Ravlin v. Chicago, A.&De K.R. Co.

• Decision Date: 15 February 1921
• Docket Number: No. 13413.,13413.
• Citation: 129 N.E. 730,297 Ill. 130
• Court: Illinois Supreme Court
• Parties: RAVLIN v. CHICAGO, A. & DE K. R. CO. CHERRY v. GUNSUL et al.

297 Ill. 130

129 N.E. 730

RAVLIN

v.CHICAGO, A. & DE K. R. CO.

CHERRY

v.GUNSUL et al. ^*

No. 13413.

Supreme Court of Illinois.

Feb. 15, 1921.

Error to Appellate Court, Second District, on Appeal from Circuit Court, Kane County; C. F. Irwin, Judge.

Action by Frank W. Ravlin against the Chicago, Aurora & De Kalb Railroad Company, wherein F. W. Cherry was appointed receiver. An order approving the receiver's final report was vacated on motion of certain stockholders and creditors of the Railroad Company, who subsequently filed intervening petition against Cherry, attacking his acts as receiver, and the holder of bonds of the Railroad Company filed bill to foreclose a trust deed, in which suit Harvey Gunsul was appointed receiver of the company, and Gunsul filed intervening petition, attacking the conduct of Cherry as receiver, the suits attacking the conduct of Cherry as receiver being consolidated. To review decree in favor of petitioners against Cherry, Cherry brought error to the Appellate Court, which reversed the decree in part and otherwise affirmed, and Cherry brings error, defendants in error assigning cross-errors.

Judgment of the Appellate Court affirmed.John A. Russell, of Elgin, for plaintiffs in error.

John K. Newhall, of Aurora, for defendant in error Gunsul.

Peffers & Wing, of Aurora, for defendants in error Doan and May.

THOMPSON, J.

The Chicago, Aurora & De Kalb Railroad Company was organized in 1909 under the General Railroad Act of Illinois (Hurd's Rev. St. 1919, c. 114), and since that time has operated an electric railroad between Aurora and De Kalb, cities in Illinois. In 1913 J. H. Bliss and W. S. Kirby were appointed receivers of the company, and served until July 10, 1916, when plaintiff in error became receiver. At the September term, 1917, of the circuit court of Kane county plaintiff in error resigned. His final report was approved and his resignation accepted. Before the end of that term, on motion of defendants in error Enos Doan and George E. May, stockholders and creditors of the company, the order approving said report was vacated. Thereafter Doan and May by leave of court filed an intervening petition, attacking various acts of plaintiff in error as receiver, and especially charging that while receiver he had made large profits from secret sales of the stock and bonds of the company. About that time the holder of certain bonds of the company filed a bill to foreclose the trust deed securing said bonds, and in that cause defendant in error Harvey Gunsul was appointed receiver of the company. Thereafter Gunsul, as receiver, by leave of court filed in this cause an intervening petition, attacking the conduct of plaintiff in error as receiver, which petition was similar to that of Doan and May. Plaintiff in error answered these petitions, and they were consolidated for hearing. The cause was heard by the chancellor, who entered a decree, directing plaintiff in error to pay Gunsul, as receiver, $47,066.71, which he found plaintiff in error, while receiver, had made as profit on the sale of certain securities of the company, $2,350, which he found plaintiff in error had paid his attorney without authority of court, and $3,000, which he found plaintiff in error had paid a Princeton bank without authority of court. The cause was reviewed by the Appellate Court for the Second District on writ of error. Errors and cross-errors were assigned. The Appellate Court reversed the decree of the circuit court as to the $2,350 paid by plaintiff in error as receiver to C. A. Trimble as attorney fees, as to the matter of interestupon the $3,000 paid the Princeton bank and as to the failure to charge plaintiff in error interest on said profits, and in all other respects affirmed the decree. By the judgment of the Appellate Court the cause was remanded to the circuit court of Kane county, with directions to modify the decree in conformity with its opinion. The cause is brought to this court by certiorari.

Plaintiff in error admits that the $3,000 paid the Princeton bank was properly charged to him, and that the judgment of the Appellate Court with regard to interest on the item was correct. He contends that the intervening petitions do not state a cause of action; that the contracts and documents in evidence show, as a matter of law, that he is not liable to defendants in error; that a certain worthless $10,000 note was improperly charged to him in fixing the amount of the decree, and that the amount of profits is not properly computed. Defendants in error have assigned cross-errors, asking that the plaintiff in error be deprived of the fees paid him as receiver, that interest be allowed on the profits from February 13, 1917, and that the item of attorney fees be charged to plaintiff in error.

Plaintiff in error insists with much force that the intervening petitions filed in this cause are insufficient and do not state a cause of action. He contends that the petitions are a series of general averments and conclusions of the pleader, and that this court has held such averments insufficient where fraud is the basis of the claim. It is true that when one assails as fraudulent certain transactions the complaining party must plead specific acts or facts relied on to establish the fraud, and the acts thus charged must be clearly and distinctly proved or there can be no relief. Dexter v. McAfee, 163 Ill. 508, 45 N. E. 115;Langlois v. McCullom, 181 Ill. 195, 54 N. E. 955. Even if it were necessary to plead and establish fraud in order to recover in this case, it was not urged in the court below that the intervening petition was insufficient, either by demurrer to the petition or in opposition to the introduction of testimony, and consequently the objection cannot be made here for the first time. Smith v. Henline, 174 Ill. 184, 51 N. E. 227. If the allegations were not sufficiently specific in this regard and attention had been called to them in the court below, the petitioners there might have been permitted to amend their petitions.

To properly consider the other points it will be necessary to review the evidence. It shows that Henry H. Evans, of Aurora, had obtained charters for two interurban railroads, and he desired to buy a controlling interest in the stocks and bonds of the Chicago, Aurora & De Kalb Railroad Company and merge the properties into one general system. The De Kalb Company had a capital stock of $950,000. It had issued $200,000 of first mortgage bonds secured by a trust deed, and $750,000 of what it called general mortgage bonds secured by a second trust deed. Plaintiff in error had had experience in promoting railroad properties, and so Evans arranged with him to secure a sufficient amount of the capital stock and the outstanding mortage bonds of this company to give Evans control, Evans did not want to be known in the transaction, so plaintiff in error was to deal in his own name. He made investigations and found that theretofore the company had given various promissory notes to various banks, and that each of said notes had been indorsed by J. H. Bliss, WilliamGeorge, B. G. Richmond, A. J. Erlenborn, John Loser, Peter Klein, and Frank W. Ravlin, directors of the company, and as further security said directors had deposited with said banks, as collateral security, $50,000 of the first mortgage bonds and $122,500 of the second or general mortgage bonds, and that afterwards, when the banks demanded payment, said notes had been paid by the indorsers, and, with the collateral securities, placed in the hands of W. C. Estee under a trust agreement hereinafter described. Each of said directors also owned a large amount of the capital stock of the company, aggregating $387,600 at par value, and general mortage bonds aggregating $80,000. Thereupon plaintiff in error sought to buy said bonds and stock. He could not at that time deal with George or Erlenborn. June 6, 1916, he made a written contract with the other five of the seven directors to buy all their interests, and later a supplement was added to this contract. June 12, 1916, he made a written contract with Evans by which he agreed to obtain said stock and securities and sell and assign the same to Evans, and also obtain the interests of George and Erlenborn and deliver those to Evans as soon as he received them, and Evans was to pay certain sums therefor.

This litigation grows out of the performance of these agreements. The principal item involved is the profit made by plaintiff in error from the sale of the securities held by Estee as trustee for Bliss and his associates, five-sevenths of which was purchased by plaintiff in error under his contract of June 6, 1916. Practically the only issue raised throughout this litigation has been the time of the completion of the above contracts, the first being designated for convenience the Bliss-Cherry contract and the second the Evans-Cherry contract. Defendants in error claim certain foreclosure proceedings, brought to the February term, 1917, by Bliss and his associates, beneficiaries in the Estee trust agreement, against the Railroad Company and against plaintiff in error as receiver, were instituted at the expense of plaintiff in error and by his procurement; that the object of this suit was to enable plaintiff in error to fulfill the provisions of the Evans-Cherry contract; that he concealed from the court that he had such a contract with Evans; that he permitted the court to approve the sale of these securities at a price much less than the price Evans had contracted to pay for the bonds; that thereby, while receiver and because of his concealment of the true facts from the court, plaintiff in error had made a large profit for himself, and that he must in equity surrender that profit to the railroad company. On the other hand, plaintiff in error contends that he had completed his contract with Evans, and that he had obtained all his profits on said contract on and before ...