Nelson v. John B. Colegrove & Co. State Bank
| Decision Date | 22 December 1933 |
| Docket Number | No. 21750.,21750. |
| Citation | 188 N.E. 461,354 Ill. 408 |
| Parties | NELSON, Auditor of Public Accounts, v. JOHN B. COLEGROVE & CO. STATE BANK. |
| Court | Illinois Supreme Court |
OPINION TEXT STARTS HERE
Error to Appellate Court, Third District, on Appeal from Circuit Court, Christian County; F. R. Dove, Judge.
Proceeding by Oscar Nelson, Auditor of Public Accounts, against the John B. Colegrove & Co. State Bank, wherein D. Digby Large was placed in charge of the bank as receiver, and wherein Charles H. Shamel filed a petition. Decree denying his petition in part was affirmed by the Appellate Court (268 Ill. App. 56), and petitioner Shamel brings certiorari.
Affirmed.
Provine & Williams, of Springfield, for plaintiff in error.
Oscar J. Putting, of Springfield, for defendant in error.
The auditor of public accounts closed the John B. Colegrove & Co. State Bank of Taylorville on October 10, 1929, and shortly thereafter placed a receiver in charge of the bank. On November 13, 1929, the auditor filed a bill of complaint in the circuit court of Christian county charging the insolvency of the bank and praying for its dissolution and the settlement of its affairs. Charles H. Shamel filed a petition in the proceeding for the return of certain bonds pledged as security for a deposit of money made by the state treasurer, and, in case the particular bonds could not be returned, that other bonds of the same issue and denomination should be substituted. The receiver answered the petition, evidence was introduced, and the court, by its decree, allowed the petitioner a preferred claim for the proceeds of part of the bonds, and a claim as a general creditor for the amount of the proceeds of the remaining bonds. Complaining that the portion allowed as a general claim should also have been given a preference in payment over the bank's general creditors, the petitioner prosecuted an appeal to the Appellate Court for the Third District. The decree was affirmed by that court, and thereafter the petitioner made application to this court for a writ of certiorari. The application was granted, and the record is submitted for a further review.
The John B. Colegrove & Co. State Bank was organized in 1920 and conducted a general banking business in the city of Taylorville, in Christian county, until it was closed by the auditor of public accounts. Substantial withdrawals of deposits during July and August, 1929, made it imperative for the bank to obtain additional funds to continue in business. To this end, John B. Colegrove, the president of the bank, on two occasions, sought to induce Charles H. Shamel, the plaintiff in error, who was a stockholder, to purchase certain mortgages which, it was represented, the bank held. The plaintiff in error, after an investigation, refused to buy any of the mortgages offered to him.
Colegrove knew that Shamel held ten Imperial Japanese government bonds for $1,000 each, and three United States government bonds for $1,000, $500, and $50, respectively. Late in August, 1929, Colegrove asked him to allow the use of his bonds to obtain for the bank a deposit of $10,000 by the state treasurer. For this purpose, the plaintiff in error was informed the bank would pledge desirable first mortgages with him. Colegrove later exhibited to him notes and mortgages executed by Samuel Peat and his wife, by Grace Flesher, and by Martha L. Perrine and her husband. Negotiations ensued with the result that the plaintiff in error delivered his bonds to Colegrove for the bank's use, and received in return the foregoing notes and mortgages, and Colegrove's note, dated August 29, 1929, by which he promised to pay $11,550 to Shamel's order, on December 1, 1929, with interest at 7 per cent. It was recited in the body of the note that the three mortgages were pledged as collateral security for its payment. The back of the note bore the following indorsement:
‘[Signed] John B. Colgrove.’
Two or three days later Colegrove informed the plaintiff in error that the bonds had been pledged as security for the desired deposit of $10,000 by the state treasurer. The general ledger of the bank disclosed that bonds of the face value of $11,550 had been borrowed from the plaintiff in error. At the time he delivered his bonds to Colegrove, the bank owned the mortgage executed by Martha L. Perrine and her husband but not those made by Samuel Peat and his wife and by Grace Flesher.
Late in November, 1929, after the bank had been closed, the state treasurer sold four of the Japanese government bonds and all the United States government bonds, pledged with him as stated, for $5,786.71. This sum, with the proceeds theretofore derived by the state treasurer from the sale of other bonds not involved in this proceeding, produced $113.08 in excess of the bank's indebtedness to the state. Accordingly, the latter sum was remitted and the remaining Japanese government bonds were delivered to the receiver of the bank on December 9, 1929. The receiver did not know that the plaintiff in error claimed any interest in these bonds, and on December 15, 1929, sold the six Japanese government bonds returned by the state treasurer for $6,281.
The plaintiff in error instituted suits to foreclose the mortgages executed by Samuel Peat and his wife and by Grace Flesher. These mortgages, it appeared, were part of the assets of a deceased person's estate, and the bank had no interest in them. The mortgage made by Martha L. Perrine and her husband proved to be a junior incumbrance. These three mortgages the plaintiff in error offered to surrender upon the return to him of the bonds Colegrove had obtained from him.
The court found that the plaintiff in error was entitled to have paid to him the sum of $113.08 remitted to...
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