Rice's Estate, Matter of

• Decision Date: 24 October 1979
• Docket Number: Nos. 78-118,78-387,s. 78-118
• Citation: 396 N.E.2d 298,77 Ill.App.3d 641,33 Ill.Dec. 73
• Parties: , 33 Ill.Dec. 73 In the Matter of the ESTATE of Daniel F. RICE, Deceased. In the Matter of the ESTATE of Ada L. RICE, Deceased. Arthur A. Nolan, Jr., Individually and as Co-Executor of the Estate of Ada L. Rice, Deceased, et al., Respondents-Appellants. Daniel F. Rice, Jr., Appellee. Charles D. Donaldson, et al., Appellees. In the Matter of the ESTATE of Ada L. RICE, Deceased. Arthur A. NOLAN, Jr., Individually and as Co-Executor of the Estate of Ada L. Rice, Deceased, Respondent-Appellant, v. William F. LINKUL, Appellee.
• Court: United States Appellate Court of Illinois

Page 298

396 N.E.2d 298

77 Ill.App.3d 641, 33 Ill.Dec. 73

In the Matter of the ESTATE of Daniel F. RICE, Deceased.

In the Matter of the ESTATE of Ada L. RICE, Deceased.

Arthur A. Nolan, Jr., Individually and as Co-Executor of the

Estate of Ada L. Rice, Deceased, et al.,

Respondents-Appellants.

Daniel F. Rice, Jr., Appellee.

Charles D. Donaldson, et al., Appellees.

In the Matter of the ESTATE of Ada L. RICE, Deceased.

Arthur A. NOLAN, Jr., Individually and as Co-Executor of the Estate of Ada L. Rice, Deceased, Respondent-Appellant, v. William F. LINKUL, Appellee.

Nos. 78-118, 78-387.

Appellate Court of Illinois, Second District.

Oct. 24, 1979.

Jenner & Block, Charles J. O'Laughlin, Michael J. Rovell, Kathleen Purcell, Eckhart, McSwain, Hassell & Silliman, Chicago, Robert B. Hupp, Reid, Ochsenschlager, Murphy & Hupp, Aurora, Marvin A. Marder, Highland Park, Robert P. Howington, Jr., William J. Scott, Atty. Gen., James J. Costello, Chicago, Robert Tingler, Asst. Atty. Gen., Chicago, Donovan & Roberts, Wheaton, Barasa & Larkin, Francis J. Cuneo, Gregory G. Lawton, Asst. Atty. Gen., Chicago, Hartman E. Stime, Wheaton, Leonard Cahnmann, Asst. Atty. Gen., Lambert M. Ochsenschlager, Reid, Ochsenschlager, Murphy & Hupp, Aurora, McDermott, Will & Emery, Chicago, Samuel H. Young, Professional Corp., Skokie, Francis J. Cuneo, Jr., Naperville, Charles J. O'Laughlin, Morris Spector, Chicago, for respondents-appellants.

John B. Davidson, Louis G. Davidson & Associates, Chicago, William F. Linkul, Glen Ellyn, Harry G. Fins, Sonnenschein, Carlin, Nath & Rosenthal, Wilson & McIlvaine, Louis G. Davidson & Associates, Howington, Elworth, Osswald & Hough, Chicago, for appellees.

GUILD, Presiding Justice:

This opinion deals with two appeals as to the estates of Daniel F. Rice, Sr. and Ada L. Rice. Appeal No. 78-118 is from a February 2, 1978 order by which Judge Philip F. Locke removed Arthur F. Nolan (Nolan) as co-executor of Ada L. Rice's estate, appointed William Linkul (Linkul) to serve in Nolan's place as co-executor, and made a number of other findings relating to the disposition of property from both estates, including a ruling as to which of two competing groups were rightful directors of the Rice Foundation. The other appeal, No. 78-387, is from an award of $14,936.20 in fees given to Linkul for his services as a replacement co-executor. We are consolidating these appeals on our own motion due to their intimate factual connection.

Because of the complexity of the issues herein, a brief historical overview of the Rice estates is necessary. It is to be noted that more than 20 attorneys or law firms participated in the two cases here involved. Daniel F. Rice, Sr. died on February 6, 1975, leaving an estate of over seventy million dollars. Mr. Rice left virtually his entire estate to two trusts, denominated Trust A and Trust B. Each trust received about one-half of his estate.

By means of Trust A, Mr. Rice left his widow Ada, a beneficial interest in fifty percent of his assets and gave her a testamentary power of appointment over the corpus of Trust A. Trust B received the other half of the estate. Trust B, by the terms of Mr. Rice's will, is to expire on February 5, 1985. According to the terms of Mr. Rice's will, six named beneficiaries are to share each year, per stirpes, the first $80,000 of income from Trust B as follows:

2/16 Daniel F. Rice, Jr.

2/16 Florence Rice Bachrach, a niece, now deceased

3/16 Shirley Gillick Maginot, a sister

3/16 Patricia Gillick Nolan, a niece

3/16 Elizabeth Ann Gillick Palmer, a niece

3/16 Beatrice Rice Sheridan, a sister.

Any income earned by Trust B, over and above the $80,000, goes to the Rice Foundation. On February 5, 1985, upon the expiration of Trust B, the corpus of the trust is to be distributed to the beneficiaries, including the Rice Foundation, in the proportion that those beneficiaries share in the trust income immediately prior to the dissolution of the trust, i. e., prior to February 5, 1985.

On December 30, 1975 Mrs. Rice, the Rice Foundation and the executors of her husband's will filed a will construction suit in the Circuit Court of DuPage County. In February, 1976, Daniel F. Rice, Jr. filed a claim against his father's estate. Mrs. Rice died on April 11, 1977. By her will she exercised her power of appointment over Trust A in favor of the Rice Foundation and left Daniel F. Rice, Jr. an annuity interest in a $500,000 trust "in consideration of (his) agreeing to settlement of the claims involving my husband's estate and (his) agreeing to release me from any claims." Her will named Nolan and the Continental Bank and Trust Company of Illinois as co-executors of her estate. After his mother's death Daniel F. Rice, Jr. filed several law suits relating to the disposition of his parents' estates, including a petition on November 4, 1977 to set aside his mother's will.

In December, 1977 a settlement was proposed by Judge Locke of the Circuit Court of DuPage County, by which the junior Mr. Rice would receive $5,000,000 tax-free from the estates of his parents. This settlement was approved by Daniel F. Rice, Jr. and by the executors of his mother's estate and of his father's estate. The directors of the Rice Foundation, however, rejected the December settlement proposal, their stated reason being that it would have had severe adverse tax consequences for the estates. On December 16, 1977, during one of the settlement conferences, a question was raised orally by counsel for Daniel F. Rice, Jr. before Judge Locke regarding the composition of the Board of Directors of the Rice Foundation. Counsel for Daniel F. Rice, Jr. contended that the directors who were controlling the Rice Foundation in December, 1977 (hereinafter known as the Nolan group) and "wrongfully acted as directors"; that certain by-laws giving the right to select a majority of directors to certain local medical institutions had been adopted in 1974 and that Nolan and the other directors had wilfully ignored those 1974 by-laws. On December 27, 1977 a lawsuit was filed in the Circuit Court of Cook County in which the directors of the Rice Foundation (the Nolan group) sought a judicial ruling on the proper composition of their Board.

Mr. Nolan's fitness to serve as executor of Ada Rice's estate was first placed in issue on December 29, 1977, when counsel for Daniel Rice, Jr., appearing before Judge Locke, presented a motion to have Nolan removed. This motion was not granted, apparently because it was not based on a verified petition. However, Judge Locke then issued a citation to remove Nolan as co-executor on his own motion, which is set forth below and was substantially the same as the motion submitted by counsel for Daniel F. Rice, Jr. Nolan filed a petition for a change of venue, asking that the cause be heard by another judge because of Nolan's belief that Judge Locke was prejudiced against him. This petition was filed prior to the return date on the citation and before any substantive rulings had been made in the citation proceeding. Nolan also moved for a more definite statement and for a postponement to allow him to conduct discovery. All three of these motions were denied by Judge Locke. Nolan also filed a motion to dismiss the citation, claiming that there was no conflict as a matter of law between his position as co-executor of Ada Rice's estate and his position with the Rice Foundation. Judge Locke took this motion under advisement and continued the hearing to January 24, 1978. In the meantime, on January 11, Judge Locke entered an order allowing certain medical institutions to file a petition in the probate proceeding seeking a ruling that the medical institutions had the right to select the board of directors of the Rice Foundation. No answers to this petition were due prior to February 3, 1978. Hearings were conducted on the citation to remove Nolan on every day from January 24th through January 31, 1978. Witnesses were subpoenaed by Daniel F. Rice, Jr. and were called to the stand by counsel for Daniel F. Rice, Jr., who interrogated them on behalf of the court. The propriety of this procedure, as well as the other issues, will be discussed later in this opinion.

On February 2, 1978 Judge Locke entered an order which, Inter alia, removed Nolan, replaced him with Linkul, and held that the medical schools and not the Nolan group of directors should be controlling the Rice Foundation. The removal of Nolan was based on his allegedly conspiring to suppress the adoption of the 1974 amendments of the by-laws of the Foundation. Nine separate parties, including Nolan as executor and the Nolan group of directors, have appealed from this order, with Daniel F. Rice, Jr., four of the medical schools and Linkul filing briefs as appellees.

On May 11, 1978, Linkul appeared before Judge Teschner of the Circuit Court of DuPage County and filed a petition for $14,936.20 for his services as co-executor between February 2, 1978 and May 11, 1978, and for an additional sum of $27,514.90 as prospective fees. The petition for fees was presented to Judge Teschner for his In camera inspection. Unbelievably, counsel was not allowed to examine the petition or the alleged time expended by Linkul. As a matter of fact, the details of Linkul's petition for fees were not disclosed to opposing counsel until June 26, 1978, over a month after the fees were allowed without the opportunity of opposing counsel to examine Linkul as to the propriety of the fees, and no evidence as to the validity of the fees was presented by Linkul. Unbeknownst to those present before Judge Teschner, on the same day, May 11, 1978, this court issued an order staying the effect of Judge Locke's February 2, 1978 order, except as it removed Nolan as co-executor. We specifically ruled that the other co-executor, the Continental Bank, was to perform as sole executor until we had an opportunity to rule on this appeal. Linkul then withdrew...