Madden v. University Club of Evanston

• Decision Date: 19 June 1981
• Docket Number: No. 80-296,80-296
• Citation: 52 Ill.Dec. 963,422 N.E.2d 1172,97 Ill.App.3d 330
• Parties: , 52 Ill.Dec. 963 Frank H. MADDEN, Plaintiff-Appellant, v. UNIVERSITY CLUB OF EVANSTON and others, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1172

422 N.E.2d 1172

97 Ill.App.3d 330, 52 Ill.Dec. 963

Frank H. MADDEN, Plaintiff-Appellant, v. UNIVERSITY CLUB OF EVANSTON and others, Defendants-Appellees.

No. 80-296.

Appellate Court of Illinois, First District, Fifth Division.

June 19, 1981.

Frank H. Madden and Dalton P. Grief, Chicago, for plaintiff-appellant.

John L. Flynn, Flynn, Galvin & Ryan, Chicago, for defendants-appellees.

WILSON, Justice:

Plaintiff appeals from an order dismissing his amended complaint to foreclose a mortgage on property owned and occupied by the University Club of Evanston. He brought suit in his capacity as one of four trustees under a trust agreement which was created to refinance an existing bank mortgage. Plaintiff also asserts a claim based on his status as a beneficiary of the trust. The trial court granted defendants' section 48 motion to dismiss on the basis that plaintiff lacks legal capacity to maintain the suit. (Ill.Rev.Stat.1979, ch. 110, par. 48(b).) We affirm.

The facts may be stated briefly. In 1973 the University Club of Evanston had a mortgage with State National Bank which was due to mature. When the bank declined On October 24, 1978, plaintiff filed a complaint to foreclose the mortgage on the Club property because the other trustees allegedly failed to perform their duty to "secure payment" of the note. The Club and the three other trustees moved to dismiss the action on the grounds that plaintiff, as one of four trustees, was unauthorized to bring suit against the trust property. The defendant trustees also averred, through affidavits, that they had "contacted all note holders as to their preference in liquidating or extending their indebtedness, that holders of notes totaling in excess of $51,500 of the $85,000 (elected) to extend the due date of their notes for five years and that the remainder will be paid." Defendants' motion to dismiss was granted and plaintiff was given leave to file an amended complaint. This complaint was subsequently dismissed, with prejudice. On appeal, plaintiff contends that the other trustees are in breach of trust because their loyalty to the Club exceeds their dedication to the certificate holders.

[52 Ill.Dec. 965] to extend the loan, the Club refinanced the mortgage by soliciting its members to lend money to the Club. Ninety-five members contributed various amounts, totaling $79,200, which was deposited in the bank. Pursuant to a trust agreement dated October 23, 1973, the Club executed a bearer note for $85,000, payable in five years at 8% interest. The contributing Club members received certificates of participation, which represented their equitable interest in the note. The note was secured by the Club's property, which was conveyed by a trust deed held by the bank. Plaintiff and four other Club members agreed to act as trustees. As part of their responsibilities under the trust agreement they were to secure payment of the promissory note upon its maturity on October 23, 1978.

OPINION

The only issue before us is whether plaintiff has standing to maintain this action to foreclose the mortgage on the Club property, either in his capacity as a trustee or in his individual capacity as one of the certificate holders. The essence of plaintiff's theory is that, since the other trustees have abdicated their trust duty to secure payment of the note, he is the sole "active and independent" trustee. As such, it is his mandate to bring this action on behalf of all certificate holders.

We are not persuaded by this theory. His power as one of several trustees is limited by the rule that a co-trustee cannot exercise a joint power individually. (Stuart v. Continental Ill. Nat'l Bank & Trust Co. (1977), 68 Ill.2d 502, 12 Ill.Dec. 248, 369 N.E.2d 1262.) Ill.Rev.Stat.1979, ch. 148, par. 110 codifies the principle that the administration of the trust is left to the discretion of a majority of trustees. This section provides:

"If there are 3 or more trustees of a trust, a majority of the trustees are competent to act in all cases after prior written notice to, or written waiver of notice by, each other trustee, but a dissenting trustee has no liability for the acts of the majority."

The practicality and fairness of this section is evident: it facilitates trust management because it (1) allows cotrustees to act without unanimous agreement and (2) frees dissenting minority trustees from liability which may result from the acts of the majority. The dissenter is not, however, empowered to bring an action involving the trust property contrary to the wishes of the majority. In the pending case the three defendant trustees did not authorize plaintiff's foreclosure suit as a means to "secure payment" of the note upon its maturity. On the contrary, they were pursuing the plan to extend or renew the note through those Club members who were willing to forego immediate payment of their certificates.

Under these circumstances it does not appear that plaintiff has standing to sue for the foreclosure of the mortgage. As we have recognized, courts will not generally interfere with trustees' discretionary decisions absent proof of fraud, bad faith, or an abuse of discretion. (Graham Hospital Ass'n v. Talley (1975), 29 Ill.App.3d 190, 329 N.E.2d 918.) Courts also resolve "deadlocks" among trustees whose agreement is necessary under the terms of a trust instrument. (Stuart v. Continental Ill. Nat'l Bank & Trust Co. (1977), 68 Ill.2d 502, 12 Ill.Dec. 248, 369 N.E.2d 1262.) Plaintiff's allegations, however, fall short of indicating any fraud or bad faith. Indeed, it appears that the defendant trustees are attempting to effectuate the trust purpose of prolonging the life of the Club for the benefit of its members. It cannot be contended that the four trustees are deadlocked as to the proper course of action; only plaintif...