In re Estate of Defilippis

                                          FIFTH DIVISION
                                          June 6, 1997 





Nos. 1-95-3365
     1-95-3366 (Consolidated)


In re ESTATE OF LOUIS DEFILIPPIS,     ) APPEAL FROM THE 
Deceased                              ) CIRCUIT COURT OF
(Bernadette Defilippis, Petitioner-   ) COOK COUNTY.              
Appellee, v. Diane Defilippis,        )
James Defilippis, and Louis A.        ) 
Defilippis, Jr., Respondents-         ) 
Appellants).                          )      
                                      ) THE HONORABLE
                                      ) HENRY BUDZINSKI,
                                      ) JUDGE PRESIDING.
                                      )
                                       
     JUSTICE SOUTH delivered the opinion of the court:
     Petitioner, Bernadette Defilippis (Bernadette), filed a
citation to recover two condominium units that Louis Defilippis
(Louis Sr.), her deceased husband, transferred to his three
children from a previous marriage, Diane Defilippis, James
Defilippis and Louis A. Defilippis, Jr. (collectively
respondents).  The circuit court of Cook County determined that
Louis Sr. lacked present donative intent to transfer the property
to respondents and entered judgment in favor of Bernadette. 
Respondents appeal.
     Bernadette and Louis Sr. were married in 1977.  They lived
together at Louis Sr.'s residence in Chicago, Illinois, for a
short period but separated in 1979 and lived apart after 1979.  
After the separation, Louis Sr. remained at the residence with
respondents, his three adult children from a previous marriage.  
Bernadette relocated to a condominium unit in Oak Lawn, Illinois. 
Although the couple contemplated divorce, Bernadette and Louis
Sr. remained legally married until Louis Sr.'s death in 1992. 
     In 1979, Bernadette and Louis Sr. acquired condominium units
2D and 2F.  Title to units 2D and 2F was initially held by the
First National Bank of Evergreen Park, as trustee, under a land
trust.  Bernadette and Louis Sr. were the sole beneficiaries of
this land trust.  In 1980, Bernadette and Louis Sr. directed the
bank to transfer units 2D and 2F out of the land trust and issue
them quitclaim deeds for these units.  Bernadette and Louis Sr.
each held an undivided one-half interest in units 2D and 2F, as
tenants in common.  
     A third condominium unit, 3F, was also acquired in 1979 at
or about the same time units 2D and 2F were acquired.  Unit 3F
was also placed in a land trust.  Louis Sr. owned an undivided
one-half interest, and his daughter, Diane, owned the other
undivided one-half interest in unit 3F.  
     In 1984, Louis Sr. became ill with cancer.  He consulted his
attorney concerning his will and the procedure for conveying his
interest in condominium units 2D and 3F to respondents.  Louis
Sr.'s attorney advised him that after giving units 2D and 3F to
respondents, he would no longer have the right to direct the sale
of the property, the control of it, or do anything with the
property.  His attorney further advised him that his children,
respondents, could do anything they wanted with the property once
he gave it to them. 
     In order to convey unit 2D to respondents, Louis Sr. agreed
to quitclaim his undivided one-half interest in unit 2F to
Bernadette in exchange for her undivided one-half interest in
unit 2D.  Louis Sr.'s attorney sent Bernadette a letter outlining
the proposed exchange and advising Bernadette that, if she agreed
to the exchange, she would no longer have any interest in unit
2D.  Bernadette was also advised that she should retain her own
attorney to represent her in connection with the transaction.  
     In June 1984, Bernadette and Louis Sr. agreed to exchange
interests in condominium units 2F and 2D.  In the exchange, Louis
Sr. quit claimed his interest in 2F to Bernadette, and Bernadette
and Louis Sr. deeded their interest in unit 2D to a newly created
land trust.  Respondents were the sole beneficiaries of the land
trust and held exclusive power of direction thereto. 
     Louis Sr. also assigned his beneficial interest in unit 3F
to respondents.  Respondent Diane, who already owned an undivided
one-half beneficial interest in unit 3F, also assigned her
beneficial interest in unit 3F to respondents.  As a result,
respondents became the sole beneficiaries of the land trust and
beneficial owners of unit 3F.           
     In September 1986, unit 3F was sold to Martin and Mary Ann
Terpstra for $38,000.  The Terpstras paid $8,000 in cash to Louis
Sr. and executed a mortgage for $30,000 to respondents.  Martin
Terpstra testified that, when negotiating for the purchase of
unit 3F, he dealt directly with Louis Sr.  However, Martin
Terpstra testified that it was his understanding that respondents
owned unit 3F and that he purchased unit 3F from respondents. 
The Terpstras eventually sold unit 3F to a third party and paid
respondents the balance due on the mortgage. 
     In 1992, after Louis Sr.'s death, Diane moved from the
family residence into unit 2D.  That same year, Diane conveyed
her interest in the family residence to her brothers, James and
Louis Jr., and they in turn directed the bank, as trustee of the
land trust, to convey unit 2D to Diane.    
      From the time units 2D and 3F were purchased in 1979, they
were used as rental properties.  Unit 2D was used as rental
property until Diane moved into the unit in 1992.  Unit 3F was
rented to the Terpstras until 1986 when they purchased the unit
and began making mortgage payments. 
     Louis Jr. testified that Louis Sr. managed the properties to
keep himself busy during retirement and to help respondents.  He
further testified that the rent and mortgage payments from units
2D and 3F were placed in a "house account" from which the
family's common expenses were paid and that the taxes,
assessments and other expenses relative to units 2D and 3F were
also paid from this "house account."  
     Louis Sr.'s accountant testified that he prepared Louis
Sr.'s personal income tax returns from 1987 until Louis Sr.'s
death in 1992.  On the returns for 1987 and later years, Louis
Sr. reported the condominium rental income, mortgage interest
payments, condominium assessments and depreciation deductions for
units 2D and 3F.   
     On December 8, 1994, Louis Sr.'s will dated June 18, 1984,
was admitted to probate.  Bernadette renounced the will and filed
a petition for a discovery citation, which the probate court
granted.  On February 9, 1994, Bernadette filed a citation for
recovery seeking an order requiring respondents to deliver to the
estate condominium unit 2D and the Terpstras' mortgage. 
     On May 22, 1995, the circuit court ruled in favor of
Bernadette and granted her a statutory marital share of unit 2D
and the Terpstras' mortgage on 3F.  The circuit court ruled that
Louis Sr.'s 1984 transfers of units 2D and 3F to respondents were
invalid based on lack of donative intent and that Louis Sr., "in
effect, had a life estate." 
     The circuit court ordered Diane to convey an undivided one-
half interest in unit 2D to the estate.  The circuit court also
ordered respondents to pay $7,295.20 to the estate, representing
one-half of the Terpstras' mortgage balance plus 5% prejudgment
interest from the date the Terpstras sold unit 3F.  On July 12,
1995, respondents filed a motion for reconsideration, which was
denied on August 29, 1995.  This appeal followed.
                                  OPINION    
     The standard of review on appeal is whether the circuit
court's ruling is contrary to the manifest weight of the
evidence.  In re Marriage of Simmons, 221 Ill. App. 3d 89, 581 N.E.2d 716 (1991).
     On appeal, Bernadette contends that Louis Sr.'s transfers of
units 2D and 3F was a fraud on her marital rights.  Specifically,
Bernadette argues that Louis Sr. intended to maintain his control
and rights of ownership after the 1984 transfers because he acted
like an owner by reporting rent and mortgage payments as income
and took deductions for expenses for the condominiums, attended
condominium meetings and voted shares, negotiated the sale of
unit 3F and received proceeds therefrom.
     The marital right in question is the right of a surviving
spouse to share in the estate of his or her deceased spouse.  The
right was created by statute, which provides in relevant part:
          "Renunciation of will by spouse.  (a) If a will is
          renounced by the testator's surviving spouse,
          whether or not the will contains any provision for
          the benefit of the surviving spouse, the surviving
          spouse is entitled to the following share of the
          testator's estate after payment of all just claims: 
          1/3 of the entire estate if the testator leaves a
          descendant or 1/2 of the entire estate if the
          testator leaves no descendant." 755 ILCS 5/2-8
          (West 1994).

Prior to the death of the decedent, the spouse possesses
absolutely no claim with respect to this statute against any of 
the testator's individually held assets, and the spouse's
interest exists only as an expectancy.  Toman v. Svoboda 39 Ill.
App. 3d 394, 349 N.E.2d 668, 672 (1976).  
     Under Illinois law, a property owner has an absolute right
to dispose of his or her property during his or her lifetime in
any manner he or she sees fit.  The owner may convey his or her
property even though the transfer may be for the sole purpose of
minimizing or defeating the statutory marital interest of the
surviving spouse.  Johnson v. La Grange State Bank, 73 Ill. 2d 342, 383 N.E.2d 185 (1978).  The conveyance is not subject to
defeasance by the surviving spouse, unless the transfer lacks the
essential element of present donative intent and is, therefore,
colorable or illusory and tantamount to a fraud on the surviving
spouse's marital rights.  Johnson, 73 Ill. 2d 342, 383 N.E.2d 185; Payne v. River Forest State Bank & Trust Co., 81 Ill. App.
3d 1128, 401 N.E.2d 1229 (1980).  Because a surviving spouse only
has an interest in property which becomes a part of the
decedent's estate, a valid inter vivos conveyance of a property
interest would not become a part of the decedent's estate. 
     Additionally, the Illinois General Assembly set forth the
applicable test for determining when an inter vivos transfer is
invalid to defeat the marital right of the surviving spouse. 
Section 1 of the Lifetime Transfer of Property Act provides:  
          "1.  An otherwise valid transfer of property,
          in trust or otherwise, by a decedent during
          his or her lifetime, shall not, in the absence
          of an intent to defraud, be invalid, in whole
          or in part, on the ground that it is illusory
          because the decedent retained any power or
          right with respect to the property." (Emphasis
          added.) 755 ILCS 25/1 (West 1994). 

Thus, in order to successfully challenge an inter vivos transfer,
a party must show intent to defraud.  In re Estate of Mocny, 257
Ill. App. 3d 291, 630 N.E.2d 87 (1993). 
     The supreme court in Johnson explained that intent to
defraud the surviving spouse of his or her marital rights does
not involve the traditional meaning of fraud.  Rather, intent to
defraud refers to a transfer that is illusory or colorable.  A
transfer that is illusory is one that takes back all that it
gives.  A transfer that is colorable is one that appears absolute
on its face but due to some tacit or secret understanding between
the transferor and the transferee is in fact not a transfer
because the parties intended that ownership be retained by the
transferor.  Johnson, 73 Ill. 2d  at 359, 383 N.E.2d  at 193.  In
either case, the question is really whether there was present
donative intent or, instead, an intent to retain complete
ownership.  Johnson, 73 Ill. 2d  at 359, 383 N.E.2d  at 193.
     Where present donative intent exists, the transfer is valid
and effective to defeat the marital interest.  Mocny, 257 Ill.
App. 3d 291, 630 N.E.2d 87 (1993).  Where present donative intent
is absent, the transfer is treated as a disposition by will and
is not effective to defeat the marital interest.  Mocny, 257 Ill.
App. 3d 291, 630 N.E.2d 87.  
     Moreover, when a parent places title in a child, there is a
presumption that the transfer is a valid gift or advancement, and
the burden is on the one questioning the gift to overcome the
presumption by clear and convincing evidence.  Nordlund v.
Nordlund, 116 Ill. App. 3d 223, 452 N.E.2d 18 (1983); In re
Marriage of Brown, 110 Ill. App. 3d 782, 784, 443 N.E.2d 11, 13
(1982).                  
     It is well settled that reservation of a life interest,
power to revoke or modify, and power to control the trustee in
the administration of a trust does not render the trust
testamentary.  Farkas v. Williams, 5 Ill. 2d 417, 431, 125 N.E.2d 600, 607-08 (1955); Toman, 39 Ill. App. 3d 394, 349 N.E.2d 668;
Johnson, 73 Ill. 2d 342, 383 N.E.2d 185; Payne, 81 Ill. App. 3d
at 1133, 401 N.E.2d  at 1233.  Often the donor-spouse holds back
for himself the power to manage the property directly and
indirectly.  He provides that he himself shall have the power to
sell, lease, mortgage, pay taxes, make investments, and perform
other acts of trust administration or that he shall have
authority to direct the trustees as to how they shall perform
these duties.  These reservations have not generally been deemed
to show that the donor-spouse remains during his or her life the
master of the property to such an extent as to make his or her
gift to the donee testamentary.  So long as the trust continues,
the donee has equitable interests, no matter who acts for the
donee in protecting those interests, whether it be the trustee or
donor-spouse.  Payne, 81 Ill. App. 3d 1128, 401 N.E.2d 1229.     
          Nevertheless, where a life estate is reserved in the
property, the existence of a present intent to give now the
future fee interest must be subjected to special scrutiny to make
certain that the donative intent is present and not merely
testamentary.  Toman, 39 Ill. App. 3d 394, 349 N.E.2d 668.  Some
elements of the special scrutiny to be applied are the degree of
control the donor exerted over the donee's interest in the
property; the secretive manner, or lack thereof, in which the
decedent acted regarding the surviving spouse; what the decedent
might have said to others as to his intent in making the apparent
gift; the value of the decedent's estate and the value of the
property left by him to the surviving spouse; the proximity in
time between the donative transfer and the donor's death; and all
factors that might indicate an intent to defraud the surviving
spouse of her statutory marital share.  In re Estate of Puetz,
167 Ill. App. 3d 807, 521 N.E.2d 1277 (1988); Toman, 39 Ill. App.
3d 394, 349 N.E.2d 668; Johnson, 73 Ill. 2d 342, 383 N.E.2d 185.
     On appeal, respondents argue that the circuit court erred in
not invoking the doctrine of equitable estoppel against
Bernadette in view of her participation in the conveyance of unit
2D to respondents, that she directly benefited from the
transaction and was aware of the transfers relating to unit 3F. 
The evidence adduced in the circuit court did not establish that
Bernadette was aware that she had transferred her interest in
unit 2D to respondents or that she was aware that respondents
were the sole beneficiaries of the mortgage proceeds from the
sale of unit 3F. 
      Bernadette testified that she and Louis Sr. "switched"
their respective interests in units 2D and 2F and that she took
unit 2F and Louis Sr. took unit 2D.  Bernadette further testified
that she was unaware that Louis Sr. had subsequently transferred
unit 2D to respondents and that she believed that Louis Sr.
continued to own unit 2D after 1984.  
     Although the evidence established that Bernadette may have
been aware of the sale of unit 3F to Martin and Mary Ann
Terpstra, it did not establish that Bernadette was aware that
respondents, as opposed to Louis Sr., were the sole beneficiaries
of the mortgage proceeds from the sale.  Therefore, the circuit
court did not err in not invoking the doctrine of equitable
estoppel against Bernadette.  
      However, notwithstanding the fact that the circuit court
determined that Louis Sr. "treated the property during his
lifetime as if it were his own" and that "[h]e, in effect, had a
life estate," there was no formal life estate reserved by Louis
Sr. once he transferred units 2D and 3F to respondents.  Although
Louis Sr. managed the property after the transfers and received
proceeds derived from the property, he did so strictly under the
authorization of respondents who possessed exclusive legal right
to control the property.  
     Furthermore, while retention of a life interest is relevant
on the issue of the existence of present donative intent, it is
not controlling.  Such evidence merely establishes that the
precise subject matter of the gifts that Louis Sr. intended to
give was not the present fee interest in the condominiums but was
a vested future fee interest only.  Farkas v. Williams, 5 Ill. 2d 417, 431, 125 N.E.2d 600, 607-08; Toman, 39 Ill. App. 3d 394, 349 N.E.2d 668; Johnson, 73 Ill. 2d 342, 383 N.E.2d 185.  Hence, the
presumption as to the validity of the transfers of units 2D and
3F to respondents as gifts from their parent, Louis Sr., was not
rebutted by clear and convincing evidence that Louis Sr. lacked
present donative intent to render the transfers testamentary.  
     There is, however, one type of real gift that will not
deprive the surviving spouse of his or her statutory marital
right.  That type of real gift is one in which the donor-spouse,
under the law applicable to the method of gift used, lawfully
retains such a degree of control over the donee's interest in the
property that, for purposes of the statutory marital right of the
surviving spouse, the transfer of title to the donee must be
regarded as quasi-testamentary, and the transfer is voidable to
the extent required to protect the said statutory marital right.
Toman, 39 Ill. App. 3d at 403, 349 N.E.2d  at 676.   
     The exception relates to certain inter vivos donative
transfers of legal title under the applicable law of property or
equitable title under the applicable law of trusts and to the
creation of contract rights in certain donee beneficiaries under
the applicable law of contracts.  Such inter vivos donative
transfers, though real under the respective applicable law so as
to vest presently existing property rights in the donee,
nevertheless create in the donee mere defeasibly vested rights
that are defeasible at the will of the donor during the donor's
lifetime.  Toman, 39 Ill. App. 3d at 403, 349 N.E.2d  at 676.
     The usual form of complete control by the donor is his or
her retention for life of the power to revoke the transaction and
thereby defeat the presently existing rights of the donee.  In
the case, however, of transfers of equitable title to a donee by
means of an inter vivos revocable trust, some further retention
of control by the donor is required, namely, the retention of
some substantial power over the trust res that would normally be
vested in the trustee, as, for example, the power to invest and
reinvest the trust funds.  Toman, 39 Ill. App. 3d at 403, 349 N.E.2d  at 676.         
     In the present case, there is no evidence that, during Louis
Sr.'s lifetime, he retained such complete control over the
presently existing rights of respondents that, for purposes of
the statutory marital right of Bernadette, the transfers of title
to the land trust with respondents as sole beneficiaries must be
regarded as quasi-testamentary and the transfers voidable to the
extent required to protect Bernadette's statutory marital right. 
As previously indicated, although Louis Sr. managed the property
directly and continued to receive benefits from the property, he
did so strictly under the authority of respondents, who solely
held legal right to control the property.  
     After being advised by his attorney that his children,
respondents, could do anything they wanted with the property once
the transfers were complete, Louis Sr. elected to relinquish to
respondents all legal rights to govern the affairs of the
property.  Louis Sr. retained no legal right to revoke the
transfers of units 2D and 3F to respondents.  He retained no
power of direction to deal with the titles to units 2D and 3F or
to manage and control the property.  Nor was Louis Sr. the named
beneficiary of the mortgage executed to secure the $30,000 note
for the sale of unit 3F.      
     The fact that respondents shared or gave the earnings,
avails and proceeds from units 2D and 3F to their father, Louis
Sr., and that Louis Sr. reported the income and expenses on his
tax returns, did not obviate the fact that Louis Sr. retained no
legal right to control unit 2D or to receive the mortgage
proceeds from the sale of unit 3F.  Respondents, alone, as sole
beneficiaries of the land trust containing unit 2D and the
mortgage proceeds from the sale of unit 3F possessed exclusive
right to control the property.  Based on the foregoing, it cannot
be held that Louis Sr. lacked present donative intent to transfer
units 2D and 3F to respondents and that the 1984 transfers were
merely testamentary.
     Accordingly, the order of the circuit court granting one-
half interest in unit 2D and $7,295.20, representing one-half of
the Terpstras' mortgage balance plus 5% prejudgment interest from
the date the Terpstras sold unit 3F, to the estate of Louis Sr.
is reversed.
     Reversed.
     HOFFMAN and HOURIHANE, JJ., concur.