Murray v. Tolman

• Court: Illinois Supreme Court
• Writing for the Court: CARTER
• Citation: Murray v. Tolman, 162 Ill. 417, 44 N.E. 748 (Ill. 1896)
• Decision Date: 28 March 1896
• Parties: MURRAY v. TOLMAN.

162 Ill. 417

44 N.E. 748

MURRAY

v.TOLMAN.¹

Supreme Court of Illinois.

March 28, 1896.

Appeal from appellate court, First district.

Bill in chancery by Thomas W. B. Murray against Daniel H. Tolman and others. Decree rendered by Judge Tuthill in the circuit court of Cook county for complainant, which was reversed by the appellate court (54 Ill. App. 420), and complainant appeals. Reversed.

Bulkley, Gray & Moore, for appellant.

Moses, Pam & Kennedy, for appellee.

CARTER, J.

Appellee Murray filed his bill in equity in the circuit court of Cook county against appellant Tolman, the Midland Company, the Chicago Trust & Savings Bank, and others, for the rescission of a certain contract of subscription or purchase of 10 shares of the capital stock of said Midland Company, alleged to have been obtained by Tolman from Murray by fraud; and for an accounting of payments therefor, and of certain payments of usurious interest on two certain judgment notes of $1,000 each, given by said Murray, and held, as alleged, by the defendants, or some of them; and for the cancellation and delivering up of said notes; and for an injunction to prevent the assignment of said notes, or the entry of the judgment thereon. On the report of the master of the evidence and his conclusions, Murray amended his bill, and the defendants filed amendments to their answers. The issues as made were found in favor of Murray, the master finding that the allegations of the bill, in substance, were fully sustained, and the court decreed accordingly. This decree was reversed in the appellate court for the First district, and the bill ordered dismissed. From that judgment, Murray has taken this appeal.

The record is voluminous, and we cannot undertake to set out here anything more than the bare substance of the case as we find it to be. It appears that Tolman was the president and principal stockholder or the Chicago Trust & Savings Bank, which, for convenience, is called the ‘Bank.’ Murray was a manufacturer of tents, awnings, etc., and had occasion to borrow money on short time, and had borrowed money from the bank through Tolman. Afterwards, and before such borrowed money was repaid, Tolman called upon Murray at his place of business, and represented to him that he was getting up a company to accommodate such men as he, who needed money on short time; that the company was on the mutual principle of building and loan associations, and organized to guaranty the payment of moneys which should be borrowed by its members. Murray had never before heard of the Midland Company, and knew nothing of its object, its organization, or the value of the stock, except what he was told by Tolman. The conversation on the subject sought and had by Tolman with Murray were three or four in number, and extended over a period of about three weeks, in April, 1888. He represented to Murray that members of the company could borrow money on its guaranty at 6 per cent., and, while they would pay to the company 1 per cent. per month for its guaranty, the dividends they would receive as stockholders would amount to 25 per cent., and proceeded to demonstrate to Murray how the plan would work out the results as stated by him. Murray testified that Tolman figured it out to his satisfaction at the time, but that he could not himself reproduce or explain it. Murray replied to Tolman that he did not need to borrow money in that way, but that he could get all the money he wanted at his bank. Tolman assured him, however, that it was a profitable investment any way; that there were other men in it whose names he knew, who did not need to borrow money; that it would pay 25 per cent. on the money invested, and so figured it out to him; represented that the stock was then worth $150 for each share of $100; that Murray could sell it for that if he got tried of his bargain; and that he would himself buy it back at that figure. The promise to repurchase was repeated more than once. Without any other information of the company, its charter powers, or the value of its stock, than that given to him by Tolman, and relying upon its correctness and the truth of Tolman's statements and promises, he signed a paper produced by Tolman, reading as follows: ‘The Midland Company having been established with a capital stock of $100,000, divided into one thousand shares, we, the undersigned, hereby subscribe for and agree to purchase of D. H. Tolman the number of shares of said company set opposite our respective names, paying therefor $150, and to take delivery at the Chicago Trust and Savings Bank, May 5, 1888.’ This paper was eventually signed by upward of 100 persons. The articles of incorporation were not, nor was any writing purporting to show the purpose of the incorporation or its charter powers, produced or shown to Murray; but he relied entirely upon the truth of the statements and representations of Tolman, without making any independent inquiry or investigation. Some time afterwards Murray applied to Tolman to redeem his promise, and to repurchase the stock, but was told by Tolman that he had all the Midland stock he wanted then, but that Murray should come again in the spring. In the spring he refused to buy, and afterwards, about 2 1/2 years after obtaining the stock, Murrary tendered it back to Tolman, and demanded the return of the purchase money, but was refused. Soon thereafter this bill was filed.

Prior to signing the paper above mentioned by Murray, Tolman had caused an application to be made to the secretary of state for articles of incorporation of said company, showing that its object was to guaranty commercial paper, and to deal therein; but the application had been refused by the secretary, with the information that the articles of incorporation would not be issued on such a statement. He then caused another application to be made, for a charter containing the statement that the object for which the corporation was formed was to secure information and furnish statements concerning the responsibility of persons and corporations, to conduct a merchanidise commission business, and to contract in respect thereto. So that Tolman knew that his representations to Murray as to the object, purposes, and charter powers of the Midland Company were false. He had special information and knowledge also on that subject, which he concealed from Murray. The application for incorporation was made at the instance of Tolman, by employés in his bank. The company was paid for its stock by a check on the bank of $50,000 of Tolman for the stock subscribed for by him, and by his checks given to four others, who, at his instance, had subscribed for the other $50,000, and which checks they turned over to the company; and the whole $100,000 was placed to the credit of the company on the books of the bank. Tolman parceled out the stock to those who, like Murrary, had agreed to purchase from him at an advance of 50 per cent., and in this way realized a profit of $50,000 almost as soon as the company was organized, and, by subsequent purchases and sales before its final collapse, an additional amount of more than double this amount. It does not appear that he was possessed of the same confidence in the eventual success and dividend-paying power of the company that he was able to inspire in others, for, when the final collapse came, he did not own any of the stock; at least, not any considerable amount of it. Of this $100,000 placed to the credit of the company, it seems that $62,500 was invested in the...