McKay v. Kusper

624 N.E.2d 1140, 252 Ill. App. 3d 450, 191 Ill. Dec. 762
CourtAppellate Court of Illinois
DecidedMarch 29, 1993
Docket1-91-0797, 1-91-3062 cons.
StatusPublished
Cited by11 cases

This text of 624 N.E.2d 1140 (McKay v. Kusper) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McKay v. Kusper, 624 N.E.2d 1140, 252 Ill. App. 3d 450, 191 Ill. Dec. 762 (Ill. Ct. App. 1993).

Opinion

JUSTICE CAMPBELL

delivered the opinion of the court:

This is a consolidated appeal. Plaintiffs, taxpayers, appeal from the February 5, 1991, order of the trial court dismissing counts III, IV and V of their second amended complaint against defendant Amalgamated Trust and Savings Bank (Bank), and from the March 19, 1991, order of the trial court dismissing counts I and II against defendants Stanley Kusper (Kusper), former clerk of Cook County (County Clerk), and David Orr (Orr), present clerk of Cook County, for alleged violations of the deposit of public funds act (Deposit Act) (111. Rev. Stat. 1989, ch. 102, par. 34) and the Public Funds Investment Act (Investment Act) (111. Rev. Stat. 1989, ch. 85, par. 901). Plaintiffs further appeal from the August 14, 1991, order of the trial court denying both plaintiffs’ motion to vacate the dismissal of Orr and petition for the award of attorney fees. For the following reasons, we affirm.

The record reveals the following relevant facts. Beginning in at least November 1982 and continuing through 1988, Kusper, as county clerk, received public funds in the form of proceeds from the “scavenger” sales of tax-delinquent parcels of real property located in Cook County (County). Kusper retained the proceeds from the scavenger sales for subsequent disbursement to the county treasurer, depositing the proceeds in non-interest-bearing accounts at the Bank.

Following public disclosure of Kusper’s investment practices in February 1990, the Bank made what it described as a “voluntary” payment of $265,779.60 to the County as interest on $6.8 million held in a County Clerk account at the Bank for a period of eight months. At this time, Kusper publicly announced that the County Clerk and the Bank were under no legal obligation to deposit and accrue interest on the public funds received from the scavenger tax sales. A County auditor’s report estimated that at least $900,000 in interest would have accrued on funds deposited by Kusper through 1988.

On March 15, 1990, plaintiffs filed a “taxpayer derivative action” on behalf of themselves, all other taxpayers similarly situated, and for the benefit of the County, against Kusper and the Bank for violations of the Deposit and Investment Acts. In their complaint, plaintiffs alleged that defendants Kusper and the Bank fraudulently deprived the County of interest on County funds by failing to deposit the proceeds obtained from the scavenger sales of real property into interest-bearing accounts. On June 15, 1990, plaintiffs sent a letter to the county board and the Cook County State’s Attorney (State’s Attorney) demanding that legal action be taken on behalf of the County to recover the interest from the public funds at issue. At that time, plaintiffs stated their belief that it would be futile to make the demand upon Kusper because of his position that he was not subject to the requirements of the Deposit and Investment Acts. In a letter dated July 5, 1990, the State’s Attorney, on behalf of the County, rejected plaintiffs’ demand.

Plaintiffs filed their amended complaint on July 9, 1990. On December 6, 1990, the trial court granted the Bank’s and the County’s separate motions to dismiss plaintiffs’ amended complaint without prejudice, pursuant to section 2 — 615(a) of the Code of Civil Procedure (111. Rev. Stat. 1989, ch. 110, par. 2 — 615(a)). At that time, the trial court also denied Kusper’s motion to dismiss plaintiffs’ amended complaint. In addition, the trial court instructed plaintiffs to include Orr as a defendant, as he had recently succeeded Kusper in the office of County Clerk. Plaintiffs filed their second amended complaint on December 20, 1990, including Orr as a defendant and naming the County as a nominal defendant.

Count I of plaintiffs’ second amended complaint, directed against both Kusper and Orr collectively as the “County Clerk,” alleged that as custodian of public funds, the County Clerk’s practice of investing the proceeds of the scavenger sales in non-interest-bearing accounts directly violated the deposit and investment requirements established in the Deposit and Investment Acts.

The Deposit Act provides in pertinent part:

“§1. Any treasurer or other custodian of public funds may deposit such funds in a savings and loan association or State or national bank in the State. When such deposits become collected funds and are not needed for immediate disbursement, they shall be invested within 2 working days at prevailing rates or better.” (111. Rev. Stat. 1989, ch. 102, par. 34.)

Section 2 of the Investment Act describes “Permitted Investments” as follows:

“To the extent a public agency has custody of funds not owned by it or another public agency and does not otherwise have authority to invest such funds, the public agency may invest such funds as if they were its own. Such funds must be released to the appropriate person at the earliest reasonable time, but in no case exceeding 31 days, after the private person becomes entitled to the receipt of them. All earnings accruing on any investments or deposits made pursuant to the provisions of this Act shall be credited to the public agency by or’ for which such investments or deposits were made, except as provided otherwise *** and except where by specific statutory provisions such earnings are directed to be credited to and paid to a particular fund.” (HI. Rev. Stat. 1989, ch. 85, par. 902.)

Plaintiffs alleged that the County Clerk’s failure to comply with the' Deposit and Investment Acts deprived the County and its taxpayers of the interest earnings required to accrue under the Acts, and sought an accounting and payment of the amount of interest the County would have received had the funds been invested in accordance with the statutes.

Count II of plaintiffs’ second amended complaint alleged that the County Clerk breached his fiduciary duty to the County and the taxpayers by failing to invest the public funds in accordance with the statutes. No count of plaintiffs’ second amended complaint is directed against the County, and the prayer for relief does not seek any relief from the County.

Counts III, IV and V of plaintiffs’ second amended complaint contained allegations against the Bank. In count III, plaintiffs alleged that the Bank had constructive notice that the County Clerk’s practice of investing the public funds in non-interest-bearing accounts violated the County Clerk’s fiduciary duty to the county taxpayers under section 6 of the Investment Act, which provides:

“§6. (a) No bank shall receive any public funds unless it has furnished the corporate authorities of a public agency submitting a deposit with copies of the last two sworn statements of resources and liabilities which the bank is required to furnish to the Commissioner of Banks and Trust Companies or to the Comptroller of the Currency. Each bank designated as a depository for public funds shall, while acting as such depository, furnish the corporate authorities of a public agency with a copy of all statements of resources and liabilities which it is required to furnish to the Commissioner of Banks and Trust Companies or to the Comptroller of the Currency ***.” (111. Rev. Stat., 1989, ch. 85, par. 906.)

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Bluebook (online)
624 N.E.2d 1140, 252 Ill. App. 3d 450, 191 Ill. Dec. 762, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mckay-v-kusper-illappct-1993.