Court of Appeals of Illinois, First District, Sixth Division
LINDA S. KAGAN, on Behalf of Herself and All Persons Similarly Situated, and ELLIOT SAMUELS, Trustee of the Abe Samuels Trust and Executor of the Estate of Diane Samuels and on Behalf of Himself and All Persons Similarly Situated, Plaintiffs-Appellants,
WALDHEIM CEMETERY COMPANY, ROSEMONT PARK, INC., and DAVID GALE, Defendants (Zion Gardens, Inc., Defendant-Appellant; Bank of America, N.A., Successor to LaSalle Bank, N.A., Defendant-Appellee. ZION GARDENS, INC., Plaintiff-Appellant,
BANK OF AMERICA, N.A., Successor to LaSalle Bank, N.A., Defendant-Appellee
from the Circuit Court of Cook County. Nos. 11 CH 22722 & 11
CH 23177 Cons. Honorable Rodolfo Garcia, Judge Presiding.
Appeal from the Circuit Court of Cook County. No. 11 CH
33936. Honorable Rodolfo Garcia, Judge Presiding.
Appellant: Matthew T. Hurst, Matthew T. Heffner, Susman,
Heffner & Hurst, Chicago, IL; Daniel A. Edelman, Cathleen M.
Combs, James O. Laturner, Tiffany Hardy, Edelman, Combs,
Laturner & Goodwin, LLC, Chicago, IL.
Zion Gardens, Inc., Appellant: Jack Joseph, Esq., Sarah J.
Isaacson, Esq. of Counsel, Chicago, IL.
Appellee: David A. Baker, Jared R. Cloud, Sam P. Myler,
McDermott, Will & Emery LLP, Chicago, IL.
and Delort, Justices concurred in the judgment and opinion.
[¶1] The plaintiffs, Linda S. Kagan and
Elliot Samuels (the plaintiffs), appeal from an order of the
circuit court of Cook County dismissing their second amended
consolidated complaint against the defendants, Bank of
America (the Bank), Waldheim Cemetery Company (Waldheim),
Zion Gardens, Inc. (Zion), Rosemont Park, Inc. (Rosemont),
and David Gale. Zion filed separate appeals from the order
dismissing the second amended consolidated complaint and from
the dismissal of its separate amended complaint against the
[¶2] On appeal, the plaintiffs contend that:
(1) they stated a claim for breach of common law fiduciary
duty against the Bank; (2) a private right of action exists
under the Cemetery Care Act giving them standing to sue the
Bank; (3) the circuit court abused its discretion when it
denied them leave to amend their second amended consolidated
complaint; and (4) they adequately pleaded a claim for
violation of section 2Z of the Illinois Consumer Fraud and
Deceptive Business Practices Act (Consumer Fraud Act) (815
ILCS 505/2Z (West 2012)).
[¶3] In its separate appeal from the
dismissal of the second amended consolidated complaint, Zion
seeks reversal of the dismissal order insofar as it rested on
a finding (1) that the beneficiaries of a cemetery care trust
lacked standing to sue an independent trustee they alleged
was responsible for their injury or (2) a finding that the
lien provision of the Cemetery Care Act (760 ILCS 100/1
et seq. (West 2012)) was relevant to the issue of
standing, or could exonerate the Bank.
[¶4] In its appeal from the dismissal of its
amended complaint against the Bank, Zion contends that Zion
had standing to seek redress against the Bank for the benefit
of the grave owners and the general public as well as itself.
[¶5] On the parties' motion, we
consolidated the three appeals for review. For reasons that
follow, we affirm in part and reverse in part the orders of
the circuit court.
[¶7] The litigation in these cases centered
on provisions of the Cemetery Care Act (Care Act) (760 ILCS
100/1 et seq. (West 2012)). The Care Act was
enacted to remedy the evils relating to possible frauds or
mismanagement in the handling of care funds and in the
advertising and sales of services to which the funds for care
were to be devoted. Union Cemetery Ass'n of the City
of Lincoln, Illinois v. Cooper, 414 Ill. 23, 34, 110
N.E.2d 239 (1953).
[¶8] A cemetery licensed under the Care Act
must establish a care fund into which deposits of the funds
collected from the purchasers of cemetery property and
services are placed and must hold the funds in trust.
First of America Bank, Rockford, N.A. v. Netsch, 166
Ill.2d 165, 179, 651 N.E.2d 1105, 209 Ill.Dec. 657 (1995);
760 ILCS 100/4 (West 2012). The cemetery authority may act as
trustee of up to $500,000 in care funds, but it must retain
an independent trustee for any amount over $500,000. "
The net income only from the investment of [special] care
funds shall be allocated and used for the purposes specified
in the transaction by which the principal was established in
the proportion that each contribution bears to the entire sum
invested." 760 ILCS 100/3 (West 2012).
[¶9] In 2000, when the care funds exceeded
$500,000, David Gail, vice-president of Rosemont, entered
into a trust agreement with LaSalle Bank. Rosemont was named
the settlor of the trust, and LaSalle was named the trustee
of the trust into which the care funds were deposited.
Subsequently, the Bank became the trustee when it acquired
LaSalle Bank. Pertinent parts of the trust agreement provided
" 3. This trust is established by Rosemont, as Settlor,
which owns and operates Rosemont Cemetery (hereinafter the
" Cemetery" ), for the purpose of managing funds
received and to be invested to provide income for future care
services to be provided by Cemetery in accordance with the
Care Act and the terms hereof shall be construed accordingly.
* * *
5.2 All moneys transmitted by Settlor under this Trust
Agreement shall be held in trust by Trustee as to principal
and shall be invested in the manner required by the Cemetery
* * *
5.4 Settlor covenants and agrees to use the income received
from this Trust Fund for the care, landscaping and
maintenance service provided for in the Cemetery Care Act to
the extent of the income received.
* * *
6.10 Trustee shall be entitled to rely absolutely upon the
truth of the recitals of fact contained in deposit
memorandums and documents required to be presented to it
under the terms of this Trust Agreement, and upon accounting
information furnished by Settlor and shall be fully protected
and absolved from all liability in so doing; and Trustee
shall not in any way be responsible or liable of the proper
application of any amounts so paid by it or upon the
direction of Settlor pursuant to any such documentation.
7.1 In administering this trust, Trustee shall have the
express powers enumerated herein, together with all the
powers conferred by law upon trustees in the Cemetery Care
Act and to the extent not covered then powers conferred by
law upon trustees generally in Illinois Statutes. In addition
to, and not in limitation of the powers vested and to be
vested in it by law or enumerated in this Trust Agreement,
Trustee shall have the power to take any action with respect
to the Trust Assets as is appropriate in carrying out the
purposes of this Trust Agreement. Trustee may exercise these
powers at any time and from time to time in any valid manner
without a court order."
[¶10] In 2005, plaintiff Kagan paid $1,300
to Rosemont for perpetual care of a gravesite. In 1990 and
2006, respectively, plaintiff Samuels paid $41,493.78 and
$4,291, to Rosemont for perpetual care of multiple
[¶11] Beginning in 2005, Rosemont began to
transfer funds from the trust account in such amounts that by
2009, the principal of the trust was completely depleted, and
the cemetery was in a severe state of neglect. Under the Care
Act, Rosemont was required to submit an annual accounting of
all care funds to the Illinois Comptroller (the Comptroller).
760 ILCS 100/12 (West 2012). Rosemont failed to file reports
in 2005 through 2008 but requested and received a filing
extension for each of those years. In 2009, the Comptroller
served Rosemont with a notice of audit and an opportunity to
respond. Rosemont submitted documentation to the Comptroller
confirming that it had withdrawn and spent nearly the entire
principal of the trust to operate the cemeteries under its
[¶12] In 2011, Rosemont entered into an
agreement with Waldheim whereby, for the sum of $10, Waldheim
would purchase and operate Rosemont's cemeteries.
Waldheim created a subsidiary, Zion, to operate the Rosemont
cemeteries. As a condition of obtaining a license to operate
the cemeteries, Zion agreed to replenish the depleted trust
principal. Subsequently, Zion sent a letter to the holders of
perpetual-care contracts informing them that those contracts
were no longer valid.
CIRCUIT COURT PROCEEDINGS
The Kagan and Samuels Complaints
[¶15] In June 2011, plaintiff Kagan and
plaintiff Samuels filed separate class action complaints
against the defendants. Both complaints sought redress for
themselves and others who purchased extended-care services
from Rosemont. On August 23, 2011, following the circuit
court's consolidation of the Kagan and Samuels
complaints, an amended consolidated complaint was filed
against the Bank, Zion and the other named defendants
alleging conversion, common law breach of fiduciary duty,
violations of the Illinois Cemetery Oversight Act and the
Care Act and violation of the Consumer Fraud Act. They also
sought an accounting.
[¶16] The Bank filed a combined motion to
dismiss the amended consolidated complaint pursuant to
section 2-619.1 of the Code of Civil Procedure (Code) (735
ILCS 5/2-619.1 (West 2012)), the Bank moved to dismiss the
amended consolidated complaint. The circuit court granted the
Bank's motion to dismiss in part finding that under
section 2-615 of the Code (735 ILCS 5/2-615 (West 2012)), the
plaintiffs failed to state causes of action for conversion
and common law breach of fiduciary duty. The plaintiffs were
granted leave to replead the dismissed conversion and common
law breach of fiduciary duty counts.
[¶17] The plaintiffs filed their second
amended consolidated complaint, repleading the conversion and
common law breach of fiduciary duty claims solely to preserve
them for appeal. While the circuit court had not dismissed
the consumer fraud count, the plaintiffs added the term
" knowingly" to their claim of consumer fraud.
Pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West
2012)), the Bank moved to dismiss the second amended
consolidated complaint. On April 10, 2013, the circuit court
granted the Bank's motion and dismissed the second
amended consolidated complaint with prejudice.
Zion's Complaint Against the Bank
[¶19] In September 2011, Zion filed a
separate lawsuit against the Bank alleging multiple causes of
action including, inter alia, illegal withholding of
funds, breach of the trust agreement, and violation of the
Care Act. Pursuant to section 2-619.1 of the Code, the Bank
moved to dismiss Zion's complaint. The court dismissed
the counts alleging illegal withholding of funds, breach of
the trust agreement and violation of the Care Act under
section 2-615, and Zion was granted leave to amend those
[¶20] Zion filed an amended complaint. Count
I alleged an equitable cause of action against the Bank based
on the violations of the trust agreement, the Care Act, the
Trusts and Trustees Act (760 ILCS 5/1 et seq. (West
2012)), breaches of common law duties owed by a trustee,
fraud and collusion with Rosemont and sought a finding of
malice and an award of punitive damages. Count II sought a
declaratory judgment that (1) Zion had standing to maintain
its action on behalf of itself, the care fund trust, the
owners of the lots and gravesites and on behalf of the
general public and (2) the Bank was a fiduciary of the
beneficiaries of the trust, which included Rosemont, the
owners of the lots and grave ...