author: Foster, J.:—

text:
      {Municipal Court of Chicago.)
    Smith, et al. vs. Loyal Americans of the Republic.
    (1907.)
    1. Corporations — Consolidation—Nature of. Consolidation is to be distinguished in law from a succession or a purchase or a transfer of assets. The usual form of consolidation is for one corporation to issue its own stock to the shareholders of the other.
    2. Fraternal Insurance Companies — Consolidation.—What Constitutes. Where the members of a fraternal organization are transferred to another similar organization and the latter issues new certificates of insurance to the former members of the other company, this is in effect a consolidation.
    3. Consolidation of Corporations. Corporations cannot be consolidated without express legislative sanction.
    4. Fraternal Benefit Societies — Right to Consolidate. Under the laws of Illinois, fraternal benefit societies are not authorized to consolidate.
    5. Same — Right to Pay for Obtaining New Members. Under section 8 of the Fraternal Benefit Association Act which provides that such societies shall not employ paid agents in soliciting or procuring members except in the organizing or building up of subordinate bodies, or granting members inducements to procure new members, it is contemplated that all such new members shall be secured by individual application and medical examination. It does not include the wholesale transfer of all the memberships in another organization.
    6. Same — Contract With Members — What Constitutes. The contract between a member, and his society consists in his application, examination by physician, constitution, by-laws, and certificate.
    7. Corporations — Ultra Vires- — Estoppel. The doctrine that a corporation cannot avail itself of the defense of ultra vires when a contract has in good faith been performed by the other party and the corporation has had the full benefit of its performance does not apply where such contract is immoral or illegal or prohibited by statute, or .where its enforcement would be against public policy.

      On demurrer to amended fifth and sixth additional counts. First class.- Heard before Judge Foster. The facts are stated in the opinion.
    No. 350.
    Messrs. Dandridge & Pugh, attorneys for plaintiff.

      D. W. Dixon, and Tenney, Coffeen, Harding & Wilkerson, attorneys for defendant.
   Foster, J.:—

The two additional counts demurred to set out in substance that the defendant is a Fraternal Benefit Society, which was originally organized under the Act approved and in force June 22, 1893, under the name of Royal Circle, and that the defendant now acting under its new name is governed by that act and the acts amendatory thereto; that the Fraternal Army of Loyal Americans was another society of the same kind as defendant with “a rate paying membership of more than 22,500 members,” and that the defendant employed the plaintiffs, who were members of defendant society, to procure and • bring about * * * a so called consolidation and uniting of the membership of the Fraternal Army of Loyal Americans with the defendant, which said consolidation and uniting consisted and was to consist in the securing and transferring to the defendant of the said membership and the reinsurance of the said members of the Fraternal Army of Loyal Americans in the defendant society, and that plaintiffs did procure said so called consolidation or uniting * * * and did secure and cause to be transferred to the defendant about 22,500 members, more or less, and the insurance of said members by the defendant; that the acts of plaintiff resulted in the organizing and building up of a great number of subordinate lodges of and for the defendant, and secured new members “to the number of 22,500 as aforesaid.”

The counts contain further allegations as to the benefits that accrued to defendant from plaintiff’s acts, and one proceeds on the theory of qucmtum meruit, while the other alleges a special contract to pay plaintiffs the amount of $70,000' in consideration of these services.

While there is perhaps some ambiguity in the language employed, it sufficiently appears, and is, we understand, admitted by counsel that the substance of the transaction was a consolidation or uniting of the membership of the two fraternal benefit societies; as counsel for plaintiff states, “The acts themselves being set out, it seems immaterial whether they are referred to as a 'consolidation/ 'amalgamation/ 'merger/ or 'benevolent assimilation.’ ”

“Consolidation” is to be distinguished in law from a succession or a purchase or transfer of assets; Loughlin v. U. S. School Furniture Co., 118 Ill. App. 36; but here, where all the 22,500 members were transferred and 'reinsured by the defendant, it would seem that the word “consolidation” was correctly, used by the plaintiffs in their declaration. As is said in 10 Cyc. p. 314, “The * * * usual form (of consolidation)' is for the purchasing company to issue its own shares to the shareholders of the selling company in payment or exchange therefor.” To the same effect is the decision of our supreme court in C. S. F. Ry. Co. v. Ashline, 160 Ill. 373. This case emphasizes such issuance of stock as the distinguishing feature of a consolidation. Applying this principle to insurance companies, it is hard to see how “consolidation” could be more completely effected than ’in the case at bar, where the defendant company, it would appear (although the allegation is not specific), issued new certificates of insurance to the former members of the other company.

The main question, therefore, that arises on this demurrer is whether or not the defendant corporation and the Fraternal Army of Loyal Americans could be lawfully consolidated or merged.

As stated by our supreme court -in' American Trust Co. v. Minn. & N. W. R. R. Co., 157 Ill. 641,.“ Corporations cannot be consolidated without express sanction .of the state * * * and if the power to consolidate with other railroads is withheld, it is regarded as a prohibition against the exercise of such a power; 3 Wood on Law of Railroads, sec. 486.” This case is followed, and its doctrine applied to an attempted merger of a domestic with a foreign insurance company in Kavanaugh v. Omaha Life Association, 84 Fed. 295.

There is no general statute of the state of Illinois authorizing the consolidation of such corporations, and the question presented must be determined by an examination of the particular act under which these two companies were organized.

In Lehman v. Clark, 174 Ill. 279, Mr. Justice Phillips said: “It was held in Bastian v. Modern Woodmen, 166 Ill. 595, that the two acts approved June 22, 1893, were designed to create certain classes of corporations furnishing life insurance or indemnity under various former acts and to enact and create a complete code for each.” In fact, the act in force July 1 contains an express provision in section 11 that it does not apply to fraternal benefit societies and the act in force June 22, 1893, expressly provides in section 1 that “all such (benefit) societies shall be governed by this act, and shall be exempt from the provisions of all insurance laws of this state, and no law hereafter passed shall apply to them unless they be expressly designated therein.” (Hurd’s revised statutes, chap. 73, sec. 258.) What construction, then, is to be put upon the fraternal benefit society act approved and in force June 22, 1893? Hurd’s revised statutes, chap. 73, sec. 258, et seq., p. 1222.

It is to be noted that the assessment company act approved on the same day, June 22, 1893, but in force July 1 (Hurd’s revised statutes, chap. 73, sec. 230 et seq., p. 1214, contains an express clause (see. 16, Hurd’s revised statutes, sec. 245, p. 1219) authorizing the transfer of all of the risks of a company organized under its provisions, but prescribes certain conditions that must first be complied with for the protection of the insured, to wit: That the contract of transfer or reinsurance must be approved by a vote of two-thirds of the insured at a meeting specially called for the purpose, and each member is given the right within ten days after the meeting to give notice that he prefers to be transferred to some other society.

These provisions, have of course, no application to the ease at bar, but they indicate the policy of the state to protect the insurance certificate holders. See also Boles v. Mutual Re serve Life Association, 220 Ill. 400, and Brown v. Mutual Reserve Life Association, 224 Ill. 576. Indeed, all life insurance companies are peculiarly under the control of the state for the protection of their members. Chicago Life Insurance Company v. Auditor, 101 Ill. 82.

The very fact that the assessment company act passed by the legislature at the same session and approved on the same day contained the above power to consolidate, while the act herein in question contained no such power, is in itself evidence that the legislature did not wish to authorize, under any circumstances, a consolidation of fraternal benefit societies.

It is not altogether clear just how the “consolidation,” “merger,” “amalgamation,” or “benevolent assimilation” — ■ to use again the terms applied by plaintiffs — was brought about, but enough does, we think, appear from the declaration to show that the Fraternal Army of Loyal Americans went out of existence, for not only were its full 22,500 members transferred to the defendant, but, as appears by the sixth additional count, “all the assets of the Fraternal Army of Loyal Americans, amounting to approximately $40,000 in cash and securities,” were received, used, and retained by the defendant. Enough, we think, is stated to show that the transfer of members to the defendant was in bulk, and not in the regular method of receiving separate applications and passing medical examinations. In fact, the declaration refers to the “ordinary and usual methods of securing premium paying members * * * by solicitation of individuals” as being quite different from the methods pursued here by which the plaintiffs 1 ‘ caused to be transferred to the defendant about 22,500 members. ’ ’ The plaintiffs cite in their brief three different cases, whereas their brief states the “reinsurance contract was similar to the one in controversy.” In two of these cases — Seymour v. Chicago Guaranty Fund Life Association, 55 N. W. 907 (Minn.), and Cotton v. South Western Mutual Life Ass’n, 115 Iowa, 729, 87 N. W. 675 — the consolidated or reinsuring company issued its own new policies of insurance, but without new applications by the members ■and without new medical examinations, while in the third case — Parvin v. Mutual Reserve Life Insurance Company, 100 N. W. 39 (Iowa) — no new policies were issued. In all cases there was a contract, by the company sued to assume ■all liabilities of the former society, and to take over all the members of the latter company and some such general contract between the Fraternal Army of Loyal Americans and the defendant must, it would seem, have been made here.

The plaintiffs’ declaration proceeds on the theory that they can recover under section 8 of the fraternal benefit association act, which provides as follows: “Such societies shall not employ paid agents in soliciting or procuring members, except in the' organizing or building up of subordinate bodies, or granting members inducements to procure new members.”

■ We are of the opinion that the only method contemplated by this section of securing new members was by individual application and medical examination, “the plan of organization” requiring such preliminary steps as much in .the case of later applicants as it does in case of original organization. Fraternal Tribunes v. Steele, 114 Ill. App. 194.

Plaintiffs therefore cannot claim that this “consolidation” and the “transferring of 22,500 members caused by them” was such a securing of new members or building up of new subordinate lodges as section 8 refers to. If we are right in this conclusion,' then this section contains an express prohibition against such a claim as the plaintiffs now make for compensation.

The courts of at least three states have already condemned wholesale transfers of membership similar to the case at bar.

In State v. Bankers’ Union, 99 N. W. 531 (Neb., 1904), the court says: “It is charged that the defendant has diverted the funds of the society and paid out large sums for the alleged purchase of the business and membership of other purchased organizations, and that the memberships of such other purchased organizations were admitted to the defendant association without medical examination, at lower and less rates of charges and assessments than required from persons originally becoming members of the defendant society. * e * “Referee finds * * * of these evils the following are the most conspicuous. * * * There are of necessity members whose health has failed or who have passed the age of 55, between the date of the entry into the transferred order and its transfer to another order. These must, either be ignored and their insurance thus destroyed without their consent, or a physical examination must be waived contrary to the .provisions of the statutes of the state. Reserves, accumulated must be diverted by the transferred society to an improper purpose, and thus there must be violated a sacred, trust.” * * *

“The statute prescribes the qualifications of members that may be admitted, and to admit members above the age limit or without medical examination is clearly in violation of its provisions. What may not be done directly in that regard cannot be done by taking over the entire membership of another society, and the conduct of the defendant was clearly a manifest violation of law.”

It does not affirmatively appear that in the. case at bar any of the transferred members were over the age of 60 years— the limit prescribed in the act — but if such consolidations are to be allowed there would of necessity be some eases in which, such facts would arise.

Certificates issued by the consolidated company to any members above the age of 60 years would be absolutely void. Steele v. Fraternal Tribunes, 215 Ill. 190 (affirming 114 Appellate, 194.) And any such certificate holder in the former-society which had been consolidated and gone out of existence-would be left without adequate protection.

Bankers’ Union of the World v. Crawford, 73 Pac. 79 (Kansas, July, 1903), In this case it appears that a contract was made Oct. 12, 1901, by which the general'officers of the-National Aid society, a fraternal insurance company, should do all they could to secure the transfer of the management of that association to the Bankers’ Union and to procure-members of the former to become members of the Bankers’ Union, and said officers were to receive $500 if the consolidation was completed, and the further sum of $10,000 which was evidenced by notes; such consolidation was effected and the Bankers’ Union obtained an increase of 4,000 members. Prior to this contract William H. Crawford died in good standing in the National Aid; the plaintiff was his beneficiary, but her claim had not been paid by the National Aid and she sued the defendant under the above contract by which defendant “assumed and agreed to pay all the just and legal claims” of the National Aid society. The court say at page 81: “It is not sufficient to authorize a corporation to act that no limitation is found in the law forbidding the act. The right to act must be conferred expressly or by necessary implication, or it does not exist. We have searched the statute in vain to find adequate warrant therein for a transaction such as is stated in plaintiff’s petition. It is claimed that section 3575, Gen. St. 1901, relating to fraternal beneficiary societies, which authorizes such societies to make and enforce contracts in relation to their business, implies the right to make the contract in question. It is suggested that the increase of members is the chief object of the existence of these beneficiary associations; hence an agreement made to promote that end would be one in relation to the business of the corporation.

“While, of course, no corporation, much less one of this character, could exist without persons connected therewith, neither could one like this long exist without a constant accession to its membership; it surely is a misuse of terms to say that the obtaining of members is the business of the corporation. Members enable it to pursue its business, but the obtaining of members is not its business. Its business is defined in the statute to be the making of provision for the payment of benefits in case of death, sickness, or temporary disability; and this business must be carried ón for the sole benefit of its members and their beneficiaries. For the purpose of carrying on this business, such associations are authorized by the statute to create a fund 1 from which the expenses of such association shall be defrayed, which shall be derived from assessments, premiums, or dues from its members, and interest accumulations thereon.’ Thus it appears clearly that these associations are to be administered for the sole benefit of their members and their beneficiaries, by means of assessments and dues collected from such members, that is, that only members may be called upon to contribute, and only they or their beneficiaries may receive indemnity. These associations are not permitted to go out and engage generally in the business of furnishing indemnity. Their distinct characteristics and charter life would be destroyed in so doing. The agreement counted upon in the case at bar contemplates the payment of money to one not a member of the Bankers’ union from moneys not received from the association of which plaintiff is a beneficiary. Such a transaction is wholly outside of the letter and spirit of the charter act, and in excess of any power conferred upon the association. The making and procuring of it is therefore ultra vires, and not to be enforced. * * *' It is, however, claimed by the defendant in error that, while it would not be permitted the Bankers’ union to collect money from an assessment upon its members for the purpose of paying the death loss of one who had never been a member, yet it is competent for it to pay this death loss out of the expense fund which the association is authorized to accumulate; that the obtaining of members of any association costs approximately $10 apiece, and that by this arrangement a large number of members were added without expense, so that the payment of this claim, which is in fact a mortuary one, might be made out of the expense fund, in lieu of paying a canvasser or deputy for accomplishing the same result. We are not disposed to give this suggestion serious consideration. To permit that to be accomplished indirectly which could not be done directly is to encourage indirect and reprehensible means, rather than open and fair dealing. Besides this, we find no allegations in the petition on which to base this claim.”

The case of Twiss v. Guaranty Life Association, 55 N. W. 8 (Iowa), is to the same effect.

I have read the cases cited by plaintiffs to sustain their contention, but do not find that they call for extended comment. The ease of Parvin v. Mutual Reserve Life Insurance Company, 100 N. W. 39 (Iowa), deals with the transfer of all members of an Illinois assessment company organized under the act that went into effect July 1, 1893. The only question before the court was as to whether the power to transfer or consolidate expressly given by that statute had been followed. The court, in its opinion, gave expression to some general propositions which do not, as we understand it, correctly represent the-law of Illinois.

A careful reading of the fraternal benefit society act in our state makes it sufficiently plain, we think, that no such “consolidation” was ever contemplated or authorized by the legislature. These are unique corporations organized for “the sole benefit of its members and their beneficiaries and not for profit.” It is repeatedly declared that they must maintain a lodge system with ritualistic form of work and representative form -of government. As above stated, no paid agents are to be employed except in certain specified cases. The members of any religious denomination may incorporate under the act, and members in such corporation shall be confined to the members of such religious denomination.

■ Commercial travelers are also allowed to incorporate under the provisions of this act, but members of such incorporations are limited to those actually engaged as travelers or those who employ them.

The contract between a member and his society consists in his application, examination by physician, constitution, bylaws, and certificate. Fullenwider v. Royal League, 180 Ill. 625.

Suppose that a Methodist denomination association was organized under the act and then a “consolidation” or “merger” such as in the case at bar was brought about with some Baptist denomination society similarly organized, or suppose a commercial travelers’ association was so “consolidated” or “merged” with an association having miscellaneous members. Would not the contract as above defined between the Methodist society and its members in the first instance, and the contract between the commercial travelers’ association and its members in the second instance, have been wholly violated? But it will be said such facts do not arise here. That is true, but these provisions and the possibility that such facts might appear in other cases, if mergers were allowed, show that the legislature never intended that they should take place.

Finally, it is alleged by plaintiff that the defendant has received the benefits of the plaintiff’s labor, and it is urged that the defendant is estopped to set up the defense of ultra vires. This contention is met by the following decision:

In Fritze v. Equitable B. & L. Society, 186 Ill. 183, the court says at 199: ‘ ‘ The doctrine, however, that a .corporation cannot avail itself of the defense of ultra vires when a contract has been in good faith performed by the other party and the corporation has had the full benefit of its performance was never held to have any application where such contract is immoral or illegal or prohibited by statute, or where its enforcement would be against public policy.” The contract "there was prohibited by the statute, not expressly, but by implication from omission as in the case at bar, and its enforcement was held to be against public policy.

In Steele v. Fraternal Tribunes, 215 Ill. 190, Mr. Justice Wilkin said: “It is insisted, however, that even though the contract be regarded as ultra vires, yet defendant in error cannot avail itself of such defense, the contract having been performed in good faith by the other party, and the corporation had the full benefit of such performance. We cannot agree with this contention. A contract of a corporation which is ultra vires in -the proper sense of that term — that is to say outside the object of its creation, as defined by the laws of its organization and therefore beyond the powers conferred upon it by the legislature, is not only voidable, but wholly void and of no effect. The objection to the contract here is not merely that the corporation ought not to have made it, but that it could not lawfully make it. The contract could not be ratified by either party because it could not have been authorized by either. No performance by the parties could give the unlawful contract validity or become the foundation of any right of action upon it. * * *

“A party dealing with a corporation having limited and delegated powers is chargeable with notice of those powers, and cannot plead his ignorance of their existence. ’ ’

This ease represents the law of this state as we understand it. A violation of a charter provision cannot be waived and no estoppel can be invoked. Such acts as are found in the Steele case and in the case at bar are to be distinguished from mere violations of by-laws adopted by the society which can be waived. (Wood v. Supreme Ruling of the Fraternal Mystic Circle, 212 Ill. 532.)

Surely if a certificate holder who has in good faith paid all his assessments cannot recover when his acceptance by the society was beyond its charter powers the plaintiffs here cannot be allowed to claim that the principle of estoppel forbids the defendant from pleading ultra vires.

The general demurrer to the first and sixth additional counts is therefore sustained.


source: Caselaw Access Project

author: Dicker, J.:—

license: Public Domain

text:
      (Municipal Court of Chicago.)

    Rose Chudnovski vs. James H. Eckels, et al., Receivers of Chicago Union Traction C
    (1907.)
    1. Municipal Court Act — Jurisdiction Over Actions Brought on Contract, for Personal Injuries. Under section 2 of the Mu- * nicipal Court Act giving jurisdiction to the municipal court in “all actions on contracts, express or implied,” held, there being nothing in the Municipal Court Act to show that the legislature used these words in any other than their common legal accepted sense, that the municipal court has jurisdiction over actions brought on contract for personal injuries.
    2. Constitutional Law — Class Legislation. The provision of the Municipal Court Act giving jurisdiction to the municipal court over actions on contracts express or implied, when construed as giving jurisdiction over actions for personal injuries based on contract relations, is constitutional, and is not class legislation.
    3. Actions fob Personal Injuries — Jurisdiction of Municipal Court of Chicago. Plaintiff brought an action of assumpsit, setting up in the declaration that the plaintiff became a passenger on one of the street cars of the defendant, and further setting up an implied contract to safely carry the plaintiff, and the breach of such contract on the part of the defendant hy negligently managing another car on another line so that it collided with the car upon which the plaintiff was riding, whereby the plaintiff was injured. Upon general and special demurrers to the declaration, held that the municipal court of Chicago had jurisdiction.
    Action of assumpsit. Municipal court of Chicago. Heard upon general and special demurrers to the declaration before Judge Dicker.
    The facts are stated in the opinion of the court.
   Dicker, J.:—

This is an action in assumpsit. The declaration sets up that .the defendants were engaged in operating a street railroad in the city of Chicago.

That the plaintiff became a passenger on one of its cars, and further sets up an implied contract to safely carry the plaintiff, and breach of said contract on the part of the defendant by negligently managing another car on another line, so that it collided with the car upon which plaintiff was riding, and the plaintiff was thereby injured, alleging damages of $10,000.

General and special demurrers were filed to the declaration, on the ground that this court has no jurisdiction of the subject matter, as set forth in the declaration.

Section 2 of the Municipal Court Act provides, in part, as follows:

“That said Municipal Court shall have jurisdiction within the city of Chicago in the following cases: 1. All actions on contracts, express or implied, when the amount claimed by the plaintiff exceeds one thousand dollars ($1,000), and all actions for the recovery of personal property, or for the recovery of damages for the conversion of and injury to personal property, when the value of the property, or the amount of damages sought to be recovered as claimed by the plaintiff exceeds one thousand dollars ($1,000), and which, for convenience, will be hereinafter referred to and designated as cases of the first class — .”

It has been repeatedly held in this state, and it is conceded by the defendants, that there is a contract between the passenger who pays his fare and a carrier, and that an action in assumpsit will lie for the breach of such contract, and that there is no question but that the declaration filed in this case states a cause of action in contract against a carrier, although it states it more fully than is required.

It is contended, however, that the words “contracts, express or implied,” as used in this statute, and other statutes of the state of Illinois, do not include, and were not intended by the legislature to include cases of this nature.

“In order to ascertain the legislative intention', the primary rule is that a statute is to receive that meaning which the ordinary reading of its language warrants, words not technical being taken in. their ordinary familiar acceptation, with regard to their general and popular use; and the meaning thus arrived at must be adopted when it involves no absurdity, if from a view of the whole law and other laws in pari materia, no different legislative intent is apparent.

If the language is clear, and admits but one meaning, the legislature should be intended to mean what it has plainly expressed, and there is no room for construction.” 26 Am. & Eng. Ency. of Law, 598.

“The principle just stated includes implicitly the further rule that it is the duty of the court neither to add anything to nor to take anything from a statute, unless good grounds appear for thinking, that the legislature intended something which it has failed precisely to express.

■ ‘ ‘ Thus an exception out of the general provisions of the statute will never he implied in favor of particular persons or cases unless they are expressly mentioned; for general words in a statute must receive a general construction, unless there is something in it to restrain them.” 26 Am. & Eng. Ency. of Law, 600, 601.

Our own supreme court says, in C., M. & St. P. R. R. v. Dumser, 109 Ill. 402, 410: “Where a statute is expressed in clear and precise terms, where the sense is manifest, and leads to nothing absurd, or where its provisions, if literally applied, would work no palpable injustice, nor contravene any imperative public exigency, there can be no reason not to adopt the sense it naturally presents In such case there can be, no necessity for restricting its operation, and the statute should be enforced as it is plainly written.”

The jurisdiction conferred upon the municipal court in civil cases may be properly divided into three general classes. “First. All those classes of suits and proceedings, whether civil or quasi-criminal, of which justices of the peace are now given jurisdiction by law * * * when the amount sought to be recovered, whether by way of damages, penalty or otherwise, if the suit or proceeding be for the recovery of money only, or the value of the personal property claimed, if the suit or proceeding be brought for the recovery of personal property, does not exceed one thousand dollars. * * *

“All other suits at law, for the recovery of money only, when the amount claimed does not exceed one thousand dollars.”

As to this class of cases, there are no written pleadings, except as expressly provided for in the statute, and an examination of the statute will show thot it was expected or intended that the eases should have speedy hearing and be promptly disposed of, with as little technicality and formality as possible.

The second class of cases are those transferred from the circuit and superior courts of Cook county.

The third class are those provided for by the first paragraph of section 2 of the act above quoted.

An examination of the act shows that in the disposition of this latter class of cases common law pleadings and practice prevail. Therefore all suits brought under this section,of the act must be brought under some of the forms of action known to common law, and in framing the section it will be presumed that the legislature had this in view.

At p. 97, vol. 1, of Chitty on Pleading, it is stated: “Personal actions are in form ex contractu or ex delicto, or, in other words, are for a breach .of contract, or for wrongs unconnected with contract.” Considering this section, therefore, in view of the subsequent provisions of the statute regarding the pleadings and practice in suits under this section, and in view of the well-known rules of common law in relation to pleading and practice, there appears to have been conferred on the municipal court jurisdiction in all cases for breach of contract, express or implied; or, in other words, actions ex contractu and certain actions ex delicto, namely, replevin, trover, and actions on the ease for injury to personal property.

There is nothing in the statute itself to justify the assumption that the legislature intended any narrower interpretation of the words “contracts, express or implied,” than is above set forth. "Where the same words are used in the Practice Act, section 37, providing for affidavit of claim and affidavit of merits the words “contracts express or implied” are modified and limited by the words immediately following: “for the payment of money,” and the same modification appears in section 38 of the Justice Act.

Subdivision 2 of section 2647, Revised Statutes of Wisconsin, provides: 1 ‘ The plaintiff may unite in the same complaint several causes of action, whether they be such as were formerly denominated legal or equitable, or both, when they arise out of * * * (2) contract, express or implied.”

In the case of Childs v. Harris Mfg. Co., 32 N. W. 43, 68 Wis. 231, the supreme court of Wisconsin held that the words “contract, express or implied” in that statute would include a judgment. In the case of Umlauf v. Umlauf, 103 Ill. 651, 654, our supreme court, in construing the act relating to appeals' from the appellate to the supreme court, says:

“The term ‘contract’ in its popular signification, is generally limited to actual agreements between determinate contracting parties, but in law it has a much more extended signification. There are many duties and obligations growing out of certain relations which are regarded by the law as species of contracts, where it is clear there never was any actual agreement between the parties to such relations. Hence it is said by Mr. Bishop, in defining a contract, that — ‘a contract is a promise from one to another, either made in fact, or crea,ted by law, either to do, or refrain — etc.’ ” Bishop on Contracts, secs. 1, 5, 72.

There being nothing in the act, therefore, to show that the legislature in this section used the words “contracts, express or implied,” in any other than their common, legal accepted sense, I am of the opinion that the municipal court acquired thereby jurisdiction in all cases ex contractu, and that the case at bar is within the purview of the act.

It is further contended by the defendant that, if the intention of the legislature be construed to be that actions may be brought on contract for personal injuries under class 1, then it is submitted that so much of the section as is comprised under the heading “Class 1” is unconstitutional and a denial of equal rights, privileges and immunities to each citizen. Article 4, section 2 of the constitution of the state is violated, because this would be class legislation, and the fourteenth amendment to the federal constitution is violated because there is denied the equal privilege and immunity to every citizen of the United States residing within the state of Illinois.

I do not consider this contention well taken, and it is not substantiated by any of the cases cited, all of which are based upon the view of the court that the acts passed upon were designed to discriminate in favor of or against certain classes of persons. ■

Here the distinction between the cases that can be brought and those that cannot be brought is based on well-known principles of the common law. If it is not competent for the legislature, in fixing the jurisdiction of courts of limited jurisdiction, to make such classification according to well-known forms of actions and with reference to the remedies sought, then it could be as well claimed that the Justice Act is unconstitutional because certain classes of suits where less than $200 is involved can be brought in such courts, while other claims, in which like amounts are involved, cannot be brought because the form of remedy required is different, and that the act conferring common law jurisdiction in the county court is class legislation because it does not include cases involving less than $1,000 where an equitable remedy is sought.

There is no reason apparent why it is not as competent for the legislature, in the municipal court act, to have given jurisdiction in eases based on contracts and to withhold it in cases based on torts than it is to have conferred upon the court jurisdiction in cases of law and withheld it in cases in, equity.

By the amendment to the constitution of 1904 the general assembly was authorized to create a municipal court in the city of Chicago, and to fix the jurisdiction and practice, and in pursuance to that amendment the present court was created and its jurisdiction fixed by general classification applicable alike to all classes of people residing and found within its jurisdiction, and this provision can in no sense be held to be ■class legislation.

The demurrer of the defendant will therefore be overruled.

NOTE.

The foregoing decision was affirmed by the supreme court of Illinois in February, 1908. — Ed.


author: Windes, J.:—

text:
      (Circuit Court of Cook County. In Chancery.)

    Francis W. Dunbar et al. vs. American Telegraph & Telephone Company, et al.
    (1908.)
    1. Res Adjudicata — Views of Supreme Court Binding on Lower Court After Remanding. Where a case is reversed and remanded by the supreme court with directions to proceed in conformity with the views expressed in the opinion of the Supreme Court, such views are res adjudicata and binding on the lower court as to the law in so far as applicable to the evidence.
    2. Corporations — Power to Hold Stock in Other Companies — Purpose of. if one corporation becomes the purchaser of the stock of another corporation with the unlawful purpose and intention of putting the latter corporation out of business, or so using and controlling it as to prevent rivalry in business and creating a monopoly, such purchase is illegal and void and against the public policy of Illinois.
    3. Same — Purchase in Name of Third Person. The legality of the transaction is not aided by making purchase in the name of third persons. 4. Same — Complete Monopoly Not Necessary. To invalidate the purchase by one corporation of stock in another corporation for the purpose of suppressing competition or creating a monopoly, it is not essential that a complete monopoly or a complete restraint result. It is sufficient that the tendency be in that direction.
    5. Foreign Corporations — Powers to Hold Stock in Illinois Company. Foreign corporations are subject to all the regulations provided by the laws of the state as to domestic corporations and consequently cannot purchase or hold stock in domestic corporations where a domestic corporation could not.
    6. Corporations — Purchase of Stock in Other Corporations — Purpose Not Material Where Tendency is to Suppress Competition or Create a Monopoly. Where the purchase hy one corporation of stock in another corporation has a tendency to create a monopoly or suppress competition the purpose of the purchaser in making the purchase is not material. In other words, it ;is not necessary in order to invalidate the transaction that the purpose and the tendency be the same.
    7. Monopolies — Power to Dissolve Competitor Tends to Create. Where the purchase by one corporation of the stock of a competitor gives the purchasing corporation absolute control and empowers it to wind up such competitor, the tendency of the transaction to suppress competition and to create a monopoly is apparent.
    8. Judicial Notice — Fact That Large Corporations or Interests Seek to Absorb or Overcome Competitors. The court should not ignore the well recognized fact throughout the business world that with rare exceptions the persons who control large corporations or business interests are on the lookout continually to absorb or overcome their competitors in trade.
    9. Corporations — Ultra Vires — Purchase of Stock of Domestic Corporation by Foreign Corporation. It would seem that under the decisions of the supreme court of Illinois and section 26 of the corporation act that the purchase of the majority of the stock of a domestic corporation by a foreign corporation is ultra vires.

    10. Equity Pleading — Not Necessary to Allege Tendency of Acts Charged. When the facts upon which the relief asked is based are alleged in the bill it is not necessary to allege the tendency of such acts.
    11. Corporations — .Setting Aside Purchase by Corporation of Stock of Competing Corporation — Conditions of Relief. Where the * purchase by one corporation of the stock of a competing corporation is set aside, the court should restore, so far as possible, the conditions existing before the time of the purchase. The purchaser should be required to return the stock and the dividends paid thereon with interest on the amount of such dividends. The sellers of the stock should be required to return the purchase price with interest thereon. If the sellers fail to return such purchase price, the stock should be sold and the proceeds to the extent of the original purchase price and interest should be paid to the original purchaser.

      Bill, amended and supplemental and cross-bill. The facts are stated in the opinion and in the opinion of the supreme court in the same case, 224 111. 9. Heard before Judge Thomas G. Windes.

      Henry 8. Bobbins, for Francis W. Dunbar. Charles H. Aldrich & Henry 8. McAuley, for Kempster
    B. Miller and George L. Burlingame.

      John 8. Miller & Pliny B. Smith, for Milo G. Kellogg. Hon. A. N. Waterman and Holt, Wheeler & Sidley, for
    American Telephone & Telegraph Co., Western Electric Co. and Enos M. Barton.

      Tenney, Coffeen, Harding & Wilkerson, for certain other parties.
   Windes, J.:—

The bill in this case was filed on the fifth of June, 1903, by -certain minority stockholders of the Kellogg Switchboard and Supply Company, representing about 370 shares of the stock of the par value of $100, against the American Telephone and Telegraph Company, a New York corporation, the Western Electric Company, and the Kellogg Switchboard and Supply Company, the latter two being Illinois corporations; also certain officers of these defendant corporations, and the remaining stockholders, as I understand it, of the Kellogg Switchboard and .Supply Company, that are not complainants in the case. The court will refer to these three corporations as the American Company, the Western Company, and the Kellogg ■Company, respectively, so as to save a few words.

Stating the case generally, the principal purpose of the bill was to have declared void and set aside a sale of certain stock ■of the Kellogg Company by several of its stockholders to a defendant, Mr. Barton, the stock being taken in the names of the defendants Barton and Baker, but taken for the American Company, as I believe is conceded. Certain other specific relief is asked by the bill, beside the setting aside of the contract, and it also asks for general relief. After the filing of clivers demurrers on the part of different defendants, and answers to the original bill, the filing of an amended bill, ■ a supplemental bill and a cross-bill by the defendant, Milo G. Kellogg, and of demurrers' and answers and amendments to these answers by different defendants, to the amended and supplemental bill, and the cross-bill, respectively, the demurrers were sustained, and the several bills dismissed for want of equity by decrees entered by Judge Mack some three years and a half ago. These decrees were sustained on appeal to the branch appellate court, but on further appeal the decree dismissing the amended and supplemental bills was reversed by the supreme court, though the court in its opinion says the demurrer is sustained to the original bill, and the cause was remanded with directions to proceed in conformity to the views of the supreme court. The decree dismissing the cross-bill was affirmed by the supreme court. Since that decision of the supreme court the issues were made up on the amended and supplemental bills in conformity to the supreme court decisions, and after the hearing had commenced in the case a further supplemental bill was filed, on which issues were made during the progress of the hearing. To state the details or even the substance of all these pleadings would take unnecessary time, and it would be needless in view of the conclusions that the court has reached. I will endeavor to make it as condensed as I can.

The evidence, which took some four weeks to hear,. among other things which the court deems unnecessary to be stated, shows that the Kellogg Company was organized in 1897, and ever since has been operated as a manufacturing corporation, manufacturing telephone switchboards and telephone apparatus in Chicago. It has been a very successful and prosperous corporation, up to the latter part of 1901, when its president, and the active manager of the corporation, the defendant Milo G. Kellogg, who was the owner of a large majority of its stock —as I remember about 3,300 shares of the total of 5,000 shares of the capital stock — was compelled on account of the very extreme ill-health in the latter part of November, 1901, to leave all business and go to California for an indefinite time, the prospect then being, as is quite clearly shown by the evidence, I think, that he might not be able to resume active business again for a long period, if at all. Mr. Kellogg, on leaving for California, left practically all his private business matters and property in charge of and under the management of the defendant, Wallace L. DeWolf, who is his brother-in-law; and Mr. DeWolf, who was also a stockholder and vice president of the Kellogg Company, then took the active management of that company on the 16th of November, 1901, in place of Mr. Kellogg. Mr. Kellogg was an exr pert of very long experience in the business of manufacturing telephones and telephone apparatus, and in their installation, and was also a patent expert in the same line. Mr. DeWolf was a lawyer by profession, and had, for quite a number of years prior to this date, and including 1901, been engaged in the real estate business in Chicago, though he was without any practical experience as a manufacturer of, or in the installation of, telephones or telephone apparatus, nor does it appear that he had any experience with patente.

The Kellogg Company, though its business had been quite prosperous, had up to this time paid no dividends, and the management tentatively had arranged" a short time prior to Mr. Kellogg’s leaving for an increase of its capital stock, and the sale of the same to different stockholders, and I believe some others — I am not sure about that — in order to meet the necessities of the company’s then contemplated expansions in its business, as well as its financial difficulties, by reason of the apprehended failure of one of its principal customers, referred to in the evidence and arguments of counsel as the Everett-Moore Syndicate, that Syndicate being then indebted to the Kellogg Company about $275,000, which was largely in the form of short-time notes that had been discounted at different banks by the Kellogg Company, to the amount of about $220,000.

Soon after Mr. Kellogg left for California this syndicate failed to meet certain of its discounted notes as they matured, and they had to be paid by the Kellogg Company. The question then as to the failure of the syndicate at once became very important to the Kellogg Company and Mr. DeWolf, after a suggestion to him of the sale of Mr. Kellogg’s stock in the Kellogg Company, and the suggestion ■ of the name of the defendant, Enos M. Barton, as a possible purchaser of that stock, by Leroy D. Kellogg, a son of Milo Kellogg, and after discussing the situation with him — I refer to Leroy D. Kellogg, who was then, too, the secretary and treasurer of the Kellogg Company — commenced negotiations with Mr. Barton for the sale of the stock of his father, in order to raise money to meet the financial situation of the Kellogg Company. These negotiations commenced — it is not definitely fixed when, but I think the preponderance of the evidence is that they commenced at least early in the month of December, 1901, and extended through the remainder of that month, and up to January 4, 1902.

Mr. Barton was then the president and had the active management of the defendant, the Western Company, which was a competitor in business of the Kellogg Company, located in Chicago, and engaged in the manufacture of electrical apparatus and supplies, telephones, telephone apparatus, and their installation, but mainly for the American Company and its licensees or lessee companies. The relations of the American Company and the lessee companies will be more definitely referred to later. It also was then operating a large manufacturing plant in New York, engaged in a similar line of business. The American Company at this time owned and still owns more than sixty per cent of the capital stock of the Western Company, and also a. majority of the stock of numerous local telephone corporations in different parts of the United States, as well as a minority of the stock in many other like telephone corporations, throughout the United States, all of which local telephone corporations had licenses from the American Company, and are known throughout this case, in the evidence especially, as licensee or lessee companies. These last named companies constituted a part of the system of telephone business of the American Company practically, which extends throughout this whole country and is referred to in the evidence and the pleadings, in connection with the American Company and the Western Company, as the “Bell System,” the “Bell interests” and the “Bell Telephone Monopoly, ’ ’ though it is quite clear that it is not a complete monopoly.

The American Company at this time had an authorized capital stock of $150,000,000 and had outstanding stock issued to a very large number of stockholders, to the amount of, nearly $120,000,000. Its authorized capital during the year 1907 was increased to $250,000,000 and it had stock actually issued during last year to the amount of about $150,000,000.

The American Company is, and has been ever since its organization, engaged in what is known as long distance telephone service throughout the United States, and in connection with its lessee companies, as well as other telephone companies in no way connected with it, and with the exception of the business done by what are referred to in the pleadings and in the evidence as the Independent telephone companies or system, does all the long distance telephone business in the United States; and it is also referred to in the evidence of its president, the defendant Frederick T. Fish, as a stock-holding corporation, evidently because of the large amount of stock that it owns in its licensee companies above referred to.

I think it clearly appears from the preponderance of the evidence that the American Company has a practical monopoly of the telephone business in a very large part of the United States, and its competition with other corporations known as the Independent telephone companies, engaged in that business in many parts of the United States, was at the time of the sale of the stock in question, and for several years before that sale, quite a strenuous competition, and in some instances the witnesses put it as a “ bitter ’ ’ competition. There was such competition between the Bell interests and the independent companies at this time, in the court’s opinion, it being established by a preponderance of the evidence, as I have stated, and it is practically admitted by some of the defendant’s witnesses, Mr. Dommerque, Mr. DeWolf and Mr. Barton; and this competition is also shown by the evidence of the president of the American Company, Mr. Pish, who was called as a witness on behalf of the plaintiffs.

During the whole existence, up to January 4, 1902, of the Kellogg Company, it was the principal manufacturer in the United States of telephones, telephone switchboards and telephone apparatus and supplies for these independent companies. The next largest manufacturer in that line in the United States was a corporation known as the StrombergCarlson Telephone Manufacturing Company, and which will be referred to hereafter as the Stromberg-Carlson Company. Another leading manufacturing corporation in that line, in January, 1902, was the American Electric Telephone Company. These three last named corporations were the only ones then manufacturing multiple switchboards for independent companies in the United States, which up to' January, 1902, was the principal part of the business of the Kellogg Company. The Western Company at this time was largely engaged in manufacturing for the American Company and its licensee companies. In January, 1902, there were about four thousand telephone operating companies in the United States, and organized in many of the states, into state associations, and there was also a National Association, which included about that number, and they were in no way connected with the Bell interests except their lines in some instances operated together, and these independent companies purchased their supplies largely from the Kellogg Company,' and the other two independent manufacturing corporations above referred to. They, including the manufacturing companies, represented an investment in 1902, of about $150,000,000. In 1907, the number of these independent telephone companies had increased to about seven thousand in the United States, and about that number was included in the National Association of the independent companies. But what their investment was in 1907 does not appear from the evidence, so far as the court could discover. Divisions 2 to 11, both inclusive, ■of the complainants’ amended bill, show far more specifically in detail by their allegations the nature and extent of the business of the Kellogg Company, the Western-Company, the American Company and its lessees, and the independent telephone companies, their relations to each other and the public, .-and the nature of the competition between the American Company or the Bell System and the independent telephone companies, including the Kellogg Company, up to January, 1902. All of these allegations referred to are, in the opinion of the ■court, substantially proven by the evidence.

The Everett-Moore Syndicate and the Kellogg Company, through Mr. DeWolf and its attorney, during December, 1901, had considerable negotiations in regard to the payment of the syndicate indebtedness to the Kellogg Company, and efforts to make arrangements by which the Kellogg Company’s finan■cial condition on account of this indebtedness would be relieved; but nothing was accomplished by these negotiations. And on January 2, 1902, the failure of this syndicate was publicly announced in the press, and the attorney of the Kellogg Company, who was down East at the time, where these negotiations were progressing, and who then had charge of them on the part of that company, about that date — I don't remember specifically the day on which the notice was given— notified Mr. DeWolf in substance that no arrangements as to the indebtedness of the Syndicate to the Kellogg Company -could be made. Then and not until then the negotiations between Mr. DeWolf and Mr. Barton, and Mr. Fish through Mr. Barton, culminated, and resulted in the contract for the sale ■of the stock in question to Mr. Barton. This contract, omitting the attached statement referred to in it, is as follows: I will not take the time to read that, that is entirely familiar to counsel, and will only refer to certain parts of it.

The ease was remanded by the supreme court, with directions to proceed in conformity with the views expressed by that court, and therefore those views are res adjudicata on the law, and binding on this court, in so far as applicable to-the evidence in this case. The court says in its opinion, 224 Ill. at p. 22: If the American Company became the purchaser of' said stock, with the unlawful purpose and intention of putting the Kellogg Company out of business, or so using and controlling it as to prevent rivalry in business and creating a monopoly, it called for an answer from the defendants. Also, if the American Company had purchased a majority of the capital stock of the Kellogg Company in its own name fertile purpose of controlling the latter, and thereby preventing-competition between itself and the latter corporation, the-transaction would have been one which the courts of this state would not uphold. Citing People v. Chicago Gas Trust Co., 130 Ill. 258, and other cases.

And the court also further held that the purchase by the-American Company in the name of another would make the transaction illegal. Also, in commenting on whether the tendency of the purchase would be to suppress competition, it. says (p. 23) : “while a complete monopoly or a complete restraint of competition would not necessarily result, the tendency would be in that direction, which is sufficient to condemn the transaction as unlawful. ’ ’ Citing the Gas Trust case above referred to, and Moore v. Bennett, 140 Ill. 69, known as the Reporters’ case. And in reference to the averment of the bill that it was the purpose of the American Company to-suppress competition and create a monopoly, it says that it is. further aided bythe averment as to how Barton was to pay for-the stock, and that the business of the Kellogg Company was to-be carried on in the usual manner for one year. And further-says that, these averments plainly indicate “that a dissolution of the Kellogg Company was contemplated, because in no other event could the Amercian Company appropriate the assets of the Kellogg Company to pay a stockholder of1 that company for the stock purchased by the former company from him.” And says that the court had reached the conclusion— I quote the exact language: "that the purpose and tendency of the purchase by the American Company are sufficiently shown by the bill to be to suppress competition by that company in telephone service to the public and create in the American Company a monopoly of that business.”

Further, in speaking of the American Company being a foreign corporation, the court held that it is subject to all the rules and regulations provided by the' laws of this state, citing a number of eases, and the 26th section of the Corporation Act which so far as material here is as follows: "Foreign corporations, and the officers and agents thereof doing business in this state, shall be subjected to all the liabilities, restrictions and duties that are or may be imposed upon corporations of like character organized under the general laws of this state, and shall have no other or greater powers.” The court, speaking of the power of the American Company to purchase a majority of the stock of the Kellogg Company for the purpose of controlling it, held that it could not do it, and said — This is the direct language of the court: "To permit it to do so would be against the law of this state and its public policy.”

It makes no difference now that the evidence shows that the American Company also purchased stock of another corporation, since under the Illinois statute, and the supreme court decisions, an Illinois corporation cannot purchase stock under the circumstances attending this purchase. And that, the court is of opinion, is fairly established by the Gas Trust Case, and others following since that, especially the Glucose Case in the 182nd Ill., I think the decision is reported in (Harding v. American Glucose Co., 182 Ill. 551)

The language of the supreme court, by the use of the words "purpose and tendency” conjunctively, in several instances which the court has referred to, and in others not referred to, when speaking of a question as to whether the purchase of the stock would have the effect of suppressing competition or creating a monopoly, would seem to indicate that “purpose” in that regard on the part of the purchaser should be shown in order to make the contract illegal. This court is, however, of opinion, that such was not intended to be the ruling of the supreme court, for it, in effect, says, on page 23 of the opinion, . that “tendency to create a monopoly or restrain competition is sufficient to condemn the transaction as unlawful.” And that is the holding of the supreme court in the Gas Trust Case, Moore v. Bennett, Harding v. The American Glucose Company, 182 Ill. 551, at pages 617 to 620, and the cases there cited. This court considers this ruling as res adjudicata as to the law of the case. And if it can be said that the contract, considering the circumstances under which it was made, had a tendency to suppress competition, or create a monopoly, it is void as against public policy. The allegations of the bill the court has referred to, regarding the circumstances under which the contract was made, being substantially proven, it follows that the supreme court’s ruling must control in the decision of this case on this point.

The fact that the purchase gave the American Company the absolute control of the Kellogg Company, enabled it to prevent the selling of supplies by the Kellogg Company to independent telephone companies, to stop the business of the Kellogg Company, or even to dissolve the Kellogg Company, shows a natural and reasonable tendency to suppress competition and create a monopoly; though it is but just to the defendants in this connection to say that the Kellogg Company did not cease its sale of supplies to the independent companies, nor did it stop its business, and it has not been dissolved, but it has paid a dividend since this sale, upon its stock, of fifty per cent. The court thinks there was a very wise and prudent conduct and management of the business of the Kellogg Company to avoid any evidence, so far as it possibly could, which would tend to establish the tendency of such a contract.

If the court, however, is wrong as to the scope of the supreme court decision in this regard, and that it is necessary that there should be shown purpose on the part of the purchaser of .this stock, in order to make the contract illegal, that is, a purpose to suppress competition, or create a monopoly, the court is of opinion that the preponderance of the evidence shows such purpose on the part of the American Company. To review this evidence would require very much time, and it seems sufficient to make reference to the proof in a general way. The fact that there was a serious competition between the American Company, its lessee companies, and the Western Company, known as the Bell System, on the one part, and the independent telephone companies, of which the Kellogg Company was one of the principal independent manufacturing companies in the United States on the other part, when the nature and extent of the business of all these companies, as alleged in divisions 2 to 11, inclusive of the amended bill, and which have been substantially proven as heretofore stated by the court, are considered in connection with the terms of the contract of purchase, and the circumstances shown by the evidence as existing during the negotiations leading up to the purchase, especially the seriously involved financial condition of the Kellogg Company, and Milo G. Kellogg, his past activity in the Independent Telephone Movement for more than five years prior thereto, his opposition generally to the Bell System in his business and in the business of the Kellogg Company, the strong probability that this activity would not commence again for a long period, if at all, because of his bad state, of health; that Mr. DeWolf was to be in charge of the Kellogg Company and had very friendly business relations with Mr. Barton and the Western Company; that the Everett-Moore syndicate, which was also on the verge of failure- and largely indebted to the Kellogg Company, was a large independent telephone organization, which, if successful in its line of business would prove a strong competitor of the Bell interests; all of which matters are clearly established by the evidence — there seems to have been ample reason for saying there was a purpose on the part of the American Company to place itself in a position, by this purchase, to suppress competition and build up a monopoly.

Also in addition to these matters, the court should not ignore the well recognized fact throughout the business world that with rare exceptions, the leading characters to which the court will omit names, who control large corporations or business interests are on the lookout continually by some means, whether direct or indirect, to absorb or overcome their competitors in trade. When this natural tendency of human nature is considered with all the other matters referred to, the conclusion as to purpose seems to the court a reasonable one, to use a mild term, notwithstanding the evidence as to the intention of the purchase by Mr. Barton and Mr. Fish to the contrary, and also notwithstanding the very exhaustive and able arguments of defendants’ counsel.

Very soon after January, 1902, more than a year before the purchase was known to the public, of the making of the contract of purchase of the stock, the evidence shows that there was an effort by Mr. DeWolf and Mr. Barton to buy out the Stromberg-Carlson Company, the next largest independent manufacturing company of telephone apparatus, to the Kellogg Company; or, to put it more mildly, negotiations to purchase were started during the month of January, 1902, or about that time, though nothing was accomplished. That is a strong item of evidence in the court’s opinion, tending to show a general purpose to suppress competition and get control of the then largest independent telephone manufacturing companies for the purpose of promoting a monopoly. Considerable evidence was also presented to the court of like efforts on the part of the American Company to make similar purchases as late as 1907, but the court regards it as quite remote in point of time, questions the competency of this evidence, and has therefore not considered it in reaching its conclusion on the matter of purpose of the American Company in making the purchase of the stock in question.

The court is of opinion that the contract, therefore, is void as against public policy of the state of Illinois, because the preponderance of the evidence shows a purpose to suppress competition and create a monopoly in the line of business of the Bell System, though not a complete monopoly. And this purpose is in addition to the tendency of the contract to the same effect as has been stated by the court. In view of these conclusions, it seems to the court unnecessary to discuss the question of whether the contract was ultra vires, though that would seem, under the evidence and the rulings of the supreme court, under our statute — section 26 of the corporation act which has been quoted- — to be settled in the affirmative.

A great mass of evidence was offered and admitted, subject to objection, by the court, both on behalf of the complainants and the defendants, regarding the manner in which the business of the Kellogg Company has been conducted since the purchase by the American Company of its stock; the extent of that business; its profits; the increase and decrease of certain parts of its business; as- to certain patent suits between the Kellogg Company and its customers on the one part, and the Bell interests on the other part, both before and after the purchase of the stock; as to the foreign business done by the Kellogg Company both before and after the purchase, within the past two years mainly; also the purchase by leading employes of the Kellogg Company of the Western Company’s stock, the Kellogg Company loaning them more than $57,000 in order to enable the employes to make their purchases; and negotiations between Mr. DeWolf and one Judge Thomas, in regard to the Kellogg Company entering into a combination with certain independent telephone companies; all of which it is claimed has a bearing on the question of purpose and intention of the American Company in making the purchase of the Kellogg Company’s stock. The court had some doubt as to the competency of all this evidence, because a great deal of it was with regard to matters quite remote from the transaction in question and not necessarily having any bearing upon it. It may be that many of the things shown were done because of purposes or intentions formed after the purchase of the stock in question; and if so, they would have no bearing on the transaction. And for that reason, namely, that it was not necessary to the result reached by the court as to the tendency of the purchase, to consider purpose and intention, the court has not considered the items of evidence last above referred to, as should have been done had the court thought that the decision of the case depended wholly upon the purpose or intention of the American Company in making the purchase. It is contended by defendants’ counsel that the amended bill contains no allegation as to tendency, and therefore that no relief can be granted under the pleadings. This contention, in the court’s view, is not tenable, for the reason that as has been stated, facts are alleged which the court is of opinion clearly show the tendency of the purchase, and it was so decided by the supreme court.

It was contended by defendants’ counsel that allegations of the amended "bill, in effect, charge the commission of a crime on the part of the defendants, and therefore that the allegations of the bill must be proven beyond all reasonable doubt, before any relief could be based thereon. It is unnecessary to pass upon this point, for the reason that the court’s ruling is as to the tendency and purpose of the purchase, and that does not amount to a crime, but only shows that the transaction is. void as against public policy.

The court on the hearing took notes of the evidence and arguments of counsel, in an abbreviated form, which if written out would make about 125 typewritten pages, all of which it has carefully considered since the arguments closed, and it has also read such parts of the pleadings and evidence as were necessary to refresh its recollection. Reference has not been made to many points of the arguments of counsel, nor to the details of the evidence, but all have been carefully considered, and the conclusions reached thereafter. The court makes this statement to assure counsel that the importance of the case has been appreciated, and nothing presented has failed to receive the consideration of the court by reason of carelessness or willful negligence.

The transaction in question being void, if the court is right in its ruling in -that regard, it follows that no title to the stock passed, and Milo Gr. Kellogg and the other sellers of stock under the Barton contract are still the owners of the stock under the law. The decision of the supreme court controls as to Milo Gr. Kellogg’s rights to any relief under the cross-hill, it being based upon alleged fraud, and there was no offer in the cross-bill to place the purchaser in statu quo. It is true, the court says: 1 ‘ The contract is not void, but only voidable at the election of the defrauded party.” But this must be construed with reference .to the relief asked in the cross-bill being based upon alleged fraud, and has no bearing on the complainants’ rights under the amended bill, which depend upon the situation as to them. The supreme court holds, on . page 26 of the opinion that the invalidity of the purchase is sufficient to entitle complainants, as minority stockholders, to have the American Company restrained from voting the stock purchased by it, and thus controlling the Kellogg Company. This right of complainants exists, notwithstanding the adjudication of the supreme court on the cross-bill, based on its allegations of fraud in bringing about the purchase. If the transaction between the American Company and Milo G-. Kellogg and other sellers of the stock is void as held, the complainants are entitled to relief that - should be granted on the basis of their equities, although the result may indirectly be a benefit to Milo G-. Kellogg and other sellers of stock and an injury to the American Company. Complainants’ relief should not be limited on this account, but should be granted on such conditions as will cause the least injury to the parties concerned in the transaction and at the same time give them their equitable rights. To protect the complainants and do equity to them, they are entitled to have restored, so far as possible, the situation as it was before the purchase of the stock, and in so far as a change has resulted from that sale. This can be accomplished by requiring the American Company to bring the stock in question into court, together with all dividends paid thereon, with interest at five per cent per annum from the times of payments respectively of such dividends, and the return of the stock to Milo G. Kellogg and to others that sold to the American Company under the Barton contract, upon their paying to the American Company the prices paid them for this stock, with interest at five per cent per annum from the times when.said payments, respectively, were made to them. 'In case the sellers, or either of them, should fail to make return of the purchase prices of stock with interest as stated, within thirty days from the entry of the decree, then the decree should provide that the stock be sold under the direction of the court, say one-half cash, and balance in six months from sale, with interest at five per cent per annum, such balance to be secured by a deposit of the stock with the clerk of this court as security. Pending the making of such payments the business of the Kellogg Company should be conducted by the present administration of that company, or its president should act as a receiver of the court, of course giving large and ample bond, which I think in this ease should not be less than $100,000; and the annual meeting of the stockholders should be adjourned under the terms of the decree of the court until said payments are made, or, in default thereof, until a sale of said stock shall be made and perfected, as indicated.

In case of failure of any seller of the stock to pay the purchase price of his stock to the American Company within thirty days from the entry of the decree, then the proceeds of the sale of that specific stock should be paid to the American Company to the extent of the purchase price paid by it for such stock, and interest at five per cent, per annum from the dates at which the American Company paid such seller for such stock. If there should be any surplus on the sale of the stock over said price paid by the American Company and interest, it should be paid to the seller of said stock — I refer, by the seller, to the American Company, under the Barton contract, — said dividends and interest thereon, as if paid into court, should be paid over to the seller of said stock, after deducting therefrom any deficit from the purchase, price of said stock, as paid by the American Company, and interest thereon, which may result from the sale of the stock, under the order of the court.

The court is inclined to the view that the facts alleged in the amended and supplemental bill and as has been stated were proven, and the fact that the bill has a prayer for general relief, would justify a decree as indicated, except as to the receiver, which is suggested, not because there seems to be an absolute necessity for one, but to avoid, so far as possible, any friction that may arise, pending a closing up of the decree, or pending an appeal, which may be taken from this ■court, as has already been suggested by counsel on both sides. If the complainants desire a receiver, the court is of opinion there should be an amendment to the pleadings, and perhaps additional proof even, which would be justified because of the injunction which has already been granted temporarily, and the apparent financial responsibility of the parties in control of the Kellogg Company, and especially in view of the financial success of that company since it has been under their control.

One part of my notes I failed to give, and that is this: The American Company and its representatives should by the decree, and pending its accomplishment, be enjoined from in any manner interfering with the management or conduct of the business of the Kellogg Company, and the temporary injunction, granted February 13, 1907, should be made final, ■except as in some of its provisions it may conflict with the decree here indicated by the court.

If a decree is to be entered on the pleadings, as they now are, it may be drafted, declaring the sale of the stock void, as against the public policy of this state, and setting it aside; and also in accord with the court’s rulings, as has been indicated, omitting the receiver. If counsel for defendants, they having declined in the, oral argument to discuss any decree except one denying complainants any relief, are of opinion that the decree directed by the court is not proper, under the court’s rulings, and in view of the evidence and the pleadings, the court will consider anything they desire to say on that subject at the criminal court next Tuesday morning at 8:45. If counsel ‘ cannot present their views, if they desire to present any on that point, why then they can prepare a brief in three days on the question of the form of the decree only.