Mullanphy Bank v. Schott

• Decision Date: 24 January 1891
• Citation: 26 N.E. 640,135 Ill. 655
• Parties: MULLANPHY BANK et al. v. SCHOTT et al.
• Court: Illinois Supreme Court

135 Ill. 655

26 N.E. 640

MULLANPHY BANK et al.

v.SCHOTT et al.¹

Supreme Court of Illinois.

Jan. 24, 1891.

Appeal from appellate court, fourth district.Krome & Hadley John G. Irwin, and Geo. F. McNulty, for appellants.

Dale & Bradshaw and Wise & Davis, for appellees.

Julius A. Barnsback, the American Powder Company, and Robert Klitzing filed a bill in chancery in the Madison circuit court, and alleged therein the recovery of certain judgments against the Brookside Coal & Coke Company, the execution of certain mortgages charged to be fraudulent, and the insolvency of said coal and coke company. The bill further averred certain rights in Barnsback, as lessor of lands, and charged fraudulent acts of certain officers of the Brookside Coal & Coke Company, and prayed the appointment of a receiver, the marshaling of assets, and the settlement of the affairs of the company, and made the corporations and certain mortgagees, trustees, judgment creditors, and stockholders and officers of the company parties defendant. It also appeared from the bill that the company had been organized and incorporated in 1880, under the name of ‘The Brookside Coal Company,’ but that in 1884 its name had been changed. Louis Schlosstein filed an intervening petition, and by leave of court filed his answer and cross-bill, in which it was averred that on the 22d day of September, 1881, the Brookside Coal Company executed three notes to Martin J. Schott, two for $1,665 each, payable, respectively, in one and two years after date; the other for $1,670, payable three years after date,-all bearing interest at the rate of 8 per cent. per annum. That to secure payment of said notes the said company, on the 19th day of October, 1881, executed a mortgage to Schott on the real estate of said company, and that the mortgage was recorded November 17, 1881. That Schott, for a good and valuable consideration, prior to the maturity of said notes, and each of them, assigned to Schlosstein the said notes, whereby he became legal and equitable holder and owner of them; and averred that the lien of said mortgage is a first and prior lien upon the property described therein. William H. Krome, trustee in a certain deed of trust, and other persons, who were owners of bonds secured thereby, filed answers and a cross-bill. In the cross-bill it was alleged that on the 17th day of June, 1882, and prior to the date of the judgments obtained by complainants in original bill, the brookside Coal Company, for and in consideration of $15,000, really and in good faith paid to the company, executed and delivered to Ed. B. Huegy 30 bonds, each bearing date June 17, 1882, each for $500, and bearing interest from date at 7 per cent. per annum, interest to be paid semiannually, on June 17th and December 17th of each year, on presentation of coupons thereto attached at the Mullanphy Savings Bank, St. Louis, Mo., which bonds provide that, in case of non-payment of any half-yearly installment of interest, each should become due; if such default should continue three months after maturity of said installment, then the principal in such bond should become due; which bonds were signed by William Freudenau, president, and William Kombrink, secretary of said company; and countersigned by William H. Krome, trustee, and made payable to Ed. H. Huegy, or bearer, at the Mullanphy Savings Bank, St. Louis, Mo., on the 17th day of June, 1892, and numbered from 1 to 30, inclusive. That to secure the payment of principal and interest of said bonds said company, on the 17th of June, 1882, by its deed of trust, conveyed to William H. Krome, trustee, in trust for the holders of said bonds and coupons, and to secure the same, and the performance of certain other covenants in said deed, certain property in said deed described, it being the interest of the said company in the lands, and in the fixtures of such coal mine. It was further averred that the lien of said deed of trust and the bonds and coupons thereby secured was superior to that acquired by complainants in the original bill by virtue of judgments therein mentioned, or any of them; and, further, that it was superior to any lien or judgment of any kind in the bill mentioned, and that it was superior and prior to the lien alleged to exist on property in favor of Louis Schlosstein. An answer was filed by John Alexander, averring that a mortgage was executed by the corporation to John O. Evans, Sr., of the date of January 21, 1885, recorded, etc., to secure $3,500, and such interest as might accure according to certificates executed by the company, bearing date January 21, 1885, payable to the order of said John O. Evans, Sr., or bearer, and numbered from 1 to 178, consecutively, and amounting to $3,500, payable, at the option of the company, at its office at Brookside, with 6 per cent. per annum from date, on or before January 21, 1887; and alleging the mortgage is a lien upon the real and personal property in the mortgage described, and that it was made in good faith, and given to secure bona fide indebtedness, and for a valuable consideration, and that he, the defendant Alexander, is holder of certificates secured by said mortgage, and naming certain certificates; and alleging that he is entitled to the appropriation of the mortgaged property to his certificates, to the exclusion of other creditors, stockholders, or parties interested in the mortgaged property; and alleging that said claims were also secured by chattel mortgage, dated January 25, 1885, duly acknowledged and recorded, and claiming the same to be a valid and first lien on all the personal property, goods, and chattels of the company.

The answers of certain judgment creditors of the Brookside Coal & Coke Company showed judgments against the corporation, in amounts, and in order of seniority, as follows: Daniel Thomas, transcript filed in the circuit court, February 26, 1885, $138.26. A judgment, February term, 1885, in the county court of Madison county, in favor of the American Powder Company, for $554; and in favor of the same company, $739.75. Judgments in the circuit court of Madison county for the March term, 1885, in favor of Julius A. Barnsback, for $823.64; Robert Klitzing, $474.85; Schott & Kombrink, $4,506.10; William Kombrink, $1,767.55; Bryon-Brown Shoe Company, $83.78; Martin J. Schott, $2,540.80; Martin J. Schott, $2,661.80; E. C. Meacham Arms Company, $221.65; Evans & Howard, $476.90; Eli Burke, $1,029; John O. Evans, Sr., $254.32; Grant Coal Company, $254.81; Mullanphy Savings Bank, $62.82; Ed. Zanders, $208.60. In the circuit court of Madison county at the October term, 1885, Chris G. Kaufman, $199.44. On a motion made in the circuit court of the coming in of the answers to the original bill and the filing of the cross-bills a receiver was appointed, and all of the coal-shafts, escapement shafts, side tracks, fixtures, buildings, structures, engines, boilers, machinery, tools, ventilating fans, coke-ovens, elevators, coal-cars, weighing scales, and all other real and personal property owned and used by the Brookside Coal & Coke Company, were sold by the receiver under the order of the circuit court to the Consolidated Coal Company, for $16,000; and at the time of the rendition of the final decree the receiver reported in his hands the sum of $16,148.16. Otto G. Schott filed a supplemental bill, averring that since the commencement of the suit he has become the holder for value of the notes in the cross-bill of Louis Schlosstein described, and alleging a priority of the lien of the mortgage to secure the same, and asking a foreclosure of the same. Other defendants filed answers, and certain others were defaulted. The decree of the court finds the mortgage to Martin J. Schott a first and superior lien, and finds that the notes secured therein were assigned and delivered before maturity to Louis Kammerer, trustee for Louis Schlosstein, for value, and that Otto G. Schott is, and was at the time of filing the supplemental bill, the legal and equitable holder of the notes, he having acquired the interest and title of Schlosstein therein, and that there is due Otto G. Schott, on said notes and mortgage, $7,079.99. The decree then recites the deed of trust to Krome, and finds as to the ownership of bonds secured by such deed of trust, and finds that deed of trust is a second lien upon the property mentioned in the mortgage made to Martin J. Schott and is subject to the lien first created, but that the Krome mortgage is a first lien on the property therein described, and not mentioned in the Schott mortgage, and is a lien upon all the property described in the deed of trust, superior to the lien of the mortgage made to Evans. Further finds that the receiver sold all the property covered by the mortgage and deed of trust, and that there is in his hands the net sum of $16,148.16, realized from such sale, after the payment of costs and expenses of sale. Further finds that the property covered by the Schott mortgage is worth $10,000. That Otto G. Schott is entitled to receive full payment of the sum of $7,079.99 out of said sum of $16,148.16, after the payment of costs, and that the holders of bonds secured by the deed of trust to Krome are entitled to the balance of said sum of $16,148.16 pro rata, according to the amounts found due to them respectively. The several judgments mentioned in the bill, cross-bill, and answers, and the mortgage of John O. Evans, Sr., and the chattel mortgage to him, are postponed to the mortgage of Schott and the deed of trust to Krome, and are not entitled to any part of said sum of $16,148.16; and decrees that the receiver pay- First, the unpaid costs; next, to the solicitor of Otto G. Schott the sum found due him, with interest from the date of the decree; and that he pay the balance of the sum in his hands to bondholders, naming them, pro rata according to the amounts due them respectively. Upon appeal to the appellate...