Northern Illinois Medical Center v. Home State Bank of Crystal Lake

• Decision Date: 30 August 1985
• Docket Number: Nos. 2-84-0628,2-84-0629 and 2-84-0648,s. 2-84-0628
• Citation: 90 Ill.Dec. 802,482 N.E.2d 1085,136 Ill.App.3d 129
• Parties: , 90 Ill.Dec. 802 NORTHERN ILLINOIS MEDICAL CENTER, Plaintiff-Appellant, v. HOME STATE BANK OF CRYSTAL LAKE, as Trustee under the Last Will and Testament of Thomas W. Ames, deceased, Defendant-Appellee. MEMORIAL HOSPITAL FOR McHENRY COUNTY, Plaintiff, v. HOME STATE BANK OF CRYSTAL LAKE, as Trustee under the Last Will and Testament of Thomas W. Ames, deceased, Defendant. CRYSTAL LAKE HOSPITAL ASSOCIATION, and Sherman Hospital, Plaintiffs, v. HOME STATE BANK OF CRYSTAL LAKE, as Trustee under the Last Will and Testament of Thomas W. Ames, deceased, Defendants. Neil F. Hartigan, Attorney General for the State of Illinois, and City of Crystal Lake, Intervenors.
• Court: United States Appellate Court of Illinois

Page 1085

482 N.E.2d 1085

136 Ill.App.3d 129, 90 Ill.Dec. 802

NORTHERN ILLINOIS MEDICAL CENTER, Plaintiff-Appellant, v. HOME STATE BANK OF CRYSTAL LAKE, as Trustee under the Last

Will and Testament of Thomas W. Ames, deceased,

Defendant-Appellee.

MEMORIAL HOSPITAL FOR McHENRY COUNTY, Plaintiff, v. HOME STATE BANK OF CRYSTAL LAKE, as Trustee under the Last

Will and Testament of Thomas W. Ames, deceased, Defendant.

CRYSTAL LAKE HOSPITAL ASSOCIATION, and Sherman Hospital, Plaintiffs, v. HOME STATE BANK OF CRYSTAL LAKE, as Trustee under the Last

Will and Testament of Thomas W. Ames, deceased,

Defendants.

Neil F. Hartigan, Attorney General for the State of

Illinois, and City of Crystal Lake, Intervenors.

Nos. 2-84-0628, 2-84-0629 and 2-84-0648.

Appellate Court of Illinois Second District.

Aug. 30, 1985.

Boodell, Sears, Giambalvo & Crowley, Jeffrey R. Ladd, Lawrence M. Gavin, Neil F. Hartigan, Atty. Gen., Floyd D. Perkins, Chicago, Sheflow, Rydell, Travis & Kirkland, Richard E. Travis, Elgin, for plaintiff-appellant.

Zukowski, Poper, Rogers & Flood, Richard G. Flood, Andrew T. Freund, Richard R. Zukowski, Cowlin, Ungvarsky, Kukla & Currant, Michael F. Kukla, Crystal Lake, for defendant-appellee.

REINHARD, Justice:

This opinion addresses three separate appeals which have been consolidated for the purposes of our review. Northern Illinois Medical Center (hereinafter "NIMC") plaintiff/appellant in appeal No. 84-0628, the Crystal Lake Hospital Association and Sherman Hospital, (hereinafter collectively referred to as "CLHA" or "Crystal Lake Ambutal") plaintiffs/appellants in appeal No. 84-0648, and the Attorney General of the State of Illinois, intervenor/appellant, in appeal No. 84-0629, each appeal from the trial court's judgment denying the plaintiff medical health care organizations status as beneficiaries under a charitable testamentary trust established by paragraph 11 of the Last Will and Testament of Thomas W. Ames.

The following issues have been raised for our consideration: (1) whether this court should engage in an independent analysis of the record and resolve the instant cases as a matter of law; (2) whether the doctrines of res judicata and/or collateral estoppel preclude NIMC, Crystal Lake Ambutal, and the Attorney General from maintaining the instant actions; (3) whether the plaintiff medical health care facilities qualify as beneficiaries under a reasonable construction of Mr. Ames' charitable testamentary trust; (4) whether the plaintiff medical health care facilities are entitled to the proceeds of the charitable testamentary bequest under the doctrine of equitable deviation; and (5) whether the trial court erred in excluding certain evidence on the grounds of relevance and materiality.

Thomas W. Ames died on February 8, 1963. In his Last Will and Testament, he left the bulk of his estate, valued at $850,000 at the time of trial, in trust for the charitable purpose of establishing a hospital in or near the city of Crystal Lake, Illinois, within 20 years of his death. Defendant, the Home State Bank of Crystal Lake was named as trustee of the testamentary trust and has continuously served as trustee from October 10, 1966 to the present.

All three consolidated appeals center on the construction and enforcement of the charitable testamentary trust bequest which is set forth in paragraph 11 of Mr. Ames' Will and provides, in relevant part:

"Eleventh: After the payment of the items hereinabove provided ... I then hereby give, devise and bequeath all of the rest, residue and remainder of my estate, ..., unto the HOME STATE BANK OF CRYSTAL LAKE, 40 Grant Street, Crystal Lake, Illinois, IN TRUST, nevertheless, as Trustee for the following uses and purposes: I direct said Trustee to sell and convert into cash all of the rest, residue and remainder of my estate, as aforesaid, at either public or private sale, for such price or prices as it may deem best as soon as practicable after my decease and to use and apply the proceeds realized therefrom toward the cost of incorporating and establishing a not-for-profit hospital association or foundation in or near the City of Crystal Lake, Illinois, and toward the cost of erecting, constructing and maintaining of a hospital building or buildings and also toward the cost of the operation of such hospital when so constructed for the diagnosis, treatment, medical care and cure of sick, injured and diseased persons. I direct further that such hospital association or foundation be so incorporated and established, the hospital building or buildings erected and the hospital operating as such within twenty (20) years after my decease, and said Trustee is hereby given the right to select the location and site for such hospital building or buildings in or near the City of Crystal Lake, Illinois, as aforesaid. In the event, however, that said Hospital association or foundation is not so incorporated or established, the hospital building or buildings not erected and the hospital not operating as such within said twenty-year period after my decease, then and in that event I hereby direct said Trustee to use and apply such proceeds in its hands from the sale of the rest, residue and remainder of my estate, as aforesaid, toward the sponsoring of whatever other public or worthwhile charitable cause or project said Trustee in its good judgment and discretion may consider for the best interest and welfare of the people residing in or near the City of Crystal Lake, Illinois. When the above purpose has been accomplished and if it is feasible to do so, it is my wish and will that such hospital or other project be named in my memory."

[90 Ill.Dec. 807] Paragraph 11 essentially delineates six requirements which must be satisfied by an organization seeking to qualify as a recipient beneficiary under its terms. A qualifying beneficiary must establish: (1) first, that it is a not-for-profit hospital, association, or foundation, not in existence at Mr. Ames' death; (2) second, that it is located "in or near" the city of Crystal Lake, Illinois; (3) third, that it is a hospital constructed for the diagnosis, treatment, medical care and cure of sick, injured and diseased persons; (4) fourth, that it was operating as a hospital on February 8, 1983, within 20 years of Mr. Ames' death; (5) fifth, that the trust provision gave the trustee the right to select the location and site for the hospital; and (6) sixth, that the new facility is to be named in memory of Thomas W. Ames, if it is feasible to do so.

The consolidated cases underlying the instant appeals represent a second attempt by NIMC and Crystal Lake Ambutal to obtain the Ames trust proceeds. In 1975, a prior action was instituted by Crystal Lake Ambutal against Home State Bank, as trustee, seeking the trust monies. NIMC, formerly McHenry Hospital, was permitted to intervene in the 1975 suit. Following a bench trial, Judge Michael J. Sullivan issued a memorandum opinion on July 1, 1981, delineating his express finding that Crystal Lake Ambutal was not a "hospital" within the provisions of the Ames trust. In a subsequent September 17, 1981 order, the court entered its further finding that McHenry Hospital (currently NIMC) was not "in or near the City of Crystal Lake" as contemplated by the Ames trust. In entering judgment against all plaintiffs, the court noted "that at the time of entry of this Order, the cause is not ripe for the application of the doctrine of cy pres or any other such equitable doctrine," indicating that its decision was based solely on its construction of the trust provisions and that it did not consider any equitable theory. Neither plaintiff appealed the earlier 1981 decisions.

Plaintiff, NIMC is an Illinois not-for-profit corporation formed on June 7, 1982, as a result of a major corporate reorganization of McHenry Hospital. Evidence adduced at trial showed that McHenry Hospital was incorporated on March 16, 1956, and was in existence both prior to the time Thomas Ames executed his Will on August 30, 1962, and prior to the date of Ames' death on February 8, 1963. All assets and liabilities of McHenry Hospital were transferred to NIMC and to two other successor corporations. Both NIMC and McHenry operate under the same license and share many of the same employees. Old McHenry Hospital had 40 beds and, after an expansion, was increased to 136 beds.

In August 1981, the Illinois Department of Health approved NIMC's application for a new 180 bed hospital facility. At the time of the second trial (May 1984), the new NIMC facility was 95% complete, however, it was not scheduled to be finished and operational until June 15, 1984, more than 20 years after Ames' death. The projected bed capacity has been increased to 195.

NIMC's new facility is located at Route 31 and Bull Valley Road within the city of McHenry. At trial, consulting engineer John Smith testified concerning the distances and travel times between the new NIMC facility and the city of Crystal Lake. Smith informed the court that NIMC's new facility is located approximately 4.18 miles and five minutes away on Route 31 from the northern boundary of Crystal Lake, 2.23 miles nearer than NIMC's previously existing facility. Smith also characterized the travel route along Route 31 between the northern border of Crystal Lake and the new NIMC facility as rural, with no stop signs or stoplights. However, on cross-examination he noted that depending on where a Crystal Lake resident resided, he had to travel past commercial enterprises, retail establishments, a residential subdivision, other municipalities, and a railroad crossing to reach the new facility. Smith also admitted that his measurements were only from the northern boundary of Crystal Lake and that he was unaware of the location of Crystal Lake's other geographic boundaries. Smith also measured the distance from Crystal Lake to Memorial Hospital and found Memorial to be 6.63 miles and 9.9...