Assets Realization Co. v. Defrees, Brace & Ritter

• Decision Date: 21 February 1907
• Citation: 80 N.E. 263,225 Ill. 508
• Court: Illinois Supreme Court
• Parties: ASSETS REALIZATION CO. v. DEFREES, BRACE & RITTER.

225 Ill. 508

80 N.E. 263

ASSETS REALIZATION CO.

v.DEFREES, BRACE & RITTER.

Supreme Court of Illinois.

Feb. 21, 1907.

Appeal from Appellate Court, First District.

Application by Defrees, Brace & Ritter for the allowance of counsel fees for resisting the appointment of a receiver of the Mechanics' & Traders' Savings, Loan & Building Association. From an order allowing such petition, affirmed on a writ of error by the Court of Appeals, the Assets Realization Company appeals. Affirmed.Felsenthal, Foreman & Beckwith, for appellant.

John G. Campbell (Defrees, Brace & Ritter, of counsel), for appellee.

Mechanics' & Traders' Savings, Loan & Building Mechanics & Traders' Savings, Loan & Building Association filed a bill of complaint in the circuit court of Cook county, asking for the appointment of a receiver and the winding up of the corporation.

While this bill was pending, on July 31, 1897, the State Auditor of Public Accounts took possession of the assets of the association, and placed a custodian in charge pursuant to certain provisions of an act of 1897, found as sections 17 to 27, inclusive, Hurd's Rev. St. 1905, pp. 523-526, c. 32.

The Auditor, under the statutory provisions, convened a meeting of the stockholders on August 9, 1897.

The bill states that there were at this time 15,294 shares of stock outstanding and that 9,869 shares were represented in person or by proxy at this meeting.

The meeting was adjourned by the stockholders until August 12, 1897, but no notice seems to have been sent to the stockholders of this adjourned meeting.

Over 11,000 shares were present or represented at this adjourned meeting.

A resolution providing for voluntary liquidation or reorganization being submitted, received affirmative votes of 9,394 shares, which is 802 shares less than two-thirds of the stock alleged by the bill to have been then in force but much more than a majority.

There appear to have been few, if any, votes cast against this resolution.

The stockholders also voted, by a majority vote, to remove the then directors and to elect a new board of directors.

For the purpose of avoiding, if possible, any irregularity in the election of these directors, that evening and the next day the old board met with the new board, and by a process of resignation and election the old board elected as directors the identical persons who had been elected at the stockholders' meeting.

Shortly after the adjournment of the meeting of August 9th, a committee appointed at that meeting to secure counsel employed appellees herein, and at the meeting of the new board of directors on August 12, 1897, upon the recommendation of the committee so appointed, appellees were employed by the board of directors to look after the affairs of the association and protect its interests.

August 13, 1897, at the relation of the State Auditor of Public Accounts, the Attorney General filed a complaint under the provisions of said act of 1897, in which it was alleged that less than two-thirds of the members of the said association having voted in favor of the resolution to reorganize, said association was unable to reorganize or go into voluntary liquidation, and praying that a receiver be appointed to take charge of the property and assets. A temporary receiver was appointed, and afterwards this bill was consolidated with the original bill of complaint filed by certainof the shareholders. Said board of directors heretofore referred to. through appellees as their counsel, contested the appointment of a receiver. Considerable litigation arose over this and allied questions. The circuit court upheld the legality of the appointment of a receiver and on appeal to the Appellate Court the decision of the lower court was upheld. Mechanics' & Traders' Savings, Loan & Building Ass'n v. People, 72 Ill. App. 160.

In December, 1897, the court granted permission to the acting board of directors to call a shareholders' meeting for the purpose of attempting to reorganize or go into voluntary liquidation, in accordance with the statute, and the receiver sent out notices calling this meeting. It appears that from the inception of the litigation up to this time neither counsel representing the directors of the association, nor any one for them, were permitted to examine the stock books to ascertain the number of shareholders or number of shares in force. This meeting was called for December 18, 1897, and resulted in a vote of 8,004 shares in favor of voluntary liquidation and 204 against, this being less than two-thirds, although more than a majority, of the apparent number of shares in force, and the representatives of the association having no means of determining the actual number of shares in force, the fight to prevent the appointment of a receiver was abandoned, and appellees, by the orders of the board of directors, filed a supplemental answer submitting the entire matter to the court. At the meeting of December 18, 1897, a new board of directors was elected, comprising the previous board elected August 12th, with the exception of two or three persons. This newly elected board met December 21st, and passed certain resolutions, among others the following: ‘Resolved, that the circuit court of Cook county be, and is, hereby requested to allow and pay out of the funds in...