Hillmer v. Chicago Bank of Commerce

• Citation: 375 Ill. 266,31 N.E.2d 309
• Decision Date: 05 February 1941
• Docket Number: No. 25604.,25604.
• Parties: HILLMER et al. v. CHICAGO BANK OF COMMERCE et al.
• Court: Supreme Court of Illinois

375 Ill. 266

31 N.E.2d 309

HILLMER et al.

v.CHICAGO BANK OF COMMERCE et al.

No. 25604.

Supreme Court of Illinois.

Dec. 16, 1940.

As Modified on Denial of Rehearing Feb. 5, 1941.

Action by Armin F. Hillmer and others, on behalf of themselves and all other creditors of the Chicago Bank of Commerce, against the Chicago Bank of Commerce and others and J. N. Canavan and others, to enforce superadded, constitutional liability of the stockholders of the bank, wherein J. N. Canavan and others filed a cross-bill. From a decree for the plaintiffs, J. N. Canavan and others appealed to the Appellate Court. From a judgment of the Appellate Court, 303 Ill. App. 43, 24 N.E.2d 388, affirming the decree, J. N. Canavan and others appeal.

Judgment affirmed in part and reversed in part, and cause remanded, with directions.

SHAW, J., dissenting.Appeal from Appellate Court, First District, on Appeal from Superior Court, Cook County; James F. Fardy, Judge.

Matthews, Harmon, Karr & Springer, John K. Notz, Hopkins, Sutter, Halls & DeWolfe, Isham, Lincoln & Beale, Wilson & McIlvaine, Markheim, Parker & Miller, Mayer, Meyer, Austrian & Platt, Pope & Ballard, McDonald & Richmond, William F. Price, Thomas G. Deering, and Shulman, Shulman & Abrams, all of Chicago (Kenneth L. Karr, J. F. Dammann, Frank D. Mayer, Kenneth F. Montgomery, Donald J. DeWolfe, Becher W. Hungerford, Marshall Sampsell, and Floyd E. Thompson, all of Chicago, of counsel), for appellants.

Orr, Sullivan & Ricks, Leonard & Leonard, Seyfarth & Atwood, Owens & Owens, and Russell, Murphy & Pearson, all of Chicago (Warren H. Orr, George E. Leonard, Karl E. Seyfarth, Thomas L. Owens, and Walter P. Murphy, all of Chicago, of counsel), for appellees.

FARTHING, Justice.

This representative suit was brought by appellees on behalf of themselves and all other creditors of the Chicago Bank of Commerce, to enforce the liability imposed by section 6 of article 11 of the Illinois constitution, Smith-Hurd Stats., on State bank stockholders. By the amended and supplemental complaint in chancery it was alleged the Chicago Bank of Commerce commenced business April 5, 1930, and that at that time its capital stock was $3,000,000, divided into 30,000 shares of $100 par value; that January 13, 1931, the stockholders, at a meeting duly convened and held, adopted a resolution to reduce the par value from $100 to $50 a share, and to decrease the capital stock from $3,000,000 to $1,500,000, represented by 30,000 shares of $50 par value; that a certificate of approval issued by the Auditor of Public Accounts of Illinois was filed in the office of the recorder of deeds of Cook County, Illinois, on February 7, 1931; that this certificate recited this action was taken in accordance with the provisions of section 12 of the Illinois Banking act; that, thereafter, 30,000 shares of capital stock of par value $50 were duly issued and delivered to the stockholders of said bank. June 25, 1932, the bank was closed by order of the Auditor of Public Accounts, a liquidating receiver was appointed, and he filed a suit in the circuit court of Cook county to liquidate the bank, which suit is still pending. The prayer was the stockholders be held liable for the bank's liabilities which accrued during their respective periods of stock ownership.

The master in chancery's report contains a detailed discussion of whether the decrease in the par value of the capital stock was valid and effective. The master concluded: ‘I am therefore of the opinion and find that the reduction of the par value of the stock of the Chicago Bank of Commerce was effective against future creditors, but ineffective against past creditors, and in determining the liabilities of the defendants herein, I have computed their liabilities for all unpaid indebtedness accruing during their ownership of said $100 par value stock at a maximum of $100 per share. After the reduction of said stock to $50 per share, I have computed their liabilities for all unpaid indebtedness accruing during their ownership of said $50 par value stock at a maximum of $50 per share. I find, however, that the reduction in the capital stock and the issuance of a new $50 par value stock for the old $100 par value stock did not constitute a transfer of stock or ownership of new or additional stock, and I have therefore considered the ownership of said stock as a continuous one and in no case have I computed the liabilities attaching to a share of $100 par value stock, for which a share of $50 par value stock was substituted, at a sum in excess of $100 per share.’ The master refused to separate the indebtedness into periods corresponding to the several periods of stock ownership so that the report would show which stockholders were liable for debts of the bank accruing during any period of ownership.

The master filed his report April 7, 1937, and on the same day an order was entered that all objections stand as exceptions. April 16, 1937, this court rendered its opinion in Burket v. Reliance Bank & Trust Co., 366 Ill. 98, 7 N.E.2d 850. May 11, 1937, certain defendants, who were later joined by all who have appealed, petitioned for leave to file a cross-bill, and in the petition cited the Burket case. The petition alleged petitioners held stock when it had a par value of $100; that the unsatisfied liabilities which had accrued before the reduction in par value were $79,417.60 and these had been reduced to $59,563.20 by a twenty-five per cent dividend paid by the Auditor's liquidating receiver; that after the reduction in par value the liabilities of stockholders for all unpaid indebtedness should be computed at a maximum of $50 per share; that after the institution of this proceeding, and before this petition was filed, stockholders holding during the $100 par period had paid in $69,766, either on account of shares held only during said $100 par period or in excess of the $50 par on shares held during both periods, and that this was more than all the unsatisfied liabilities which had accrued during the $100 par period. By applying all payments in excess of $50 per share to reduce the liabilities accruing while the stock was of $100 par value, as was alleged should be done under authority of the Burket case, petitioners reached the conclusion there was no warrant of law requiring further payments on account of these liabilities. Leave was granted and the cross-bill was filed setting forth the above facts.

The reply to the cross-bill quoted section 12 of the Illinois Banking act and asserted that section, properly construed, prohibited the purported reduction in par value, and if construed otherwise, it was unconstitutional by reason of section 6 of article 11 of the Illinois constitution. It also alleged the matters set forth in the cross-bill came too late to merit consideration of the court. It further alleged that at the time of the reduction of the par value of stock a distribution in cash was made and paid to each of the stockholders amounting to $80 per share and totaling $2,400,000; that this was a violation of section 11 1/2 of the Banking act. It further asserted that by reason of having received this unlawful dividend defendants were estopped to set up the purported reduction in par value of the stock, and that defendants should be estopped to set up the defense of payment until they offered to do equity by returning the aforementioned illegal distributions. The chancellor overruled appellants' motion to strike the reply, sustained the reply and dismissed the cross-bill. After this, the court permitted the same defendants to file additional exceptions to the master's report setting forth the same contention, that payments by contemporaneous stockholders had extinguished the liabilities of these defendants. The chancellor overruled the exceptions, and entered a decree in conformity with the master's report. The decree recited the procedure by which the par value of the stock was reduced and the payment to the stockholders of $80 per share, and stated the master found the Banking act in force at the time permitted such decrease, and the reduction was accomplished in accordance with the statute and with the consent and approval of the banking authorities of the State, and ‘The master thereupon found that the reduction of the par value of the stock of the bank was effective against future creditors but ineffective against past creditors.’ Some of defendants were held liable for $100 per share. On appeal, this decree was affirmed by the Appellate Court. We have granted an appeal from that judgment.

The first question confronting us is the effect of the reduction in the par value of the stock from $100 to $50 per share. Appellants claim the decree of the superior court held it was valid and effective,and since no appeal was taken from this portion of the decree and no cross-error assigned on this ruling, the question of the correctness of that part of the decree is not before us. With this we cannot agree. A party who obtains a decree in full accordance with his claims, as here, has no right or need to appeal from findings of the court embodied in the decree, and an appellee has a right, without assigning cross-errors on the findings of the decree, to sustain it upon any facts in the record, whether they are the same as those found by the decree or not. Pelouze v. Slaughter, 241 Ill. 215, 89 N.E. 259. On the other hand, appellees maintain that in sustaining their reply to the cross-bill, which reply set forth the invalidity of the proceedings relating to the reduction in par value and that appellants were estopped to rely on that action, and in dismissing the cross-bill, the court held in accordance with the position of appellees; that no appeal was taken from this order, and, therefore, appellants cannot now question the correctness of that ruling. This contention cannot be sustained. The court permitted appellants to file additional exceptions to the...