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In Re Estate of Sternberg

MAY 14, 1956.

IN MATTER OF ESTATE OF WILLIAM F. STERNBERG, DECEASED. STERNBERG DREDGING COMPANY, PLAINTIFF-APPELLEE,

v.

ESTATE OF WILLIAM F. STERNBERG, DECEASED, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Ford county; the Hon. FRANK S. BEVAN, Judge, presiding. Reversed and remanded.

JUDGE REYNOLDS DELIVERED THE OPINION OF THE COURT.

Rehearing denied June 11, 1956.

On March 1, 1935, after the death of C.H. Sternberg, Deceased, his heirs entered into an agreement for the operation of a certain farm in Pulaski County, Indiana, jointly owned by the said heirs. These heirs were O.E. Sternberg, H.J. Sternberg, L.E. Sternberg, Minnie Hilbrant, Emma A. Walther, Jessie Sternberg, and W.F. Sternberg, each having a one-seventh interest in said farm, and the chattel property thereon consisting of livestock and other chattels. By this agreement, the seven heirs agreed that W.F. Sternberg should attend to the active management of the farm, making improvements to the farm and conducting a livestock business, and constituted and appointed the said W.F. Sternberg their true and lawful attorney in fact, and agent, to do and perform the following acts: 1. To demolish certain buildings on farm and erect others, as in his judgment were necessary, together with other improvements. 2. To take charge of the livestock and other personal property and to purchase other livestock as he saw fit, to care for, feed and prepare livestock for market. 3. To buy any and all feed needed to take care of the livestock. 4. To pay taxes on the property, to insure the buildings thereon, and to make such repairs and improvements as he might deem advisable. 5. To arrange for the farming of the property. 6. To sell crops and livestock, upon such terms and for such prices as he might deem proper. 7. To employ such labor and help as he might think proper. 8. To settle, adjust and compromise any debts, claims, demands or matters of dispute in the conduct of the business of the farm. 9. To operate under the name of Carl H. Sternberg Estate, W.F. Sternberg, Agent. 10. To execute note or notes to a bank or banks to be selected by W.F. Sternberg, as such agent. 11. To execute chattel mortgages as such agent. 12. To deposit money of the business in such bank or depository as he might choose, and to issue checks and payments in the transaction of the business. 13. To inventory the personal property owned by the heirs once each year, on or about January 1st. 14. To keep written accounts of receipts and expenditures. 15. To annually, make a written report of such inventories and accounts. 16. To receive as compensation $10 per trip to the farm, and the sum of $5 per day for attending the business of the farm operation, together with necessary expenses. 17. To distribute, when he deemed it advisable, such profits to the heirs, according to their rights, and if he deemed it advisable, demand that the heirs should contribute money for the carrying on of the business, the contribution of each heir to be according to his or her interest. 18. To use his own judgment in the conduct of the business, but if he desired, to consult with O.E. Sternberg.

The agreement provided for sale of the interest of an heir, and for the termination of the agreement. It also provided that the agreement should be construed liberally in favor of the powers granted to said agent, W.F. Sternberg.

On January 27, 1943, W.F. Sternberg as agent for C.H. Sternberg Heirs, executed and delivered to the H.J. Sternberg Dredging Company, a note due two years after date, with interest at 6% in the amount of $7,500. On the same day, January 27, 1943, another note signed as before, by W.F. Sternberg, Agent of C.H. Sternberg Heirs, due two years after date, with interest at 6% in the amount of $2,952.64, to H.J. Sternberg Dredging Company, was executed and delivered. The stock of the Sternberg Dredging Company, a Delaware corporation, was owned, except for two shares, by H.J. Sternberg, one of the C.H. Sternberg heirs, and one of the signers of the agreement of March 1, 1935. These two notes with accrued interest, are the basis for the claim in this cause.

H.J. Sternberg died January 10th, 1944, and afterwards, on October 21, 1949, the stockholders of the Sternberg Dredging Company, unanimously voted to dissolve. This dissolution consent was filed in the office of the Secretary of State for Delaware on October 24, 1949. On April 17th, 1950, W.F. Sternberg died. On July 5, 1950, the claimant, Sternberg Dredging Company, filed in the County Court of Ford county, Illinois, claim against the estate of William F. Sternberg, Deceased, in the amount of $16,715.61. The defendant estate filed an answer and numerous defenses, and the pleadings are quite voluminous, but since the matters raised will be considered later in this opinion, it is not necessary to detail them at this time. On February 25, 1952, the County Court of Ford county, Illinois entered judgment for the claimant against the Estate of William F. Sternberg, Deceased, in the amount of $17,750.41. This judgment was appealed to the Circuit Court of Ford county, and on December 2, 1952, the Circuit Court held that while the claimant corporation had been at one time authorized to transact business in the State of Illinois, that it had failed to pay its franchise tax to the State of Illinois, and had failed to file annual reports, and that on November 15, 1950, the Secretary of State of the State of Illinois had revoked the authority of the claimant corporation to transact business in this State, and that by reason of such revocation, the claimant corporation could not maintain its action against the defendant estate, and dismissed the suit with costs against the claimant and remanded the claim to the County Court. The claimant corporation appealed this order to the Appellate Court, and this Court, in the case of Sternberg Dredging Co. v. Estate of Sternberg, 351 Ill. App. 514, reversed the judgment of the Circuit Court and remanded the cause to that Court, holding that the Circuit Court erred in entering a final judgment against the claimant corporation, instead of continuing or abating the action until such time as the corporation filed the annual reports and paid the franchise taxes. Afterwards, the claimant corporation paid the franchise taxes and made the annual reports and filed its motion to re-instate the cause, with certificate from the Secretary of State of Illinois, that the claimant corporation had complied with all the provisions of the Business Corporation Act of Illinois. The cause was re-instated, and on May 9th, 1955, the Circuit Court entered its order and judgment allowing the claim in the amount of $20,040.05 and costs of suit against the defendant estate. The Circuit Court held that there was no partnership, that the obligation was joint and several, and could be enforced against any one of the obligors, and that the claimant corporation was not one of the obligors. From that judgment the defendant estate has appealed to this court. Thus this cause has been before the County Court of Ford county one time, before the Circuit Court of Ford county twice, and in this Court twice. Since some of the numerous defenses interposed by the defendant estate were passed upon in the decision of this Court in Sternberg Dredging Co. v. Estate of Sternberg, 351 Ill. App. 514, it will not be necessary to consider them. But in order to properly pass upon the case, it will probably be necessary to review them. Defense No. 1 was cured by amendment. Defenses Nos. 2, 3, 4, 5, 7 and 9 were disposed of by this Court in the case of Sternberg Dredging Co. v. Estate of Sternberg, 351 Ill. App. 514. Defense No. 8, contending that the act of loaning the money by the claimant was ultra vires was also disposed of by this Court in the same case. This leaves only defense No. 6, as amended, and defenses Nos. 8, 10, 11, 12 and 13, for this Court to pass upon. These defenses are interrelated and present these questions: 1. In what capacity did William F. Sternberg sign the notes? 2. Was there a partnership? 3. Was the claimant corporation, being owned wholly by one of the heirs, namely Herman J. Sternberg, an agent of Herman J. Sternberg, and if so, shall the corporation be treated as if Herman himself was plaintiff herein?

It must be conceded that in signing the notes William F. Sternberg acted in a representative capacity as agent for himself and the other heirs of C.H. Sternberg. It must be also conceded that by the terms of the agreement dated March 1, 1935, he was authorized to sign the notes in a representative capacity. The defendant admits this by its second defense, when this language appears "That the notes described in said claim were executed by the seven heirs of C.H. Sternberg, deceased, by William F. Sternberg, also known as W.F. Sternberg, their agent thereunto duly authorized." This being the case, if the estate of William F. Sternberg, can be held liable, it must be as one of the principals.

The second question "Was there a partnership" presents a very disputed question. The Circuit Court held that it was not a partnership that no partnership was intended by the agreement dated March 1, 1935, that nowhere in the agreement does the word "partnership" appear, but that the heirs were acting as a group of individuals operating a joint enterprise. The Circuit Court also pointed out in its opinion, that Herman J. Sternberg died January 10, 1944, and that by Section 31, Uniform Partnership Act, Chapter 106 1/2, Illinois Revised Statutes, the partnership would be dissolved by the death of any partner, yet no effort was made by William F. Sternberg or any other heir to wind up the alleged partnership.

The Uniform Partnership Act, Chapter 106 1/2, Illinois Revised Statutes, Section 6, defines a partnership as "An association of two or more persons to carry on as co-owners a business for profit."

Section 7, Chapter 106 1/2, Illinois Revised Statutes sets out rules to determine whether a partnership exists, as follows: — "(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

"(a) As a debt by installments or otherwise;

"(b) As wages of an employee or rent to a landlord;

"(c) As an annuity to a widow or representative of a deceased partner;

"(d) As interest on a loan, though the amount of payment vary with the ...


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