Nat'l Hollow Brake Beam Co. v. Chicago Ry. Equip. Co.

• Decision Date: 21 February 1907
• Citation: 80 N.E. 556,226 Ill. 28
• Parties: NATIONAL HOLLOW BRAKE BEAM CO. et al. v. CHICAGO RY. EQUIPMENT CO.
• Court: Illinois Supreme Court

226 Ill. 28

80 N.E. 556

NATIONAL HOLLOW BRAKE BEAM CO. et al.

v.CHICAGO RY. EQUIPMENT CO.

Supreme Court of Illinois.

Feb. 21, 1907.

Appeal from Appellate Court, First District.

Suit by the Chicago Railway Equipment Company against the National Hollow Brake Beam Company and another. From a judgment of the Appellate Court (123 Ill. App. 533), reversing a judgment for defendants, they appeal. Reversed and remanded.Shope, Mathis, Zane & Weber, and Eddy, Haley & Welton, for appellant.

H. H. C. Miller, W. S. Oppenheim, and David S. Geer, for appellees.

The pleading and facts of the case are sufficiently stated in the following statement made by the Appellate Court:

‘On March 21, 1902, the Chicago Railway Equipment Company, appellant, filed its bill in the superior court of Cook county to enjoin the National Hollow Brake Beam Company and Henry D. Laughlin, appellees, from re-entering upon the premises occupied by appellant and removing it, or any of its property, therefrom, and to restrain Laughlin, as president of the brake beam company, from acting under the power conferred upon him by the lease, from seizing the books and papers of appellant, and from undertaking to secure and deliver to the brake beam company an assignment and transfer of patents and inventions for which applications for patents are pending, choses in action or any other property belonging to appellant.

‘The material allegations of the bill are to the effect that on January 1, 1893, appellant took possession of all the property, business, and good will of the brake beam company under an agreement called a ‘lease,’ dated December 8, 1892. Under this agreement appellant was to pay the brake beam company the sum of $65,000 per year, in semiannual installments, for the period of 15 years. The lessee assumed the payment of $50,000 of the mortgage bond of the lessor and the interest thereon. At the expiration of the lease the lessee was to return the property leased, and, if it had not already done so, the amount of cash received from the lessor or the balance thereof still unpaid, the outstandings turned over to it, together with the amount of the cash price, as per inventory, of the stock and materials on hand, manufactured and unmanufactured, turned over by the lessor to the iessee. The lessee had the right, from time to time, to pay back to the lessor, before the expiration of the lease, the whole or any portion of the money received by it or that may be collected on the outstandings in the payment of not less than $5,000. As such payments were made from time ot time the rents should be reduced thereafter per annum in an amount equal to 6 per centum on the amount or amounts so paid back. The lease provides for a forfeiture in case the lessee should fail to pay any installment of rent for three months after it bacame due, the forfeiture to be declared after giving a written notice of such intention to the lessee, and, after receiving such notice, the lessee has three months from the date of the receipt of the notice to make good its default. The lease further provides for a re-entry and the removal of the lessee in case of forfeiture, and gives the lessor the right to take possession of the premises, together with the machinery and stock and material, manufactured and unmanufactured, all cash on hand, in bank or elsewhere, notes, accounts, choses in action, all books and papers and evidences of indebtedness, and provides that the lessor shall thereupon succeed immediately to the right, title, and interest of the lessee. The lessor is to account to the lessee, and, after liquidating all claims of the lessor against the lessee, it shall pay over to the lessee any balance in its hands. It is further provided therein that the lessor shall become the owner of all patents and inventions owned by the lessee, with all claims for infringement of any such rights, and makes the president of the lessor the attorney in fact of the lessee, to execute and deliver to the lessor all necessary assignments and transfers thereof, without any charge in any sum whatever for the same.

‘On March 16, 1898, appellee Laughlin sent a communication to appellant referring to a certain proposition which he had submitted in April, 1897, relating to a reduction of the rent reserved in the lease. In this communication Laughlin submitted a new proposition upon the same subject, and, among other things, said that the item of $106,287.90, referred to in the original proposition, had been returned to appellee brake beam company, and that appellant had made good to the brake beam company all the moneys acquired by appellant through the lease, but that appellant still stands charged with machinery and office furniture accounts amounting to $16,294.90. Laughlin then proposed to appellant that, if it would pay to the American Trust & Savings Bank of Chicago, for his account, $107,000 cash and $300,000 of its negotiable bonds, he would have its rent reduced from the amount it was then paying to $5,000 per annum thereafter, and that, until he secured such reduction, he himself would pay to the brake beam company all rent over and above the sum of $5,000 per annum. This proposition was accepted by appellant, and appellant paid the money and turned over the bonds in the fall of 1898, in accordance with the agreement. Appellee Laughlin, in the meantime, had entered into an agreement with the brake beam company whereby it consented to the reduction of the appellant's rent to $5,000 per annum in consideration of certain agreements on the part of Laughlin to purchase at par all the stock of the beam company held by all stockholders other than himself. A certificate was thereupon given by the beam company to the equipment company evidencing an agreement to the reduction of the rent to $5,000, beginning January 1, 1899, which was to be paid in semiannual installments of $2,500 each. On December 31, 1898, the balance of the rent due for the year, amounting to the sum of $21,500, was paid by appellant to the beam company by turning over a note of appellee Laughlin for $7,500, a note of the El Nayal M. & M. Company for $4,000, a note of the Hammond Manufacturing Company for $5,000, and a certificate of the receiver of the Monterey & Mexican Gulf Railroad for $4,500. On December 18, 1901, appellee Laughlin delivered a notice to appellant that the turning over of the last three items was no payment, in fact, of the rent, and unless the balance of $13,500 represented by said papers, with 6 per cent. interest from December 31, 1898, was paid within three months, the appellee the brake beam company intended to forfeit the lease.

‘The bill sets up efforts to have the controversy settled amicably; that the capital stock of appellant is $2,500,000 and worth at least $1,000,000; that, in the development of its business, it has acquired a large number of patents; that it has accumulated a surplus of more than $100,000, and that it has paid dividends for the year 1901 at 6 per cent. on its capital stock; that the break beam company threatens to take forcible possession of its property, and to secure an assignment of all its letters patent, and thus irreparably damage and destroy its property and business, and prays for an injunction against a forfeiture of its lease, etc. The amended answer of appellee the brake beam company denies that the rent in dispute has been paid, or that the three obligations for $13,500 were taken or accepted as cash, or otherwise, by the brake beam company; alleges that the pretended transfer of the three obligations was attempted to be made by Edward B. Leigh, who was, at the time thereof, general manager of the equipment company; that Leigh had, prior to the time of the pretended transfer, used the moneys of the equipment company for his own private purposes, and for such moneys so taken the three obligations had been given, and that on December 31, 1898, the said claims were worthless. At that time Leigh was in charge of the books of the brake beam company, and, being about to become treasurer of the beam company, fraudulently, for the purpose of imposing said worthless claims upon the beam company, and in the interest of the equipment company, and without the knowledge of the officers and directors of the beam company, made certain entries on the latter company's books pretending to transfer to it the said worthless claims in part payment of the installment of rent due December 31, 1898; that Leigh had no authority to make such entries; that they were not known to the brake beam company, and, as soon as known to it, were by it repudiated; that the equipment company was ignorant of such pretended transfer, but was afterwards informed thereof and of...