Bates v. Paddock.

• Decision Date: 13 November 1886
• Citation: Bates v. Paddock., 118 Ill. 524, 9 N.E. 257, 59 Am.Rep. 383 (Ill. 1886)
• Parties: BATES, Assignee, etc.,v.PADDOCK.
• Court: Illinois Supreme Court

118 Ill. 524

9 N.E. 257

59 Am.Rep. 383

BATES, Assignee, etc.,

v.PADDOCK.

Supreme Court of Illinois.

November 13, 1886.

Appeal from Second district. Eckels & Kyle and H. T. Gilbert, for appellants.Skinner Bros. and Kendall & Lovejoy, for appellees.

MAGRUDER, J.

On July 2, 1883, Sower Bros. made trust deed to George S. Skinner, upon their mill property in Princeton, Bureau county, to secure their notes to the appellee, Anne G. Paddock. On April 26, 1884, they made an assignment, for the benefit of their creditors, to appellant, Eugene C. Bates, and in the list of creditors, attached thereto, named appellee as having a claim for $1,000. May 15, 1884, the assignee gave notice to all creditors to present their claims within three months. On August 14, 1884, appellee presented to the assignee and proved her claim for $1,017, being the amount due upon the notes so held by her. On August 18, 1884, the assignee reported, and filed with the clerk of the county court, a list of the creditors who had proved their claims, including therein appellee's claim, and stating therein that said claim was secured by the trust deed above named. No person interested as creditor or otherwise filed any exceptions to her claim within 30 days, or at any time. On December 30, 1884, the assignee filed, in the office of the county clerk, his report, showing that the total amount of all claims filed, including that of appellee, was $14,423.58, and that the total amount in his hands, subject to distribution, was $5,162.65; that appellee's claim then amounted to $1,043.33; and that the property, described in the trust deed, securing it, was worth only $765.75; and therein praying for an order of distribution of 30 per cent. among the creditors, except appellee, and, as to her claim, for an order to pay her 30 per cent. on the excess of her claim over and above $765.75, and to hold in his hands 30 per cent. on said $765.75 until her rights in the mortgaged property should be determined and realized upon, or until the further order of the court. The assignee's report, dated December 30, 1884, was approved by the county judge on January 27, 1885, and a dividend ordered in accordance with the prayer thereof. Appellee took an appeal to the circuit court of Bureau county, and, upon a hearing of the cause, on September 29, 1885, the circuit court rendered a decree, approving said report of the assignee, affirming the order of the county court made thereon, and directing a distribution to be made in the same manner as directed by the county court. At the hearing appellee offered to surrender or assign her claim and trust deed to the assignee, or other creditors, on payment of her claim in full, or to release her claim and trust deed upon payment of her claim in full by the assignee or creditors; but such offer was refused. At the hearing, also, appellee entered her motion for a dividend of 30 per cent. upon the full amount of her claim, as proven and reported, which motion was overruled by the circuit court. Appellee prosecuted her appeal from the circuit to the appellate court. The appellate court reversed the decree of the circuit court, remanded the cause, with directions that an order of distribution be entered, giving the appellee here, who was the appellant there, a dividend upon the full amount of her claim, and adjudged that she should recover of the assignee, Bates, who was appellee there and appellant here, her costs. The appellate court has allowed the assignee an appeal to this court, upon a certificate that the case involves questions of law of such importance, on account of the principal and collateral interests, as that it should be passed upon by the supreme court.

The question presented for our consideration is whether the assignee should have paid appellee a dividend upon the whole amount of her claim as proved and reported, or a dividend only upon the excess of her claim over and above the value of the security which she held. We think that the appellate court decided correctly, and that the dividend should have been upon the whole amount of the claim. The interest of the assignors in the property covered by the trust deed passed to the assignee, subject to the lien of the trust deed. All that the assignee took by the deed of assignment was the equity of redemption. The trust deed was owned by the cestui que trust therein named, and could not be subjected to the control or disposition of the assignee.

The thirteenth section of the ‘Act concerning voluntary assignments,’ etc., (Starr & C. St. 1307,) provides that ‘every provision in any assignment hereafter made in this state, providing for the payment of one debt and liability in preference to another, shall be void.’ The payment here referred to is a payment to be made out of the assets passed by the assignment to the assignee, or obtained by him by virtue of his position as assignee. If the letter of the law forbids any provision to be made, in the instrument of assignment, for preferential payments out of the assigned assets, the spirit of the law would forbid any such preferential payments in the mode of distributing such assets. To pay all the creditors, except one, dividends upon the full amount of their respective claims, and, at the same time, to pay that one creditor a dividend upon a portion only of his claim, is to give a preference over one creditor to all the rest of the creditors.

The section 13 above named also provides that ‘all debts and liabilities within the provisions of the assignment shall be paid pro rata from the assets thereof.’ Appellee's debt, as proved and reported without objection or exception, was $1,043.33. Her debt was not $277.58, the excess of $1,043.33 over $765.75, the estimated value of her security. Her whole debt was provided for in the assignment, because the whole of it was mentioned by the assignor himself as one of his debts in the attached list of liabilities. It was therefore the whole debt, and not a part of it, which was to be ‘paid pro rata from the assets.’ It is true that appellee held a trust deed securing her debt, but such trust deed had never been foreclosed, and no part of the debt had been paid out of the security. Before the assignment, appellee could have filed a bill to foreclose her trust deed, or, if she preferred, she could have sued at law on the notes, and enforced ‘payment from other means than the mortgaged property.’ Rogers v. Meyers, 68 Ill. 92. She could have obtained judgment and levied on personal property, though holding a mortgage on real estate. So, after the assignment, she could claim her dividend on her whole debt out of the general assets of the estate, though possessed of a special security. Of course, she could have but one satisfaction. The amount of the dividend must be credited on the debt, and the mortgage foreclosed for the balance, and, in the event of a surplus, that surplus would go to the assignee for the benefit of the other creditors.

Counsel for the appellant claims that the assignment act provides for winding up the trust within a limited time, and that such trust might be indefinitely prolonged if its settlement should await the realization of a surplus after foreclosure. By the decree of the circuit court the assignee was to take from the assets 30 per cent. of $1,043.33, to-wit, $312.99, and of this pay 30 per cent. on $277.58, to-wit, $83.27, to appellee; but the balance, to-wit, $229.72, that is, 30 per cent. of $765.75, was to be...