Appeal from the Circuit Court of Cook County. Honorable Albert Green, Judge Presiding.
As Modified On Denial of Rehearing June 30, 1994. Released for Publication July 14, 1994. Petition for Leave to Appeal Denied October 6, 1994.
The opinion of the court was delivered by: Mcnulty
MODIFIED ON DENIAL OF REHEARING
Justice McNULTY delivered the opinion of the court:
The First National Bank of Chicago (FNBC) is the trustee of an open end real estate collective investment fund known as Institutional Real Estate Fund F (Fund F). The Illinois Municipal Retirement Fund (IMRF) is an employee benefit plan which invested in Fund F. The governing trust agreement requires that the assets of Fund F be invested "primarily * * * in real property or investments of any kind relating to real property. Open end real estate collective investment funds are regulated by the Comptroller of the Currency (OCC). (12 C.F.R. § 9.18.) By letter dated November 22, 1988, IMRF notified the trustee of its decision to withdraw from Fund F.
Both section 5.2 of the trust agreement and the regulations of the OCC at 12 C.F.R. section 9.18(b)(4) have an impact on withdrawal requests. It is undisputed that section 5.2 requires that the trustee satisfy any withdrawal request within one year. It is also undisputed that under section 5.4 of the trust agreement FNBC has the option to satisfy a withdrawal request from Fund F in cash, or with property in kind, or partly in cash and partly in kind. Where FNBC opts to redeem units in Fund F by means of a distribution of real property in kind, then FNBC is required to distribute the property, ratably, in fractional shares of all the properties in Fund F, and not in whole properties pursuant to the regulations of the OCC at 12 C.F.R. section 9.18(b)(3) and (b)(6).
After receipt of IMRF's withdrawal request, and prior to the expiration of the IMRF's one year redemption period on November 22, 1989, the trustee made six cash distributions totalling over $20 million to IMRF in partial satisfaction of its withdrawal request.
In a letter dated October 17, 1989, FNBC, through its investment advisor, Brinson, proposed alternative redemption methods to the IMRF for the satisfaction of its withdrawal request from Fund F. The letter stated, in pertinent part, as follows:
"The current liquidity needs of Fund F and the investment situation regarding the real estate therein we believe necessitates that should IMRF's demand for total distribution in November stand, we will have to exercise our option under the governing Declaration of Trust to make an in kind distribution of real estate to you in satisfaction of your withdrawal amount. The Trustee is specifically given that discretion under the governing Declaration.
IMRF's best interests may be served by amending your request in order to withdraw and redeem only so much on each future valuation date, and at values to be determined on those dates, as would be available in cash to be distributed to all withdrawing participants on such date in a pro rata manner. This alternative would assure IMRF a distribution in cash rather than in property. In the meantime, IMRF would continue to be a Participant in the Fund, albeit on an ever diminishing basis through time. The timing of a cash payout as described above is difficult to project and will depend primarily on the timing of asset sales. In connection with the latter, please be advised that property valued at approximately $172,000,000 is currently on the market. We would be glad to discuss with you at any time the method by which an in kind distribution could be made as well as to further explore the alternatives available to you."
According to IMRF's second amended complaint, subsequent to the expiration of the IMRF's one year redemption period on November 22, 1989, FNBC made a cash distribution to the IMRF in partial satisfaction of the IMRF's request for a withdrawal from Fund F. This distribution redeemed $557,142.51 on December, 7, 1989.
On July 10, 1992, the IMRF notified the FNBC, by letter of its continuing demand for a redemption of its units in Fund F. That letter stated that the IMRF was "prepared to accept cash, or a combination of cash and fractional interests in real property, in satisfaction of its redemption request."
FNBC claims that on January 15, 1993, it satisfied the remainder of IMRF's redemption request through a mixed distribution of cash and fractional ...