American Rubber & Plastic Corp. v. First National Bank ( 1971 )

MR. JUSTICE GOLDENHERSH

delivered the opinion of the court:

The sole question presented in this appeal is whether a restriction in the nature of a right of first refusal contained in a trust instrument, and admittedly applicable in the event of sale by the trustees of certain shares of American Rubber and Plastics Corp. (ARP), applies in the event of their sale by the distributees of the trust estate. The circuit court of Cook County- entered judgment on the pleadings and rendered its decree ordering that the right of first refusal is applicable to sales by the distributees and further ordering that the stock certificates be endorsed to show the restriction. The appellate court affirmed (266 N.E.2d 375), and we allowed defendants’ petition for leave to appeal.

The facts are well stated in the opinion of the appellate court and will be restated only to the extent necessary to this opinion. On August 15, 1960, Peter G. Torosian created a revocable inter vivos trust, hereafter called the August Trust, which at the time of his death on August 19, 1964, held 146,650 shares of ARP.

Paragraph 5B(e) of the August Trust agreement provides: “In the event that, after my death, any part or all of the stock held in the trust estate described in this Paragraph 5B is to be sold, the Trustee shall first offer to sell such stock to those then living of John Chalik, Sr., John Chalik, Jr., and Eugene Chalik and also to American Rubber and Plastics Corporation, or any successor thereto, and to any employee benefit plan or trust established by American Rubber and Plastics Corporation, or any successor thereto, before offering it for sale to any other purchaser, the price at which any one or more of the aforementioned may buy such stock to be the market price on the date on which such sale is made, such offer to be of fifteen days duration at the end of which any such stock not purchased by those of the aforementioned may be sold as the Trustee deems appropriate.”

Between the date of Torosian’s death and the filing of this suit the trustees had distributed 85,000 shares of the stock to the trustees of an irrevocable trust created by Torosian in May, 1960, hereafter called the May Trust, and 26,000 shares to defendant Elizabeth Torosian, his widow. Under the terms of the trust agreements creating both the May and August Trusts, upon Torosian’s death, Elizabeth Torosian became a co-trustee with defendant, The First National Bank of Chicago. Following the distribution of the 26,000 shares to Elizabeth Torosian she sold 2,5000 shares to ARP and placed the remaining 23,500 shares in a trust which she created on August 19, 1965.

Under the terms of the August Trust, unless sold by the trustees in accordance with paragraph 5B(e), a portion of the ARP stock was to be distributed to Fund A and thereafter, depending upon certain contingencies, either to Elizabeth Torosian or Fund B. The remainder of the stock was distributable only to Fund B, through it to the May Trust, and ultimately to the Torosian Foundation.

The purpose of judicial construction of a trust instrument is to ascertain the intent of the settlor and carry it out (Olson v. Rossetter, 399 Ill. 232) and in so doing the instrument must be considered as a whole.

Considering the trust instrument as a whole, it is our opinion that if at any time after his death the stock was to be transferred by the trustees or the distributees named in the trust instrument, it was the intent of the settlor that it be first offered in accordance with the provisions of paragraph 5B(e). There is no limitation placed upon the time “after my death” and no attempt to restrict the amount of stock to which the provision is applicable. It is further noted that Funds A and B are not separate trusts, but “Funds” created as part of the August Trust, that the trustees of the August Trust are also trustees of the May Trust and that Elizabeth Torosian, the distributee of Fund A, is one of the co-trustees. In our opinion, to hold that the trustees can render meaningless the provisions of paragraph 5B(e) by the simple device of distributing the shares to the May Trust, or that Elizabeth Torosian can do so by the exercise of her right of withdrawal from Fund A, would fly in the face of sound rules of judicial interpretation. If it were the settlor’s intent that the right of first refusal contained in paragraph 5B(e) apply only to sales by the trustee prior to any distribution, it would have been a simple matter to so limit it. The circuit and appellate courts correctly construed the trust instrument and the judgment of the appellate court is affirmed.

Judgment affirmed.