Appeal from the Circuit Court of Cook County; the Hon. CHARLES
S. DOUGHERTY, Judge, presiding. Reversed and remanded with
MR. PRESIDING JUSTICE ENGLISH DELIVERED THE OPINION OF THE COURT.
Rehearing denied June 1, 1964.
This is an appeal from dismissal of a petition for a writ of mandamus to compel defendant corporation and its officers to transfer shares of its stock owned by a deceased shareholder to plaintiff as his executor and to issue the certificate therefor.
The decedent had been one of five doctors who were subscribing shareholders in a corporation formed to operate a collection agency business dealing primarily with delinquent medical accounts. The minutes of a special meeting of the board of directors on July 19, 1960, reflect that each of the five doctors had paid in $2,400; that each was "entitled" to 480 shares of stock; and that the secretary was "directed to prepare stock certificates to be issued to the respective holders." Due to a delay, possibly occasioned by a slight modification of the corporate name, the certificates had not yet been issued at the time of a regular meeting of the board on November 15, 1960, when, as again disclosed by the corporation's minute book, the board "directed that the stock certificates be issued."
Defense to the action rests primarily upon a purported stock reacquisition agreement among the original subscribers. This alleged agreement appears solely in the minutes of the directors' meeting of November 15, 1960. It is there stated that the decedent himself had expressed concern over the possible ownership of shares by a widow upon the death of a shareholder, considering that such an eventuality would not be in the best interest of the corporation. A motion by one of the other subscribers was thereupon carried unanimously, the full text of which is as follows: "[I]t is the agreement of the stockholders that in the event a stockholder died, his stock would be purchased by the corporation at its book value and the widow or beneficiary of the stock would receive the proceeds."
Two weeks later plaintiff's decedent died. The defendants obtained a report from a certified public accountant in which the decedent's 20% ownership interest in the book value of the corporation, as at November 30, 1960, after provision for federal income tax and after provision for contribution to the profit sharing trust was stated to be $4,264.57. This amount was offered to plaintiff for his decedent's interest in the corporation, but was rejected by him and this litigation ensued.
The initial question concerns the propriety of the remedy in view of the alleged reacquisition agreement. Defendants argue for the principle that mandamus will not lie where title to stock is in issue. *fn1 However, the historical purposes for this rule would seem to have been negatived or fulfilled so as to obviate the rule itself and preclude its application in the instant case.
A nineteenth-century authority, High, Extraordinary Legal Remedies, 3rd Ed, § 313 (1896), sets out one purpose of the rule as being based on the availability of another remedy, as follows:
In conformity with the general principle that mandamus will not lie when other adequate and specific remedy may be had at law, the courts refuse to lend their interference by this extraordinary writ for the purpose of compelling the transfer to a purchaser of shares of capital stock upon the books of an incorporated company, or to compel a company to issue certificates of stock. In all such cases full and complete satisfaction, equivalent to specific relief, may be had by an ordinary action at law to recover the value of the stock, and the existence of such other remedy is a complete bar to the exercise of the jurisdiction by mandamus when it does not appear that the particular stock in question possesses any especial value over stock of the corporation.
In a footnote, High cites Shipley v. Mechanic's Bank, 10 Johns Rep 484 (1813), which makes the point forcefully:
The applicants have an adequate remedy, by a special action on the case, to recover the value of the stock, if the bank has unduly refused to transfer it. There is no need of the extraordinary remedy by mandamus in so ordinary a case. It might as well be required in every case where trover would lie. It is not a matter of public concern, as in the case of public records and documents; and there can not be any necessity, or even a desire, of possessing the identical shares in question. By recovering the market value of them, at the time of the demand, they can be replaced. This is not the case of a specific and favorite chattel, to which there might exist the pretium affectionis.
In the case before us it is nowhere suggested that plaintiff be limited to a suit for damages, perhaps because the stock could not be replaced, there being none available on the open market. But defendants do suggest that the executor be relegated to another remedy citation proceedings in the probate court under Ill Rev Stats ch 3, §§ 183-187a. Without passing on the applicability of that statute, it should be pointed out that the Mandamus Act was amended in 1874 to provide: "The proceedings for a writ of mandamus shall not be dismissed nor the writ denied because the petitioner may have another specific legal remedy, where such writ will afford a proper and sufficient remedy; . . . ." Ill Rev Stats 1961, ch 87, § 9. See Carus v. Matthiessen, 196 Ill. App. 445, 449 (1915). We give no credit, therefore, to defendants' argument that mandamus is inappropriate because of the availability of another remedy.
Another historic reason for the impropriety of mandamus in a case relating to corporate stock was the danger to the corporation in making a mistake in issuing certificates since, under a general common law rule, the corporation was bound to protect all interested persons against illegal or unauthorized transfers of stock. See Campbell v. Morgan, 4 Ill. App. 100, 105 (1879). Accordingly, where a corporation was sued in mandamus to transfer stock on its books to an assignee-plaintiff, the writ was denied because plaintiff's right thereto was not clear in view of conflicting claims of ownership. The court, in People v. Elgin Motor Car Corp., 209 Ill. App. 601, 605 (1918), concluded as follows:
[D]efendant was not obliged to act at its peril and determine the conflicting claims arising as to the ownership of the said stock, but under the circumstances was ...