Brown v. Sprague

229 Ill. App. 338, 1923 Ill. App. LEXIS 43

• Court: Appellate Court of Illinois
• Decided: May 9, 1923
• Docket: Gen. No. 27,742
• Status: Published

Opinion

Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought suit against the defendants to recover $2,250 with interest claimed to be due for the balance of the purchase price of an invention for which an application for letters patent was pending, There was a trial before the court without a jury and a finding and judgment against both defendants in plaintiff’s favor for $2,475, the amount of her claim, to reverse which the defendant Sprague prosecutes this appeal.

The record discloses that the defendants, William D. Sprague and Anna M. Andrews, were respectively president and secretary and directors of the Combustion Improvement Company, a corporation organized under the laws of Delaware; that the corporation had never been licensed to do business in the State of Illinois ; that on February 13, 1917, a contract in writing was entered into between the Delaware corporation and Gideon Pillow Brown of Lake Bluff, Illinois, since deceased; that this contract was entered into in Illinois and was executed on behalf of the corporation by the defendant Sprague as its president. That contract recites that the company is a corporation organized under the laws of Delaware and that it is the owner and assignee of a certain new and useful invention “for combustion in boilers, furnaces,” etc., for which invention it then had an application pending for letters patent in the Patent Office in Washington. It further recited that Brown had invented a new device for “recombustion” which he claimed was an improvement on similar devices; that the corporation was desirous of securing Brown’s interest in his invention which was described in the application for letters patent then pending, and by the terms of the contract it was agreed that the corporation should advance certain costs toward securing Brown’s patent and that it should manufacture and sell the apparatus covered by Brown’s patent and pay him certain royalties therefor. The contract gave the corporation an option for a period of two years to purchase outright all of Brown’s interest in and to the invention for $2,500. The evidence further shows that on the same day Brown received $250 from the corporation and executed his receipt as follows:

“Combustion Improvement Company 29 S. La Salle St.

Suite 916

Tel. Randolph 4480.

Chicago, 111., Feby. 13, 1917.

“Received Two Hundred and Fifty Dollars ($250.00) from the Combustion Improvement Company, a corporation, said sum to apply on the outright purchase price of $2,500 for invention and letters patent covering a fuel saving device upon which application has been filed February 7, 1917, serial number • 147068.”

This receipt was signed by the deceased.

Brown died February 27,1917, and his widow, plaintiff, was appointed administratrix of his estate. She brought suit against the corporation in the municipal court of Chicago to recover $2,250, and had a judgment therefor. An execution was issued and returned no part satisfied, and afterwards the instant suit was brought.

Prior to the trial plaintiff filed interrogatories to which the defendant Sprague replied in writing, wherein he stated that the corporation was organized under the laws of the State of Delaware and that it did not at any time procure a license to do business in the State of Illinois. He further stated that he was president of the company, and in reply to an interrogatory as to whether the corporation maintained an office in Chicago prior to February 13,1917, he stated: “Never had lease to office. Had desk room at 29 S. La Salle street.” He further answered that the option contract to which we have referred was executed at 29 S. La Salle street, Chicago.

Plaintiff testified that in the fore part of March, 1917, she saw the original of the receipt offered in evidence for $250 dated February 13, 1917, in Mr. Sprague’s office at 29 S. La Salle street, and that her husband’s signature was on it. She further testified that she saw the defendant Sprague at Lake Bluff, February 28, 1917, the day after her husband died; that after stating he was sorry to learn of Mr. Brown’s death both he and the defendant Andrews said that plaintiff would get all that was coming to her; that Sprague then asked her to come to see him at the office, which she did in the early part of March, going to 29 S. La Salle street; that she saw Sprague at that time and place and told him that she had called at his request to talk over the business which her late husband had had in reference to the patents; that she there said: “You have purchased this patent from him and I have a copy of the receipt for the first payment of $250, and you were to pay $250 on March 9, 1917, and $100 per month thereafter, and he said ‘Yes,’ and I said ‘I have come to talk the matter over with you. ’ He said I would be treated right in this affair. I said ‘I am getting letters of administration in Lake County, in Waukegan, and when I receive them I will come to collect this money due me.’ He said 'all right, as soon as you get your letters of administration then you come in.’ ” She further testified that about a week later she again called at Sprague’s office and went with him and defendant Andrews to lunch; that nothing particular was discussed at that time; that she again saw Sprague about the first week in April and told him she had received her letters of administration and that she had come to collect her money, and that Sprague replied that he had paid, and he then took out some checks and receipts, on top of which was the original receipt signed by her husband for $250 above mentioned; that she asked about the contract and receipt and told Sprague he had only made the first payment of $250, but he denied owing anything.

Plaintiff further testified that she talked with the defendant Andrews during the holidays in 1919, and at that time the latter told plaintiff that she was secretary and treasurer of the company. Plaintiff also testified that she saw the original contract entered into between the company and her husband in defendant Sprague’s office at 29 S. La Salle street.

The affidavit of merits filed by the corporation in the suit brought against it in the municipal court was offered in evidence. It was sworn to April 1, 1918, by the defendant Sprague as president of the company. On cross-examination plaintiff testified that when she first saw Sprague at his office on La Salle street she told him that she had talked the matter over with her husband shortly after the contract was made and that he told her that the first contract was for the manufacture of the device on a royalty basis; that right after the contract was signed, her husband together with Sprague agreed that the company buy his interest outright for $2,500; that Sprague said he did not have that much money, that he had only $500 and would pay $250 then, $250 the next month and $100 per month thereafter until the total amount was paid; that Brown agreed to that and a check was then drawn for the first payment, to which Sprague replied that the plaintiff’s version of the transaction was correct; that he had the canceled check and brought out a package of checks or receipts, on top of which was the original receipt for $250, which bore her husband’s signature. This was all the .evidence offered on behalf of the plaintiff.

Fred B. Silsbee, a lawyer, testified for the defendant that he met Brown at Sprague’s office and had a conversation with Sprague in Brown’s presence relative to the patent on or about January 20, 1917; that he officed in a room adjoining the space occupied by Sprague; that the door between the two offices was always locked; that on January 20 a young man came into his office and stated that Mr. Sprague wished to speak with the witness. He further testified that he prepared an application for the Combustion Improvement Company and started to take the necessary steps for it to procure a license to do business in Illinois; that he had written the Secretary of State of Hlinois for the necessary blanks and the Corporation Trust Company of Delaware for a certified copy of the. charter; that the blanks had not been forwarded to the Secretary of State; that he went into Sprague’s office and Sprague said: “What kind of a mess have you got us into here1? Why, we are a Delaware corporation and we are not licensed to do business in the State of Illinois. Why haven’t you attended to this matter?” The witness replied that he had written for blanks and a copy of the charter, and was ready to go ahead and complete the licensing of the corporation in this State but had not done so because Sprague had been making changes in the organization. On cross-examination this witness testified he had been sitting with counsel for defendants advising them in the trial of the case; that at the time he had the conversation with Sprague, Brown was sitting outside of the railing but took no part in the conversation. This was all the evidence offered on behalf of the defendants. Neither of the defendants testified or appeared at the trial although each was represented by counsel.

In rebuttal plaintiff gave testimony tending to show that her husband was not in Chicago on or about January 20, 1917, the time when Silsbee testified he had the conversation with Sprague.

1. The defendant Sprague contends that where, as here, it is sought to hold the officers of a foreign corporation which has not been licensed to do business in this State personally liable, the plaintiff must prove that such corporation transacted business in this State and that the entry into one contract or a single transaction is not doing business within the meaning of our statute and the authorities. In support of this the cases of Plew v. Board, 274 Ill. 232; Watson Fireproof Window Co. v. Miller, 194 Ill. App. 316; Anderson Computing Scale Co. v. Hattenbach, 199 Ill. App. 467; Watson Fireproof Window Co. v. Rysdon & Co., 189 Ill. App. 134; People v. Mascot Copper Co., 202 Ill. App. 151, and other cases are cited. And it is contended that .there is no evidence in the record that the Combustion Improvement Company at any time transacted any business of any kind or character in this State other than to enter into the written option contract with Brown; that the company maintained no office in this State, held no meetings, and did no business within the meaning of the authorities, and that before the defendant Sprague could be held liable, it was incumbent upon plaintiff to allege and prove that the Combustion Improvement Company exercised its corporate powers within this State."

We think the law as contended for by counsel for defendant is correct, that before he could be held liable in the instant case it must appear that the Combustion Improvement Company was a foreign corporation not licensed to do business in this State and that it had transacted business here. The only question to be determined on this phase of the case, and it is not at all free from difficulty, is whether the Delaware corporation transacted any business in this State. Section 1, ch. 32, J. & A. Ann. St. ff 2526, provides that “before any foreign corporation for profit shall be permitted or allowed to transact any business or exercise any of its corporate powers in this State of Illinois” it shall be required to comply with our statutes by being licensed by the Secretary of State. The question what is the transaction of business by a foreign corporation which has not complied with our statute has often been before this and the Supreme Court of Illinois. It has been held that “entering into one contract or transacting an isolated business act is not engaging in business in this State.” Plew v. Board, supra. And in Alpena Portland Cement Co. v. Jenkins & Reynolds Co., 244 Ill. 355, and Finch & Co. v. Zenith Furnace Co., 245 Ill. 586, it was held that the words “doing business” or “transacting business,” as used in our statute in. reference to regulating foreign corporations, have a well settled meaning, and refer only to the transaction of the ordinary business in which the corporation is engaged, and do not include acts such as instituting actions in court.

In the Plew case suit was brought on a promissory note of the United Publishing Company. They interposed an affidavit of merits setting up that the company was a Delaware corporation and the court said that from the statement of claim it appeared that suit was brought against the two defendants because the publishing company was a foreign corporation and had made two notes when not authorized to transact business in this State. It was held that the giving of the notes by a foreign corporation was not the transaction of business in this State.

People v. Mascot Copper Co., supra, was a mandamus proceeding to compel the officers of a corporation to permit the stockholders to examine its books. One of the defenses set up was that the company was a foreign corporation organized under the laws of Arizona; that it was neither licensed to do business nor was it doing business in this State, and, therefore, mandamus would not lie. The copper company owned mines and other property in Arizona. All of its business and affairs were conducted in that State and not in this State. It further appeared that for convenience in the conduct of its business it maintained an office in Chicago which was leased in the name of its treasurer. It was there pointed out that section 13, ch. 32, Rev. St., which required corporations to keep a set of books at their principal office, did not apply to foreign corporations. It is clear that that case is not in point. In the instant case the record discloses that the Delaware corporation by the defendant Sprague, as its president, entered into a royalty contract with Brown in Chicago; that on the same day it again entered into a contract to purchase Brown’s interest in his invention; That the corporation maintained an office in Chicago; that its president and other officers were in Chicago where plaintiff saw them on a number of occasions. It further appears that they authorized their counsel, Mr. Silsbee, to take out a license for the company to operate in Rlinois. There is no evidence that the company was engaged in business outside of Illinois. Neither of the defendants appeared on the trial, although counsel for the plaintiff said he would waive any objection to their being disqualified under the statute to testify, and although counsel for defendants say they expected to have Sprague in court, but on account of objection by plaintiff’s counsel the court refused to postpone the matter. We think if the defendants desired to testify they should have been in court. Upon a careful consideration of the facts and the law, we are of the opinion that plaintiff made ont a prima facie case sufficient to warrant the holding of the court that the Delaware corporation was doing business in this State without a license, and in these circumstances Sprague, acting as president of the company, would be personally liable. Ryerson & Son v. Shaw, 277 Ill. 524.

2. - The defendant Sprague next contends that the court erred in permitting Mrs. Brown to testify over objection that she was administratrix of her deceased husband’s estate, and that this could only be shown by producing the record of her appointment by some court of competent jurisdiction. We think the objection when made should have been sustained, but it further appears in the examination of this witness that she testified a number of times without objection that she had been appointed administratrix of her husband’s estate. In these circumstances we think the point was waived. Complaint is also made that the court improperly admitted the rules of the municipal court over defendant’s objection, and that like error was committed in admitting the notice served on counsel for the defendant without proof of the signatures, and that there was further error in admitting the unsigned receipt purporting to show receipt of $250 by Brown on account of the purchase price of his invention. We think neither of these contentions can be sustained. The rules of the municipal court were offered in evidence and the trial judge under the law takes judicial notice of them. There is no contention that they were not the proper rules, nor is there any contention that the notice served upon counsel was not signed by them. The testimony of the plaintiff was that she saw the original receipt signed and that it bore her husband’s signature.

3. It is further contended that the plaintiff failed to establish the agreement on the part of the defendant to purchase the invention from Brown. The testimony of the plaintiff was to the effect that on a number of occasions she called on Sprague for her money. She said in substance that her husband had told her that he sold his invention and this, she testified, Sprague admitted was the fact. A further complaint is that Sprague is not liable because Brown knew that the Delaware corporation was not authorized to do business in this State, and in these circumstances Sprague could not be held liable. We think the evidence fails to show that Brown knew that the corporation had not been licensed to do business in this State. The only evidence of defendants in the testimony of Silsbee, who says that when he was discussing the matter with Sprague, Brown was sitting outside the railing and that Brown took no part in the conversation. This is clearly insufficient to show that Brown knew that the Delaware corporation was not licensed to do business in this State.

The judgment of the municipal court of Chicago is affirmed.

Affirmed.

Thomsok, P, J., and Taylor, J., concur.