my children or their descendants, and in case of the death of any of my heirs, the children and heirs of each taking the share of the deceased parent, share and share alike."

The encumbrances having been discharged and the five children of the testator having died, a partition suit was instituted in the state court and eventually removed to this court. The only question presented is as to the character and quality of the estate of Rolla A. Jordan, grandson of the testator and son of James A. Jordan, one of the sons of the testator. Rolla was duly adjudicated bankrupt on December 2, 1920. He scheduled "an interest in" the real estate of which the testator had died seized. His trustee in bankruptcy, later, by order of court, sold and conveyed that interest in to R. M. Hodam. Rolla's father died in 1927. Rolla now claims the 1/25th interest which he would now own had he not been in bankruptcy, saying that the deed of the trustee in bankruptcy was wholly without legal effect. Sadie B. Hodam, plaintiff, devisee of R. M. Hodam, the purchaser at the bankruptcy sale, claims the interest on the theory that it vested first in Rolla and then passed to his trustee in bankruptcy and was properly sold and conveyed to her devisor. Specifically, plaintiff Hodam claims that the remainder was vested in Rolla from the beginning, while Rolla, defendant, asserts that it was a contingent remainder, which, under the Illinois decisions, did not pass to his trustee in bankruptcy, and did not vest in him until certain contingencies later disappeared. The property has been sold at partition sale, and the proceeds of sale, by stipulation of the parties, are to stand and be disposed of by the court in lieu of the real property. The court has jurisdiction, inasmuch as diversity of citizenship exists and the amount in controversy is in excess of $3000.

If the interests of Rolla and the testator's other grandchildren created by the will were contingent upon the ultimate takers surviving the payment of all encumbrances, it is probable that the trust violated the rule against perpetuities as it has been applied in the state of Illinois. Thus, in Johnson v. Preston, 226 Ill. 447, 80 N.E. 1001, 1003, 10 L.R.A.,N.S., 564, the court held void a gift to continue for the space of 25 years "from and after the date of the probate of this will," upon the reasoning that probate of the will, a condition precedent to the effectiveness of the gift, might not occur within the limits prescribed by the rule. See also Ryan v. Beshk, 339 Ill. 45, 47, 170 N.E. 699. However, that such is not universally the law, is apparent from Belfield v. Booth, 63 Conn. 299, 27 A. 585. There a similar gift was declared valid. Gifts to take effect after the payment of debts, if contingent upon the survivorship of that event, are equally subject to objection under the English authorities and according to the teaching of Professor Gray. Carey & Schuyler, Future Interests, Section 489, Note 71. On the other hand such gifts have always been upheld in this state when the interests created by them are vested. Scofield v. Olcott, 120 Ill. 362, 11 N.E. 351. Such terms as "when" or "after" when used in connection with the creation of the gift are said to relate to the time of enjoyment and not to the time of vesting. Heisen v. Ellis, 247 Ill. 418, 93 N.E. 362. In the present case, we find even stronger language, for the testator has said that title of the remainder-man "shall vest" at the time of enjoyment "and not before." However such expressions are not always conclusive that vesting is to be postponed. Carey & Schuyler, supra, p. 295. And it is well established in Illinois that the law favors the early vesting of estates. Murphy v. Westhoff, 386 Ill. 136, 53 N.E.2d 931. While the decision of the Connecticut court in Belfield, supra, would permit the gift to stand against the rule against perpetuities on the theory that at all events the trustees shall pay the testator's debts within 20 years from the testator's death, we can not ignore the binding effect of Johnson v. Preston, supra. Because of this threat to the validity of the trust, I am inclined and it is my duty, I think, to hold that the interest vested at the earliest possible moment.

We should consider also, before reaching the ultimate question, the proposition that if the testator used the word "heirs" in its technical sense, the question immediately arises as to whether the rule in Shelley's case applied. Here was a gift of income to the testator's children followed by a gift over, at their deaths "to my said grandchildren and to the heirs of Charles A. Jordan and James A. Jordan." Of course, if real property is given to A for life, remainder to the lifetenant's heirs, the rule in Shelley's case vests the remainder in fee in A, irrespective of whether the life estate and the remainder are legal or equitable, so long as they are of the same character. McFall v. Kirkpatrick, 236 Ill. 281, 86 N.E. 139; Richardson v. Roney, 382 Ill. 528, 47 N.E. 2d 714, expressly overruling Gehlbach v. Briegel, 359 Ill. 316, 194 N.E. 591. Whatever estates James A. Jordan and the other children of the testator may have taken as beneficiaries in the trust created, there would seem to be no doubt that they were equitable. So also was the "remainder" to the children's "Heirs," for I think there is no doubt that the trustees, having been given power to mortgage, took the legal fee. As is said in Nowlan v. Nowlan, 272 Ill. 526, 112 N.E. 259, 261, "an express devise of the trust estate to a trustee coupled with the power to sell necessarily vests the trustee with the fee", and in Harvey v. Ballard, 252 Ill. 57, 96 N.E. 558, if the will shows an intention that the trustee shall have power to mortgage and lease, the trustee necessarily takes the fee. To the same effect is Restatement of Trusts, Vol. 1, Section 88(1). The law is summarized by Carey & Schuyler, Section 99, p. 171, in this statement: "Powers to sell, to mortgage, to convey at the end of the trust or to make long term leases will be regarded not as mere powers but as a grant."

I think that for other reasons, the rule in Shelley's case is not applicable. The estate of Rolla's father appears to be, at most, an estate pur autrie vie, i. e. for the lives of the three named children, whose lives were to measure the life of the trust. The other beneficiaries were to take nothing unless and until all encumbrances on the property devised had been discharged, and even if it could be assumed that an estate pur autre vie in the ancestor would support the application of the rule in Shelley's case to the gift with remainder to the heirs, the direction to pay encumbrances in the instant case is persuasive that the gift is an executory one to which the rule would not apply. Smith v. Thomas, 317 Ill. 150, 147 N.E. 788. Then again it seems clear that by the gift over to the "heirs" of the first takers here, the testator had reference to their children (Carey & Schuyler, supra, pp. 163, 164, 214, 218), in which event the rule in Shelley's case would obviously be inapplicable. I am of the opinion that the rule in Shelley's case does not apply.

If the remainders were limited to "heirs" in the technical sense, of the life tenants, then, as I have indicated, the rule in Shelley's case applies. But, examination of the fifth and sixth clauses would seem to make it certain that the testator did not use the word "heirs" in its technical sense. In the fifth clause, he said: "* * * divide the income * * * among my children * * *, and in case of the death of any one of my said children, the same to be paid to the heirs or in case of minority to the legal guardian of such child or children * * *." The last phrase clearly indicates that by the word "heirs" the testator meant children. Taking into consideration the language of the entire instrument as well as that of the sixth clause, I think the testator intended this:

"After the death of my children, I devise to my grandchildren such share as their deceased parent would have taken had this will not been made, it being my intention that at that time (i. e. after the death of my children), and not before, the...