230 Ill. 373 | Ill. | 1907
delivered the opinion of the court:
First—It is contended by appellants that in accepting certain property'in payment of MacICaye’s subscription to ■the capital stock of the Columbian Celebration Company to the amount of $1,999,600, the directors fixed that value up-1 on the property offered in the fair and honest exercise of their judgment as to its worth, and that the stock must therefore be regarded as fully paid and non-assessable, even •if the directors erred in their judgment as to its value.
When the board of directors met on May 16, 1892, the principal asset of the corporation was MacKaye’s subscription for stock to .the amount above mentioned. The law required the directors, in collecting that subscription, to obtain from MacKaye “money or money’s worth” to the full amount of the subscription. (Coleman v. Howe, 154 Ill. 458; Garden City Sand Co. v. Crematory Co. 205 id. 42.) “Money or money’s worth” means cash or its equivalent. If the directors saw fit to accept property in lieu of cash they could only take it at its fair cash market value,- if it was property which had an ascertainable market value. If it had no ascertainable market value, then the only price at which the directors could purchase it was such price as could be realized by selling it to others for cash. ■
On the date last .mentioned the directors of the corporation entered into a contract with MacKaye, by which, in satisfaction of his liability on his subscription, MacKaye transferred to the corporation the .sole and exclusive right to use eleven alleged new, useful and valuable improvements in scenic art; also the right to use and produce a “spectators” or play entitled “The Great Discovery,” of which it is said MacKaye ivas the author, in the-States of Illinois, Indiana, Michigan, Minnesota, Iowa and Missouri for a period of fifteen years, burdened with a ten per cent royalty reserved to MacKaye. At the time the' contract was made no application had been made for a patent on any of the inventions. The description of the inventions contained in the contract is very general in character. With one or two exceptions the descriptions are not such as would enable the reader to identify the invention. They consist usually of the name given by MacKaye to the invention, followed by a statement of the object of the invention. The play, “The Great Discovery,” had not been written. / At the time Mac-Kaye’s subscription was so satisfied the directors were Mac-Kaye, Butterworth, Crosley, White and Edmonds. Crosley did not attend the meeting of May 16, 1892, and MacKaye did not vote upon the proposition in reference to the payment of his subscription by the transfer of the rights above enumerated. Those who voted in favor of accepting the proposition were Butterworth, White and Edmonds. Butterworth was a co-promoter with MacKaye, and a few. days later, in accordance with an arrangement effected prior to May 16, 1892, received from MacKaye a considerable portion of the stock subscribed for by the latter. Edmonds was an assistant to Butterworth, as secretary of the World's Columbian Exposition. White was a clerk in the employ of MacKaye and Butterworth, doing clerical work in connection with the promotion of MacKaye’s scheme. So far as the transaction of business affecting the corporation was concerned, White and Edmonds were wholly dominated by MacKaye and Butterworth. Edmonds testified that he “never formed any intelligent conclusion as to the value of the patents/’ referring to the inventions the right to use which was transferred by the contract; and further: “I did not consider it [the MacKaye proposition which was accepted] in the sense that I was going to put a lot of money in it myself, but I honestly believed on May 16," 1892, that the resolution was for the best interests of the company and was a good proposition for it.” White says: “I don’t remember making any inquiry, as a member of the board of directors or an officer, into the merits of these inventions.”
It will no doubt be agreed that the rights transferred to the corporation by the contract were without" market value. It was then the duty of the directors, before accepting the rights transferred by this contract in payment of this large subscription, to ascertain whether those rights had value, and if so, what the value was. The natural and reasonable method to be pursued in determining that question would have been to have applied to men not interested in the promotion of MacKaye’s scheme, who were of wide experience in the production of great spectacular plays, for their views in reference to the worth of the rights which- MacKaye proposed to transfer. No such investigation was made. No other steps were taken to ascertain the value of the rights MacKaye proposed to transfer, such as would have been taken by directors seeking to deal honestly and fairly with the assets of the corporation. It was the duty of these directors to ascertain the value of these rights precisely as they would have done had they intended to invest money in such rights themselves, and that they did not do. It is no doubt true that if the directors, in the fair, honest and intelligent exercise of their judgment, make a mistake and accept property at a price greater than its real value, such can not be regarded as a fraudulent over-valuation of the property ; but that rule only applies where the transaction constitutes a valid contract of bargain and sale, made in good faith on the part of the directors and in the intelligent ex- ' ercise of fair and honest judgment on their part. There was no such transaction here. The transfer to the corporation was a mere sham. It was, in fact, a sale by MacKaye to MacKaye, and was, in law, a fraud. It was a transfer of the right to use for a period of years, in a limited territory, an unwritten play and inventions not perfected and not accurately described. The writing of the play and the perfecting of the inventions depended upon MacKaye moving in the matter in the future, and he is conceded to have been practically without property other than these inventions and this play. The play, in fact, never was written. Successful applications were made, after the execution of the contract, for patents upon all the inventions except one. As to that one the application was denied. The evidence leads irresistibly to the conclusion that had the directors on May 16, 1892, after the signing of this contract, sought to have disposed of the rights thereby transferred, they could not, in the world of the drama or elsewhere, have obtained for the rights transferred to the company by that contract anything of value whatever. It follows that MacKaye’s stock subscription remained wholly unpaid.
Second—The certificates for MacKaye’s stock recited that the shares were “fully paid and non-assessable,” and the law is, that where stock is so issued and the holder thereafter sells or assigns the same, and the assignee acquires it in good faith and without notice that it has not been fully paid, he cannot be made liable if, -in fact, the stock is not fully paid. (Coleman v. Howe, supra; Sprague v. National Bank of America, 172 Ill. 149.) Appellants insist that, even if this stock was wholly unpaid, they acquired it in good faith without notice of that fact, and are therefore not liable. “Notice,” in this connection, must be given the ordinary signification of that term, and means knowledge that the stock was unpaid, or knowledge of such facts as would have put an ordinarily prudent man upon inquiry, when the inquiry might reasonably be expected to have led him to knowledge that the stock was unpaid. (Russell v. Ranson, 76 Ill. 167.) Many of the appellants knew precisely how MacKaye had paid for his stock, and all of the appellants acquired their stock, as they knew, within a few months after the organization of this corporation. They obtained it without giving. any valuable consideration therefor, except in a few instances where it is claimed that a small percentage of the face value of the stock was paid therefor by services rendered or by other methods, not including cash actually paid at the time of the transfer of the stock. The fact that the corporation had just been organized, and that its stock was being transferred without, or practically without, any valuable consideration, was, we think, sufficient to put a reasonably prudent man-upon inquiry, and that inquiry would, in our judgment, have led to knowledge of the fact that the stock was wholly unpaid.
Third—Appellants who are bondholders express the view that, having entered into a contract by which they were to pay a certain sum of money to the corporation and receive in exchange therefor bonds equal in face value to the amount of money paid, and stock of the corporation, fully paid and non-assessable, to the same amount, the money paid should be held a payment for the stock and not for the bonds, and consequently they cannot now be held liable for the subscription price of the stock., - The proof shows conclusively as to the great majority of appellants who are bondholders and satisfactorily as to the other appellants who are bondholders, that each signed a subscription agreement which provided that the undersigned “hereby subscribe for the number of the first mortgage bonds of the Columbian Celebration Company, of $1000 each, set opposite our names, respectively, as hereunder written, subject, however, to the following conditionsFirst, no subscription should be binding until $500,000 had been subscribed; second, to each subscriber, on the payment of the amount subscribed by him, there should be delivered, by a trustee appointed for that purpose, “the number of bonds subscribed and paid for by him, and in addition thereto an amount, of the capital stock of the Columbian Celebration Company equal, at its par value, to the par value of the- bonds subscribed and fully paid for by such subscriber.”, If the par value of the bonds subscribed was fully paid by the subscriber, the money subscribed and paid could only be held to apply upon the purchase price of the'bonds. No portion of the money paid would remain to apply on the stock. The agreement plainly indicates that the money paid by the bondholders was payment for the bonds alone. All parties to the transaction, as appears from the evidence, looked upon the stock which accompanied the bonds of each subscriber as a bonus.
Fourth—It appears that a few of the appellants who are bondholders paid their subscriptions and accepted the bonds but failed or refused to take the stock to which they were entitled from the custody of the trustee, and that a few others paid their subscriptions and failed or refused to ,take actual possession of either bonds or stock, and it is claimed that these appellants did not become stockholders. Under the subscription agreement, when the necessary $500,000 was subscribed and payment was made by any subscriber he became the owner of the stock which was to accompany his bonds. Whether or not he obtained the certificate or left it with the trustee is a matter of entire indifference.' It was by virtue of the subscription contract that he became the owner of the stock. Whether he actually received the.certificate is immaterial. Van Alen v. Illinois Cent. Railroad Co. 7 Bosw. 515; Chester Glass Co. v. Dewey, 16 Mass. 94; Spear v. Crawford, 14 Wend. 20; Burr v. Wilcox, 22 N. Y. 551.
It has also been suggested on .behalf of those who did not take actual physical possession of the stock certificates, that if nothing' was paid for the stock it was optional with the subscribers to take the stock or leave it when they paid for the bonds. • A careful reading of the subscription agreement, which is set out in htzc verba in the foregoing statement, shows that the subscribers were under precisely the same obligation to receive the stock that they were to accept the bonds. If, as between themselves and the corporation, they had the right to decline to take certificates of stock for which they had paid nothing, they had no such right as to creditors. When they became the owners of the stock, though they acquired it without paying anything therefor, they incurred a contingent liability to creditors which was not to be avoided by refusing to receive the certificates.
Again, it is urged that the contract did not provide for the delivery of any particular stock but merely for the delivery of “fully paid and non-assessable stock,” and that if the stock delivered or tendered was not of that character the subscriber was under no obligation to accept it. Certificates for all the stock of the corporation had been issued when the subscriptions were taken for the bonds. None of the stock was fully paid and non-assessable. Nothing of value had been paid for it or any of it. The bond subscribers had notice of this fact or of such facts as put them upon inquiry. Under these circumstances the contract must be held to have reference to the stock of the company as it then existed, viz., wholly unpaid but represented by certificates stating that the stock was fully paid and non-assessable.
Fifth—The master found that certain of the creditors knew, at the time credit was extended to them, that the stock issued to MacKaye had been issued as fully paid and non-assessable in consideration of the transfer by MacKaye to the corporation of certain rights in his inventions and in his play entitled “The Great Discovery,” and appellants insist that those creditors are estopped to aver that the stock is not fully paid. In Sprague v. National Bank of America, supra, we said that the liability of the stockholder to the creditor for the unpaid portion of the subscription for stock is not “in anywise affected by the fact that the creditor knew or did not know, when he extended credit to the corporation, that the stock was in part unpaid.” We are entirely satisfied with that view, and it is decisive of this question.
Sixth—In allowing the claims of the bondholders the court permitted the recovery of interest only to the time of the filing of the bill, and those bondholders who have appealed insist, upon the authority of Barker v. International Bank, 80 Ill. 96, that interest should have been allowed to the time of the decree. That was a case of a bill to foreclose a deed of trust given to secure a promissory note, and the case merely announces the ordinary rule. The holder of the note is entitled to a decree for the amount of his note and interest at the rate fixed by the note to the date of the decree, and if the property does not satisfy the debt he is entitled to a decree in personam against the maker of the note. Where the assets of a corporation, including stock liability, are less than its indebtedness, and it passes into the control of a court of chancery .for the administration of its assets and for dissolution, the general rule is that interest is not allowed on the claims against the funds. The delay in distribution is the act of the law. It is a necessary incident to the settlement of the estate. The rights of all the creditors are fixed when the court takes jurisdiction of the property. (Williams v. American Bank, 4 Metc. 323; Thomas v. Minot, 10 Gray, 263; Thomas v. Western Car Co. 149 U. S. 94; People v. American Loan and Trust Co. 172 N. Y. 371.) It is therefore inequitable that interest should thereafter be allowed on the claims where certain of the' claims draw interest at one rate and others draw interest at a lower rate or do not draw interest at all. If interest under such circumstances was allowed at the rate fixed by the contract, and the litigation extended, as here, through many years, the mere lapse of time would enable those holding claims drawing a high rate of interest to materially lessen the proportion of the assets which would pass to those holding claims drawing a lower rate of interest or drawing no interest at all. This is not permitted.
Prior to the filing of the bill herein a bill had been filed by MacKaye against the corporation and others for the alleged purpose of protecting the rights of those interested in the corporate property, and a receiver had been appointed in that suit prior to the filing of the bill in this suit. Afterward that suit was consolidated with this and the receiver who had been appointed in that suit was appointed receiver in this. Under these circumstances we think it not inequitable that the date of the filing of the bill in this suit should be, as it was, fixed by the court as the date when the bonds should cease to draw interest as against the fund to be administered by the court. If this was a case where, after the administration of the fund, there was any party against whom the claimholders could take a personal judgment, as to such party, of course, the claim would draw interest according to the terms of the contract upon which it was based.
Seventh—-On July 31, 1905, after the principal decree had been enrolled, the court entered a supplemental decree, which appellants regard as void. That decree finds that certain of the defendants desired to make settlement of their liabilities as fixed by the decree theretofore entered, and the decree points out a method to be pursued by the receiver in adjusting the liability adjudged against those defendants and against any other defendant desiring to make payment. Appellants have not pointed out any way in which their rights are prejudiced by that supplemental decree, and we have been unable to perceive that they are in any manner harmed thereby.
Eighth—The court allowed a claim" against the estate of the corporation, in favor of the First National Bank of Chicago, in the sum of $1386.29. It is contended by appellants that nothing was due to the bank. • Whether the amount allowed was due depends, so far as this suit is concerned, entirely upon the question whether a finding of the master in reference to a matter of fact is correct. Neither of appellants seems to have excepted to that finding of fact, and there is therefore nothing upon which to base the assignment of error attacking this allowance.
Ninth—In the principal brief filed herein on behalf of the appellants, special argument is made as to the liability of each of the following appellants: The executor of the will of Egbert W. Gillett, deceased, Edward B. Butler, Homer P. Knapp and Edward L. Brewster.
Egbert W. Gillett departed this life, testate, after the master’s report was filed and before the decree was enrolled. His executor was substituted. Egbert W. Gillett, in his lifetime, rendered certain services and advanced certain monies to MacKaye and Butterworth, and in exchange received from MacKaye a due bill calling for 500 shares and from Butterworth a due bill calling for 400 shares of stock of the corporation. He assigned these due bills to his brother, Clarence R. Gillett, and testifies that he sold the stock to be issued thereon to his brother for twenty-five per cent of its par value and took his brother’s promissory notes for the purchase price. Clarence R. then presented the due bills, received the certificates of stock, assigned them in blank and deposited them with Egbert. W., ostensibly as security for the notes given for the shares of stock. The notes contained provisions authorizing Egbert W. to sell the stock at public or private sale, before or after the maturity of the notes, without notice to the maker. Egbert W. was held liable for that stock and also for 150 shares of stock, to which he seems to have been entitled as a bonus, accompanying stock of the Spectatoria Company, which he purchased from Mac-Kaye and Butterworth. He caused the certificate for this stock in the celebration company to issue to his brother-in-law, George M. Drake. The same course was pursued in this instance as in that of the transaction with Clarence R. Gillett. Drake gave Egbert W. his promissory note for twenty-five per cent of the par value of the stock, and after receiving the certificate assigned it in blank and deposited it with Egbert W., for the apparent purpose of securing the promissory note. That' note contained a power of sale similar to that found in the notes given by Clarence R.' Both Drake and Clarence R. were practically, insolvent. Drake never paid any cash on his note, although a credit of $50 appears thereon, which was the result of the settlement of an account between the maker and the payee of the note. The notes of Clarence R. also remain in large part unpaid, the credits appearing on those notes having resulted from the closing up of certain business transactions in which Clarence R. and Egbert W. are said to have been interested together.
We are satisfied from the evidence that Egbert W. Gillett was the owner of this stock. The certificates assigned in blank were in his possession. Drake and Clarence R. were without financial responsibility,. and were evidently mere dummies, to whom Egbert W. caused the certificates to issue. Under these circumstances the decree against him for the face value of this stock was a just and proper one. Cook on Corporations, 253; Houghton v. Hubbell, 91 Fed. Rep. 453; Dunn v. Howe, 107 id. 849; American Alkali Co. v. Kurtz, 134 id. 663; Ohio Valley Nat. Bank v. Hulitt, 204 U. S. 162.
The master also found Egbert W. was liable for 50 shares of stock accompanying the bonds for which he subscribed, making a total of 1100 shares of stock. Egbert W. also acquired 15 additional shares of stock and received for the same certificate No. 33. Thereafter he returned this certificate and directed the re-issue of a certificate for 10 shares-to Clarence R. and 5 shares to himself. Certificates issued accordingly, and both were thereafter transferred to Henry E. Weaver. The master did not find Egbert W. liable for these 15 shares of stock. The court, however, without any exception being taken to the report of the master in that regard, found Egbert W. liable for these 15 shares and entered a decree against him for a total of $111,500, being the par value of the 1115 shares..
Counsel criticises the chancellor very sharply for entering a decree holding the executor liable for the 15 shares once represented by certificate No. 33, basing his criticism principally upon the fact the master’s finding in reference to the liability of Egbert W. in this regard was not challenged by an exception. The master correctly found, as a matter of fact, that Egbert W. had been the owner of these 15 shares. His finding as to the total liability of Egbert W. was a mistaken legal conclusion. It is not necessary for the party dissatisfied with the legal construction which the master places upon facts correctly stated, to except to the report. “Exceptions relate to matters of fact, and the question whether the master has drawn an incorrect legal conclusion from the facts will be heard without exceptions.” (VonPlaten v. Winterbotham, 203 Ill. 198, and authorities cited at page 202.) The conclusion of the chancellor with reference to Egbert W.’s liability for these 15 shares was correct and was rightfully embodied in the decree, even in the absence of an exception to the report of the master. Counsel is plainly in error in stating that the bill contains no averments under which proof of the facts above stated as to Egbert W. could be made. It is also said that there is no prayer for the relief granted as to Egbert W. There was in the bill a prayer for general relief. No other prayer was necessary. Other objections interposed to the decree holding Egbert W. liable for the 1115 shares of stock are disposed of by what has already been said in this opinion.
Edward B. Butler was held liable for 50 shares of stock upon his bond subscription and for 450 shares of stock which he obtained from Butterworth that were turned over to him by Butterworth on account of money loaned and other favors extended by Butler to Butterworth. Homer P. Knapp was held liable for 45 shares of stock which had been transferred to him by Butler in payment of about $1006 which Butler owed Knapp upon the conclusion of a real estate transaction between them. Objections made to the decree in regard to Butler’s liability and that of Knapp are disposed of by what is said elsewhere in this opinion.
Edward L. Brewster was held liable by the master for 50 shares of stock. The court found that there was evidence that he had been the owner of an additional 100 shares of stock and rendered a decree against him for the par value of 150 shares, of stock. The finding of the court as to the additional 100 shares of stock charged against Brewster by the decree is based upon the following facts: The blank certificates of stock were printed in a so-called stock book, and each was attached to a stub upon which was printed a blank receipt. When the certificate was issued it was detached from the stub, and the person to whom it was issued ■and delivered signed a receipt therefor on the stub. Stock certificate No. 273 was issued to Steele MacKaye, and was. thereafter returned and again attached to its stub. At the time of the hearing before the master there appeared on the back of the certificate an assignment of the stock represented by the certificate, signed by Steele MacKaye. The blanks in-the printed form upon which the assignment is written are filled in with words written in black ink, the effect of which was to make an apparent assignment of the stock to Brewster. Through the name of Brewster, in the body of the assignment, however, is drawn a line in red ink, and the name “Steele MacKaye” is written in red ink directly after Brewster’s name, the effect of which, if the name of Brewster be regarded as erased, is to make the assignment apparently one from MacKaye to MacKaye. Across the face of the certificate is written: “Surrendered and canceled this 28th day of April, 1893, for re-issue.—Sidney C. White, Jr., Sec’y.” The receipt on the stub of that certificate is dated April 22, 1893, and signed “Steele MacKaye.” Below Mac-Kaye’s signature on the stub is written, in red ink, “Reissued in ctf. No. 282 to E. L. Brewster.” A line is then drawn through the name “E- L. Brewster,” and below it is. written, “S,- MacKaye in ctf, No, 288.-”■ Certificate No. 282 remains in the stock book and has never been detached from the stub. It was filled out and signed by the proper officers under date of April 28, 1893, and runs toMacKaye for 100 shares of stock. Across the face is written: “Canceled May 1, 1893; issued by mistake; re-issued to Steele MacKaye in certificate No. 288.—Sidney C. White, Jr., Sec’y.” No receipt for this certificate No. 282 appears on the stub. Certificate No. 288 is not in the stock book. The stub of that certificate shows that it was issued to Steele MacKaye, and under the words “from whom transferred” is written, “Steele MacKaye, ctf. No. 273.” Following that is a receipt for the certificate No. 288, dated May 2, 1893, and reciting that the certificate is for 100 shares. That receipt is signed, “Steele MacKaye, per S. C. White, Jr.” There is no evidence that Brewster ever had certificate No. 273, that he ever owned or had any claim to- the stock thereby represented, or that he ever had any knowledge that his name appeared in the assignment on the back of certificate No. 273 or on the stub thereof. White, the secretary, testified, but was asked nothing in reference to Brewster’s name appearing in that assignment or on that stub, and the presence of that name in those two places is wholly unexplained. When Brewster testified, counsel for complainants ' apparently did not seek to charge him with liability as to the stock once represented by certificate No. 273, and he was asked nothing in reference thereto by counsel for either party.
We have recited all the evidence considered by the chancellor in determining the question of Brewster’s liability for the additional 100 shares of stock now in question, and are of the opinion that it does not prove that Brewster ever owned the stock, and that the decree, in so far as it finds him liable for the value of the additional 100 shares, is erroneous.
Tenth—In addition to the principal brief and argument and brief in reply for appellants, separate briefs and argumerits have been filed for each of the appellants Edwin L. Lobdell, Milton W. Kirk, Edward C. Berriman, Lyman J. Gage and Robert Stuart, and two separate briefs and arguments have been filed for the executrix of the will of Henry E. Weaver, deceased. There have also been filed two additional reply briefs, one in behalf of Lyman J. Gage and one in behalf of Robert Stuart. These cases having all been consolidated there should have been but one brief and argument and one reply brief filed on behalf of all those complaining of the decree. We have, however, given to the additional briefs and arguments and the additional reply briefs the same consideration that they would have been entitled to had they been properly upon the files. The additional briefs and arguments, excepting those filed on behalf of Weaver’s executrix, present only questions that have already been disposed of in this opinion.
The decree of the circuit court found Weaver liable for the par value of 155 shares of stock. The first brief and argument filed on behalf of his executrix is devoted to the question of his liability for this stock. The only contention made by that brief and argument which requires particular attention is in reference to go shares of stock at one time held by Weaver, which the executrix avers he held merely as security for money loaned, and for that reason she conceives that he was not liable therefor. Certificate No. 13 for 4361 shares of stock was originally issued to MacKaye. He returned that certificate and in lieu thereof several other certificates were issued. One was for go shares of stock and was issued to Weaver. That certificate had been detached from the stub and did not appear in evidence. Weaver’s receipt for that certificate of stock, bearing his own signature, appears on the stub of the certificate under date of July 7, i8g2. The presumption from this, in the absence of any contrary showing, would be that Weaver was the owner of the stock. It is urged that his testimony shows that this was not true. He testifies that he hasn’t any idea where the go shares came from; that he don’t know what he did with the stock; doesn’t know whether he now has the certificate in his possession; that if he received it; he paid for it; that if he paid anyone for it he paid MacKaye; that he' paid MacKaye $2500- for Spectatoria stock; that he thinks Mac-Kaye “turned over some Celebration stock when I did that; don’t recollect that I paid anything to him for this stock; I paid MacKaye money for pay-rolls; whether that related to this or not I don’t know.” On cross-exámination he expressed the belief that he loaned MacKaye money on Spectatoria stock of the par value of $2500, and that at the same time he thinks he got the 90 shares of stock in the Columbian Celebration Company which' is in question, and that MacKaye agreed to pay him $2500 and take the stock back at some future time. This testimony, as a whole, is entirely too indefinite to overcome the presumption arising from the fact that the certificate was issued to him, and that he receipted for the same without indicating that he was other than the absolute owner of the stock represented by the certificate.
• After the decree against the stockholders had been entered, and on June 16, 1905, Weaver filed in the circuit court a‘ petition asking that the decree be vacated as to him and that he be permitted to file a cross-bill. Prom that petition it appears that in May;,' 1905, he received a letter from Leroy D. Thoman, an attorney at law who had appeared for him and for a great number of other alleged stockholders in the.circuit court, advising him that a decree was about to be entered in the case and stating that Thoman had represented him for twelve years in the litigation; that shortly afterward he was advised by another letter from Thoman that .the decree had been entered; that he then made an investigation and learned that he had been held liable for $15,-500 as a stockholder; that he had not theretofore known that Thoman had acted as his solicitor in the case; thqt he called upon Thoman, and learned from Thoman that the latter had been retained to act as solicitor for him by E. W. Gillett. The petition avers that Weaver never authorized Gillett to retain Thoman, never authorized Thoman to represent him, and never knew of Gillett’s action until advised by Thoman; that at the time he was served with summons he was insolvent and was unable to retain a lawyer to defend him; that he then believed that he had a good defense to the case made by the bill, but believed that owing to his insolvent condition a decree against him would not be collectible; that in April, 1893, he made a voluntary assignment, under the law of the State, for the benefit of his creditors; that in 1899 he filed a voluntary petition in bankruptcy in one of the district courts of the United States and in due course obtained a discharge in bankruptcy; that John H. Hamline, who at an earlier time had been for many years attorney for petitioner, told him, after the termination of the bankruptcy proceeding, that his discharge would be a complete protection to him as against the claims of the creditors in the case at bar; that Hamline, who represented a portion of the complainants in the bill, then stated that he would not ask for a decree against him, and that, relying upon the statement of Hamline, he (Weaver) paid no further attention to the case; that since the entry of the decree against him he has been advised that it will be necessary for him to file a cross-bill setting up his discharge in bankruptcy. The proposed cross-bill accompanied the petition, and avers that Thoman’s appearance for Weaver was without the knowledge or consent of the latter, and interposes the discharge in bankruptcy. To the petition appellees demurred. The demurrer was sustained and the petition dismissed. Weaver appealed to the Appellate Court for the First District. The decree dismissing the petition was af- . firmed, and his death háving occurred, his executrix appeals to this court.
The second special brief filed in this court on behalf of the executrix is devoted to the expression of her views with reference to the decree dismissing the petition and the judgment affirming that decree. The decree rendered against Weaver in the original suit was entered on May 20, 1905. The petition avers that he received Thoman’s letter in May, 1905, advising him that a decree was about to be entered. It does not appear from the petition at what time in May this letter was received. For aught that is shown it may have been nineteen days before May 20. The petition must be construed most strongly against the petitioner. It was his duty, if he desired to be heard in reference to the decree that was to be entered, to present his views or make his defense prior to the time the decree was signed, if he had an opportunity to do so. It does not appear from this petition but that his opportunity so to do was abundant. He could ■not rightfully rely upon the assurance of the attorney for a few of many creditors that no decree would be taken against him. The petition does not show the exercise of diligence on his part, and for that reason the demurrer thereto was •properly sustained, and the judgment of the Appellate Court affirming that decree was correct.
Eleventh—Appellees urge certain cross-errors. Their 'first contention is, that the appellants' who were bondholders should not be permitted to share in the fund arising from the stock liability, for the reason that they themselves participated in what appellees regard as a fraudulent scheme designed to prevent collection of the moneys due for stock.
The second cross-assignment affords basis for the contention made by appellees that interest at five percentum per annum should have been awarded against the stockholders on the amount of their stock liability from the date of the filing of the bill up to the time of the décree, and that as the decree against each stockholder is only for the par value of the stock held by him, it is erroneous. The supplemental decree above referred to, taken on July 1, 1905, after the filing of the decree against the stockholders, was entered pn the motion of the receiver, who is one of the appellees. From that decree none of the appellees appealed and none of them have sued out a writ of error to review it. On the contrary, they insist it should be affirmed. By that decree the receiver was authorized to make settlement with any of those against whom the decree of May 20, 1905, had passed, in satisfaction of their liabilities as fixed by that decree. As the amount adjudged against each stockholder by the decree of May 20, 1905, is to be accepted by the receiver as in full of his stock liability, those making, settlement under the supplemental decree could not thereafter be required to pay any sum in addition to the amount paid in making such settlement. The insistence of appellees that this supplemental decree should be affirmed might perhaps be regarded as an acceptance of the decree of May 20, 1905, and as an election to abide by the terms thereof. The cross-errors assigned apply as well to the rights of stockholders who made settlement by virtue of the supplemental decree as to those of stockholders who have brought the record of the circuit court here; but those stockholders who did not appeal or sue out a writ of error are not parties to the proceeding in this court, as the decree, as against the various stockholders, was, in effect, a separate decree as to each. The appeal of the stockholder from the decree and the assignment of cross-errors in this court upon that appeal do not bring before this, court stockholders not appealing or suing out a writ of error and to whom the particular portion of the decree appealed from does not apply. Appellees, as above indicated, have not questioned- the entry of the supplemental decree by the assignment of any error or cross-error in reference thereto. On the contrary, they insist that it was a proper exercise of the power of the circuit court. As we have stated, that decree permits defendants who appeal and defendants who do not appeal to settle their liability as fixed by the decree of May 20, 1905, upon the terms of that decree. Inasmuch as appellees are content with the supplemental decree we are of the opinion that their cross-errors should not be considered. If the cross-errors are well assigned, the original decree certainly should not be reversed unless the supplemental decree be also reversed, and as appellees do not attack the supplemental decree it cannot be reversed merely for the purpose of opening a way for the entry of a judgment here reversing the original decree upon their assignments of cross-error.
The judgment of the Appellate Court in this case, and in all the cases consolidated herewith, will be affirmed, excepting only the case of Edward L. Brewster, appellant, against the Chicago Title and Trust Company, receiver, and others. In the Brezvster case-, so excepted, the judgment of the Appellate Court will be reversed and the decree of the circuit court will be reversed in so far as it requires Brewster to pay the sum of $15,000 on account of stock liability, and a judgment here will be entered against Brewster, and in favor of the receiver, for the sum of $5000, with interest thereon at five percentum per annum from June 20, 1905, which shall be in full of Brewster’s stock liability, and which, when collected, shall be distributed by the receiver in accordance with the directions of the circuit court. The costs of this court occasioned by Brewster’s appeal will be divided, one-half to be paid by Brewster and the other half by the appellees. In each of the cases other than that of Brewster the ordinary judgment for costs will be entered against the appellant.
Appellees move that the cost of a supplemental abstract filed by them be taxed. The supplemental abstract was unnecessary. The motion will be denied.
Izidgment affirmed in each case excepting that of Brezvster. In Brezvster’s case judgment of the Appellate Court and decree of the circuit court reversed and judgment here.
