Appeal from the Circuit Court of Madison County, Third
Judicial Circuit; the Hon. JOSEPH J. BARR, Judge, presiding.
This is a chancery case brought in the Circuit Court of Madison County seeking to have certain notes and mortgages executed by a corporation in favor of the defendants set aside, and plaintiffs be awarded a first and prior lien against all assets which secured such notes and mortgages. The court entered judgment denying the relief sought by the plaintiffs and this appeal was taken.
The relevant facts as may be gleaned from the testimony, exhibits and stipulations are as follows:
On January 3, 1944, Luer Bros. Packing & Ice Co., an Illinois Corporation, had authorized capital of Five Hundred Twenty Five Thousand Dollars ($525,000) consisting of 2,100 shares of seven percent (7%) cumulative preferred stock and 3,150 shares of common stock, each having a par value of One Hundred Dollars ($100). The stock was owned in practically three (3) equal parts by three brothers: William J. Luer, Carl Luer, and Herman F. Luer. On January 3, 1944, Herman F. Luer and Carl A. Luer sold all of the shares of preferred and common stock of the corporation, which they owned, to the corporation, and in consideration the corporation agreed to pay the sum of Three Hundred Forty Thousand Two Hundred and No/100 Dollars ($340,200), as follows: Forty-nine Thousand Five Hundred and No/100 ($49,500) was paid in cash on that date, and, further, the corporation delivered to Carl and Herman F. Luer a series of seventeen (17) notes, executed by the corporation, numbered 1 through 17, aggregating Two Hundred Ninety Thousand Seven Hundred and No/100 Dollars ($290,700), one of such series being payable to the order of Herman F. Luer and the other to the order of Carl A. Luer, each note in each series being dated January 3, 1944, being for the sum of Eight Thousand Five Hundred Fifty and No/100 Dollars ($8,550), and bearing interest at the rate of three percent (3%) per annum, payable semiannually, first note in each series being numbered one (1), maturing January 3, 1948, and the balance of the notes in each series maturing in numerical order, one on January 3 of each year thereafter until 1964, when the last of the notes matured.
Following the transaction full ownership and control of the corporation was then in the third brother, William J. Luer.
Note numbered 1 in each series was paid in 1945. Two more notes in each series, being notes numbered 2 and 3, were paid in 1946. After the death of William J. Luer which occurred in 1946, the corporation paid three more notes in each series, being notes numbered 4, 5, and 6, during the year of 1947, two notes in each series, being notes numbered 7 and 8, during the year 1948, and two more notes in each series, being notes numbered 9 and 10, maturing January 3, 1956 and January 3, 1957, during the year 1953. Subsequent to the transaction complained of, the corporation paid note numbered 11 in each series, maturing January 3, 1958, and paid the interest accruing upon the balance of said notes up to January 3, 1960.
Herman F. Luer died on August 20, 1952, naming the plaintiff, Alton Banking & Trust Co. as Trustee of his estate.
Carl A. Luer died on November 19, 1965, a resident of the State of Florida. The plaintiff, Alton Banking & Trust Co. was appointed Administrator with Will annexed for the Estate of Carl A. Luer.
During the later part of 1957 and for some time prior thereto the corporation was authorized to issue 2,500 shares of stock consisting of 750 shares of seven percent (7%) cumulative preferred stock of par value of $100 per share and 1,750 shares of common stock of par value of $100 per share, of which 750 shares of the 7% cumulative preferred stock and 1,098 shares of the common stock were actually issued and outstanding. The defendants were the owners of all the outstanding shares as follows:
Owner Preferred Common Stock Stock
Minnie Luer and Dorothy L. Harms, 64 896 as Trustees Under the Will of William J. Luer Minnie Luer, Individually 410 26 Dorothy L. Harms, Individually 263 16 David L. Saylor, II 13 145 G.G. Mihill 15 ___ _____ 750 1,098
The evidence further revealed that on December 27, 1956, a conference was held at the Alton plant between George H. Suelthaus, an attorney and the Secretary of the corporation at the time, Dorothy Luer Saylor, the President, G.G. Mihill, the Vice-president, and Norman Brammell, a business consultant specializing in the packing house industry, who had been employed to manage and supervise the business; that as a result of the conference Mr. Suelthaus proceeded to familiarize himself with all of the facets of the operation; that he found that the corporation had a loss pattern for the past year and one-half; that its cash position had been weakened by the expenditure of some $100,000 during the past year for modernization of its sausage unit; that economies would have to be effected, including the termination of Mr. Brammell's services due to the expense involved; and that the labor situation at the plant was the major reason for the corporation's inability to operate on a profitable basis.
Mr. Suelthaus testified that on February 11, 1957, the corporation terminated the services of Mr. Brammell; that at about the same time, the Office Manager, who had been employed through Mr. Brammell, tendered his resignation; that a replacement for the Office Manager was found through Peat, Marwick, Mitchell & Co., the corporation's auditors, in the person of Mr. Paul Branding, a certified public accountant; that after interviewing a number of applicants for the office of Plant Manager, Mr. Grover Foster, who had been employed in the packing house industry for many years, was selected as the best qualified man available for the office; that despite the changes in management and numerous economies effected, the corporation continued to lose money; that at a special meeting of the Board of Directors held on September 26, 1957, it was decided to employ the law firm of Moller & Talent, of St. Louis, Missouri, to negotiate with the labor union representing the employees which had previously given notice that its contract would expire October 30, 1957, and that it would expect higher wages and greater fringe benefits; that these attorneys reported that the union was not willing to make any concessions and about October 15, 1957, it was decided to stop killing, to liquidate the perishable inventory and to make efforts to obtain a purchaser of the business by means of the purchase of all the outstanding stock; and that on November 1, 1957, the plant was put strictly on a standby basis, with Mr. Branding being put in charge of the plant and nothing but the sales force and such employees as were required to maintain the cooling system and the other essential equipment being retained on the payroll.
Mr. Suelthaus also testified that on or about November 9, 1957, Mr. Harry Munson, former Officer Manager, contacted him advising that he and his associates, Gerald Moss and William Drake, were interested in purchasing the plant and requested that he get in touch with their attorney, Mr. Ralph Curry, of St. Louis, Missouri; that he and Mr. Curry then negotiated the sale of the stock; that he first offered to sell the stock at book value but his offer was rejected; that Mr. Curry advised him that his clients would not be interested unless a plan could be worked out which would enable the corporation to acquire all the outstanding preferred and common stock and provide a minimum of ...