Chicago Title & Trust Co. v. Munday

• Decision Date: 08 June 1921
• Docket Number: No. 13525.,13525.
• Citation: 131 N.E. 103,297 Ill. 555
• Court: Illinois Supreme Court
• Parties: CHICAGO TITLE & TRUST CO. v. MUNDAY et al.

297 Ill. 555

131 N.E. 103

CHICAGO TITLE & TRUST CO.

v.MUNDAY et al.

No. 13525.

Supreme Court of Illinois.

April 21, 1921.

Rehearing Denied June 8, 1921.

Bill by William C. Niblack, receiver of the La Salle Street Trust & Savings Bank, the Chicago Title & Trust Company being appointed as receiver on his death, against Charles B. Munday and others. Decree dismissing the bill was affirmed by the Appellate Court, which allowed certificate of importance, and plaintiff appeals.

Reversed and remanded, with directions.

Appeal from Second Branch, Appellate Court, First District, on Appeal from Superior Court, Cook County; Denis E. Sullivan, Judge.

Hiram T. Gilbert, of Chicago, for appellant.

Moses, Rosenthal & Kennedy, C. Van Alen Smith, and Delbert A. Clithero, all of Chicago (Walter Bachrach and Henry Jackson Darby, buth of Chicago, of counsel), for appellees Bennett, Gunderson, and Hock.

STONE, J.

On September 21, 1916, William C. Niblack, as receiver of the La Salle Street Trust & Savings Bank, filed a bill against appellees, as directors of said bank, seeking to recover moneys lost by the bank through their alleged negligent acts as such directors. An amended bill was filed April 12, 1918. Demurrers were filed by various defendants, which were by the decree of the superior court of Cook county sustained, and the amended bill was dismissed for want of equity. An appeal was prayed and allowed to the Appellate Court for the First District, which affirmed the decree of the superior court and allowed a certificate of importance, and the cause comes here by appeal.

During the pendency of the cause in the Appellate Court William C. Niblack, receiver, died, and the Chicago Title & Trust Company was appointed in his stead, and prosecutes this appeal.

As the amended bill was dismissed on demurrer, the only question involved in this record is whether or not it stated a cause of action.

As the history and affairs of this illstarred venture have been stated in cases previously before this court, particularly in the case of Golden v. Cervenka, 278 Ill. 409, 116 N. E. 273, it is not necessary to set out such history as is contained in the bill in this case. The bill sets out the various steps in the organization of the La Salle Street National Bank of Chicago and of the La Salle Street Trust & Savings Bank and of the taking over by the latter of the assets and liabilities of the former. The original complainant was appointed receiver on June 10, 1914, for the La Salle Street Trust & Savings Bank by the circuit court of Cook county by reason of a bill filed at the instance of the auditor of public accounts and the receiver was directed to wind up its business affairs and to collect and distribute its assets among the parties entitled thereto.

One of the objections of the appellees, under the demurrer filed, is that the receiver did not have authority, in the absence of express authority given him by the court, to institute the present proceedings. This contention is without merit. The order of the circuit court appointing the receiver authorized him to institute and prosecute, either in the name of the La Salle Street Trust & Savings Bank or in his own name as such receiver,any and all suits at law and in equity which he might deem necessary or advisable for the collection of the moneys due or to become due such bank or for the recovery of property belonging to it. There would seem to be no question but that this general authority was sufficient to authorize the receiver to bring the bill filed in this case.

The principal ground for recovery alleged in the bill in this instance is that by the by-laws of the bank its affairs were to be administered by a board of 15 directors, 5 of whom should constitute a quorum for the transactionof business; that the business was, in fact, conducted by defendants William Lorimer as its president and Charles B. Munday as its vice president, aided by Charles G. Fox, Thomas McDonald, Charles E. Ward, and L. L. Bacchus, the bill further charging that Fox, McDonald, and Bacchus were dominated and wholly controlled by Lorimer and Munday. The bill also charges that defendants Bennett, Hoch, Magner, Gunderson, Hanecy, Hanney, and Huttig, though directors of the bank, took no part in the management or supervision of the business, and made no investigation or inquiry whatsoever into the same, but carelessly and negligently permitted Lorimer and Munday, without any supervision whatever or attempted supervision or investigation or inquiry by the other members of the board of directors, to carry on the business of the bank and to fraudulently misapply the assets thereof and to cause great losses to the bank; that said last-named directors failed to exercise ordinary care in the management and supervision of the business affairs of the bank, and particularly in regard to the loans which Lorimer and Munday made to firms and corporations who were insolvent, and in regard to investments made by Lorimer and Munday in bonds and other securities of little or no value, as Lorimer and Munday well knew. The bill sets up various transactions showing losses of large sums of money which it avers were unsafe and imprudent, and were well known to Lorimer and Munday to be so, and further avers that the unsafe and imprudent character of these transactions was known to the other defendants, or would have been known to them had they exercised ordinary care and diligence in the performance of their duties as directors. It also charges that all of the directors knew, or by the exercise of ordinary care should have known, that Munday was fraudulently misapplying the money and property of the bank to his own use; that he was insolvent and unfit to be trusted with the management of the bank; that notwithstanding the knowledge which the directors had of this matter or the means of knowledge which existed, they carelessly and negligently permitted him to have the management of the bank and to carelessly and fraudulently misapply its moneys. It is also charged that this bank, when instituted, was insolvent to the certain knowledge of all the directors.

There appears to be no question in the record as to the sufficiency of the charges of the bill against the defendants Lorimer and Munday, and the Appellate Court so found, but in affirming the decree of the superior court the Appellate Court based its opinion on the insufficiency of the bill as regards those directors referred to as nonactive director defendants, who are named in the bill as Bennett, Gunderson, Magner, Hoch, Gardner, Hanecy, Hanney, and Huttig. As the sufficiency of the bill as to such last-named directors appears to be the only question involved here, our attention will be directed to that feature of the case.

The issues under the bill, as we understand it, are whether or not an account may be had and...