Axelrod v. Giambalvo
| Decision Date | 11 December 1984 |
| Docket Number | No. 83-2733,83-2733 |
| Citation | 84 Ill.Dec. 703,472 N.E.2d 840,129 Ill.App.3d 512 |
| Parties | , 84 Ill.Dec. 703 Harry AXELROD and Margaret B. Axelrod, Plaintiffs-Appellants, v. N.A. "Jim" GIAMBALVO, Jo Lee Winterrowd, Robert Kyts, Donald Jeffers, Joseph A. Rubenstein, Ruth Holtman, Paul J. Randolph, individually and as Managing Trustees of the 860 Lake Shore Drive Trust and LaSalle National Bank of Chicago, individually and as the Corporate Trustee under the 860 Lake Shore Drive Trust, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
Joseph J. LaRocco, Ronald V. Hirst, LaRocco, Baker & Hirst, Chicago, for plaintiffs-appellants.
Leonard A. Nelson, Schoenberg, Fisher & Newman, Ltd., Chicago, for defendant-appellee Donald E. Jeffers. Sidney Z. Karasik, Chicago, for certain defendants-appellees.
Plaintiffs Harry and Margaret B. Axelrod are owners of a certificate of beneficial interest in the 860 Lake Shore Drive Trust ("Trust"). The Trust holds title to two 26-story cooperative apartment buildings located at 860-880 N. Lake Shore Drive, in Chicago. As certificate holders among some 268 others, they were entitled to, and did, lease an apartment in one of the buildings. Responsibility for managing the Trust under the Trust Agreement is vested in a board of 5 managing trustees who, since 1978, have been elected to those positions by the certificate holders ("beneficiaries"). The managing trustees are required to be certificate holders and tenants of the building under the Trust Agreement. The present litigation commenced on March 15, 1979 when plaintiffs sued as defendants the corporate trustee, La Salle National Bank, and managing trustees of the Trust, alleging numerous breaches of trust in an amended 21 count complaint seeking a variety of forms of relief including money damages, injunctive relief, and construction and modification of the Trust Agreement against separate defendants in both their individual and official capacities. Each count alleged facts substantially distinct from the facts of the other counts. Each count ran through several pages, plus many pages of exhibits. Further amendments were filed after judgment.
Some counts were ruled upon pursuant to motions to strike, some upon motion for summary judgment, and one was decided after an 8-day trial. All issues were decided against plaintiffs. Plaintiffs appeal, raising as issues whether: certain counts were erroneously stricken and dismissed; the circuit court's grant of summary judgment for defendants on counts VI and XXI was appropriate; and the circuit court's decision in defendants' favor on count XX was contrary to the manifest weight of the evidence. The dismissal of counts filed against the corporate trustee bank has not been argued on appeal.
Certain common threads can be identified in the various legal theories presented. They may be placed in 3 categories, namely: (1) charges of a derivative nature which sought relief against individual defendants based on their former status as managing trustees of the Trust; (2) charges of a derivative nature which sought relief against individual defendants personally for the asserted benefit of the Trust; and (3) one non-derivative count which sought relief against the individual defendants for the individual benefit of plaintiffs.
The Trust was the subject of related litigation in 1977, when a class action was filed by beneficial owners against the corporate trustee and the managing trustees. Certain beneficiaries, including plaintiffs here, opted out of the class. Nevertheless, the Axelrods continued to appear regularly and actively in the proceedings. (Wool v. La Salle National Bank (1980), 89 Ill.App.3d 560, 562, 44 Ill.Dec. 769, 411 N.E.2d 1135.) During the course of the 1977 action, a new board of managing trustees was elected, who are defendants in the instant case. This new board petitioned the circuit court for instructions as to whether they should pursue any legal claims against their predecessors. In that case, Wool v. La Salle National Bank, No. 77 CH 483 (Cir.Ct., Cook Co., Ill. June 6, 1979), the circuit court issued an order prohibiting the new board from instituting such legal action against the predecessor managing trustees. That order was appealed to this court by certain beneficiaries. Plaintiffs here, the Axelrods, also filed an appeal, which was dismissed as untimely filed and the circuit court order was not disturbed. Wool v. La Salle National Bank, supra.
On May 1, 1980, still another new slate of managing trustees, also tenants-owners of the Trust as are plaintiffs and defendants, assumed office on behalf of the Trust. As a result of this change, none of the previously elected (1977) defendants remained in office. There is no claim in the record of any personal financial benefit accruing to these successor managing trustees as a result of a favorable outcome for defendants in this lawsuit, bad faith or abuse of discretion on their part. On September 4, 1981, after various derivative counts had been stricken and dismissed, the successor managing trustees submitted an affidavit to the circuit court, which formed a basis for defendants' motion for summary judgment on 2 of 3 remaining counts. This affidavit, in part, states as follows:
"1. We are the duly elected managing trustees of the 860 Lake Shore Drive Trust, and we are all managing trustees presently in office.
2. In connection with this litigation, we support all motions made and positions taken by the defendants. We oppose all motions made and positions taken by plaintiffs, except as the same may be agreed to by defendants.
3. We believe that termination of this lawsuit with judgment entered on all counts in favor of defendants is in the best interests of the Trust, for the following reasons:
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b. This lawsuit has been a disruption to the Trust's orderly procedure. Plaintiffs' counsel have interrupted the normal routine of the building office to investigate documents. Defendants' counsel must confer with the La Salle National Bank, the building manager, and with the managing trustees about this case. They must review and sign affidavits. All of this takes time and effort for everyone concerned.
c. Even if plaintiffs should, by some remote chance, be successful in this case, the benefits which might be achieved for the Trust could not possibly compensate for the time and expense of litigation.
d. The publicity attendant upon this case can continue to diminish the value of the Trust and of the tenant/owners' equity. Some people may be reluctant to purchase an apartment in a building where the managers are the subject of litigation.
e. Most important of all, the present managing trustees wish to encourage certificate holders to run for the office of managing trustee. Particularly in light of the fact that the managing trustees receive no pay for their efforts, they do not want obstacles placed in the path of those who have volunteered to serve the Trust. They want to keep a difficult job from being even more onerous. They definitely do not want certificate holders to be dissuaded from running for office through fear that dissident tenant/owners might bring marginal or frivolous lawsuits against them."
Summary judgment on counts VI and XXI was thereafter granted. Following an 8-day trial, judgment for defendants on count XX was also entered. This appeal followed.
Plaintiffs assert that the circuit court improperly struck and dismissed counts I through V and VII through XIX of their second amended complaint for failing to state causes of action. These counts included charges of a derivative nature based both upon defendants' former positions as managing trustees of the Trust and against them personally for the asserted benefit of the Trust.
Among the reasons given by the circuit court for its decision was that sections 4.01-4.07 of the Trust Agreement delegated to the managing trustees broad authority to make decisions in managing the business of the Trust and at the same time expressly limited their liability by virtue of the provisions of section 4.10 of the Trust Agreement. That section, in part, provides:
Notwithstanding the language contained in section 4.10, plaintiffs maintain that exculpatory clauses such as the foregoing should be read strictly and given no effect, relying upon Browning v. Fidelity Trust Co. (3d Cir.1918), 250 Fed. 321, and New England Trust Co. v. Paine (1945), 317 Mass. 542, 59 N.E.2d 263. Plaintiffs also cite Countiss v. Whiting (1940), 306 Ill.App. 548, 29 N.E.2d 277, in which the appellate court refused to give effect to a similar exculpatory clause under the facts there presented. The cases cited involved exceptional circumstances including contraventions of public policy, instances of bad faith and intentionally committed breaches and acts performed in reckless indifference to the welfare of the beneficiaries. In contrast, the alleged wrongful acts articulated in various counts of plaintiffs' amended complaint in this case do not rise to the level of exceptional circumstances related in the cases cited.
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