McCormick v. McCormick

• Court: United States Appellate Court of Illinois
• Writing for the Court: CAMPBELL
• Citation: 129 Ill.Dec. 579,180 Ill.App.3d 184,536 N.E.2d 419
• Parties: , 129 Ill.Dec. 579 Brooks McCORMICK, Jr., Plaintiff-Appellant, v. Brooks McCORMICK and Charles E. Schroeder, as trustees of the Brooks McCormick, Jr. Trust, dated
• Decision Date: 05 August 1964

Page 419

536 N.E.2d 419 180 Ill.App.3d 184, 129 Ill.Dec. 579 Brooks McCORMICK, Jr., Plaintiff-Appellant,
v.
Brooks McCORMICK and Charles E. Schroeder, as trustees of
the Brooks McCormick, Jr. Trust, dated August 5, 1964, as
amended; Miami Corporation, a Delaware corporation; Thomas
E. Oehring; and Charles E. Schroeder, Defendants-Appellees.
Charles E. SCHROEDER and Brooks McCormick, as trustees,
Petitioners-Appellees,
v.
Brooks McCORMICK, Jr., individually; and Gary-Wheaton Bank,
as trustee, Respondents-Appellants. No. 87-2701. Appellate Court of Illinois,
First District, First Division. Dec. 5, 1988.

As Modified on Denial of Rehearing March 31, 1989.

Page 421

[180 Ill.App.3d 187] [129 Ill.Dec. 581] D'Ancona & Pflaum (Barry T. McNamara, Selwyn Zunn, of counsel), Katten Muchin & Zavis, Chicago, James C. Murray, Jr., Peter Petrakis, for plaintiff-appellant.

[180 Ill.App.3d 188] Wildman, Harrold, Allen & Dixon, Chicago (Max E. Wildman, Jerald P. Esrich, Craig M. Whie, Cal R. Burnton, of counsel), for defendants-appellees.

MODIFIED ON DENIAL OF REHEARING

Presiding Justice CAMPBELL delivered the opinion of the court.

This appeal arises from: (1) Brooks McCormick Jr.'s ("Brooks Jr.") suit for an accounting and damages for breach of fiduciary duty against Brooks McCormick Sr. ("Brooks Sr.") and Charles E. Schroeder (jointly referred to as the "Trustees"), as former trustees of the Brooks McCormick Jr. Trust, dated August 5, 1964, as amended (the "Trust") and against Miami Corporation and Thomas E. Oehring, as agents of the Trustees (the "Agents"); (2) the Trustees' petition for approval of their accounts and claim against the Trust for repayment of $32,792.28; (3) the counterclaim of Gary-Wheaton Bank, current trustee of the Trust; (4) Gary-Wheaton Bank's and Brooks Jr.'s counterclaim against the Trustees; and (5) Gary-Wheaton Bank's and Brooks Jr.'s third-party complaint against the Agents for breach of fiduciary duty.

In its November 19, 1985 order, the trial court granted the Trustees/Agents' section 2-619 motion and dismissed the third-party complaint. In its August 24, 1987 order, the court granted: (1) summary judgment in favor of the Agents and against Brooks Jr. on the complaint; (2) partial summary judgment in favor of the Trustees and against Brooks Jr. for all claims based on acts occurring prior to January 1, 1978; (3) final judgment in favor of the Trustees and against Brooks Jr. on the complaint; (4) final judgment in favor of the Trustees and against Brooks Jr. and Gary-Wheaton Bank on the counterclaim to the petition for approval of accounts; (5) judgment in favor of the Trustees and against Brooks Jr. and Gary-Wheaton Bank in the

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[129 Ill.Dec. 582] amounts of $32,792.28 plus interest, and $36,000 in trustees' fees; and (6) judgment in favor of the Trustees and against Brooks Jr. and Gary-Wheaton Bank in the amount of reasonable attorneys' fees and costs incurred in making the accounting and in defending against claims asserted in the complaint.

On appeal, Brooks Jr. and Gary-Wheaton Bank contend that: (1) Brooks Jr. is entitled to a new trial on the ground that the trial judge was prejudiced against him; (2) the trial court erred in concluding that the Trustees did not breach their fiduciary duties to Brooks Jr.; (3) the Trustees failed to sustain their burden of proof on the affirmative defenses of consent, acquiescence and ratification; (4) the trial court erred in ruling that Brooks Jr.'s release of a predecessor trustee from [180 Ill.App.3d 189] all claims and liabilities also released the Trustees and Agents from all claims and liabilities arising out of their acts for that same period; (5) the trial court abused its discretion in excluding the testimony of Brooks Jr.'s expert witness; (6) the trial court erred in ruling that the Agents could not be held independently liable for breaches of fiduciary duty committed by them in the exercise of authority delegated to them by the Trustees; (7) the trial court erred in awarding trustees' fees to the Trustees; (8) the trial court erred in finding sufficient evidence to support the Trustees' claim that they are entitled to recover the sum of $32,792.28 plus interest from the Trust; and (9) the trial court erred in awarding attorney's fees and costs to defendants. For the following reasons, we affirm in part, reverse in part and remand with instructions.

This is the second appeal arising from substantially the same facts. The first appeal was decided by this court in McCormick v. McCormick (1983), 118 Ill.App.3d 455, 74 Ill.Dec. 73, 455 N.E.2d 103 ("McCormick I "). For purposes of providing a factual framework for the issues raised in this appeal, the relevant underlying facts set forth in McCormick I are reiterated and supplemented as necessary with facts arising subsequent to that decision.

Brooks Jr., as sole beneficiary of the Trust, filed an 11-count verified amended complaint against the Trustees; the Agents; Myron Ratcliffe, past president of Miami Corporation and former co-trustee of the Trust; Otis and Associates, architectural firm retained by Brooks Jr. to prepare plans for Brooks Jr.'s residence and to supervise its construction; and Ragnar Benson, Inc., general contractor hired by Brooks Jr. to build the first phase of the residence. The complaint alleged that in the summer of 1977, construction of Brooks Jr.'s personal residence began on property that the Trust had purchased from Brooks Sr. The complaint further alleged that the Trustees negotiated and accepted an architect's contract and a construction contract which stated that the maximum cost to build the residence would be $398,000. Payments for the residence were to be approved in writing by Brooks Jr. and then paid out of Trust assets by the Trustees.

Counts I through VI of the verified amended complaint alleged that the Trustees and the Agents mismanaged and wasted Trust assets by spending in excess of $1,900,000 on the construction of Brooks Jr.'s residence, the Trustees paid contractors for unfinished work which had not met contract specifications, and made duplicate payments to the architect and contractor. As a result of this alleged mismanagement, Brooks Jr. claimed that a majority of the Trust's assets had been improperly invested in a non-liquid, non-marketable residence.[180 Ill.App.3d 190]

Count VII alleged that Brooks Sr. had built a "spite fence" adjacent to Brooks Jr.'s property and sought an injunction against Brooks Sr. ordering him to remove the fence and to pay compensatory and punitive damages for trespass and other injury to the Trust property. Counts VIII through XI of the complaint alleged breach of contract and professional malpractice against the contractor and architect.

The trial court dismissed counts I through VI with prejudice for failure to state a cause of action. Count VII was

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[129 Ill.Dec. 583] severed and dismissed without prejudice on the ground that a cause of action for trespass could be found in its allegations. Counts VIII through XI were also severed and continued in separate litigation. The dismissal of counts I through VI was the basis for the appeal in McCormick I.

In McCormick I, this court reversed the trial court's decision with respect to counts I and II, affirmed the dismissal of counts III through VI, and remanded for further proceedings. Count I had charged defendants with breach of trust and requested an accounting, a declaration of rights, compensatory and punitive damages. Count II had alleged waste of trust assets by the Trustees and the Agents.

Upon remand, the Trustees and Agents filed an answer in which they raised, inter alia, the affirmative defenses of release, consent, acquiescence and ratification, and filed a counterclaim seeking: (1) attorneys fees, costs and expenses incurred in maintaining the petition for approval of their accounts and in defending against Brooks Jr.'s complaint, and (2) compensation for services rendered on behalf of the Trust. The Trustees also filed an amended petition for approval of their accounts, in which they sought repayment of the $32,792.28 sum allegedly owed by the Trust to Miami Corporation, trustees fees, and attorneys fees and costs. Brooks Jr. and Gary-Wheaton Bank, as current trustee, filed answers raising the affirmative defense of breach of fiduciary duty. Gary-Wheaton Bank also counterclaimed for instructions from the court as to its obligations concerning acceptance of the accounts of the former Trustees. Additionally, Brooks Jr. and Gary-Wheaton Bank filed a counterclaim against the Trustees and a third-party complaint against Schroeder, Oehring and Miami Corporation, alleging that the Trustees and the Agents had breached their fiduciary duty to Brooks Jr. by making interest-free loans of Trust monies to National Boulevard Bank of which Miami Corporation is majority shareholder. On November 19, 1985, the trial court dismissed: (1) the third-party complaint with prejudice pursuant to Section 2-619 on the ground that the Agents could not be independently liable to Brooks [180 Ill.App.3d 191] Jr.; and (2) all claims in the counterclaim pertaining to acts by the Trustees prior to January 1, 1978. The basis for the latter ruling was that Brooks Jr.'s release of Myron Ratcliffe, a former trustee, from all claims arising from his acts during his tenure as trustee from 1964 to December 31, 1977 also released the Trustees and Agents from all claims arising from their acts during that period. Subsequently, on April 21, 1986, the trial court applied these rulings to the complaint and granted summary judgment to the Agents and partial summary judgment to the Trustees. On August 24, 1987, following a bench trial, the trial court entered final judgment in favor of defendants.

On appeal, Brooks Jr. first contends that he is entitled to a new trial on the ground that the trial court was prejudiced against him, thereby denying him his right to a...