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Nugent v. Collins

OPINION FILED OCTOBER 20, 1980.

BEVERLY NUGENT, TRUSTEE, PLAINTIFF-APPELLEE,

v.

RIEMORE NUGENT COLLINS ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.

MR. PRESIDING JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

This litigation involves the capital stock of two Illinois corporations: Midwest Machinery Movers (Midwest) and Mechanical Wallmaster, Inc. (Mechanical). The stock at issue consists of 15 shares of Mechanical and 100 shares of Midwest. It is undisputed certificates reflecting these shares were issued to "John A. Nugent Trust, John A. Nugent, Trustee." John A. Nugent died on January 11, 1979. Beverly Nugent (plaintiff) is his surviving spouse and executor of his estate.

The litigation here involved was commenced on April 25, 1979, when plaintiff filed suit against Midwest, Mechanical and Riemore Nugent Collins (defendants). After trial, a judgment order was entered finding the John A. Nugent trust is the owner of the shares in question and plaintiff is the lawful successor trustee of said trust. The court directed that A Midwest and Mechanical be required to hold shareholders meetings; and that one-half of the stock of Midwest and Mechanical be reissued to plaintiff as successor trustee. This appeal by defendant Collins, Midwest and Mechanical followed.

In this court the defendants contend plaintiff did not have a clear legal right to the issuance of a writ of mandamus because she was not a shareholder of record when she commenced the action; plaintiff was obliged to establish her right to become a shareholder before being entitled to the writ; plaintiff failed to prove annual meetings of the shareholders were due to be held when she filed her suit; plaintiff did not establish a clear legal right to issuance of half of the corporate stock to her as successor trustee of the John Nugent trust; and the trial court erred in preventing defendants from raising affirmative defenses.

The size of the record and the length of the briefs before us make the formulation of a correct factual statement a difficult task. In our opinion, much of the evidence is extraneous. However, the record does show the following facts. The John A. Nugent trust agreement was dated February 19, 1959. The trust was the owner of record of 100 shares of Midwest and 15 shares of Mechanical. There is also in existence a Riemore Nugent trust created by a trust agreement dated February 19, 1959. The trustee thereof was formerly Riemore E. Rosauer. The present duly acting trustee thereof is Riemore Nugent Collins, defendant. The deceased John A. Nugent and defendant are half brother and sister.

Testimony was given by an auditor who was familiar with the affairs of both corporations and by one of the attorneys for plaintiff who had examined all of the corporate records involved. The United States Corporation income tax returns filed by these corporations for 1974 to 1977 inclusive indicate that each of the trusts is the owner of one-half of the outstanding corporate stock. The attorney's testimony traced the corporate history of both corporations. As regards Midwest, the corporation is a result of several mergers. However, it appears from the record before us that the total outstanding shares of stock in Midwest are 200 which are equally divided as regards registered ownership between the John A. Nugent trust and the Riemore Nugent trust.

Prior to the death of John A. Nugent he was trustee of the trust, and he was the president and a director of both corporations. On January 12, 1979, defendant Collins, acting as the sole director, elected herself acting president and also elected a vice president and secretary for both corporations.

Plaintiff offered in evidence an executed copy of the John A. Nugent trust. This document provides plaintiff is designated as first successor trustee in event of the death of the original trustee. During the pendency of this appeal, plaintiff located an original executed copy of the agreement. Plaintiff made a motion in this court to supplement the voluminous record by addition of this executed original. This court being satisfied by examination of both documents that the executed carbon copy received in evidence is in fact a true and correct copy, we have denied the motion as unnecessary. It also appears that on March 20, 1979, plaintiff accepted her designation as successor trustee. On or about March 6, 1979, plaintiff sent similar notices to the shareholders of both corporations purporting to call a special meeting of shareholders. Plaintiff also sent notices on March 27, 1979, calling an annual meeting of shareholders. The complaint for mandamus prays for a direction that both corporations hold annual meetings of shareholders. Additional facts will be discussed as required.

Defendants' first four contentions deal with the alleged failure of plaintiff to prove her legal right to a writ of mandamus. "Mandamus is an extraordinary remedy and will not be awarded unless a clear right to the writ is shown." Kohl Outdoor Advertising, Inc. v. Department of Transportation (1979), 72 Ill. App.3d 413, 415, 390 N.E.2d 950.

I.

Defendants first argue plaintiff had no clear right to mandamus because plaintiff did not attempt to reregister the shares in her name upon the death of John A. Nugent and therefore, she was not the shareholder of record. Defendants depend upon section 30 of the Illinois Business Corporation Act which provides, in part (Ill. Rev. Stat. 1979, ch. 32, par. 157.30):

"Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares standing in the name of a trustee may be voted by him, either in person or by proxy."

• 1 In our opinion, despite the fact the stock of both corporations was actually in John A. Nugent's name and was not reregistered in plaintiff's name at the time this suit was commenced, plaintiff, as successor trustee, had clear legal right to vote the stock. While the books of the corporation do not show a change of ownership of the stock, the right to vote the stock and all other rights incident to ownership thereof were transferred by operation of law to plaintiff, as the successor trustee, upon the death of John A. Nugent. (See Bogert, Trusts & Trustees § 532 (2d ed. 1978), citing Reichert v. Missouri & Illinois Coal Co. (1907), 231 Ill. 238, 83 N.E. 166.) The physical act of reregistering the stock would have been purely ministerial since it would be "absolute, certain and imperative, involving merely the execution of a set task * * *." Peabody v. Sanitary District (1928), 330 Ill. 250, 257, 161 N.E. 519.

In addition, tender of the stock certificate by plaintiff to the corporation for transfer would have been a useless act. John A. Nugent's death left both corporations without a president to approve the transfer or sign new certificates. Section 34 of the Business Corporation Act (Ill. Rev. Stat. 1979, ch. 32, par. 157.34) provides the number of directors may not be less than the number of shareholders. Therefore, defendant Collins did not have authority as "sole ...


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