Loewenthal Sec. Co. v. White Paving Co.

• Decision Date: 22 February 1933
• Docket Number: No. 20807.,20807.
• Citation: 184 N.E. 310,351 Ill. 285
• Parties: LOEWENTHAL SECURITIES CO. v. WHITE PAVING CO. et al.
• Court: Illinois Supreme Court

351 Ill. 285

184 N.E. 310

LOEWENTHAL SECURITIES CO.

v.WHITE PAVING CO. et al.

No. 20807.

Supreme Court of Illinois.

Dec. 23, 1932.

Rehearing Denied Feb. 22, 1933.

Error to Second Branch, Appellate Court, First District, on Appeal from Superior Court, Cook County; Oscar Hebel, Judge.

Suit by the Loewenthal Securities Company against the White Paving Company and others. Decree for complainant was affirmed by the Appellate Court (259 Ill. App. 612), and defendants bring certiorari.

Decree of trial court and judgment of Appellate Court reversed.

George F. Barrett, Charles Barrett, William C. Wermuth, and Cooke, Sullivan & Ricks, all of Chicago (Schuyler, Dunbar & Weinfeld, George A. Cooke, Edward H. Fiedler, and Philip A. Gibbons, all of Chicago, of counsel), for plaintiffs in error.

Mayer, Meyer, Austrian & Platt, of Chicago (Frederic Burnham and Richard Mayer, both of Chicago, of counsel), for defendant in error.

PER CURIAM.

Defendant in error, the Loewenthal Securities Company, filed its bill in the superior court of Cook county against the plaintiffs in error, the White Paving Company and the White Construction Company, and also against the Bessemer Investment Company and the city of Chicago, as defendants. The two last-named defendants were dismissed from the case. The trial court entered a decree requiring the paving company and the construction company to pay to the securities company the sum of $210,458.76 as damages, with interest thereon at the rate of 5 per cent. The decree was affirmed by the Appellate Court, and this court awarded a writ of certiorari for a review of the record.

At the times in question the complainant securities company was a corporation engaged in the business of buying and selling municipal securities, including local improvement bonds. The construction company was a Wisconsin corporation organized in 1908, and the paving company was an Illinois corporation organized in 1915. Michael E. White and his relatives owned all but a few shares of the stock of the construction company and the paving company, but neither of these corporations owned any of the stock of the other nor were the stockholders of the two corporations identical. The construction company was engaged in construction work and had various jobs throughout the country, including work in the suburbs of Chicago. Although its work was principally the construction of roads, it also did other construction work and had a contract for construction of a sewage disposal plant at the Des Plaines river, near Chicago. The paving company was engaged in paving streets in Chicago. It had never done, and was not equipped for, any other kind of work. Its work had been confined to asphalt paving. White was an officer of both companies and the companies had other common officers. Each of these companies kept its own set of books and had its own bank account. They were operated as separate and distinct corporations, although occasionally one would lend some of its employees or equipment to the other and make a charge for the lending. Each of these companies had its own equipment, its own field organization, and its-own jobs.

The securities company and its officers knew White and knew of the existence of both the construction company and the paving company. It also knew of the character of the business done by these companies. The securities company had made contracts with the paving company as early as the years 1917 and 1918 for the purchase of vouchers received by the paving company from the city of Chicago on paving jobs in the city. In 1921 the securities company solicited another contract with the paving company and a separate contract with the construction company. At that time the securities company stated that it would not make a contract with the construction company unless it could also make one with the paving company. Finally a contract dated September 20, 1921, was made between the securities company and the paving company. The securities company made no contract with the construction company but invited the construction company to submit its paper from time to time in the future, and stated that if such paper met the requirements of the securities company the latter would buy it or make a contract to buy it. No representation or promise was made at any time that the paving company would bid for any city jobs or that White or the construction company would not so bid.

The contract of September 20, 1921, between the securities company and the paving company, provided a price of 90 cents on the dollar for the bonds and vouchers to be sold by the paving company to the securities company thereunder. At the instance of the paving company that contract was canceled May 23, 1922, and on that date a new contract was entered into between the same parties, which is the contract now in question. No contract was made with the construction company or with Michael E. White. By the contract of May 23, 1922, the paving company agreed to sell the securities company the bonds and vouchers ‘that have been issued by the city of Chicago in payment of work done or to be done’ by the paving company ‘on contracts awarded’ to the latter by the city during the years 1921 and 1922, with the exception of $300,000 of such bonds or vouchers, which the paving company desired to dispose of or retain for itself. The price of these securities was to be 92 cents on the dollar for 5 per cent. bonds or vouchers and 95 cents for 6 per cent. securities. It was agreed, however, that should the market price paid by the securities company to any other contractors for the 1922 season be in excess of the above prices the paving company was to receive the benefit of such higher price. The contract contained provisions making the purchase of the securities subject to obtaining the approval of specified firms of attorneys and subject to obtaining ‘final adjudication’ of the court in the special assessment proceedings. The clause with respect to final adjudication is as follows: ‘It is further understood that on any of the bonds or vouchers delivered wherein work is completed prior to February 15, 1923, unless final adjudication is entered into on or before March 1, 1923, we will re-purchase from you any vouchers (or bonds that may have been issued in exchange for vouchers) on demand at the price that you paid us for said bonds or vouchers, plus interest, at the rate said bonds or vouchers bear, from date of issue to date of re-purchase. On any work completed after February 15, 1923, unless final adjudication is had on said work before March 1, 1924, we will repurchase from your any vouchers (or bonds that may have been issued in exchange for vouchers) on demand at the price that you paid us for said bonds or vouchers, plus interest, at the rate said bonds or vouchers bear, from date of issue to date of re-purchase.’ This was followed by a clause by which the paving company also agreed to sell, and the securities company agreed to purchase, ‘the interest-bearing vouchers that may be issued against supplemental assessments' in cases where the paving company had theretofore sold and delivered to the securities company ‘the original paper,’ and the securities company agreed to ‘receive and purchase’ the supplemental paper ‘upon the same terms and conditions that the original paper was purchased, as soon as final adjudication has been entered by the court and legal opinions furnished’ by one of the specified firms of attorneys, and the paving company agreed to re-purchase such supplemental paper from the securities company ‘on the same terms and conditions as apply to re-purchase of paper on the original warrants.’

On April 29, 1922, a special assessment for the so-called Broadway sewer project in the city of Chicago was confirmed. The city advertised for bids for this work three times but was unable to obtain any bidders. About September 12, 1922, the city again advertised for bids, to be opened September 27, 1922. At the suggestion of Michael E. White, Herlihy, who was an officer of the paving company, approached Freudenthal, who was an officer of the securities company, and sought to induce him to excludethe Broadway sewer project from the operation of the contract. Herlihy stated, in effect, that unless that job was so excluded the paving company would not submit a bid but that the construction company would. Freudenthal refused to accede to this request. The paving company did not submit a bid for that work. There were only two bidders: The construction company, whose bid amounted to $2,386,560, and the American Sewer & Drain Construction Company, which bid $2,421,280, or about $35,000 more than the bid of the construction company. The city awarded the work to the construction company and these two parties entered into the contract of October 28, 1922. The construction company sublet all the work to others but supervised the doing of the work through its own engineering force. Construction of the sewer constituted the principal part of the work, and this was sublet to the American Sewer & Drain Construction Company and Michael Pontarelli, as subcontractors. Construction of sidewalks and driveways and most of the curb and gutter work was sublet to the Simpson Construction Company. The remainder of the work, which was of minor importance and merely incidental to the main work, consisting of repairing the surface of the streets and a portion of the curb and gutter work, was sublet by the construction company to the paving company. The construction company made all payments to its subcontractors out of its own funds and also paid out of its own funds all other expenses in connection with the city contract. The paving company's men did the work for the paving company under its subcontract but did no other work. The evidence shows that with respect to the subcontract between the construction company and the paving company the two companies dealt with each...