Court Opinion

ID: 8869752
Source: CourtListenerOpinion
Date Created: 2022-11-26 18:21:10.133356+00
Date Added: 2024-06-11T17:06:08.054909
License: Public Domain

Mr. Presiding Justice Burke dissenting: The instrument did not create a trust, nor did the facts and circumstances attendant upon its execution raise an implied trust. The effect of plaintiff’s contention as to the obligation assumed by defendants would be that during the four years following May 4, 1925, Continental was under a duty to operate and manage the Walpart properties with no compensation to itself and with only the knowledge that if it were successful in its operation it would -recover the $86,000 debt which Walnart owed. Beyond that, under plaintiff’s theory, Continental was entitled to nothing. According to plaintiff’s theory, Continental assumed the obligation of carrying on a business in Chicago, undertaking to pay its financial obligations, undertaking to endeavor to put the company on a sound financial basis through advances and through loans secured from bankers; and it would have made no difference if Walnart had continued in financial difficulties throughout the four-year period; it would have made no difference if Walnart lost large sums of money and proved itself unable to operate at a profit; it would have made no difference if Continental had been required to pour hundreds of thousands of dollars into Walnart in order to maintain its operations; and none of these things would have made a difference because Continental had obligated itself by the May 4th contract to keep the business running for plaintiff’s benefit, and, if at the end of four years plaintiff was not able or did not wish to pay Continental the amount of Walnart’s debt, then plaintiff would have said, “I don’t wish to redeem my stock, you may have the company.” It cannot be doubted that if at any time after the May 4th contract was made, defendants acted under the terms of the contract and threatened to sell, liquidate or dispose of the business of Walnart, and plaintiff had commenced a suit to enjoin such threatened disposition on the ground he now urges, namely, — that the Walnart business was trust property and could not be sold until after the expiration of four years — that such suit could not have been successfully maintained. The law is well settled that where a trust is sought to be established, every word used in the instrument wherever found must, if possible, be given weight in determining the effect of the instrument. Bear v. Millikin Trust Co., 336 Ill. 366; Ellis v. Flannigan, 279 Ill. 93, 97. In my opinion the words used in the contract do not show an intention expressed or implied to create a trust in the Walnart properties. In arriving at the intention, the court should look to the preamble as well as to the operative part of the contract. The preamble expressly negatives an intention that the Walnart business and properties be held in trust for any definite period of time. I agree with the contention of the defendants that even if the May 4th instrument created a trust in the Walnart business and properties, plaintiff by Ms own voluntary acts agreed to a disposition of the properties which he contended constituted the res of the trust. Plaintiff, in support of his theory, testified in detail to the alleged conversations had with defendants’ representatives as to developments in Walnart’s affairs after May 4, 1925. This testimony was given about 14 years after the conversations allegedly took place. The testimony given by plaintiff as to these conversations is uncorroborated. In my opinion, the letters admittedly passing beween the parties and other documentary evidence tell the true story. Plaintiff contends that for six years after the bill of sale was executed (September 30, 1926) he believed that Walnart was being operated for his benefit and that Walnart was entitled to the profits of operation. The letters and other documents in the record, written by the parties at the time the transactions took place and before any controversy had arisen, disprove plaintiff’s contention and show clearly that the defendants acted honorably and fairly in all their transactions with the plaintiff. I am convinced that the plaintiff was fully aware of what was transpiring and that he acted with full knowledge of his rights. Walnart was hopelessly involved financially. Plaintiff was willing to have Continental take over the business. Shortly after the October 1926 documents were executed, the name “Walnart” was taken from the Walnart building, from the delivery trucks and the telephone directory, and the lock on the door of the premises was changed. Billings and correspondence thereafter appeared on the letterheads of Continental, Walnart being designated as the Chicago factory of Continental. Everything that was done in and about the premises and business of Walnart showed the change of ownership from Walnart to Continental. On January 8, 1927 plaintiff wrote Wright acknowledging receipt of a notice of a directors’ meeting of Walnart to be held on January 11, 1927. In this letter plaintiff said he had been reviewing recent events pertaining to Walnart, having in mind some future date when he would again operate that plant; that plaintiff objects' to defendants’ charging Walnart interest on the Walnart notes, saying that this seemed entirely contrary to the understanding to the effect that in consideration of the dollar per year lease, all expenses, including interest, should be borne by Continental. This letter continued: “Now in this manner, you having assumed all of Walnart’s assets and means of income, are further adding interest charges on money being used for your benefit without providing an income to offset that expense.” This letter clearly recognizes that Continental was rightfully operating the business in its own behalf and urged that because such was the case, interest should not be charged to Walnart. Walnart’s real estate, machinery and equipment, having been excluded from the bill of sale, delivered in 1926, was thereafter and until May 1929 owned by Walnart. In September 1926 the premises and the plant of Walnart were leased to Continental. It was agreed that Walnart close its business, that all the business, good will, patents and patent rights of Walnart be assigned to Continental in further consideration of the payment during the period of the lease by Continental of current taxes, premiums on fire insurance policies, interest on two mortgages on the property, and in further consideration of Continental not bringing suit against Walnart for collection of its claims, based on all or any part of the indebtedness due by Walnart. The originals of the bill of sale and the lease were signed by plaintiff as president of Walnart between September 22, 1926 and September 30, 1926. On January 9, 1929 Wright wrote to plaintiff calling his attention to the fact that the contract of May 4, 1925 would expire in a few months and asked plaintiff if he desired to repossess himself of Ms stock covered by the May 4th contract. Plaintiff replied to this letter on January 14, 1929. On January 28, 1929 Wright replied to plaintiff’s January 14th letter, enclosing an extract from Continental’s books "showing- the amount owing Continental by Walnart to be $216,687.60, and stating- that if Walnart did not liquidate this indebtedness by the expiration date of the contract, Continental would take formal possession of the property. TMs aggregate sum of $216,687.60 is made up of various debts of Walnart theretofore paid by Continental, and all debts owing to Continental from Walnart, less certain credits given Walnart. It was admitted in the complaint that these debts were properly chargeable to Walnart. On February 9, 1929 plaintiff replied to Wright’s letter of January 28, 1929, saying that he examined the statement showing the debt due from Walnart to Continental as $216,687.60, and that this amount was approximately correct. In that letter he also asserted that when he stated that the amount was approximately correct he questioned Wright’s justi-fication for charging interest amounting to about $24,000 “because during that period the property was operated by and for the benefit of yourself and under the lease contract there was no income to offset this interest charge.” In the letter he also called attention to the indebtedness statement and said that omitted from the statement were current liabilities amounting to $61,222.25, which properly should be credited to Continental. While in his letters, plaintiff insisted that interest was not chargeable to Walnart, in his pleadings in this case plaintiff does not allege that the items of interest were improperly charged to Walnart. On May 10, 1929, at a meeting of the stockholders of Walnart, a resolution was passed reciting that Walnart was indebted to Continental in the sum of $216,687.60; that WaMart had for several years past ceased to do business, but retained the title to the Green street premises in Chicago. At this meeting it was resolved that the officers of Walnart were authorized to convey by warranty deed to Continental the Green street premises, machinery, etc., and to have the value of the real estate applied toward the repayment of the indebtedness of Walnart to Continental, the latter then being the only creditor. The minutes of this meeting were read and approved in writing by plaintiff. On May 14, 1929 a deed was executed by Walnart conveying the Green street real estate to Continental. On April 24, 1940 plaintiff signed and sent to Wright a proxy for a meeting of the stockholders of Walnart, the meeting to be called for the purpose of passing a resolution dissolving the Walnart corporation. A certificate of dissolution of Walnart was filed with the Secretary of State of Illinois on June 25, 1930. Plaintiff’s contract of employment was terminated on May 1, 1932. In August 1932 a controversy arose with respect to plaintiff’s employment contract with Continental. On November 29, 1932 plaintiff filed his complaint in the instant case. Shortly before the complaint in the case at bar was filed, plaintiff brought suit against Continental in the United States district court, claiming damages arising out of an illegal termination of plaintiff’s employment contract. This suit resulted in a verdict and judgment for defendant Continental. Judge John Barnes, who presided at the time, entered a finding of fact that the employment contract was rightfully terminated by Continental. Upon plaintiff’s appeal to the United States circuit court of appeals the judgment of the district court was affirmed. A careful reading of the record establishes that plaintiff was possessed of full knowledge of all details of the business of Walnart between May 4, 1925 and October 1, 1926; that in fact he was in full control of the operation of Walnart during that period, except for the handling of credits. Being in possession of all the material facts he agreed to every transaction of which he later complained. The master found that during that period plaintiff “was in full knowledge of the details of the Walnart business and activities.” I agree with the contention of defendants that the master’s ultimate finding that Continental sold $400,000 in materials to Walnart between May 4, 1925 and October 1, 1926, upon which defendants made a profit, was not based on any allegations in the pleadings; was not supported by the evidence in the record; and that the proof shows that plaintiff acquiesced in sales made by Continental, receiving the benefit of same, and was therefore estopped from obtaining any advantage growing out of such sales. Plaintiff knew that Walnart could get materials from no other source and that if Continental refused to sell materials to Walnart, it would, of necessity, have immediately been forced to cease operations. I agree with the contention of defendants that the master’s reports, which the decree affirmed, do not conform either to the theory of the complaint or to , the proof. The master found that the September and October 1926 conveyances constituted a valid sale as far as profits after October 1, 1926 were concerned, but nevertheless found it was not a valid sale as far as the tangible assets described in the bill of sale were concerned. The finding that plaintiff was entitled to relief was not based on any allegation appearing in the complaint and was made despite the sole theory of the complaint that Walnart was entitled to profits after October 1, 1926. It will not be disputed that the bar of laches begins to run from the time that the facts complained of would have been discovered by the exercise of reasonable diligence. Plaintiff alleged that he did not know until 1932 that the Walnart debt to Continental had been paid prior to December 31, 1927, “out of the operation and net profits.” However, the record shows that as early, as 1927, when plaintiff was working for Continental in Chicago, he had figures before him showing that large profits were being made out of the operation of the Walnart premises. Plaintiff admitted that he conferred with his attorney in 1930, two years before the instant suit was filed, with reference to the Walnart dealings, and showed him the letters and documents pertaining to these transactions. I am of the opinion that the decree should be reversed and the cause remanded with directions to dismiss the complaint for want of equity.