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Guettel v. Hillebrecht





Appeal by defendant from the Circuit Court of Cook county; the Hon. CORNELIUS J. HARRINGTON, Judge, presiding. Heard in the first division MR. JUSTICE FRIEND DELIVERED THE OPINION OF THE COURT.

Balaban and Katz Corporation, respondent to a rule to show cause in this proceeding, entered July 21, 1950, appeals from an order of the circuit court entered April 24, 1951, providing in substance for the specific enforcement of an alleged sale of certain assets of Congress Building Corporation to it, and, as an incident thereto, from a series of so-called interlocutory orders collateral to the issues of the principal litigation between plaintiffs and defendants herein, in which respondent was not a party nor in any wise involved.

Jennie Guettel and others initiated the main litigation on May 20, 1946 by filing a complaint in equity against Congress Building Corporation and three voting trustees under a trust agreement dated May 18, 1936, relating to the stock of the corporation. The corporate property consists of several parcels of land on Milwaukee avenue at Rockwell street, improved with four buildings constructed so as to give the appearance of a single unit; one of these is a theatre building with an entrance lobby on Milwaukee avenue adjoining the corner. In 1936 the property was placed in trust under a reorganization plan, with the primary object liquidation of its assets as soon as there was an available market. Plaintiffs are the registered holders of 70 units of a total of 12,390 issued. They alleged that during the ten years of their tenure of office the trustees made no attempt to sell or liquidate the trust property, as was contemplated under the terms of the trust indenture; that on April 1, 1946 the trustees, by resolution, extended the trust to May 18, 1951, contingent upon approval by 51 per cent of the certificate holders; that plaintiffs were refused access to the list of registered owners of certificates which they desired to use for the purpose of having a sufficient number of them join with plaintiffs in opposition to the extension; that the trustees improperly influenced certificate holders to vote in favor of the extension; and plaintiffs sought a decree holding that the vote thus obtained be decreed of no force and effect, that the extension be held to be void, and that the court direct the trustees to immediately advertise the premises for sale, the court to pass upon the form, notice and terms of the sale, and if fewer than the required holders of certificates still objected to the sale, then the sale to be held in court.

On October 15, 1946 an order was entered striking from the complaint all the prayers except that with respect to the sale of the property. The order directed that the trustees continue their efforts to make a satisfactory sale of the assets of the corporation or of its stock, and that on or before eight months thereafter they report their progress to the court; and it provided specifically that the provisions of the order "shall not be construed as an order that said assets or stock shall be sold."

In a supplemental amendment to the complaint filed August 1, 1949, plaintiffs sought further to have the court find and determine that the acts of the officers, directors and trustees, as alleged in the complaint, were illegal or fraudulent; that the payment of commission to one of the trustees was improper and excessive; that the extension of the trust was illegal and void; that Hillebrecht was disqualified to serve as a voting trustee or as an officer and director, that the appointment of Benjamin Wham as successor trustee subsequent to the acquisition of the jurisdiction by the court was void and without force and effect, and that he be disqualified to serve; that the trust property either be sold at an upset price of not less than the bid made by the lessee or, in the alternative, that the court direct a liquidation of the corporation pursuant to section 86 of the Business Corporation Act; and plaintiffs prayed that an order be issued restraining the corporation and trustees from encumbering the property or taking any steps inconsistent with the relief prayed for until the further order of the court. On oral argument counsel stated that the case is not at issue; no decree or order has been entered on the merits as to any issue raised on the complaint or supplement thereto, nor has any decree or order been entered on the merits of the cause or for the sale, liquidation or disposition of any of the assets of the corporation.

On March 1, 1950, an informal conference was held in the chambers of JUDGE PRYSTALSKI relating to the sale of the real estate and personal property of the corporation, at which the court and counsel for all parties were present. Balaban and Katz Corporation, which was not a party to the main litigation, was represented at that conference by C.D. Satinover, who appeared at the request and invitation of the trustees. At that conference respondent verbally offered to pay $540,000 for the real and personal property. On March 7, 1950, following the conference, a petition for instructions was filed by the defendant building corporation and the trustees reciting the offer which they characterized as "fair and reasonable," and which, they felt, "should be accepted," and they prayed that an order be entered "authorizing and directing petitioners to execute and deliver to Balaban & Katz Corporation, a contract for the sale of all of the assets of said Congress Building Corporation for the sum of Five Hundred Forty Thousand Dollars ($540,000.00) subject to submission of said agreement to the certificate holders" for approval. In the several hearings which followed, JUDGE PRYSTALSKI and counsel for the trustees both recognized that at most the court was merely acting in an advisory capacity, as appears from the following excerpts from the record; the trustees were advised by their counsel that they could act independently of the court under the broad powers conferred upon them in sections 1 and 2 of article IV of the trust instrument, but that to do so might be taken as an affront to the court, and others might take exception to it. "The Court: After all, the trustees are appointed to consider the situations and their powers, in the petition that you filed, which sets forth some of their powers, their powers are very broad.

"Mr. Biossat [attorney for the trustees]: They are.

"The Court: And they can act without me.

"Mr. Biossat: I grant you that, and I so abide by it." Then, reading from the trust agreement, the court referred to the broad powers of the trustees to not only vote the stock but to sell, mortgage, pledge or lease it, and continued as follows: "Well, if these trustees have the power to sell all of the property of the corporation, it isn't in my province to say that they should be sold, that the corporate assets should be sold. It is their problem. I will, if they make a recommendation to me, I will back them up. I will try to follow their recommendation. They have now two bids. This is not a trial. This a matter for the —

"Mr. Biossat: For the trustees to act upon.

"The Court: For the trustees to act upon, and it was brought to my attention, and it is here, and if the trustees want to act on it, they have my blessing to act on it. . . . For two years that I know of, approximately two years, they have been trying to sell this property. They have not been able to do it, and now the thing came up to a sale, the other day, for $540,000.00. That price is now raised to $600,000.00 [a bid subsequently made on behalf of David W. Pollock]. . . . All I am interested in is the sale or proceedings that will lead up to the sale.

"Mr. Wade: To protect the security holders.

"The Court: Yes. Now, the matters of detail as to the contract are matters of future consideration, and I will take care of them. But a sale is being made on a general proposition of a sale, and there is to be a statement made as to the amount of taxes that one shall pay, rents, and all of those things are to be adjusted, as is done in the ordinary case. Now that is all that is before me."

At the last of several hearings before JUDGE PRYSTALSKI on April 12, 1950 he referred the matter to JUDGE HARRINGTON with the comment: "I don't want it any more. I want things that are ready. Send it to Judge Harrington for the 26th. You can tell him about it. It won't take long." After the matter was referred to JUDGE HARRINGTON, further hearings were had, during which he entered the several orders that are the subject matter of this appeal. JUDGE HARRINGTON was unaware that there were no orders authorizing or directing a sale of the property, and was undoubtedly under the impression that the matter had been referred to him for the sole purpose of carrying on the sale. This is indicated by the following (on May 4, 1950):

"Mr. Satinover: Before directing my attention to the amount of the bid, I would like to take just a minute or two to indicate our position in the matter. We are not parties to this proceeding. There has been controversy among the Trustees for some time as to certain issues which are not important here, and I think your Honor referred that matter to the Master for hearing. It was obvious apparently to the Trustees that all that that would result in would be long extended litigation, and I have been informed, I was informed that Mr. Biossat with the consent of the Trustees, determined to present a petition to the Court, in effect, seeking the Court's advice and help in disposing of the case, it apparently being agreed ...

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