People ex rel. Brady v. La Salle St. Trust & Sav. Bank, Gen. No. 46126

Decision Date08 March 1955
Docket NumberGen. No. 46126
Citation5 Ill.App.2d 261,125 N.E.2d 654
PartiesPEOPLE of the State of Illinois, ex rel. James J. BRADY, Auditor of Public Accounts, Plaintiff below, v. LA SALLE STREET TRUST & SAVINGS BANK et al., Defendants below. Joseph J. DUFFY, Administrator of the Estate of William Lorimer, Deceased, etc., et al., Intervening Petitioners below, Appellants, v. CHICAGO TITLE AND TRUST COMPANY, Respondent below, Appellee.
CourtUnited States Appellate Court of Illinois

Rothbart & Rosenfield, Francis M. Lowes, Chicago, (Edward Rothbart, J. M. Rosenfield, Francis M. Lowes, Joseph Stein and Thomas E. Moran, Chicago, of counsel), for appellants.

Charles F. Grimes, Kirkland, Fleming, Green, Martin & Ellis, Chicago ( Joseph B. Fleming, Thomas M. Thomas, Elmer M. Leesman and William M. Rice, Chicago, of counsel), for appellee.

McCORMICK, Presiding Justice.

A decree was rendered in the Circuit Court of Cook County on an amended intervening petition filed by William Lorimer and others on January 12, 1932. The suit in which the intervening petition was filed was started June 18, 1914 to wind up the affairs of the La Salle Street Trust and Savings Bank, an Illinois corporation. Certain objections had been filed to various reports and accounts submitted by the Chicago Title and Trust Company, successor receiver of the La Salle Street Trust and Savings Bank, which accounts were filed on March 16, 1932, April 18, 1940 and on April 21, 1943, and these objections were substantially the same as those alleged in the petition. These objections were included in the order of referral to the master and were considered in the hearing. The trial court entered a decree dismissing the amended intervening petition for want of equity, approving and confirming all the accounts theretofore filed by the Chicago Title and Trust Company as receiver of the La Salle Street Trust and Savings Bank, and overruling all objections thereto. The decree further provided that the respondent, Chicago Title and Trust Company, be released and discharged from all further duties and liabilities on account of the said receivership. From this decree appeal is taken on the theory that the intervening petition and the objections to the accounts and reports were to recover assets of a receivership estate which allegedly wrongfully came into the possession of the respondent and were not accounted for by it, and to recover the legal profits which the respondent received while acting in a fiduciary capacity towards the receivership estate, together with interest thereon; that the master and the chancellor incorrectly interpreted the law applicable, and that under a proper application of the law the facts established were sufficient to sustain the petition.

The abstract filed in this case consists of 323 printed pages. An additional abstract was filed consisting of 244 pages. The record contains 7,321 pages. The essential facts contained in this voluminous record are as follows: The La Salle Street National Bank was organized on or about May 9, 1910, and carried on a general banking business in Chicago from that time until about October 21, 1912, when it ceased doing business. On October 19, 1912 the La Salle Street Trust and Savings Bank an Illinois corporation, was organized and succeeded the National Bank. During the entire time, William Lorimer was president, Charles B. Munday vice president, and they, together with Harry W. Huttig, were members of the board of directors, both of the National and State Banks.

The Rosehill Cemetery Company is a corporation organized under a special Act of the General Assembly of the State of Illinois approved February 11, 1859. The capital stock of the cemetery company, as fixed by its charter, was $50,000, divided into 5,000 shares of the par value of $100 each. The Rosehill Cemetery Company acquired about 325 acres of land in the town of Lake View in Chicago, which it used and is using for cemetery purposes, together with other property incidental thereto.

The Rosehill Cemetery Company, when it sold burial lots, had for many years collected an additional sum over and above the selling price of the lots, which money it agreed to hold in trust forever as a perpetual care fund. By the spring of 1912 that fund had reached substantial proportions and was invested in numerous high grade securities.

In 1912 Rosehill had 5,000 shares outstanding. Of these, 2,668 1/3 were owned by the three heirs of Killian Lansingh (Grace Wiles, Van Rennsalaer Lansingh and Blanche Freeman), and 447 1/2 were owned by Pettibone, Osborne and Minor. The remaining shares of the 5,000 were owned by Wesley Dempster, A. W. Vercoe and others, hereafter referred to as the Dempsters.

On May 20, 1912, by a contract dated April 1, 1912, Munday and Huttig, associated with Joseph Morris, Frederick Reynolds and Jess Briegel, contracted to purchase from Pettibone, Osborne and Minor 447 1/2 shares of Rosehill stock for $300 per share, and on May 20, 1912, by a further contract (hereafter referred to as the Lansingh contract), which was dated April 1, 1912, Munday and Huttig and their associates agreed to buy 2,668 1/3 shares of Rosehill stock from Lansingh, Wiles and Freeman at an agreed price of $325 a share, or a total of $867,208.33, payable over a period of ten years. The buyers made a down payment in cash of $96,208.33 and agreed to pay the remaining balance of $771,000 in installments, $20,000 to be paid on October 1, 1912, $25,000 semiannually during the years of 1913, 1914, 1915 and 1916, and $50,000 semiannually during the years of 1917, 1918, 1919, 1920 and 1921, with a final payment of $51,000 in 1922, with interest at 5% per annum on the deferred payments.

Under the terms of the contract the Chicago Title and Trust Company, as Trustee, held possession of the stock until the purchase price was fully paid, but the buyers could withdraw up to 167 shares as they made the payments. This would at all times leave 2501 1/3 shares, or a majority of all the Rosehill shares, in the hands of the Trustee, which shares, however, could be voted by the buyers on proxies issued by the Trustee. The contract further provided that in the case of default in the payment of the principal or interest, or in the performance of any of the covenants, the Trustee, on the written request of the sellers, could declare the full amount of all the notes then outstanding to be immediately due and payable.

By the purchase of the said stock Munday and his associates secured control of Rosehill Cemetery Company, and they shortly after April 1, 1912 formed a new corporation known as Cemetery Securities Company. Under the Lansingh contract Munday and his associates were entitled to withdraw one share from the trust for every $325 paid in excess of the sum of $150,000. On April 1, 1914, under the terms of the contract, they had paid $191,208.33 and therefore were entitled to, and did receive, shares representing the difference between that sum and $150,000, or 126 shares. They assigned the 447 1/2 shares purchased from Pettibone, Osborne and minor, together with their rights to the 2,668 1/3 shares purchased under the Lansingh contract, of which 126 shares had actually been delivered to them, to the Cemetery Securities Company in payment for the stock in that corporation. The Cemetery Securities Company therefore held 573 1/2 shares of Rosehill Company stock, with the right to secure the balance of the stock sold under the Lansingh contract.

The Cemetery Securities Company then made loans from the La Salle Street Trust and Savings Bank (hereafter called the State Bank), which at the time of the closing of the bank amounted to the sum of $106,000, evidenced by its note and secured by 352 1/2 shares of Rosehill stock. From April, 1912 to 1914, Munday and his associates, while in control of the Cemetery Securities Company and the Rosehill Cemetery Company, transferred 219 shares of Rosehill stock, along with certain worthless securities, to the Rosehill Cemetery Company, and received in return therefor good securities out of the Perpetual Care Fund of the Rosehill Company, and certain cash which was paid to Munday and Huttig. The remaining two shares of Rosehill stock held by the Cemetery Securities Company were transferred to one Thomas Wallis.

On May 22, 1914, a minority stockholders' suit was filed by Wesley Dempster, on behalf of the stockholders of Rosehill, in the Superior Court of Cook County, case No. 308793, against the State Bank and against Munday and his associates, charging the wrongful depletion of the Rosehill Perpetual Care Fund and the wrongful using of such money to make payments for the Rosehill shares purchased by Munday and his associates from Pettibone, Osborne and Minor, and from the Lansinghs, and praying for an accounting and return of the money and securities taken from the Perpetual Care Fund. As a result of this suit the Auditor of the State of Illinois closed the State Bank on June 12, 1914, and on June 18, 1914 filed this suit, being Circuit Court No. B-3379. On June 19, 1914 William C. Niblack was appointed receiver of the State Bank, and a creditors' committee was formed on behalf of the creditors. At the time of his appointment as receiver for the State Bank and down to the time of his death on May 6, 1920, Niblack held the office of vice-president, director and trust officer of Chicago Title and Trust Company, the respondent herein.

At the time the State Bank went into receivership it held 352 1/2 shares of Rosehill stock, as collateral for notes of the Cemetery Securities Company, and Thomas Wallis held two shares to qualify as one of the directors of the Rosehill company. The balance of 2542 1/3 shares left after the withdrawal by Munday and his associates of 126 shares from the original 2,668 1/3 shares sold under the Lansingh contract was held by Chicago Title and Trust Company,...

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