Central Standard Life Ins. Co. v. Davis
| Decision Date | 23 November 1955 |
| Docket Number | No. 33610,33610 |
| Citation | 130 N.E.2d 169,7 Ill.2d 266 |
| Parties | CENTRAL STANDARD LIFE INSURANCE COMPANY, Appellant, v. C. Hayden DAVIS et al., Appellees. |
| Court | Illinois Supreme Court |
Vernon R. Loucks, Chicago, and H. E. Fullenwider, Springfield (Charles O. Loucks, and James L. Henry, Chicago, of counsel), for appellant.
Barber & Barber, Springfield, and E. K. Bekman, Ottumwa, Iowa (Clayton J. Barber and Alton G. Hall, Springfield, of counsel), for appelleesC. Hayden Davis et al.
Giffin, Winning, Lindner & Newkirk, Springfield (Montgomery S. Winning, Springfield, of counsel), for appelleeLincoln Hotel Co.
Central Standard Life Insurance Company filed its complaint in the circuit court of Sangamon County as a class action on behalf of itself and approximately three hundred other holders of the preferred capital stock of the Abraham Lincoln Hotel Company, Springfield, Illinois, asking that the court direct and decree that the business of the Hotel Company be liquidated, its assets, consisting largely of real estate, be sold, and the proceeds after payment of debts be distributed to the preferred and common shareholders as their interests appear.From a decree dismissing the complaint for want of equity plaintiff appeals directly to this court on the grounds that a freehold and a franchise are involved.For the reasons stated we have concluded that jurisdiction on direct appeal does not exist.
The Business Corporation Act provides for the liquidation of a corporation in a suit by a shareholder if it is shown that the acts of the directors or those in control are 'illegal, oppressive, or fraudulent.'(Ill.Rev.Stat.1955, chap. 32, par. 157.86.)The oppressive conduct complained of here is the refusal of the controlling common shareholder, the defendant Davis, to permit liquidation of the assets of the corporation.The complaint alleges that the par value of the preferred stock, plus twenty-three years' accumulation of unpaid cumulative dividends, so far exceeds the actual or potential value of the assets of the corporation that the interest of the controlling common shareholder is financially worthless, and that his only purpose in refusing to liquidate the corporation is to force the preferred shareholders to sell out to him at distress prices, and to benefit another corporation, also controlled by him, the Abraham Lincoln Hotel Operating Company, which leases and operates the hotel and owns the furnishings and equipment.
The various defendants denied the principal allegations of the complaint and set forth a separate defense of estoppel and laches.The separate defense alleges that the plaintiff's president, E. H. Henning(then president of Illinois Bankers Life Assurance Company), was a director of the hotel company from 1935 until his resignation in 1952, just prior to the commencement of this suit, that at the time of the execution of the present lease between the hotel company and the operating company Henning as a director moved the adoption of the resolution authorizing the execution of the lease, and that at the shareholders' meeting that year Henning voted the stock now owned by the plaintiff in favor of the resolution, unanimously adopted, ratifying the action of the board.Defendants claim that plaintiff is thereby estopped from maintaining this action.Plaintiff admits the facts charged in the special defense, but claims that they are immaterial.
At the trial much evidence was offered concerning the income, earnings and value of the assets of the two companies.The master rejected all this evidence as immaterial and found for the defendants on the ground that the relation between the income of the hotel company and the operating company was governed by the lease which had been assented to by the then owner of plaintiff's stock, and that the terms of the lease had been fully complied with by the operating company.He further found that in the absence of evidence that plaintiff or its predecessor in ownership had ever dissented in a shareholders' or directors' meeting to action then taken, the conduct of the defendants could not have been oppressive.His recommendation that the cause be dismissed for want of...
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