text:
    Katharine W. Long, Appellant, v. Wilson Stove and Manufacturing Company et al., Appellees. James B. Wilson, Appellee, v. Wilson Stove and Manufacturing Company and Katharine W. Long, Appellant.

      Opinion filed January 5, 1934.
    Rehearing denied October 22, 1934.
    Charles C. Grassham and H. A. Evans, for appellant.
    Rot R. Helm and Charles E. Feirioh, for appellees Wilson Stove & Mfg. Co. et al.

      George Eigel, for appellees Susan Gray Wilson et al.
    L. E. Stewart, for appellee James B. Wilson, complainant in cross-bill.
   Mr. Justice Murphy

delivered the opinion of the court.

This case was tried in the circuit court of Massac county and appealed to the Supreme Court and that court transferred the record to this court.

The questions presented on this record arise out of an attack made by a minority stockholder of the Wilson Stove & Manufacturing Company, an Illinois corporation, upon certain proceedings leading to a voluntary sale of the largest part of the assets of said corporation and the sale of a part of those assets to James B. Wilson, who was at the time of the sale a stockholder, director and president of the corporation, and the sale of another part of the assets to Vlasta Klimt, who was not a stockholder.

The property involved in the sale was free of lien, and at the time of the sale the company was solvent and no rights of creditors are involved. • The corporation was not indebted to either of the purchasers at the sale.

The Wilson Stove & Manufacturing Company was originally founded in St. Louis, Missouri, in 1894 with an original investment of six or seven thousand dollars. It was engaged in the manufacture of stoves, principally wood heaters. In 1916 the offices and factory were moved to Metropolis, this State, and on January 1, 1917, began operation there. James Wilson, the father of the litigants who are principally interested in this case, was the original founder and was president and actively engaged in its management until his death in 1927. After his death the stock he owned in the corporation, which was the major part, was divided between his two daughters, Katharine W. Long and Susan Gray Wilson, and his son, James B. Wilson. The capital was $450,000, representing 4,500 shares of $100 par value, each, and after the division of the stock among the heirs of James Wilson, the ownership of all the stock was as follows: Katharine W. Long 991 shares, Susan Gray Wilson 1,500 shares, James B. Wilson 1,500 shares, Stephen H. Long 507 shares, Ernest L. Cox two shares. Stephen H. Long is the husband of Katharine W. Long. After the division of the stock, the officers and directors of the corporation were James B. Wilson, director and president, Stephen H. Long, director, vice president and treasurer, and Ernest L. Cox, director and secretary. The corporation was operated as a family affair with the cares of its management and operation resting principally upon James B. Wilson and Long. The by-laws provided for stockholders ’ meeting and for regular monthly meetings of the board of directors, but no regular called meetings were held until 1932. If matters arose which necessitated a record, James B. Wilson and Long decided the matter, a record was made and all stockholders signed the minutes of the purported meeting. This practice continued until the company met with severe financial losses. The company met with a good degree of financial success from 1917 to 1929. During that period its net profits, after allowing for depreciation and payment of dividends, ranged from $8,648.18 in 1929 to $77,455.68 in 1917. Every year within this period showed a profit, except the year 1921 when there was a loss of approximately $50,000. The financial depression which the witnesses fix as taking its worst form in October, 1929, took its. toll in the following years and the loss for each year was approximately as follows: 1930, $38,0001931, $98,000; 1932, $54,000. There is no charge in this record that any part of these losses was caused by inefficient or improper management on the part of the directors or officers.

Prior to January, 1932, the directors had consulted efficiency engineers as to the best methods to pursue to stop the losses and one plan was to enlarge the method of distribution. Charles Gr. Schott was employed as general sales manager for that purpose. The losses continued, and on January 2, 1932, the stockholders held a meeting to discuss the financial condition of the company and to work out a plan for future action. Stephen H. Long attended this stockholders’ meeting, representing his own stock and his wife’s. It does not appear that he held any power of attorney to vote her stock but he did vote it and she subsequently approved the action taken by signing the minutes of the stockholders’ meeting. The financial condition of the corporation was fully discussed, James B. Wilson leading the discussion, and one plan involved the advancement by the stockholders of $150,000 to $175,000 as working capital. On vote this was unanimously defeated. The other plan involved the liquidation of the assets of the corporation and Stephen H. Long offered a resolution which, after reciting that in view of the losses already sustained and likely to be sustained, provided, “that it would therefore be necessary and desirable to liquidate to the best advantage the assets of the company, and the Board of Directors are authorized to conduct negotiations to this end to the best of their ability.” This resolution was unanimously adopted. Following the adoption of this resolution Wilson and Long, on behalf of the corporation, employed Schott to assist in the sale. His directions from the directors were rather indefinite and vague, but it seems that the purpose of his employment was to contact prospective buyers in this and other States, and if they appeared interested he was to report the matter to the directors and they would endeavor to arrive at a purchase price and terms of sale with the prospective purchaser. Schott was thus employed from January until in August and during that time contacted 60 or more officers of corporations, or individuals, engaged in the manufacture of stoves or similar products in various parts of the country. In August, 1932, he reported to Wilson and Long that he could not effect the sale and asked for further instructions. Susan Gray Wilson, a stockholder, was at that time in California. On August 27th Wilson and Long both participated in the preparation of a letter to her, stating that it appeared impossible to sell the corporate assets as a whole and that some other alternative would have to be selected, and asked that she come for a stockholders’ meeting. Later in this opinion we shall have occasion to discuss in more detail the events, as they occurred, between the date of the letter, August 27th, and the stockholders’ meeting on November 15th.

At the time of the stockholders’ meeting on November 15th, the ownership of the stock was the same as hereinbefore stated, except that in October preceding, Susan Gray Wilson had assigned two shares of her stock to Schott. All persons owning stock were present at this meeting with the exception of- Susan Gray Wilson and Schott held her proxy dated October 24, 1932, to vote her 1,498 shares. This meeting had been called pursuant to a resolution of the board of directors held on October 29th, at which meeting directors Wilson .and Cox voted for the resolution, Cox being absent. The resolution of the board of directors provided for calling of a special meeting of the stockholders to be held on November 15th, for the purpose of holding a meeting for the election of directors, “the stockholders having neglected and failed to hold the annual meeting for an election of directors in accordance with the by-laws,” and for discussing, considering, acting upon and establishing of a procedure, plan or method to make effective a resolution passed at a meeting of stockholders on January 2, 1932, providing for the liquidation of the corporate assets, and for the purpose of liquidating of the assets in accordance with the statute, and for passing such resolutions as were necessary for carrying out the plan or procedure adopted. Notice was given to each stockholder by mail, which notice stated the purpose of the meeting as aforesaid.

Upon the convening of the meeting the first action taken was the election of directors and resulted in the election of James B. Wilson, Long, and Schott. Immediately following, Schott offered the resolution hereinafter set forth, Wilson seconded its adoption and the vote upon the adoption of the resolution was: 3,509 shares for and the 991 shares owned by Mrs. Long-present and not voting. James B. Wilson and Schott voted all their votes for the adoption of the resolution. The resolution is as follows:

“Resolution

“Be it resolved by the stockholders of Wilson Stove & Manufacturing Company, a corporation:—

“That the Directors of Wilson Stove & Manufacturing Company shall at once and without delay, proceed to make effective a resolution adopted at the meeting of the stockholders on January 2, 1932, providing for the liquidation of the corporation’s assets.

“That the Directors of Wilson Stove & Manufacturing Company shall at once and without delay, proceed to sell all the corporate assets of the corporation (excepting cash, bills and accounts receivable and stock in Columbia Stove Company).

“That the Directors of Wilson Stove & Manufacturing Company shall at once and without delay, proceed to make an inventory of the assets of the corporation (excepting cash, bills and accounts receivable and stock in Columbia Stove Company). This inventory shall show substantially all assets of the corporation, (except as above stated) but not in minute detail and shall be substantially in the following groups:

“Group 1. Real Estate, being land and improvements thereon, situated in Massac County, Illinois.

“G-roup 2. Patterns, including followboards, sand matches and core boxes; flasks, bottom boards, tight boxes and jackets; Trade Marks, Patents, Machinery, Equipment, Raw Materials, Manufactured stock.

“Group 3. Real Estate being land and improvements thereon, situated in Massac County, Illinois, patterns, including followboards, sand matches and core boxes, flasks, bottom boards, tight boxes and jackets, Trade Marks, Patents, Machinery, Equipment, Raw Materials, Manufactured stock.

“Group 4. Real Estate, being land and improvements thereon, situated in St. Louis County, Missouri.

“That the Directors of said Wilson Stove & Manufacturing Company shall, at once and without delay, proceed to sell all of the above mentioned assets of said corporation (excepting cash, bills and accounts receivable and stock in Columbia Stove Company), to the highest bidder or bidders.

“That notices of said sale, showing the above inventories, time, place and terms of sale, shall be sent by the President or Secretary of Wilson Stove & Manufacturing Company to all persons, firms or corporations, who are known to them to be interested in the purchase of any group or groups or combination of those groups.

“That any stockholder or director or officer of Wilson Stove & Manufacturing Company, knowing of any person, firm or corporation, who might be interested in the purchase of any group or groups or combination of said groups shall give the name of such person, firm or corporation and the correct address to the President or Secretary of Wilson Stove & Manufacturing Company, who shall send to such person, firm or corporation a notice of the time, terms and conditions of sale and an invitation to submit a bid or bids thereon.

“That any stockholder, Director or Officer or Employee of said Wilson Stove & Manufacturing Company shall have the same right as any other bidder or bidders to bid on any group or groups or combination of said groups.

“That bids shall be submitted in writing, in sealed envelopes and shall be mailed or delivered to Mr. Henry J. Humma, President of the First National Bank, Metropolis, Illinois.

‘ ‘ That bids shall be received up to and not later than 12 o’clock noon, central standard time, Jan. 17, 1933.

“That bids can be submitted on groups 1 and 2 separately or on a combination of groups 1 and 2 identified as group 3.

“That individual bids only will be permitted on group 4 as bids on this group will not be considered in combination with any other group or groups.

“That a certified check for twenty per cent (20%) of the amount of each bid shall accompany each bid; with this proviso, if the bidder bids on one or more groups or permitted combination of groups, he shall attach to each group bid a certified check for twenty per cent (20%) of the amount of that bid, and then to bid on permitted combination of groups he shall attach a certified check for an amount, which, added to the amount of the check or the amounts of the checks attached to a bid or bids for a group or groups will aggregate or total twenty per cent (20%) of the amount bid on permitted combination of groups.

“That said certified checks shall be made payable to Wilson Stove & Manufacturing Company.

“That bids shall be opened at 2 o’clock P. M., on Tuesday, the 17th day of January, 1933, in the Directors’ room of the First National Bank, Metropolis, Illinois, in the presence of such bidders who choose to be present.

“That the assets of Wilson Stove & Manufacturing Company (excepting cash, bills and accounts receivable and stock in Columbia Stove Company) shall be sold to the highest bidder or bidders.

‘ ‘ That all bids shall be listed and the highest bid in each of the four (4) groups shall be designated as the highest bid for said group.

“That if the individual high bids in the aggregate on groups 1 and 2 exceed the high bid on group 3 then the several respective high bids on the respective groups 1 and 2 shall be accepted.

‘ ‘ That the high bid on group 4 shall be accepted.

“That in the event no bid is received on group 2 then the right is reserved to reject the bid on group 1 unless satisfactory arrangements can be made with the bidder and purchaser of group T for the storage of the property listed in group 2 until such time as the property listed in group 2 can be sold. This is the only exception and the high bids on groups 1, 2, 3 and 4, shall absolutely be accepted.

‘ ‘ That in the event no bid is received for any group or groups permitted combination of groups are not sold at the time and place hereinbefore fixed, any of the groups or permitted combination of groups not sold at said time shall be sold by the Directors who are directed and authorized, and empowered to then at once and without delay proceed to sell any such group or groups or combination of groups by any lawful means and at any time and in any lawful manner that the Board of Directors may decide upon and to then at once and without delay proceed to sell any such group or groups, or combination of groups without any further authorization whatsoever on the part of the stockholders.

“That after the opening, examining and listing of bids, the Directors shall declare who are the highest bidders and notify them in writing at once. The successful bidders shall within -ten (10) days from that date pay an additional thirty per cent (30%) in cash, thus making a payment of a total of fifty per cent (50%) in cash prior to the removal of any part of the group or groups purchased or the occupancy of the premises or taking any possession whatsoever, the remaining fifty per cent (50%) shall be paid at that time in cash or by the execution of a note or notes payable one-fourth (%) semi-annually over a period of two (2) years from date bearing six per cent (6%) interest per annum, payable semi-annually, said note or notes to be payable to the Wilson Stove & Manufacturing Company, the same to be secured by collateral other than by a mortgage or lien on the assets purchased and the collateral must be high grade, have a good market and shall be acceptable in all respects to the Board of Directors of Wilson Stove & Manufacturing Company.

“That certified checks of unsuccessful bidders shall be returned to said unsuccessful bidders without delay.

“That failure on the part of successful bidders to pay the remaining thirty per cent (30%) cash within the time specified and to execute note or notes and deposit collateral acceptable to the Board of Directors within ten (10) days from and after January 17, .1933, shall work a forfeiture of their respective twenty per cent (20%) cash deposits, which shall be retained by the Wilson Stove & Manufacturing Company as liquidated damages.

“That bidders who are successful shall remove property listed in group 2 on or before March 1st, 1933, unless satisfactory arrangements are made with the purchaser or purchasers of the lands and buildings or with the Wilson Stove & Manufacturing Company, in the event the land and buildings are not sold, to permit said property to remain in said building longer.

“That possession of land and buildings shall be given to the purchaser or purchasers on or before March 1st, 1933.

“That the President and Secretary of Wilson Stove & Manufacturing Company are hereby authorized, directed and empowered to execute Warranty Deed or Deeds to the purchaser or purchasers and to execute proper bills of sale to purchasers of personal property.

“That immediately upon acceptance of bids the President and Secretary are authorized, empowered and directed to execute the necessary and requisite affidavits with reference to the Bulk Sales Law of Illinois.

“That the President and Secretary and Directors are authorized, empowered and directed to do whatever and all that is necessary to be done in the carrying out of the above mentioned plan, method and procedure, and shall proceed with the sale of the assets of said Wilson Stove & Manufacturing Company, as hereinbefore set forth, at once and without delay. That as soon as said sale or sales have been consummated and the assets, including bills and accounts receivable and stock in Columbia Stove Company, have been reduced to cash or to cash and notes and the debts have been paid, the President and Secretary and Directors are directed, authorized and empowered to make a distribution of cash to the stockholders and to endorse and deliver to the stockholders of said corporation any and all promissory notes and all collateral securing the same, the said endorsements and assignments to show and indicate the respective and undivided interest or part in each note that each stockholder shall have and complete and full distribution of cash and notes shall be made to the stockholders according to their respective rights and interest's.

“That as soon as said distribution has been made of cash and notes to stockholders, or, in connection with said distribution the President and Secretary and Directors are directed and empowered and authorized to take the necessary legal steps to dissolve the corporation and surrender its Charter.”

Soon after the adoption of the Resolution the diRectors prepared an inventory of the property as described in the resolution and the property was grouped in accordance therewith. Invitations to bid were prepared by the directors and were mailed to persons, firms or corporations whom anyone interested in the corporation might think a prospective bidder. It was mailed to about 300 different firms, persons or corporations.

There were but two bids filed; that of James B. Wilson for $15,000 for properties listed as groups 1 and 2 and a combination of them as group 3, and one by Henry Cornet filed in the name of Vlasta Klimt for $4,500 for group 4, or the St. Louis property.

Immediately following the opening of the bids, Schott and Wilson, as directors, declared the two bids received to be the highest bids and directed notice to be given to each bidder of that fact. James B. Wilson and Schott, as directors, wrote a letter to James B. Wilson notifying him that his bid was the highest, and similar notice was given to Vlasta Klimt.

On the fourth day following the opening of the bids Katharine W. Long filed her bill of complaint in the circuit court of Massac county against Wilson Stove & Manufacturing Company, Susan Cray Wilson, James B. Wilson, Charles C. Schott, Stephen H. Long, Cornet & Zeibig and Vlasta Klimt. By her bill she alleges the organization of the corporation, the ownership of the stock, the directorate and officers of the corporation; that the corporation is solvent, and that James B. Wilson and Charles C. Schott unlawfully conspiring together for the unlawful purpose of benefiting themselves and freezing out the complainant and her husband and Susan Gray Wilson of their interest in such corporation and acquiring the property' for their own use and benefit, determined to bring about a forced sale by throwing the same upon the market at a forced sale and to acquire it themselves for a mere pittance and nominal part of its value; sets out the resolution of November 15, 1932, and avers that the same was passed over her protest and opposition; that the corporation is wholly under the management and control and domination of Wilson and Schott, they being the majority of the board of directors and owning or voting a majority of the shares of the stock and that it would be unavailing and futile for her to request or demand the said corporation to institute an action in its name for a cancellation of this bid or to prevent a sale by said corporation to said bidders; that the adoption of said resolution was fraudulent and void in that it purported to authorize James B. Wilson, who was then president and director, to purchase for his own personal benefit and gain in violation of his trust and duty toward the stockholders of the company at a greatly inadequate price when it must have been known to him that such property could not be sold on the market for anything like its present value; that no notice was given to the general public for bids by publication in local papers, metropolitan papers or trade journals of this or any other State; that the invitation to bid was a pamphlet in book form, setting forth the nature of the property to be sold, which was sent to persons who were supposed to have an interest in the purchase of such property; that group 4, the St. Louis real estate, was no part of the company’s plant or used in connection with the business of said company; alleges the filing of said bid by James B. Wilson of $15,000 for groups 1, 2 and 3 which comprise the whole plant and its property located at Metropolis; that said resolution contemplated competitive bidding, but when there was but one bid it could not be said to be the highest bid because it was also the lowest bid; that there was no cause or compelling circumstances that necessitated the sacrifice of this property and that she will suffer irreparable loss in income, property rights and the value of her stock if the cancellation of said sale is not perfected.

The prayer of the bill is that the court will cancel the bids of James B. Wilson and Vlasta Klimt for their respective tracts; that the corporation be restrained from consummating the sales to Wilson and Klimt, and that Wilson and Klimt be permanently enjoined and restrained from further taking possession of said property; that the company be restrained from a sale of the property to Wilson and Klimt, and that a receiver be appointed to take charge of and conserve all property and to sell the same either at public or private sale, providing an adequate bid can be obtained, and if it cannot be readily sold on the market at the present value that it be preserved and protected until such time as it can be sold at a reasonable and adequate price, and upon sale being made the proceeds thereof, after the payment of the costs, be apportioned to the several stockholders in proportion to the ownership of their stock.

An answer to the bill of complaint was filed for and on behalf of the corporation, James B. Wilson, as director and president of the corporation and in his individual capacity; Charles G. Schott, as secretary and director, and as agent of Susan Gray Wilson and in his individual capacity. By answer it was admitted that the stock was owned as alleged in the bill; that the corporation was solvent, but denied any unlawful conspiracy between Wilson and Schott to acquire the property of the corporation for their own benefit; admitted the passage of the resolution November 15, 1932, and denied that it was any part of a scheme originated by Wilson and Schott to acquire the property of the corporation; denied that the resolution was passed over the protest of the complainant, but avers that, the complainant was present and did not vote either in favor of it or against the resolution; denies that the corporation is wholly under the management of Wilson and Schott; admits that the sale was not advertised in any newspaper; admits the filing of the bid by Wilson and Klimt, and sets up. the steps that were taken to prevent-further losses as hereinbefore set forth, and alleges that the complainant did not furnish co-operation in said corporate matters.

James B. Wilson filed a cross-bill covering the same matters set up in the answer and made the corporation and Katharine W. Long parties defendant, and prayed that the bid of $15,000 be decreed to be the fair cash value of the property as covered by the bid; prays the court to enter a decree approving the bid and directing specific performance on the part of the corporation and directors, and that the board of directors be directed to prepare a proper conveyance for the real estate and personal property, and that Katharine W. Long be permanently enjoined from asserting and claiming any interest in said property so purchased by the cross complainant.

On behalf of the corporation an answer-was filed to the cross-bill admitting most of the allegations of the cross-bill, and admitted that if the bid was determined to be a valid bid, that deeds and instruments of conveyance should be made.

An answer to the bill of complaint was filed on behalf of Cornet & Zeibig and Vlasta Klimt who neither admitted nor denied the charges of fraud and conspiracy, but alleged that the bid made in the name of Vlasta Klimt for $4,500 was made in good faith and was all that the property was worth.

Susan Gray Wilson filed her separate answer to the bill of complaint, admitting the ownership of the stock in the corporation; denied the charge of fraud and conspiracy and alleged her consent to the acceptance of the bids submitted if they are proven to be the highest bids filed.

The answer of Katharine W. Long to the cross-bill of James B. Wilson admits all matters appearing by the corporation record and denies all allegations of lack of co-operation by her or Stephen H. Long.

After a hearing before the court a decree was entered finding the organization of the company, the ownership of the stock, the solvency of the company, the passage of the resolution and the filing of the bids as alleged in the original bill; that the corporation had sustained losses, and that it was to the best interests to liquidate its assets; that there was no fraud, conspiracy or collusion by James B. Wilson and Charles G. Schott; that the bids were adequate and represented the fair cash market value of the property, and ordered that the original bill be dismissed for want of equity, and the prayer of the cross-bill granted, directed that the corporation within 30 days from that date make, execute and deliver to James B. Wilson, a conveyance of the real estate owned by the corporation at Metropolis and transfer to him the personal property, all to be done upon his payment of the balance of the purchase price, and that similar conveyance be made to Vlasta Klimt, and that Katharine W. Long be enjoined and restrained from asserting or claiming any interest in the property so sold.

Katharine W. Long perfects this appeal, and defendants Wilson Stove & Manufacturing Company, James B. Wilson, Charles B. Schott, Susan Gray Wilson, Cornet & Zeibig, Vlasta Klimt and James B. Wilson, as cross complainant, each appearing by their respective solicitors, join in the same brief and argument in this court.

For a proper consideration of the questions involved it will be necessary to consider, in addition to the facts already stated, the evidence (1) upon the valuation of the property, (2) upon the attitude and conduct of the parties in their negotiations leading up to the adoption of the resolution for a sale of the property.

There is a conflict in the evidence upon the valuation of the property and we will first consider the evi dence on value as it relates to the real and personal property located at Metropolis. The foundry site consisted of 14 acres, upon which there was a three-story brick building; one-story frame building, one-story brick foundry and mill room, a two-story brick cupola room, a one-story brick nickel plating shop, one-story crate shop and various other small buildings. All of the buildings have an aggregate floor space of 158,000 square feet. The oldest buildings were erected in 1916, and the remainder within three or four years thereafter at an aggregate cost in excess of $140,000.

Included in group 2 is an inventory of patterns listed under 63 different headings; under many of these headings are a large number of items. In said group 2 there is an inventory of raw materials, floor flasks, tight boxes, jackets, bottom boards, machinery, equipment and manufactured articles all running into innumerable items and including all stock in trade, supplies and equipment used in the operation of said plant.

Bight witnesses testified for appellant on the valuations of the Metropolis property. The ones who gave their opinion as to the fair cash market value of all the property fixed it at from $50,000 to $100,000. Two witnesses testified as to the value of the buildings and fixed it at $50,000, and the third gave it as his opinion that they were worth $80,000. One witness who testified as to the value of the stock in trade, and the parts used in the foundry work, fixed the value at $15,000. One witness who testified as to the value of the steel bars, stove bolts, etc., fixed it in excess of $3,000. One witness testified that the foundry site, without any buildings or improvements, was worth from $150 to $300 per acre.

There was but one testified for appellant as to the válue of the St. Louis property included in group 4, and he fixed it at $45,000.

On behalf of appellees nine witnesses testified as to valuations, three of them stating that in their opinion the building site and plant had no market value, and another fixed the value of the grounds and buildings at $10,000. One witness who gave his opinion as to the value of the inventoried property, group 2, fixed it at $5,500. One witness, engaged in the wrecking of buildings, estimated that the cost of clearing the site would be from $6,000 to $8,000, and that there would be no value in the salvage. James B. Wilson fixed the value of all the property that he bid upon at $15,000. Schott’s valuation was $10,000. Henry L. Cornet, one of appellees, fixed the value of the St. Louis property at the value of his bid, or $4,500. The St. Louis real estate was improved with buildings and had a rental value of $150 to $175 per month with an annual tax of approximately $1,050. Schott testified that when he was endeavoring to interest prospective buyers in the purchase of the property he was submitting sale prices ranging from $150,000 to $250,000, and while it does not appear that these figures were fixed by Wilson there is proof in the record that Schott made many reports to the directors, including Wilson, as to what he was doing in the matter, and a reasonable inference would arise that Schott’s valuation to prospective purchasers was submitted with Wilson’s consent and approval.

Under the evidence in this case we find that the preponderance of the evidence is that the property, as listed in the several groups, had a value far in excess of the amounts bid.

The evidence does not disclose any dissension or lack of co-operation existing among the stockholders prior to August, 1932. In January of that year at a stockholders ’ meeting which had been informally called, the stockholders unanimously agreed that they would not advance any money to the corporation as a working capital, and all voted for a resolution authorizing the directors to make a sale of the property. The resolution of January 2 does not contain specific directions as to the sale, but from the steps taken by the directors in trying to effect a sale it must be assumed that it was contemplated at that time to sell the plant as a whole and as a going concern. This is also indicated by the letter that James B. Wilson and Long wrote on August 27 to Susan Gray Wilson wherein they say: “Up to the present time we have not been successful in finding a purchaser for the plant as a whole and it appears impossible to dispose of it that way. The only alternative as I think is to sell everything piecemeal.” In response to said letter or another letter written immediately thereafter Susan Gray Wilson came from California for a stockholders’ meeting, arriving in St. Louis on September 24th.

It is the contention of appellees that after the return of Susan Gray Wilson every reasonable effort was made in endeavoring to have a meeting of the stockholders but that Katharine W. Long, appellant herein, would not join with them in holding such a meeting and that she gave verbal notice that she would not attend a meeting unless it was a legally called meeting, and that thereafter appellees and the corporation were forced to take the steps they did in calling the meeting. Appellant’s reply is that the reason she did not consent to a meeting was on account of the illness of her husband who was confined in the St. Louis hospital from September 9th to November 24th, with the exception of the dates, October 9th to 12th; October 21st to November 8th, and November 10th to November 18th. The evidence discloses that James B. Wilson did not call upon appellant and request a meeting and that no notice was prepared calling a legal meeting during the time that Susan Gray Wilson was here, she being here from September 24th to October 25th. The day before Susan Gray Wilson left for California, and at the suggestion of James B. Wilson, she executed a power of attorney to vote her 1,498 shares. She testifies that she selected Mr. Schott as her agent to vote the stock. She also gave him two shares of stock. The consideration therefor is not shown by the evidence. On October 29th, while Long was in the hospital, James B. Wilson and Director Cox passed a resolution calling a special meeting of stockholders for November 15th. Notice was given of this stockholders’ meeting-in accordance with the statutes of the State and the by-laws of the corporation. This was the first meeting of the stockholders that had been called by formal notice. Prior to the date of the meeting- of directors on October 29th, Schott had many interviews with appellant, and in one of those interviews she told him that she was suspicious of the motives of her brother. The principal topic of discussion in these various meetings was the matter of calling a meeting* of the stockholders and adopting procedure for the disposal of the corporate property. At that time appellant insisted that in any action taken in reference to calling for bids on the property, there should be a minimum sale price stated.

Sometime prior to November 15th, James B. Wilson, while in St. Louis, made a rough draft of the resolution which was adopted on November 15th and submitted it to Schott who made suggestions in reference to the arrangement and grouping of the property. On the evening preceding the meeting of November 15th, Wilson, Schott and the attorneys for the corporation met in Paducah and the resolution was again considered by Wilson and Schott, changed in certain minor parts and given to the attorneys for the final wording in legal phraseology. When the meeting was convened on November 15th, Schott announced that he held a proxy to vote 1,498 shares belonging to Susan Gray Wilson, and thereafter offered the resolution. The evidence shows that this was the first time that appellant had any knowledge of such a resolution, or that any resolution of a similar nature was to be presented at that meeting. The resolution was read and discussed and appellant interposed the objection that it did not contain a minimum sale price. Two attorneys who were acting for and on behalf of the company were present at said meeting. When appellant was asked for her vote she stated that she would not vote on the resolution until she had legal advice. Mr. Wilson states that he heard her say to her husband that “it was cut and dried and she would not vote on it.”

After the election of the board of directors, an invitation to bid was prepared, setting forth the property that was included in the various groups as defined in the resolution. It also contained the statement that any stockholder, director, officer or employee should have the same right as any other bidder to bid on said property. There was no right reserved to reject the highest bid in the event that it should be considered inadequate. This invitation to bid, with inventory attached, was mailed to some 300 persons, firms or corporations, the names of whom had been suggested by each of the directors. ^ No notices were posted or published in any newspaper or trade journal. James B. Wilson testified that after January 1, and before the date of sale, he made inquiry of certain persons in Metropolis as to their estimate of the value of the property, and that he did so with a view of knowing what kind of a bid to place upon it.

Wilson denies that there was any intent or design upon his part to acquire this property for his own use to the detriment of the interests of the other stockholders. He does testify, however, that he bid to protect his interest. It does not appear that Schott has any present or future interest in the property other than what he may have acquired as an owner of two shares of stock.

As to the St. Louis property it appears that Cornet & Zeibig, real estate men in St. Louis, represented the Wilson Company in renting the property and collected the rents of that property, and Cornet testifies that he bought it for his own personal use on the expectation that he might be able to sell it to a third party.

It is the settled law of this State that the directors of a corporation are trustees of its business and property. As such directors they are subject to the general rule in regard to trusts and trustees, and cannot in their dealings with the business, or the property of the trusts, use their relation to it for their own personal gain. Dixmoor Golf Club v. Evans, 325 Ill. 612; Higgins v. Lansingh, 154 Ill. 301.

In the performance of their duties as trustees it is incumbent upon them to administer the corporate affairs for the good and benefit of all the stockholders, and exercise their best care, skill and judgment for the management of the corporate business and act solely in the interest of the corporation. Farwell v. Pyle-National Headlight Co., 289 Ill. 157.

It is the duty of the directors in dealing with the corporate affairs to keep themselves in a position where their own personal interest will not conflict with the best interests of the corporation. Dixmoor Golf Club v. Evans, supra; Gilman, Clinton & Springfield R. Co. v. Kelly, 77 Ill. 426.

A director of a corporation cannot become the purchaser of property of the corporation which it is his duty to sell. Chicago Hansom Cab Co. v. Yerkes, 141 Ill. 320. In the Dixmoor case, supra, the court said:

“He is subject to the ordinary rule that an agent to sell cannot sell to himself, and an agent to buy cannot buy of himself. The interests of buyer and seller are inconsistent, and an agent cannot represent both interests at the same time. While a director is not disqualified from dealing with the corporation and buying its property, or selling property to it, he must act fairly and be free from all fraud or unfair conduct, his transactions will be subjected to the closest scrutiny, and if not conducted with the utmost fairness, to the end that the corporation shall have received full value, they will be set aside. (Nowak v. National Car Coupler Co., 260 Ill. 260.) If he becomes a party to a contract with the corporation, his obligation to candor and fair dealing is increased in the precise degree that his representative character has given him power and control from the confidence reposed in him by the stockholders. (Beach v. Miller, 130 Ill. 162.) ”

Under the facts in this case we are of the opinion that James B. Wilson violated the duty that rested upon him as a director of this corporation. He had known for months that the then depressed financial condition of the country was such that it would be difficult, if not impossible, to sell such property. From January to August of the same year Schott, on behalf of .the company, had contacted 60 persons, firms or corporations of financial standing, endeavoring to interest them in the purchase of this property, but without avail. With such facts before him, it was his plain duty, as a director and in the capacity of trustee of the trust property to keep himself in such a position that he could at all times during the liquidation of the property exercise a fair and impartial judgment on matters arising on the sale of the property, and make every reasonable effort to sell it in such a way that it would bring the highest price to the corporation. When he filed a bid he removed himself from that position and violated his duty as a director and trustee. It is no excuse for him to say that no other bid was filed and that therefore if it had not been for his bid the sale could not have been made. Under the conditions, as then existing, he should have kept himself in such a position that he could fairly and impartially determine whether or not it was for the best interests of the corporation to sell the property at that time, or if it was to be sold, to place a minimum sale price upon the property before offering it, and reserve in the invitation the right to reject a bid that appeared inadequate. By the filing of his bid he placed his personal interests first, and therefore could not exercise such judgment on behalf of the corporation.

At the stockholders’ meeting of November 15th, the resolution could not have been adopted except by vote of a part of the shares owned by James B. Wilson; at the directors’ meeting held on January 17th, following the opening of the bids, his bid for $15,000 could not have been declared to be the highest, except for his own vote as a director. Such a transaction cannot stand in equity.

In Klein v. Independent Brewing Ass’n, 231 Ill. 594, the court in quoting from the Higgins case, supra, and Harts v. Brown, 77 Ill. 226, used this language:

“It was further said that during the solvency of the corporation the directors are the agents or trustees of the stockholders; and in Harts v. Brown, 77 Ill. 226, it was said that a director, in so dealing, must act fairly and be free from all fraud and oppression, and must act for the interest of the company and impose no unfair or unreasonable terms. But it has not been held that the company or its stockholders may not avoid a contract requiring the action of the board of directors to make it, whether made in good faith or not, where so many of the directors are interested in the contract adversely to the company that the company is not represented by a disinterested majority of the directors voting. On the contrary, it is held that the directors, without the sanction of the stockholders, have no power to contract, for the corporation, with themselves or for the benefit of themselves, and if they attempt to do so the contract may be avoided by the corporation or its stockholders not consenting, whether the contract appears to be fair and just or not.”

It is contended on behalf of appellees that appellant consented, through her husband, to the proceedings that were taken and that therefore she is now estopped to question them. Prior to August, 1932, Stephen H. Long, on one occasion, voted the stock of appellant, but during the period following and prior to the stockholders ’ meeting November 15th, Wilson, through Schott, recognized that they must have appellant’s consent to a stockholders’ meeting and endeavored to carry on negotiations with her for that purpose. At the stockholders’ meeting she did not vote her own stock, while her husband voted his stock for the resolution." Schott testified that in an interview with Mr. and Mrs. Long prior to November she insisted that the minimum price should be $150,000; that Mr. Long suggested another amount, and that Mrs. Long told him that her husband had no choice in the matter and that Mr. Long acquiesced in her suggestion. We are convinced that Long was not representing his wife’s interest and that anything he did does not estop her from questioning these proceedings.

It is our conclusion that fraud and unfair dealing permeate the whole transaction of the sale and all the proceedings leading up to it to such an extent that the sale of the St. Louis property should also be set aside.

A part of the relief prayed for by appellant is that a receiver may be appointed to take charge of and conserve the property, and to properly advertise and sell the same and in the event it cannot at this time be readily sold on the market that the said property be preserved and protected until such time as it can be sold.

The general rule is that courts of chancery have no general power to appoint receivers of corporations, but that a receiver can only be appointed where expressly authorized by statute. Appointing a receiver to take possession of the assets of the corporation and to distribute them is tantamount to dissolving a corporation by decree in equity. Steenrod v. Gross Co., 334 Ill. 362; Blanchard Bro. & Lane v. Gay Co., 289 Ill. 413.

There are exceptions to this general rule. “A stockholder may invoke and set in motion the powers of a court of equity to appoint a receiver where the corporation is fraudulently mismanaged by its officers, whereby it is in imminent danger of insolvency, or has been rendered insolvent by reason of such mismanagement.” Blanchard Bro. & Lane, etc., supra.

Section 86, Cahill’s St. 1933, ch. 32, ¶ 86, provides that a court of equity has power to liquidate the assets and business of a corporation upon a suit by a shareholder when it is made to appear that the acts of the directors, or those in control of the corporation, are illegal, oppressive or fraudulent, or that the corporate assets are being misapplied or wasted, and, by section 87 of said Act, it is further provided that in a proceeding to liquidate the assets and business of a corporation the court shall have all the ordinary powers of a court of equity to issue injunctions, to appoint a receiver, or receivers, and take such steps as may be necessary to preserve the corporate assets.

On January 2, 1932, the stockholders unanimously voted for a sale of the assets of the corporation.' It is our conclusion that the evidence shows that in the execution of the resolution, a majority of the stock and a majority of the directors have undertaken a course of procedure in the dissolution of the assets of said corporation that is oppressive and fraudulent as against the interest of the appellant, and that the action taken by the directors in charge of the corporate assets are leading to a misapplication and waste of such assets, and that a receiver should be appointed in accordance with the prayer of appellant’s bill.

For the reasons assigned the decree of the circuit court is reversed and the cause remanded with directions to the trial court to enter a decree dismissing the cross-bill of James B. Wilson for want of equity, and to enter a decree in accordance with the views herein expressed.

Reversed and remanded with directions.


source: Caselaw Access Project

author: Mr. Justice Stone

license: Public Domain

text:
    Frank C. Toombs, Appellee, v. James Lewis, Appellant.

      Opinion filed February 2, 1934.
    Rehearing denied October 22, 1934.
    F. C. Meserye and Sumner & Lewis,' for appellant.
    Fred W. Gee, for appellee; John Sebat, of counsel.
   Mr. Justice Stone

delivered the opinion of the court.

This was a suit brought April 18, 1932, by appellee, hereinafter called the plaintiff, against appellant, hereinafter called the defendant, in the circuit court of Lawrence county.

The first count of the declaration alleged that on February 21, A. D. 1932, the defendant ordered the plaintiff to sell 75. units of $8 interest bearing allotment certificates of the Associated Gas & Electric Company at a price of $38 per unit or better; that the plaintiff found a purchaser for the $8 certificates at $38 per unit; that the plaintiff advanced the purchase price of $2,850 and instructed the defendant to forward the $8 certificates sold on his behalf; that the defendant failed to forward such certificates but forwarded 75 units of $1.60 interest bearing allotment certificates which were refused by the purchaser; and that defendant had since failed and refused to reimburse the plaintiff.

There were the usual common counts in assumpsit except that a demurrer was sustained to the count for money paid under mistake. The jury returned a verdict for the plaintiff for $2,835 and interest. Plaintiff waived the interest on remittitur ordered by the court and a motion for new trial was denied.

The defendant appealed. Plaintiff moves to dismiss the appeal and submits in support thereof that the clerk did not certify that the bill of exceptions is a part of the record, or that the matters filed constitute the complete record, or that the matters filed constitute a complete transcript of the record.

The defendant had filed a short record and obtained an extension of time for filing the bill of exceptions. The certificate of the clerk to the short record gives the title of the cause to which the certificate applies and certifies that the foregoing is a “true and correct copy of the records and files in the case . '. . except the bill of exceptions’’-and that the person certifying is the legal custodian of the records, files, and seal of office in the court in which the cause was tried. The certificate to the bill of exceptions gives the same identification of the cause and the person certifying and certifies that “the foregoing is a true and correct copy of the bill of exceptions filed in the case . . . , as appears of record and in the files of Lawrence County.”

When the clerk certifies that a transcript is a true copy of the records and files except the bill of exceptions we cannot say that he may have intended to except other matters also appearing in the files. We think that taken together the certificates clearly show that the transcript is a copy of the complete records and files in the case. The cases cited by the plaintiff do not interfere with this result. In City of Chicago v. Wohlbach, 316 Ill. 203, 204, there was no certificate that the bill of exceptions filed was a part of the record. In Bartlett v. Woodbine Sav. Bank, 57 Ill. App. 423, the certificate followed the praecipe which called for no pleadings other than the declaration. In Glos v. Randolph, 130 Ill. 245, there was apparently no certificate of the clerk. In Hosmer v. People, 96 Ill. 58, the certificate was not signed, sealed, or dated. In Mathes v. William Barr Lumber Co., 248 Ill. App. 160, there was no authentication of the transcript by the clerk. In Hiser v. Baker, 115 Ill. App. 12, there was no certificate that the transcript of record was a transcript in any cause. The plaintiff also submits in support of the motion to dismiss that no praecipe for record was filed with the clerk of the circuit court. This is not a ground for dismissing the appeal especially where it appears that a complete record has been filed. People v. Chicago Title & Trust Co., 266 Ill. 224.

The evidence showed that the plaintiff sent his agent, - Jewett, to see the defendant to persuade him to sell certain coal company bonds which were not listed on the general market. While there Jewett learned that defendant possessed interest bearing allotment certificates of the Associated Gas & Electric Company. He computed what he considered to be the value of the certificates by looking up the value of securities into which the allotment certificates were convertible. He computed a value of $13 or $14 on a share. He then found a list price of $42 per share for Associated Gas and Electric Company interest bearing allotment certificates. He said there was something about the transaction that did not meet the eye, but that the organization of this company was very complicated. Defendant had paid about $27 per share for the certificates. Capitalizing the $1.60 at six per cent share would give a value of over $26. Jewett testified that such shares were worth just what you could get for them. Jewett advised the defendant to sell his allotment certificates and said that his principal, the plaintiff, would be glad to handle the transaction.

Defendant then went to Mr. Gee, a banker, and told him to have the plaintiff sell the certificates for him. Mr. Gee gave an order to plaintiff to sell at $38 upon plaintiff’s advice concerning the value. There is some difference in testimony concerning the exact terms of the order to sell, which will be discussed later.

Plaintiff gave an order to his Chicago correspondent to sell at $38 and was advised that the shares brought $38.50. Plaintiff then confirmed to defendant a purchase by him from defendant at $38 and charged defendant at the same time a $15 brokerage charge.

Defendant sent the certificates to the plaintiff’s bank at Danville with a draft on the plaintiff for $2,835 attached. Plaintiff instructed his agent to pay the draft and forward the shares. At the time of delivery to the ultimate purchaser it was discovered that the Associated Gas and Electric Company issued allotment certificates bearing $8 interest and also allotment certificates bearing $1.60 interest. The buyer declined to take the $1.60 certificates. This was the first notice to plaintiff and defendant of the difference in the certificates.

Plaintiff sues on the theory that he was the agent of the defendant and that he paid out money for his principal which he ought to receive back. Defendant contends that the transaction constitutes a sale to the plaintiff.

We have previously noted that plaintiff sold at $38.50, confirming his own purchase at $38 and then charged defendant a broker’s commission. He justifies this action by saying that he had an order to sell at $38 and that it was customary among brokers to make the extra profit as additional commission. Defendant’s agent, Gee, testified that he gave an order to sell at “$38 or more.” Plaintiff’s declaration alleged that the order to sell was “$38 or better.” It is not necessary to instruct an agent to do the best he can. The law requires it. Furthermore, if in fact it is a custom among brokers to make additional charges without notice to clients and to represent that sales are made for less than is obtained we cannot condone it. Nothing is better settled in the law than that an agent shall not make a secret profit out of sales for his principal in addition to the charge for his services.

Under the circumstances, plaintiff having elected to take the benefits of a sale, contrary to instructions from his principal, we have no hesitation in holding that the defendant may hold him to his bargain.

Plaintiff contends that assuming the transaction to have been a sale, it was a sale made under mistake and can be rescinded.

There is no evidence to support count one of the declaration. The evidence shows that Associated Gas. and Electric Company interest bearing allotment certificates with no further specifications were the basis of the dealings between the parties.

The circumstances under which a contract will be set aside for mistake of fact are set forth in the case of Steinmeyer v. Schroeppel, 226 Ill. 9, on p. 13, “If there is an apparently valid contract in writing, but by reason of a mistake of fact by one of the parties, not due to his negligence, the contract is different with respect to the subject matter or terms from what was intended, equity will give to such a party a remedy by cancellation where the parties can be placed in statu quo.”

The evidence shows that there was no mistaken assumption by either party except the assumption by the plaintiff that he could get a better price than was possible. The actual certificates were forwarded to the plaintiff. They were plainly marked $1.60 interest bearing allotment certificates. There was nothing which they purported to be which they were not.

Defendant was a farmer, unlearned in the security market; plaintiff was a broker with years of experience in the market. He did not take the trouble to use the sources of information which were certainly more available to him than to the defendant. He did not inspect the certificates before he made his inquiry concerning prices. The manifest weight of the evidence shows the plaintiff to have been negligent in this regard.

The cases cited by the plaintiff are: Nelson v. Pedersen, 305 Ill. 606, 610; Bivins v. Kerr, 268 Ill. 164; Morgan v. Owens, 228 Ill. 598; Rupley v. Daggett, 74 Ill. 351; Lunt v. Wrenn, 113 Ill. 168, 175; Drennan v. Bunn, 124 Ill. 175, 186. The first three require that the party seeking to relieve against the mistake establish lack of negligence on his part. Rupley v. Daggett is a case of clear misunderstanding as to terms of the contract. Lunt v. Wrerun is a case of a sale of counterfeit scrip. Drennan v. Bunn is a case of legal fraud.

There is no evidence to show that market conditions are such or that optional values of the certificates are such that the defendant can be placed in statu quo.

In Jenson v. Muting, 255 Ill. App. 514, there was a latent defect in the article sold in that the parties negotiated on the basis of current stock of the Radio Corporation of America whereas the stock supplied was stock which had been called in and canceled four years prior to the sale. No inspection of the article would have disclosed this. An inspection of the article in the present case would have given the plaintiff an accurate description from which he could have obtained the information he desired. It also appears in Jenson v. Muting that the parties stood on an equal footing, whereas in the instant case the party making the mistake had superior means of obtaining information.

In the case of Pierce v. Hoyt, 260 Ill. App. 182, the purchaser at a foreclosure sale relied on the master in chancery’s figures concerning the indebtedness. He inquired of the master because he intended to bid slightly less than the amount of the debt. The master had made a miscalculation and the bid was considerably higher than the amount of the indebtedness. The court found that the bidder was negligent in not discovering the master’s miscalculation and refused to set aside the sale. Steinmeyer v. Schroeppel, supra, presents a similar situation.

The situation here involved does not concern any misunderstanding between the parties or any false assumption with respect to the subject matter of the sale but an assumption of the plaintiff with respect to collateral facts concerning the value of the shares.

Let us assume that the prices of the shares are reversed and that a sale is being negotiated: The owner of the shares asks the buyer what he will give for them. The buyer mistakenly quotes a list price of lower valued shares not knowing there are two shares of the same type at different values. After the sale can the seller rescind on the ground that if he had known there were two kinds of shares and that the usual price for his kind was much higher than he received, he would not have sold? We think not. We see no difference in the case where shares are overvalued instead of undervalued.

Generally, a mistake concerning a collateral fact will not justify rescission. Williston, Contracts, sec. 1569. Kerr in his work on Fraud and Mistake (5th eel.), p. 550, states this rule: “If the buyer purchases the very article at the very price and on the very terms intended by him and the vendor, the sale is complete by mutual assent even though the buyer be totally mistaken in the motive which induced the assent.” It should be remembered that in this case the specific shares were forwarded to the plaintiff. After stating the general rule above Kerr goes on to say that the sale cannot be set aside because the seller must have known from the price or from the buyer’s general habits that he thought he was buying a sound article.

Avoidance of contracts on the ground of mistake whether at law or in equity is based upon equitable principles. Unless it were a clear case of mistake of fact concerning the subject matter of the transaction we should be disinclined to set aside the bargain which the plaintiff has made for himself where there is such a clear indication of bad faith on his part.

It is unnecessary to consider the other defenses presented. The judgment of the circuit court of Lawrence county will therefore be reversed.

Judgment reversed.


author: Mr. Presiding Justice Gridley

text:
    Arthur Lyons et al., Complainants, v. 333 North Michigan Avenue Building Corporation et al., Defendants and Appellees. Arthur Lyons, Appellant.
    Gen. No. 37,054.

      Opinion filed October 16, 1934.
    S hulmán, Shulman & Abrams, for appellant; Meter Abrams, of counsel.
    Pam & Hurd and Poppenhusen, Johnston, Thompson & Cole, for certain appellee; Andrew J. Dallstream and James W. Hyde, of counsel.
    Taylor, Miller, Busoh & Boyden, for certain other appellees; John S. Miller, Laurens G. Hastings and Egbert A. Oakes, of counsel.
   Mr. Presiding Justice Gridley

delivered the opinion of the court.

Complainants’ original hill was filed on February 11, 1933. After demurrers had been filed by the 333 North Michigan Avenue Building Corporation (hereinafter called the 333 Corporation) and by other defendants, the cause came on for hearing on the demurrers, and the court sustained them, gave leave to complainants to file an amended bill, and ordered that “the decision of the motion of the Central Republic Trust Co. (hereinafter called the Trust Co.) to dismiss the bill for lack of jurisdiction in the court to entertain the same ’ ’ (by reason of the pendency of a bill to foreclose, Case No. 551,529, filed by the Trust Co., as Trustee, against said 333 Corporation and others) “be reserved until the filing of said amended bill. ’ ’

Complainants’ amended bill was filed on April 5, 1933. It is signed by a firm of solicitors in the names of Arthur Lyons, Benjamin Galperin, Becky Doppelt, Minnie Roderick, Sam Baer, Joseph Savelson, Bertha Steinhard and Charles Nider, and it is verified by said Nider, who designates himself as one of the complainants. It states in the first paragraph that “Arthur Lyons, in his own behalf and on behalf of the other bondholders who join herein as complainants, and for the benefit of all other bondholders who are equally situated and desire to join herein as complainants, respectfully shows:” Then follow many allegations, as contained in 30 paragraphs, from which the following salient facts appear: That in June, 1927, the 333 Corporation, organized under the laws of Illinois, issued a large number of first mortgage bonds (in excess of 8,400) of the total par value of $6,250,000, for the purpose of erecting a building on the real estate now known as 333 North Michigan Avenue, Chicago; that to secure the bonds, it, on June 6, 1927, executed its trust deed to the Bank of America, as trustee, conveying the premises; that by various consolidations and changes of name the trusteeship under the trust deed passed to and now is in said Central Bepublic Trust Co.; that on January 25, 1932, a certain “Deposit Agreement” was executed between the Greenebaum Sons Investment Co. (hereinafter called the Investment Co.) as Beorganization Manager, and such of the bondholders as might thereunder deposit the bonds they severally owned, in which agreement the Trust Co. was named as the depositary; that Arthur Lyons deposited his $1,000 bond under the agreement; that just prior to February 1, 1932, the Trust Co., as trustee under the trust deed, took possession of the premises and building and began, and is now, collecting the rents and profits thereof; and that on February 1, 1932, the Trust Co. accelerated the maturity of the bonds and filed a bill (case No. 551,527) in said superior court to foreclose the trust deed securing the bonds, on which no foreclosure decree has as yet been entered.

The amended bill malíes charges against defendants of fraud and misrepresentation, largely by conclusions rather than by allegations of facts, in the stated value of the premises securing the bonds, in the published advertisements concerning the value of the bonds when they were offered for sale, in the actions and doings of some of the defendants in promoting the plan of reorganization, and in procuring bondholders to deposit their several bonds with the Trust Co., as depositary, under the Deposit Agreement. A certain “Income Statement with Comparison” (erroneously called a “Balance Sheet” by complainants’ counsel) and the “Deposit Agreement” are set out in full in the bill, and three other documents are attached thereto as Exhibits “A,” “B” and “D.” The allegations of the last two paragraphs of the bill are in substance as follows :

(29) That Benjamin Galperin, who joins as a co-complainant, is the owner of one bond for $1,000, which he has deposited with the Depositary under the Deposit Agreement; that Lyons and Galperin “were not aware of the fraudulent purpose for which the deposit was sought, but, having now discovered its real object, they- repudiate the actions of the Committee, the depositary and the agreement, and do not desire to be parties to a fraudulent enterprise to cheat and defraud the other bondholders”; that they, therefore, bring this action in their names, and for the use and benefit of all other bond owners “who are equally desirous of preventing this fraudulent scheme to freeze out their co-beneficiaries, devised by the Trustee, the Reorganization Manager and the Mortgagor,” to the end that said two bonds deposited by said Lyons and Galperin, as well as the bonds deposited by the other bond owners, “be returned to them free and clear from the lien of the depositary, trustee and reorganization manager. ’ ’

(30) That Becky Doppelt (owner of two bonds of $500 each), Minnie Roderick (owner of one bond of $500), Sam Baer (owner of two bonds of par value of $1,500), Joseph Savelson (owner of $5,000 of the bonds), Bertha Steinhard (owner of one bond of $500), and Morris Rider (owner of two bonds of $1,000 each) also herein join as co-complainants; that the total amount of all of the bonds owned by Lyons and his co-complainants aggregates $12,500; that Doppelt, Roderick, Baer and Savelson “have heretofore attempted to intervene in said foreclosure proceeding, claiming adverse interests to that of the Trustee, but because of the objection by the Trustee now join herein as co-complainants”; that one Lottie Brenner (who did not join as a co-complainant) “is the owner of bonds aggregating $100,000 and is also objecting to the ‘ scheme, ’ and there are many other bond owners who object thereto ’ ’; that it would be too expensive to make all bondholders parties to the proceeding, many of whom are widely scattered and out of this court’s jurisdiction; that their interest is not in conflict with that of complainants; and that “all are interested in one common cause, namely, the protection of their rights. ’ ’

The prayer of the amended bill is substantially as follows:

That the 333 Corporation, the Trust Co. (individually and as trustee, and as depositary), the Investment Co., and said nine other named parties (individually and as officers and directors of said 333 Corporation) answer the bill, but not under oath; that they also answer 17 special interrogatories as set forth; that “the court may find and determine that there is now due the whole bond issue and interest thereon”; that “a money decree be entered against the Mortgagor (333 Corporation) and the persons who may be found to be personally liable thereon, less any funds which may be turned over in reduction of the indebtedness of the items enumerated below upon a proper accounting”; and that the court may find and decree:

1. That any funds collected from the income of the premises for the payment of taxes and interest, which were “diverted” for other purposes, be followed into the possession of the several defendants “be charged and impressed with a lien in favor of all bondholders,” and that the persons “who participated in the diversion of the funds” be ordered and decreed to refund same.

2. That the Trust Co., as trustee in the trust deed securing the bonds, and the Investment Co. were “negligent and faithless,” and “failed to protect the beneficiaries of the trust and their fiduciaries in allowing the mortgagor (333 Corporation) to file objections to the payment of taxes without setting up a sufficient reserve fund in accordance with the provisions of the trust”; that they are liable for the 1928 and 1929 taxes in the sum of $100,009.68, plus interest and penalties due thereon; that they are also liable for the 1930 taxes, for the moneys paid thereon by the trustee (Trust Co.) from the income received in 1932, and for the unpaid balance of the 1930 taxes amounting to $65,420.77; that they also are liable for the payment of the balance of the loan account which they paid over under the agreement, “which provided that such funds be paid in reduction of the last maturities and which last maturities were fraudulently sold and the funds paid over as aforesaid, — the exact amount of which is unknown but which should be ascertained upon a proper accounting.”

3. That the individual defendants, “who received the funds under the aforesaid agreement and who participated in the fraudulent scheme,” be required to refund such moneys and “be held jointly and severally liable thereon, together with the Trust Co. and the Investment Co.”

4. That the “scheme” to foreclose the premises was “conceived for the purpose of foreclosing the interest of the bond owners and not the interest of the mortgagor (333 Corporation), and, in order to coerce the bond owners to part with their bonds and entrust them to the re-organization Manager under a plan which would be beneficial to said Mortgagor, the Trustee, the Investment Co., and said individuals, but detrimental to the bond owners ’ ’; that said scheme to foreclose “was fraudulent”; and that the bonds be returned to the “true owners” and “such proceedings be stayed.”

That the court may also find that this bill was properly filed for and on behalf of all of the bondholders, who are equally interested in the relief sought; that complainants are entitled to the expense incurred in this behalf and “to the payment for the expense of their counsel and solicitors”; that during the pendency of the cause “a receiver be appointed” and all of the corporate assets and property be turned over to such receiver; that the court may also find “that the Deposit Agreement was procured by fraud and coercion and that the bondholders were deceived thereby”; that the parties endeavoring to carry out the terms thereof be “permanently enjoined from carrying out their proposed reorganization plan”; and that complainants may have such further general relief as to equity may seem meet.

That the 333 Corporation, the Trust Co., the Investment Co., and their respective officers, agents and attorneys be restrained “from using any of the funds received from the income of the premises or any of the assets belonging to the mortgagor (333 Corporation), and from diverting any of said funds or assets for any purpose except the payment of taxes and assessments, and interest if any on the bond issue; from further proceeding with the foreclosure heretofore commenced by them; from soliciting the bond holders to deposit their bonds with them; and from using any of the bonds in their possession or control for the purpose of pledging them as security for the fees of the Trustee, the Depositary, the Eeorganization Manager, their counsel and agents, until the further order of this Court. ’ ’

To the amended bill the Investment Co. filed a general and special demurrer, in which the stated causes of demurrer are in substance: (1) No equity shown; (2) adequate remedy at law; (3) bill is multifarious; (4) lack of jurisdiction because of the pending foreclosure suit; (5) insufficient statements of facts as distinguished from conclusions; and (6) all proper relief sought may be had in the foreclosure suit. The Trust Co. filed a written motion to dismiss the bill for the reasons: (1) That on February 1, 1932, the Trust Co., as trustee in the trust deed, filed its bill in the superior court (case No. 551,529) against the 333 Corporation, asking for the enforcement of the trusts created; that on February 29, 1932, the 333 Corporation entered its appearance as a defendant therein; that thereupon the exclusive jurisdiction of the trust, the trustee and the beneficiaries and the subject matter of the trust vested in the superior court in said cause No. 551,529, to the exclusion of all other courts; that the only remedy any beneficiary had under the trust was by proving in said foreclosure suit that the trustee was violating its trust, and by intervening therein for that purpose; (2) that so far as the Trust Co. is involved, all relief to which complainants in the present suit are entitled “is involved in and must be obtained in said foreclosure suit.” And the Trust Co. further stated that on the hearing of the motion, and in support thereof, it would “use the records and files in the present suit and the records and files in cause No. 551,529.” The motion was set for hearing at a future day, and it was further ordered that all demurrers theretofore filed to complainants’ original bill stand as such to the amended bill. On June 29,1933, the general and special demurrer of John A. Holabird (one of the individual defendants) was filed to the bill, in which, as causes for demurrer, he states in substance: That the bill shows upon its face that there is now pending in the superior court said foreclosure suit, and that any and all relief prayed for herein against this defendant can be obtained in said foreclosure suit.

That the bill shows that four of the complainants (i. e., Doppelt, Roderick, Baer and Savelson) “have already submitted themselves to the jurisdiction of the court in said foreclosure proceeding, in that they have heretofore attempted to intervene therein.”

That the bill is multifarious, in that it therein appears that it is exhibited against this defendant and others “for several different matters and causes,” in many of which it appears that this defendant “is not in any manner interested or concerned”; that by reason of such distinct matters, the bill is drawn out to considerable length, and, by joining issues involved in the foreclosure suit with matters involving this and the other individual defendants, the proceedings in the progress of this suit will be “intricate and prolix,” and this defendant “will be put to unnecessary charges and expenses in matters which in no way relate to or concern him.”

That, as appears from the face of the bill, complainants have an adequate remedy at law.

That the bill is “ambiguous, confused and inconsistent,” particularly as follows:

(1) In section 4 it is alleged that “the persons interested in the project, who had an interest in the land, caused to convey to the corporation” (333 Corporation) the land, without stating who those persons were or in any way connecting them with any of the parties to the suit.

(2) In section 4 it is also alleged that “said land was appraised by the incorporators (of said 333 Corporation) at the value of $1,600,000, and the capital stock in that amount was subscribed for and paid for by the land thus appraised.” But the original charter of the corporation, which is incorporated in the bill as an exhibit, “shows upon its face that only a part of the land was appraised at said sum of $1,600,000.”

(3) In section 7 certain persons are referred to as “individuals of recognized business and financial standing, ’ ’ without stating who they are.

(4) In the bill these persons are alleged to have “caused to organize” the 333 Corporation. But the original charter discloses that the incorporators of the corporation, as well as the subscribers to its stock, “were persons not mentioned by name in the bill or made parties thereto. ’ ’

(5) In the bill it is alleged that there was a complete “waiver of liability” of the officers and directors of the 333 Corporation; whereas “it appears from the trust deed (made a part of the bill by reference) that the provision with respect thereto was to the effect that no recourse under any obligation, covenant or agreement of said indenture, or of any bond or coupon secured thereby, should be had against any present or future stockholder, officer or director of the corporation, either directly or through the company, by the enforcement of any assessment, or by any legal or equitable proceeding by virtue of any statute or otherwise, except for stock subscriptions, and except in so far as they or any of them should have guaranteed the payment of the same by a signed undertaking separate from any participation in any corporate action by the company or from any action as such stockholders, officers or directors.”

(6) In the bill it is alleged that the trust deed “was never given to the bondholders”; whereas it appears from the trust deed, and from the form of bond set forth therein, that each bondholder is referred to the deed “for a statement of the terms and conditions upon which the bonds were issued and secured and the rights of the holders of the bonds, ’ ’ and that the bonds “all contained a provision similar to that referred to as being in the trust deed with respect to recourse against stockholders, officers or directors of the corporation.”

(7) Although this defendant and other individuals are made parties defendant to the bill, individually and as officers and directors of the 333 Corporation, it does not appear that any of them are either such officers or directors.

(8) In the bill it is alleged that the trust deed “did not contain any provision for monthly payments, as was represented to the bond owners and complainant by numerous circulars and pamphlets which were issued by the Investment Co. when the bonds were purchased by them, which was unknown to complainants until about this date”; whereas the bill does not identify said circulars and pamphlets or allege they had any connection whatsoever with the issue of the bonds by the 333 Corporation.

(9) In the bill it is alleged that “it was represented to the bond owners that the cost of construction was greatly in excess of the amount of the loan”; whereas it is not alleged by whom such representations were made, or-that this defendant and any of the other defendants were in any way connected with such representations.

(10) In the bill it is alleged that “as a result of the placing of the bond issue, the Trust Co., Investment Co., and the officers and directors of the 333 Corporation have greatly profited by using the funds derived from the sale of the bonds for their own purposes”; whereas it does not appear from the bill that any of the defendants are such officers and directors.

(11) In section 21 of the bill the figure of $470,-501.09, is given as the total net figure from certain tabulations set forth; whereas it appears from the face of the bill and from said tabulations that said figure is erroneous and should be $1,608.39, instead of $470,501.09.

Thereafter other general and special demurrers to the bill were filed by other defendants. The Trust Co. brought up for hearing its motion that the bill be dismissed for want of jurisdiction in the court to entertain it because of the pendency of said foreclosure suit, and on June 29, 1933, the motion was heard, resulting in the court denying the same. Thereupon, on the same day, the Trust Co. filed its general and special demurrer to the amended bill, setting forth in substance as causes of demurrer that (a) the bill is multifarious; (b) complainants have an adequate remedy at law; (c) bill cannot be maintained because of the pendency of the foreclosure suit, and (d) bill is demurrable because of lack of sufficient allegations of fact, as distinguished from conclusions, to warrant the relief prayed. And thereupon, on June 29, 1933, after a full hearing upon the several demurrers, the court entered the decree in question, in part as follows:

1. That said amended bill is multifarious in that it sets up separate causes of action against some of the defendants and other causes of action against other defendants, with which respective causes of action all of the defendants are not connected;

2. That complainants have a complete and adequate remedy at law for any and all fraud claimed to have been perpetrated against them by defendants or any of them;

3. That the matters and things set up and alleged in said amended bill, so far as the parties to said foreclosure suit mentioned in said bill are concerned, are properly cognisable in said foreclosure suit and should not be heard by this court;

4. That said amended bill consists almost entirely of argument and conclusion and does not set up facts sufficient to entitle complainants to any relief whatever.

“It is, Therefore, Ordered, Adjudged and Decreed that said demurrers, general and special, and each and every of them, be and they are hereby sustained, and said amended bill of complaint is dismissed for want of equity.”

The present record does not disclose that after the demurrers were sustained complainants asked leave to amend the bill or to file another one, but from the decree they prayed and were allowed a “joint and several” appeal. Lyons, alone, perfected the present appeal.

After carefully reviewing the amended bill and the writings embodied therein or attached as exhibits thereto, and considering the exhaustive briefs and arguments of opposing counsel, we have reached the conclusion that the court was fully warranted in sustaining said demurrers and in entering the decree in question.

We are of the opinion that the demurrers were properly sustained on the ground that the bill is multifarious. Multifariousness in bills, and the principles or rules to be applied in ascertaining that defect, are discussed at length in First Nat. Bank v. Starkey, 268 Ill. 22, 26, 27. In 1 Puterbaugh’s Chancery, 7th Ed., sec. 40, pp. 78, 79, it is said: “Multifariousness may be defined as the improper joining of distinct and independent matters in one bill, or the improper joinder of parties not connected with the controversy in its proper and legitimate scope. . . . One of the important reasons for the rule against multifariousness is to avoid the inconvenience to the defendant of being compelled to present unnecessary defenses or to complicate his defense by combining matters which have no necessary connection with each other. There is no settled rule, and therefore, as to what constitutes multifariousness, every case must be governed by its own circumstances leaving the court to the exercise of its sound discretion.” Under these principles and rules we think that it sufficiently appears on the face of the bill that it is multifarious because (a) it seeks to litigate several claims which are separate and distinct, and (b) it joins distinct subject matters against several defendants, some of whom have no interest in one or more of the matters thus joined.

And we are of the opinion that the matters and things alleged in the bill were cognizable in the foreclosure suit pending in the superior court, which had original prior jurisdiction to determine said matters and things, and that for this reason, as stated in the decree, the court properly sustained the demurrers and dismissed the bill. (See Farmers’ Loan & Trust Co. v. Lake Street Elevated R. Co., 177 U. S. 51, 61; Ward v. Foulkrod, 264 Fed. 627, 630; Nolan v. Barnes, 268 Ill. 515, 520.) In the case last cited it is said: “It is elementary that the court first lawfully obtaining jurisdiction will retain it until the end of the controversy and to the exclusion of all others; also, that no other court, even of concurrent jurisdiction, can or will make findings or orders which have any bearing upon the issues in the court originally entertaining the cause.”

Counsel for complainants state in their printed brief that “fraud” is the gravamen of the bill, but after carefully reading'the bill we are of the opinion that, as stated by the court in the decree-, it “consists almost entirely of argument and conclusions and does not set up facts sufficient to entitle complainants to any relief” upon the ground of fraud. It appears to us (1) that the allegations in the bill as to the claimed improper practices and advertisements of the former Greenebaum Sons’ Bank & Trust Co. are not sufficiently shown to have any connection with the transactions resulting in the purchase by complainants of their particular bonds; (2) that the allegations of. fraud, based upon the so-called “Balance Sheet,” are contradicted by facts and figures appearing on the face of the instrument itself; (3) that the allegations of the bill, taken in connection with certain attached exhibits, do not sufficiently show any fraudulent valuation of the entire land, which was conveyed by the 333 Corporation to the Trust Co., trustee, as security for the bond issue in question; and (4) that the allegations of the bill do not sufficiently show that the plan of reorganization was fraudulent as claimed, or that some of the complainants were induced by fraud and misrepresentation to deposit their bonds with the Trust Co., as depositary. It is well settled law in this State that where there is discrepancy or contradiction between allegations in a bill in chancery and facts as shown in an exhibit attached to and made a part of the bill, the exhibit will control; and that a demurrer to the bill does not admit such allegations as are in conflict with facts disclosed by such exhibit. (Price v. Solberg, 269 Ill. 459, 462; Armstrong v. Douglas Park Bldg. Ass’n, 176 Ill. 298, 300; Waller v. Village of River Forest, 259 Ill. 223, 230.)

From the allegations of the bill, as contained in paragraphs 29 and 30 above set forth and in other paragraphs, it appears that of the complainants, who joined in the suit with Arthur Lyons (the owner of one $1,000 bond) none is an owner of bonds in a large amount (i. e., Galperin, $1,000; Doppelt, $1,000; Roderick, $500; Baer, $1,500; Savelson, $5,000; Steinhard, $500, and Nider, $2,000; or a total, including Lyons, of $12,500); that the total principal amount of all bonds, issued by the 333 Corporation and secured by its trust deed sought to be foreclosed in said prior foreclosure action, is $6,250,000; that Lyons and Galperin have deposited their bonds with the Trust Co., as depositary, under the deposit agreement and plan of reorganization; and that complainants Doppelt, Roderick, Baer and Savelson have “attempted to intervene” in said foreclosure proceeding, “claiming adverse interests.” It is not alleged in the bill whether or not complainants, other than Lyons and Galperin, have deposited their bonds with the depositary under said agreement and plan; nor is it alleged that either Lyons or Galperin, before the commencement of the present action, made any demand upon the depositary for the return of their bonds. In paragraph 4 of the prayer of the bill it is asked that the court may find and decree “that the 'scheme’ to foreclose the premises was conceived for the purpose of foreclosing the interest of the bond owners and not the interest of the mortgagor, and in order to coerce the bond owners to part with their bonds and entrust them with the Reorganization Manager, under a plan which would be . . . detrimental to the bond owners, ’ ’ that the bonds be returned to the true owners, and that “such proceedings be stayed.” It is contended by counsel for the 333 Corporation and the individual defendants, as well as by counsel for the Trust Co., in substance, that the facts alleged in the bill do not warrant the granting of any such relief, and that the bill sufficiently discloses that the real purpose of its filing was the possible blocking of the plan of reorganization mentioned and further prosecution of the prior foreclosure suit, and thereby creating a maneuvering value in the comparatively very small number of bonds held by complainants. After considering the bill in its entirety we are of the opinion that there is substantial merit in the contention.

The decree of the superior court of June 29, 1933, sustaining the demurrers of the several defendants to complainants’ amended bill and dismissing said bill for want of equity, is affirmed.

Affirmed.

Scanean and Sullivan, JJ., concur.