Groves v. Farmers State Bank of Woodlawn

• Decision Date: 03 February 1938
• Docket Number: No. 24402.,24402.
• Citation: 368 Ill. 35,12 N.E.2d 618
• Parties: GROVES v. FARMERS STATE BANK OF WOODLAWN et al. BOURLAND et al. v. FIRST NAT. BANK OF WOODLAWN.
• Court: Illinois Supreme Court

368 Ill. 35

12 N.E.2d 618

GROVES

v.FARMERS STATE BANK OF WOODLAWN et al.

BOURLAND et al.

v.FIRST NAT. BANK OF WOODLAWN.

No. 24402.

Supreme Court of Illinois.

Dec. 17, 1937.

Rehearing Denied Feb. 3, 1938.

Suit by William H. Groves against the Farmers State Bank of Woodlawn and others, in which the First National Bank of Woodlawn intervened, Ed Bourland and others filed motions for leave to intervene, and defendant bank and another filed a motion to set aside orders entered on the national bank's intervening petition. From an order denying the motions, the moving parties appeal.

Affirmed.Appeal from Circuit Court, Jefferson County; Blaine Huffman, judge.

June C. Smith, of Centralia, and Hugh V. Murray, Jr., of Carlyle, for appellants.

Gilbert & Gilbert, of Mt. Vernon, for appellee.

WILSON, Justice.

This appeal is prosecuted from an order of the circuit court of Jefferson county of July 22, 1937, denying motions of thirty-four stockholders and eight depositors for leave to intervene in a stockholders' liability suit instituted on June 15, 1932, and a motion of the closed bank and its receiver to set aside orders entered on May 21, 1935, and June 10, 1936, respectively. The propriety of the order assailed requires a review of the previous proceedings.

On October 4, 1930, a state bank, the Farmers State Bank of Woodlawn, and a national bank, the First National Bank of Woodlawn, entered into an agreement whereby the state bank agreed to transfer all its assets to the national bank and the latter promised to assume and pay all the creditor liabilities of the former, and, further, to liquidate its business and affairs. The state bank agreed to save harmless the national bank from all losses which might ensue. The contract expressly recited that it was made for the purpose of liquidating the state bank and gave the national bank the right to determine the manner of accomplishing this objective. Although the agreement was authorized by the boards of directors of the respective banks, it was neither submitted to nor approved by the auditor of public accounts. Voluntary liquidation of the state bank proceeded under the immediate supervision of John W. Watkins, formerly cashier of the state bank. Nearly two years later, June 15, 1932, William H. Groves, a creditor of the state bank, filed his bill in the circuit court of Jefferson county on behalf of himself and all other creditors of the state bank against the bank and its former and final stockholders to enforce the superadded constitutional liability of the stockholders. One allegation of the bill merits mention. The complainant, after reciting that the national bank had, by agreement with the state bank, assumed and paid all, or nearly all, of the deposit accounts of the state bank, alleged that the national bank and another bank ‘now are the creditors to which nearly all of the indebtedness of said Farmers State Bank is payable at this time, and now the total indebtedness aforesaid amounts to approximately $43,500.’ Groves sought the appointment of a receiver (1) to collect the stock liability and (2) to collect and convert into money the remaining assets of the bank. Practically all the stockholders were served with process or waived summons and entered their appearances. These stockholder defendants were defaulted, however, for want of answers. On July 12, 1932, a decree, among other things, fixed their liability at $100 per share, and assessed thirty-nine named persons amounts equal to the par value of the shares they owned or had owned. Watkins was appointed receiver and authorized to collect the stock liability, to collect and convert into money the remaining assets of the state bank, and to distribute the moneys pursuant to the directions of the court. This decree also narrated the arrangement between the state bank and the national bank of October 4, 1930, by which the latter assumed the liabilities of the former, found that the national bank was one of the two principal creditors of the state bank, and, particularly, that it was a creditor to the extent of $40,000. No appeal was taken by any stockholder from this decree. Watkins, as receiver, proceeded to collect the amounts due from the stockholders, and also to administer and liquidate the pledged assets of the state bank.

On August 30, 1932, upon a petition and report of Watkins, as receiver, an ‘order and decree’ was entered, finding, among other things, (1) that the total indebtedness of the state bank at the time of the receiver's appointment was $45,532.63, of which the state bank owed the national bank $40,000; (2) that the receiver had collected $11,382.37, and directed the payment to all creditors, including the national bank, of a dividend of 25 per cent. of the amounts of their respective claims, and, further, that other claims against the bank be filed with the receiver on or before the first day of the October term of court, 1932, and that the requisite notice be published once in each week for three successive weeks in a local newspaper. When additional moneys had been collected by the receiver, other orders for payment of dividends were entered on November 15, 1932, December 9, 1932, January 9, 1933, as of July 12, 1932, and May 23, 1934. The record discloses no objection by anyone to the payment of these dividends to the national bank as a creditor of the state bank.

Two and one-half years after the entry of the original final decree of July 12, 1932, namely, December 5, 1934, the national bank filed an intervening petiton in the proceeding naming as parties defendant thereto the State bank and Watkins, as receiver. This petition sought the enforcement by the court of the agreement of October 4, 1930, between the state bank and the national bank, alleging that as of November 27, 1934, $15,774.30 was due from the state bank upon its liability account. In addition, the petition asked the removal of Watkins, as receiver, and the appointment of a successor to collect the liability remaining due from stockholders. In reality this petition was the national bank's claim under the contract of October 4, 1930. The state bank and Watkins, as receiver, on January 5, 1935, filed their answer to the intervening petition of the national bank, averring, among other things, that the agreement of October 4, 1930, was invalid and ultra vires, and hence unenforceable against the state bank. In particular, they charged that the agreement was not consummated or made effective by the parties thereto prior to November 4, 1930, the day the amendments of 1929 to the Banking Act were ratified by the people of the State, and that by amended section 15 (Ill.Rev.Stat.1937, c. 16 1/2, § 15) the agreement became ‘unlawful, ineffective and inoperative, and in violation of the provisions of the statute.’ The answer denied that the balance due to the national bank was $15,774.30, but countered that the true balance due the national bank was approximately $5,500. Defendants answered, further, that the national bank did have a valid claim against the state bank ‘for the money advanced by it for the use and benefit of said Farmers State Bank’ and that the latter ‘owes said balance, wholly outside of the said contract or agreement’ of October 4, 1930, although insistent that the agreement was void. The state bank and Watkins, by their answer, urged that the original decree of July 12, 1932, was final and binding on all parties to the suit, including the national bank when it became a party to the suit by filing its intervening petition and, specifically, ‘that whether said decree was right or wrong, at the time it was entered, it constitutes a final decree and adjudication of this court, and within the jurisdiction of this court, and cannot now be challenged, modified or set aside.’ They further affirmed the legality of the appointment of Watkins, as receiver, maintaining that he was acting in such capacity under a final decree of the court in all respects legal and proper. Referring to the decree of July 12, 1932, they directed attention to the fact that the right of a court of equity to appoint such receiver remained an open and unsettled question until the opinion of this court in People ex rel. v. Shurtleff, 353 Ill. 248, 187 N.E. 271 was filed on June 15, 1933.

By what is denominated an ‘Interlocutory Order and Decree,’ of May 21, 1935, the court found that the national bank had substantially complied with and performed the terms and conditions of the agreement which existed between the parties, and resolved the material issues arising upon the intervening petition and answer concerning the dealings of the parties and the amount then due and payable to the national bank, the intervening petitioner, in its favor and against the state bank and its receiver, the defendants. The order recounted that the affairs of the state bank had been in liquidation since October 6, 1930, and declared the receivership should be completed by January 1, 1936. The amount of the claim of the national bank under the contract of October 4, 1930, was fixed at $70,469.70. Of this amount the chancellor found that the bank had received payments and credits aggregating $57,841.88, leaving a balance due under the contract, on May 21, 1935, the day the order was entered, of $12,627.82, which sum the receiver was commanded to pay in due course of administration, as directed by the court. The court further prescribed that a lien by impressed upon all of the assets in the hands of the receiver in favor of the national bank, until the amount of its claim should be fully paid, and that, pending the completion of the receivership, in the furtherance of justice, the cause should remain on the docket until the further order of the court. By this order, the court, in effect, enforced the agreement of October 4, 1930. No appeal was taken by the defendants, the state bank, and Watkins, as receiver, from the order of May 21, 1935.

June 10, 1936,...