Investors Syndicate of America, Inc. v. Hughes

• Decision Date: 14 January 1942
• Docket Number: No. 26263.,26263.
• Citation: 38 N.E.2d 754,378 Ill. 413
• Parties: INVESTORS SYNDICATE OF AMERICA, Inc., et al. v. HUGHES, Secretary of State.
• Court: Illinois Supreme Court

378 Ill. 413

38 N.E.2d 754

INVESTORS SYNDICATE OF AMERICA, Inc., et al.

v.HUGHES, Secretary of State.

No. 26263.

Supreme Court of Illinois.

Nov. 18, 1941.

Rehearing Denied Jan. 14, 1942.

Appeal from the Circuit Court, Cook County; John J. Prystalski, judge.

Proceeding by the Investors Syndicate of America, Inc., and others for a writ of mandamus to compel Edward J. Hughes, Secretary of State, to issue to the plaintiff a certificate of authority to transact business in the state as a foreign corporation. From a judgment in favor of petitioners, defendant appeals.

Judgment reversed.George F. Barrett, Atty. Gen. (Albert E. Hallett, Jr., of Chicago, of counsel), for appellant.

John L. McInerney and Don M. Peebles, both of Chicago, for appellees.

STONE, Justice.

Defendant, Edward J. Hughes, Secretary of State, appeals from a judgment of the circuit court of Cook county ordering the issuance of a writ of mandamus commanding defendant to issue to the plaintiff, the Investors Syndicate of America, Inc., a Minnesota corporation, a certificate of authority to transact business in this State as a foreign corporation.

Plaintiff is a wholly owned subsidiary of the Investors Syndicate, an old, established corporation, which parent corporation has done business in Illinois for many years, and at present has outstanding in this State installment savings contracts and certificates of an aggregate maturity value of approximately $40,270,000, with a cash surrender value of approximately $3,460,000. The business dealings of the parent company, in this State, have always been satisfactory and no investment with it has been lost. It became subject to the terms of the Federal Investment Company Act, 15 U.S.C.A. § 80a-1 et seq., effective January 1, 1941, which provided for the registration and regulation of investment companies with the Securities and Exchange Commission. After due investigation and consideration, the parent company concluded it could best and most efficiently function under that act, through the medium of a wholly owned subsidiary, which plan met with the approval of the Securities and Exchange Commission.

Under that plan, the plaintiff company, as such subsidiary, was organized to take over the business of issuing and selling investment contracts after January 1, 1941, under the name the ‘Investors Syndicate of America, Inc.’ The parent company ceased selling investment contracts on January 1, 1941. However, in accordance with the obligations of its existing contracts, it continues to collect payments, and keep funds invested on outstanding contracts until they mature. Under the plan all assets of the parent corporation are to remain intact for the benefit of its creditors alone. The operations of both companies are to be carried on by the already existing organization and personnel of the parent company. In plaintiff's statement it appears that it has of paid-in capital and surplus, $1,012,500.

On November 18, 1940, it filed a formal application with the defendant Secretary of State, pursuant to sections 102, 106 and 107 of the Business Corporations Act, Ill.Rev.Stat.1939, c. 32, §§ 157.102, 157.106, 157.107, seeking a certificate of authority to transact business in Illinois a foreign corporation under the name and style of the Investors Syndicate of America, Inc. Consent of the parent company to the issuance of such certificate was filed. The consent of the parent corporation does not purport to make the new corporation an agent of the parent corporation or to underwrite or guarantee the contracts of the new corporation, or to make any of the assets of the old company available for the fulfillment of contracts entered into by the new corporation. It is conceded that no one contracting with the subsidiary may look to the parent company as security for fulfilling his contract.

The Secretary of State denied the certificate on the ground that he was forbidden by the Business Corporations act to issue it. Section 104(a) ( Ill.Rev.Stat.1939, chap. 32, par. 157.104) of that act is as follows: ‘No certificate of authority shall be issued to a foreign corporation: (a) Which has a name the same as, or deceptively similar to, the name of any domestic corporation existing under any Act of this State or any foreign corporation authorized to transact business in this State, or a name the exclusive right to which is, at the time, reserved in the manner provided in this Act,’ etc. Plaintiff's amended petition for mandamus prayed, as alternative relief, that the trial court grant an appeal from the Secretary of State's decision and hear its petition de novo under section 148 of the Business Corporations Act, Ill.Rev.Stat.1939, c. 32, § 157.148.

Defendant filed a motion to dismiss on the grounds that under said section 104(a) of the Business Corporations Act it was his duty to refuse to issue a certificate to plaintiff because its proposed name was ‘deceptively similar’ to that of another corporation authorized to transact business in Illinois. The court denied defendant's motion and ordered him to answer. He, however, elected to stand on his motion to dismiss and a writ of mandamus was ordered as prayed. The court also denied a trial do novo on the ground that section 148 of the Business Corporations Act, purporting to grant that right, is an unconstitutional attempt to impose administrative duties upon the courts. It appears from the record that both parties requested a hearing de novo as on appeal.

Section 148 of the Business Corporations Act provides that if the Secretary of State shall fail to approve any document before the same shall be filed in his office, as provided in the act, he shall give writtennotice to the person or corporation delivering the same, specifying the reasons therefor. The section then further provides: ‘From such disapproval such person or corporation may appeal to the Circuit or Superior Court of the county in which the registered office of such corporation is, or is proposed to be, situated by filing with the clerk of such court a petition setting forth a copy of the articles or other document sought to be filed and a copy of the written disapproval thereof by the Secretary of State; whereupon the matter shall be tried do novo by the court, and the court shall either sustain the action of the Secretary of State or direct him to take such action as the court may deem proper.’ Plaintiff, appellee here, contends that the court erred in not granting the statutory appeal and in holding section 148 unconstitutional. No cross-appeal has been filed but the Attorney General, in his brief, expresses the opinion that the trial court was right in so holding, but asks that the validity of section 148 be decided on this appeal.

There have been numerous cases in other jurisdictions concerning the validity of similar statutes providing for so-called appeals from decisions of various State officers and bodies to the courts. A statute of this nature which designates the procedure as an ‘appeal’ but provides for a hearing ‘de novo’ on a petition setting forth a copy of the documents sought to be filed, and a copy of the written disapproval of the officer or commission, this court had held, does not confer appellate jurisdiction upon the court, but merely authorizes it to exercise its original jurisdiction. To that effect are Railroad & Warehouse Comm. v. Litchfield & Madison Railway Co., 267 Ill. 337, 108 N.E. 347, and Maxwell v. People, 189 Ill. 546, 59 N.E. 1101. This court has also upheld the ‘appeal’ provisions of section 68 of the Public Utilities Act, Ill.Rev.Stat.1939, c. 111 2/3, § 72, which provides for an appeal to the circuit court ‘for the purpose of having the reasonableness or lawfulness of the rule, regulation, order, or decision inquired into and determined.’ This court held in People's Gas Light & Coke Co. v. City of Chicago, 309 Ill. 40, 139 N.E. 867, that, though termed an ‘appeal,’ the act only provided, in effect, for an original judicial investigation of the matter, and that the court had original jurisdiction.

Counsel for defendant cites North Chicago Hebrew Congregation v. Board of Appeals, 358 Ill. 549, 193 N.E. 519,Hopkins v. Ames, 344 Ill. 527, 176 N.E. 729, and City of Aurora v. Schoeberlein, 230 Ill. 496, 82 N.E. 860, as being inconsistent with the rulings of the court just discussed. All of these cases involved an appeal from administrative boards acting in a non-judicial capacity, and the statutes in question purported to give the right of appeal and did not provide for an exercise of original jurisdiction through a trial de novo. Because such boards were non-judicial bodies, it was held that there could not be an appeal from such boards to a judicial body. Maxwell v. People, supra. In the present case, section 148 of the Business Corporations Act, provides only for the filing of a copy of the document sought to be filed and a copy of the written disapproval thereof by the Secretary of State. Judicial proceedings begin with the filing of these instruments and the court does not exercise appellate jurisdiction in such a case, and there is there no appeal in a legal sense. Railroad and Warehouse Comm. v. Litchfield & Madison Railway Co., supra. The ‘appeal’ provided for is a method of procedure for bringing before the court questions of property rights of which it has jurisdiction. City of Aurora v. Schoeberlein, supra. The court is to determine de novo from the pleadings presented whether the order of the Secretary of State is lawful and reasonable, and the right of plaintiff to the use of its proposed corporate name. In view of the holding of this court in similar cases, we are of the opinion that section 148 is not open to constitutional objection that it is an attempt to impose administrative duties on the courts.

Plaintiff has raised for the first time in his answer to defendant's appeal to this court, the validity of section 104(a) of the Business...