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SECOND DIVISION
December 28, 2001

JUSTICE GORDON delivered the opinion of the court:

Appellants, numerous groups of approximately 1,200 non-cash- asset account holders,⁽¹⁾ appeal an order of the circuit court of Cook County allocating a $68.1 million cash shortage from trust funds deposited for investment with Independent Trust Corporation (Intrust). The trial court allocated the shortage among all account holders, even those whose assets were noncash at the time Intrust was placed in receivership because virtually all cash deposited with Intrust, including that used to acquire noncash assets, was commingled in a single, common account. The noncash account holders argue that only the cash account holders should bear the burden of the $68.1 million loss. Appellants also appeal the trial court's order authorizing the receiver to charge its fees and expenses to the individual trust accounts via a levy on the accounts. We disagree with appellants that the trial court erred in allocating the shortage to all account holders. However, we do agree with appellants that the trial court erred in charging all of the receiver's fees and expenses to the individual accounts and remand on this issue.

Intrust was an Illinois corporate fiduciary organized under the Corporate Fiduciary Act (Act) (205 ILCS 620/1-1 et seq. (West 1998)) and was regulated by the Illinois Commissioner of Banks and Real Estate (Commissioner). Intrust served as the custodian for various investment trust assets, including individual retirement accounts (IRAs), qualified benefit plans, Starker trusts, personal trusts, and Illinois land trusts, that its customers (appellants and others who have not appealed) placed in its custody. The assets were managed either by the customers or their investment advisors in a wide variety of investments, including cash, money market funds, stocks, mutual funds, limited partnerships, life insurance policies, tax lien certificates, and promissory notes. Intrust did not exercise discretion in investing assets deposited with it although, according to appellants, Intrust did manage money left in its "cash management program." Those customers who traded in commodity futures contracts and options, who utilized the cash management program, agreed to leave 30% of the principal balance of their accounts on deposit with Intrust in the form of cash as a safety net for margin calls.⁽²⁾

As of April 14, 2000, Intrust had approximately 17,000 customers and acted as custodian for approximately $1.84 billion in assets. Intrust's accounts were extremely active, averaging 200,000 transactions per week. These transactions included both the deposit of cash and noncash assets into trust accounts as well as the purchase and sale of securities and other noncash assets. Because of the volume of transactions conducted, Intrust held large amounts of cash on a daily basis. Intrust held all cash in a single, commingled account designated as its money market cash trust fund (commingled account). The cash of virtually every account holder passed through the commingled account, albeit perhaps only briefly, at some time. Specifically, cash newly deposited with Intrust⁽³⁾ was placed in the commingled account before an account holder's investment instructions were carried out. From there, depending on the account holder's instructions, the cash would remain in the commingled account, be transferred to another depository institution, be transferred to an escrow account at Intercounty Title Company (Intercounty), or used to purchase specific noncash assets. Money was deposited into the commingled account when another depository institution transferred money back to Intrust, when Intercounty transferred money back to Intrust, when a noncash asset was liquidated in connection with a new investment purchase (if another noncash asset was purchased, the money would then again leave the commingled account) or to generate cash to pay custodial fees and investment advisory fees, or when, in an effort to close an account, a noncash asset was liquidated. Most, if not all, purchases and sales of noncash assets required cash or produced cash, which passed through the commingled account. Intrust used computerized accounting software, which, according to PriceWaterhouseCoopers, LLP, the receiver appointed upon commencement of the receivership, was limited and out of date, to keep track of account records. According to the receiver, this software was unable to recreate historical account transactions and account balances on any given day.

From December 1990 through April 23, 1999, Intrust transferred substantial portions of cash from the commingled account to the custody of Intercounty on approximately 41 occasions,⁽⁴⁾ which in turn, commingled the money it received from Intrust with funds of its own customers. Intrust accounted for the amounts held at Intercounty in the commingled account ledger. Although some of the money transferred to Intercounty was returned to Intrust's custody and deposited into the commingled account, a majority of the funds were never returned.⁽⁵⁾

The Commissioner directed Intrust to reestablish control over the funds transferred to Intercounty and because Intrust failed to comply, on April 14, 2000, the Commissioner seized control of Intrust pursuant to the Act, by letter appointed PriceWaterhouseCoopers, LLP, as receiver, and commenced an action for dissolution and liquidation of Intrust through receivership in the circuit court of Cook County via a verified complaint.

On April 17, all 17,000 account holders were sent a letter by first class mail informing them that cash was missing from Intrust and that the company was in liquidation. The letter advised account holders that the receiver was undertaking an investigation and would determine how the cash shortage would affect their accounts. It also informed account holders that all accounts were frozen. Lastly, the letter stated that due to the substantial cost of sending written communications to all account holders, such communications would be made with the account statements or account holders could obtain up-to-date information on Intrust's website.

In response to the receiver's motion to set a hearing on the allocation and direct the method of notice to provide to account holders, the trial court entered an order setting a hearing and approving the form of the notice. The order contained identical information as that to be embodied in the notice form and, as such, need not be detailed. Both the order itself and the notice form were posted on Intrust's website. In addition, the receiver mailed the notice, by first class mail, to all 17,000 account holders. The notice stated that the receiver would be filing its recommendation with respect to the proposed allocation by June 23 and that a hearing was set for July 28 following.

According to the notice, at the allocation hearing, the trial court would consider the receiver's recommendation, hear evidence, and issue a determination as to the method of allocation, which determination would be binding upon the accounts holders and may affect their rights to assets in their accounts. The notice advised account holders that the recommendation would be posted on Intrust's website and that those account holders who did not have access to the Internet were to so advise the receiver, in writing, and if they desired a copy of the recommendation, to request a copy from the receiver. The receiver would then mail its recommendation by first class mail to those account holders. Account holders were informed to file any objections to the receiver's recommendation by July 14.

The receiver conducted an examination and filed its initial recommendation with the court, revealing that as of April 14, Intrust held $1.74 billion worth of noncash assets for its account holders, all of which were located and fully accounted for. Also, at this time, Intrust's books showed that it should be holding $102 or $103 million in cash. However, the receiver was unable to locate approximately $68.1 million, consisting of $51 million transferred to Intercounty and $17 million in interest accruing on that amount. The investigation revealed that these funds were misappropriated by Intercounty over the last 10 years. The receiver instituted litigation against Intercounty on June 1.

The receiver further stated that because Intrust used a single, commingled account in virtually all of its transactions, including those between it and Intercounty, its financial records were incomplete, its accounting software was not able to create historical account information, many accounts holders departed prior to the time of the receivership, and the tremendous number of transactions conducted by Intrust, it was impossible to ascertain which account holders' funds were deposited or withdrawn from Intercounty on any particular date and, therefore, which specific accounts were affected by the misappropriation, i.e., it could not trace the missing funds to any specific accounts.

After setting forth alternative possible allocation formulas, the receiver recommended to allocate the shortage to all accounts, not just those accounts containing cash, because of the inability to actually trace the missing funds to any specific accounts and to use the entire balance of the accounts, rather than the cash only balance of the accounts. The receiver recommended excluding the following accounts: (1) accounts opened after April 23, 1999 (the date of the last transfer to Intercounty); (2) land trusts; (3) bookkeeping accounts; and (4) accounts closed prior to April 14, 2000 (the commencement date of the receivership). The receiver recommended using the April 30, 2000, account balances as the date of valuation, backing out withdrawals and deposits made between April 15 and April 30. Potential sources for recovery of the loss were identified as including insurance coverage and litigation against Intercounty. Thereafter, approximately 300 account holders filed objections to the receiver's recommendation, alleging multifaceted theories and arguments.

Subsequently, the court held a hearing on the receiver's recommendation and many accounts holders (the exact number is not disclosed by the record) were represented by counsel and made arguments to the court, offering alternative allocation methods. At the conclusion of the hearing, the trial court stated that it would largely follow the receiver's recommendation, but it would entertain motions to exclude accounts whose holders could demonstrate their funds were not at risk of being included in the money transferred to Intercounty. Specifically, the court would consider excluding an account from the allocation process if it satisfied one of the following: "(1) the account never contained cash; (2) the account balance on April 23, 1999, was zero or de minimus; [or] (3) substantially all cash in the account was not subject to risk." Notice of this decision was posted on Intrust's website, which notice the court found sufficient, reasonable, and adequate. In response to the trial court's decision, over the course of the next few months, a multitude of account holders filed motions to exclude their accounts from the allocation.

After an initial hearing on the receiver's proposed allocation at which 24 attorneys were present representing numerous groups of account holders who were permitted to make extensive comments and suggested revisions with respect to matters raised by the receiver's proposed order, the court first found that the notice and opportunity for hearings available to account holders were reasonable and adequate. The court then ordered that the following accounts would be excluded from the allocation process: (1) accounts opened after April 23, 1999; (2) Illinois land trusts; (3) bookkeeping accounts; and (4) accounts which contained double-counted assets. The court reiterated that it would consider excluding those accounts specifically identified in its prior order and that account holders seeking an exclusion should file motions to exclude. In addition, because approximately 5,000 motions to exclude had been filed, many of which presented similar factual or legal issues, the court ordered the receiver to identify and categorize the motions, to choose as many motions as necessary out of each group to fully detail the common issue presented, to identify these chosen motions as exemplar motions, and post copies of them on Intrust's website. Lastly, at the conclusion of this hearing, the trial court denied certain objections filed by account holders and requests to surrender particular noncash assets, finding that because deposits with Intrust were commingled in a single fund, allocation would be made among all accounts.

Thereafter, the trial court held a hearing on the receiver's motion for authorization of fees. The receiver filed a motion seeking to charge the individual account holders (as opposed to Intrust's assets) fees and expenses to defray the expenses of continued administration of the receivership and winding up of the receivership estate. The motion described the activities the receiver had undertaken and the activities it still needed to undertake. The receiver estimated that it would incur expenses of $500,000 per month to carry out its activities. Prior to the motion, the Commissioner preapproved fees at a blended rate of $240 per hour for accountants and $325 per hour for attorneys. Several hundred account holders opposed this motion.⁽⁶⁾ At the hearing, the court heard objections and arguments from account holders after which it overruled the account holders' objections and authorized the receiver to charge a sliding scale fee across the board to all account holders.⁽⁷⁾

A second hearing was conducted with respect to the receiver's proposed order of allocation. At this time, the court also heard objections to the proposed process of hearing exemplar motions to exclude. Over 50 attorneys were present representing account holders. The trial court thereafter entered an order stating that it would hear exemplar motions to exclude during the week of September 25. Despite the court's ruling, additional account holders subsequently filed objections to the exemplar process, which the trial court ultimately overruled following an additional hearing on the objections.

During the course of the proceedings, two groups of account holders served interrogatories and requests to produce upon the receiver. Account holders sought detailed information with respect to each and every transfer from Intrust to Intercounty, information with respect to all bank accounts maintained by Intrust, and bank statements from each bank account during the misappropriation period. Because the receiver did not answer discovery, they filed a motion to compel. It was the receiver's position that discovery was neither necessary nor appropriate, particularly since the discovery was not directed at any specific account but, rather, was directed broadly at Intrust's business as a whole. According to the receiver, all accounts held by Intrust were at risk and how money moved from one place to another was irrelevant. At least 16 attorneys were present at the hearing on the motion representing account holders. The motion was subsequently denied.

During the week of September 25, the trial court conducted hearings on the exemplar motions to exclude. Following the hearings, the trial court granted some of the motions to exclude and denied others. Generally, the trial court granted exclusions for those funds deposited into an account subsequent to April 23, 1999,⁽⁸⁾ including any deposits made after 12:20 p.m.--the time of the last transfer to Intercounty, trustee-to-trustee transfers, accounts that never contained cash, accounts with a zero balance as of April 23, 1999, and bookkeeping accounts. The court also excluded any account opened subsequent to April 23, 1999, but only if the account was not funded with proceeds of assets held at Intrust prior to April 23.

The court denied exclusions where account holders argued that they could show their funds went into the account one day and out the next, accounts holders who could show that their accounts contained no cash on the misappropriation dates, accounts holders who argued that their funds were not deposited until after a substantial amount of money had already been misappropriated, account holders who argued that they opened their accounts only a short time prior to April 23, 1999, and account holders who argued that the misappropriation should be allocated only to the cash balance of accounts, not to the entire balance. The basis for each of these denials was the trial court's finding that if money was deposited at Intrust, it was commingled, "whether one week, one day, one hour, or one minute" and, therefore, subject to risk of loss to misappropriation.

Subsequent to these rulings, at least one motion for reconsideration was filed and numerous notices of appeal were filed. In addition, because not all motions to exclude were determined during the week of September 25, additional hearings were held and appropriate additional orders entered, excluding or including specific accounts.

Thereafter, the trial court approved a purchase and assumption agreement entered into between Intrust and Millennium Trust Company LLC (Millennium) pursuant to which Millennium would take over the trust accounts and most of Intrust's corporate assets. Millennium was to be responsible for implementation and collection of the shortage in accordance with any allocation order entered.

After all motions to exclude had been resolved, the receiver filed a motion for entry of a final order on allocation, to which a copy of the proposed final order was attached. The receiver also filed its report on calculation of the allocation percentage and informed the court and the parties of its intent to use the March 1999 account balances for valuation based on the trial court's prior exclusion of all accounts opened after April 23, 1999. Account holders thereafter filed objections to the proposed final order.

On February 26, 2000, for the first time, account holders filed a motion to continue consideration of entry of the final order until issues related to a potential conflict of interest of the receiver's attorney were addressed, seeking a continuance until they had an opportunity to pursue certain limited discovery with respect to the conflict of interest. The basis of the motion was centered on the fact that the receiver had originally recommended allocating the shortage only to cash account holders, but later had a "change of heart" and recommended allocating the shortage to all account holders. According to the account holders, the receiver's attorneys had long, close ties to the commodity futures industry and the firm's approach to dealing with the allocation may have been influenced by that relationship. Even more specifically, the motion contended that the law firm represented defendants in a federal lawsuit who were owners, directors, or officers of commodity futures brokers and that some of these individuals may have customers who had accounts at Intrust through which they conducted futures trading. It was the account holders' position that the firm could not neutrally represent the receiver, as it was required to do, because it may be representing other parties with substantial economic interests in the outcome of the allocation process, namely, commodity futures brokers who stood to have their customers lose substantial amounts of investment monies due to the allocation. Thus, to the extent that the firm had a direct or indirect relationship with brokers who maintained or whose clients maintained accounts at Intrust, the firm should be disqualified. Consistent with the foregoing contention, a second group of account holders also filed a motion requesting a hearing on the receiver's attorney's potential conflict of interest. These motions were denied following a hearing.

The trial court conducted at least two hearings on the proposed final order and on March 1, 2000, it entered the final order, which identified those accounts that would be excluded from the allocation. The court specifically found that the notice and opportunity to be heard afforded to account holders was reasonable, adequate, and sufficient. In addition, the trial court found it had jurisdiction and authority, pursuant to the Act, to allocate the shortage. The court determined that the allocation was to be made among all accounts, with the exception of those it had excluded.

To determine the amounts to which the 8.69 allocation percentage was to be applied, the reference date upon which the allocation should be premised was determined to be March 31, 1999. If the balance for that date was unavailable, the reference date was moved back to December 1998. If the balances for either of these dates was unavailable, the reference date for allocation was April 30, 2000. Lastly, if none of these balances were available, alternative valuation dates were detailed. Subsequent to entry of the final order, certain account holders filed motions to reconsider while other account holders filed notices of appeal. The motions to reconsider were denied. Allocation letters and statements were mailed to all account holders on May 1. Subsequently, we denied appellants' motions to stay the trial court proceedings pending resolution of the appeals.

On August 24, Millennium informed the trial court that the $68.1 million shortage had been collected. It requested that the trial court conduct a hearing to release the restrictions on accounts.⁽⁹⁾ On September 12, the supreme court denied appellants' motions for direct appeal and appellants' motions to stay. However, pursuant to a supervisory order, the supreme court directed us to consider this appeal on an expedited basis.

On October 29, 2001, we entered a brief stay to November 19, 2001 and subsequently extended that stay to November 29, 2001.

Two general briefs were filed: one by the O'Brien group of account holders and a second by the Bommer group of account holders.⁽¹⁰⁾ Three special briefs were filed addressing specific types of accounts: one by the Abbott group, one by the Agabedis group, and one by Norman and Shirley Bard, pro se.

Each will be addressed and considered.

The Bommer appellants contend that the trial court lacked jurisdiction to allocate the shortage. They apparently attack both subject matter and personal jurisdiction, although their arguments are amorphous in their organization and characterization of the specific jurisdictional issues which they apparently sought to raise. They generally contend that the issue of allocation is not properly before the trial court because the Act gives the court no authority or power to allocate. According to appellants, other traditional proceedings had to be undertaken, in particular, procedures under the Code of Civil Procedure (735 ILCS 5/1-101 et seq. (West 1998)), that were not taken. Specifically, appellants contend that the receiver was required to file a complaint against each of the 17,000 account holders and serve summons upon them. In a related argument, appellants argue that they were not afforded due process guarantees because the notice and opportunity to be heard were insufficient. Again, appellants argue that due process requires a complaint and summons against them individually as well as additional hearings. We disagree with appellants that the circuit court lacked either subject matter jurisdiction or personal jurisdiction and further disagree that they were not provided with constitutional due process.

The crux of appellants' argument appears to be that, other than the fact the Act does not authorize allocation, the attempt to intrude into their individual accounts is an intrusion into their individual property rights and, therefore, for the circuit court to have jurisdiction over their accounts, a complaint must be filed against each account holder individually.

Subject matter jurisdiction is the power of the court to decide a class of cases to which the case in question belongs. 3 R. Michael, Illinois Practice