Lackner v. McKechney

• Decision Date: 13 March 1918
• Docket Number: 2127.
• Citation: 252 F. 403
• Parties: LACKNER v. McKECHNEY et al. MILLER et al. v. LACKNER et al.
• Court: U.S. Court of Appeals — Seventh Circuit

252 F. 403

LACKNER v. McKECHNEY et al.

MILLER et al. v. LACKNER et al.

No. 2127.

United States Court of Appeals, Seventh Circuit.

March 13, 1918

On July 28, 1900, Levi C. Weir, a citizen of Ohio, and the executor of the estate of Frederic C. Weir, appointed as such by the courts of Ohio, of which Frederic was a resident, filed a bill as such executor against John McKechney and John McKechney, Jr., alleged to be the surviving copartners of Frederic, and citizens of Illinois. The bill charges that while the partnership was to continue until certain work with the city of Chicago and the drainage canal was completed, and during such time the defendants should superintend the work without pay, they had nevertheless wrongfully paid out funds of the partnership to one of them for such services. Other wrongful transactions were charged. The bill further alleged that in 1897 an action was brought against the city of Chicago; that on March 1, 1899, Frederic died; that the action was revived in the name of the defendants, as surviving partners, on March 10, 1899; that in August, 1899 a large judgment was recovered against the city of Chicago that an appeal was then pending from the judgment, which judgment constituted the only remaining asset of any value and that all of the business had been completed, except to collect the judgment and pay the debts of the firm and to distribute the surplus between plaintiff and the defendants. The bill then recited the firm indebtedness to sundry persons, including Levi C. Weir in his individual capacity as an accommodation indorser and for money loaned since the death of Frederic. Insolvency of the defendants, and the threat and danger of a settlement of the judgment and the disposition thereof, to the injury of the bona fide creditors of the partnership and of Frederic's estate, were charged, and an accounting of the partnership transactions and adjustment of the rights of the parties prayed for; the plaintiff offering to pay the defendants whatever might be due.

The defendants, answering, denied insolvency, as well as the allegations of wrongdoing, and charged that Levi was interested with his brother Frederic in the latter's share in the firm, and as such was liable for the firm's debts and should be made a party to the suit. They further filed a cross-bill for an accounting as to several joint enterprises. Levi was never served individually, and never in any manner appeared in the proceeding other than in his capacity as executor of Frederic's estate. Certain agreements, in the nature of an armistice, were subsequently made by the parties. In February, 1902, the wife of John McKechney, claiming an interest in the firm's assets under this agreement, filed a bill in the state court for the appointment of a receiver. Thereupon a supplemental bill was filed in the court below. The state court proceedings were restrained, and the order appointing a receiver for the firm in the court below was affirmed in this court. McKechney v. Weir, 118 F. 805, 55 C.C.A. 417.

In April, 1904, the defendants filed a petition, alleging that the receiver had no funds to conserve the estate; that they were unable to pay the attorney's fees of the present appellants, John S. Miller and Merritt Starr, who had represented the firm in the litigation with the city of Chicago; that these counsel had given notice of their intention to withdraw, whereupon they prayed authority to employ counsel to prosecute the claims. Levi C. Weir, as executor, in his answer to the petition, alleged that, since the death of Frederic and during the pendency of the action against the city of Chicago, he had advanced considerable sums for the benefit of the firm, and specifically had advanced the money necessary to pay Miller and Starr to file a petition for rehearing, after the Supreme Court had reversed the judgment against the city of Chicago; that by this action the opinion had been modified, so that a recovery against the city was deemed probable. He denied any liability to Messrs. Miller and Starr for their past services. McKechney's petition was subsequently withdrawn by leave of court.

In July, 1904, the firm of Peck, Miller & Starr withdrew their appearance as solicitors for the defendants in this cause and thereupon the appellants, by leave of court, filed their intervening petition in the proceedings. This petition alleged that the firm of Weir, McKechney & Co., and its several members, about January 26, 1899, retained the petitioners in and about their business and in the prosecution of claims against the city of Chicago; that the original contract of employment was made by John McKechney, the managing partner, and was ratified by Frederic C. Weir; that, shortly after Frederic's death, the surviving partners renewed the request that the petitioners prosecute the claims, and that these requests and the promise to pay for the services were made at the instance or with the assent of Levi C. Weir, the executor; that, shortly after his appointment as executor, Levi, as executor, renewed the requests that the petitioners prosecute the suits; and that pursuant thereto they have rendered services to the firm since January 26, 1899. The petition further recites the recovery of the judgment against the city of Chicago in the sum of over half a million dollars in August, 1899, but its final reversal in the Supreme Court of Illinois; that the action was then still pending and undetermined. Petitioners charged that the balance due them, amounting to over $65,000, was a lien upon the assets of the firm, to be paid therefrom before any division among the partners. It charged the insolvency of the defendants McKechney; further that Levi C. Weir is the principal legatee of Frederic, and that the estate of Frederic is solvent; that Levi, as executor, has large sums in excess of all individual and firm debts of Frederic. Levi, as executor and individually, as well as the McKechneys, were made parties respondent. Petitioners prayed for an order calling upon creditors to prove their claims and for an allowance of petitioners' claim, to

be paid to them, as well as for general relief.

Levi C. Weir, as executor, demurred to the petition for want of equity. Appended to the demurrer was an affidavit of the attorney, stating that Levi was without the jurisdiction, and that the attorney did not represent Levi personally and had no authority to appear for him individually. The order overruling the demurrer of Levi C. Weir, as executor, and directing him to answer the petition, contained the following addition: 'The question as to the right of said petitioners to recover as against Levi C. Weir, executor of the last will and testament of Frederic C. Weir, deceased, to be paid from or out of the assets coming to his hands as executor or received by him as devisee under the will of Frederic C. Weir, deceased, is reserved, and not passed upon, by the action taken in overruling said demurrer. ' Thereupon Levi C. Weir, as executor, filed a document, entitled 'a demurrer in part and an answer to the residue of the petition. ' As to so much of the petition as charged the receipt by Levi, as executor, of large sums of money, and as prayed that Levi, as executor, might be decreed to pay the petitioners the amount which might be found due and owing them, Levi, as executor, demurred generally for want of equity, and as to the residue of the petition answered that he neither admitted nor denied the original retainer of petitioners, the ratification by Frederic, the renewal of the contract after Frederic's death, by the surviving partners, but denied that the surviving partners' promises were made with his assent, or that he requested the petitioners to attend to the business of the firm. The petitioners replied to so much of this document as purported to answer the petition, and as to the remainder moved that it be stricken out.

The cause had been referred to a master in chancery in 1900. In March, 1905, prior to the disposition of the demurrers to Miller and Starr's petition, this order of reference was ordered to stand. No proceedings were taken thereunder, and on December 16, 1912, the order of reference was set aside, and the 'cause' referred to another master. In the meantime, by the order of September, 1910, Joseph L. Lackner, as administrator de bonis non with the will annexed of Frederic C. Weir, deceased, was substituted as complainant, and it was ordered that all intervening petitions filed should stand without prejudice by reason of the death of Levi C. Weir.

In February, 1913, testimony was begun to be taken before the master on the petition of Miller and Starr. In June, 1913 the hearing was stayed by order of court. In January, 1914, the proceedings before the master were again stayed, and discontinued until the determination in the state court of a bill of review of the former proceedings and the judgment in favor of the city of Chicago. On March 16, 1914, a decree was...