National City Bank v. Northern Illinois University

Case Date: 11/05/2004
Court: 2nd District Appellate
Docket No: 2-03-1281 Rel

 

No. 2--03--1281


IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
 

NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS, as Trustee under
the Will of Genevieve O. Vrba, Deceased,

          Plaintiff-Appellant,

v.

NORTHERN ILLINOIS UNIVERSITY,
DEPAUL UNIVERSITY, LOYOLA
UNIVERSITY, CATHOLIC DIOCESE OF
ROCKFORD, HARVEY SHARE, and
THE PEOPLE ex rel. JAMES E. RYAN,
Attorney General,

          Defendants-Appellees.

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Appeal from the Circuit Court
of De Kalb County.




No. 02--MR--57






Honorable
Kurt P. Klein,
Judge, Presiding.


JUSTICE HUTCHINSON delivered the opinion of the court:

Plaintiff, National City Bank of Michigan/Illinois (National City), in its capacity as trusteeunder the will of Genevieve O. Vrba, deceased, appeals from the trial court's order granting summaryjudgment in favor of defendants, Northern Illinois University (NIU), DePaul University (DePaul),Loyola University (Loyola), the Catholic Diocese of Rockford (the Diocese), Harvey Share, and thePeople of the State of Illinois ex rel. Attorney General James E. Ryan (Attorney General), onNational City's complaint for declaratory judgment. In its complaint, National City requested the trialcourt to declare null and void a purported amendment (the amendment) to "The Vrba-O'BrienScholarship Trust" (the Scholarship Trust) approved by defendants NIU, DePaul, the Diocese, andShare, in their capacity as members of the Scholarship Trust's "Advisory Committee" (AdvisoryCommittee). The amendment directed National City to divide the corpus of the Scholarship Trustamong defendants NIU, DePaul, Loyola, and the Diocese for the award of college scholarships attheir individual direction. The trial court found that the amendment was valid and ordered that theScholarship Trust's corpus be divided pursuant to the terms of the amendment. On appeal, NationalCity argues (1) the amendment was contrary to the provisions of Vrba's will; (2) the trial court erredin concluding that the amendment was binding; and (3) the trial court erred in relying upon certainconclusory statements contained in the affidavits supporting the motion for summary judgment. Wereverse and remand with instructions that judgment be entered in National City's favor.

The following facts are relevant to the disposition of this appeal. Genevieve Vrba died onSeptember 1, 1989. In her will, Vrba bequeathed a substantial portion of her estate to be held in trustas the Scholarship Trust. The DeKalb Bank was named in the will as the original trustee. NationalCity is a successor to The DeKalb Bank by operation of law. According to article V(C)(2) of Vrba'swill, the purpose of the Scholarship Trust was as follows:

"It is my wish that this Scholarship Trust shall be administered primarily to providescholarships to deserving persons from rural areas of certain midwestern states of the CatholicFaith, but not exclusively, to enable such persons to acquire and complete their undergraduatedegrees, or their masters or doctors degrees, primarily in Catholic, but also in public andprivate colleges and universities. It is also my wish that those distributions made for purposesother than scholarships (which distributions shall not constitute ten (10%) percent of thedistributions made annually) to deserving persons, shall include distributions to any kind ofreligious, charitable, scientific, literary, or educational institutions, including distributions toassist teachers in the primary and secondary educational institutions, to enhance the qualityof the education in said institutions, but in no event shall such distributions be used to pay thesalaries of any teachers or administrators. The Advisory Committee is also authorized tomake distributions to the Newman Foundation, located at the Northern Illinois University inDeKalb, Illinois, in order to carry on their work in assisting students at the University. Forpurposes of the operation of this Scholarship Trust, it is anticipated that the majority of thepersons receiving scholarships from this Scholarship Trust, shall reside in the states of Illinois,Iowa, Indiana, Wisconsin, or Michigan."

Article V(C)(3) of Vrba's will provides that the Scholarship Trust shall terminate 50 years after Vrba'sdeath. Vrba's will provides that, at the time of termination, all accumulated corpus shall be distributedto the Diocese to be used for "providing scholarships to deserving persons."

Vrba's will also established the Advisory Committee to oversee the Scholarship Trust. Vrba'swill provided that the Advisory Committee would consist of the following people: (1) a personappointed by the president of DePaul; (2) a person appointed by the president of NIU; (3) a personappointed by the senior judge in age of the United States District Court having jurisdiction in DeKalb;(4) a person appointed by the Catholic Bishop of the Diocese; and (5) a person appointed by thepresident of Loyola. Article V(E)(1) of Vrba's will provided that a majority of the members of theAdvisory Committee could amend the Scholarship Trust whenever, in their opinion, "it [was]necessary or advisable to enable the Trustee to carry out the purpose of the Scholarship Trust Estatemore effectively." Vrba's will also authorized National City to use the assets of the Scholarship Trustto pay all administrative fees, including trustee fees and the meeting expenses of the AdvisoryCommittee.

Between 1991 and 2001, the Advisory Committee awarded approximately $1.5 million inscholarships to students attending various universities. Some of the scholarships were awarded tostudents attending DePaul, Loyola, and NIU. However, scholarships were also awarded to studentsattending other universities.

On March 1, 2002, a majority of the members of the Advisory Committee executed anamendment agreement that purported to amend the terms of the Scholarship Trust. The amendmentagreement was signed by the Advisory Committee members appointed by DePaul, NIU, the Diocese,and the senior United States District Court judge (collectively referred to as "the majoritydefendants"). The amendment directed National City to divide the Scholarship Trust's corpus intofour separate shares and deliver shares to DePaul, NIU, and Loyola for use as scholarships tostudents attending only those universities. The remaining share was to be delivered to the Dioceseto award scholarships consistent with the provisions of Vrba's will. DePaul, NIU, and Loyola wereeach to receive an 11.11% share of the Scholarship Trust's corpus, and the Diocese was to receivea 66.67% share. The amendment provided that "[e]ach separate share shall be held as a separate trustor similar permanent endowment fund by the institution so indicated, with the named institutions assole Trustee or fiduciary."

On April 1, 2002, National City filed a complaint for declaratory judgment, seeking adeclaration that the amendment exceeded the Advisory Committee's authority under the terms ofVrba's will. Specifically, National City alleged that the amendment was void because it was animproper termination of the Scholarship Trust and because it was contrary to the provisions of Vrba'swill.

On May 8, 2002, the majority defendants filed a collective answer denying that they lackedauthority to make the amendment. Loyola answered separately on May 22, 2002. Throughout theproceedings, Loyola has taken a position of neutrality with respect to the validity of the amendment.

On August 3, 2002, the majority defendants moved for summary judgment. In their motion,the majority defendants argued that the Advisory Committee had the authority to execute theamendment in question. The majority defendants further argued that the amendment did notimproperly terminate the Scholarship Trust but, instead, separated the Scholarship Trust's corpus into"separate trust accounts." The majority defendants claimed that the division of the corpus in such amanner would eliminate the annual federal excise taxes, trustee fees, and meeting expenses incurredby the Scholarship Trust. These taxes and fees averaged $38,000 annually. The majority defendantsargued that the money saved would permit the award of a greater number of scholarships, therebymore effectively achieving Vrba's purpose in creating the Scholarship Trust. In support of themotion, each of the majority defendants submitted an affidavit executed by an institutional officialaverring that each institution was "capable of efficiently and effectively carrying out the intentions ofthe Vrba-O'Brien Scholarship Trust."

On September 17, 2002, National City filed its own motion for judgment on the pleadings. In its motion, National City argued that the amendment was void because it constituted an impropertermination of the Scholarship Trust and because it was contrary to the language of Vrba's will. National City also filed a motion to strike the affidavits accompanying the majority defendants' motionfor summary judgment as conclusory, in violation of Supreme Court Rule 191(a) (Official ReportsAdvance Sheet No. 8 (April 17, 2002), R. 191(a), eff. July 1, 2002).

On November 4, 2002, the Attorney General filed an appearance and a statement of supportfor the majority defendants' motion for summary judgment.

On February 26, 2003, following a hearing, the trial court entered an order granting themajority defendants' motion for summary judgment and denying National City's motion for judgmenton the pleadings. National City subsequently moved for reconsideration, which the trial court deniedon June 3, 2003. In denying the request for reconsideration, the trial court expressed its belief thatthe cost efficiency of the Scholarship Trust was a more important consideration than whether theAdvisory Committee had the legal authority to execute the amendment. In response to NationalCity's argument that the Advisory Committee lacked the legal authority to terminate the ScholarshipTrust, the trial court stated:

"You know you're telling me why technically, and that may be valid. I don't mean todiminish the seriousness of this argument, why technically I can't do what I did. But tell mepractically, why is it not better for me to do what I did?"

The trial court ordered that the parties should proceed to "effectuate the terms and conditions of theAmendment Agreement in a reasonable manner and upon a reasonable time frame agreeable to theparties thereto." The trial court also denied National City's motion to strike the affidavitsaccompanying the majority defendants' motion for summary judgment. National City subsequentlyfiled a timely notice of appeal. The Attorney General has filed a brief urging this court to affirm thetrial court's judgment.

On appeal, National City contends that the trial court erred in granting the majoritydefendants' motion for summary judgment and in denying its motion for judgment on the pleadings. National City argues that, in upholding the amendment, the trial court improperly substituted itsjudgment as to the best use of the Scholarship Trust's funds for that specifically chosen by Vrba inher will. National City argues that the amendment improperly terminates the Scholarship Trust andimproperly alters the purpose of the Scholarship Trust by creating scholarship endowments withDePaul, NIU, Loyola, and the Diocese. National City alternatively argues that the trial court erredin granting summary judgment based upon affidavits that did not conform to the requirements of Rule191(a).

A motion for judgment on the pleadings and a motion for summary judgment both rely solelyon the pleadings. Westfield National Insurance Co. v. Long, 348 Ill. App. 3d 987, 989 (2004). Theentry of judgment on the pleadings or summary judgment is proper if the admissions contained in thepleadings disclose that there is no genuine issue of material fact and that the movant is entitled tojudgment as a matter of law. 735 ILCS 5/2--1005(c) (West 2002); Westfield, 348 Ill. App. 3d at 989. In ruling on these motions, the trial court must view the evidence in the light most favorable to thenonmovant. Westfield, 348 Ill. App. 3d at 989; Turner v. Roesner, 193 Ill. App. 3d 482, 487 (1990). Our review of the disposition of a motion for judgment on the pleadings or a motion for summaryjudgment is de novo. Westfield, 348 Ill. App. 3d at 989; Quinton v. Kuffer, 221 Ill. App. 3d 466, 471(1991).

Except as limited by statute or contract, a testator has the right to distribute his or herproperty as the testator sees fit. In re Estate of Mank, 298 Ill. App. 3d 821, 825 (1998). Moreover, in construing a will, the testator's intent, as derived from the provisions of the will, must be giveneffect unless contrary to law or in violation of public policy. Mank, 298 Ill. App. 3d at 825. Thepurposes of judicial construction of a will or a trust instrument are to ascertain the intent of thedrafter and to carry it out (Northern Illinois Medical Center v. Home State Bank of Crystal Lake, 136Ill. App. 3d 129, 145 (1985)), not to consider the justice or propriety of the disposition made in theinstrument (In re Estate of Haines, 51 Ill. App. 3d 163, 167 (1977)). In construing the scope of anyamendment power conferred within a trust document, we are similarly bound by the intent of thesettlor as evidenced by the plain meaning of the language contained within the trust document. Olsonv. Rossetter, 399 Ill. 232, 238 (1948).

Article V(E)(1) of Vrba's will provides that the Scholarship Trust "may be amended from timeto time by a majority of the Advisory Committee, whenever, in their opinion, it is necessary oradvisable to enable the Trustee to carry out the purpose of the Scholarship Trust." However, articleV(E)(2) limits this amendment power by prohibiting any amendment that "shall alter the intention thatthe Scholarship Trust Estate be operated exclusively for the purposes, and within the limits, set forthin Paragraph (C) herein." National City argues that the amendment violates this prohibition becauseit fails to honor Vrba's intentions as expressed in article V(C). Specifically, National City asserts thatthe amendment prematurely terminates the Scholarship Trust despite Vrba's expressed desire in articleV(C)(3) that the Scholarship Trust continue for 50 years. National City further argues that theamendment improperly changes the purpose of the Scholarship Trust, as it creates specific scholarshipendowments for the benefit of students attending only DePaul, NIU, and Loyola, despite Vrba'sintention expressed in article V(C)(2) that trust assets be used to award scholarships to studentsattending all universities, both public and private. We consider each of these arguments in turn.

In response to National City's argument that the amendment improperly terminated theScholarship Trust, the majority defendants do not appear to contest that they were without authorityto terminate the Scholarship Trust prior to the 50-year term specified in article V(C)(3) of Vrba's will. Indeed, we note that our supreme court has previously held that trustees cannot utilize a generalpower of amendment to alter a fixed date of termination provided in a trust. See Olson, 399 Ill. at242 (holding that a trust provision granting a trustee the power to "alter, amend or modify the trustagreement" was never intended to confer "authority to amend the trust agreement in so vital a partas to extend the period of its duration"). The majority defendants instead assert that the amendmentdid not terminate the Scholarship Trust but merely "separated" it into four separate trust accounts. We find this assertion unavailing.

The Restatement (Second) of Trusts defines a trust as a "fiduciary relationship with respectto property, subjecting the person by whom the title to the property is held to equitable duties to dealwith the property for the benefit of another person, which arises as a result of a manifestation of anintention to create it." Restatement (Second) of Trusts