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12/29/89 First National Bank and v. J.P. Schermerhorn and

December 29, 1989

TRUSTEE, ET AL., PLAINTIFFS-APPELLEES

v.

J.P. SCHERMERHORN AND COMPANY, INC., ET AL., DEFENDANTS-APPELLANTS



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SIXTH DIVISION

FIRST NATIONAL BANK AND TRUST COMPANY OF EVANSTON, as

549 N.E.2d 862, 192 Ill. App. 3d 1057, 140 Ill. Dec. 211 1989.IL.2059

Appeal from the Circuit Court of Cook County; the Hon. Anthony J. Scotillo, Judge, presiding.

APPELLATE Judges:

JUSTICE LaPORTA delivered the opinion of the court. EGAN, P.J., and McNAMARA, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LAPORTA

Plaintiffs instituted this action in chancery against defendants seeking an accounting, an injunction, and damages based upon defendants' breach of fiduciary duties and contract obligations in relation to property held in a land trust. The trial court granted the injunctive relief and ordered an accounting. After a trial on the allegations regarding the accounting, the trial court granted plaintiffs compensatory and punitive damages but denied plaintiffs' petition for attorney fees. Defendants have appealed the award of compensatory and punitive damages, and plaintiffs have appealed the denial of their petition for fees.

First National Bank and Trust Company of Evanston was trustee under trust number R -- 1715, which held title to the property at issue. The beneficial interest under the trust was held by plaintiffs Margaret Schermerhorn and Ella Metoyer. Margaret Schermerhorn owned 80.8% of the beneficial interest under the trust, and Ella Metoyer owned the remaining 19.2% of the beneficial interest. Plaintiffs filed a three-count complaint on November 22, 1983, naming J.P. Schermerhorn & Co., Inc., and Jack P. Schermerhorn as defendants and seeking an injunction, an accounting, and compensatory damages. Plaintiffs later amended the complaint, asserting three additional counts against the defendants.

Defendant Schermerhorn & Co. was added as a party-defendant after Jack P. Schermerhorn voluntarily dissolved the corporate defendant J.P. Schermerhorn & Co. and on the same day incorporated Schermerhorn & Co., transferring all of the former corporation's assets to the new corporation.

On December 2, 1983, the trial court granted plaintiffs' request for injunctive relief, entering an order restraining defendants from managing or attempting to manage the property and from interfering with plaintiffs' management thereof. On April 30, 1984, defendants filed a motion to dismiss the accounting action, asserting that they had fully accounted to plaintiffs as reflected by the monthly statements which were attached as exhibits to the motion to dismiss. The motion to dismiss was denied, and the court ordered defendants to file a formal, verified accounting. Thereafter, defendants filed an "accounting" which included the same monthly statements previously attached to the motion to dismiss along with 10 pages of "minor discrepancies" intended to correct certain errors in the "accounting." This pleading was signed by defendant Jack Schermerhorn as president of the previously dissolved J.P. Schermerhorn & Co. This accounting was stricken, and on November 3, 1987, defendants filed a verified amended accounting which indicated that defendants owed plaintiffs $489.37. Plaintiffs filed objections to the accounting regarding certain disputed items contained therein.

A trial was subsequently held on count I of the complaint, which sought an accounting. The evidence adduced at trial established that plaintiff Margaret Schermerhorn was the younger sister of defendant Jack P. Schermerhorn, and that these two parties entered into a contract by which defendants were to manage the apartment building which was the property at issue. That contract contained a provision indicating that it was to run initially for two years commencing May 15, 1978, and was to continue thereafter until terminated by either party upon 90 days' prior written notice. The contract also provided that defendants' compensation for management was to be 5% of the gross amount collected each month, and for leasing, was to be at the regular and customary rates as recognized by the Chicago Real Estate Board for all new tenants secured, and one-half such rates for renewals of leases executed while the agreement was in force.

Defendants managed the property under that contract for 5 1/2 years, until plaintiffs terminated the contract by letter to defendants on November 9, 1983, effective immediately. At trial, witnesses for both plaintiffs and defendants testified as to the management of the plaintiffs' property and as to the specific amounts reflected in defendants' verified accounting. Plaintiffs presented the testimony of Marie Richter, a certified public accountant specializing in real estate accounting. Richter examined the accounting and supporting documents submitted by defendants and prepared a report which reflected errors and omissions in defendants' accounting. Defendants presented the testimony of Neil King, who stated that the charges reflected in defendants' accounting were proper. At the Conclusion of all of the evidence presented, the trial Judge found that defendants' conduct in relation to management of plaintiffs' property was not a mere omission and oversight, but amounted to neglect and intentional misrepresentation. The court concluded that defendants had breached their fiduciary duty to plaintiffs. The court entered a judgment on the accounting in favor of the plaintiffs in the amount of $7,874.40, plus punitive damages to be assessed at a later date. Defendants subsequently filed a motion to reconsider the judgment, asserting that errors were made in the calculation of compensatory damages. On July 11, 1987, the trial court denied defendants' motion to reconsider the judgment and awarded plaintiffs $2,500 as punitive damages.

On May 14, 1984, four years prior to entry of the judgment, plaintiffs had filed a motion for attorney fees pursuant to section 2-611 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2-611), which had been entered and continued sine die. On August 16, 1988, plaintiffs modified their petition for fees under section 2-611. The fee petition was denied by the trial court on October 28, 1988.

Thereafter, defendants appealed the judgments for compensatory and punitive damages, and plaintiffs appealed the denial of sanctions under section 2-611 ...


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