Hood v. Commonwealth Trust & Sav. Bank

• Decision Date: 04 June 1941
• Docket Number: No. 25503.,25503.
• Citation: 34 N.E.2d 414,376 Ill. 413
• Parties: HOOD et al. v. COMMONWEALTH TRUST & SAVINGS BANK et al.
• Court: Illinois Supreme Court

376 Ill. 413

34 N.E.2d 414

HOOD et al.

v.COMMONWEALTH TRUST & SAVINGS BANK et al.

No. 25503.

Supreme Court of Illinois.

April 15, 1941.

As Modified on Denial of Rehearing June 4, 1941.

Consolidated actions by Carl S. Hood and others against the Commonwealth Trust & Savings Bank and others, to enforce bank stockholders' liability. From decree entered, A. G. Williams and others appeal, and the Chicago Title & Trust Company, individually and as executor of the last will and testament of Douglas V. Bussie, deceased, filed a cross-appeal, and plaintiffs Carl S. Hood, Joseph Weiss and A. M. Alderman also filed a cross-appeal.

Affirmed in part, and reversed in part.

SHAW, J., dissenting.Appeal from Superior Court, Cook County; John J. Lupe, Judge.

Lucius, Buehler & Lucius, George Gillette, John Mann, Thomas G. Deering, Benjamin F. Langworthy, Harold L. Reeve, Warren B. Buckley, Church & Chowen, and Levinson, Becker, Peebles & Swiren, all of Chicago, for appellants.

Gold & Liebman and Leo Waxman, all of Chicago (Charles Liebman, of Chicago, of counsel), for respondents.

MURPHY, Justice.

The Commonwealth Trust and Savings Bank of Chicago was closed by the auditor June 22, 1932. The same day, plaintiff Joseph Weiss filed a representative action in the superior court of Cook county against eighty-eight persons named as stockholders of the bank to enforce their superadded liability as stockholders. A month later, Carl S. Hood and A. M. Alderman instituted a similar action but did not name any of the stockholders. Later, the two cases were consolidated and an amended and supplemental complaint was filed and new parties added. Answers were filed on behalf of part of the defendants. The order of reference was as to a part of the defendant stockholders. A decree was entered September 21, 1939, which fixed the amount of unpaid liability for the several periods of ownership and entered judgment as to each defendant named in the order of reference.

A. G. Williams, Otto E. Lucius, Belle M. Lucius, Philip S. Graver, Albert E. Lucius, Edward B. Lucius, Mildred L. Lucius, Elizabeth Winship, Harriet Winship, Ida M. Wortendyke, Cornelius S. Kelly, Maurice J. Flynn, the Harris Trust and Savings Bank and Charles D. Heile, filed notice of appeal from such decree. The Chicago Title and Trust Company, individually and as executor of the last will and testament of Douglas V. Bussie, deceased, filed a cross-appeal. Plaintiffs Carl S. Hood, Joseph Weiss and A. M. Alderman also filed a cross-appeal as to certain parts of the decree.

The appellants in the initial appeal contend the decree violates the constitutional provision imposing liability upon stockholders for all liabilities accruing while he or she remained such stockholder because the terms ‘liabilities' and ‘liabilities accruing,’ as used therein, when applied to a single creditor, means the net sum due from the bank to the creditor after crediting any amount due from such creditor to the bank and that no proof was made by plaintiffs as to the existence or nonexistence of such liability and that, therefore, this involves a construction of the constitutional provision (section 6 of article 11, Smith-Hurd Stats.) imposing the liability, which gives this court jurisdiction by direct appeal. In Lewis v. West Side Trust & Savings Bank, 376 Ill. 23, 32 N.E.2d 907, in which an opinion was filed at the February term, 1940, the same question was presented but the instant case was filed in this court before the decision of the Lewis case, so that the general rule, that the jurisdiction of this court can not be invoked by direct appeal when there has been a construction of the constitutional provision in controversy leaving no fairly debatable question, has no application. The controversy as to the liability of the Harris Trust and Savings Bank, as an alleged stockholder, necessitates a construction of the constitution on a question not heretofore considered. This court has jurisdiction on direct appeal.

Appellants made the claim that the decree is void for want of due process of law, in that it is based on an audit and modification thereof, which they claim was not taken from the records of the bank, but was made from the records of the receiver appointed in the liquidation proceedings. It is also asserted that the audit reflects book entries which were made after some of the defendants ceased to be stockholders. The claim is that none of this evidence was admissible for the reason it did not come within the rule which permits introduction of the contents of the bank books as admissions against the interest of the stockholders. The record discloses that all the liabilities of the bnak detailed in the audit were taken from the books of the bank, except a few of the deposit liabilities not appearing in the bank's ledger because the sheets showing them had been removed by an absconding employee. The accountant who made the audit testified that, as to the liabilities supposed to have been entered on the sheets which were taken, he took the claims of such creditors as filed with the receiver and then checked them with the respective claimants. The evidence of the witnesses who testified in reference to the liabilities shows that the figures contained in the audit of liabilities were not taken from the receiver's record but merely checked against it. Outstanding drafts, checks and certified checks not presented for payment, and the unpaid claims on account of liability for permitting the delivery of goods without payment of the accompanying sight draft with bill of lading attached, were added to the audit and shown by the work sheets, and the accountant testified he checked the work sheets for accuracy. The liability items in the audit above referred to which were not taken from the books of the bank aggregate $11,812.09. An examination of the decree in reference to the unsatisfied accrued liability for each period of ownership as it affects appellants, and a comparison of the liabilities for the same ownership period as fixed in the master's report discloses that the $11,812.09 was deducted in the decree and appellants were given the benefit of the deduction. It thus appears that all the accrued liabilities of the bank upon which the decree was based were taken from the books of the bank.

Offsets in the audit against certain deposit liabilities by way of credits on account of debts owing the bank by such depositors were not taken from the books of the bank but were taken from the receiver's records and entered in the audit as credits against the liabilities of the bank. Appellants claim that taking offsets from the records of the receiver instead of from the books of the bank renders the whole audit inadmissible in evidence. The further contention is made that the burden was upon the plaintiffs to prove the net liabilities by crediting all offsets, and the decree fixing the amount of judgments can be based only on the net balance after deducting all such offsets. All of appellants' contentions in reference to the burden of proving offsets were decided adversely to their claims in Hillmer v. Chicago Bank of Commerce, 375 Ill. 266, 31 N.E.2d 309, and Lewis v. West Side Trust & Savings Bank, supra. In each of those cases it was held that the plaintiffs made a prima facie case by proving the same things that would be required in a suit by a depositor against the bank itself, plus proof as to the time the stockholders held their stock and the number and par value of their shares; that the liability books of the bank are admissible in evidence as admissions against interest of the stockholders who held stock when entries contained in the books were made that show liabilities accrued during their particular ownership of stock, and that the same is true as to such entries and each succeeding class of stockholders, all without showing the cross demands, if any, that the bank had against its creditors. The facts in this case come squarely with in the rule laid down in the Lewis case, supra.

Inasmuch as the liability books of the bank were admissible in evidence against the defendants as admissions against interest and contained many thousands of such entries, it was not error to admit the audit in evidence. Comstock v. Morgan Park Trust & Savings Bank, 367 Ill. 276, 11 N.E.2d 394. The fact that the audit, as first prepared, was later modified by adding additional offsets increasing the amount from $22,000 to more than $32,000, in no way militates against its admissibility in evidence. The items of offset, including those added, were in the computation under the final audit upon which the decree was based, and the credits arising from all the offsets were given full effect and thereby operated to the benefit of the appellants. It was held in the Lewis case, plaintiffs were not required to furnish proof of any offsets. If there were other offsets that should have been included, the appellants had access to the sources of the testimony and ample opportunity to furnish proof of the same. They do not now contend that there were any other offsets not shown by the audit and which were not taken into consideration in the decree. They merely assert that there is strong probability that there are offsets which are not included, and that the burden was on plaintiffs to make it conclusive that all were included. The decree does not violate the constitutional provision invoked by appellants.

On the claim that some of the certain of appellants ceased to be stockholders and could not, therefore, be considered as admissions against interest, it is sufficient to say that, other than above noted, the contention is directed against the offsets and not against liability entries. Since the offset entries inured to the benefit of appellants, they can not make complaint.

Appellant Charles D. Heile transferred his stock June 14, 1928. He was served with summons December 28, 1933. His plea setting up the...