Hummel v. Cardwell

• Decision Date: 20 July 1944
• Docket Number: Gen. No. 9936.
• Citation: Hummel v. Cardwell, 323 Ill.App. 440, 55 N.E.2d 881 (Ill. App. 1944)
• Parties: HUMMEL v. CARDWELL ET AL.
• Court: Appellate Court of Illinois

323 Ill.App. 440

55 N.E.2d 881

HUMMEL

v.CARDWELL ET AL.

Gen. No. 9936.

Appellate Court of Illinois, Second District.

Feb. 2, 1944.

On Rehearing July 20, 1944.

Appeal from Circuit Court, Lake County; Ralph J. Dady, Judge.

Suit by Fred E. Hummel, as trustee in bankruptcy of the estate of Dorothea W. Huszagh, against James R. Cardwell, Dorothea W. Huszagh, and Fred J. Wegg, as sole trustee under the last will of Frederick H. Wickett, deceased, to review proceedings and decree in a creditor's suit, wherein Dorothea W. Huszagh filed a counterclaim. From a decree dismissing the complaint and counterclaim, the plaintiff appeals and the defendants cross-appeal.

Affirmed in part and reversed in part, and cause remanded with directions. Sidney H. Block, of Waukegan, for appellant.

Edward G. Berglund, Barre Blumenthal, and Oscar S. Seaver, all of Chicago, for appellee.

WOLFE, Justice.

The appellant, Fred E. Hummel, is the trustee in bankruptcy of the estate of Dorothea W. Huszagh, who is a beneficiary under a trust, created by the last will of her father, Frederick H. Wickett, deceased. Dorothea W. Huszagh filed her petition to be adjudged a bankrupt on August 17, 1940. In her bankruptcy schedules she stated that under a creditor's bill proceeding, in the circuit court of Lake County, her interest and estate in the trust had been sold by the master in chancery under a decree of sale entered on November 17, 1939, to her judgment creditor, James R. Cardwell.

Hummel was appointed trustee in bankruptcy on October 24, 1940. On November 15, 1940, he filed in the circuit court of Lake county, his complaint (bill of review) against James R. Cardwell, Dorothea W. Huszagh, and also Fred J. Wegg as the sole trustee under the will of Frederick H. Wickett, to review the proceedings and decree in the creditor's suit. The defendants filed their respective answers to the complaint and Dorothea W. Huszagh also filed a counterclaim. After a hearing before the chancellor, both the complaint and the counterclaim were dismissed as being without equity. From this decree Hummel has appealed. All of the defendants have filed cross-appeals resulting in a diversity of contentions being vigorously urged in this court by the different parties to the suit.

The creditor's bill of the defendant, James R. Cardwell, is governed by the provisions of section 49 of the Chancery Act, sec. 49, ch. 22, Ill.Rev.Stat.1943 (Jones Ill.Stats.Ann. 106.12), which is as follows: “Whenever an execution shall have been issued against the property of a defendant, on a judgment at law or in equity, and shall have been returned unsatisfied, in whole or in part, the party suing out such execution may file a complaint against such defendant, and any other person, to compel the discovery of any property or thing in action, belonging to the defendant, and of any property, money, or thing in action due to him, or held in trust for him, and to prevent the transfer of any such property, money or thing in action, on the payment or delivery thereof to the defendant, except when such trust has, in good faith, been created by, or the fund so held in trust has proceeded from, some person other than the defendant himself. The court shall have power to compel such discovery, and to prevent such transfer, payment or delivery, and to decree satisfaction of the sum remaining due on such judgments, out of any personal property, money or things in action, belonging to the defendant, or held in trust for him, with the exception above stated, which shall be discovered by the proceeding in chancery, whether the same were originally liable to be taken in execution at law or not; Provided, that no answer made to any complaint filed under this and the preceding section shall be read in evidence against the defendant on the trial of any indictment for fraud charged in the complaint.”

As heretofore stated, the decree of sale directed the master in chancery to sell all the right, title and interest of Dorothea W. Huszagh in the trust estate created by the will of Frederick H. Wickett. This decree was a determination that such interest was subject to sale under a creditor's bill. At the time the creditor's bill was filed and when the decree of sale thereunder was entered, she had no interest, benefit or property given to her by the will, except such interest and estate as came to her as a cestui que trust. The claim of the judgment creditor, Cardwell, that as the purchaser of her title and interest in and to the trust estate under the decree of sale entered on November 17, 1939, necessarily rests on the validity of that decree, as now opposed to the claim of Hummel, that Dorothea W. Huszagh's interests and estates in the trust passed to him, as trustee in bankruptcy, upon the filing of her petition in bankruptcy. The validity of the decree of sale is vital to the claim of Cardwell and to the contention of the testamentary trustee, Wegg, that Cardwell's claim is prior or superior to the claim of the trustee in bankruptcy. It is the duty of this court to decide whether the circuit court had jurisdiction of the subject-matter of the suit based on the creditor's bill which is now brought into review. If the decree of sale is void, owing to the circuit court's lack of jurisdiction to render such a decree, nothing was presented for review, except the validity of the decree of sale.

The will of Frederick H. Wickett provides for the payment of his debts and makes specific bequests, which are not necessary to consider in construing his will. The residue of his estate, the testator devises and bequeaths to Fred J. Wegg, (and Norman M. Hancock who refused to act) in trust for uses and purposes set forth in the will. The will provides that if one of the trustees refused to act the one accepting the trusteeship should have all the powers given to the two trustees. The trustees are given full power and absolute control of the residuary estate, to manage and dispose of it, or any part thereof, as they deem best. They are empowered to sell, assign or exchange, invest and reinvest, any and all of said property at such time and prices as they see fit. The proceeds of such sales to become part of the trust estate and subject to the terms of the trust.

The tenth clause of the will is as follows: “My said trustees are directed to pay out of the net income of this trust estate to my wife, Alice W. Wickett, for and during the term of her natural life the sum of Fifteen Hundred Dollars ($1500.00) per month. In the event that said net income is not sufficient to pay my wife the sum of Fifteen Hundred Dollars ($1500.00) per month, then I direct my said trustees to pay such deficiency out of the corpus of this trust estate as may be necessary to secure to my said wife an income of not less than Fifteen Hundred ($1500.00) dollars per month. I expressly authorize and empower my said trustees to pay to my said wife, either out of income or out of the corpus of my estate, such further and other sum or sums of money, from time to time, as in their judgment shall seem fit, having in mind the needs and requirements of my wife.”

The eleventh clause of the will is as follows: “Upon the death of my said wife, my said trustees are directed to pay the net annual income of my said trust estate, in such installments as in their judgment shall seem best, equally to my children, Dorothy Huszagh and Marjorie Huszagh, share and share alike. My said trustees are, however, expressly authorized and empowered to pay over and deliver to my said children, Dorothy Huszagh and Marjorie Huszagh, from time to time, as in their judgment shall seem fit, such further or other portion of the corpus of this trust estate; Provided, however, that at all times both of my said children shall be treated equally, so far as the division of said trust estate is concerned.”

The fifteenth clause of the will is as follows: “I hereby expressly authorize and empower my trustees from time to time to pay any part of the corpus of this trust estate to any of my relatives if, in the opinion of my said trustees, they may be in want or need of assistance.”

Alice W. Wickett, the widow of the testator, renounced the provisions of the will for her benefit. The legal title and possession of the testator's estate relinquished by her renunciation, with other residuary assets of his estate as provided by the will, passed to the trustee, Wegg, as part of the trust estate. Dunshee v. Dunshee, 251 Ill. 405, 96 N.E. 298. The will does not provide that Dorothea W. Huszagh survive her mother to be entitled to the net income from the trust estate. Under the eleventh clause of the will the trustees are directed to pay the “net annual income” of the trust estate to the two daughters, Dorothea W. Huszagh and Marjorie Huszagh, equally. It is necessary to refer to the pleadings and the decree of sale in the creditor's suit to determine the contention of Dorothea Huszagh and Wegg, the testamentary trustee, and the contention of Cardwell.

It is contended by Dorothea Huszagh and Wegg that the trust created by the will of Frederick H. Wickett is a Spendthrift Trust. In her answer to the creditor's bill of Cardwell, Dorothea Huszagh alleged that the trust is in the nature of a Spendthrift Trust and not subject to any legal or equitable assignment, by operation of law, or otherwise, and that the plaintiff (Cardwell) is not entitled to have such interest in the trust sold for the purpose of having the proceeds of the sale thereof, applied in satisfaction of his judgment. In the decree ordering the sale of Dorothea Huszagh's interest in the trust, the court decided her interest in the trust estate, constitutes personal property, which did create a trust, but not a Spendthrift Trust, and that her interest in the trust is subject to equitable attachment and sale for the purpose of satisfying, in whole or part, as the case may be, the unpaid judgment in favor of Cardwell. The Circuit...