This case is controlled by the decision in Plast v.
Metropolitan Trust Co.
MR. JUSTICE FULTON DELIVERED THE OPINION OF THE COURT:
Rehearing denied May 19, 1952.
The appellant, Marshall Sarasin, filed a complaint in chancery in the superior court of Cook County on August 31, 1950, seeking the construction of a certain liquidation trust agreement. The complaint also asked that an injunction be granted enjoining the trust managers from delivering shares of stock in exchange for units of beneficial interest under the trust; that the court decree the conveyance of the trust res, if already made, to be void; that the court order a public sale of the property in question and decree the suit to be a class suit, allowing plaintiff his costs and reasonable attorney's fees to be borne by all of the trust beneficiaries ratably. A petition for an injunction was filed on September 6, 1950, but no injunction was ever issued. The answer of the Live Stock National Bank of Chicago, trustee under the trust agreement in question, was filed September 14, 1950, and George W. Kemp, C.A. East and James A. Malooly, trust managers, filed their answer on September 22, 1950. Testimony in the cause was taken on November 27, 1950, and a stipulation as to the facts was filed without prejudice to either party to introduce further proof. On January 5, 1951, the plaintiff sought and obtained leave to file a supplement to his original complaint, in which plaintiff asked for a partition of the real estate in question. On the same date, the court entered an order sustaining a motion to strike the supplement to the complaint and entered a final decree dismissing the original complaint for want of equity. The appellant, by this appeal, seeks a reversal of the order and of the decree of the superior court dismissing his complaint. Since a freehold is involved, the appeal comes directly to this court.
The final decree recites that the cause was heard upon the original complaint, the answers of the trustee and trust managers, testimony of witnesses and a stipulation of facts. No questions are raised as to any of the pleadings. The stipulation covers most of the facts and there is no real dispute in that regard.
The property involved is the Fecher Apartment Building located at 8053-61 Cottage Grove Avenue in the city of Chicago. This building was built in 1926, is three stories high and contains eight stores and twenty apartments. Originally the property was subject to a $135,000 bond issue, which had been reduced to $103,500 when the bonds were defaulted in 1931. In the latter year the trust deed securing the bonds was foreclosed and the property was bid in and acquired by a committee representing the bondholders.
On December 2, 1935, a trust agreement was entered into, between the bondholders' committee and the Live Stock National Bank of Chicago as trustee, creating the Fecher Block Liquidation Trust for the benefit of bondholders, which was designated as Trust No. 11064. Article I of this agreement designates the purposes of the trust. It states that its objects shall be the sale and liquidation of the trust property, the distribution of the net proceeds thereof as soon as may be practicable in the opinion of the trust managers, the conservation thereof meanwhile, and, to that end, the management and control thereof and distribution of net income to the certificate holders. The preamble provides that the certificate holders shall be trust beneficiaries only, having only a beneficial interest in the net income, proceeds and avails which may come into the hands of the trustee through sales, leases, assignments or other dispositions, conversions or uses of the trust property or any part or parts thereof.
Article II of the same agreement, in defining the duties and powers of the trustee, provides, inter alia: "and said trustee shall have full power to grant options to purchase, to contract to sell and to sell the trust property and any part or parts thereof upon any terms, including a sale of the trust property or any part or parts thereof to another trust or to a corporation now or hereafter organized in exchange for stocks, bonds or other securities of such corporation or trust." Article II further provides that the trustee shall hold all of the trust property in trust to sell and convert the same into cash or other personal property, but provides that the trustee shall not, prior to the termination of the trust, make any disposition of the trust property except upon written order signed by the trust managers. There is the further provision in the same article that the trustee shall not, prior to the termination of the trust, sell or otherwise dispose of the trust property unless, not less than twenty days prior to such sale or other disposition, the trustee shall mail to the certificate holders a notice in such form as shall be designated by the trust managers, specifying the property to be sold and the terms and conditions of such proposed sale or other disposition, and no such sale or other disposition shall be made if, within twenty days of the mailing of such notice, the holders of 35 per cent or more of the units outstanding, represented by certificates of interest then outstanding of record, shall lodge with the trustee written objection to such proposed sale or other disposition.
Article VI of the agreement, in making provision for the certificates of beneficial interest under the trust and prescribing their form and contents, provides that the holders thereof have no interest, legal or equitable, in any of the property covered or referred to but only an interest in the net income, proceeds and avails thereof. By the acceptance of a certificate of beneficial interest, the holder agrees to be bound by all the terms of the trust as though set forth in full in such certificate.
Article X of the agreement provides that the business of the trust is to be managed by three trust managers. Article XV gives the trust managers the power to amend the agreement from time to time by filing amendments with the trustee. If, in the judgment of both the trust managers and trustee, (which is made conclusive and binding,) any such amendment does not materially alter the rights of the certificate holders, the amendment when filed becomes binding on all persons interested, without notice. If either the trustee or trust managers feel that the rights of the certificate holders will be affected materially by the amendment, article XV provides for the same notice as article II to all certificate holders, with the provision that if 35 percent or more file objections in writing to such amendment it shall not become effective.
Article XVI of the trust agreement provides for the methods of its termination. The trust may be terminated at such time as the trust managers in their sole discretion may determine, or by written direction lodged with the trustee by the holder or holders of the majority of the units of beneficial interest then outstanding. It is recited that it is the intention that the property be sold and liquidated as soon after the institution of the trust as conditions may permit, and the net proceeds distributed to the certificate holders. Article XVI further provides that, if not sooner terminated, the trust shall in any event terminate within fifteen years of the date of the agreement. The fixed termination was, therefore, December 2, 1950.
Pursuant to the terms of the trust agreement, the property was conveyed to the Live Stock National Bank of Chicago as trustee in December of 1935 and the latter assumed control of the property. Certificates of beneficial interest under the trust agreement were issued to all former bondholders. The total number of units of beneficial interest in said trust outstanding on August 3, 1950, was 1118.88, each of the face value of $100 per unit. There were, as of the same date, 130 registered certificate holders. The defendants, George W. Kemp, C.A. East, and James A. Malooly, were the duly appointed and acting trust managers.
The Fecher Building Corporation was organized as an Illinois corporation on June 2, 1950, under the sponsorship of the trust managers, for the purpose of acquiring from the trustee all of the trust property in exchange for all of the stock in the corporation. The corporation then submitted to the trustee an offer to exchange all of its capital stock for the assets of the trust and to deliver to the trustee 1118.88 shares of its fully paid and nonassessable capital stock, having no par value, being all of the authorized and issuable stock of the corporation, for all of the assets of the trust.
At the same time, the trust managers prepared a plan to transfer the trust property to the building corporation in exchange for all of the stock of the corporation, to be submitted to the certificate holders by the trustee. It was also proposed to amend article XVI of the trust agreement by authorizing the trustee to distribute the stock pro rata among the certificate holders. The trust managers, by direction in writing as required, requested the trustee to submit the proposed plan and proposed amendment to the certificate holders, certifying that in their opinion the amendment materially affected the interests of the certificate holders.
On August 3, 1950, the trustee, by letter of that date, submitted the plan and proposed amendment to the 130 registered certificate holders. It is stipulated that the plan and proposed amendment were submitted to all certificate holders. The trustee mailed with its letter a copy of the plan, a copy of the proposed amendment to the trust agreement, a statement of the assets and liabilities of the trust as of January 9, 1950, a summary of the earnings of the trust for each of the fiscal years 1936 to 1949, both inclusive, a statement of the income and expenses of the trust for the same years, a statement of cash disbursements per unit for the holders of certificates of interest for each of the above years, a pro forma balance sheet of the Fecher Building Corporation, giving effect to the proposed exchange, and a statement of estimated fees and expenses in connection with the execution of the plan. A self-addressed, stamped post card was mailed to each certificate holder, which could be used by him in advising the trustee of his consent or dissent to the plan and the amendment. In the letter each certificate holder was advised that if he desired to dissent he must file his written objection with the trustee within twenty days, and that failure to object was the equivalent of approval; that unless 35 per cent or more of the units outstanding lodged with the trustee written objections, the trustee would carry out the plan.
On August 16, 1950, the plaintiff, Marshall Sarasin, who had not owned any of the certificates previously, purchased a certificate for one unit of interest under the trust and on August 23, 1950, he delivered his letter to the trustee objecting to the proposed transfer ...