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09/27/88 Majs Investment, Inc., v. Albany Bank & Trust

September 27, 1988





529 N.E.2d 1035, 175 Ill. App. 3d 478, 124 Ill. Dec. 918 1988.IL.1448

Appeal from the Circuit Court of Cook County; the Hon. Thomas P. Quinn, Judge, presiding.


JUSTICE EGAN delivered the opinion of the court. HARTMAN, P.J., and BILANDIC, J., concur.


The plaintiff, MAJS Investment, Inc. , and Babu Patel filed a complaint in the circuit court of Cook County seeking money damages. The trial court relied on an exculpatory clause in a trust agreement existing between the parties and dismissed the complaint on the defendant's motion. Only MAJS appeals.

The original complaint filed in December 1986 and the first amended complaint alleged the following.

Under a land trust agreement dated October 13, 1980, the defendant became the legal title owner of a piece of real estate valued at $800,000 which was encumbered by a mortgage in the sum of $475,000. The named beneficiary was the plaintiff corporation. At the time the sole shareholder and president of the plaintiff corporation was Meena Patel, who had the power of direction and was the wife of Babu Patel. In March 1983 the defendant was served with a mortgage foreclosure complaint and summons filed against the real estate.

Upon receipt of the documents, the defendant forwarded them in an envelope addressed to Babu Patel at his home address, which was also the registered address of the plaintiff corporation. The cover letter enclosing the documents requested Babu Patel to acknowledge receipt thereof, to provide the defendant with the name, address and telephone number of his attorney and to direct his attorney to advise the defendant "that he is taking action to dismiss the bank or is taking other appropriate action to protect the interest of the bank as well as your own interest in this trust." The letter further stated that "[if] we do not hear from you or your attorney within ten days, it will be necessary that we turn this matter over to our attorney to perform such services and charge this trust accordingly for all expenses and attorney's fees." No letter was addressed to the plaintiff corporation or to Meena Patel, the sole shareholder of the corporation at the time, and the defendant received no response from either of them or Babu Patel. A default judgment of foreclosure was entered against the plaintiff corporation, and the plaintiff's motion to vacate the foreclosure was subsequently denied.

Both the original complaint and the first amended complaint were in two counts. Count I was based on an allegation of a breach of fiduciary obligations. Count II was captioned "Punitive Damages" and made the same allegations as count I plus an allegation that the defendant "acted with a reckless disregard for the rights" of the plaintiff. The first amended complaint also alleged that the defendant knew that Babu Patel was frequently out of the city and not readily "communicable [ sic ]" and had agreed with him "to provide legal service to protect the interest of MAJS if necessary, and if Patel was not available; said service to be paid by Patel." The trial court, in dismissing the first amended complaint, held that since Babu Patel was not a beneficiary at the time of the foreclosure suit, the defendant owed him no duty. As noted, Babu Patel has not appealed.

The plaintiff bases its claim on two theories: First, the trust agreement provided that if the trustee shall be required to pay any sums of money on account of the trust or be made party to any litigation, the beneficiary was required to reimburse the trustee. It also provided as follows:

"However, nothing herein contained shall be construed as requiring the trustee to advance or pay out any money on account of this trust or to prosecute or defend any legal proceeding involving this trust or any property or interest thereunder. The sole duty of the Trustee with reference to any such legal proceeding shall be to give timely notice thereof to the beneficiaries hereunder after the Trustee is served with process therein and to permit such legal proceedings to be brought or defended in its name, provided that it shall be indemnified in respect thereto in a manner satisfactory to it."

The plaintiff contends that the defendant breached that duty to give timely notice to the proper party. Second, the plaintiff maintains that the letter of March 25, 1983, which the bank sent mistakenly to Babu Patel with a copy of the foreclosure complaint, constituted a modification of the trust agreement and that the bank was obligated thereby to provide legal services. The plaintiff's second argument we may deal with summarily. The very case it cites, John Kubinski & Sons v. Dockside Development Corp. (1975), 33 Ill. App. 3d 1015, 339 N.E.2d 529, is authority against it. In order that a modification of a contract may be established, it must be shown that the parties assented to the same terms. There is ...

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