Lederer v. St. Clair Hotel

• Decision Date: 20 December 1949
• Docket Number: Gen. No. 44729
• Citation: 339 Ill.App. 214,89 N.E.2d 739
• Parties: LEDERER et al. v. ST. CLAIR HOTEL, Inc., et al.
• Court: United States Appellate Court of Illinois

Page 739

89 N.E.2d 739

339 Ill.App. 214

LEDERER et al. v. ST. CLAIR HOTEL, Inc., et al.

Gen. No. 44729.

Appellate Court of Illinois, First District, Second Division.

Dec. 20, 1949.

Rehearing Denied Dec. 30, 1949.

Edward Graff and Jerome M. Brooks, Chicago, for appellant.

Mitchell Edelson and William N. Wise, Chicago, for appellee St. Clair Hotel, Inc Hoffman & Davis, Chicago, for appellee Joseph W. Koebel.

SCANLAN, Justice.

From a decretal order entered November 5, 1948, which order, inter alia, dismissed the cause for want of equity, Jake Levin, additional party plaintiff and intervening petitioner, appeals.

As the chancellor dismissed the cause upon the pleadings without hearing evidence, we will outline the pleadings at the time the order of November 5, 1948, was entered: On April 23, 1946, Henry Lederer and Jennie Guettel filed their complaint against St. Clair Hotel, Inc., a corporation (hereinafter also called Hotel), and The Trust Company of Chicago, as Trustee under Trust No. 5163. By a supplemental complaint filed March 12, 1948, Joseph W. Koebel and Managers, Incorporated, a corporation, were made additional defendants. The complaint alleges that Henry Lederer, plaintiff, was the owner of 2,010 shares of stock, and Jennie Guettel, plaintiff, the owner of 1,500 shares of stock in Hotel; that The Trust Company of Chicago as trustee for an undisclosed principal entered into a contract with Hotel to purchase all of its property and also to purchase its capital stock from individual stockholders; that on April 15, 1946, plaintiffs received a communication from Hotel which stated that it had received an offer of $1,100,000 from The Trust Company of Chicago to purchase the property consisting of Hotel; that no other offer for the purchase of the property would be submitted to the stockholders and that if the offer would be accepted there would be available for each share of stock approximately $2.99; that a notice for the annual meeting was also inclosed but that the notice contained no mention concerning the restrictions that no other bids would be accepted; that a form of proxy was also inclosed asking the stockholders to approve the sale; that this proxy was silent as to the restriction that no other offer would be received; that at the same time The Trust Company of Chicago addressed a communication to the stockholders agreeing to purchase their stock for $2.99 per share without waiting until the deal was closed; that the stockholders were also informed that the books of transfer would remain open until April 26, 1946, giving the purchaser the right to vote the stock purchased and also making available to it the names and addresses of all stockholders. The complaint further sets forth that the property of Hotel is worth far in excess of the appraised value and the proposed purchase price and that if competitive bidding were allowed the property would bring far in excess of the price offered; that plaintiffs do not object to the sale of the property but object to the restrictions prohibiting any higher offer and in making the names and addresses of the stockholders available to the purchasers so that they could purchase stock and vote the same in their favor. The complaint charges that the directors are without power to submit the sale of the property with the restrictions that no other bids would be received, and that it is beyond the authority of the Board of Directors to submit such conditions and to solicit proxies for such purposes; that it is the duty of the directors to obtain the maximum amount from the sale of the property for the benefit of the stockholders. The supplemental complaint filed March 12, 1948, alleges that on March 3, 1948, Hotel mailed a new communication to the stockholders which states that a written offer has been received from defendant Joseph W. Koebel in which he agrees to purchase the property of Hotel for $1,100,000; that Koebel is identified with Managers Incorporated as its treasurer, and that said Managers Incorporated is the agency which was employed for the past thirteen years by Hotel to operate and manage the hotel, and that a substantial number of shares of Hotel are held by nominees for the benefit of Managers Incorporated; that the offer made by Koebel is objectionable in that it gives Koebel the privilege of meeting any higher bids and is substantially the same as the previous offer described in the original complaint; that if the sale is completed to Koebel the shareholders will receive $2.50 per share, which is less than the shareholders would have received under the previous offer that the new offer is subject to the same objections as the previous offer and is subject to more scrutiny because of the ownership of large blocks of stock by persons affiliated directly or indirectly with the offeror, and plaintiffs pray that the court enjoin the sale upon the above basis and that a sale be held upon competitive bidding without restrictions. On March 17, 1948, one D. Bobrow by order of court was given leave to file his intervening petition in which he alleges substantially all of the allegations of the original and supplemental complaints. On March 19, 1948, by order of court Jake Levin, appellant, was given leave to file his intervening petition and be considered an additional party plaintiff. This intervening petition sets forth that he is an original owner and holder of 500 shares of Hotel which he received in exchange for original mortgage bonds which were issued in the reorganization of said hotel in 1934. The intervening petitioner joins in all of the allegations in the original and supplemental complaints and in addition sets forth that if said building would be submitted for sale at free and open competitive bidding without any privilege or option to the purchaser, Managers Incorporated, or any one else, that 'he' would secure a higher offer. Petitioner alleges that he is prepared to bid $1,200,000 for the property and as evidence of his good faith he tenders a certified check in the sum of $50,000. The petition further alleges that the report of the president of Hotel that the company will be unable to consider favorably the declaration of any dividend was made for the purpose of coercing the shareholders to sell the property to the controlling stockholders. Defendants were ordered to answer or plead to said intervening petition of Levin. On April 2, 1948, by leave of court, intervening petitioner Levin filed an amendment to the intervening petition in which he joined in the allegations of the original and supplemental complaints and further set forth that at the meeting of the shareholders held March 20, 1948, he experienced considerable difficulty and obstruction on the part of the officers of Hotel; that he was finally able to present a written offer for the purchase of the property in the amount of $1,200,000 and that he presented at said meeting a cashier's check for $50,000 as earnest money; that the president of the corporation accepted an offer by some person representing Managers Incorporated for the sum of $1,200,000; that the president of the corporation notified intervenor Levin that the property was sold to Joseph W. Koebel for the sum of $1,201,000; that Managers Incorporated claims that it owns and controls a substantial number of the outstanding shares of Hotel and that it also has control of the election and conduct of the majority of the Board of Directors of Hotel; that the proceedings at said meeting constituted a fraud upon the shareholders of Hotel; that the intervenor, Levin, is ready, willing and able to offer the sum of $1,300,000 for the property of Hotel. On April 22, 1948, the following order was entered:

'On motion of Mitchell Edelson, attorney for the defendant, St. Clair Hotel, Inc., for leave to withdraw the written motion to dismiss, heretofore filed herein by said defendant, and to file the answers of said defendant to the original and supplemental complaint and to the intervening petition of D. Bobrow and amended intervening petition of Jake Levin herein; and due notice having been given to all parties entitled thereto; and the court being fully advised in the premises, Doth Hereby

'Order that leave be, and the same is hereby given to the defendant, St. Clair Hotel, Inc.

'1) to withdraw its written motion to dismiss, heretofore filed in this cause; and

'2) to file its answers this 22nd day of April, 1948, to

'a) the original and supplemental complaint of the plaintiffs herein;

'b) the intervening petition of D. Bobrow; and

'c) the amended intervening petition of Jake Levin.'

Thereafter Hotel and Joseph W. Koebel filed answers to the supplemental complaint of plaintiffs and to the amended intervening petition of Levin, appellant. The answers set forth, in substance, that the average stockholder was not misled by reason of any matter set forth in the complaint and that the offer of The Trust Company of Chicago referred to in the original complaint was not passed by reason of the fact that it did not receive the affirmative votes of at least two-thirds of the outstanding stock. Answering the supplemental complaint defendants state that the terms of the new offer are not contrary to public policy; that on February 6, 1948, Joseph Koebel offered to purchase the property for $1,100,000 and that the Board of Directors at a meeting duly held submitted the same to the stockholders for their consideration and called a meeting of the stockholders for March 20, 1948; that at a meeting held on said date Levin bid on the property and also one Charles Grosscurth; that the latter offered $1,200,000 for said property and tendered a check for $100,000 as earnest money, and that thereupon, by the affirmative vote of more than two-thirds of the holders of outstanding stock, it was resolved that the offer of Grosscurth be accepted subject to the right of Joseph W. Koebel to raise said offer by not less than $500;...