Green v. Hedenberg

• Decision Date: 20 January 1896
• Citation: 42 N.E. 851,159 Ill. 489
• Parties: GREEN v. HEDENBERG.
• Court: Illinois Supreme Court

159 Ill. 489

42 N.E. 851

GREEN

v.HEDENBERG.

Supreme Court of Illinois.

Jan. 20, 1896.

Appeal from appellate court, First district.

Bill by J. W. Hedenberg against W. C. Green and others, officers and directors of the Nutting Electric Manufacturing Company, praying relief for a misappropriation of corporate funds. From a decree as prayed (55 Ill. App. 425), defendant W. C. Green appeals. Affirmed.

French, Teller & Brown, for appellant.

E. B. Tolman, for appellee.

WILKIN, J.

This is a bill in chancery by appellee, as a stockholder, against the Nutting Electric Manufacturing Company, and its officers and directors, charging them with misappropriation of corporate funds, to his prejudice, and praying relief. The decree of the circuit court was according to the prayer of the bill, and has been affirmed by the appellate court. 55 Ill. App. 425. The material facts set up in the bill are that the capital stock of the corporation, consisting of 1,000 shares, of $100 each, were on April 13, 1893 held by two rival factions; complainant, his son James W. Hedenberg, and his son-in-law Jason R. Prindle being the owners of 536 shares, and William H. Foulke, Samuel E. Nutting, Frank A. Smith, S. D. Brown, and Nellie C. Bonner the remaining 464 shares. At that time the last-named parties, with W. C. Green, A. S. Nutting, A. W. Bonner, P. L. Taylor, and D. B. Switzer, through complainant, acting for himself and his son-in-law, purchased all the shares they owned, agreeing to pay therefor $40,000,-$15,000 in cash and $25,000 in notes, secured by the stock sold and 214 additional shares, delivered to him as collateral. Upon the consummation of this sale, complainant, who was then president, and his son-in-law Prindle, who was then secretary, of the company, resigned, and appellant, W. C. Green, was elected president and W. H. Foulke secretary. Two others of the purchasers were made directors. Frank A. Smith was then treasurer, and continued to be an officer of the company. At this time there was due the company certain insurance money, amounting to $15,200, and it is alleged in the bill that that money was afterwards misapplied by the president, Green, and treasurer, Smith, with the consent and concurrence of the other directors, to the payment of said $15,200 in cash in the purchase of said 536 shares of stock. The bill alleges that the total cash assets of the company at that time were $21,648.43, other personal property, $3,000, and patents of great value, but does not state their value. It is further alleged that, on November 3d following the purchase of the stock from complainant, $50,000 in bonds were issued by the officers and directors of the company, secured by a chattel mortgage, in which Eugene Clifford was named as trustee, for the purpose of raising funds to pay a debt of $6,600 pretended to be due and owing by the company; and it is alleged that if the $15,200 had not been misappropriated as stated, no necessity whatever would have existed for the issue of the bonds, even though the indebtedness really existed. It charges certain fraudulent transactions in regard to those bonds by Clifford, William H. Hope, and A. Emma Smith, wife of Frank A. Smith, and these parties were made defendants to the bill. They answered, denying its allegations as to them. The company, Samuel E. Nutting, W. H. Foulke, P. L. Taylor, W. C. Green, Frank A. Smith, and A. W. Bonner filed a joint and several answer, in which they admit the ownership and sale of the shares of stock on April 13, 1894, substantially as alleged, but aver that the purchase was in fact by the company, and not by the individuals in whose names the transaction was had. ‘They admit the $15,200 paid to complainant for the stock purchased was taken from the funds of the company by said Green, acting as president, and William H. Foulke, acting as treasurer, * * * and admit that the money was taken with the concurrence and assent of the board of directors; aver that it was also taken with the consent and concurrence and at the request of every one of the stockholders, and with the full knowledge and consent of complainant, James W. Hedenberg, and Prindle. * * * They admit that if the $15,200 had been in the treasury there would have been no necessity to issue the bonds or make the assignment of patents, but deny that there was any misapplication or misappropriation of the funds of the company, and deny that the bonds, mortgage, or assignment of patents were made pursuant to any fraudulent scheme or plan to depreciate the stock or wreck the company, or for any other fraudulent or unlawful purpose, and aver that the same were made to raise money for the legitimate use of the company, and for no other purpose. And they admit that the officers and directors hypothecated all of said bonds referred to with the Central Trust Bank as security for a debt owing said bank of $6,524.50; but deny that it was done pursuant to any unlawful or fraudulent scheme or conspiracy of any kind; and aver that it was necessary for the company to raise money to that extent for its use, and that they had no other security to offer. They admit that if the money had not been taken from the assets no occasion would have arisen to pledge the bonds; but aver that the money taken and paid to complainant and his associates was taken with...