Ashley Wire Co. v. Illinois Steel Co.

• Decision Date: 09 November 1896
• Citation: Ashley Wire Co. v. Illinois Steel Co., 164 Ill. 149, 45 N.E. 410 (Ill. 1896)
• Parties: ASHLEY WIRE CO. et al. v. ILLINOIS STEEL CO.
• Court: Illinois Supreme Court

164 Ill. 149

45 N.E. 410

ASHLEY WIRE CO. et al.

v.ILLINOIS STEEL CO.

Supreme Court of Illinois.

Nov. 9, 1896.

Appeal from appellate court, Second district.

Bill by the Illinois Steel Company against the Ashley Wire Company and others to foreclose a mortgage. From an affirmance of a judgment in favor of plaintiff (60 Ill. App. 179), defendants appeal. Affirmed.Geo. S. House, for appellants.

Garnsey & Knox and E. P. Prentice, for appellee.

This is an appeal from a judgment of the appellate court of the Second district, affirming, on a writ of error, the decree of the Will county circuit court in the cause of the Illinois Steel Company against the Ashley Wire Company et al. Upon rendition of such judgment of affirmance, the following opinion, reported in 60 Ill. App. 179, was announced (Cartwright, J.):

‘Defendant in error filed its bill March 7, 1894, in the circuit court of Will county, to foreclose a mortgage executed July 19, 1893, by the Ashley Wire Company, by the hand of C. H. Carpenter, its president, under its corporate seal, attested by James R. Ashley, its secretary, and recorded on the same day in the recorder's office of said county, where the mortgaged premises were situated, securing the payment of a promissory note for $67,246.24, due in two years, with interest at 5 1/2 per cent., and providing for the insurance of the buildings on the mortgaged premises in the sum of $50,000 for the benefit of the mortgagee. It was stipulated in the mortgage that, in default of payment of interestwhen due, the whole principal and interest should, at the option of the mortgagee, become due, and the mortgage be foreclosed; and it was alleged in the bill that default had been made in the payment of interest due January 19, 1894, wherefore the mortgagee had elected to declare the whole indebtedness due. The other plaintiffs in error were made defendants with the Ashley Wire Company under averments that they had or claimed some interest in the mortgaged premises, which it was alleged were subject to the mortgage. It was also averred that the Ashley Wire Company was insolvent, and that George W. Bush had been appointed receiver of its property and estate, in pursuance of a bill filed for that purpose by the First National Bank of Joliet. The Ashley Wire Company answered the bill, admitting that on July 19, 1893, it was largely indebted to the complainant, and that on that day the mortgage in question was duly recorded in the recorder's office of Will county, purporting to be executed by it to secure such indebtedness, but insisting that the mortgage was not binding on it because its officers acted without lawful authority in the execution of such mortgage. It was admitted that Bush was receiver of the company, and it was claimed that, when the mortgage was executed, the company was insolvent, and that complainant was aware of that fact. The First National Bank of Joliet, John Y. Brooks, and the Will County National Bank of Joliet filed answers, claiming rights as judgment creditors, and denying the validity of the mortgage. George W. Bush answered as receiver, setting up his appointment as such receiver, and his possession of the property, and neither admitting nor denying the other allegations of the bill. Replication having been filed, the proofs were heard by the court, and a decree was entered finding that the mortgage was a valid and binding security, and for a foreclosure of the same, and a sale of the mortgaged premises to pay the sum of $72,752.86, being the amount due on the note, together with moneys advanced by complainant for insurance and interest thereon, and $500 solicitor's fees, all of which were provided for by the terms and conditions of the mortgage. The only question in the case is whether the note and mortgage were binding obligations of the Ashley Wire Company.

‘At the hearing the complainant produced and offered in evidence the note described in its bill, dated July 19, 1893, for $67,246.24, payable two years after date, with interest payable semiannually, at 5 1/2 per cent., signed by the Ashley Wire Company under the hand of C. H. Carpenter, its president, attested by J. R. Ashley, its secretary, and also the mortgage in said bill described, securing the payment of said note, with the provisions above stated, duly executed by the Ashley Wire Company under the hand of its said president, and its corporate seal attested by its said secretary, together with the certificates of acknowledgment and recording thereof in accordance with the averments of said bill. Complainant also proved that default was made in the payment of the installment of interest due January 19, 1894; that the Ashley Wire Company had no insurance on the mortgaged property after January 1, 1894; and that complainant effected such insurance, and paid $1,500 in premiums on account of the same. It was then agreed by the defendants that, if complainant was entitled to a decree of foreclosure, it should recover $1,500, and $69.44 interest thereon, for insurance premiums. By this proof the complainant made out a primafacie case that the note and mortgage were valid obligations of the Ashley Wire Company, executed by its authority, and the defendants took upon themselves the burden of proving that it was not so executed. Smith v. Smith, 62 Ill. 493;Sawyer v. Cox, 63 Ill. 130;Wood v. Whelen, 93 Ill. 153;McDonald v. Chisholm, 131 Ill. 273, 23 N. E. 596;Glover v. Lee, 140 Ill. 102, 29 N. E. 680;Atwater v. Bank, 152 Ill. 605, 38 N. E. 1017.

‘It was contended by the defendants that the note and mortgage were not binding on the Ashley Wire Company because they were executed by its officers under authority conferred at a meeting of its board of directors which was not regularly convened in accordance with its by-laws, and which was held at a place not authorized by such laws, and also that the special provisions of the mortgage, such as declaring the debt due on default in payment of interest, were not binding because not specified in the record of the meeting. To support their claims the defendants offered evidence, and the proofs established the following facts: The by-laws of the Ashley Wire Company provided that its business should be managed by a board of seven directors, to be elected by the stockholders at their annual meeting, to be held on the first Thursday after te tenth day of July in each year. The officers of the company were a president, secretary, and treasurer, to be appointed by the board of directors from their own number, as soon as practicable after the election of such board. The by-law regulating meetings of the board of directors is as follows: ‘(4) Regular meetings of the board of directors shall be held quarterly, the first Thursday in the month, commencing October 5, 1882, at the office of the company in Joliet. The president or any two directors shall have the authority to call special meetings of the directors, when in his or their judgment he or they think the interests of the company demand their attention. And he or they shall require the secretary to give a reasonable notice to such directors, in writing or in person, of the time of such meeting, and at each regular or called meeting the secretary shall present a full report of the business transacted since the previous meeting of the board. Four directors shall constitute a quorum to do business at all meetings.’ There was also a resolution of the board that the notice to directors should be in writing. An annual meeting of the stockholders was held at the office of the corporation in Joliet, July 13, 1893, at which H. S. Smith, S. H. Sweet, C. H. Conover, E. C. Hager, Charles Pettigrew, C. H. Carpenter, and J. R. Ashley were elected directors. Immediately on the adjournment of the stockholders' meeting the board of directors met, all being present except Hager. At that meeting C. H. Carpenter was elected president, and J. R. Ashley was elected secretary. The president and C. H. Carpenter and S. H. Sweet were appointed a committee to confer with complainant, the Illinois Steel Company, concerning its request for the cancellation of a contract under which the Ashley Wire Company had been buying wire rods from complainant, and the committee was directed to make such arrangements for the adjustment of the account due complainant as might be thought best, and to report at the next meeting of the board of directors. The board then adjourned subject to the call of the president. The committee so appointed conferred with complainant, and on July 15, 1893, the president called a meeting of the board of directors, of which a notice was mailed to each director July 15, 1893, except the president and secretary. The notice mailed to the director Hager was as follows: ‘July 15, 1893. E. C. Hager, Esq., Bay View, Mich.-Dear Sir: Pursuant to adjournment, the directors of the Ashley Wire Company are hereby requested to meet Wednesday, July 19th, 1893, at the...