Court Opinion

ID: 7001288
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:42:32.597208+00
Date Added: 2024-06-11T16:09:56.061648
License: Public Domain

Opinion per Curiam. The bill of complaint sought to restrain the directors and officers of the Illinois Staats Zeitung Company from acting upon the resolution to mortgage the corporate property, upon the ground that the resolution necessary therefor was not passed by sufficient votes of shareholders. It is alleged in the bill that by the special charter, under which the corporation was formed, a two-thirds vote of the capital stock was necessary to authorize the directors of the corporation to mortgage its real property. To this it is replied by appellees that the charter limitation does not apply to mortgages, but only to absolute conveyances of the fee, and that by the action of trustee Lee in voting the entire stock, held jointly by himself and his co-trustee, Pietsch, under the authority of the Probate Court, a two-thirds vote was in fact cast for the resolution. We are of opinion that neither of these contentions can be maintained. As to the first, the limitation imposed by the charter upon any alienation of the real property of the corporation would seem to apply as well to an alienation by mortgage as by absolute conveyance. The provision of the charter is, in part, as follows : “ And deeds and conveyances made by said company shall be authorized by vote of the stockholders who own or legally represent at least two-thirds of the shares of the stock of said company.” In Thompson's Commentaries on the Law of Corporations, section 6158, the rule is thus announced : “ We have seen that a statute granting the power to sell includes the power to mortgage. By parity of reasoning a statute prohibiting a corporation from selling its property includes, by necessary implication, the prohibition of the power to mortgage, since a mortgage may become by defeasance an absolute sale. ‘ It makes no difference,’ said Gray, J., ‘ whether the transfer is absolute or conditional, to take effect immediately upon its delivery, or at some future time. A mortgage, transferring a title which upon the happening of a certain contingency may be made absolute by sale or foreclosure, has the effect, as soon as it becomes of any value to secure the purpose for which it was made, to accomplish as complete a transfer of the corporate franchise and property and the means of performing the corporate duty, as if it had been originally an outright sale.’ ” Richardson v. Sibley, 11 Allen, 65. The only authority which we find to the contrary is in decisions of the Supreme Court of Iowa. Middleton Bank v. City, 15 Ia. 394; Krider v. Trustees, 31 Ia. 547. We incline to the rule as announced by the Massachusetts court. Courts will rigorously maintain such limitations to corporate action. Bradley v. Ballard, 55 Ill. 413. Therefore, it is simply the question of the authority of Lee, under the direction of the Probate Court, to vote the trust stock, which is determinative of this appeal. It is argued by the learned counsel for appellees that the action of Pietsch and Lee in voting the shares of stock disposed of by the will of A. G. ILesing, is the act of executors and not of trustees, and therefore that the Probate Court mMit properly direct the voting of such shares. We are of opinion that this contention is not tenable. We think it clear that the control of the stock was a matter pertaining t» the trust created by the will, wherein a confidence was. reposed by the testator in the discretion of the trustees. An examination of the terms of the will discloses that the testator intended to create and did create a special trust in the matter of the control of this stock. The fact that in such control the trustees were to consult with and be guided by the advice and wish of testator’s son, indicates very clearly that this was intended to be a trust. Pahlman v. Smith, 23 Ill. 448. In that case the court said: “ Had he associated any person not an executor with them, in the power to sell, there could have been no question of his intention that'they should act as trustees, and not as executors. It would have indicated that the testator relied upon their judgment and discretion when acting together,” etc. All the language of the will, referring to Pietsch and Lee as trustees, until the concluding clause, which directs that these “trustees” be also appointed executors so far as it has any weight, tends to the same conclusion. Pahlman v. Smith, supra. The pendency of the executorship is not at all inconsistent with the pendency of the trust separate and distinct from it at the same time. 1 Perry on Trusts (4th Ed.), Sec. 281; Waterman v. Alden, 144 Ill. 90; Penn. v. Fogler, 182 Ill. 76. In Perry on Trusts the author says: “If a testator in his will appoint his executor to be a trustee, it is as if different persons had been appointed to each office; a court of equity can not remove him from the executorship, for courts of probate have exclusive jurisdiction over the appointment and removal of administrators and executors; but if the office of trustee is separate from and independent of the office of executor, a court of equity may remove him from the office of trustee, and leave him to actas executor; or if he has completed his duties as executor and is holding and administering the estate simply as trustee, a court of equity may remove him.” Wood v. Brown, 34 N. Y. 337. In Waterman v. Alden, supra, the administration of the estate in which the defendants were executors was still pending and undetermined in the Court of Probate at the time of the tiling of that suit against the defendants as trustees. The action of Pietsch and Lee in the voting of the trust stock being a matter which the testator had committed to their discretion jointly as trustees, it was a matter in which neither one could assume to act contrary to the discretion of the other, either alone or conjointly, with any other than his co-trustee. The Penn. Co. v. Bauerle, 143 Ill. 459; Bryan v. Stewart, 83 N. Y. 270; DeHaven v. Williams, 80 Pa. St. 480; Tunis v. H. M. & F. P. Ry. Co., 149 Pa. St. 70. Nor could the Probate Court exercise the discretion reposed jointly in the two trustees by the testator. Wood v. Brown, supra; Burt v. Burt, 41 N. Y. 46; Crowley v. Hicks, 72 Wis. 539. In Wood v. Brown, supra, the New York court said, speaking of the control exercised by the surrogate: “ This power is not arbitrary, and can only be invoked in aid of some regular proceedings which the statute authorizes to be taken against executors and administrators. The surrogate can not, for instance, prevent an executor from defending or prosecuting a suit, in which he must consult his own judgment and act upon his own responsibility.” In Crowley v. Hicks, supra, the Wisconsin court said: “We can not compel the dissenting executor to join in the conveyance and execute the sale which has been made without his approval or consent.” The rule thus announced applies with greater force to the discretionary action of trustees in the control of a special trust, and irrespective of any statutory provisions relating to executors and administrators only. If either of the trustees was acting or refusing to act wrongfully or in a manner which constituted mischievous or negligent conduct in relation to the trust, a court of chancery might be 'invoked to remove such trustee if such intervention appeared necessary for the preservation of the trust estate. Brower v. Callender, 105 Ill. 88; Sherman v. Leman, 137 Ill. 94; Richards v. Barrett, 5 Ill. App. 510. It is contended by counsel for appellees that the demurrer was properly sustained because there appears to have been a lack of necessary parties to the suit, viz, certain stockholders. This defect was not pointed out by the demurrer in the court below, where amendment might have cured it. It can not now be availed of. Portones v. Badenoch, 132 Ill. 377. The bill having equity it should have been held, so that the proper parties could have been brought into the suit, not dismissed for want of equity. Knapp v. Marshall, 26 Ill. 63; Thomas v. Adams, 30 Ill. 37. We are of opinion that the court erred in sustaining the demurrer and in dismissing the bill for want of equity. The decree is reversed and the cause is remanded for further proceedings consistent with this decision. Reversed and remanded.