79 N.E.2d 54 | Ill. | 1948
The sole question presented by this appeal requiring consideration is whether a franchise is involved, within the contemplation of section 75 of the Civil Practice Act. Ill. Rev. Stat. 1947, chap. 110, par. 199.
From the pleadings and the evidence it appears that, prior to 1920, Anthony Marnik and Joseph Cyze were engaged, as equal partners, in the business of manufacturing, buying and selling meat products. In February, *68 1920, Marnik and Cyze organized the Northwestern Packing Co. with a capitalization of $70,000, represented by 700 shares of common stock having a par value of $100 per share. Marnik and Cyze each subscribed and paid for 175 shares. Thereafter, Marnik and Cyze and their immediate families each acquired an additional 175 shares so that, by August, 1941, Marnik and the members of his family owned and controlled 350 shares of the capital stock and Cyze and members of his immediate family also owned and controlled 350 shares. Anthony Marnik died on August 21, 1941, leaving as his only heirs-at-law, his wife, Sophie, and their children, Jean, Anton and Raymond. On the day named, Sophie Marnik, individually owned 250 shares, 99 shares were registered in the name of Anthony Marnik, and one share in the name of a nominee. Sophie Marnik also owned first mortgage bonds or notes issued by Northwestern Packing Co. having a par value of $25,000. In September, 1941, pursuant to an order of the probate court of Cook County, Sophie Marnik, as administratrix of her husband's estate, sold 99 shares to Cyze for $3000. At this time, Mrs. Marnik sold her own 250 shares to Cyze for $7000, and, in October, 1942, she sold the notes to him for $13,000.
On January 21, 1944, the plaintiffs, Sophie, Jean, Anton and Raymond Marnik, brought an action in the superior court of Cook County against the defendants, Northwestern Packing Co., Joseph Cyze, his wife, Verney, his brother, Adam, and Louis V. Zralek. By their complaint, plaintiffs alleged that, for fifteen years prior to Marnik's death, the two families were, in a commercial and business sense, on terms of intimacy, trust and confidence and that, in particular, a fiduciary relationship obtained between Sophie Marnik and Joseph Cyze; that, for several months prior to Marnik's death, Cyze and others, in violation of the trust and confidence of plaintiffs and, particularly, of plaintiff Sophie Marnik, by deceit and trickery, contrived and *69 conspired to procure for Cyze's benefit all the shares of Northwestern Packing Co. owned by Marnik at the time of his death and, also, the notes and shares owned by Sophie Marnik; that, from the date of its organization to August 21, 1941, the company's business prospered and flourished with but minor and insignificant interruptions and, on the day Marnik died and thereafter to the day the complaint was filed, the shares were worth a minimum of $200 each, and that the sales of the shares owned by plaintiffs were induced by false representations on the part of Cyze with respect to the financial condition of the corporation. Plaintiffs offered to return to Cyze the full purchase price, together with interest, received in payment of the notes and shares of stock sold to him. The relief sought was a decree rescinding the several sales of notes and shares of stock described and adjudging plaintiffs the equitable owners of the corporate shares. Joseph Cyze answered the complaint, denying its material allegations. His answer was adopted by Verney and Adam Cyze. Louis Zralek who filed a separate answer was later dismissed as a party defendant. The cause was referred to a master in chancery on April 21, 1944.
Thereafter, on July 5, 1944, plaintiffs were granted leave to amend their complaint. The gist of the paragraphs added to the complaint is that Cyze withdrew corporate funds in excess of $30,000 for his own private purposes; that these loans and withdrawals were ultra vires, fraudulent, without plaintiffs' consent and injurious to them as shareholders, and that, in excess of $19,000 of the $23,000 paid to plaintiffs for their shares of stock and notes of the company was unlawfully and fraudulently borrowed or otherwise acquired by Cyze from the corporation; that the loans to the extent of $23,000 are shown by the corporate records to be still outstanding and due from Cyze, and that these acts and omissions, among others described, on the part of Cyze, constitute waste of the corporate *70 funds, gross mismanagement and wilful and wanton fraud as against the corporation and the plaintiffs. The prayer of the original complaint was amended by adding, among other paragraphs, one asking the appointment of a liquidating receiver for the Northwestern Packing Co., conformably to the provisions of paragraphs 86 and 87 of section 157 of the Business Corporation Act. Ill. Rev. Stat. 1947, chap. 32, sec. 157.86, 87.
After an extended hearing, the master in chancery made his report finding that, on August 21, 1941, Anthony Marnik and his family owned and controlled 350 shares of stock of Northwestern Packing Co. and that Joseph Cyze and his family likewise owned and controlled 350 shares; that plaintiffs failed to prove by a preponderance of the evidence their allegations (1) that the business of the corporation prospered, (2) that, on the day Anthony Marnik died, the stock was worth a minimum of $200 a share, (3) that a fiduciary relationship, based upon intimacy between the families, existed, and (4) that Sophie Marnik sold the bonds relying upon any representation of Cyze. The master recommended that the complaint, as amended, be dismissed for the want of equity. Plaintiffs' objections to the report were overruled and allowed to stand as exceptions. The decree of the superior court overruled the exceptions and dismissed the complaint and amendment thereto for want of equity. This appeal followed.
The term "franchise," as employed in the statute authorizing direct appeals to this court, refers to a special privilege conferred upon an individual or corporation by the government, which does not apply to citizens generally by common right.(People ex rel. Groff v. Board of Education,
To authorize a direct appeal to the Supreme Court on the ground that the franchise of a corporation is involved, there must be a question as to the validity or existence of the corporation or franchise, and not merely a question as to what construction shall be placed upon the charter of the corporation. (Wennersten
v. Sanitary District,
The action in Chicago Steel Works v. Illinois Steel Co.
In Coquard v. National Linseed Oil Co.
In People ex rel. Palmer v. Peoria Life Ins. Co.
For another illustrative case where a franchise was directly involved so as to authorize a direct appeal to the court, see:St. Louis and Sandoval Coal and Mining Co. v. Edwards,
Upon review, the question of jurisdiction must be determined by the issues affected by the decree. (Ryan v. City of Chicago,
Plaintiffs place reliance, however, upon Bixler v. Summerfield,
In the present case, the amendment to the complaint, to the extent it seeks the appointment of a liquidating receiver, pursuant to sections 86 and 87 of the Business Corporation Act, is an afterthought representing an attempt to find a basis for a direct appeal to this court. The principal errors relied upon by plaintiffs for a reversal are that the chancellor should have held that the Northwestern Packing Co. was a partnership in corporate form; that Joseph Cyze was a fiduciary for each of the plaintiffs, growing out of their personal and business relationship; that Cyze bore a fiduciary relationship to Sophie Marnik growing out of the fact he was the surviving partner of her deceased husband; that the burden of proof rested upon Cyze to show the challenged transactions were fair and equitable, the price adequate, and that Sophie Marnik acted with full knowledge and understanding of these transactions; that plaintiffs were entitled to rescind the sale of the bonds and stock sold by Sophie Marnik, individually *76
and as administratrix, to Cyze, and that a rescission should have been decreed and the stock and bonds restored to plaintiffs upon equitable terms. Of the fourteen errors assigned, the foregoing represent the contentions actually made and argued. It is true that two of the errors assigned are that the trial court erred in not appointing a liquidating receiver for Northwestern Packing Co. and in not holding the evidence established a deadlock in the management of the corporate affairs, and gross mismanagement of the corporate assets by Cyze, and their conversion to his own and his family's use. In their principal brief of 133 pages, plaintiffs set forth the substance of paragraphs 86 and 87 of section 157 of the Business Corporation Act and refer to Bixler
v. Summerfield,
Here, plaintiffs do not argue, in their extended brief, that a dissolution of Northwestern Packing Co. should have been decreed. The master in chancery to whom the cause was referred made no finding with respect to this *77 question. The decree is silent in this regard and the issue, for all practical purposes, has been abandoned by plaintiffs upon this appeal, except for the limited purpose of urging the amendment to their complaint as a basis for a direct review. We must observe that, in their brief and upon oral argument at the bar of this court, plaintiffs repeatedly asserted that Northwestern Packing Co. is a partnership in corporate form. Both their briefs and their oral argument make abundantly clear that the relief desired and which, if granted, will be entirely acceptable to plaintiffs, is a rescission of the sales of their stock and bonds upon the return of the purchase price by them to Cyze. Indeed, if plaintiffs prevail upon appeal, a dissolution of the corporation could not be ordered, in the absence of a ruling upon this issue by the trial court, and a remandment of the cause would become necessary for determination of the propriety of an order of dissolution. On the other hand, if the decree be affirmed, it is manifest that a franchise is not involved.
We are of the opinion that a franchise is not involved so as to vest this court with jurisdiction of a direct appeal, and the cause is transferred to the Appellate Court for the First District.
Cause transferred.