Appeal from the Circuit Court of Cook County; the Hon. Harold
A. Siegan, Judge, presiding.
JUSTICE CAMPBELL DELIVERED THE OPINION OF THE COURT:
Rehearing denied October 31, 1983.
Plaintiff, Brooks McCormick, Jr., appeals from the dismissal of his complaint against the former trustees and their agents of a trust of which plaintiff is both grantor and beneficiary. Six counts of his complaint which alleged breach of trust, waste of trust assets and conflict of interest, were dismissed with prejudice for failure to state a cause of action. On appeal, plaintiff contends that the trial court applied an erroneous standard of review in dismissing the six counts of his complaint and that defendant Myron Ratcliffe failed to establish the validity of Ratcliffe's purported release from liability.
Plaintiff filed an 11-count verified amended complaint against four individuals and three corporations. The allegations of the complaint center around the construction of plaintiff's personal residence by the Brooks McCormick, Jr., trust. A brief explanation of the parties will aid the discussion of this case.
Brooks McCormick, Jr., is the settlor and sole beneficiary of the Brooks McCormick, Jr., trust dated August 5, 1964 (hereinafter referred to as "the trust"). Plaintiff established the trust with assets he received from his grandmother and directed his trustees to pay him such part of income and principal that the trustees considered advisable for plaintiff's comfortable maintenance, medical care and welfare.
Defendant Brooks McCormick is plaintiff's father and was co-trustee of the trust from its inception until December 31, 1980, when he resigned.
Defendant Miami Corporation is a personal holding company for the assets of the McCormick and Danielson families. The stock of the corporation is owned by the trusts established by the various family members, including the trust at issue here. The Miami Corporation also functions as an agent for the trustees of the family trusts and employs investment managers and accountants for this purpose. One of the assets held by the corporation is a controlling interest in the National Boulevard Bank of Chicago.
Defendant Charles Schroeder is president of the Miami Corporation and chairman of the board of the National Boulevard Bank. Schroeder served as co-trustee of plaintiff's trust from January 1, 1978, to December 31, 1980.
Defendant Myron Ratcliffe is a past president of the Miami Corporation and former chairman of the board of the National Boulevard Bank. Ratcliffe served as co-trustee of plaintiff's trust from its inception until December 31, 1977, when he retired. Ratcliffe, and Schroeder after him, acted as plaintiff's attorney-in-fact under a broad power of attorney. On May 11, 1978, plaintiff executed a release of Ratcliffe relieving him of all liability resulting from his management of the trust.
Defendant Thomas Oehring has served as an officer and employee of the Miami Corporation since August 1978. His predecessor, F.J. Hoppe, originally was named as a defendant in this case but was dismissed by motion at the time of his death.
Otis and Associates is the architectural firm retained by plaintiff to prepare plans for the residence and supervise its construction. Ragnar Benson, Inc., is the general contractor which plaintiff hired to build the portion of the residence referred to as "phase one."
The complaint alleges that in the summer of 1977, construction of plaintiff's personal residence began. The residence was built in Bensenville, Illinois, on property that plaintiff's trust purchased from plaintiff's father. The complaint alleges that on behalf of plaintiff and the trust, the trustees negotiated and accepted an architect's contract and a construction contract which stated that the maximum cost of building the residence would be $398,000. Payments for the residence were to be approved by the plaintiff in writing and then paid out of trust assets by the trustees. Plaintiff approved two change orders which increased the contract price to $449,542. The architect's fee was $70,000 and the land cost $365,000.
Plaintiff alleges that the defendants have authorized the spending of more than $1,900,000 on the construction of the residence; that many expenditures were made over plaintiff's stringent objections; that payments were made on work that was not authorized by change orders; that the contractor was paid for work that was not completed and that did not satisfy contractual specifications; and, that defendants gave the architect and contractor duplicate payments for the same work. Plaintiff alleges that when he objected to some of these unwarranted payments, defendants told him that such payments must be made in order to protect defendant McCormick's "reputation in the business community." The residence still has not been completed in compliance with the contract specifications and still remains incomplete and uninhabited. Plaintiff alleges that defendants' mismanagement has resulted in the investment of most of the trust assets in a nonliquid and essentially nonmarketable residence.
The verified amended complaint is 75 pages long and has approximately 150 pages of exhibits attached to it. Counts I through VI allege that the trustees of the trust, their agents and the Miami Corporation committed mismanagement and waste of trust assets. These counts were dismissed with prejudice by the trial court for failure to state a cause of action and are the basis of this appeal. Counts VIII through XI allege breach of contract and professional malpractice against the contractor and architect. These counts were severed from the rest of the complaint and have been continued in litigation. Count VII alleges that defendant McCormick built a "spite fence" adjacent to plaintiff's property and requests that defendant be enjoined to remove the fence and pay compensatory and punitive damages for ...