Comstock v. Morgan Park Trust & Sav. Bank

• Decision Date: 08 December 1937
• Docket Number: No. 24048.,24048.
• Parties: COMSTOCK et al. v. MORGAN PARK TRUST & SAVINGS BANK et al.
• Court: Illinois Supreme Court

367 Ill. 276

11 N.E.2d 394

COMSTOCK et al.

v.MORGAN PARK TRUST & SAVINGS BANK et al.

No. 24048.

Supreme Court of Illinois.

Oct. 15, 1937.

Rehearing Denied Dec. 8, 1937.

Representative suit in equity by Katherine B. Comstock and others against the Morgan Park Trust & Savings Bank and others. From a judgment of the Appellate Court [4 N.E.2d 653, 287 Ill.App. 613] affirming a decree of the circuit court for plaintiffs after transfer from the Supreme Court [2 N.E.2d 311, 363 Ill. 341], defendants appeal.

Affirmed in part, and reversed and remanded with directions in part.Appeal from First Branch Appellate Court, First District, on Appeal from Circuit Court, Cook County; George Fred Ruch, Judge.

Enoch J. Price and Owen N. Price, both of Chicago, for appellants.

Friedman, Schimberg & Alster and Aaron Soble, all of Chicago (Max M. Grossman and Max Chill, both of Chicago, of counsel), for appellees.

Charles Le Roy Brown, Theodore S. Chapman, Thomas L. Marshall, John J. Sharon, Francis E. Matthews, and Kenneth L. Karr, all of Chicago, amici curiae.

Clyde L. Day, of Chicago, Merritt J. Little, of Aurora, Karl Edwin Seyfarth, George Edward Leonard, and Benton Atwood, all of Chicago, Julian E. Latham, of Aurora, and Gordon McLeish Leonard, of Chicago, other amici curiae.

FARTHING, Chief Justice.

When this cause first came before us, we transferred it to the Appellate Court for the First District. Comstock v. Morgan Park Trust & Savings Bank, 363 Ill. 341, 2 N.E.2d 311. That court affirmed the decree of the circuit court of Cook county [287 Ill.App. 613, 4 N.E.2d 653] and we have granted leave to appeal.

On Sunday, January 24, 1932, the above bank's board of directors met at the president's home in Chicago and adopted a resolution which stated that, an account of withdrawals, the secondary reserves of the bank had been exhausted to such an extent that the directors were convinced that the bank could not meet additional withdrawals. The auditor of public accounts was requested to take charge of the bank for the purposes of examination and such other action as he deemed proper. Accordingly, he took charge next day and the bank was not reopened. The auditor appointed his receiver and is liquidating the bank. The appellee Lipshitz filed the original bill on behalf of himself and the other creditors shortly after the bank's opening hour on the day the auditor took charge. On a printed form, he alleged that he had on deposit in the bank $167. The proof showed later that his balance was less than $6. The bill alleged that on that day the auditor had made an examination to determine the bank's financial condition and had closed the bank, etc.; that its assets were carried at more than $1,000,000; that its liabilities exceeded $1,500,000; and that it was hopelessly insolvent. The bill prayed that the stockholders be held liable under section 6 of article 11 of the Illinois Constitution; that a receiver be appointed to receive and disburse moneys collected from the stockholders; and that all other creditors be enjoined from filing suits against the stockholders. The auditor appointed his receiver to liquidate the bank February 25, 1932, and on March 4, 1932, he filed his bill in the circuit court of Cook county in liquidation proceedings. Later an amended and supplemental bill was filed in the case before us and, on October 18, 1934, while testimony was being taken, appellants filed their cross-bill, setting up the payment, by the auditor's receiver, of a 25 per cent. dividend to the general creditors of the bank. They sought to have this dividend deducted from the amounts due creditors which affected their liability as stockholders and asked that the appellees be restrained from prosecuting their suit until the bank had been fully liquidated. The court struck the cross-bill for want of equity.

When the supplemental bill was filed, a separate suit in the superior court of Cook county was dismissed and the complainants therein were joined as complainants in the amended and supplemental bill. The supplemental bill was based on section 11 of the Banking Act (as amended by Laws 1929, p. 179 [16 1/2 S.H.A. § 11]), as was the case in Elkin v. Diversey Trust & Savings Bank, 363 Ill. 160, 1 N.E.2d 844. The minority of certain complainants was divulged during the hearings before the master. Complainants amended their bill again, making these parties complainants by next friends. However, no cost bond was filed, and appellants insist that this was required by statute. 64 S.H.A. § 18; Ill.Rev.Stats.1935, c. 64, par. 18. We have held that it is discretionary to allow a minor to sue, by a suit to be prosecuted by his next friend, without security for costs (Chicago & Iowa Railroad Co. v. Lane, 130 Ill. 116, 22 N.E. 513) and that the cost bond is not a jurisdictional requirement (Consolidated Coal Co. v. Gruber, 188 Ill. 584, 59 N.E. 254;Baltimore & Ohio Southwestern Railway Co. v. Keck, 185 Ill. 400, 57 N.E. 197).

In addition to the failure to disclose the minority of certain appellees, the overstatement of the amount of Lipshitz's bank account, and the early filing of the original bill, appellants point out matters in connection with the allowance of solicitors' fees, all in support of the claim that appellees were not bona fide suitors and did not come into equity with clean hands. Concerning the requirement of ‘clean hands,’ Pomeroy says: ‘The maxim, considered as a general rule controlling the administration of equitable relief in particular controversies, is confined to misconduct in regard to, or at all events connected with, the matter in litigation, so that it has in some measure affected the equitable relations subsisting between the two parties, and arising out of the transaction: it does not extend to any misconduct, however gross, which is unconnected with the matter in litigation, and with which the opposite party has no concern. When a court of equity is appealed to for relief it will not go outside of the subject-matter of the controversy and make its interference to depend upon the character and conduct of the moving party in no way affecting the equitable right which he asserts against the defendant, or the relief which he demands.’ I Pomeroy's Eq.Jur. (3d Ed.) p. 659. Here the acts of misconduct charged against appellees and their solicitors have no bearing on or connection with the right of complainants to file their suit. The contention that they did not come into court with clean hands must, therefore, be overruled. City of Chicago v. Union Stockyards Co., 164 Ill. 224, 45 N.E. 430,35 L.R.A. 281.

In the final analysis, appellants argue that they are liable only as sureties, for they insist not only that insolvency is a necessary and material allegation, but that they are entitled to a continuance of the case against them until liquidation is complete. We have not held, as appellants contend, in either Heine v. Degen, 362 Ill. 357, 199 N.E. 832, or Zimmerman v. Zeimer, 363 Ill. 220, 1 N.E.2d 854, that insolvency must be alleged and proved to entitle creditors to maintain representative suits against stockholders in state banks. On the contrary, in the former case we held that stockholders could not delay a reference to...