Blair v. Illinois Steel Co.

• Decision Date: 20 January 1896
• Parties: BLAIR et al. v. ILLINOIS STEEL CO. et al.
• Court: Illinois Supreme Court

159 Ill. 350

42 N.E. 895

BLAIR et al.

v.ILLINOIS STEEL CO. et al.

Supreme Court of Illinois.

Jan. 20, 1896.

Appeal from appellate court, Second district.

Bill by the Illinois Steel Company and others to have a receiver appointed for the winding up and dissolution of the Joliet Enterprise Company, to set aside a certain trust deed and have it declared a general assignment for the benefit of creditors, and to determine and enforce the liabilities of stockholders of the corporation. From a judgment of the appellate court (53 Ill. App. 314) setting aside the trust deed, the trustee, Chauncey J. Blair, and certain hereinafter named beneficiaries under said trust deed, appeal. Reversed.E. A. Otis (Geo. S. House, of counsel), for appellants,

E. P. Prentice (Williams, Holt & Wheeler, of counsel), for appellees.

On December 10, 1892, the Will County National Bank and Joseph Stephen filed their bill in the circuit court of Will county, alleging, among other things, that the complainant Stephen had recovered a judgment against the Joliet Enterprise Company, a corporation of this state engaged in manufacturing barbed wire at Joliet, and execution had been issued and returned unsatisfied, and that said incorporation was insolvent, and praying for the appointment of a receiver, the dissolution of the corporation, the ascertainment and enforcement of the individual liability of the stockholders and directors, and for such other, further, and different relief as might be agreeable to equity. On December 24, 1892, the Cleveland Rolling-Mill Company and Illinois Steel Company filed their bill in said court, alleging, among other things, that the Cleveland Rolling-Mill Company had recovered a judgment against the Joliet Enterprise Company, December 1, 1892, for $17,464.67, on which execution was immediately issued, and which remained wholly unpaid and unsatisfied; that said Joliet Enterprise Company was also indebted to the Illinois Steel Company in the sum of $169,751.04; that Charles M. Fish, George M. Fish, Henry M. Fish, Francis H. Connell, and John T. Brooks were directors and officers of said Joliet Enterprise Company; that said directors Charles M. Fish, George M. Fish, and Henry M. Fish, together with Henry Fish, their father, composed the firm of Henry Fish & Sons; that on November 30, 1892, the defendant corporation confessed judgment in said circuit court in favor of said firm of Henry Fish & Sons for $176,420.96, on which execution immediately issued, and was levied on all the property of the corporation; that on the same day said corporation executed and delivered a trust deed to Chauncey J. Blair, trustee, securing various creditors, to the amount of about $159,000; that said corporation at that time was, and for many months prior thereto had been, insolvent; and that said confession of judgment and trust deed were unlawful attempts to prefer creditors,-and praying that James L. O'Donnell, assignee of said firm of Henry Fish & Sons, insolvent, should be enjoined from enforcing said judgment; that the judgment and trust deed should be set aside and declared null and void; that the trust deed be decreed to be a general assignment for the benefit of creditors; that the assets of the corporation should be marshaled, administered, and distributed among all the creditors of the corporation; that liabilities of stockholders, directors, and officers should be determined and enforced; and that complainants might have such other and further relief as to equity should seem meet. The whole property of the corporation, except such as was in the custody of the sheriff, under the execution in favor of Henry Fish & Sons and certain attachment writs, had been in the possession of a receiver, appointed under a bill filed in the United States court; but on the same day that said bill of the Cleveland Rolling-Mill Company and the Illinois Steel Company was filed, the bill filed in the United States circuit court was dismissed for want of jurisdiction, and George H. Munroe, the former receiver, was appointed receiver under said bill of the Cleveland Rolling-Mill Company and the Illinois Steel Company, and took possession as such. On December 30, 1892, the court, on its own motion, and in pursuance of the stipulation and agreement of parties, consolidated the two suits so begun in the Will county circuit court, and the appointment of Munroe as receiver was extended over both. The Joliet Enterprise Company was defaulted on the bill to wind up the corporation, but answered the bill which questioned the judgment confessed and the trust deed, and contested that bill. James L. O'Donnell, assignee for Henry Fish & Sons, in his answer, claimed the right to enforce the judgment in favor of that firm for the full amount for the benefit of their creditors. The trustee and beneficiaries under the trust deed, in their answer, claimed the benefits conferred by the trust deed, and insisted on its validity. A cross bill was also filed by Chauncey J. Blair, trustee, and certain of the beneficiaries named in the trust deed for the foreclosure of the same. The Cleveland Rolling-Mill Company and Illinois Steel Company answered the cross bill, challenging the validity of the trust deed, and setting out substantially the same matters averred in their original bill concerning it. Joseph S. Wiley and the Ashley Wire Company were brought in as defendants in said cross bill filed to foreclose the trust deed, and they answered and filed a cross bill thereto, alleging the recovery of judgments in their favor against the Joliet Enterprise Company, and averring that no execution had issued because the property of the corporation was in the hands of a receiver, and that the trust deed was an unlawful preference, and not authorized, and praying that it should be set aside and declared null and void. Afterwards said Joseph S. Whey and the Ashley Wire Company were, by order of the court, admitted as complainants in the bill of the Will County National Bank and Joseph Stephen; and on the hearing of the cause said Joseph S. Wiley filed an intervening petition, setting out the recovery of his judgment, and asking to be made a party complainant with the Cleveland Rolling-Mill Company and the Illinois Steel Company in their bill. The prayer of the petition was granted, and said Joseph S. Wiley filed a supplemental bill to said bill of the Cleveland Rolling-Mill Company and the Illinois Steel Company, alleging that he recovered said judgment, and that no execution was issued because the property of the Joliet Enterprise Company was in the hands of a receiver, as aforesaid.

As a result of the hearing the court found that the judgment recovered by confession in favor of the firm of Henry Fish & Sons was based upon six judgment notes of the Joliet Enterprise Company, for $29,000 each, which were given for money actually loaned to said corporation by said Henry Fish & Sons; that said corporation was insolvent March 31, 1892, and thereafter the directors had no right to loan it money and take judgment notes therefor; that four of said judgment notes were renewals of like notes for loans made before March 31, 1892, and two were for loans made after that date; that the corporation had no power to make said last two judgment notes, because three members of said banking firm were members of the corporation; that $1,000, included in the judgment as attorney's fees, could not be sustained, and that $1,420.96 was wrongfully included as interest; and it was decreed that said judgment should stand for $116,000 only, the principal of the four notes held valid. The findings concerning the trust deed, and the rights of the beneficiaries thereunder, were that the several debts secured by the trust deed were all evidenced by notes of the Joliet Enterprise Company; that the debts were not created when the trust deed was made, but had existed a considerable time; that neither the trustee nor any beneficiary knew of the execution and recording of the trust deed, until after it was executed and recorded by the officers of the corporation; that in every case, except that of Cornelia A. Miller, two or more members of the banking firm of Henry Fish & Sons, who were also directors of the corporation, were bound as guarantors for the payment of the indebtedness, by written guaranties indorsed on the notes; that, as to such debts so guarantied, the trust deed was an unlawful attempt on the part of the directors to secure indebtedness for which they were personally liable; that on November 30, 1892, the same day the trust deed was made, the corporation paid to Cornelia A. Miller, on her note, $4,500, leaving due her $500 and interest; that judgment was confessed on said note for $621.35, which included $50 attorney's fees; that said attorney's fees should not be allowed; and that she had a right to rely on the trust deed to the amount of $508 and interest due. The cross bill to foreclose the trust deed was therefore dismissed, with costs, for want of equity, except as to said Cornelia A. Miller, and except as to her the trust deed was held to be an illegal and fraudulent preference, and was set aside and canceled.

From the decree that was rendered by the circuit court an appeal was taken to the appellate court of the Second district by James L. O'Donnell, assignee of Henry Fish & Sons, by Chauncey J. Blair, trustee, and by the Merchants' National Bank of Chicago, the American Trust & Savings Bank of Chicago, the Third National Bank of New York, the Will County National Bank, the First National Bank of Joliet, and the Washburn & Moen Manufacturing Company, whose claims were secured by the trust deed. In the appellate court numerous errors were assigned by these appellants, and cross errors were assigned by the Illinois Steel Company and by others. By the judgment of the appellate court the decree of the circuit court was affirmed in all respects, except as to the judgment by...