Olmstead v. Vance & Jones Co.

• Decision Date: 16 April 1902
• Citation: 196 Ill. 236,63 N.E. 634
• Court: Illinois Supreme Court
• Parties: OLMSTEAD v. VANCE & JONES CO. et al.

196 Ill. 236

63 N.E. 634

OLMSTEAD

v.VANCE & JONES CO. et al.

Supreme Court of Illinois.

April 16, 1902.

Error to appellate court, First district.

Proceedings for the winding up and liquidating of the affairs of a corporation, in which J. T. Olmstead filed claims as a creditor, to which the Vance & Jones Company and others objected. From a judgment of the appellate court (92 Ill. App. 287) reversing the decree of the circuit court allowing the claims, the claimant, Olmstead, brings error. Affirmed.I. M. Earle and Samson & Wilcox, for plaintiff in error.

Wilson, Moore & McIlvaine, for defendants in error.

The Smith & Jones Company, a corporation of Illinois, was formed in 1893 for the purpose of manufacturing boots and shoes, with a capital stock of $125,000, $60,000 of which was subscribed by J. C. Smith, $2,500 by David Tilt, and $62,500 by Arthur G. Jones. On the 16th day of January, 1894, there was submitted to Bentley & Olmstead, who were wholesale boot and shoe dealers in Des Moines, Iowa, a proposition substantially as follows: ‘Gentlemen: Having secured a factory in the city of Chicago, and organized a limited corporation, to be known as the Smith & Jones Company, for the purpose of manufacturing boots and shoes for the wholesale trade exclusively,we make you the following proposition, to wit: That whereas the company is organized under the laws of the state of Illinois, with a paid-up capital of one hundred and twenty-five thousand ($125,000) dollars, one hundred thousand ($100,000) dollars of which is common stock, and twenty-five thousand ($25,000) dollars of it preferred stock, and as the common stock has all been subscribed for, we offer you the privilege of subscribing for fifty shares of the preferred stock at par, $100, guarantying eight per cent. dividend per annum on the same, and agree to by back any portion of this stock at the end of two years at one hundred and ten ($110) dollars per share. * * * Thirty per cent. of this (subscription price) to be paid at once, thirty per cent. February 15, and the balance during March or by April 1,’-which was signed, ‘Arthur C. Jones, for Smith & Jones Co.’ This paper was written and signed in the office of Bentley & Olmstead, in Des Moines; and they wrote their acceptance at the bottom of it, and afterwards sent their checks in the installments fixed by that instrument, amounting in all to $5,000, which checks the company received in Illinois and accepted. Afterwards, on April 6, 1894, a certificate of stock was issued, signed by the president and secretary of the company, running to Bentley & Olmstead, for 50 shares, on which was written in ink the word ‘Preferred.’ Up to the time the 50 shares were issued to Bentley & Olmstead by the company, such shares had not been paid for by any one, but the shares were deducted from those subscribed for by Smith and Jones, and the payment made by Bentley & Olmstead was credited as a payment of a portion of the subscription made by Jones and Smith. On December 22, 1893, a like proposition was made to the Vance Shoe Company of Wheeling, W. Va., which was accepted by them, and under its contract the Vance Shoe Company paid $5,000, and received certificates for 50 shares, of $100 each. marked ‘Preferred.’ There was no provision in the by-laws or charter of said company for issuing preferred stock, and it appears that nothing was done to prefer this stock, otherwise than by so designating it, and guarantying its dividends, and making the agreement to buy it back at the end of two years. On December 8, 1894, $200 was paid as a dividend upon the Bentley & Olmstead stock, and on April 16, 1895, a like amount. No more dividends were voluntarily paid, but on June 11, 1896, Bentley & Olmstead, having purchased boots and shoes from the Smith & Jones Company, retained $400 of the price, claiming it as dividends upon their stock, and indorsed it upon their certificate. The Vance Shoe Company objected to having the Smith & Jones Company, whose name had been changed to the Vance & Jones Company, allow the $400 as dividends, and that item was charged to Jones' personal account. Neither the Vance Shoe Company, nor its stockholders or officers, ever consented to the allowance of the $400. On December 12, 1895, Bentley & Olmstead, by letter of that date, notified the Smith & Jones Company that they had decided to accept the company's offer of $110 per share for their stock. No other or further demand was ever made by them for the surrender or cancellation of their stock. On December 13, 1895, Mr. Jones personally replied to their letter of the 12th, in which he said, in substance: ‘In regard to the stock, I don't want you to dispose of it at this time, as I wish to have you with me, provided the arrangement had been satisfactory to you,-and I hope it has; and I will continue the agreement, so that you won't lose any chance of getting $110 per share, or more, at any time, but will see you some time between now and the 16th of January, and will talk the matter over more in regard to your order for January goods.’ Some negotiations followed this correspondence, looking towards the purchase by said Jones from Bentley & Olmstead of their stock, but the negotiations failed, and the evidence does not show that any direct effort ever was made to induce the company itself to buy back said stock. Some time after January 16, 1896,-the date the company had agreed to repurchase said stock,-it became embarrassed, and compromised with all its other creditors for 33 cents on the dollar. On June 1, 1896, the Vance Shoe Company purchased of Smith 575 shares of his stock in said company, and of Jones 208 shares of his stock in said company, and new capital was put into said company by the Vance Shoe Company. In the contract between the Vance Shoe Company and Jones in the purchase of his shares, Jones agreed personally to exempt and protect the Smith & Jones Company from any action that Bentley & Olmstead might take to recover the amount paid by them for the stock they held in said company. Subsequently the Vance Shoe Company discovered that under the laws of Illinois it had no power to...