Heine v. Degen

Decision Date05 February 1936
Docket NumberNo. 22785.,22785.
Citation362 Ill. 357,199 N.E. 832
PartiesHEINE et al. v. DEGEN et al.
CourtIllinois Supreme Court

362 Ill. 357
199 N.E. 832

HEINE et al.
v.
DEGEN et al.

No. 22785.

Supreme Court of Illinois.

Dec. 19, 1935.
Rehearing Denied Feb. 5, 1936.


Suit by Frank Heine and others against Helen Degen and others to enforce the liability of defendants as bank stockholders. From the decree, defendants Loyd W. Lowe and others appeal, and plaintiffs cross-appeal.

Modified and affirmed.

SHAW, ORR, and HERRICK, JJ., dissenting.


[362 Ill. 359]

[199 N.E. 833]

Appeal from Circuit Court, Kankakee County; Claude N. Saum, judge.

[199 N.E. 834]


Miller & Shapiro, A. L. & C. M. Granger, Walter C. Schneider, Claude M. Granger, Eva L. Minor, and Vernon G. Butz, all of Kankakee, and Milton M. Adelman, of Chicago (Leland K. Neeves, Benjamin V. Becker, and Don M. Peebles, all of Chicago, of counsel), for appellants.

W. H. Dyer, of Kankakee (Eben B. Gower, of Kankakee, of counsel), for appellees.


FARTHING, Justice.

Three creditors of the American Trust & Savings Bank of Kankakee, a state bank, filed their bill in the circuit court of Kankakee county on behalf of themselves and the 2,929 other such creditors, to enforce the liability of 173 stockholders of the bank under section 6 of article 11 of the Constitution of 1870 and ‘An Act to revise [362 Ill. 360]the law with relation to banks and banking,’ approved June 23, 1919, p. 224. (Smith's Hurd Ann.St., c. 16 1/2, § 6; Cahill's Rev.St.1933, c. 16a, § 6.) By their second amended supplemental bill, filed April 20, 1931, the appellees asked that the court ascertain who were the bank's creditors, the amount of their claims, and who were liable as stockholders and in what amounts; that such persons be required to pay such liability to Fred G. Snow, who had been appointed receiver for the bank; that he be authorized to collect and receive the respective amounts found due the creditors, and that he also be authorized to apply to the court for orders directing the refunding of a surplus, if it developed later that individual stockholders had been overassessed. On July 21, 1931, the appellant Lowe and other stockholders filed a motion asking that all creditors of the bank be ruled to come in as parties to the proceeding and to prove their claims against the bank and its stockholders within a reasonable time to be fixed by the court before a reference of the cause was made to the master in chancery. This motion was denied. The appellants filed their answers. The reference to the master was made and the appellants filed objections to his report. The objections were overruled. Exceptions were filed, and the chancellor overruled them except as to the ownership of 200 shares of stock, mentioned later. A decree was rendered in conformity with the prayer of the second amended supplemental bill.

The facts found by the decree were: The American State & Savings Bank was organized April 3, 1911. The name was changed January 11, 1921, to the Legris Trust & Savings Bank, and on February 20, 1929, to the American Trust & Savings Bank of Kankakee, Ill. The capital stock was increased on the last-named date from $100,000 to $150,000. The stockholders of record received one share of stock in exchange for two shares previously held by them and the remaining $100,000 of stock was [362 Ill. 361]sold. On December 27, 1929, the bank suspended business, and on January 23, 1930, because the bank's capital was hopelessly impaired, the auditor of public accounts appointed Fred G. Snow receiver. At the time the bank suspended business its cash resources were $8,089.55, and its unpaid deposits, debts, and obligations were $455,871. The decree finds that the receiver had paid to depositors (excepting certain stockholders) a dividend of 25 per cent. on the amount of the claims filed and allowed in their favor. The ownership of stock was divided into eighty-two periods. The first period was from the date of suspension of business to the date of the last previous stock transfer, and the remaining periods were fixed by dates of stock transfers. The appellees are each found to have been creditors of the bank, and each appellant is found to be a stockholder who owned, during one or more of said eighty-two periods, stock in the bank in the amount and for the period or periods set forth in the decree. The court then found that the suit was brought by the appellees for themselves and as representatives of all other creditors; that the liabilities of the bank accrued from time to time while the defendant stockholders held shares of stock, and that, aside from the dividend mentioned, no part of the debts due the creditors has been paid; that the complainants, and other creditors on whose behalf they sue, filed their properly verified claims with the receiver, and that the claims were allowed and remain unpaid, except as to the 25 per cent. dividend. The court sustained an exception to the finding of the master

[199 N.E. 835]

that the appellants Loyd W. Lowe, W. R. Hunter, W. W. Huckins, Charles Pratt, and Sam Battaglia were liable upon stock certificates Nos. 1, 4, and 5, representing 200 shares of stock, which stood on the books of the bank in the name of F. E. Legris, Sr., and held that Legris alone was liable on this stock. As already indicated, the remaining exceptions were overruled. A cross-appeal has been perfected from the ruling [362 Ill. 362]on this exception. The decree ordered payment to the receiver within thirty days. The stockholders were assessed amounts equal to the full par value of the shares they owned or had owned. The court retained jurisdiction of the cause for the purpose of making collection, distribution, etc., and ordered that each of the bank's creditors file with the receiver a verified statement of his claim by December 1, 1934.

The appellees question our jurisdiction to entertain this direct appeal. They contend that the appellants failed to raise and preserve constitutional questions in the trial court and that they are, therefore, precluded from doing so here. Our jurisdiction must be determined before we consider the other questions presented.

The general rule is that a case cannot be brought directly to this court for review on the ground that it involves a constitutional question unless the record shows that such question was in some way presented to the trial court. Moses v. Royal Indemnity Co., 276 Ill. 177, 178, 114 N.E. 554.

The appellants filed their motion in the trial court on July 21, 1931, above referred to. This motion was overruled and the case was referred to the master in chancery. The appellants contend that when the appellees closed their proofs there was no competent evidence to show who were the creditors of the bank, and that there was no attempt made to prove when their respective claims accrued. They filed objections to the master's report, which were in part as follows: ‘In recommending a blank decree for $204,758.78, without saying in whose favor said decree shall run and with the evident purpose of having such amount put in hotchpot and prorated among all the depositors without regard to when their claims accrued, thus causing stockholders to pay to claimants whose claims did not accrue during the period of stock ownership of the particular defendant. In recommending a decree which has the effect of imposing the maximum liability on all stockholders[362 Ill. 363]for all periods regardless of the circumstance that in some periods the gross liability does not equal one per cent of the amount of the outstanding capital stock. In recommending a decree which is confiscatory of private property in violation of the constitution of the United States and also in violation of the constitution of the State of Illinois. In recommending a decree in violation of law.’ The abstract shows that these objections were joined in by all the appellants, contrary to the contention of the appellees. The objections stood as exceptions to the master's report and were overruled by the chancellor.

The appellants contend that under a proper construction of section 6 of article 11 of the Constitution the creditors' right is not a collective one against the stockholders, but that it is an individual right of each creditor against the group of stockholders liable to him. The appellants contend that the suits are combined only for convenience in procedure, and that due process is denied by a decree which does not find who are the individual creditors, the amounts respectively due them, and which stockholders owe such amounts. They contend their property is taken without due process of law through a decree which is void because no inquiry was made into facts necessary and essential to its validity.

The appellees say that the constitutional questions were not raised in the trial court because it is neither necessary nor proper to file objections or exceptions to the master's legal conclusions, and that, therefore, these objections and exceptions were void. They cite Pace v. Pace, 271 Ill. 114, 110 N.E. 878,Gillett v. Chicago Title & Trust Co., 230 Ill. 373, 82 N.E. 891, and Von Platen v. Winterbotham, 203 Ill. 198, 67 N.E. 843. Although we held in those decisions that it is not necessary to file exceptions to the conclusions of law arrived at by a master in order to call the alleged errors to the attention of the chancellor, this is not a holding that such exceptions are void. Regardless of the fact that they were not necessary, [362 Ill. 364]they show that the appellants did present the constitutional questions to the chancellor. The exceptions recite these questions, and the chancellor was not asked to strike them but to do what the record shows he did, viz., to overrule them.

[199 N.E. 836]

The appellees rely upon Iles v. Heidenreich, 271 Ill. 480, 111 N.E. 524,Odin Coal Co. v. Industrial Commission, 297 Ill. 392, 130 N.E. 704, and McNeil & Higgins Co. v. Neenah Cheese & Cold Storage Co., 290 Ill. 449, 125 N.E. 251, to sustain their contention that the appellants were under the duty to point out what articles of the...

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