Chicago Title & Trust Co. v. Smith

• Decision Date: 11 October 1895
• Court: Illinois Supreme Court
• Parties: CHICAGO TITLE & TRUST CO. v. SMITH.

158 Ill. 417

41 N.E. 1076

CHICAGO TITLE & TRUST CO.

v.SMITH.¹

Supreme Court of Illinois.

Oct. 11, 1895.

Appeal from appellate court, First district.

Bill by the A. D. Juilliard, John B. Claflin Company, a corporation, the copartnership of Bliss, Fabian & Co., and Columbus R. Cummings, William B. Howard, Irving T. Hartz, and E. Noa against James H. Walker, James H. Walker, Jr., and the James H. Walker Company. In this suit the Chicago Title & Trust Company was appointed receiver. L. A. Carton also filed a bill against the same defendants. The causes were consolidated. Thomas H. Smith filed a petition in the suit praying that certain funds in the receiver's hands be paid to him. The circuit court dismissed this petition, but the appellate court (54 Ill. App. 517) reversed the order of dismissal. The receiver appeals. Affirmed.Partridge & Partridge and W. C. Niblack, for appellant.

Hamline, Scott & Lord, for appellee.

Early in 1893 the James H. Walker Company, a corporation organized in 1892, was engaged in the wholesale and retail dry-goods trade in the city of Chicago. Prior to the organization of the company business had been transacted by a partnership under the same name, and composed of Columbus R. Cummings, William B. Howard, and James H. Walker. The stockholders of the corporation were James H. Walker, 3,107 shares, $310,700; C. R. Cummings, 6,605 shares, $660,500; William B. Howard, 4,751 shares, $475,100; James H. Walker, Jr., 535 shares, $53,500; George S. Willitts, 2 shares, $200; total, 15,000 shares, $1,500,000. James H. Walker was president, and looked after the merchandising, while William A. Mason was its vice president until March, 1893, and at all times its treasurer, and looked after the finances. In March C. C. Lay became the vice president, and as Walker testifies was practically the head over all. Walker, Lay, Hartz (the secretary), Mason, and Cummings were the directors, and Cummings, Lay, and James H. Walker made up the executive committee. Its duties were as follows: ‘The executive committee shall exercise a general supervision of the entire business of the company, the management of every department, and all the property of the company shall be under their control, subject, however, to the direction of the board of directors. The several officers and employés of the company shall be responsible to the executive committee for a proper and faithful discharge of their several duties, and make such report to the executive committee touching the business coming under their charge as such committee from time to time may require, and between the meetings of the board of directors the executive committee shall have the power of the board. In the absence of any member of the committee such member may designate a proxy to act with the full powers of the member.’ About the middle of May, Cummings, by his guaranty, secured credit for the company at the Union National Bank, upon the promise of the company to give him an equal amount of accounts to secure him. July 25th the company assigned certain open accounts to Mason as a trustee for Cummings, to secure his guaranty, Mason drawing off a list thereof from the books, and seven or eight days thereafter the open accounts were turned into notes. Walker, the president, signed the company's name to this assignment. On August 3d a meeting of the board of directors of the company was held, and on motion of Mr. Willitts (who had been a director until then), representing Mr. Howard's interest, the following resolution was adopted: ‘Whereas, efforts are being made in New York and elsewhere to raise money to help this company out of its existing difficulties; and whereas, certain of the creditors are becoming importunate and pressing in their demands for payment: Now, therefore, be it resolved that pending the arrival of the expected assistance from New York the treasurer of the company be and he is hereby authorized to indorse over or assign any drafts, bills, and accounts receivable of the company which may be in his hands in payment of or security for any claim against or debts of this company; and he is also hereby authorized to assign and transfer any accounts due to the company, in the same manner, to such creditors, or to such other persons as they may designate, for their protection.’ The minutes of the corporation meeting show that at this same meeting Mr. Willitts tendered his resignation as director of the company, which was accepted, and on motion Mr. Irving T. Hartz was elected in his place; also that Lay, the vice president, presided at the meeting, and that all the directors except Walker and Cummings were present, and that on the same day Cummings' written consent to and ratification of the meeting was received, as follows: ‘August 3rd, 1893. I hereby consent to the holding of the above meeting as aforesaid, and hereby ratify and confirm all acts and proceedings had at said meeting, and consent that they may have the same effect as if I had been personally present and voted therefor. [Signed] C. R. Cummings.’ On August 3d, immediately after the passage of this resolution, and in pursuance thereof, Mason, who generally signed all papers in connection with the paying out of money, told Smith, who was assistant credit man for the company, to make out a list of the cash deposits with the corporation by country customers, a list of the employés in the house who had money on deposit with the corporation, and select enough accounts to secure them. Smith did so, and Mason, in the name of the corporation, signed an assignment of both lists to Smith, as trustee for the creditors therein named, before 9 a. m. August 4th, and Smith at once accepted the assignment in writing. The customers named in the list were all residents of Illinois, but not of Cook county, and had money on deposit with the corporation aggregating $33,210.62. Accounts were assigned on various parties to secure the above amounts, which assigned accounts amounted to the sum of $34,264, and which assignment was made by the James H. Walker Company, by W. A. Mason, treasurer, on August 4, 1893, and accepted by the trustee, Smith. In addition to those assigned accounts for the benefit of depositors, there were assigned accounts aggregating $7,626 to secure employés who had sums deposited, etc., whose claims amounted to $6,121.23. For these deposits the corporation acted, in receiving the same, as bankers. The assignments were not consented to by Walker. Notices of these assignments were sent out by Smith and Mason to the debtors, and on the account books these accounts were marked as transferred to the trustee, and he was proceeding to collect the same. On the 4th day of August, 1893, the A. D. Juilliard, John B. Claflin Company, a corporation, with others, filed a bill making the James H. Walker Company defendant, by which an indebtedness of several hundred thousand dollars by the defendant was alleged, etc., and asking for the appointment of a receiver for the James H. Walker Company; and on the same day, by an interlocutory order, the Chicago Title & Trust Company and William A. Mason were appointed receivers. On the next day Mason resigned as receiver. On August 22d Lawrence A. Carton exhibited his bill in chancery, setting forth a judgment, etc., and asking the appointment of a receiver and that the business of the corporation be wound up, etc. An order was entered consolidating this cause with the bill filed by the A. D. Juilliard, John B. Claflin Company et al., and to the consolidated causes answers were filed, etc. The Chicago Title & Trust Company, receiver, filed on December 22, 1893, in the consolidated cause, its petition setting forth the assignment of accounts to Smith as trustee, the purpose for which the accounts were assigned, for whose benefit, and the amount thereof; that the receiver had collected of those accounts the sum of $34,394.10; and prayed the instruction of the court as to its distribution. Answers were filed by James H. Walker and National Bank of Commerce of Providence, R. I., wherein they deny that the transfer by the James H....