Case Name: Laura Hills, Administratrix, v. S. W. McMunn et al.
Court: Illinois Appellate Court
Jurisdiction: Illinois
Decision Date: 1907-07-09
Citations: 135 Ill. App. 338
Docket Number: Gen. No. 13,139
Parties: Laura Hills, Administratrix, v. S. W. McMunn et al.
Judges: 
Reporter: Illinois Appellate Court Reports
Volume: 135
Pages: 338–363

Head Matter:
Laura Hills, Administratrix, v. S. W. McMunn et al.
Gen. No. 13,139.
1. Bill in equity—interest essential to maintain. In order to maintain a bill in equity it must appear that the complainant has an actual existing interest in the subject-matter of the litigation.
2. Specific performance—who cannot enforce. A party cannot enforce the transfer of stock which he never owned or purchased and in regard to which he never made a contract. A privity of interest is essential to the maintenance of a proceeding for specific performance.
Freeman, P. J„ dissenting.
Bill in equity. Appeal from the Circuit Court of Cook county; the Hon. Oscar E. Heard, Judge presiding.
Heard in the Branch Appellate Court at the October term, 1906.
Affirmed.
Opinion filed July 9, 1907.
Statement by the Court. This is an appeal from a decree of the Circuit Court dismissing appellant’s amended bill for want of equity, upon the close of complainant’s evidence.
The substantial facts shown by the evidence in the record are as follows:
Albert H. Weber, one of the defendants to the bill, had organized a corporation under the laws of Arizona called “The Slick Steel Piling Company” with a capi tal of 5,000 shares of $100 each, for the purpose, it is said, of taking over United 'States Letters Patent No. 639,884, issued December 26, 1899, to Samuel K. Behrend, for an invention in the use of steel piling and making and selling steel piling thereunder. The corporation was simply a paper corporation, and had no money or property, and had never received anything for the 600 shares of stock which had been issued to Weber. Certificates for the other shares of stock had never been issued. Weber had represented to the directors of the company that he had acquired Patent No. 639,884 for steel sheet piling, and proposed to transfer to the company a three-quarters interest, subject to an indebtedness of $7,500 due June 15, 1904, for 4,995 shares of the capital stock of the company. Weber had an option contract for the three-quarters interest in the patent with Behrend for $6,000. The board of directors accepted this proposition and.appear to have issued to him 600 shares of stock. The patent or any interest therein was never conveyed to the company.
Shortly thereafter in May, 1904, Weber entered into an agreement with Fred Hills, the complainant, whereby it was agreed that the complainant should use his best efforts to make a sale of 3,000 of the shares of stock of the Slick Steel Piling Company, and that in case he effected a sale, all the proceeds of the stock over and above what was necessary to secure the conveyance of the above patent to the Slick Steel Piling Company, and over and above what might be required by the terms of the sale to be placed in the company’s treasury for working capital, should be divided equally between complainant and Weber, and that the remaining 2,000 shares of the stock of the company should be divided equally between them. This agreement was modified on August 17, 1904, as we shall state later.
In the latter part of July and in the early part of August, 1904, Hills had several interviews with the defendant S. W. McMunn, appellee, for the purpose of inducing him to purchase some of this stock, and on August 9, 1904, Hills submitted to McMunn the following proposition:
“Auditorium Hotel, Chicago, Illinois.
August 9, 1904.
S. W. McMunn, Esq.,
Chicago, Ill.
Dear Sir : The Slick Steel Piling Company is a corporation organized under the laws of Arizona, with 5000 shares of $100.00 each, par value, and is the owner of U. S. patent No. 639884,.under date of Dec. 26th, 1899, for steel piling, being the prior patent for this kind of product.
I will deliver you 3000 shares of this stock for $25,000 of which amount $15,000 is to be cash paid to •me; the remaining $10,000 is to be placed in the Treasury of the Slick Steel Piling Company for operating expenses.
I make you this offer and will hold same open for ten days, when you will please report to me the progress you have made in Pittsburg, Pa.
Faithfully yours,
A. H. Weber.”
Upon receiving the proposition Mr. McMunn caused an investigation to be made of the affairs of the Slick Steel Piling Company. This investigation disclosed that the representation as to the ownership of the patent, made in the proposition, was not true; that it was not the owner of the patent and that it had nothing in the way of property or money, and that it had never received anything for the shares issued to Weber.
On August 20, 1904, Weber and Hills went to Mc-Munn’s office and McMunn accepted Weber’s proposition, dating his acceptance August 18th, in order to bring it within the period named in the proposition. The acceptance was in writing, as follows:
“Chicago, August 18, 1904.
" The above proposition is accepted by me. The payment of the sums above mentioned are to be made by me only when satisfactory evidence is presented to me that the Slick Steel Piling Company is a lawful corporation of the Territory of Arizona and duly and legally organized and when a good title to letters patent No. 639884, free and clear of all liens and incumbrances, is conveyed to said Slick Steel Piling Co., all of which must be done within 30 days from Aug. 18th, 1904, or this agreement shall be at an end and void, all of which is agreed to by A. H. Weber.
S. W. McMinsm.
404 Lakeside
Harrison 4348. Fred Hills.
A. K Weber.”
On the same day after signing the above McMunn loaned Weber $300 and took his note for it, upon Weber’s statement that his wife was sick in California, and that it was necessary for him to go there.
Before leaving for California, Weber gave Hills two powers of attorney, both dated August 19, 1904. One of these authorized Hills “to ask, demand, sue for, collect, receive and give acquittance for all sums of money, debts and demands, whatsoever, which are or shall be due, owing or belonging to me, or be detained from me, or which I shall be entitled by reason of the sale and delivery of three thousand shares of the capital stock of the Slick Steel Piling Company to ............................. To sign, execute and deliver as my said attorney any and all instruments in writing that may be necessary or are required to make such sale and delivery, and to assign any and all certificates of stock of the Slick Steel Piling Company now issued to me, or that may be hereafter issued to me by said company in order to fully consummate said sale.”
The powers conferred upon Hills by the other power of attorney were “to take the general control and management of my affairs and business in connection with the Samuel K. Behrend patent steel piling, said patent being covered by letters patent and are numbered 639,884 and bear date the 26th day of December, A. D. 1899; and to take the general control and management of my affairs and business in connection with the Slick Steel Piling Company with full power to sign all contracts, instruments in writing of every kind, nature and description whatsoever, together with full power to receive and sign for, or deliver any and all certificates of stock, and do any and all things to fully consummate the delivery of said patent to the said Slick Steel Piling Company, and to fully consummate any and all things herein mentioned.”
Hills first learned from Weber on the afternoon of August 20th the ownership of the various interests of the Behrend patent. On the following Monday, August 22, 1904, Hills told McMunn that Weber had informed him on Saturday preceding how the various interests in the patent stood, and that it was very different from what he had expected; and that Samuel K. Behrend of Denver owned a three-fourths interest, which could be had for $6,000; that Geo. M. Eckels of Chicago, Mr. Behrend’s attorney, held in escrow an assignment of his interest to the Slick Steel Piling Company; that a Mr. Cochran of Chicago owned a one-eighth interest which could be obtained for $1,500, and that Mr. Campbell of Pittsburg owned a one-eighth interest which could be purchased for $1,000. Hills also told McMunn that he had written a letter to Behrend with Weber’s approval offering Behrend $6,000 for his interest, on condition that Behrend make the assignment to Hills or Weber; and that he also wrote Campbell offering to buy his interest. He also told McMunn that neither he nor Weber had any money, and that they could not obtain the money to purchase the interests in the patent; and that if McMunn wanted them he must pay the money for them himself. Thereupon McMunn told Hills to go ahead and obtain those interests, and that he would take care of them. Between that date and August 31, 1904, Hills by-correspondence and telegrams arranged with Behrend and Campbell to come to Chicago and have interviews with Mr. McMunn; and also arranged an interview between Cochran and McMunn, all for the purpose of purchasing their respective interests in the patent. These interviews resulted in the purchase by McMunn of the various interests at the prices above named. When Behrend’s interest was purchased, Mr. Eckels, the attorney of Behrend, under instructions which he stated he had from Weber, to whom Behrend had given an option, refused to advise Behrend to make the assignment of his interest to anyone but Weber or Hills. McMunn was therefore obliged to take the assignment of Behrend’s interest in Hills’ name. In order to concentrate all the interests in one person, McMunn had the assignments from Campbell and Cochran also made to Hills; and on or about September 1, 1904, Hills at McMunn’s request conveyed all the interests to James M. McConahey. At that time Hills did not know McConahey and he delivered the assignment to Mr. Bern, who was McMunn’s private secretary. Hills had no conversation with and did not even meet McConahey at the time he made the assignment to him; and. did not notify him of the assignment of the patent to him.
On September 5,1904, complainant Hills entered into the employ of McMunn on an annual salary of $3,500, and remained in his employ for several months and until he resigned for the purpose of bringing this suit.
Between August 24, 1904, and September 28th following, Hills wrote Weber several letters relating to the business he had in hand. These letters were at the time called to the attention of McMunn, who knew their contents, and what the agreement was between Hills and Weber. In his letter to Weber dated September 3, 1904, Hills says: “I have worked hard and faithfully to accomplish the McMunn trade, and I appreciate Ms goodness very much in standing by the matter as long as he has. * * * You undoubtedly know the state you left the deal in, the many complications surrounding it and possibly you realize, as I do, that it could not and cannot be carried out under your proposition of August 9th. Matters are not in shape even now so that I can write you fully, and in sending you this to-day it is simply to assure you that everything possible is being done to consummate matters.”
In Ms letter to Weber of September 28, 1904, Hills writes: “I may as well be frank with you and tell you the status of the Slick Steel Piling Company was rotten. It had issued stock when it had no property to issue stock on. In fact it was issued simply on account of your holding an option on three-quarters interest of the Behrend patent at that time. As a business man and as Mr. McMunn has connected with him some of the strongest men in the country, it was essential that he proceed on purely business lines.” The letter then proceeds to explain the decision of McMunn to organize a new company, and refers to his acceptance of the proposition of August 9th, and approves of the organization of the new company.
At tMs time McMunn had organized the United States Steel Piling Company, the final certificate of which was issued and received September 17,1904. At the request of McMunn, McConahey conveyed all his interest in the patent, which he held as trustee for McMunn, to the United States Steel Piling Company and paid the company $10,000, for which he received a certificate of the entire capital stock of the company, which he held as trustee for McMunn. The money so paid was furnished McConahey by McMunn.
On September 10, 1904, Hills became ill, went to Mercy Hospital, Chicago, and remained there until September 23, 1904. While in the hospital he learned from a newspaper of the organization of the United States Steel Piling Company. When he got out of the hospital, in conversation with McMunn he spoke of the new company, and McMunn said they would soon get things in shape for their first meeting, and nothing of importance was said between them.
As above stated the arrangement between complainant Hills and Weber was changed after the proposition was made to McMunn. On August 17,1904, Weber made the following proposition to Hills in writing:
‘ ‘ Chicago, Aug. 17, 1904.
Mb. Feed Hills,
Chicago, Ills.
After the $15,000 (Fifteen thousand dollars) is paid to me (deducting $500.00 (Five hundred dollars) as commission to be paid to you) for (3000) Three thousand shares of the Slick Steel Piling Co. you and I shall and will divide equally, on the remaining shares, after all expenses is paid, and our obligations satisfied. This contract being based on us being man and man. If either of us fails to fill this moral obligation, the court shall decide which is man.
This contract to remain in force as far as consummation of above deal, for and until Aug. 23d, 1904, providing one thousand dollars ($1000.00) shall be paid to me, to apply on expense^ or purchase account, payable Saturday, 20th inst.
Truly yours,
A. H. Weber.
I agree to above.
Feed Hills. ”
This seems to have been the last contract between them. Hills never paid the $1,000 mentioned in the above contract.
October 25, 1904, Hills wrote McMunn demanding for Hills and Weber $15,000 less the cost of purchasing the patent and of incorporating the United States Steel Piling Company, and less the money advanced to Hills and Weber; also demanding 2,000 shares of stock of the company. McMunn replied to the letter denying any liability. About a month later similar letters passed between the parties, and subsequently this bill was filed.
Weber has not appealed from the decree;
Isham, Lincoln & Beale, for appellant.
M. J. Scbaffobd, for appellees.

Opinion:
Mb. Justice Smith
delivered the opinion of the court.
No question is presented by the record or in arguments of counsel as to the pleadings, or that the evidence offered by complainant is admissible under the amended bill of complaint. We do not find it necessary therefore to make any statement of the pleadings.
The case turns entirely upon the sufficiency of appellant's evidence to make a case for the relief asked by the amended bill.
The terms of the original contract between Weber and MeMunn are admitted by the pleadings. . Appellant necessarily contends, and it is the theory of the bill, that this contract was by agreement between Hills and MeMunn modified by the substitution of the stock of the new corporation, United States Steel Piling Company, for the stock of the Slick Company named in the contract, and in all other respects as though the former company had been named in the contract in place of the Slick Company.
In the opinion of the court the evidence fails to sustain this theory or contention.
The evidence of this modification relied upon by appellant consists of Hills' testimony as to various conversations between himself and MeMunn, all of which, with possibly one exception, took place after the contract was made. One of these conversations occurred August 17 or 18, 1904, in which MeMunn is represented as saying in substance that the Pitts-burg people who were interested with him did not like Arizona corporations and the word "Slick" was ob jectionable, and expressed a preference for an Illinois corporation. Thereupon Hills said to McMunn: "All right. If this thing is to go through, as it is, and you prefer an Illinois corporation, we will pay our pro rata of the incorporation charges of making a corporation under the laws of the State of Illinois out of the money that is coming."
The following week a second conversation occurred upon this subject, according to Hills'testimony, and he (Hills) said that United States Steel Piling Company would be a satisfactory name to him.
Hills says that during the week following the making of the contract he told McMunn that neither he nor Weber had any money, and that they could not obtain the money with which to purchase the interests in the patent, and if McMunn wanted them he must pay the money for them himself, and that McMunn told him to go ahead and acquire the interests and "we will take care of the thing as soon as we get meetings and get settlement and get a new corporation."
The fourth conversation is said to have occurred about September 1, 1904, when the assignments were lying in McMunn's safe. Hills testifies that he said to McMunn: "What are you going to do with these assignments?" McMunn replied: "You have no objection to putting them in trust?" To this Hills says he replied: "No, Mr. McMunn, with a good man, no, on condition that they shall be delivered either to the Slick Steel Piling Company or the new corporation that we may choose to name under the laws of Illinois." McMunn-said: "Well, I will fix that."
In connection with these conversations it is urged that in support of the proposition that the agreement was modified, that the letters written in McMunn's office by Hills to Weber which were brought to the attention of McMunn and were criticised and changed by him, should be considered as confirmatory proof of the modification of the agreement.
Upon a careful review and consideration of the tes timony and proof on this point we find no agreement to modify the contract. The conversations prior to arid on August 22, 1904, in regard to securing the various interests in the patent, and the inability of Hills and Weber to procure the money with which to purchase those interests, do not indicate a purpose or intention to change the agreement which Hills stated to McMunn that neither Weber nor himself could carry out. McMunn's statement that he would furnish the money does not show such a purpose. There is in these conversations no expression from which we can find any such agreement. There is no promise on McMunn's part to furnish the $15,000 and deliver to Hills or Weber 2,000 shares of stock in the United States Steel Piling Company, or the new company which was to be formed. Hills ' testimony proves that McMunn paid to the holders of the various interests in the patent $8,500 and took assignments to Hills of these interests in trust for himself or the company which was to be formed and not in trust for Weber or the Slick Company or Hills, and that Hills understood this perfectly, for he without delay or objection transfers, at McMunn's direction, all interests which he had received to McConahey, a stranger to him, delivering the assignment to Bern, McMunn's representative.
The allegation of the amended bill, therefore, that McMunn advanced Hills that sum to apply on the $15,000 which was to be paid by McMunn to Weber under the contract between them, and that Hills immediately distributed the. $8,500 among the owners of the patent, and that this was done under the modified or changed agreement, is not proved, and is not true.
The conversation which took place about September 1, 1904, does not, in our opinion, prove that McMunn agreed or expressed any intention to modify the agreement, as claimed. Hills testifies that in that conversation he consented to transferring the interests in the patent which then stood in his name to McConahey, as trustee for the Slick Company or the new corporation, but he does not testify that any particular modification of the original agreement between Weber and McMunn was mentioned or agreed upon. He does not swear that McMunn agreed to anything in that conversation. The substance of that interview is that McMunn wanted the assignment made to McConahey, and Hills made it without objection. Hills' testimony to the construction which he placed on the assignment to McConahey, which the assignment itself does not warrant, is not proof of a fact or of an agreement.
The interview after Hills came out of the hospital does not, in our opinion, tend to prove a modification.
It is clear that McMunn and Hills never in the most informal way talked over a modification of the original agreement. It is therefore impossible for us from the testimony to find what the alleged modification was, or what the contract as modified provided, without making a new contract for the parties. This a court will not do. By its terms the contract expired on September 18, 1904, and it was never renewed or extended. Weber had failed to comply with its conditions on his part, and Hills never paid the $1,000 as provided in his contract with Weber of August 17, 1904, and therefore never complied with his contract with Weber.
The correspondence between Hills and Weber shows that not until September 28, 1904, when the contract had expired by its terms, did Hills inform Weber that any change was contemplated by the formation of the new corporation. His letter of that date first informs Weber of the organization of the United States Steel Piling Company. If there had been a modification of the contract, as contended, it is reasonable to suppose that Hills would have notified Weber at once and asked his consent to the change, hut the record shows nothing of the kind. The consent of Weber to any modification was necessary before it would be effective or binding, for there was nothing in the powers of attor ney which Weber gave to Hills, before leaving for California, which conferred upon Hills the power to make any change in the agreement. We do not find any snch consent or authority expressed in any letter from Weber to Hills in the record. There is in fact no reason to expect any such consent on the part of Weber, for we have searched the letters of Hills to Weber in vain for any such proposition or suggestion. As above stated, the letter of September 28, 1904, of Hills to Weber, contains the first mention of the new company. After commending the wisdom of the formation of this corporation, Hills in this letter says: "At this present moment, while we have had no meeting, I see no reason why and have heard no intention of Mr. McMunn insisting upon any change in our original offer, excepting of course that we shall have to pay the cost of the incorporation of the new company." This, we think, shows that Hills himself had no idea of any modification of the original contract at this date. It is not seriously claimed, we think, that any modification was made subsequently.
If the contract was not modified, or if it was modified as claimed, the question is, does the evidence show that Hills has an actual existing interest in the subject-matter of the suit, and is he entitled to institute a suit in equity against McMunn and the United States Steel Piling Company concerning it, asking for a specific performance of the contract?
No point is made in argument upon the fact that Hills' name appears attached to the acceptance by McMunn, in connection with Weber's name. It is not claimed that by appending his name to the acceptance, Hills made the contract his own or became a party to it. He did not own, nor was he selling the shares of stock in the Slick Company. Appending his name to the contract therefore had no legal effect. The contract was and remained a contract between Weber and McMunn. Before the contract was made Hills had no interest in the subject-matter of the contract. After the contract was signed he still had no interest in the subject-matter of the contract. When the contract should be performed by the parties, Hills, by virtue of his agreement with Weber, would become interested as between him and Weber in a portion of the proceeds realized by Weber, if he had performed his agreement with Weber. But this possible right in certain proceeds did not vest him with that actual existing interest in the subject-matter of the WeberMcMunn contract and give him the proper title in the subject-matter of the contract which would enable him to institute and maintain a suit in equity concerning it. Enc. Pl. & Pr., vol. 3, p. 359, and case there cited.
In Story's Equity Pleading (9th ed.), par. 261, the learned author says, quoting from Mitf. Eq. Pl. by Jeremy, 155, 15'6: "Want of interest in the subject of a suit, or of a title to institute it, are objections tó a bill seeking any kind of relief." And in the following paragraph the author says: "The bill, too, should not only show the title and interest of the plaintiff in the subject-matter of the suit; but there must be sufficient averments to show that the defendant also has an interest in the subject-matter and is liable to answer to him therefor. For it has been well remarked, that a plaintiff may have an interest in the subject of bis suit, and a' right to institute a suit concerning it, and yet he may have no right to call on the defendant to answer his demand. This may be for want of privity between the plaintiff and the defendant."
Whether the contract between Weber and MeMunn remained as it was made originally, or whether it was modified by the substitution of the United States Steel Piling Company's stock for the stock of the Slick Company, it still continued to be a contract between Weber and MeMunn, and not between Hills and MeMunn. There was no privity between Hills and MeMunn in either case, and therefore .Hills has no right to demand of McMunn a specific performance of the contract. Hills seeks by this bill to enforce the transfer of stock which, according to the evidence, he never owned or purchased, and in regard to which he never contracted with McMunn. Weber made a contract with McMunn for the sale of stock of the Slick Company, and under this contract or a modification of it, though not a party to it, Hills asks for a decree giving him stock in the United States Company which Weber never owned and never attempted to sell.
In our opinion appellant Hills is not entitled to the relief demanded in the amended bill and the Circuit Court did not err in dismissing it. The decree is affirmed.
Affirmed.