APPEAL from the Circuit Court of Cook County; the Hon. F.
EMMETT MORRISSEY, Judge, presiding.
MR. JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:
On April 3, 1975, an order was entered in the Circuit Court of Cook County, Illinois, Chancery Division (1) granting the motion for summary judgment of the successor receiver for the Taxicab Drivers Maintenance and Garage Helpers, Local 777, Health and Welfare Plan and Trust (hereinafter referred to as the Plan or Trust); (2) denying the motion of the defendant, Central National Bank in Chicago (hereinafter referred to as Central or the Bank), for summary judgment; and (3) awarding damages of $50,481.03 to the successor receiver. The defendant appeals from the order; the plaintiff cross-appeals.
The issues presented for review are (1) whether the trial court acted properly in granting the plaintiff's motion for summary judgment and denying the defendant's motion for summary judgment and (2) whether the proper measure of recovery is the entire amount of the earnings produced by the Plan funds while deposited with the defendant.
In December 1958, Yellow Cab Company, Checker Taxi Company, Inc., and the Transportation Maintenance Corporation entered into an agreement with Taxicab Drivers Maintenance and Garage Helpers Union, Local 777, the union then representing the companies' respective employees. The agreement established a health and welfare plan and trust fund pursuant to the collective-bargaining agreements in effect between the companies and the union. The purpose of the Plan was to provide certain health and welfare benefits for eligible employees from either the principal or income of the Plan assets and trust account.
The Plan provided for a board of trustees to administer the Plan, consisting of four regular trustees and two alternate trustees. There were to be two regular employer trustees and one alternate, and two regular union trustees and one alternate. The regular trustees appointed by the employer companies were Michael Sokoll and Rudolph Bieze. The appointed regular union trustees were Joseph Glimco and Joe Coca. The Plan provided that the board, as trustee, should have complete and exclusive control over all Ilan assets.
The litigation from which this appeal arises apparently commenced in 1961 when the employer trustees, Yellow Cab Company and Checker Taxi Company, Inc., filed a petition for instructions complaining of the union trustees and various other defendants. The petition alleged that due to controversies between the various trustees, the Plan could not operate effectively without a declaration of the rights of the participating employees and of the rights and duties of the trustees. A receiver was eventually appointed for the Plan in 1970. Further details of the history of this litigation are not critical to this appeal.
On February 15, 1974, William Randall, the appointed receiver for the Plan, filed an amendment to the complaint in the nature of an additional count naming Central as the amended defendant. The amended complaint alleged that Central became a fiduciary and a trustee for the trustees of the Plan, pursuant to a valid safe-keeping receipt executed between the trustees and Central. Under the receipt, Central held certain United States Treasury Bonds belonging to the Trust for collection. The receipt provided that the collected proceeds would be disbursed only in accordance with the directions of the depositor trustees. On May 15, 1966, the Bank presented the bonds for collection and received proceeds in the sum of $250,000. The complaint stated that the defendant Bank knew or should have known that any legal authorization regarding the Trust could only be made in writing with two signatures, one by an employer trustee and the other by a union trustee. And, further, that the Bank as trustee and fiduciary, should have known that the trustees desired that the bond proceeds be placed in an income producing account since the money belonged to the Trust. Therefore, according to the complaint, the Bank breached its duty as fiduciary and trustee when on May 16, 1966, without instructions or authorization from the Plan trustees, it credited the bond proceeds to the trustees' checking account and failed to place the proceeds in an income, interest, or dividend producing account. The proceeds remained in the trustees' checking account until November 23, 1970. During that time, no interest was credited to that account.
Alleging that the Bank was unjustly enriched to the detriment and expense of the Trust by the free use of the collected proceeds for its commercial benefit, the receiver sought to recover all sums of money by which the Bank had become so enriched, plus interest or compensation for the use of the proceeds, in addition to costs and reasonable attorneys fees. The prayer included that Central be required to account to the receiver for any profits, income increment, or gain obtained from the use and benefit of the bond proceeds.
The Bank, in its amended answer, denied that it was a trustee for the Plan trustees but admitted its fiduciary capacity. The Bank asserted various affirmative defenses, including equitable laches and expiration of the applicable statute of limitations. Central argued, in support of its motion for summary judgment, that the relationship between a bank and its depositor is that of debtor and creditor rather than trustee and beneficiary. The Bank relied in part on the Restatement (Second) of Trusts, Explanatory Notes § 12, comment 1, at 41 (1959), which provides:
"A general deposit of money in a commercial bank does not create a trust, but a relation of debtor and creditor, the depositor having in addition to his rights as creditor certain contract rights against the bank. This is true although the depositor is a trustee; * * *."
Thus, according to the Bank, it had no legal duty to invest the collected proceeds and was obligated only to follow the specific terms of the safekeeping agreement. The trial court commented that although Central may not have become a trustee, a fiduciary relationship probably existed between the Bank and the trustee depositors.
It is undisputed that the trustees maintained no savings or interest bearing accounts with Central, and at no time did they give to Central authorization or instructions to reinvest the collected proceeds. The Bank asserted that before the bond proceeds were collected and credited to the checking account, tremendous effort was made by Bank personnel to contact the trustees for instructions regarding the disposition of the proceeds. The trustees failed to provide the Bank with any instructions. However, the successor receiver, Tully Trainor, argued that the Bank had failed to contact the employer trustees, and had contacted only the union trustees. Trainor contended that any negligent or wrongful acts of any trustee did not relieve the Bank of its fiduciary and contract obligations. According to Central, however, it was never informed of, and was totally unaware of, the difficulties that existed at that time between the employer and union trustees.
The Bank concluded that had it acted without instructions and unilaterally placed the proceeds in one of the many available investment plans, it would certainly have breached its contract with the Plan trustees; the safekeeping agreement authorized the Bank as holder of the bonds only to "keep safe and redeem." The language of the receipt defined the obligation of the Bank as follows:
"This bank's services are limited to holding the securities in safekeeping for the depositor and dealing with them as herein expressed ...