Court Opinion

ID: 8803734
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:41:14.262152+00
Date Added: 2024-06-11T17:04:00.685894
License: Public Domain

Mr. Presiding Justice Freeman, dissenting. A three-quarter interest in the patent was held- by Samuel K. Behrend, .who had made an assignment of it to the Slick Steel Piling Company to be delivered on payment of $6,000. This assignment was held in escrow by Behrend’s attorney in Chicago. The other quarter interest was held by two other parties who had agreed to transfer their respective interests upon payment of $1,000 to one and $1,500 to the other. Hills thereupon, with Weber’s approval, árranged with Behrend to assign his three-quarters interest to Hills, procured the preparation of assignments conveying the other interests and told McMunn that neither Weber nor himself had $8,500 necessary to pay for these outstanding interests in the patent. Thereupon, after the assignments were executed in form approved by McMunn, the latter advanced $8,500 to apply, according to Hills’ testimony, on account of the $15,000 to be paid Weber under the contract. The $8,500 was immediately paid over to the holders of the several interests in the patent, and assignments thereof were had to Hills, vesting in him the entire title to the patent. There is evidence tending to show that McMunn objected to the name of the Slick Steel Piling Company and suggested to Hills that he would prefer to consummate the contract by substituting for said company a new corporation organized under the laws of Illinois, and suggested that the title to all the interests in the patent be assigned to Hills so that it could thereafter be assigned either to the Slick Steel Piling Company or such new corporation as the parties might thereafter determine, that Hills assented to this and it was agreed that such new corporation if formed should be capitalized at $500,000, with 500 shares at a par value of $100 per share, corresponding in all these respects with the organization of the Slick Steel Piling Company. This would enable the contract to be consummated in all respects, merely substituting the United States Steel Piling Company for the Slick Steel Piling Company in the contract mentioned. Subsequently Hills at McMunn’s request assigned the title to the patent to one McConahey by conveyance absolute in form, but, as Hills testifies, upon the understanding with McMunn that McConahey was to act as trustee and was to convey the patent either to the Slick Steel Piling Company or to the new corporation when organized, the money to be paid and the stock divided in accordance with the terms of the original contract. During this time Weber was informed of these transactions by letters which were written in McMunn’s office by Hills and submitted to McMunn’s approval before being mailed. September 10,1904, Hills became ill and was obliged to go to the hospital for nearly two weeks. While he was there McMunn caused the United States Steel Piling Company to be organized, with an authorized capital of $500,000, represented by 5,000 shares of stock, each of the par value of $100, corresponding in these respects, as above stated, to the Slick Steel Piling Company. The incorporators and subscribers were persons in McMunn’s employ. Immediately after its complete organization MeConahey transferred to this new corporation the title to said patent. It appears that substantially all the stock was issued to MeConahey, representing McMunn, as a consideration for such transfer, and McMunn now holds and controls most of the stock. He claims this stock as his own and refuses to comply in any respect with the original contract to pay Weber and Hills the $15,000 less the $8,500 advanced by him to pay for the outstanding interests in the patent and to transfer to them the 2,000 shares of stock corresponding to the amount to be retained by Weber and divided between himself and Hills, under the terms of the original contract. The relief which appellant seeks is that defendant “McMunn be required to pay complainant one-half of said $15,000, less one-half of the advances heretofore made by McMunn on said sum,” and also that he “cause to be transferred to complainant 1,000 shares of the capital stock” of the United States Steel Piling Company. The sole question presented is whether the evidence introduced in behalf of appellant is sufficient to support the allegations of the bill and warrant the relief sought. With the exception of one witness, MeConahey, whose testimony is said to have been introduced for convenience before appellant rested, no proof was introduced by or in behalf of the appellees. Hone of the evidence in behalf of appellant is disputed. The original contract upon which appellant’s claim is founded was in writing. The evidence tends to show that through Weber and Hills, defendant McMunn has received at least all that he would have been entitled to under the contract had it been literally fulfilled in accordance with its precise terms. He was to receive 3,000 shares of the Slick Steel Piling Company, “a corporation organized under the laws of Arizona with 5,000 shares of $100 each par value,” which corporation was to become the owner of the Behrend patent. Instead, he has received all the shares of United States Steel Piling Company, a corporation organized under the laws of Illinois, with the same capitalization of 5,000 shares having a par value of $100 a share, • which corporation does own that patent. For conveyance of 3,000 shares of the stock of the company owning said patent he was to pay $10,000 into the treasury of the company. He has paid that sum into the treasury of the United States Steel Piling Company. By the terms of the contract, having undisputed notice before he signed it that complainant Hills “had a half interest in the proceeds of the contract” and that when they had “settled everything up” Weber and Hills “would divide equally,” he agreed to pay to said Weber $15,000 in cash when a good title to the letters patent in controversy, free and clear of encumbrance, was conveyed to the Arizona corporation, which he knew had not then been done. The required good title to the letters patent has been conveyed to the United States Steel Piling Company substantially within the thirty days from date of the original contract. If the actual conveyance to the corporation was a day or so after the expiration of the thirty days, the delay was McMunn’s and not complainant’s. Substituting therefore the Illinois corporation for the Arizona corporation,—in substance a mere change of names and location,—defendant McMunn has received all he bargained for under the original contract,"the other parties thereto having apparently in substance and equity complied on their part with the agreement. It is stated in the answer of defendant McMunn that he “consented to purchase all interests, including the three-fourths interest held by Behrend for and on his, defendant’s, own personal account.” In view of the fact that this patent was so valuable that McMunn had agreed to pay $25,000 for it—$15,000 of that sum in cash to Weber and Hills—and that he was advancing only $8,500 of this latter sum to take up the options which Weher had on the letters patent, McMunn has not lost anything, at least, by this alleged “consent.” The evidence clearly tends to show that he succeeded in getting the patent with the aid of complainant Hills acting for himself and also for Weber under powers of attorney. While McMunn advanced the $8,500 to be used for the purpose of taking up Weber’s options or of complying with the terms of the arrangements made by Weber to purchase the outstanding interests in the patent, the assignments of these respective interests were made to complainant Hills. There is evidence tending to show the controlling interest at least could not otherwise have been obtained. This McMunn knew. The assignment of the three-fourths interest made by Behrend to complainant Hills was prepared by McMunn’s attorney. The evidence is direct and positive that McMunn had “desired the assignment made out either to McMunn or someone for him,” but was told that under instructions from Weber this would not be done. Hills testified that after receiving the assignments made to himself he said to McMunn, “I do not want to carry these things around—put them away,” and they were put in the safe in McMunn’s office, in which office Hills then had his headquarters. Subsequently McMunn said to him, “You have no objection to putting them in trust?” to which Hills replied, “No, on condition that they be delivered either to the Slick Steel Piling Company or the new corporation that we may choose to name under the laws of Illinois.” To this he says McMunn responded, “Well, I will fix that,” and named McConahey as trustee, to whom Hills accordingly assigned the patent at Mc-Munn’s instance. As McMunn had advanced $8,500, it was doubtless reasonable that such assignment should be made for his protection, pending conveyance of the patent to the corporation. Subsequently, when the United States Steel Piling Company was organized, McConahey assigned the patent to it in consideration of its full capital stock of $500,000, par value, and a payment to the company of $10,000 made by McMunn. McConahey testifies that in this he “acted for McMunn and transferred the stock as he asked me to.” It is claimed that the evidence tends to support appellant’s contention that the transfer of the patent to the United States Steel Piling Company was not only in substantial compliance with the original contract as executed by McMunn, Weber and Hills, but in actual compliance with that contract as modified by a subsequent agreement between defendant McMunn and complainant Hills. Hills’ testimony is explicit upon this point. He states that on five different occasions he and McMunn discussed the proposition to substitute a new corporation for the Slick Steel Piling Company mentioned in the original written contract, that Mc-Munn objected to the name “Slick,” that it was ultimately agreed between them that if McMunn chose to so decide the substitution of a new company might be made, and that it was made in accordance with such agreement. This testimony of Hills is corroborated by certain letters written by him from McMunn’s office to Weber, which letters he testifies were scrutinized, criticised and “censored” by McMunn before being sent. He testifies that all these letters but one were written by McMunn’s stenographer. In the letters Hills advises Weber of the progress being made. The tenor of the correspondence indicates that Hills and McMunn were proceeding in pursuance of the original contract. It was desired to have Weber assign the three-quarter interest in the patent to Hills, who in one letter promised to “assign it with the other two-eighth interests in one assignment to the Slick Company.” September 20, 1904, Hills wrote that “the Behrend interest, as also those of Cochran and Mr. Campbell, have been paid for and were conveyed to me and are in the hands of a trustee until -we have complied with all our promises.” The letter of September 28,1904, if examined and approved by McMunn, as. Hills testifies it was, is significant. In it Hills reminds Weber that in the original contract McMunn required “the good title of the Behrend patent should be established before any money was paid.” He then proceeds as follows: “After you left when I found out there were interests outside which had to be taken care of, and when Mr. Behrend appeared on the scene, Mr. McMunn was good enough to advance the money to pay for all these interests, all of which assignments were made in my name, and all of which were transferred to a trustee, who was to deliver to the Slick Company, or to another company, if it were found that the former was not legal. “Mr. McMunn has decided to abandon the Slick Company and has' incorporated a company under the laws of Illinois, by name the United States Steel Piling Company, with a capitalization of $500,000, and I look forward to a meeting of this company in a few days. “It is needless for me to say that I consider this by far the best step, particularly as business men do not like the name of the word ‘ Slick, ’ which does not savor of integrity, and also on account of the Arizona incorporation, companies from which do not smell as sweet as the name above mentioned. “At this present moment, while we have had no meeting, I s^e 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. “According to my agreement with you, I will equally divide with you every cent that you have paid out for this patent, and will divide with you the stock that I secure for our joint interest. “Whatever stock we secure will be worth a great deal more under a live and pushing company than it would be with an ordinary corporation such as we might have been forced to form. “I have no intention to do otherwise than to live up to my agreement, and as soon as I am in shape to tell you exactly what we have, it will be for you to say whether you can accept or not. My advice to you is to trust implicitly to the man who pulled you through, and not to those who talk with their mouth. ’ ’ In these letters Hills was writing Weber in constant recognition of the latter’s interest in the transaction under the original contract and expressing “no intention of Mr. McMunn insisting upon any change in our original contract,” except that Weber and Hills would have to pay the cost of incorporating the new corporation substituted for the Slick Company. Under this evidence the contents of these letters must be given the same force and effect, so far as they relate to McMunn, as if he had actually signed them. They state that the various interests in the patent assigned to Hills had been put in the hands of a trustee— McConahey—until “all our promises” had been complied with; that the trustee was to “deliver to the Slick Company or to another company”; that McMunn had “advanced” the money to pay for the interests in the patent, not that he purchased them for his own personal account; that the Slick Company had been abandoned and the United States Steel Piling Company incorporated to take its place in the transaction; that there was no intention to change the original proposition; and that Weber and Hills were to have stock in the company. It is argued in behalf of appellees that the powers of attorney from Weber to Hills did not authorize Hills to modify the contract and agree to the sale and delivery of any shares of stock of the new corporation, the United States Steel Piling Company. Whether- so or not, this is not a matter of which appellees can complain, and no one else objects. Weber was informed of the substitution of the new corporation in place of the Slick Company and the reasons for it. He makes no objection and the other defendants cannot. It is urged there is no evidence of any contract to deliver to Hills and Weber 2,000 shares of the stock of the new corporation and pay them the balance of the $15,000. If, as there is evidence tending to show, the new corporation was by agreement of the parties substituted for the Slick Company and the contract modified to that extent, its obligations were not thereby changed or lessened. Nor was it necessary in order to execute the contract in spirit and substance that the shares of the new corporation should be issued to Weber or Hills as a matter of form, and that they should then deliver 3,000 shares of that stock to defendant McMunn. It was immaterial by what precise method McMunn should receive the 3,000 shares, nor how Weber and Hills should receive the remaining 2,000 shares. That the new corporation was organized by McConahey for McMunn at the latter’s instance, instead of by Weber or Hills, is not a matter of which McMunn can complain, nor of which he can take advantage. The contract would be sufficiently performed if all parties were put in the same situation as to the United States Steel Piling Company that the original contract contemplated as to the Slick Company. Equity will find no fault with the manner of performance when there is performance in substance and fact. It is urged, however, in behalf of appellees that complainant Hills is not shown to have had any interest in the subject-matter such as to enable him to maintain this bill. The undisputed evidence tends to show that prior to the signing of the original contract Hills notified McMunn that he had a half interest in the proceeds of the contract and that when they settled he and Weber would divide equally. That he had such interest is evidenced by his signature to the original agreement and is corroborated by the testimony of Cooper that on August 20, 1904, Weber told him in the presence of Hills that they were to divide the money and remaining stock equally after the expenses were paid. Before that time there had apparently been an agreement, as indicated by the letter of August 17, 1904, that Hills was to receive a commission of $500 “for 3,000 shares of the Slick Steel Piling Company,” after which they were to divide the stock equally. There is a subsequent reference to this commission in a letter from Hills to Weber dated September 5,1904, in which he repudiates an apparent attempt on Weber’s part to allow Hills only $500 as commission out of the $15,000 cash payment when made, without reference to the division of the stock. In that letter Hills said: “First of all I -wish to say that my agreement with you is for an equal division as man to man and I shall make no other division. ’ ’ There seems never to have been any question as to their equal interest in the division of “the remaining shares after all expense is paid and our obligations satisfied,” as expressed in the unfulfilled agreement referred to, which was to remain in force providing $1,000 should be paid “on expense or purchase account” on the twentieth of August. The money was not paid and it is said that agreement ended on that day, but it seems to have been superseded by the agreement testified to by Cooper, in accordance with which Hills and Weber were to divide equally in everything, share and share alike, after the expenses were paid. It is, however, unnecessary to review in detail the evidence of Hills’ equal interest as against Weber. Weber in his cross-bill asks only for one-half of the $15,000 cash payment provided for in the contract, less half of the $8,500 advanced thereunder by Mc-Munn, and for one-half of the 2,000 shares of stock of the United States Steel Piling Company claimed by himself and Hills. The evidence tends to show that whatever may have been the original relations of Hills and Weber under the contract with McMunn, in all the subsequent conduct of the transactions in controversy Hills acted and was recognized not as an employe of Weber’s, but as an independent half owner with the latter in the contract in , question, of which he was one of the original signers, the consideration for Ms interest being the services he had rendered and continued to render to bring about the completion of the contract. As such half owner, Hills took the assignments of the various interests in the contract in his own name, acting for himself directly and for Weber under the powers of attorney, McMunn advancing the $8,500 necessary to pay for them. It is, however, imnecessary to define the exact nature of Hills ’ interest or how it was acquired. It was treated by all parties in the negotiations as of the same character as Weber’s interest. But whether an actual or a mere beneficial interest in what Weber should be entitled to is immaterial, so far as concerned his right to maintain this bill. In Winkelman v. Kiser, 27 Ill. 20-21, it is said: “that the person holding the beneficial interest should be made complainant.” In Elder v. Jones, 85 Ill. 384-387, it is said of one not made a party in a chancery suit, “He is the beneficial party and the suit should have been brought in his name.” In Cameron v. Boeger, 102 Ill. App. 649-653, it is said: ‘ ‘ In chancery suits are properly conducted in the name of the real parties in interest.” In Smith v. Bates, 182 Ill. 166-169, it is said to be well settled “that a valid equitable assignment of part of a fund may be made before the fund is due or actually in being, providing it exists potentially,” and courts of chancery always have jurisdiction to enforce trusts. “It is a familiar rule that equity disregards mere forms and looks to the substance in the application of equitable principles.” Beal v. Harrington, 116 Ill. 113-122. McMunn did not rescind the contract when he learned the ownership of the patent was still outstanding:, and that Weber had merely an option. On the contrary he waived whatever right he might have had to do so, and induced Hills to proceed with the understanding on the part of the latter that its terms and conditions were to be complied with as modified by the substitution of the new corporation, the United States Steel Piling Company, for the Slick Steel Piling Company. McMunn ought not, therefore, to be “allowed to go on and derive all possible benefits from the transaction and then claim to be relieved from his own obligations by a rescission or a refusal to perform on his part. If after discovering the untruth of the representations he conducts himself with reference to the transaction as though it were still subsisting and binding, he thereby waives all benefit of and relief from the misrepresentations. ’’ Day v. Fort Scott Inv. Co., 153 Ill. 293-305. For reasons thus indicated I am unable to concur in the views expressed in the majority opinion.