Whalen v. Stephens

61 N.E. 921, 193 Ill. 121

• Court: Illinois Supreme Court
• Decided: October 24, 1901
• Status: Published

Opinion

Per Curiam:

In deciding this case the Appellate Court delivered the following opinion:

“The chief question in controversy is whether appellees, Stephens and Lay, have any interest in the stock of the Whalen Consolidated Copper Mining Company. Complainant and Lay claim that they have each one-third interest in said stock. Appellant claims the stock is wholly his, and that appellees have no interest whatever in it. There is no controversy between the parties as to the amount of the Whalen company stock in question.

“The Whalen company is an Illinois corporation, and' its capital stock, the number of shares into which it is divided and the par value of each share are as statéd in the bill. The location of its principal office is in Chicago, and May 17, 1882, its articles of incorporation were duly recorded. The St. Peter’s company is also an Illinois corporation. Its capital stock is $5,000,000, divided into 100,000 shares of the par value of $50 each. The location of its principal office is in Chicago, and it was organized March 5, 1887. Whalen subscribed for 99,996 shares of the stock of the St. Peter’s company, and prior to and at the date of the partnership agreement was president of the company. He also subscribed for 99,996 shares of the stock of the Whalen company. Prior to the date of the partnership agreement the St. Peter’s company and the Whalen company each had mines in Nevada,—the former silver and the latter copper mines,—but appellant, who was the manager of both companies, was confined in the Missouri penitentiary for three years expiring July 13, 1897, for obtaining money by false pretenses, as appears by his own letter, and during that time the mining properties in Nevada were lost by the companies. At the date of the partnership agreement the Whalen company had no property, and the only property which the St. Peter’s company had was certain stock of the Whalen company which had been donated to it by appellant. Such was the situation at the time appellant commenced negotiations with appellees which culminated in the partnership.

“Lay testified that about July 20,1897, he met appellant and had interviews with him several days in succession thereafter; that appellant told him of wonderful copper property which he had owned in Nevada but had lost and then had no title to it, and asked the witness to assist him to take charge of re-organizing and reviving the company and securing money to acquire the title of certain miners to the property; that witness told him he had no money himself but thought he could secure the assistance of Thomas 0. Stephens, the appellee, who had been a banker;, that at seven o’clock in the evening the witness; Stephens and Whalen met at the Atlantic Hotel, in Chicago, and for about four hours discussed the whole matter of securing the Whalen property and the miners’ claims, which were then in the hands of Kenney, Doherty and Thomas R. Whalen, a cousin of appellant. ‘Appellant said he would like to form a partnership with us, and would give us one-third interest in both the St. Peter’s and Whalen companies.’ Stephens then agreed that he would furnish appellant the money and a pass to go to Nevada. Subsequently Mr. Hargis drew up an agreement in accordance with the verbal statement made to him by Stephens, which was submitted to Barnum, appellant’s attorney, and finally Barnum drafted the agreement of August 12, 1897, which was read over to and signed by the parties. Hargis testified that he had a talk with all the partners before drafting the first agreement, and that Stephens told him, in the presence of Whalen and Lay, that he had given to Stephens and Lay each one-third interest in the Whalen company stock, and that Whalen said that was all right.

“Counsel for appellant now objects to so much of the foregoing evidence as relates to negotiations between the parties prior to the execution of the written agreement of partnership. No objection was made to the evidence when taken, nor among the objections to the master’s report is there any objection relating to the admission, exclusion or refusal to exclude evidence. The objections to the master’s report were ordered to stand as exceptions on the hearing. The hearing is limited to questions of this nature raised by the exceptions, and when such question is not so raised error cannot be assigned in respect to it. The objection comes too late. (Prince v. Cutler, 69 Ill. 267; Pennell v. Lamar Ins. Co. 73 id. 303; Jewell v.’Rock River Paper Co. 101 id. 57; 14 Am. & Eng. Ency. of Law, 944.)

“An additional reason why appellant cannot avail of the objection is, that he, being examined by his solicitor, gave his version of the negotiations between him and the appellees prior to the execution of the written agreement, materially contradicting the testimony of Lay and Hargis.

“In Moyer v. Swygart, 125 Ill. 262, a bill was filed to set aside a will. The court say: ‘Both parties gave in evidence the statements and conversations of decedent, made by and had with him long before the making of the alleged will, and neither party will now be heard to insist such statements and conversations were not competent evidence. ’ (Ibid. 277.)

“By the express terms of the partnership agreement Whalen transferred to the partnership of Whalen, Lay & Stephens, for their joint interest, all his stock in the St. Peter’s company. Before the execution of the agreement Whalen had transferred to the St. Peter’s company all his stock in the Whalen company, and at the date of the agreement it was held by the former company. The stockholders of the St. Peter’s company were therefore the equitable owners of the stock of the Whalen company, and Whalen, knowing that the St. Peter’s company held all the Whalen company stock, must, we think, have intended by the agreement to transfer to the partnership the Whalen company stock. The object of the partnership is stated in the agreement to be ‘to take the necessary steps to revive and re-establish the Whalen company, and to re-open and renew operations upon what are known as the Whalen mines, in the Antelope mining district, in Eureka county, Nevada, and to proceed at once with the work and development of said mines.’ The mines referred to in the agreement by the words ‘known as the Whalen mines, ’ are the Whalen copper mines. This clearly appears from the evidence, including Whalen’s testimony. The contract further provides for the procuring of books and papers belonging to the St. Peter’s company, and calling stockholders’ and directors’ meetings of that company for the purpose of reviving and re-organizing the Whalen company. The expressed consideration for the transfer by Whalen of his stock to the partnership is, that each of the partners shall engage his best services and endeavors in and about promoting the interests of Whalen and the Whalen company.

“By the agreement Whalen was to have the exclusive management of the mines and the control of the employees. No salaries were to be paid until the mines should produce an income in excess of all expenses. The agreement provides that the partners shall consolidate their several interests into one interest, and that at the end of the partnership the partners shall account, each to the other; ‘and all and every the stock and stocks, and increase thereof, which shall appear to be remaining, either in money, goods, stocks, wares, merchandise, fixtures, debts or otherwise, shall be divided between them, share and share alike. ’

“The sole final purpose of the partnership, as expressed in the agreement, was to work the Whalen copper mines. No intention whatever is expressed or indicated of working the St. Peter’s mines. If, then, as Whalen claims, his partners, Lay and Stephens, acquired no interest in the Whalen company stock, they bound themselves to furnish money, their time and best services and endeavors in promoting the interests of a company in which they had no interest whatever and in the profits of which they could not participate,—in other words, for practically nothing; because, with the exception of the Whalen stock, the St. Peter’s company had no property,, and its stock was consequently worth nothing in the market. The partnership not being bound by the agreement to work the mines formerly belonging to the St. Peter’s company, or any mines in the name of that company, the provision above quoted for thé equal division between the partners, at the termination of the partnership, of all profits, stocks, etc., of the partnership, is, if the appellant’s contention be conceded, utterly meaningless. ‘Courts will seek to discover and give effect to the intention of the parties, so that the performance of the contract may be enforced according to the sense in which they mutually understood it at the time it was made. And greater regard is to be had to their clear intent than to any particular words which they may have used to express it.’ (Minnesota Lumber Co. v. Coal Co. 160 Ill. 85.) And for the purpose of ascertaining the intention of the parties, the court will endeavor, by extrinsic evidence of such facts as the parties had in view, to place itself as nearly as possible in their position, so that it may understand the language used in the sense intended by them. (Doyle v.Teas, 4 Scam. 202; Barrett v. Stow, 15 Ill. 423; Sigsworth v. McIntyre, 18 id. 126). In seeking to ascertain the intention, regard will also be had to the practical construction, if any, which the parties, by their acts, have given to the contract. (Leavers v. Cleary, 75 Ill. 349; Alexander v. Tolleston Club, 110 id. 65; Crown Coal and Tow Co. v. Yoch Coal Mining Co. 57 Ill. App. 666.)

“In Doyle v. Teas, supra, the court repudiates the rule announced by Lord Bacon, that a patent ambiguity can not be explained by parol evidence, and quotes with approval this language from Fish v. Hubbard, 21 Wend. 651: ‘It is impossible to sustain this rule if we take ambiguity in its broad sense of doubtfulness, uncertainty and double meaning.’

“After executing the agreement Whalen went to Nevada, Stephens having furnished him with money to pay his expenses and railroad transportation as far as Omaha and secure contracts for the copper mines formerly owned by the Whalen company. That a meeting of the stockholders of the St. Peter’s company was held about September 30,1897, at which a board of directors was elected, and the directors were authorized to liquidate an alleged indebtedness of the company to Whalen, and to. transfer to him 79,980 shares of the Whalen company stock theretofore donated by Whalen and wife to the St. Peter’s company, and that subsequently the board of directors transferred to Whalen 78,740 shares of the Whalen company stock, and passed a resolution thát the remaining shares not so transferred should be transferred to Whalen when all debts due by the St. Peter’s company should be satisfied, are matters not controverted. The appellant in his answer admits that 79,891 shares of the Whalen company stock were delivered to him by the directors of the St. Peter’s company, and that in lieu of small certificates of the same a single certificate was issued by the Whalen company when that company was organized and had elected a board of directors. The evidence shows that on October 1, 1897, the Whalen company issued to Whalen a certificate for 79,470 shares in his name, on which certificate is endorsed an assignment or transfer to Messrs. Lay, Stephens and Whalen, signed ‘Wm. Whalen,’ and on which is also endorsed: ‘Canceled by request of William Whalen and certificate No. 1084 issued in lieu of same.—Charles Lay, Secretary and Treasurer.—November 1,1897.’ Whalen’s signature to the assignment was proved.

• “Stephens, Lay and Whalen were elected directors of the company, and Stephens was chosen president, Whalen vice-president, and Lay secretary and treasurer of the Whalen company on its re-organization. November 1, 1897, the Whalen company issued to Lay, Stephens and Whalen certificate No. 1084, for 78,980 shares of the stock of that company. Lay testified that Whalen was present at a majority of the meetings of the board of directors. The agreement of February 10, 1898, between Lay and Whalen, a copy of which is contained in the statement preceding this opinion, shows what became of certificate 1084. It was provided by that agreement that certificate 1084 should be canceled and a new certificate, to be numbered 1136, for 82,115 shares, should be issued to William Whalen. The agreement contains the following significant language: ‘To be held by him, the said William Whalen, for the present, being all the time the property of the said Lay, Stephens & Whalen. ’

“Lay testified that the agreement was drawn under the following circumstances: Whalen had told him, Lay, that he, Whalen, had made a statement that there had been more stock sold by him to third parties than there had been sold to one Cooper, and asked him, Lay, to prepare a statement which he, Whalen, could use to exonerate himself; that the stock could be canceled and left in such a condition that it could be stated to have been issued to Whalen, and that it could be placed in Barnum’s hands; that he, Lay, then told Whalen that it would be impossible to cancel the certificate so far as Stephens was concerned, he being absent, but that so far as they two were concerned they might do it. Stephens, who, at the time of the agreement was absent in Boston on business of the Whalen company, had left his signature to about twenty blank stock certificates, to be used, if necessary, in the sale or transfer of stock. In pursuance of the agreement of February 10, certificate No. 1136, of date February 10, 1898, for 82,115 shares, was issued to William Whalen. Endorsed on the certificate is a blank for an assignment, no name of transferee or assignee being filled in, signed ‘William Whalen.’ June 22,1898, after Stephens returned from Boston, certificate 1136 was canceled and certificate 1190, for 72,119 shares of Whalen company stock, was issued in Whalen’s name. Lay testified that when certificate 1190 was issued, he, Stephens and Whalen went to Barnum’s office and left it in Bar-, num’s hands in escrow; that while they were all present in Barnum’s office, Stephens asked Barnum if he would charge anything for taking and holding the stock, and that Barnum said that as it came under the contract agreement for him to hold it in escrow he would make no charge for doing so.

“The issue to the partnership of Whalen company stock, Whalen being vice-president and a director of the Whalen company at the date of such issue, the transfer by Whalen to the partnership of stock issued in his name, the agreement between Whalen and Lay of February 10, 1898, and the depositing certificate 1190 with Barnum by and for the partnership, are not only evidence that it was the intention of the parties in executing the agreement of August 12, 1897, that the Whalen company stock should be partnership property, but are, as we think, inconsistent with any other reasonable hypothesis. These acts are a practical construction of the partnership agreement by the parties. Whalen in his testimony admitted that about the date of the February agreement he signed a paper for Lay, but that he could not read and did not know what it was; that he had promised Lay and Stephens 1000 shares each of Whalen company stock when the Whalen company should be on a paying basis if they would act honorably with the company and in his interest; that Mr. Lay said that Stephens and Lay ought to have something to show what had been promised them, and that the paper was read to him in that way. Lay not only testified as above stated in respect to the conversation between him and Whalen which preceded and led up to the execution of the agreement, but further testified that the contract was in duplicate and that Whalen took one of the duplicates—facts inconsistent with Whalen’s evidence. Whalen testified that he could read figures when plainly written and could write his name.

“Whalen attempted to avoid the effect of the testimony that certificate 1190 was deposited with Barnum in escrow by producing a receipt from Barnum for the certificate and a power of attorney from himself to Barnum, both of date June 22, 1898, in respect to the shares evidenced by the certificate, which receipt and power of attorney are wholly inconsistent with the hypothesis that the certificate- was partnership property or was deposited by and for the partners, and by testifying that he, Lay and Stephens were present when the receipt and power of attorney were executed, and that they were read in their presence. It was testified by Lay and Stephens that on June 22,1898, they, Lay and Stephens, left Barnum’s office together; that Whalen said he had some private business with Barnum and remained in the office after they left, and that they had no knowledge whatever of the receipt or power of attorney. William H. Gruver, an attorney at law and notary public employed in Mr. Barnum’s office, and who took, as notary, Whalen’s acknowledgment to the power of attorney, testified that Lay and Stephens were in Barnum’s office the day the power of attorney arid receipt were executed, but that they left the office before they were executed, and that at the time of the execution of the papers the only persons present in the office were himself, Whalen and Barnum. We think the master was warranted in discrediting Whalen’s testimony.

“Certain documentary evidence introduced by appellees tends to support their contention that the Whalen company stock was the property of the partnership. Among such evidence is an account signed by Whalen and sent by him from Nevada to Lay, which is headed ‘Private account of Stephens, Lay & Whalen.’ It is dated June 1,1898, and relates solely to expenses incurred, etc., in connection with the working of the copper mines in Nevada. The last item in the account is: ‘June 2.—Com-pany owes up to date $113.98. ’ Appellant’s counsel contend that the words ‘Private account of Lay, Stephens & Whalen’ are in a different handwriting from the remainder of the document, and a forgery, and the original document has been produced for our inspection. Frederick Mannheim, who was appellant’s clerk at the date of the document, testified that he wrote it at appellant’s dictation, and that the entire document, except the signature, ‘William Whalen,’ was in his (the witness’) handwriting. Our opinion is, on inspection of the document, that, excepting the signature, it is all in the same handwriting.

“Eight letters written by appellant while in Nevada, to Lay, were put in evidence by appellees. These letters indicate that the stock of the Whalen company was partnership property. In a letter of date May 24,1898, this occurs: T would like to put some miners to work in two or three of the mines. I will say again, about sixteen men for two months, say from June to July, would make Siegel & Cooper crazy, or anybody like them. Then our stock will be w'orth $200 a share, and a great deal more than that.’ In his letter of August 17, 1898, appellant writes: ‘Will yourself and stockholders give me an option on your stock for six months? You both ought to be willing to do this, ’ etc. In his letter of August 18, 1898, he'writes: ‘Before yourself and the rest of the directors of the majority of the board closes the office, I presume yourself and Mr. Stephens ought to be very willing and glad to give that option that I asked for in my letter of the 16th, the proposed stock that you both got by contract which is in escrow, which has not cost either of you a cent; on the contrary, you are money ahead. Under the present circumstances yourself and Stephens can’t have much value on the stock, so I am looking for you to give me a very low option, and that will relieve.you and Stephens of the great strain that you. claim you are undergoing.’ The only stock in escrow, so far as the evidence shows, is the stock placed in Barnum’s hands by the partners June 22, 1898. In his letter of August 20, 1898, he again asks for an option, writing: T hope you and Mr. Stephens will give me a reasonable option on your stock,’ etc. In his letter of September 1, 1898, he writes: T will give both of you $20,000 apiece if you will give me an option on your interest, as I have asked for before.’

“It appears from the evidence, including one of appellant’s letters, that money, the proceeds of sale of the Whalen company stock, was deposited in bank, by appellees’ consent, in the name of Lay as trustee, and that appellees were authorized by appellant to draw on the bank account. Whalen in his testimony refers to money, the proceeds of sales of the stock in question, as his private funds.

“Seven witnesses testify to admissions by appellant that appellees were his partners in the business of the Whalen company and in working that company’s mines. There was conflicting evidence on the part of appellant, comment on which would unnecessarily and profitlessly extend this opinion. Suffice it to say we regard the master’s conclusions of fact well supported by the evidence.

“It clearly appears from the evidence that the sole purpose of re-organizing the St. Peter’s company was to procure a transfer by that company of the Whalen company stock. The company after its re-organization and the transfer of that stock did nothing more. It also appears from the evidence that there was no intention on the part of Whalen or either of the other partners to operate any mines except the Whalen qompany copper mines. It was testified by Stephens, and his testimony was not contradicted, that the partners owned all the stock of the St. Peter’s company. Owning all the stock, they were able to control the company’s affairs.

“Appellant’s counsel contend that the St. Peter’s company could not lawfully hold the stock of the Whalen company, citing People v. Chicago Gas Trust Co. 180 Ill. 268. If this proposition were sound, we cannot perceive how it would help the appellant. If the donation by appellant to the St. Peter’s company was void, then the stock remained the property of appellant and he cofild lawfully contract for its becoming partnership property. The case cited is not the least in point. In the articles of incorporation of the gas company one of the objects of incorporation was stated to be to purchase and hold or sell the capital stock of other gas or electric companies. The question negatively decided was whether the power to so hold or sell could be conferred on the gas company under the general Incorporation law of this State. It was not decided in that case, nor has it been in any other case so far as we are aware, that a donation of money or personal property cannot lawfully be made to a corporation.

“It is also contended by counsel for appellant that no cause warranting a dissolution of the • partnership was proved. Stephens testified that during the summer of 1898 Whalen stated to him, in the presence of Lay, that after January 1, 1899, there would be no further partnership. It is apparent from the letters heretofore mentioned, written by Whalen to Lay, that there was a radical difference between the partners as to how the mines should be operated and that Whalen was bitterly antagonistic to his partners. In his letter of September 6,1898, to Lay he writes: ‘One of these days you will have to account for falsehoods and insults in touching my personal character, in the courts. Just as sure as God is in heaven I will try and bring you to justice. It’s an old saying, and a true one, that ‘It’s a long road without any turn in it. ’ * * * I see you have turned the business of the company into scandals that was never proven that such things or scandals ever existed. * * * You are like Siegel & Cooper—either rule or ruin. Yes, if there was $100,000 or $1,000,000, and yourself and Stephens had access to it as you did have, there would be nothing left for Mr. Whalen. * * * The understanding was, and the pledge was, that you both would not tell any one about the contract that was made between us. We did shake hands and word on this,—the three of us,—but you both broke your pledge and told it to the two Jews. Then you set them wild to try to get a block of stock for nothing. This it was that caused all this blackmailing business. It’s my opinion that you’ll make the same accomplishment as you did in Michigan City, and as you did in Chicago when you were secretary of the bicycle company. I’m sure I was not connected with either of those two enterprises. Yes, I knew all along that the outside stockholders did not know the rascality that was going on, and that is why you didn’t want to send their names and addresses. As long as you picked out remarks out of Mr. Shindel’s report, why didn’t you pick out all of it? Your action proves to me, and the letters you write, that you are just as crooked as a crooked stick could grow. Your history will come out after a while, but I suppose you won’t care. You have cheated the prisons out of a victim. There is plenty of honest men in them, and the Lord knows but you’d have your dues if you were there. But as I said before, it’s a long road without a turn. I don’t want to waste paper in writing more to you.’ As before shown, appellant was so anxious to dissolve the partnership that he offered his partners $20,000 each for an option on their interest.

“In Singer v. Heller, 40 Wis. 544, the court say: ‘The law seems to be well settled that a court of equity will dissolve a partnership when the disagreements and disputes between the parties have become so violent and lasting as to prevent any beneficial results from the continuance of the connection,’—citing authorities. In Girard v. Gateau, 84 Ill. 121, the court say: ‘That such embittered relations may exist as would render it impracticable to conduct the business and justify a decree dissolving the partnership admits of no discussion, on principle as well as upon authority. ’ (See, also, cases cited in note 2, 17 Am. & Eng. Ency. of Law, p. 1105.)

“We are of opinion, from the evidence, that such embittered relations exist between appellant and his partners as render it impracticable for them, as partners, to conduct beneficially the business of the partnership.

“Lastly, it is objected that the master should have reported a statement or account showing, in detail, what each partner owed to the others and to the partnership, and what the partnership owed to each of the partners. The objections to the master’s report, which stood as exceptions on the hearing, do not include any objection to the form of the report. The objections numbered 34 and 35 are as follows:

“ 'Thirty-fourth—To the finding that the complainant is indebted to this defendant upon the partnership accounting had before the master in only the sum of $479.17.

'"Thirtyfifth—To the finding that upon payment by this defendant to said complainant of the cost of this proceeding said complainant should be ordered to pay to this defendant only the sum of $479.17.’

“These are the only objections relating to the accounting, and we do not find them sustained by the evidence.

“Filed in the cause is what purports to be an abstract of the record. Little or no attempt at condensation has been made in its preparation. Questions to and answers by witnesses appear as in the record. The rule of the court requires that printed abstracts of the record,—not printed copies of it,—shall be filed. '

“The decree will be affirmed.”

The facts are correctly stated by the Appellate Court; and we concur in the conclusion reached by them, and in the reasoning by which that conclusion is supported. Accordingly, the judgment of the Appellate Court is affirmed.

Judgment affirmed.