Ahlenius v. Bunn & Humphreys, Inc.

• Decision Date: 24 October 1934
• Docket Number: No. 21908.,21908.
• Citation: 358 Ill. 155,192 N.E. 824
• Court: Illinois Supreme Court
• Parties: AHLENIUS v. BUNN & HUMPHREYS, Inc.

358 Ill. 155

192 N.E. 824

AHLENIUS

v.BUNN & HUMPHREYS, Inc.

No. 21908.

Supreme Court of Illinois.

Oct. 24, 1934.

Error to Appellate Court, Third District, on Appeal from Circuit Court, McLean County; Edward Barry, Judge.

Suit by R. O. Ahlenius against Bunn & Humphreys, Incorporated. Judgment rendered for plaintiff in the circuit court was reversed by the Appellate Court, which increased the amount of plaintiff's recovery, and defendant brings error.

Judgment of Appellate Court reversed and judgment of Circuit Court affirmed.

B. L. Catron, of Springfield, and Hal M. Stone and Branson Wright, both of Bloomington, for plaintiff in error.

Bracken, Livingston & Murphy, of Bloomington, for defendant in error.

PER CURIAM.

R. O. Ahlenius, the owner of 150 shares of the common stock of J. F. Humphreys & Co., filed a petition in the circuit court of McLean county against Bunn & Humphreys, Inc., successor by consolidation to the former company and to John W. Bunn & Co., by which he sought the determination of the fair value of his shares of stock and their purchase by the consolidated corporation. The defendant interposed a demurrer to the petition and the demurrer was overruled. Thereafter, it made a motion to strike portions of the petitionrelating, among other things, to the fair and actual value of certain assets of J. F. Humphreys & Co. transferred to one of its stockholders in exchange for shares of its stock prior to the consummation of the consolidation. The motion was allowed. The cause was tried by the court without the intervention of a jury and a judgment for $12,842.72 and costs was rendered in favor of the petitioner and against the defendant. On an appeal prosecuted by the defendant, the Appellate Court for the Third District reversed the judgment of the circuit court and, without remanding the cause, on cross-errors assigned by the appellee, the original petitioner, rendered judgment for $20,144 and costs in his favor. A writ of certiorari was granted by this court and after a review of the record, the judgment of the Appellate Court was reversed and the cause was remanded to that court with directions either to affirm the judgment, or, if there was error in matter of law requiring its reversal, which error could be corrected on another trial, to remand the cause and order the correction of the error, or if a final judgment should be entered finding the facts different from the trial court, to incorporate in the judgment the ultimate facts so found. Ahlenius v. Bunn & Humphreys, Inc., 350 Ill. 46, 182 N. E. 738. Pursuant to the mandate of this court, the Appellate Court subsequently amended its opinion and judgment, incorporating findings of fact: (1) That Ahlenius was a stockholder of J. F. Humphreys & Co. before and at the time of its consolidation with John W. Bunn & Co.; (2) that he objected to the consolidation; (3) that the fair value of the shares of stock owned by him at the time of the consolidation was $17,470.50; (4) that the two named corporations were consolidated September 21, 1928; (5) that the interest on the principal debt from that day to the date of the rendition of the former judgment amounted to $2673.50; and (6) that the total damages due Ahlenius from Bunn & Humphreys, Inc., at that time were $20,144. The record is again submitted pursuant to a second writ of certiorari for a further review.

J. F. Humphreys & Co., a domestic corporation, with its principal office in the city of Bloomington, conducted a wholesale grocery business from January 12, 1891, the day of its organization, until 1928. In June of the latter year, its outstanding capital consisted of 1,223 shares of preferred and 4,000 shares of common stock, each class having a par value of $100 per share. The senior stock was preferred as to assets and earnings and dividends at the rate of 6 per cent. annually. It was widely distributed. There were but seven common stockholders. Howard Humphreys, the president, owned 30; Rogers Humphreys, his son, the secretary and treasurer, 3,793; Ahlenius, 150; and four other persons, the remaining 27 shares. Ahlenius bought his stock on three different occasions, the initial purchase occurring on October 30, 1918. For approximately ten years beginning November 1, 1918, he was a director, the vice president, and the general manager of the corporation.

John W. Bunn & Co., also a domestic corporation, had likewise been engaged in the wholesale grocery business for many years. Its principal office was located in the city of Springfield. George W. Bunn, Sr., individually and as a trustee of the estate of John W. Bunn, deceased, controlled a substantial majority of its capital stock.

On the 1st day of June, 1928, Rogers Humphreys and George W. Bunn, Sr., the controlling stockholders of the two corporations, for and on their behalf, executed a preliminary agreement for their consolidation into a new corporation to be named Bunn & Humphreys, Inc. The instrument provided, among other things, that prior to the consolidation each company should sell or dispose of all its assets which were not to be transferred to the successor corporation. These assets were described generally as real estate, doubtful accounts, certain furniture and equipment, and any other assets not specified for acquistion by the new company.

A special meeting of the board of directors of J. F. Humphreys & Co., on June 4, adopted a resolution ratifying the tentative contract. By a second resolution, in which the terms and conditions of the preliminary agreement were set forth, it was declared that the contribution of the company to the capital assets of the consolidated corporation should consist of its inventories, accounts receivable and notes deemed good, office furniture and fixtures, delivery equipment, insurance, and all money on hand on June 30, 1928, and that their value should be appraised as of the close of business on that day at the lower of their then cost price or market value. To effect the proposed plan, Rogers Humphreys offered to purchase certain parcels of land and doubtful accounts and to pay for them by the surrender of shares of the corporation's common stock. A resolution accepting this offer was adopted. It contained no provision for ascertaining the actual or fair value of either the real estate or the doubtful accounts.

The stockholders, at a special meeting held on June 26, 1928, approved the resolutions adopted by the directors, Ahlenius voted for these resolutions. The president stated that in order to comply with the requirements of a proper certificate to the Secretary of State it would be necessary to determine the exact holdings of the stockholders as a result of the appraisal and inventory required by the resolution relating to the corporation's contribution to the capital assets of the consolidated corporation. A resolution was adopted by which the meeting was adjourned to July 24, 1928, further to consider and act upon the resolution for the consolidation and the certificate to be made to the Secretary of State. On July 24 the meeting was adjourned to the 10th day of August and on that day to September 21, 1928. At the last meeting Rogers Humphreys announced that the inventories had been carefully checked and reduced to their sound values and that the number of shares of stock of the new corporation to be allocated to each stockholder had been determined. He stated that the stock to be surrendered by him to the company in exchange for the assets to be transferred to him had been fixed at 1,102 shares. With the single exception of Ahlenius, all the stockholders present voted for the adoption of a resoultion approving this transaction. The final resolution for the consolidation was also adopted at this meeting. Ahlenius voted against the resolution. In explanation of his negative vote, he said that it was not his intention to oppose the consolidation but to preserve his statutory rights. He added that he had given formal notice to and had made demand upon Bunn & Humphreys, Inc., to purchase his shares of stock. An adjourned special meeting of the stockholders of John W. Bunn & Co., held on the same day, adopted a like resolution of consolidation. On October 22, 1928, a certificate of consolidation was issued by the Secretary of State. No notice of the consolidation was mailed to Ahlenius by Bunn & Humphreys, Inc., the acquiring corporation.

The assets transferred and conveyed to Rogers Humphreys were stocks and bonds; real estate not used for corporate purposes; a parcel of land improved by a building known as the Moline building in which the company conducted its business; the machinery and equipment in a refrigerator room located in the basement of that building, and a brick structure described as warehouse C. Their combined book value, after deducting reserves set up against the two buildings, was $208,352.43. A mortgage indebtedness of $80,000 against part of the real estate reduced the net book value of the assets received by Humphreys to $128,352.43, or $116.47 for each of the 1,102 shares he surrendered. Humphreys assumed payment of the mortgage.

A condensed balance sheet prepared from the books of J. F. Humphreys & Co., by its auditor, at the direction of Ahlenius, disclosed the condition of the company on June 30, 1928, before the assets transferred to Rogers Humphreys were eliminated and other items not acceptable to Bunn & Humphreys, Inc., were charged off in contemplation of the impending consolidation. According to this statement, the book value of the assets on June 30 exceeded the liabilities by $588,486.56, and the value of each of the 4,000 outstanding shares, after deducting $122,300 for the preferred stock, was $116.54.

Ahlenius, the defendant in error, testified that an inventory of all the assets and property of J. F. Humphreys & Co. was taken as of June 30, 1928, and that they were listed at their fair net values. He was asked whether he knew of his...