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Winger v. Richards-wilcox Mfg. Co.

SEPTEMBER 27, 1961.




Appeal from the Circuit Court of Cook County; the Hon. FRANK H. BICEK, Judge, presiding. Affirmed.


Rehearing denied October 23, 1961.

Four stockholders brought a mandamus action against the defendants, the Richards-Wilcox Manufacturing Company, its president and its secretary. The stockholders were three brothers, Richard, John and Thomas Wise, and their sister, Elizabeth Winger. Their complaint alleged that the defendants refused to permit them to examine the company's books and records. After various pleadings had been filed, Elizabeth Winger moved for summary judgment. Her motion was granted, a writ of mandamus was ordered and the president and secretary were held liable to her for the statutory penalty. Ill. Rev Stats c 32, § 157.45 (1959).

The company and the two officers appeal from the order granting summary judgment and from the order denying their motion to vacate the judgment. Although the issues of the case are unresolved as to the three Wise brothers, the trial court made an express finding that there was no just reason for delaying the appeal. Ill. Rev Stats c 110, § 50(2) (1959).

The orders appealed from are final insofar as the Richards-Wilcox Company is concerned, but as to the president and secretary there remains to be determined the amount of the judgment against them for ten per cent of the value of Elizabeth Winger's stock. Since the orders as to the individual defendants are not final, their appeal will be dismissed.

Section 45 of the Business Corporation Act states that for a proper purpose a stockholder has the right, at any reasonable time or times, to examine a company's books. The corporate defendant's amended answer raised the issue of the plaintiffs' good faith; it charged that the action had been brought for an improper purpose, that it was to harass the defendant and to force it to pay an exorbitant price for the plaintiffs' shares. The principal question before us is whether this is a genuine issue of fact which should have precluded the summary judgment. Ill. Rev Stat c 110, § 57(3) (1959).

Before attempting to answer this question we must decide what evidence can be considered. Affidavits of the defendant are in dispute and the issues pertaining to them are two: may a court permit the filing of counter-affidavits after summary judgment has been entered, and can parts of depositions be incorporated in a summary judgment affidavit, if the depositions have not been filed in the case? The dispute arose in the following way: the plaintiff's motion for summary judgment and the defendant's motion to strike were set for hearing on January 8, 1960, at which time the motion to strike was denied and the motion for summary judgment was granted. The attorney for the defendant was absent on January 8th and he filed an affidavit explaining why he had not been present and moved to vacate the order of that date. Later he was granted leave to file his own affidavit and another in opposition to the motion for summary judgment. The argument over these two affidavits is somewhat academic. The attorney's affidavit, as we shall see, is so replete with conclusions, that it is of little value. The second affidavit merely incorporated by reference an affidavit already before the court, one which had been filed in support of the defendant's own motion for summary judgment.

Section 57(3) of the Civil Practice Act provides that affidavits in opposition to motions for summary judgment are to be filed before or at the time of the hearing on the motion. But on January 8th the defendant had pending a motion to strike; there was no need to file the affidavits until this motion was ruled upon. If its motion were sustained, counter-affidavits would be unnecessary; if its motion were denied, leave could be asked for time to file the affidavits. Because of a misunderstanding, the defendant was not represented in court when its motion was denied. Under this circumstance it should not be refused the privilege of fully presenting its evidence. Whether to allow affidavits to be filed after the hearing is ordinarily within the discretion of the court. Gliwa v. Washington Polish Loan & Bldg. Ass'n, 310 Ill. App. 465, 34 N.E.2d 736. The court properly exercised its discretion in this case.

The second question is the content of the personal affidavit of the defendant's attorney. It contained excerpts from depositions taken from the Wise brothers and it is contended that this was improper inasmuch as the depositions had not been placed on file. The plaintiff cites section 57(3) of the Civil Practice Act ("The judgment . . . shall be rendered . . . if the pleadings, depositions and admissions on file. . . .") and relies upon Sobelman v. Caliendo, 23 Ill. App.2d 314, 162 N.E.2d 598. The Sobelman case differs from the instant one in that the affidavit in that case merely recited the conclusions of the affiant as to the content of a deposition, whereas in this case quotations from the deposition are given. The problem has been passed upon by this court in Ness v. Bilbob Inn, Inc., 15 Ill. App.2d 340, 146 N.E.2d 234, wherein using parts of an unfiled and formally incorrect deposition in an affidavit for summary judgment was approved, where such parts constituted admissions against interest. The excerpts in this case were for the same purpose; they were submitted to show that the plaintiff had a different reason for examining the company's books than stated by her, and to show that her brothers were acting as her agents in their negotiations with the company.

Turning now to the evidence — from the complaint, amended answer, motions and the melange of exhibits and affidavits, including those we have just discussed, the following facts are disclosed: the Richards-Wilcox Company is a closely held corporation — controlled by the individual defendants and two other directors — which does not issue financial statements to its shareholders. It has 5,247 shares of stock which are unlisted and have no publicly known market value. Elizabeth Winger owns 18 shares of stock and her brothers 52 shares. They inherited the shares from their parents who had owned them for more than 20 years.

On April 10, 1958, Richard Wise wrote the president saying that he had attended the annual stockholders' meeting on March 15th and requested income statements, balance sheets and surplus account statements for 1957, 1956 and 1955 so that he could become more familiar with the company's operations. The company replied that it was not its policy to publish or send out confidential financial information, but if Wise wished to call at the company's office the subject could be discussed further. On June 17th Richard, John and Thomas Wise wrote the president saying that as shareholders they wished to know the value of their shares and wanted a list of other shareholders so that they could contact them with a view to selling their stock. They said that if a convenient time could be arranged they would send an auditor to the company to obtain the information. The company replied that their letter had been turned over to its attorney. The attorney wrote them that he would be glad to discuss the matter after his return from a vacation. On July 3rd the three brothers again wrote the president. They said they wanted a date set within two weeks for their auditor to obtain the information they desired and if this was not done they would consult their attorney. The company replied on July 7th that it was very willing to supply the brothers with all the financial information to which they were entitled. Thereupon, July 17th was fixed for the auditor's visit.

He spent two hours inspecting the company's audit reports for several prior years and the list of shareholders. The assistant treasurer of the company, in an affidavit, said that other financial records were available to the auditor but that he declared he didn't need them. In a counter-affidavit the auditor denied that any other records or books were offered to him or that he declined to use them.

In a letter dated August 13th Thomas Wise thanked the president for the information given to the auditor and inquired if he knew of anyone who would be interested ". . . in acquiring the seventy (70) shares of the Company owned by our family." On September 2nd the president asked what price Wise had in mind. Thomas Wise replied on September 10th that he felt a fair price would be somewhere near the book value of the stock. He wrote: "We would be glad to consider an offer made by anyone interested in acquiring all of the shares of the family." The company's treasurer responded on September 11th that he had communicated Wise's offer to six stockholders and two executives but that no one was interested.

On October 1st Elizabeth Winger joined her brothers in addressing a letter to the company and to its president and secretary, requesting permission to examine the company's books and records of account, reserves, minutes of directors and executive committee meetings, officers' and directors' salaries, bonuses, retirement plans and expense accounts, company-owned-aircraft logs, and the record of the shareholders. The purposes of the examination were stated to be: establishing the value of their shares, the determination of the legality and reasonableness of officers' and directors' salaries, bonuses and expenses and an analyzation of the company's dividend policy. The letter related several complaints the writers had with the company and said they had been informed that the company would refuse to permit the examination. The letter ended with the warning that legal action would follow the refusal to grant their formal request. An exchange of correspondence between attorneys ensued in which the attorney for the company said ...

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