Appeal from Circuit Court of St. Clair County; the Hon.
FRANCIS E. MAXWELL, Judge, presiding. Affirmed.
The trial court granted a summary judgment in favor of all defendants in the plaintiff's suit for damages arising out of the sale of sixty-three percent of the corporate stock of Frontier Life Insurance Company, which stock was owned by the plaintiff and had been pledged to the defendant bank as security for a loan in the sum of $44,500. Frontier Life Insurance Company (now Apollo National Life Insurance Company) was dismissed out of the suit by stipulation of the parties and is not a party to this appeal.
The note involved was dated June 1, 1966. On June 30, apparently as a result of indictments returned by the St. Clair County Grand Jury charging violation of the Illinois Insurance Code concerning misuse of corporate funds by certain directors, the defendant bank felt insecure concerning the collateral on the above-mentioned loan and ordered the loan called. On that date, the president of the bank, defendant Joseph C. Hauser, delivered the following notice to plaintiff Frontier Investment Corporation:
"It is with deep regrets, due to circumstances, that I have been instructed to demand payment of your loan of $44,500.00 dated June 1, 1966.
"It is the judgment of our Bank, due to circumstances, that the securities pledged have materially depreciated in value. We expect payment of the principal and interest on or before July 5, 1966.
"Principal $44,500.00 "Interest to 7/5/66 259.58 __________ $44,759.58
"After the 5th of July, the securities will be sold as per the Pledge of Collateral Agreement signed by your Company on June 1, 1966."
On the date of this letter, the defendant bank in response to inquiries as to the market price of the life insurance company stock had received statements from three different brokers stating that as of that date there was no market for the stock. The record further discloses that during the day of July 5, the plaintiff through its officers made various abortive efforts to make payment of the obligation due to the defendant bank without success.
After the close of banking hours on July 5, the bank's executive committee met to discuss the failure to receive payment of the loan. At 3:00 p.m. the bank's president received a call from the defendant broker advising of a firm bid of $.35 a share for the stock. This was refused because it did not satisfy the total loan and interest. Immediately thereafter, the same broker advised that it had a bid of $.39 a share, good until 3:30 p.m. on July 5, 1966. The sale at this price was confirmed and the certificates delivered to the broker. Thereafter the broker advised that the defendant Sidney Katz was the purchaser of the stock.
It appears that defendants John Robbins, Earl Butterfield, Charles Gibson, and Sam Miller were directors of both Frontier Investment Corporation and Frontier Life Insurance Company. It also appears that John Robbins was vice president of Frontier Investment Corporation and president of Frontier Life Insurance Company. At 11:45 p.m. on July 5, the plaintiff deposited a bank draft in the night depository box of the defendant bank, together with a letter demanding the return of the pledged collateral insurance stock. On July 8, Frontier Investment Corporation filed a complaint seeking only injunctive relief to restrain the bank, the broker, Katz, and the life insurance company from completing the sale of the stock to the defendant Katz. This temporary injunction was denied following a hearing on July 11, and leave granted to the plaintiff to file additional pleadings. On the same day, Katz filed a suit for the appointment of a receiver for the life insurance company charging the directors with mismanagement, asked for the termination of the directorships of Robbins, Butterfield, Gibson, and Miller, the election of new directors and the issuance of the stock to himself. The four named individuals, individually and as members of the board of directors of the insurance company, joined issues in this suit, moved to vacate the appointment of the receiver and objected to every act of the receiver. The motion to vacate was denied. A special shareholders' meeting was held on July 28, and defendant Katz and one Ogden, Slayton, and Chase were elected as directors of the insurance company. Upon presentation of the stock to the receiver, duly endorsed, the receiver caused a new certificate for 117,100 shares of the life insurance stock to be issued to Sidney Katz. The work of the receiver having been concluded and over the specific objections of the four named individuals to "approval of an order of this court ordering the transferring of 117,100 shares of stock of the Frontier Life Insurance Company, which is owned and belongs to the Frontier Investment Corporation," the court found in paragraph (c) of its order that "the actions of the receiver as to the reissuance of said certificate for 117,100 shares to Sidney Katz be and the same are hereby approved." The receiver was discharged. No appeal was taken from this order.
It is the position of the plaintiff that (1) the court originally had no jurisdiction to appoint a receiver and that any acts of such receiver or orders of the court approving the receiver's conduct are void, unenforceable, and are not a bar to the instant action, (2) that in any event the receivership proceeding did not decide any issues presented in the present complaint and did not determine the rights or obligations of the parties to the action now before the court and (3) that the orders in the receivership proceeding did not purport to deal with the "disposition" of the collateral by the defendant bank to Katz and hence did not hold that that disposition was commercially reasonable.
The plaintiff contends that the receivership proceeding is a nullity for the reason that § 201 of the Insurance Code, Ill Rev Stats 1967, c 73, § 813, holds in substance that no action interfering with the prosecution of the business of an insurance company may be brought except upon the application of the director of insurance and that the instant suit brought by an alleged stockholder did not confer jurisdiction. In support of this contention, plaintiff cites People v. Niehaus, 356 Ill. 104, 190 N.E. 349; People v. Miner, 387 Ill. 393, 56 N.E.2d 353; Korman v. Matthias, 32 Ill. App.2d 341, 177 N.E.2d 720; People v. Peoria Life Ins. Co., 357 Ill. 486, 192 N.E. 420. We cannot agree that the proceeding in the Katz suit and the appointment of the receiver is a nullity or that such proceeding is not a judicial proceeding. In People v. Williams, 392 Ill. 224, 238, 64 N.E.2d 464, 470, the Supreme Court indicated that § 201 was primarily concerned with interfering with, obstructing or terminating the insurance company's business and stated:
". . . Conversely, section 201 does not assume to restrain the prosecution of actions based upon ...