Cont'l Nat. Bank of Chi. v. McGeoch

• Decision Date: 18 February 1896
• Parties: CONTINENTAL NAT. BANK OF CHICAGO v. MCGEOCH ET AL.
• Court: Wisconsin Supreme Court

92 Wis. 286

66 N.W. 606

CONTINENTAL NAT. BANK OF CHICAGO

v.MCGEOCH ET AL.

Supreme Court of Wisconsin.

Feb. 18, 1896.

Appeal from circuit court, Milwaukee county; D. H. Johnson, Judge.

Action by the Continental National Bank of Chicago against Arthur N. McGeoch, Clara McGeoch, and John W. Flint, executors of the estate of Peter McGeoch, deceased, and Daniel Wells, to recover an alleged balance on promissory notes. From a judgment in favor of defendants, plaintiff appeals. Affirmed.

Winslow and Pinney, JJ., dissenting.

This action was commenced, June 19, 1888, by the service of the summons and complaint upon Daniel Wells and Peter McGeoch personally, but the other defendants were not served, and did not appear in the case. Peter McGeoch died pending this appeal, and his executors are substituted as defendants in his place. The amended complaint alleged, in effect, that, during the times mentioned, the plaintiff was incorporated and doing a banking business in Chicago; that McGeoch, Everingham & Co. were copartners and brokers at Chicago; that the defendants McGeoch and Wells were copartners, engaged in buying and selling lard and other commodities on their joint account, at Chicago, through the firm of McGeoch, Everingham & Co., as their brokers and agents,--and then alleged four separate causes of action, in which the plaintiff claims an alleged balance of $25,916.97, due on four promissory notes, made, indorsed, and delivered to the plaintiff, in Chicago, as follows: (1) On note, dated May 10, 1883, with McGeoch, Everingham & Co., as makers, and Wells as indorser, due August 10, 1883, for $150,000, and upon which $149,412.47 had been paid on and prior to August 20, 1883, leaving unpaid thereon $587.53, and reciting therein that certain warehouse receipts for lard were held by the plaintiff as collateral security; (2) on note, dated May 10, 1883, with J. H. Peacock, one of the firm of McGeoch, Everingham & Co., as maker, and Wells and McGeoch, Everingham & Co. as indorsers, due August 10, 1883, for $100,000, and upon which had been paid $89,750.80 on and prior to August 20, 1883, leaving unpaid thereon $10,249.20, with a similar recital; (3) on note, dated June 1, 1883, with the defendant Peter McGeoch as maker, and Wells and McGeoch, Everingham & Co. as indorsers, due August 1, 1883, for $150,000, and upon which had been paid $143,900.86 on and prior to August 20, 1883, leaving unpaid thereon $6,099.14, with a similar recital; (4) on note, dated June 1, 1883, with Wells as maker, and McGeoch, Everingham & Co. as indorsers, due August 1, 1883, for $100,000, and upon which had been paid, on and prior to August 20, 1883, $91,981.09, leaving unpaid thereon $8,981.09, with a similar recital,--and also alleged that said notes were severally given for money borrowed of the plaintiff for the benefit of Wells and McGeoch in their said business in Chicago, and that, after applying all payments, and the avails of all collaterals, there remained due to the plaintiff, on said notes, $25,916.97, with interest from August 20, 1883; and prayed judgment for that amount. The defendants Daniel Wells, Jr., and Peter McGeoch separately answered, to the effect that Wells and McGeoch were accommodation makers or guarantors; that Wells and McGeoch made large purchases of lard, through McGeoch, Everingham & Co. as their agents, and raised money for that purpose by discounting the notes in suit; that McGeoch, Everingham & Co. failed June 16, 1883, and a receiver of their property was then appointed; that the indebtedness of the said McGeoch, Everingham & Co. arose in an illegal attempt to corner the market on lard, contrary to the laws of Illinois; that, at the request of said receiver, Peter McGeoch and Wells respectively elected to waive defenses of illegality, and each to contribute $225,000 to effect a compromise and full settlement, on condition of obtaining full discharge and release from each and all of said notes and all claims of the plaintiff, as well as other claims; that all creditors, knowing all the facts, and that McGeoch and Wells were the firm's principal debtors, accepted such compromise and settlement; that Peter McGeoch and Wells each advanced and paid $225,000 to and through said receiver to obtain such compromise and settlement, and all creditors released Wells and McGeoch, personally, as well as the firm of McGeoch, Everingham & Co.; that the plaintiff elected to treat McGeoch, Everingham & Co. as debtors, knowing that Wells and McGeoch were purchasing their release from the firm; and Wells and McGeoch, relying thereon, contributed to the compromise and settlement the amount of the respective sums stated. Each answer also set up an equitable counterclaim for accounting in respect to lard so held and sold by the plaintiff as collateral. Wells, also, in effect, alleged payment; that the plaintiff was estopped from opening or seting aside said compromise and settlement; that the money was knowingly advanced by the plaintiff on said notes to assist in running an illegal corner. He claims application of the proceeds of the collaterals to the notes signed by him as maker, and that the plaintiff failed to sell the collaterals as requested. McGeoch's answer contained a counterclaim for the wrongful conversion of the lard. The plaintiff replied, and put in issue the several allegations contained in the respective counterclaims.

At the close of the trial the jury returned a special verdict to the effect (1) that the plaintiff, at and before the time of discounting the notes mentioned, did know that the firm of McGeoch, Everingham & Co. were engaged in an attempt to corner the Chicago lard market, (2) but did not then know that the loan of $500,000, evidenced by said notes, was needed and procured by said McGeoch, Everingham & Co. for the purposes of carrying on said undertaking to corner said lard market; (3) that there was no agreement or understanding between the plaintiff and McGeoch, Everingham & Co. that said loan, or any specified part thereof, should be used for the specific purposes of carrying on said corner, and that there is no evidence in the case tending to show such agreement or understanding; (4) that the plaintiff did sign and deliver said composition agreement, upon the understanding and condition that the Union National Bank should sign the same, and that said bank and all creditors should accept 50 cents on the dollar; (5) that the plaintiff, before it accepted the 50 per cent. secured to it by said composition, and before signing the release of August 25, 1883, did know that said Union National Bank had been paid or secured its claim in full by the committee of creditors who circulated said composition for signature; (6) that Peter McGeoch did not, before said composition was signed by William Young & Co., promise to pay that firm in full; (7) that the plaintiff did not dispose of the lard pledged to it as collateral security for the notes in suit in good faith, (8) nor in the exercise of ordinary care and prudence; (9) that the plaintiff did realize and credit upon said notes, on account of said collaterals, a sum considerably less than could have been realized by disposing of said collaterals in good faith and in the exercise of ordinary care.

Thereupon the court found, as matters of fact, the following, in effect, to wit: The first, second, third, fourth, and fifth findings are sufficiently stated in the opinion. (6) That afterwards the said receiver of said firm called a meeting of all of the creditors of said firm who were members of said Board of Trade, and on July 2, 1883, a meeting of such creditors of said firm was held, and said receiver submitted to such creditors, on behalf of said firm a proposition of settlement in words and figures following, to wit: “Chicago, Ill., July 2nd, 1883. To the Creditors of the Firm of McGeoch, Everingham & Co., Represented upon the Board of Trade of the City of Chicago: We submit the following proposition of compromise, to be received by each creditor in full settlement and liquidation of all unsecured claims, and the deficiencies upon all secured claims after applying the margins and collaterals up as security therefor: Provided, this proposition shall not be binding upon us until each and all of said creditors have signified their acceptance hereof by signing the acceptance hereunder written. ‘Proposition: We will pay 50 cents upon the dollar in cash within 10 days from the date of the said acceptance hereof. The amount of each claim to be settled and adjusted by John R. Bensley, receiver: Provided, that if said Bensley and any creditor cannot agree as to the amount of any claim, then, and in every such case, the amount of such claim shall be determined by the board of arbitrators of said Board of Trade in the mode prescribed by the rules of said board. Respectfully submitted, McGeoch, Everingham & Co.’‘We, the undersigned, creditors of the firm of McGeoch, Everingham & Co., in consideration of the prompt settlement above proposed, and to avoid litigation, hereby accept the above settlement as aforesaid’ [Signed by the plaintiff July 20, 1883].” Which said contract of compromise was signed by all of said creditors, including said plaintiff. (7) That afterwards, and on August 25, 1883, the plaintiff executed and delivered to said receiver an instrument in writing, in the words and figures as follows, to wit: “No. 183. Chicago, Ill., Aug. 25th, 1883. Peter McGeoch, George S. Everingham, Frank A. Crittenden, John H. Peacock, and William R. Harvey, comprising the firm of McGeoch, Everingham & Co., being in failing circumstances, and unable to pay their debts in full: Now, in consideration thereof, and of the receipt of the sum of money hereinafter named, the undersigned creditors, Continental National Bank of Chicago, hereby acknowledges receipt from them, by the hand of John R. Bensley, receiver in chancery of their estate and...