De Korwin v. First Nat. Bank of Chicago, General No. 43 C 1043.

Decision Date19 May 1949
Docket NumberGeneral No. 43 C 1043.
Citation84 F. Supp. 918
PartiesDE KORWIN v. FIRST NAT. BANK OF CHICAGO et al.
CourtU.S. District Court — Northern District of Illinois

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Charles R. Aiken and Homer F. Carey, Chicago, Ill., for plaintiff.

J. F. Dammann, William B. McIlvaine, Jr., W. Philo Gilbert, Sidney K. Jackson, George Hale, Harold V. Amberg, John W. Kearns and Frank L. Paul, Chicago, Ill., for defendant First Nat. Bank.

Cranston Spray and Winfield T. Durbin, Chicago, Ill., for defendant Gwendolyn Koch.

David A. Watts and Charles T. Martin, Jr., Chicago, Ill., for certain other defendants.

Howard D. Moses and Charles G. Culver, Chicago, Ill., for guardian ad litem.

William G. Blood, Chicago, Ill., Chandler P. Ward, Los Angeles, Cal., and Frank B. Sanders, Chicago, Ill., for certain general guardian.

Edwin C. Austin, Kenneth F. Burgess, Howard Neitzert and Lloyd S. McClelland, Chicago, Ill., for certain general guardian.

Harry S. Ditchburne, Chicago, Ill., for trustee of persons not in being.

Thomas Dodd Healy, Chicago, Ill., for special trustee.

IGOE, District Judge.

The subject matter of this litigation is the testamentary trust of Otto Young, who died in 1906. The trust assets, consisting of cash, securities and commercial Chicago real estate, valued by the parties at from thirty-five to eighty million dollars, are presently in the hands of the First National Bank of Chicago.

The suit, commenced in 1943, on behalf of the heirs of certain remaindermen under the trust, requires a construction in several respects of Otto Young's will. Upon that construction plaintiff asks an accounting and for the appointment of a successor trustee. Defendants to the original complaint were the First National Bank, as custodian of the trust properties, all legatees named in and numerous beneficiaries under Otto Young's will, including some of the heirs represented by plaintiff.

A guardian ad litem for the minor defendants and a trustee of persons not in being were appointed at the inception of these proceedings and have represented their wards throughout the course of the litigation. General guardians for issue of certain deceased grandchildren, appointed by the Surrogate's Court in New York and by the Superior Court in California, although without authority to act in this jurisdiction and, due to their foreign citizenship, apparently ineligible to qualify as guardians in Illinois were they to make application in that behalf, were, nevertheless, as a matter of judicial comity permitted to appear in this cause and be heard.

While the action was pending the plaintiff, Joseph De Korwin, died and his widow was substituted in his place. For convenience, as was done in the Court of Appeals, the substituted party will be referred to as plaintiff.

At the first trial, after issue joined, the First National Bank and other defendants petitioned the District Court for a dismissal of the cause on jurisdictional grounds. They asserted that certain of the defendants should be transported to the plaintiff's side of the controversy and that upon such realignment total diversity of citizenship disappeared. Plaintiff thereupon moved to dismiss out those defendants who were dispensable parties and for leave to file an amended complaint omitting them. The chancellor then hearing the case refused leave to voluntarily dismiss and amend the complaint and dismissed the suit for want of jurisdiction. The Court of Appeals reversed, however, holding that this Court had jurisdiction and remanded for further proceedings. De Korwin v. First Nat. Bank of Chicago, 7 Cir., 156 F. 2d 858. Certiorari was denied First National Bank of Chicago v. De Korwin, 329 U.S. 795, 67 S.Ct. 481, 91 L.Ed. 680.

The pertinent facts are not in dispute. Otto Young died November 30, 1906, leaving him surviving his widow and four daughters. By his will he made several bequests to charitable institutions and created certain annuities for collateral kindred, which provisions are not here involved. The residue of his estate was devised to the First Trust and Savings Bank in trust. Testator's widow and daughters or their issue were given the bulk of the trust income during their lives, and the principal was bequeathed to his grandchildren. The trust would continue until the death of testator's last surviving daughter or until the testator's youngest surviving grandchild reached the age of twenty-one, whichever happened last.

By the time Otto Young died his daughters had borne seven children. Eleven additional grandchildren of the testator were born after his death, making a total of eighteen. Some dispute originally existed here as to whether a nineteenth grandchild was stillborn or had died in infancy, but that issue, along with many other incidental questions, was eliminated at pretrial hearings and conferences, during which plaintiff's action was limited to two basic claims.

The testator's widow, Ann Elizabeth Young, died on March 26, 1916, precipitating a controversy with respect to trust income then held by the First Trust and Savings Bank as trustee. The will provided for an annual payment of $100,000 to Mrs. Young during her life, with a stipulation that should one-third of the net trust income exceed such fixed sum in any year the widow would be entitled to payment of the overage upon demand seasonably made. At the widow's death the trustee had in its hands as accumulated and undistributed income some $2,500,000. The executor of Ann Elizabeth Young's estate attributed such accumulation to a refusal by the trustee to properly account and pay over to testator's widow one-third of the net income in accordance with the demands made from time to time during her lifetime. Testator's daughters asserted that the trustee had been erroneously computing the trust income as a result of certain charges being made to depreciation, and they claimed that 88% of the accumulation should be distributed to them under terms of the will. The trustee disputed these claims, and in February of 1917, the First Trust and Savings Bank filed a bill in the Circuit Court of Cook County to settle its accounts and for instructions as to the correct method of computing and distributing the trust income. Crossbills were filed by the widow's executor for recovery of the additional trust income due her and by testator's daughters for payment to them of the accumulated fund. The trustee replied that the excess net income in its hands should be treated under a correct construction of the will as trust principal. An accounting was had before a master on general reference, and on April 20, 1922, a final decree was entered in the Circuit Court wherein the will was construed in respect of the issues before it, settling the trustee's accounts, and instructing the trustee concerning proper computation of trust income and as to its allocation to net income for distribution to the income beneficiaries and to trust principal. Certain specific errors in the trustee's accounts were pointed out and the cause was rereferred for calculation of the amounts due the widow's executor and to testator's four daughters. It was found by the decree that under a correct construction of the will no part of the income accumulated prior to the widow's death was payable to the testator's daughters and that the undistributed fund was properly regarded as trust corpus. The trustee's accounts from inception of the trust until March 26, 1916, were settled and approved. The costs and expenses of the suit, including an allowance of attorneys' fees, were to be fixed on the rereference, and jurisdiction of the cause was retained to pass on the supplementary master's report and for entry of a supplemental decree in that connection. On June 15, 1922, the master's report on rereference was confirmed by the Circuit Court and the payment as costs of various expenses and fees was approved.

The testator's youngest daughter, Laura Elizabeth, died in 1924, leaving two children. Selma Cecile, his oldest daughter, died in 1935, leaving three children. The third daughter, Catherine Osborne, died in 1942, leaving five children. Otto Young's second daughter, Marie Julia, born in 1877, survives, having had eight children. The youngest of testator's grandchildren, Catherine Wickes Alexander, is now twenty-six years of age.

Of Otto Young's eighteen grandchildren, four have died, two without issue and two leaving children. Louis Graveraet Kaufman, Jr., son of Marie Julia, who was born in 1905, died in 1934, leaving one child, Louis Graveraet, III., who is presently about sixteen years old. Samuel Klump Martin, III., son of Laura Elizabeth, who was born in 1908, died in 1935, leaving one child, Samuel Klump, IV., at present about nineteen years old. Otto Young Heyworth, son of Selma Cecile by her first marriage, who was born in 1897, died in 1936, leaving as his only heirs his widow, father, sister, and half-brother. Stanislaus de Korwin, sometimes known as Stanley Young, son of Selma Cecile by her second marriage, who was born in 1913, died in 1940, leaving as his only heirs his widow, father, and half-sister.

On February 11, 1929, the First Trust and Savings Bank of Chicago, named as trustee under Otto Young's will, was consolidated with the Union Trust Company and the consolidated corporation became known as the First Union Trust and Savings Bank. The consolidated bank took over the administration of Otto Young's trust without appointment by any court. On July 17, 1933, the First Union Trust and Savings Bank was merged into the First National Bank of Chicago, and since that time the First National Bank has been acting absent judicial sanction as trustee of Otto Young's estate.

The original plaintiff, Joseph de Korwin, as father of Stanislaus de Korwin, a grandchild of Otto Young who had died intestate without issue, made written demand, in March of 1943, on the First National Bank of Chicago for ...

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