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Smith v. Shoreline Printers & Publishers

JUNE 22, 1955.

P. WARREN SMITH, APPELLEE,

v.

SHORELINE PRINTERS & PUBLISHERS, INC., JOE M. COOKSEY, LANDFIELD FINANCE COMPANY, AND NATIONAL COMMITTEE ON BOYS AND GIRLS CLUB WORK, A NOT-FOR-PROFIT CORPORATION, DEFENDANTS. ON APPEAL OF LANDFIELD FINANCE COMPANY, APPELLANT.



Appeal from the Superior Court of Cook county; the Hon. JAMES R. BRYANT, Judge, presiding. Reversed.

MR. JUSTICE FEINBERG DELIVERED THE OPINION OF THE COURT.

Rehearing denied July 13, 1955.

Plaintiff sued to recover the amount due on a note, executed by defendant Shoreline Printers & Publishers, Inc., and Joe M. Cooksey, to secure which an assignment of an account receivable due from the defendant National Committee on Boys and Girls Club Work to Shoreline Printers & Publishers, Inc., was given to plaintiff. Landfield Finance Company held a prior assignment of this account receivable. At the trial plaintiff claimed that the Landfield Finance Company had agreed to subordinate its prior assignment of said account to the assignment given to plaintiff, which induced plaintiff to accept the assignment and to loan the money represented by said note to Shoreline Printers & Publishers, Inc. A trial without a jury resulted in a finding and judgment against defendants Shoreline Printers & Publishers, Inc., Cooksey and Landfield Finance Company. The appeal is only by Landfield Finance Company.

For convenience defendant Shoreline Printers & Publishers, Inc. will be referred to as Shoreline; Landfield Finance Company as Landfield, and the National Committee on Boys and Girls Club Work as the Club.

The complaint in substance alleges that Shoreline wrongfully secured payment from the Club of the account receivable, and wrongfully paid over the amount received to Landfield; and that defendants had knowledge of the assignment of the account receivable to plaintiff and knowledge of the subordination of the Landfield assignment to that of plaintiff.

For a better understanding of the question involving the authority of M.S. Landfield, as president, to subordinate the prior lien of Landfield to that of the plaintiff, it is necessary to briefly outline the corporate structure of Landfield. The evidence establishes that at the time of the transaction involved, M.S. Landfield was president of the finance company, George Landfield, his son, vice president, secretary and general manager, and Mabel Landfield, wife of M.S. Landfield, treasurer. There were 2,551 shares of stock of Landfield issued and outstanding, of which M.S. Landfield owned two shares; Mabel, his wife, owned 1,336 shares; George, the son, owned 646 shares; and the daughter of M.S. Landfield owned 567 shares. The directors were the three stockholders named. The by-laws of Landfield provide that the president shall have the active management of the business of the corporation.

The evidence on behalf of Landfield disclosed that George Landfield had general office supervision of Landfield and passed upon all loans made by Landfield. He testified, "Every loan goes through me." He had rejected many of his father's loans. No loan in excess of $2,000 had been made by the president without conferring with him.

Shoreline was at the time indebted to Landfield in excess of $100,000, to secure which Shoreline executed a chattel mortgage to Landfield of its physical assets and the assignment of the account receivable in question.

It appears from the evidence that M.S. Landfield became interested in another project during the year 1951-1952 and devoted most of his time to that project, leaving the supervision and management of Landfield to his son George. Prior to the transaction in question, plaintiff for many years had known defendant Cooksey, who was president of Shoreline, and extended some financial aid needed by Cooksey in his business. It further appears that at the time of the transaction in question, Cooksey needed immediate financial help to meet his payroll and offered plaintiff an assignment of the account receivable of the Club; that he informed plaintiff of the prior assignment of the account receivable to Landfield and promised to secure the consent of Landfield to subordinate the latter's assignment.

Cooksey testified that he and his foreman, Lambert, went to M.S. Landfield's home on Sunday evening, September 7, 1952, and informed M.S. Landfield of the need of Shoreline to meet its payroll due on the Monday or Tuesday following; that Shoreline had no money available to meet it; that the printing work in process would yield Shoreline additional revenue, estimated between $12,000 and $20,000; that plaintiff was willing to loan Shoreline $2,500 to meet the payroll, which, together with a previous indebtedness of $500 to plaintiff, would total $3,000, to secure which Cooksey had promised to give plaintiff an assignment of the account receivable of the Club, amounting to $5,100; that Landfield then agreed to the execution of the assignment of the account receivable to plaintiff and agreed to subordinate the Landfield assignment, so that the proceeds of the account receivable could be paid to plaintiff; and that Cooksey reported to plaintiff this meeting with M.S. Landfield and the agreement made with him.

It further appears that plaintiff, apparently to verify the statement of Cooksey, called the office of Landfield and asked for M.S. Landfield. He testified that someone, answering, said he was M.S. Landfield and confirmed to plaintiff over the telephone that he had agreed with Cooksey that Shoreline could execute the assignment of the account receivable to plaintiff, and that Landfield would subordinate its assignment. M.S. Landfield denied that he had any such meeting with Cooksey and Lambert at his home, and denied that he had any such telephone conversation with plaintiff. Plaintiff testified that he addressed a letter dated September 8, 1952, to M.S. Landfield, c/o Landfield Finance Company, which confirmed the telephone conversation between plaintiff and M.S. Landfield, notifying him that they were loaning the money to Shoreline and accepting the assignment of the account receivable of the Club, and intended to collect the proceeds of that invoice to repay plaintiff's loan. Landfield denied receiving this letter. A copy of the letter, as secondary evidence, was received over objection of defendant that a sufficient foundation had not been laid to admit secondary evidence.

The controlling question arising upon this record is whether M.S. Landfield, as president, had implied authority or acted within any apparent scope of authority in allegedly agreeing to the subordination of the assignment to Landfield. Admittedly, there is no express authority from the board of directors of Landfield to enter into such an agreement to subordinate, nor is there any such express authority to the president in the by-laws.

In Sacks v. Helene Curtis Industries, Inc., 340 Ill. App. 76, this court, reviewing the cases in Illinois and elsewhere upon this question, stated:

"`The president of a corporation is by virtue of his office presumed to have authority to execute such ordinary contracts as are required in the everyday business of the company. Quigley v. Macqueen & Co., 321 Ill. 124; Bloom v. Vehon Co., 341 Ill. 200; Domestic Bldg. Assoc. v. ...


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