APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION
McCORMICK, JR., Indiv., et al., Respondents-Appellants
536 N.E.2d 419, 180 Ill. App. 3d 184, 129 Ill. Dec. 579 1988.IL.1748
Appeal from the Circuit Court of Cook County; the Hon. Joseph M. Wosik, Judge, presiding.
PRESIDING JUSTICE CAMPBELL delivered the opinion of the court. QUINLAN and MANNING, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE CAMPBELL
This appeal arises from: (1) Brooks McCormick, Jr.'s (Brooks Jr.'s), 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 (Ill. Rev. Stat. 1985, ch. 110, par. 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 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 attorney 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 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 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, 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 cotrustee 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 nonliquid, nonmarketable residence.
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 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
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) attorney 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 attorney 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 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 fair trial. Specifically, Brooks Jr. argues that the trial Judge's comments during trial evidenced an impermissible bias toward lawsuits by one family member against another which predetermined the outcome of the case and deprived him of his constitutional right to due process. In support of his contention, Brooks Jr. enumerates five instances which he claims demonstrate the trial Judge's bias: (1) subjective comments made by the Judge at the close of the case and prior to entering his order which indicated his dislike for the type of lawsuit at bar and his total disbelief in Brooks Jr.'s testimony; (2) comments by the trial Judge at the hearing on the Trustees' motion to dismiss the third-party complaint that he found the vindictiveness between father and son personally repulsive; (3) an evidentiary ruling which precluded Brooks Jr. from introducing expert testimony on the liability issue and certain evidence of damages even though the Trustees had been allowed to introduce similar evidence; (4) an evidentiary ruling which granted the Trustees' motion in limine to bar Brooks Jr.'s trust expert from testifying, and the denial of Brooks Jr.'s motion in limine requesting that the Trustee's expert be barred from testifying; and (5) evidentiary rulings granting the Trustees' motion in limine to bar the evidence and testimony of Brooks Jr.'s damage expert regarding lost appreciation of securities sold by the Trustees and denying Brook Jr.'s motion in limine to exclude all evidence of appreciation of Trust assets.
In response to Brooks Jr.'s accusations that the trial court was prejudiced against him, the Trustees/Agents argue that Brooks Jr. has waived this issue for review by failing to raise the question of prejudice in the trial court. If Brooks Jr. believed that the trial court was prejudiced against him, the proper procedure would have been to request a change of venue. Section 2-1001 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-1001) governs the procedural requirements for requesting a change of venue and provides, in pertinent part:
"(a) A change of venue in any civil action may be had in the following situations:
(2) Where any party or his or her attorney fears that he or she will not receive a fair trial in the court in which the action is pending, because . . . the Judge is prejudiced against him or her, or his or her attorney . . .. In any such situation the venue shall not be changed except upon application, as provided herein, or by consent of the parties.
(c) Every application for a change of venue by a party or his or her attorney shall be by petition, setting forth the cause of the application and praying a change of venue, which petition shall be verified by the affidavit of the applicant. A petition for change of venue shall not be granted unless it is presented before trial or hearing begins and before the Judge to whom it is presented has ruled on any substantial issue in the case, but if any ground for such change of venue occurs thereafter, a petition for change of venue may be presented based upon such ground."
Although the right of a party to seek a change of venue on the ground of prejudice is absolute, it may be waived if not asserted at the appropriate time. As a general rule, a petition for change of venue is untimely if presented after the trial court has ruled on a substantial issue in the case. (People v. Lawrence (1963), 29 Ill. 2d 426, 194 N.E.2d 337; Home Federal Savings & Loan Association v. La Salle National Bank (1970), 130 Ill. App. 2d 285, 264 N.E.2d 704.) The purpose behind requiring a party to file its petition for change of venue before a decision on a substantial issue is made is to prevent counsel from ascertaining whether a court is in agreement with its theory and, if it is not, to assert prejudice and seek a change in venue. (People v. Lawrence (1963), 29 Ill. 2d 426, 194 N.E.2d 337.) Although section 2 -- 1001 does allow for the situation where a ground for change of venue occurs after a ruling has been made, the party must file a written application for change of venue or that issue will be waived for review. Hollo v. Hollo (1985), 131 Ill. App. 3d 119, 474 N.E.2d 827; Lannon v. Lamps (1980), 80 Ill. App. 3d 318, 399 N.E.2d 712; Home Federal Savings & Loan Association v. La Salle National Bank (1970), 130 Ill. App. 2d 285, 264 N.E.2d 704.
In the present case, Brooks Jr. acknowledges in his reply brief that section 2-1001 governs the procedure for requesting a change of venue, but ignores the clear language of section 2-1001 that "venue shall not be changed except upon application, as provided herein, or by consent of the parties." (Ill. Rev. Stat. 1985, ch. 110, par. 2-1001.) Instead, Brooks Jr. relies on Ludgin v. John Hancock Mutual Life Insurance Co. (1986), 145 Ill. App. 3d 703, 495 N.E.2d 1237, Keehner v. A.E. Staley Manufacturing Co. (1977), 50 Ill. App. 3d 258, 365 N.E.2d 275, and United States v. Trigg (7th Cir. 1968), 392 F.2d 860, for the proposition that due process claims of prejudice have been addressed on appeal absent motions for a transfer of venue by the complaining parties. We find these cases to be distinguishable from the present situation and unpersuasive. In Ludgin, plaintiff sued defendants under the theories of negligence and res ipsa loquitur after she was injured while riding an escalator in the John Hancock building in Chicago. The jury returned a verdict against both defendants. On appeal, defendants alleged that the trial court's opening remarks prior to voir dire were highly prejudicial and constituted reversible error. Without any reference to the content of the remarks, the appellate court held that neither the Judge's conduct nor his views unduly affected the outcome of the trial. Ludgin is clearly distinguishable from the present case on the ground that the defendants in Ludgin were not alleging that the court was prejudiced against them, but rather that remarks made by the trial court were prejudicial. The latter situation does not fall within the purview of section 2-1001.
In Keehner v. A.E. Staley Manufacturing Co. (1977), 50 Ill. App. 3d 258, 365 N.E.2d 275, plaintiff appealed from an order granting defendant's motion for a change of venue, alleging that the trial court had been prejudiced against him. The appellate court found that the trial court had erred in granting defendant's motion for change of venue after it had ruled on a summary judgment motion, but found that the error was harmless. The Keehner court never addressed the issue of compliance with the requirements of section 2 -- 1001 and, thus, is inapplicable to the issue before us.
Lastly, in United States v. Trigg (7th Cir. 1968), 392 F.2d 860, defendant was convicted of violating Federal narcotics laws. On appeal, defendant alleged that extra-judicial information received by the trial Judge adverse to defendant served to disqualify the trial Judge on the ground of prejudice. Specifically, at an interim hearing outside the presence of the jury, the trial Judge mentioned that defendant "had been seen at or close to the scene" where a government witness had been found dead. After both sides rested, the trial Judge commented that he might know more about the background of the defendant than the prosecutor did. In holding that the Judge's comments were merely expressions of his appraisal of the evidence, the reviewing court never addressed any statutory requirement for change of venue. Accordingly, we find Hollo, Lamon, and Home Federal, relied upon by the Trustees and Agents, determinative of the issue and conclude that the issue of the trial court's prejudice has been waived for review.
Even if the issue of prejudice had not been waived, we do not find that the trial Judge's comments deprived Brooks Jr. of his constitutional right to a fair trial. It is well established that a trial Judge is presumed to be impartial (United States v. Baskes (7th Cir. 1981), 687 F.2d 165) and relies only on proper evidence in reaching a determination on the merits. (People v. Beasley (1982), 108 Ill. App. 3d 301, 438 N.E.2d 1305.) The burden of overcoming this presumption rests on the party making the charge of prejudice, who must present evidence of personal bias stemming from an extra-judicial source (United States v. Baskes (7th Cir. 1981), 687 F.2d 165; People v. Beasley (1982), 108 Ill. App. 3d 301, 438 N.E.2d 1305) and evidence of prejudicial trial conduct (United States v. Bolden (7th Cir. 1965), 355 F.2d 453). During a bench trial, a Judge's comments are generally regarded as making explicit that which is implicit in the adverse ruling (People v. Faginkrantz (1960), 21 Ill. 2d 75, 171 N.E.2d 5), and the Judge's subjective opinion as to what the evidence has demonstrated is insufficient to establish personal bias or to raise an inference of prejudice. United States v. Bolden (7th Cir. 1965), 355 F.2d 453; Ludgin v. John Hancock Mutual Life Insurance Co. (1986), 145 Ill. App. 3d 703, 495 N.E.2d 1237.
With respect to the comments made by the trial court as to Brooks Jr.'s credibility and character, the record indicates that these comments were made after the close of all evidence and immediately preceding the court's announcement of its determination. In our view, the court was merely commenting on Brooks Jr.'s credibility as a witness and his underlying vindictive attitude toward Brooks Sr., which is clearly within the purview of the trial court. Regarding Brooks Jr.'s allegations that the trial court's evidentiary rulings demonstrated the court's prejudice, this court has held that allegedly erroneous findings and rulings by the trial court are insufficient reasons to believe the court had personal bias or prejudice for or against a defendant. People v. Neumann (1986), 148 Ill. App. 3d 362, 499 N.E.2d 487.
Next, Brooks Jr. contends that the trial court erred in finding that the Trustees did not breach their fiduciary duty to him by mismanaging and wasting the Trust assets. In support of his position, Brooks Jr. claims that the Trustees had wasted Trust assets by failing to supervise construction of the residence after the architect was fired in 1977; by failing to ensure that Ragnar-Benson, general contractor, complied with the provisions of its contract; and by making an unjustified payment to Ragnar-Benson. Brooks Jr. further contends that the Trustees breached their fiduciary duty to protect, preserve and prudently invest Trust assets when they made imprudent financing decisions and when they converted two-thirds of the Trust's income-producing assets into a non-income-producing residence which could be sold only for a fraction of its cost.
With respect to the allegation that the Trustees wasted Trust assets, Brooks Jr. claims that when he fired the architect in November 1977, the Trustees had no ability to control or to verify the bills submitted by Ragnar-Benson because it had been the architect's duty to do so. According to Brooks Jr., the original construction contract entered into between Ragnar-Benson and himself, together with subsequent approved written change orders, guaranteed a maximum cost of $449,542 for construction of the residence. On April 17, 1978, Ragnar-Benson submitted requisition No. 6, seeking payment of a sum which was in excess of the agreed maximum. Brooks Jr. objected to the excess payment because Ragnar-Benson could provide no justification for the increased cost. Brooks Jr. alleges that in breach of their fiduciary duty, the Trustees paid a portion of the disputed claim.
The Trustees agree that in April 1978, Ragnar-Benson submitted requisition No. 6, which requested an amount in excess of the maximum contract price, and that Brooks Jr. told Schroeder not to pay. However in a letter dated May 17, 1978, Brooks Jr. authorized the Trustees to pay the balance due on the original construction contract with Ragnar-Benson. The Trustees argue that their ...