Brubaker v. Gould

• Decision Date: 05 March 1962
• Docket Number: Gen. No. 48354
• Citation: 34 Ill.App.2d 421,180 N.E.2d 873
• Parties: Henry J. BRUBAKER and Civilla J. Brubaker, Appellants, v. W. E. GOULD, W. E. Gould and Company, an Illinois Corporation, J. H. Lahman, Interlake Industries Corporation, an Illinois corporation, and Harriet B. Gould, Executor of the Will of W. E. Gould, Deceased, Appellees, Thomas J. Cavanagh, Petitioner-Appellee.
• Court: United States Appellate Court of Illinois

Page 873

180 N.E.2d 873

34 Ill.App.2d 421

Henry J. BRUBAKER and Civilla J. Brubaker, Appellants, v. W. E. GOULD, W. E. Gould and Company, an Illinois

Corporation, J. H. Lahman, Interlake Industries Corporation,

an Illinois corporation, and Harriet B. Gould, Executor of

the Will of W. E. Gould, Deceased, Appellees,

Thomas J. Cavanagh, Petitioner-Appellee.

Gen. No. 48354.

Appellate Court of Illinois, First District, First Division.

March 5, 1962.

Rehearing Denied March 22, 1962.

Kelly, Kelly & Kelly, Chicago, John J. Kelly, Jr., Chicago, of counsel, for appellants.

Arthur Abraham, Israel Dordek, Chicago, for W. E. Gould & Co., Interlake Industries, and others.

Schultz, Krinsley, Voorheis & Hedberg, Chicago, for Lahman; Raymond Harkrider, Chicago, of counsel.

MURPHY, Presiding Justice.

Plaintiffs appeal from a decree dismissing their complaint for want of equity at the close of plaintiffs' evidence before a master in chancery. The transfer to this court of plaintiffs' direct appeal to the Supreme Court disposed of plaintiffs' theory that a freehold is involved.

The record shows that on February 24, 1949, plaintiff Henry J. Brubaker and defendant J. H. Lahman jointly accepted a letter of intent to purchase a U. S. Navy surplus plant at Rockdale, Illinois, from the War Assets Administrator. The price was $875,000, payable over a ten year period. A plant consisted of approximately 26 acres, improved with buildings containing about 700,000 square feet of space. Brubaker and Lahman made initial deposits of $30,000. On April 27, 1949, Lahman, Brubaker, and his wife Civilla, formed an Illinois corporation, Interlake Industries Corporation, for the purpose of taking title to and possession of the property.

On May 26, 1949, Brubaker, because of illness, assigned to Lahman all of his right, title and interest in the letter of intent of February 24, 1949. Lahman agreed to assume, perform and discharge all of the terms and obligations of the letter of intent; to assume payment of specified outstanding Brubaker notes; to pay Brubaker the sum of $1100, and to reserve for Brubaker a one-tenth interest in the common stock of Interlake Industries or any other corporation that might become the successor to the letter of intent.

On June 22, 1949, in exchange for Interlake stock, Lahman assigned his interest in the War Assets Administration letter of intent to Interlake. Of the stock then received by Lahman, he assigned 1,000 shares of common to Civilla J. Brubaker, and stock certificate No. 14 was issued to her.

Lahman, prior to 1949, had been borrowing money at high interest rates from defendant W. E. Gould & Company, which was in the business of lending money, primarily to corporations. After June 1949, Gould & Company commenced making substantial loans to Interlake, for which it received notes of Interlake. Interlake also picked up outstanding Lahman notes held by Gould & Company by the substitution of Interlake notes.

In 1950, Lahman and Interlake were in serious financial distress. Gould & Company held Lahman and Interlake notes and some Lahman 'NSF' checks. After negotiations, Lahman and defendant W. E. Gould, principal owner of W. E. Gould & Company and acting on its behalf, entered into a contract on May 29, 1950, intending to take Lahman completely out of Interlake and to put W. E. Gould & Company in full control as owner of all its stock. At that time Lahman, although the owner of 75% of the stock of Interlake, agreed to deliver to Gould & Company all of the outstanding stock of Interlake. Gould and Gould & Company agreed to 'turn back' to Lahman and to Interlake notes totalling $179,000, of which $67,000 were Lahman's and $112,000 were Interlake's. In addition, Lahman was to receive $11,000 in cash.

On June 1, 1950, Gould & Company took over Interlake and its properties, and Lahman stepped out completely. Gould was elected president of Interlake at a meeting purportedly held by all the shareholders on June 5, 1950, at which time, the record indicates, Gould or Gould & Company had possession of only Lahman's 75%. With the exception of the 1,000 shares held by the Brubakers, Lahman delivered to Gould the balance of the outstanding stock of Interlake shortly after May 29, 1950.

Up to this point, Lahman and Brubaker remained friendly and frequently saw each other. Lahman had told Brubaker of Interlake's difficulties in meeting the plant contract payments, and that he was going 'to have to unload to somebody and it probably would be Gould.' Finally Lahman told Brubaker that he had 'made a deal with Gould & Company to carry the ball from there on,' and that he had sold all of his interest in Interlake to Gould. Later, Lahman told Brubaker that the Gould deal included delivery of the 1,000 shares of the Interlake common held by the Brubakers, with no consideration to them. Several weeks later, Lahman started urging the Brubakers to return their Interlake stock to him, in order that he could give it to Gould. He stated that it was their duty to do so, that the stock was worthless, and he was in great distress and might go to jail if he did not get it. After some delay, the Brubakers informed Lahman they would talk it over with their attorney, Sidney O. Simon, known to Lahman.

Simon, over a period of four months, had a number of conferences with Lahman and with Brubaker, separately and together. Lahman persisted in his statements that he was very heavily involved with Gould and had received a threatening letter--he had to have the Brubaker shares to deliver to Gould. The Brubakers did not want to give up their Interlake stock and were openly suspicious that Lahman had a collateral agreement with Gould for the return of Lahman's interest in Interlake. Lahman persisted in stating that he had given the stock to the Brubakers without consideration and felt that, as he was in difficulties, it was Brubaker's 'Christian duty' to return the shares. Finally Lahman agreed to pay the Brubakers $5,000 in payment of some past due Lahman notes, which Brubaker held, and they agreed to give the stock to him.

On May 9, 1951, at a meeting at Simon's office attended by Lahman and Brubaker, Lahman gave his $5,000 check to Brubaker, and Brubaker gave to Lahman stock certificate No. 14 for 1,000 shares of Interlake common, endorsed by Civilla J. Brubaker. At that time Lahman delivered to Brubaker his affidavit, prepared by Simon, which stated that since June 1, 1950, he (Lahman) had no 'interest of any kind or character, present or reversionary,' in any of the shares of stock or real property of Interlake Industries; that the certificate representing 1,000 shares of Interlake common stock 'is being sold and delivered by Civilla J. Brubaker based on the above and only to enable affiant to fulfill his contract'; and that the affidavit was made for the purpose of inducing her to deliver to Lahman the stock certificate. Lahman delivered the stock certificate to Gould that day, and Interlake issued a new certificate to Gould & Company for the Brubaker shares.

On May 15, 1955, Lahman, as plaintiff, filed a complaint in equity in the Circuit Court of Cook County against W. E. Gould and Gould & Company, as defendants, Case No. 55 C 7294, in which Lahman alleges inter alia that the Lahman-Gould agreement of May 29, 1950, was executed under such circumstances that Lahman has the right to recover his shares in Interlake from Gould & Company upon doing equity, which he offered to do in his complaint.

In the Lahman-Gould complaint (copy of which is in evidence), Lahman alleges that the purported 'sell out' of May 29, 1950, 'was understood to be a further collateral protection to defendants and an accounting would be made from time to time.' He further alleges that the defendants and their attorney, Israel Dordek, on or before April 4, 1955, knowing that Lahman was under subpoena by the U. S. Government as a witness in the case of United States of America v. Roberts Enterprises, Inc. No. 53 C 967, summoned Lahman to defendants' office and admonished him and 'suborned the perjury of plaintiff under duress or threat as alleged that plaintiff testify falsely that the sell out of May 29, 1950, was legal and proper and that under duress plaintiff so testified and similarly in the case of Harold Ronin vs. Lahman in the Circuit Court of Cook County, No. 52 C 187, when in truth and in fact the transaction was for collateral as hereinabove alleged more particularly.'

Plaintiffs filed the instant complaint on September 9, 1955, after making a demand upon Gould and Gould & Company for the return of their Interlake stock. The complaint consists of four counts, all based on the theory that Gould and Lahman entered into a conspiracy and committed fraudulent acts, so as to defraud plaintiffs of their Interlake common stock and of a one-half interest in the Navy surplus plant now owned by Interlake. They seek a rescission of the assignment of their interest in the real estate, a rescission of the transfer of their stock certificate, an accounting, and a receiver for Interlake. All defendants answered, denying the charges, and the cause was referred to a master in chancery.

The hearings before the master commenced on January 15, 1956, and plaintiffs closed their proofs on October 31, 1957. All defendants then moved for a finding for defendants under Section 64(5) of the Civil Practice Act, Ill.Rev.Stat.1961, c. 110, § 64(5). On March 12, 1959, the death of W. E. Gould was suggested as of December 21, 1958, by Harriet B. Gould, executor of his will. She answered the complaint 'without prejudice to all proceedings heretofore had.' She also moved to exclude the testimony of the Brubakers and Lahman and adopted the motion of the defendants for a finding and decree in their favor. The report of the master in chancery is dated May 27, 1959. The witnesses include both plaintiffs, their attorney, Sidney O. Simon, and defendants Lahman and W. E. Gould, who...