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09/29/94 PROGRESSIVE LAND DEVELOPERS v. EXCHANGE

September 29, 1994

PROGRESSIVE LAND DEVELOPERS, INC., PLAINTIFF-APPELLEE/CROSS-APPELLANT,
v.
EXCHANGE NATIONAL BANK OF CHICAGO, N/K/A LA SALLE NATIONAL BANK, DEFENDANT-APPELLANT/CROSS-APPELLEE.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE STEPHEN A. SCHILLER JUDGE PRESIDING.

Hoffman

The opinion of the court was delivered by: Hoffman

PRESIDING JUSTICE HOFFMAN delivered the opinion of the court:

Plaintiff, Progressive Land Developers, Inc., filed suit against defendant, Exchange National Bank, alleging that defendant breached its fiduciary duty by improperly conveying real estate properties held in trust for plaintiff. Following a bench trial, the court found in favor of plaintiff and awarded damages of $930,815.65. Defendant appeals and plaintiff cross-appeals, challenging aspects of the damage award. Defendant also contends that (1) the court erred in determining that it breached its fiduciary duty; and (2) the court improperly found that defendant was bound by the determination in a prior probate proceeding as to the authority to control the trust property.

Background

This is another in a series of cases arising from the misappropriation of assets belonging to Elijah Muhammad, the former leader of the Nation of Islam (Nation), by members of the Nation after Muhammad's death. During his lifetime, Muhammad and others affiliated with the Nation established plaintiff, Progressive Land Developers, Inc., to hold title to certain real estate properties. In August of 1972, plaintiff transferred ten of these properties to defendant as trustee under trust No. 26950. After Muhammad's death in 1975, persons affiliated with the Nation, purporting to be newly-elected officers and directors of plaintiff, assumed control of plaintiff and directed defendant to sell each of the trust properties. In January of 1983, several of Muhammad's children (hereinafter the Estate) initiated citation proceedings to recover funds and property of Muhammad, including assets of Progressive, allegedly misappropriated by members of the Nation (hereinafter probate proceedings). The probate court determined, inter alia, that Muhammad was the sole rightful owner of plaintiff at the time of the conveyances, and that the assumption of control of plaintiff by the Nation was improper, as were the directions to convey the property in trust 26950. The case at bar arose from a subsequent suit in which plaintiff charged that defendant breached its fiduciary duty by following the directions to convey the trust property.

The prior probate proceedings

A brief review of the probate proceedings is necessary to an understanding of the issues in this case. On January 11, 1983, the Estate filed the "Administrator's First Petition for Recovery Citation" against, in relevant part, Edward D. Mustafaa, Matthew Hamidullah, Hafeezah Bahar, Syid Muhammad, and Muhammad's Mosque No. 2 Inc., a corporation which administers the Nation. Count I of the citation sought to recover shares of Progressive stock alleged to be the sole property of Muhammad and the Estate. Count II was a "Recovery Citation in the Nature of a Stockholder's Derivative Suit," filed on behalf of the Estate and Progressive, which sought to set aside conveyances improperly made by respondents after Muhammad's death, and to recover damages on behalf of the Estate and Progressive.

Following a hearing, the probate court awarded damages to the Estate in the amount of $12,975,907.50. The court concluded, inter alia, that Progressive was formed predominantly with funds belonging to Muhammad, and that the transfers and issuances of its stock by respondents after Muhammad's death were improper and void. The court further found that after Muhammad's death, the respondents illegally seized control of Progressive's books and records, appointed new directors and officers, and proceeded through the new directors and officers to sell "substantial assets" belonging to Progressive, retaining the proceeds to satisfy their own needs as opposed to those of Progressive or the Estate. Regarding the ten properties held in trust No. 26950, the court held that all transfers or conveyances after Muhammad's death were unauthorized.

The suit against defendant

The trust at issue was executed on August 24, 1972. The trust agreement authorized defendant to deal with the trust properties only under the joint written direction of plaintiff's president, Raymond Sharrieff, and secretary, Abass Rassoull, or the individual direction of Muhammad, the board chairman. The trust exempted defendant from the responsibility to inquire into the propriety of any such direction. Defendant was subsequently tendered a certified copy of a resolution reflecting the action of plaintiff's directors in executing the trust. The resolution empowered defendant to convey title and deliver deeds to the trust property on the direction of any two of the officers Sharieff, Rassoull, or Muhammad, or upon the instruction of Muhammad individually. It further authorized plaintiff's secretary to tender to defendant certified copies of future board resolutions, and directed defendant "'to reply (sic) upon such certification * * * until it is formally advised of any changes therein by a subsequent certification under the corporate seal.'" In September 1972, plaintiff assigned defendant the beneficial interest of trust No. 26950 as collateral security for a loan.

On February 25, 1975, Muhammad died intestate, and a probate estate was subsequently opened in the circuit court. About June 14, 1979, the Estate served defendant and other respondents with a citation to appear for examination concerning property believed to belong to Muhammad. The citation petition provided as follows:

"That Petitioners are informed and believe * * * that each of the [respondents] have in their possession or control cash, cash items, safe deposit boxes, personal property, account balances, records, and/or papers belonging to Decedent at the time of his death; and/or have information or knowledge needed by the Estate for the recovery of such cash or property of the Estate * * *

Wherefore, Petitioners pray that CITATIONS issue as to each of the above described persons and/or entities * * * requiring their Appearance before the Court for such hearing as shall be authorized by law and for the entry of such Order or Orders with respect thereto as shall be authorized by law and consistent with the evidence adduced at such hearings."

On June 29, 1979, defendant received correspondence from counsel for the Estate, Julian B. Wilkins, explaining that the proceedings were an effort by the Estate to determine whether it had located all assets belonging to Muhammad at his death. According to Wilkins, the Estate believed certain accounts "controlled by Muhammad," either solely, jointly, or in other names, were actually comprised of Muhammad's own assets. Wilkins listed plaintiff and two other entities as holders of Muhammad's accounts. On August 6, 1979, Martin Edwards, defendant's land trust specialist, acknowledged receipt of the citation, and furnished the requested documentation to the court.

On August 20, 1979, defendant received a resolution bearing plaintiff's corporate seal which purported to transfer the power of direction over the trust property to two new officers, named as Wallace D. Muhammad and Edward Mustafaa. The document reiterated language from the resolution originally establishing the trust, which designated plaintiff as the beneficial owner of the property. The new resolution contained ...


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