Court Opinion

ID: 8836607
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:26:07.969743+00
Date Added: 2024-06-11T17:05:05.176595
License: Public Domain

Mr. Justice Niehaus delivered the opinion of the court. The appellant, John 0. Howard, as complainant, filed a bill in equity in the circuit court of McLean county for the appointment of a receiver for the Corn Belt Farmers’ Co-operative Association, an Illinois corporation. The bill alleged that the assets of the association were insufficient to pay its debts, and that there was danger that the assets would be dissipated and lost to the creditors unless a receiver were appointed. A receiver was appointed who took charge of the property and assets of the association. The bill also alleged that the appellant had been induced to become a purchaser of and subscriber for the stock of the association; and that the association had never complied with the provisions of the Illinois Securities Act [Cahill’s Ill. St. ch. 32, ¶¶ 254-296] to authorize it to sell stock, and that hence the sale of the stock to him was voidthe stock purchased was therefore tendered back. The proof shows that the association was in an insolvent condition and, under the order of court, the receiver gave notice to creditors for presentation of claims against the association. The appellant filed Ms claim for $500, which was the purchase price paid by him for the five shares purchased by him of the stock of the association, and the stock which he had tendered back was attached to Ms claim. He after-wards amended his claim by asking to be made a preferred creditor. There was a hearing concerning the allowance of the claim, to which the receiver had objected, and the court disallowed the claim. From the order disallowing the claim an appeal is prosecuted. We are of opinion that the court properly disallowed appellant’s claim as a preferred creditor; but the evidence shows that the appellant had purchased the stock in question from the corporation, and had given therefor his note for $500 payable to the order of the corporation, wMch he afterwards paid. Corporations are legally competent to sell and dispose of shares of their own stock. First Nat. Bank of Peoria v. Peoria Watch Co., 191 Ill. 128; Republic Life Ins. Co. v. Swigert Co., 135 Ill. 150; Douglas v. Aurora Daily News Co., 160 Ill. App. 506; Roush v. Illinois Oil Co., 180 Ill. App. 346. In this case, however, the sale to the appellant was void under section 37 of the Illinois Securities Act [Cahill’s Ill. St. ch. 32, ¶ 290], because the association had not complied with the provisions of the act; and under the section referred to, the appellant had a right, “upon tender to the seller or in court of the securities sold,” to recover back the amount which he paid therefor. The corporation being the seller, the stock having been tendered back by the appellant in court, the act gave him a legal claim against the association for the amount of the purchase price of the stock which he had paid. In this sense he was a creditor who had a right to have his claim satisfied out of the assets of the association, with other creditors. The claim should therefore have been allowed on the same basis with other creditors. The order disallowing the claim is therefore reversed with directions to allow the claim without preference. Reversed and rema/nded with directions.