Harts v. Brown

• Decision Date: 31 January 1875
• Citation: 77 Ill. 226,1875 WL 8293
• Parties: DAVID H. HARTS et al.v.JEFFERSON BROWN et al.
• Court: Illinois Supreme Court

77 Ill. 226

1875 WL 8293 (Ill.)

DAVID H. HARTS et al.

v.JEFFERSON BROWN et al.

Supreme Court of Illinois.

January Term, 1875.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Logan county; the Hon. LYMAN LACEY, Judge, presiding.

This was a bill in chancery, filed by Jefferson Brown, Ezra Boren, John Howser, Mark W. Barrett, William F. Ryan, Abner C. Boyd, Joel B. Paisley, Hamilton Tibbets, Jesse Ferbis, James M. Howser, Samuel Waters, Robert B. Latham, Malon R. Hall, Eli Downey, J. Shelton Randolph, Martin Spitley and John Hukill, against David H. Harts, Frank Frorer, Silas Beason, Ambrose Miller and the Lincoln Coal Company. The object of the bill, the facts of the case and the proceedings had, are stated in the opinion of the court, so far as is necessary to an understanding of the case.

Mr. E. D. BLINN, and Messrs. ROWELL & HAMILTON, for the appellants.

Messrs. HOBLITT & FOLEY, and Messrs. NELSON & ROBY, for the appellees. Mr. CHIEF JUSTICE WALKER delivered the opinion of the Court:

The Lincoln Coal Company was first organized in the year 1867, under the general incorporation law of this State, but afterwards became incorporated under a special charter adopted at the session of the General Assembly of 1869. The stock was divided into five hundred shares of $100 each. Three hundred were sold and paid for in full, but the remaining two hundred were apportioned among the stockholders according to the number of shares each held, upon their paying $30 on each share. Three shares were subsequently forfeited, leaving four hundred and ninety-seven shares to represent the capital stock of the company.

The organization proceeded to sink a shaft, and to prepare for mining coal. The money received on the sale of shares of stock was expended, and debts to the amount of from $23,000 to $33,000 were contracted by the company. Bonds of the corporation were issued and sold to Musick to the amount of $9400, and a trust deed was executed to him on the property of the company to secure the payment of the same.

These bonds matured about the first of August, 1871, and the greater portion of them were held by Musick and Hall, who demanded payment, and refused to extend the time unless personal security was given. Prior to that time, the property had been sold under a decree for a mechanic's lien for $2000, and there was other indebtedness, as it is claimed, over the amount of assets to meet the same.

Thereupon the directors called a stockholders' meeting, and the secretary gave each shareholder a notice thereof and of the object of the meeting. It was held on the first of September, when a portion of the stockholders attended, and the condition of the affairs of the company was laid before them, and a proposition was submitted that each shareholder contribute his proportion of the amount necessary to relieve the company from this indebtedness, and they were requested to severally pay such sums. The property was advertised and sold on the 23d of December, 1871, and Frorer became the purchaser, for the amount of the indebtedness of the company, for the use of all stockholders who should join in forming a new company, and contributing thereto in proportion to the stock held by them in the old company.

Before this sale was made, Musick and appellants entered into a written agreement that he should sell and transfer to them forty-three and one-third shares of stock, and assign to them fifty-two bonds of the company, of $100 each, with the interest thereon, and a promissory note executed by Frorer, Howser and Ezra Boren, to Musick, for $3000, with ten per cent interest; and that he would sell the property of the company, under and in conformity to the terms of the trust deed, as soon as possible after the first of August, 1871, and to execute proper deeds therefor.

Appellants, on their part, agreed to execute to Musick four promissory notes-- one for $2400 and three for $2500 each--and to execute a mortgage on their interest in the coal company's property, to secure the payment of the money. They were to keep Musick harmless on account of an agreement in reference to the note he assigned to them, and free from liability to the coal company.

After the property was sold, and purchased by Frorer, appellants organized a new company, under the name of the Lincoln Coal Mining Company. They put in the property thus purchased at $80,000, and divided the stock among themselves, and have been operating it, with good profits and dividends, ever since.

Appellees filed a bill against appellants and Musick, claiming that the sale was fraudulent and void; that the company had no power to make the trust deed to any one, and especially to a director of the company, and that appellants wrongfully combined to compel a sale of the property, and to become the purchasers, and thus defraud the other stockholders out of their interest in the property.

Musick filed a cross-bill, alleging that he was induced to sell his stock to appellants, by false and fraudulent representations. Appellants claim that the company was hopelessly insolvent, and without means to pay their debts, and without credit, and that the property had been sold under a decree of court, and that the time for redemption would soon expire, and that, for the purpose of saving the means they had already embarked in the enterprise, they determined to become the purchasers, not at the sum due Musick, but at a price which would pay all the creditors of the company, and then organize a new company, giving to all the stockholders the opportunity to participate in the new organization, by contributing their ratable proportion of the sum necessary to pay the purchase price they had paid for the property.

On a hearing, the court below dismissed Musick's cross-bill, but granted the relief sought by complainants in the original bill. The court decreed a rescission of the sale, and stated the principles upon which an account should be stated, and referred it to the master to state the account. From that decree defendants prosecute this appeal, and assign various errors.

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