Northern Trust Co. v. Porter

• Decision Date: 16 February 1938
• Docket Number: No. 24430.,24430.
• Parties: NORTHERN TRUST CO. et al. v. PORTER et al.
• Court: Illinois Supreme Court

368 Ill. 256

13 N.E.2d 487

NORTHERN TRUST CO. et al.

v.PORTER et al.

No. 24430.

Supreme Court of Illinois.

Feb. 16, 1938.

Action by the Northern Trust Company and another against Washington Porter II and others to determine the validity of the will of Frances Lee Porter, deceased, and a contract of the deceased to appoint a trust fund in a certain manner. From an adverse decree, the plaintiffs appeal.

Reversed and remanded, with directions.Appeal from the Circuit Court, Cook County; C. J. Harrington, judge.

Vernon R. Loucks and A. J. Hennings, both of Chicago (Charles L. Loucks, of Chicago, of counsel), for appellants.

Edward Marshall, guardian ad litem, of Chicago, for coappellants.

Tenney, Harding, Sherman & Rogers, of Chicago (Henry F. Tenney, Wilborn W. Miller, and George B. Rogers, all of Chicago, of counsel), for Henry F. Tenney, guardian ad litem for separate appellants.

Sidley, McPherson, Austin & Burgess and Poppenhusen, Johnston, Thompson & Raymond, all of Chicago (Edward R. Johnston, James F. Oates, Jr., Albert E. Jenner, Jr., and William H. Avery, Jr., all of Chicago, of counsel), for appellees and cross-appellants.

JONES, Justice.

Caroline McWilliams died in 1913, leaving a will by which she bequeathed certain property (known as the McWilliams fund) to her daughter, Frances Lee Porter, as trustee, to receive the income for life. In addition, Frances Lee Porter was given the general power to appoint the fund by her will. In 1931 Mrs. Porter instituted suit against her son, Washington Porter II, in the superior court of Cook county. The bill of complaint is lengthy, but, in substance, alleges that Washington Porter II had, over a long period of time, schemed and contrived to strip Mrs. Porter of practically everything she possessed. The court found that a fiduciary relationship existed between the defendant Washington Porter II and his mother; that defendant caused complainant to execute and deliver to him six quitclaim deeds to certain property, she not knowing what she was signing, and, further, that defendant, by fraudulent means, caused his mother to execute to him powers of attorney, assignments of stock and checks, in substantial amounts.

At or about this time, Mrs. Porter created a trust estate naming the First Union Trust & Savings Bank of Chicago as trustee. The instrument excluded Washington Porter II as beneficiary. Subsequently, and during the suit against him, settlement negotiations were begun, and, in 1933, a settlement contract was entered into by Mrs. Porter and her son. She agreed to revoke the 1931 trust and to create a new trust naming the First Union Trust & Savings Bank as trustee. This is known as the ‘Living Trust.’ The corpus was to be held for the benefit of Mrs. Porter for life and then to be divided, one-half to Washington Porter II, for life, and one-half to a daughter, Pauline Porter White, for life. The McWilliams fund was included in the living trust. In return, Washington Porter II covenanted to sign and turn over to the trustee the property fraudulently acquired by him. Mrs. Porter created the trust and made a will appointing the McWilliams fund according to the settlement agreement. The agreement was made part of the decree and a satisfaction piece was filed of record, acknowledging the performance by Washington Porter II of the terms of the decree.

Frances Lee Porter died in 1935, leaving a will executed in 1934, which revoked all prior wills. This will devised two-thirds of the property over which she had power of appointment to the First National Bank of Chicago and Pauline Porter White, as trustees, and one-third to said bank and Washington Porter II as trustees. The First National Bank resigned as cotrustee and Washington Porter II refused to act. The Northern Trust Company was appointed successor cotrustee.

This suit was instituted by the Northern Trust Company and Pauline Porter White, who, as executors of the will of Frances Lee Porter, took legal title to the McWilliams fund. The First National Bank of Chicago is a corporate successor of the First Union Trust & Savings Bank.

The plaintiffs, the Northern Trust Company and Pauline Porter White, contend that the last will of Mrs. Porter is valid and should be enforced, and that any contract to appoint the McWilliams fund is void. The First National Bank and Washington Porter II, defendants, as third-party beneficiaries, assert a claim for damages, as a result of Mrs. Porter's failure to exercise the power of appointment pursuant to the settlement agreement. Pauline Porter White, Pauline Porter Muirhead, Marguerite Muirhead, Elizabeth Muirhead, and Gloria White, minors, by their guardian ad litem, adopt the brief of the Northern Trust Company, and further assert that the settlement decree was not supported by valuable and adequate consideration. Frederick C. Porter, Jr., and Robert H. Porter (children of a deceased son of Mrs. Porter), minors, by their guardian ad litem, urge that the provisions of the last will of Mrs. Porter, in so far as they concern the McWilliams fund, violate the rule against perpetuities, and that, as a result, the fund passes in default of appointment to the issue of Mrs. Porter, as provided in the will of the donor, Caroline McWilliams.

The circuit court of Cook county decreed, inter alia, that the agreement to create the trust, the contract to appoint, and the appointment, are valid; that the First National Bank, as trustee of the living trust, is entitled to damages against the estate of Frances Lee Porter, as a result of her breach of contract to appoint the fund pursuant to the settlement agreement; and that the provisions of the will relating to the McWilliams fund do not violate the rule against perpetuities.

The McWilliams fund was appointed by Mrs. Porter by her will of 1934 substantially as follows: Two-thirds to the First National Bank of Chicago and Pauline Porter White in trust for the following purposes: The net income shall be paid to Pauline Porter White for life and after her death to her surviving children and their descendants per stirpes. ‘Upon the death of the last surviving child of Pauline Porter White, or twenty-one years after the death of the last surviving child of Pauline Porter White who was living at the time of my death, whichever event shall happen first, I direct that the principal of said trust estate, together with all accumulated and unpaid income, if any, shall be paid in equal shares to the then surviving lawful children of Pauline Porter White-the then surviving lawful descendants of my deceased child to take, per stirpes, the share which their parent would have received if living. In the event that my said daughter does not leave any lawful descendants her surviving, I direct that said trust estate shall be paid, per stirpes, to my then surviving lawful descendants.’

The same provision was made for Washington Porter II as regards one-third of the fund. None of the children of Pauline Porter White was in being at the death of Mrs. McWilliams. Washington Porter is unmarried and has no children.

It is obvious that, if the period of the rule against perpetuities is computed from the time of the creation of the power by the donor, the gift of the McWilliams fund violates the rule against perpetuities. It is equally clear that if the period is computed from the date of the exercise of the power by the donee, that the gift does not violate the rule against perpetuities. The question presented for decision is whether the period of perpetuities begins to run from the date of the creation of the power or from the date of its exercise. It must be borne in mind that we are concerned only with the general power of appointment by will, and not with the special power of appointment or a power to appoint by deed or will. This quesion has not been presented to this court before. It may therefore not be amiss to review the authorities.

Professor Gray asserted that the period of perpetuities begins to run from the date of the creation of a general testamentary power. On the other hand, Professor Kales argued that the date of the exercise of the power was the time from which the period should be computed. 26 Harvard Law Review 64, 26 H.L.R. 720-727. Both Gray and Kales agreed that the test as to when the period of perpetuities should start to run depended upon whether the donee was ‘practically the owner’ of the appointive fund. Gray contended, with forcefulness, that the donee of a testamentary power of appointment ‘is not practically the owner; he cannot appoint to himself; he is, indeed, the only person to whom he cannot possibly appoint, for he must die before the transfer of the property can take place.’ Gray on Perpetuities, 3d Ed., § 526 (b). Kales replied that the time for determining whether or not the donee was ‘practically the owner’ was at the moment of exercising the power. It was his view that the donee of a general power to appoint by will is, at the moment when he way exercise the power, practically the owner. Kales, Estates and Future Interests, 2d Ed., § 695. To this, Gray countered: ‘But a man cannot, in the eye of the law, be at the same time alive and dead. So long as he is alive, the condition necessary for the exercise of the power is not fulfilled, and after he is dead, he cannot be an appointee.’ Gray on Perpetuities, § 952.

On the side of Kales are the English cases, Rous v. Jackson, 29 L.R.Ch.Div. 521, which overruled In re Powell's Trust, 39 L.J.Eq. 188; In re Flower, 55 L.J.Ch. 200, and, in Ireland, Stuart v. Babington, 27 L.R.Ir. 551. The Supreme Court of Wisconsin has agreed with Kales in holding that the donee of a general testamentary power of appointment was ‘practically the owner’ at the time of the exercise of the power and, therefore, that the period of perpetuities was to be computed from the date of the exercise of the power. Miller v....