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Lurie v. Rupe

AUGUST 14, 1964.




Appeal from the Superior Court of Cook County; the Hon. WALKER BUTLER, Judge, presiding. Affirmed in part, reversed in part and remanded with directions.



This is an appeal by petitioners-intervenors, Helen Wallace, Pauline Hirschberg, Norman Asher, David Horwich, Minnie Horwich and Arnold Shure, hereinafter referred to as petitioners, from an order entered in the Superior Court of Cook County on January 2, 1962, dismissing the complaint of the original plaintiffs, Samuel C. Lurie and Josephine Lurie, hereinafter referred to as plaintiffs, because (1) Sylvan Lang (defendant personally and as trustee) has not been served with process and is an indispensable party; and (2) complaint fails to state a cause of action since plaintiffs have failed to allege breach by defendants of any duty owing to plaintiffs. Petitioners also appeal from an order entered on February 5, 1962, denying their petition for leave to intervene and their motion to vacate the order of dismissal entered January 2, 1962. Petitioners and plaintiffs are residents of this State. Petitioners have adopted the complaint of the plaintiffs and made it a part of the petition. The plaintiffs are not appealing the dismissal.

There is a cross-appeal by all defendants alleging that the Superior Court did not have jurisdiction over any or all of them collectively since they were all nonresidents and none transacted business in Illinois and asking this court to reverse a portion of a decree entered on November 6, 1961, denying their motion to quash process on defendants, D. Gordon Rupe and San Antonio Corporation, a Delaware corporation.

This action was originally brought by plaintiffs for themselves and all others similarly situated in a representative suit charging that the trustees of a voting trust which controlled 85% of the 383,560 authorized and outstanding shares of the corporation had violated the trust agreement by selling corporate assets without notice in violation of Article IV, Section 2 of the voting trust which requires 20 days written notice upon all holders of voting trust certificates; by illegally extending the trust agreement in direct violation of Article VIII, Section 1, which provides that the trust should terminate in ten years as of August 31, 1947; and by failing to distribute the proceeds of a total or partial liquidation of the corporation to the trust beneficiaries and shareholders of the corporation in violation of Article IX, Section 1, which provides that in the event of a total or partial liquidation the trustees shall receive the money, securities, rights or property and shall distribute the same among the holders of trust certificates in proportion to their interests, or the trustees may deposit such monies or property with the Chicago Title and Trust Company as agent of the trustees with authority to make distribution thereof. Plaintiffs sought relief in damages against the trustees personally, sought to void the sale of the assets of the corporation, sought to void the alleged illegal extensions of the voting trust, and sought to force the trustees to distribute to the shareholders and certificate holders their fair share of the proceeds of the liquidation.

On February 1, 1962, a petition to intervene was filed, verified by Arnold I. Shure, a petitioner and attorney, stating among other things that the plaintiffs had compromised their interest in the suit and had sold their certificates prior to the entry of the order of January 2, which order was entered in violation of section 52.1 of the Civil Practice Act and erroneously adjudicated the rights of the plaintiffs and the class they purported to represent. If such order be allowed to stand the petitioners and the interests of the class would be bound.

San Antonio Corporation is an outgrowth by reorganization of Smith Young Tower Corporation. On August 31, 1937, a written voting trust agreement was entered into by and between the defendants, Sylvan Lang and D. Gordon Rupe, and such of the owners and shareholders who might become party thereto. The defendants, Lang and Rupe, are Vice-President and President of the corporation respectively, as well as trustees of the voting trust and directors of the corporation. The principal business of San Antonio Corporation is the ownership of stock in certain subsidiary corporations. Chicago Title and Trust Company has been appointed transfer agent of the corporation and the voting trust and has served in this capacity for many years. The shares of San Antonio Corporation, the physical corpus of the voting trust, are deposited in Chicago with the Chicago Title and Trust Company. Suit was commenced by service of process in Illinois upon the Chicago Title and Trust Company and upon D. Gordon Rupe in Texas. Sylvan Lang was never served although a personal judgment is sought against him. Jurisdiction was properly quashed against Lang personally and no appeal has been taken from that order.

The voting trust was scheduled to expire on August 31, 1947. It was illegally extended by the trustees in 1947 and again in 1957. About May 1, 1959, the corporation entered into an agreement with the City of San Antonio, whereby it sold to the City assets consisting of the San Antonio Public Service Company, a franchise to operate buses for public transportation in the City of San Antonio and the necessary equipment for the operation of the bus line. The defendants without notice to the certificate holders thereupon purchased the common stock of American Desk Manufacturing Co., a Texas corporation, and actively commenced the business of manufacturing desks and school furniture.

Before considering the intervention question it is imperative to determine whether there are enough contacts present for the courts of Illinois to take jurisdiction over the defendants. There are three classes of defendants: San Antonio Corporation, the trustees, and Rupe as an individual. Personal jurisdiction is sought against all three based on different contacts with Illinois. The primary illegal activities complained of occurred physically in the State of Texas: illegal sale of assets, illegal voting and illegal manipulation.

Section 17 of the Civil Practice Act (Ill Rev Stats c 110, § 17) governs jurisdiction of the courts of this State and imposes jurisdiction on all persons whether or not a citizen or resident who perform any of four enumerated acts within the State. That the courts and legislature of a state have the power to phrase or interpret the jurisdictional power of that state to a point short of the bounds of federal due process is well settled. Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 440 (1952); Missouri Pac. R. Co. v. Clarendon Co., 257 U.S. 533, 535 (1922). Jurisdiction of the courts of Illinois has been limited for the present by the legislature of this State to the four enumerated acts set out in section 17 and to the pronouncements of the courts of this State interpreting that section. The case of Kaye-Martin v. Brooks, 267 F.2d 394 (7th Cir 1959) has interpreted that in order to impose jurisdiction because of "the transaction of any business within this State" the "cause of action must be based on events which occurred in Illinois." This interpretation was subsequently limited in the 1963 Historical and Practice Notes to the annotated statutes (SHA, 1963, c 110, § 17) to the effect that:

"It was not the purpose of subsection (3) of section 17 to limit the assertion of jurisdiction under the section to cases in which every element of the transaction on which the claim is based occurred within the State of Illinois. . . .

"Jurisdiction may exist under section 17 even though only some of the events upon which the cause of action is based occurred in Illinois, provided that those events amounted to the minimum contacts with the state which are essential to jurisdiction."

[3-5] San Antonio Corporation has continuously and systematically transacted business in Illinois for the past seventeen years. It has maintained the Chicago Title and Trust Company as transfer agent, registrar, mailing agent and dividend disbursing agent of the stock held in the voting trust for the corporation in Illinois. Defendants rely on two New York cases: Robbins v. Ring, 166 NYS2d 483 (1957); Joseph Walker & Sons v. Lehigh Coal and Nav. Co., 167 NYS2d 632 (1957). These cases quash jurisdiction on two nonresident corporations where contacts were sought to be established through the activities of their New York transfer agents. The jurisdictional statute in effect in New York at the time of decision in these cases was not as broad as the comprehensive statute in effect in this State. We feel in no way bound by these cases. The test now is not the old "doing business" test but merely whether "minimum contacts" are present sufficient to allow the forum to assume jurisdiction. Grobark v. Addo Machine Co., Inc., 16 Ill.2d 426, 431, 441, 158 N.E.2d 73 (1959). It is quite true that the duties of a transfer agent are ministerial subsidiary financial duties often performed in a foreign state due to the requirements of a stock exchange or as in this case under court order. These are not relevant considerations under the Illinois law nor under the federal cases interpreting the limits of the due process clause. Both the United States Supreme Court and our own courts have laid down rules that the imposition of jurisdiction should depend upon the "quality and nature" of the forum contacts (International Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)); whether defendant "engaged in some act or conduct by which he may be said to have invoked the benefits and protections of the law of the forum" (Hanson v. Denckla, 357 U.S. 235, 253 (1958)); Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 440, 176 N.E.2d 761 (1961); the test should not be "mechanical or quantitative" (Nelson v. Miller, 11 Ill.2d 378, 384, 143 N.E.2d 673 (1957)); and the facts of each case determine the outcome (Perkins v. Benguet Consol. Mining Co. (supra at 445)).

In this case the relevant inquiry is whether San Antonio Corporation's activities in this State were of such a nature as to impose jurisdiction and whether any part of the cause of action arose in this State. The cause of action here centers around the illegal manipulation of a voting trust. The Chicago Title and Trust Company performed activities as agent for both the corporation and the trustees intimately connected to the manipulation and perpetuation of the voting trust. While it might easily be said that the activities of a transfer agent are not of a qualitative nature in a case having no connection with the internal administrative and financial arrangements of a corporation, they are of a substantial qualitative nature here. Grobark v. Addo Machine Co., Inc. (supra) which quashed jurisdiction on a New York corporation because the two distributors in Illinois were independent businessmen selling their own merchandise which had been manufactured by Addo, does not apply here at all. It is true that Chicago Title and Trust Company is an independent organization doing business in Illinois. This, standing alone, is not a relevant factor. Consolidated Cosmetics v. D-A Publishing Co., 186 F.2d 906, 908 (1951). Chicago Title and Trust is the expressly appointed agent of the defendant, continuously entrusted with certain well defined duties which it would not perform unless directed to do so. There is no profit motive or increased sales because San Antonio Corporation employs Chicago Title and Trust, but this does not detract from the continuous business contacts between the two companies. In ...

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