Woorhees v. Mason

• Decision Date: 09 June 1910
• Citation: 245 Ill. 256,91 N.E. 1056
• Court: Illinois Supreme Court
• Parties: WOORHEES v. MASON et al.

245 Ill. 256

91 N.E. 1056

WOORHEES

v.MASON et al.

Supreme Court of Illinois.

April 21, 1910.

Rehearing Denied June 9, 1910.

Error to Appellate Court, Second District, on Appeal from Circuit Court, Will County; Frank L. Hooper, Judge.

Bill by Leslie P. Voorhees against Truman A. Mason and others. From a judgment from the Appellate Court reversing a decree for defendants, complainant brings error. Reversed and remanded.

Borman & McGrath, for plaintiff in error.

C. E. Antram and J. L. O'Donnell, for defendants in error.

HAND, J.

This was a bill in chancery filed by the plaintiff in error, Leslie P. Voorhees, against the defendants in error, the Joliet Tropical Plantation Company and six of the seven directors of said corporation, namely, T. A. Mason, J. O. Barrett, George B. Carey, J. F. Skeel, J. J. Allison, and C. E. Antram, in behalf of himself and all other stock and income certificate holders in said corporation, to require the said directors to pay to the corporation the full value of 180 shares of capital stock and 180 income certificates of the said corporation issued by said directors to themselves at 50 cents on the dollar, in payment of their services in the promotion of the corporate business of said corporation, and to require said directors to repay to said corporation the dividends which they had collected on one-half of said stock and income certificates issued to themselves, and to require said directors to account to and pay over to said corporation certain sums which it was averred said directors had unlawfully retained as commissions out of the moneys derived from the sale of certain shares of the capital stock and income certificates of said corporation sold by them. An answer and replication were filed, and the cause was tried upon the pleadings and evidence, and the bill was dismissed by the chancellor for want of equity. From that decree the complainant prosecuted an appeal to the Appellate Court for the Second district, where the decreewas reversed, and the cause was remanded to the circuit court, with directions to that court to state an account between the corporation and said directors, and to charge each director with the full value of the shares of stock and income certificates issued to him and with one-half of all the dividends received by him upon said shares of stock and income certificates so issued to him, and to decree that each director pay to the complainant such portion of the amount found due from the directors as the number of shares and income certificates owned by the complainant should bear to the total number of shares and income certificates issued by the corporation. The complainant has sued out a writ of error from this court to the Appellate Court to review the judgment of that court.

It appears from the pleadings and proofs: That the Joliet Tropical Plantation Company was incorporated in the state of Delaware on the 8th day of July, 1902, by Gardner W. Kimball, of Wilmington, county of Newcastle and state of Delaware, and the defendant directors, Mason, Barrett, Carey, Skeel, Allison, and Antram, and 17 other persons, all of whom resided at Joliet, Will county, state of Illinois. That said Kimball at the time of such organization appeared personally and the other incorporators appeared by proxy. That on the 14th day of July, 1902, the stockholders of said corporation held their first meeting at Wilmington, Newcastle county, Del., Gardner W. Kimball appearing personally and the other stockholders appearing by proxy, and at said meeting a board of directors, consisting of Mason, Barrett, Carey, Skeel, Allison, Antram, and Kimball, was elected. That the first meeting of the board of directors of said corporation was held on July 16, 1902, at Joliet, in Will county, and J. O. Barrett was elected president, J. J. Allison first vice president, George B. Carey second vice president, J. F. Skeel secretary, T. A. Mason treasurer, and C. E. Antram counsel. That the board of directors established an office in Joliet, and the record books and funds of said corporation have been kept at the Joliet office and the meetings of the board of directors of the corporation have been held at the Joliet office since that time. That while the charter powers of said corporation are very broad its business since its organization has been the purchase and improvement, as a plantation, of 3,200 acres of land in Old Mexico. That the capital stock of said corporation consists of $150,000, divided into 15,000 shares of $10 each. That the by-laws of said corporation provide for the sale of the shares of stock of the said corporation at $10 per share, and that there shall be issued income certificates which shall be sold for $290 each, to stockholders only-that is, each share of stock and one income certificate shall be sold for $300. That at the time the bill was filed, 1,264 shares of stock had been issued (three of which shares had been given to Gardner W. Kimball, the nonresident director), and 1,261 income certificates had been sold, That on July 16, 1902, the following resolution was passed by the board of directors: ‘Resolved, that in consideration of the large amount of labor and the weighty responsibility which devolve upon the first board of directors of this corporation, it is but just and proper that they should be allowed to purchase a limited number of income certificates at a special reduced price, such price to be net, without any commission or other allowance, except the $10 per share paid for shares of the capital stock should apply on the price of these income certificates, as in other cases. Resolved, that income certificates, not exceeding ten in each case, may be purchased by directors of the corporation at a net price of $150 each, including the $10 paid for the corresponding share of capital stock, provided such subscription is made not later than May 15, 1903. If taken on the installment plan the payments shall be $10 per share cash in sixty days, and the balance in monthly payments of [here follows the amount of the monthly payments, aggregating $140]. Resolved, that commissions on sales of income certificates be limited to ten per cent. of such sales. When sold on installments the commission shall be payable as follows: To secretary, ten cents monthly as the payments are made, for fifty months $5; to the general agent or director making sale, twenty-five cents out of each of first twelve payments, $3; fifty cents out of each of next forty-four payments, $22-total, $30.’ That on December 29, 1902, the board of directors passed the following resolution: ‘Resolved, that in view of the heavy responsibility assumed by this board in purchasing the additional 2,000 acres, guaranteeing the agreed payments and undertaking to manage the financing and development of the whole 3,200 acres, it is deemed just and proper, and it is hereby ordered, that each director be permitted to subscribe for 20 additional shares, in addition to the 10 already authorized, at net price of $150 each, payable in seventy-eight monthly payments, each one-half the amount in regular schedule. Secretary's commission to be one-half the amount as in other cases, and no commission allowed for selling.’ That each of the defendants in error under said resolutions subscribed for 30 shares of stock and 30 income certificates, which aggregate 180 shares of stock and 180 income certificates, for which they either paid or obligated themselves to pay 50 cents on the dollar. That in the years 1904, 1905, 1906, and 1907 the corporation paid a dividend on each fully paid share of stock and income certificate, including the 180 income certificates issued to the board of directors. That on February 13, 1903, the selling price of each share of stock, with an accompanying income certificate, was advanced to $350 and the commission to $35. That the secretary of the corporation was named as selling agent of the stock and income certificates and the Illinois directors acted as subagents, and there was paid as commissions to the secretary and the Illinois directors for the sale of stock and income certificates $24,700. That the corporation purchased first 1,200 acres and afterwards 2,000 acres of land in Old Mexico, for which it paid $32,000. That on November 10, 1902, the complainant purchased of the corporation, through J. J. Allison, one of its directors, 5 shares of stock and 5 income certificates, at which time it was represented to complainant by Allison that the officers and directors of the corporation received no compensation for their service. That in 1904 the complainant ascertained for the first time that $54,000 worth of stock and income certificates had been issued to the 6 resident directors at 50 cents on the dollar, and that $24,700 had been paid to the secretary and directors as commissions upon the sale of stock and income certificates. That upon receiving such information he protested against the sale of said stock and income certificates to the directors at 50 cents on the dollar and to the payment of said...