Rosehill Cemetery Co. v. Dempster

• Decision Date: 06 December 1906
• Citation: 79 N.E. 276,223 Ill. 567
• Parties: ROSEHILL CEMETERY CO. v. DEMPSTER et al.
• Court: Illinois Supreme Court

223 Ill. 567

79 N.E. 276

ROSEHILL CEMETERY CO.

v.DEMPSTER et al.

Supreme Court of Illinois.

Oct. 23, 1906.

Rehearing Denied Dec. 6, 1906.

Appeal from Appellate Court, First District.

Bill by the Rose Hill Cemetery Company against Wesley Dempster and another. From a decree of the Appellate Court (121 Ill. App. 143), affirming a decree in favor of defendants, complainant appeals. Affirmed.

Edwin Burrett Smith and Robert F. Pettibone, for appellant.

Cannon & Poage, for appellees.

VICKERS, J.

The Rosehill Cemetery Company filed its bill in the circuit court of Cook county against Wesley Dempster and Charles W. Dempster, stockholders of said company, for the purpose of compelling the surrender, for cancellation, of certain shares of stock held by the defendants below, and to compel an accounting as to the dividends received by them on said stock. The theory of the bill is that the stock in question was wrongfully acquired by the said Dempsters, and should therefore be surrendered to the said company and cancelled, and all payments made on account of dividends should be repaid by the defendants to the company. An answer was filed to the bill, and the cause was referred to a master, who took the proofs and reported his findings, and recommended a decree dismissing the bill for want of equity. The cause was heard in the circuit court upon exceptions ceptions to the master's report, which were overruled, and a decree was entered dismissing the bill in accordance with the master's recommendation. Complainant below prosecuted an appeal from this decree to the Appellate Court for the First District, where the same was affirmed, and, by further appeal, the case was brought to this court for review.

The essential facts set up in the pleadings, and which the testimony fairly tends to prove, are as follows:

(1) The special law incorporating the Rosehill Cemetery Company went into force February 11, 1859. The promoter of the enterprise, Francis H. Benton, purchased a tract of land in the town of Lake View, a few miles north of Chicago, and gave his notes for the sum of $35,568, secured by a mortgage on the land to John S. Newhouse, as part of the purchase money. About the same time he purchased a tract of land adjoining the tract first purchased, and in payment therefor he gave $5,028 cash and a note secured by a mortgage upon this land for $25,140. These two tracts of land were all the property the Rosehill Cemetery Company owned when it commenced business. The company's capital stock was $150,000 divided into shares of $100 each. The company was financially embarrassed at the time it began its operations, and finally, being unable to meet its indebtedness, the control of its affairs passed out of the hands of the stockholders and into the hands of the creditors, who managed the company with a view of collecting the debts due out of its earnings. The creditors continued in the uninterrupted control of the affairs of the company until the year 1881, when a majority of the stockholders, believing that the earnings of the company had fully discharged its liabilities and desiring to again resume control of the company's affairs for themselves, entered into an agreement, or formed what they termed a syndicate of stockholders, for the purpose of instituting and carrying forward proceedings to secure their rights as stockholders. In pursuance of this agreement and in accordance with its terms, Killian V. R. Lansingh, as administrator de bonis non of the estate of John Dempster, filed his bill of complaint in the circuit court of Cook county December 9, 1882, on behalf of himself and all other stockholders who should come in, against Van H. Higgins, Henry W. Blodgett, the Rosehill Cemetery Company, and others to redeem 937 shares of the capital stock of the company held by Blodgett as collateral security for the payment of the mortgage debt of Francis H. Benton, which had been assumed by the company, and for other relief. Long and vexatious litigation followed, which finally resulted in a decree in the circuit court of Cook county favorable, in the main, to Lansingh. This decree was afterwards affirmed by the Appellate Court for the First District, and upon further appeal it was substantially affirmed in this court in January, 1895. For a detailed history of the Rosehill Cemetery Company in its long struggle with its liabilities and litigation, we refer to the statement made in this court in the case of Higgins v. Lansingh, 154 Ill. 301, 40 N. E. 362.

(2) Wesley Dempster first became a stockholder in the company in the year 1881, and his business partner, Samuel H. Sweet, was joined with him in the ownership of 167 shares of stock. Afterwards, through his influence, his brother, David Dempster, bought stock in the company. When Lansingh began the litigation, in 1882, it was with the express agreement that the stockholders in the syndicate, which included Wesley Dempster, should contribute a pro rata share toward the expenses of the litigation, and that Lansingh should receive for his time and labor in prosecuting the suit one-third of the stock held by each member of the syndicate, with the exception of the stock held by Wesley and David Dempster and Samuel H. Sweet. They were not parties to the agreement to transfer stock to Lanshigh in the event of the successful termination of the litigation. The mandate of this court was filed in the Cook county circuit court April 6, 1895, and the cause was redocketed, and an order of reference was made directing the master to state an account. A final decree was entered in the circuit court November 22, 1895, in accordance with the decision of this court.

(3) V. H. Higgins having died, Henry J. Furber, surviving partner of Higgins, succeeded him in the control of affairs of appellant. The stockholders, who had organized the syndicate, were still out of the actual control of the company and were anxious to secure enough stock to place themselves in control. While a decree had been entered defining the relative rights of the parties, it was not yet executed. A wide difference existed between the claims of the creditors and what the complainants in that case were willing to allow. The stockholders were disheartened by the long and expensive litigation, and some of them were unwilling, and others unable, to advance further sums of money for the expense of litigation. The accounts were complicated, and the work of adjusting them promised to be both tedious and expensive, to say nothing of future litigation that was almost certain to result over disputed items. Besides, the stockholders had no available money and no means of raising any, and the stockholders were harassed by the question of raising the money to pay Furber the amount that might be ultimately due him. Furber held 730 shares of the company's stock in pledge, and he exacted, as a condition to the proposed settlement, that the stockholders should purchase this stock from him at its face value. Wesley Dempster was an experienced and successful business man, and had wealth and credit, so that his personal guaranty was satisfactory to Furber on any contract that might be made respecting the purchase of this stock. Dempster was willing to assume the personal liability demanded by Furber, and the negotiations for a settlement proceeded. To secure himself against possible loss through the liability thus about to be assumed, Wesley Dempster entered into a written agreement with the other members of the syndicate, which recited, among other things, the pendency of negotiations for a settlement of the controversies relating to the properties of the Rosehill Cemetery Company; that the company did not have at that time a board of managers legally authorized to bind it; that it could not act directly in negotiations; and that they were, for that reason, carried on by the stockholders. It also stated that Wesley Dempster was about to execute an instrument in pursuance of such settlement, creating personal liability against said Empster, and that he might assume other obligations and incur other liabilities; that, in consideration of Wesley Dempster's becoming bound, the members of the syndicate agreed to hold him harmless, and to further secure him they pledged him all of the stock and interest of every kind and character they had in the company. It was provided that in case of loss the said Wesley Dempster should bear his share of it; also that, in case of payments made by him, he should, to the extent of said payments, be substituted and subrogated to all liens and claims and rights of the holders of such obligations. The agreement also provided that, upon the said stockholders coming into possession and control of the corporation, it would assume all rights, liabilities, and obligations of Wesley Dempster under his contract with Furber. On July 27, 1896, a final agreement was reached between Wesley Dempster and Furber, and Wesley Dempster became liable to Furber for about $70,000, and thereupon Furber released the pledged stock of the company. On August 4th following, a meeting of the stockholders was held and a board of managers elected. Lansingh, Charles W. Dempster, Clancy J. Dempster, and Henry Pitcher were elected on said board. The stock which Furber held was assigned to Wesley Dempster, and he held it to furber indemnify him on his liability to Furber. At the stockholders' meeting on August 4th Wesley Dempster voted 956 1/3 shares of stock, which he owned and represented, together with the stock which he had obtained from Furber. On August 5th the board of managers met and elected K. V. R. Lansingh president, Charles W. Dempster auditor, and Wesley Dempster was elected treasurer and made general manager, and his compensation was fixed at $300 per month. This is the first time that Wesley Dempster assumed any official relation to the corporation. The board of managers held a number of meetings and transacted various...