APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE RONALD C. RILEY, JUDGE PRESIDING.
The opinion of the court was delivered by: Hoffman
PRESIDING JUSTICE HOFFMAN delivered the opinion of the court:
The plaintiff, Tally Ho Associates, Inc. (Tally Ho), was assigned the beneficial interest of a land trust as collateral for an installment note, but Edward Halleran, the debtor on the note, retained the power of direction. The defendant, Worth Bank & Trust Company (Worth Bank), was the trustee of the land trust. Tally Ho appeals from a judgment entered after a bench trial in favor of Worth Bank on Tally Ho's complaint for breach of fiduciary duty and other similar claims. We consider: (1) whether it was against the manifest weight of the evidence for the trial Judge to find that Halleran, who had possession of the original note, was discharged; and (2) if he was not discharged, whether Worth Bank, as trustee, had a fiduciary duty to notify Tally Ho, as collateral assignee, that a foreclosure proceeding was instituted against the property and that Halleran exercised the power of direction to convey the property to a third party. For the following reasons, we affirm.
On September 20, 1977, Tally Ho sold a parcel of real property to Halleran for $925,000. On the same day, Halleran transferred title to the property into a land trust with Worth Bank and executed a collateral note to Tally Ho for $100,000. As security for the note, Halleran assigned to Tally Ho the beneficial interest of the trust, but retained the power of direction.
On July 16, 1984, Worth Bank sent a letter to Halleran by certifiedmail informing him that a foreclosure suit had been filed against the property. The letter indicates that a carbon copy of the letter was sent to Tally Ho.
On November 30, 1984, Halleran directed Worth Bank to issue a trustee's deed for the property to a third party. Halleran signed an indemnity agreement on December 13, 1984, which stated that the collateral note had been satisfied and that Tally Ho had given him the original note. Halleran agreed to indemnify Worth Bank if Tally Ho filed a lawsuit against the bank seeking damages for issuing a trustee's deed pursuant to Halleran's direction to convey without requiring Tally Ho's consent. The next day, Worth Bank issued the trustee's deed without notifying Tally Ho or obtaining its consent.
After Tally Ho learned of the sale, it filed the present action against Halleran for breach of contract and against Worth Bank for breach of trust, breach of loyalty, breach of impartiality, justifiable reliance, and fraud. Tally Ho dismissed its claim against Halleran prior to trial.
At trial, Carroll Obiala testified that she became president of Tally Ho after the death of her husband, Ed Obiala Sr., in January 1983. She testified that Halleran made some payments on the note, but did not pay it off in full. She also testified that she did not know whether the original note was given to Halleran.
Edmund M. Obiala Jr., who was the son of Carroll and Ed Obiala Sr., testified that he had been treasurer of Tally Ho since 1972, and that he was familiar with the loan transaction between Halleran and Tally Ho. He attended the closing for the sale of the property, and testified that Tally Ho received what he thought was the original note at that time. It was not until after 1984 that Tally Ho learned the note it had in its possession was not the original.
Obiala Jr. had numerous conversations with Halleran concerning payment on the note. After Halleran made a $10,000 payment in July 1982, Obiala Jr. had four to five conversations with Halleran until Obiala Sr.'s death in January 1983, and he had five more conversations with Halleran until he made a $5,000 payment in October 1983. That check noted it was "on acct." Obiala Jr. had 14 more conversations with Halleran after the October 1983 payment. Halleran never told Obiala Jr. that the note had been satisfied or discharged. There are no corporate records which show that the note was satisfied and Obiala Sr. never told Obiala Jr. that the note was satisfied. Tally Ho's record of Halleran's payments on the note showed an outstanding principal balance of $90,000.
Obiala Jr. also testified that Tally Ho did not receive a carbon copy of the letter dated July 16, 1984, which Worth Bank sent toHalleran informing him of a foreclosure action against the property. In early 1985, Obiala Jr. first learned that foreclosure proceedings were instituted against the property. Also, Worth Bank never sought Tally Ho's approval to convey the property out of trust in 1984, Tally Ho never signed a letter of direction to that effect, and Worth Bank never informed Tally Ho that the property had been sold.
Thomas Potpora testified that he was the secretary for Tally Ho. Potpora was at the closing on the property in 1977 and thought the note in Tally Ho's possession was the original. Potpora did not know how Halleran obtained the original note. Obiala Sr. never told Potpora that he had cancelled the note and Tally Ho continued in its efforts to collect on the note even after Obiala Sr.'s death. Worth Bank never notified Tally Ho of the foreclosure action or of the conveyance of the property out of trust.
Halleran testified that he made some payments on the note to Tally Ho, but in 1980 or 1981, Obiala Sr. gave him the original note back and Halleran understood that he did not owe on the note any longer. He acknowledged that there was nothing on the original note indicating that it had been cancelled or paid. He testified that a $10,000 check he wrote in June 1982 was a gift in response to Obiala Sr.'s request because he was having financial difficulty. The $5,000 check written in October 1983 was also a gift. On ...