Appeal from the Circuit Court of Cook County; the Hon.
CORNELIUS J. HARRINGTON, Judge, presiding. Judgment affirmed.
MR. JUSTICE BRYANT DELIVERED THE OPINION OF THE COURT.
This is an appeal and cross-appeal from a judgment entered October 2, 1962, in the Circuit Court of Cook County, Illinois. The matter was transferred here from the Supreme Court of Illinois after it determined there was no reasonable constitutional issue presented.
The case arose when the petitioner-appellee and cross-appellant, hereinafter referred to as McCormick, a resident of California, sought a writ of mandamus against the Statler Hotels Delaware Corporation, hereinafter called Statler, and its secretary, William J. Friedman, a resident of Illinois. McCormick asked the Court below to order that Statler and Friedman make the list of Statler stockholders available for inspection, and also asked for the imposition of a penalty under Ill. Rev Stats 1959, c 32, § 157.45, in the amount of $4,425, that being ten per cent of the value of his stock.
The Court below heard the case without a jury and entered a judgment for McCormick in the sum of $2,000, but it did not grant the writ of mandamus. Statler appeals from the judgment ordering it to pay $2,000 while McCormick has filed this cross-appeal asking that the penalty be raised to $4,425, and that a writ of mandamus be issued.
The following stipulation was made by the parties at the time of the trial:
"1, that petitioner has been a record stockholder of six thousand shares of the defendant corporation for more than six months prior to the request to examine the stock records.
"2, that at all pertinent times, Statler has been duly registered in Illinois as a foreign corporation and duly licensed and authorized by the State of Illinois to transact business in Illinois.
"4, on October 21, 1959, Roy R. Ziv, attorney and agent for the petitioner herein, delivered to the defendant, Friedman, a Power of Attorney, authorizing the said Roy R. Ziv to examine the stock transfer records of Statler;
"That said Ziv at said time requested said defendant, Friedman, to permit him to examine said stock transfer records and said request was refused by defendant, Friedman, on October 21, 1959;
"5, that Petitioner was the owner of six thousand shares at the time of said request and that the market value of said six thousand shares at that time was $7.373 per share."
An official financial statement of Statler states that all the hotels belonging to Statler are leased to the Hilton Hotels Corporation. The lease between Statler and Hilton was entered into on October 27, 1954. The lease is to run for 17 years from that date, beginning with a yearly rental of $7,500,000 and declining yearly until the ninth year, when the rent would be $5,000,000, which rental would remain constant until the expiration of the lease in 1979.
When Statler was formed in 1954, it was set up to be a corporation that would do nothing more than hold title to property and lease the property to Hilton. The terms of the lease were described in detail in the Statler prospectus. McCormick admits that he only glanced at the prospectus when he received it, and that he bought the shares without reading the prospectus carefully. It was anticipated when Statler was formed that there would be considerable tax savings, and the success of the venture depended on a favorable ruling by the Internal Revenue Service. As the matter turned out, the Service did not hand down a favorable ruling, and the investment proved to be a bad one.
Statler points out McCormick could and should have known of this dependence on a favorable tax ruling. This was pointed out in the prospectus and it is claimed we should not allow him to say he did not know the true state of affairs. Statler also stresses that McCormick has long been in the hotel business and was a vice-president and general manager of the Pick Hotel Corporation. Being a man of some knowledge in business affairs, McCormick, according to Statler, should be held to a standard of care for his own welfare appropriate to a man of his experience.
McCormick replies that the fact Statler did not even go to court to try to have the tax ruling set aside indicates that the plan was indefensible and that the directors of the corporation should have known of this, and apparently, claims they were ...