Tobey v. Robinson

• Decision Date: 14 May 1881
• Citation: 99 Ill. 222,1881 WL 10540
• Parties: ORVILLE H. TOBEYv.CHARLES ROBINSON.
• Court: Illinois Supreme Court

99 Ill. 222

1881 WL 10540 (Ill.)

ORVILLE H. TOBEY

v.CHARLES ROBINSON.

Supreme Court of Illinois.

Filed at Ottawa May 14, 1881.

APPEAL from the Appellate Court for the First District;--heard in that court on appeal from the Circuit Court of Cook county; the Hon. ERASTUS S. WILLIAMS, Judge, presiding.

Mr. EMERY A. STORRS, for the appellant:

To show that the defendant, by his acts, was estopped from denying the legality of the contracts entered into between the railway company and the stock yard association, and that he will not be allowed to claim any advantage to himself, derived from the illegality of transactions, the validity of which he has repeatedly asserted, and the full benefits of which he has reaped, counsel cited Herman on Estoppels, 461, 462, 469, 466; Stephenson v. Newnham, 13 Com. Bench, 302; Bailey v. Bailey, 44 Pa. 274; Ullery v. Clark, 18 Id. 148; Everhart v. Westchester and Philadelphia Railroad Co.28 Pa. St. 339; Erie and Waterford Plank Road Co. v. Brown, 23 Id. 156; Martin v. Ives, 17 S. & R. 364; Deford v. Mercer, 24 Iowa, 118; Phillips v. Rogers, 12 Metc. 405; State v. Van Horn, 7 Ohio St. 327; Cobb v. Dows, 10 N. Y. 335; Sherman v. McKeon, 38 Id. 266; Wood v. Seeley, 32 Id. 105; Bissell v. Michigan Southern Railroad, 22 Id. 258; Smith v. Sheely, 12 Wall. 358; Turner v. Flannigan, 1 Black, 491; Furguson v. Landram, 1 Bush, 548; West v. Madison County Agricultural Board, 82 Ill. 205; People v. Sterling Manufacturing Co. 82 Id. 461; McCarthy v. Lavasche, 89 Id. 270; Hartshorn v. Patroff, Id. 509; Chicago Packing, etc. Co. 87 Id. 547; International Bank v. Bowen, 80 Id. 541.

Robinson can not now, when called upon to account for the property, the possession of which he has dishonestly and fraudulently procured, be permitted to set up a title hostile or adverse to that which he recognized when he received the stock.

A trustee can not set up a claim to the trust property adverse to the cestui que trust, nor can he deny the title. 1 Perry on Trusts, 521; Van Huster v. Spengemann, 2 Greenlf. Ch. 187; Stone v. Godfrey, 5 DeGex, M. & G. 85; Neusom v. Flowers, 30 Beav. 469; Attorney General v. Monroe, 2 DeGex & Sen. 163; Kennedy v. Daly, 1 Sch. and Lef. 381; Sinclair v. Murphy, 14 Mich. 292; Osgood v. Nichols, 5 Gray, 420; Dervey v. Bell, 5 Allen, 168; Walden v. Karr, 88 Ill. 51; Prather v. Vineyard, 4 Gilm. 40; Eddy v. Roberts, 17 Ill. 506; Brown v. Straight, 19 Id. 89; Bristow v. Lane, 21 Id. 194; Russell v. Payton, 4 Bradw. 478; Bigelow on Estoppels, 387. Messrs. DEXTER, HERRICK & ALLEN, for the appellee:

The original issue and distribution of the stock, the subsequent surrender and redistribution, in pursuance of which the certificate claimed by the complainant was delivered to the defendant, and the entire transaction, of which these acts form a part, were tainted with illegality and fraud, and the court will not lend its aid to either party to consummate the transaction, or otherwise compel a division of the alleged profits. Non oritur actio ex turpi causa. Neustadt v. Hall, 58 Ill. 172; Arter v. Byington, 44 Id. 468; Miller v. Davidson, 5 Gilm. 524; Skeels v. Phillips, 54 Ill. 309; Craft v. McConoughy, 79 Id. 346; Dunaway v. Robertson, 95 Id. 420; Dunning v. Battherick, 41 Id. 425; Bester v. Watham, 60 Id. 138; Harris v. Hatfield, 71 Id. 300; Blackburn v. Bell, 91 Id. 434; Tamm v. LaValle, 92 Id. 263; Tenney v. Foote, 95 Id. 99; Holdman v. Johnson, Cowp. 343; Coppell v. Hall, 7 Wall. 558; Gregg v. Wyman, 4 Cush. 326; Tenney v. Foote, 4 Bradw. 601; Booth v. Hodgson, 6 T. R. 409; Simpson v. Bloss, 7 Taunt. 246; Gray v. Hook, 4 Conn. 449; Phalen v. Clark, 19 Id. 432.

The principle that the capital stock of a corporation must be paid for in money, or tangible property which shall represent that capital to the stockholders and creditors, and the public, is too well established to require an extended citation of authorities. We cite the following: Sturges v. Stetson, 1 Biss. 246; Henry v. Vermilion and Ashland Railroad Co. 17 Ohio, 187; Fisher v. Railway Co. 53 Barb. 513; Gilman, Clinton and Springfield Railroad Co. v. Kelly, 77 Ill. 426; Brice's Ultra Vires, 153; Field on Corp. sec. 126.

The capital stock of a corporation is trust property in the hands of the directors. Gilman, Clinton and Springfield Railroad Co. v. Kelly, 77 Ill. 426; Ex parte Daniels, 1 DeGex & Jones, 372.

The payment for stock by the use of the recipient's influence in favor of the corporation, is no payment, and stock issued for such a pretended consideration is wholly void. Sturges v. Stetson, 1 Biss. 246; Fisher v. Railway Co. 53 Barb. 513.

Mr. HENRY L. BURNETT, also for the appellee, made an oral argument, in which he made the following, among other legal points:

Any effort to distribute stock without payment of its full par value is fraudulent. DeRuvigue Case, Law Rep. 5 Ch. Div. 306; Ex parte Daniels, 1 DeGex & Jones, 372; Brice's Ultra Vires, 153; Fisher v. Railway Co. 53 Barb. 513; Gilman, Clinton and Springfield Railroad Co. v. Kelly, 77 Ill. 426; Knowlton v. Empire Spring Co. 57 N. Y. 518.

If a contract is in part only connected with an illegal transaction, but grows immediately out of it, though in fact it be a new contract, it is equally tainted by the illegality of the transaction from which it sprung. Gray v. Hook, 4 Conn. 449; Gregg v. Wyman et al. 58 Mass. 322, and other authorities cited in preceding brief.

Mr. JUSTICE MULKEY delivered the opinion of the Court:

By an act of the legislature of the State of New Jersey, David Allerton and six others were, on the 19th of March, 1869, duly incorporated by the name of the National Stock Yard Company. There was a meeting of the corporators on the 30th of the same month, at which Allerton was elected president. At a subsequent meeting, on the 3d of the following month, by-laws were adopted, a seal agreed upon, and a vice-president elected. By the act of incorporation, the capital stock was fixed at $1,000,000, to be divided into 10,000 shares, of $100 each, and the principal business of the company was to be “the maintenance of yards and buildings for the keeping and accommodation of live stock, and generally taking care of, buying, selling and slaughtering animals.”

The object of this organization was to establish and operate stock yards in connection with the Erie Railway Company, and the evidence tends to show that it was intended by the promoters of the scheme, or at least a part of them, that the stock yard company, when formed and put in operation, should be a mere agency of the Erie Railway Company, to be used in the interest of the principal officers of the latter company, and such others as they might, from considerations of policy, deem proper to associate with them. The Erie Railway Company, at this time, was under the management of Jay Gould and James Fisk, Jr., the former being president and the latter vice-president of the company, and they at the same time had a controlling voice in directing the affairs of the stock yard company.

By reason of a misunderstanding having arisen between them and Allerton, with respect to the management of the latter company, through their influence and instrumentality a complete re-organization of the company was effected in the months of January and February, 1870, by which Allerton, and those acting in concert with him, were deposed, and others, who were in full accord with Gould and Fisk, placed in their stead.

Under the new organization, Oliver H. Tobey, John B. Sherman and Charles Robinson became directors of the company. Robinson was also elected president of the company, and a member of the executive committee that had the immediate management of the company's concerns.

In pursuance of the original arrangement, the necessary stock yards had already been purchased and improved by the Erie company at the terminus of its railway, at Weehawkin, New Jersey. This had all been done at the exclusive expense of the Erie company, and the title to the stock yards had been taken in the name of Gould, as trustee, for the purpose of conveying the same to the stock yard company upon the final consummation of the understanding between the two companies, and a deed to that effect had already been executed preparatory to delivery, though no delivery was ever made until after the new organization was perfected. Leaving out of view the utter disregard of legal duty and moral obligation on the part of the projectors of the organization, they displayed the highest order of discernment and business skill in collecting together suitable material for the formation of the company, with a view of doing a thriving business. The plan of organization and operation, under the new management, was thoroughly digested and definitely understood.

The prominent feature in the scheme was to make the operations of the company highly remunerative to the few who were to be given an interest in it. To this end a combination was entered into in advance of the organization, by the officers of the Erie company on the one hand, and John B. Sherman, Charles Robinson, Milton Tabor and Oliver H. Tobey on the other, by which the latter were, upon certain terms, which were subsequently carried into effect, to identify themselves with the organization, or contribute their influence to the promotion of its objects and purposes. Sherman, at that time, was president of the Union Stock Yard Company of Chicago, a position wholly incompatible with the relations which he assumed to the National Stock Yard Company. Tabor was a resident of Chicago, and had been an extensive shipper of stock, and had a large and influential acquaintance with other shippers. Tobey was at that time, and had been for a number of years, an extensive shipper of live stock over the Erie railway. Robinson also had great experience in the shipment of stock, and was extensively and favorably known among stock shippers, and was also on the most intimate relations with Sherman,...