Osborn v. Albers

• Decision Date: 13 April 1937
• Docket Number: No. 23975.,23975.
• Citation: 7 N.E.2d 447,365 Ill. 631
• Parties: OSBORN v. ALBERS.
• Court: Illinois Supreme Court

365 Ill. 631

7 N.E.2d 447

OSBORN

v.ALBERS.

No. 23975.

Supreme Court of Illinois.

Feb. 18, 1937.

Rehearing Denied April 13, 1937.

Action by Minnie Osborn against Charles H. Albers, receiver of the Gibson City State Bank. A judgment for plaintiff was affirmed by the Appellate Court , and defendant appeals.

Judgments reversed and cause remanded for a new trial.Appeal from Appellate Court, Third District, on Appeal from Ford County Court; Will M. Cannady, Judge.

Writ Herrick, of Farmer City, and O. R. Middleton, of Gibson City, for appellant.

Kennedy & Kennedy, of Bloomington, and Frank Lindley, of Gibson City, for appellee.

FARTHING, Justice.

The Appellate Court for the Third District issued a certificate of importance after affirming the judgment of the county court of Ford county in favor of appellee, Minnie Osborn, in a jury trial of the right of property.

The facts leading up to this were that on November 24, 1933, the receiver of the Gibson City State Bank obtained judgment for $2,868.54, and costs, by confession on a promissory note given the bank by William A. Osborn, appellee's husband. The sheriff served the execution issued thereon and also levied on the stock of a seed store, the property here in question, on March 25, 1935. The next day Minnie Osborn caused a notice of claim of ownership to the property levied upon to be served on the sheriff. The cause was tried on April 11, 1935, and the jury returned a verdict finding the property belonged to Minnie Osborn. A motion for a new trial was overruled and judgment was rendered on the verdict.

Minnie Osborn and William A. Osborn were married on June 12, 1929. She had property of her own at that time. Her husband conducted a seed business at Gibson City from 1920 to February 1, 1933. The Gibson City State Bank was closed by the auditor of public accounts in December, 1932. Osborn admitted that he was indebted to it on February 1, 1933, and that it held his notes. When the bank closed, $540.54, the balance of his account, was credited on his indebtedness. Appellee claimed that she loaned her husband $5,000, on March 10, 1931, and that $2,500 of that amount was evidenced by a promissory note. The Osborns both testified that he sold her his seed business on February 1, 1933, and that she credited the $2,500 note with $555, the value of the seed then on hand in the store. None of this seed remained unsold at the date of the levy. Appellee and her husband testified that he managed the business for her from February 1, 1933; that she agreed to pay him $50 a month for his services; and that she supported him and paid his incidental expenses together with the taxes on his residence. With the exception of one month, the $50 a month was credited on the $2,500 note each month, after the sale of the business.

Appellee had two bank accounts, one in a Bloomington bank and the other in the First National Bank of Gibson City. Her passbook, at the latter bank alone, was introduced in evidence and showed deposits totaling over $10,000 between March 16, 1934, and March 19, 1935. Ninety-two checks were introduced in evidence which, with few exceptions, were signed by both the husband and wife. A few checks were signed by the wife, alone. None were signed Minnie Osborn by William A. Osborn. A few of these checks were on the Bloomington bank.

On March 3, 1934, the husband and wife executed an agreement. It recited that Minnie Osborn had been conducting the seed business from February 1, 1933; that William A. Osborn had acted as manager thereof; that he had given her notes for $5,000 borrowed from her; that he was to receive $50 per month from February 1, 1933, so long as he remained manager; and that she was to credit that sum on his notes at the close of each month.

The remaining witness for appellee, with the exception of Eugene Funk, a wholesale seed dealer of Bloomington, testified that Osborn told them that he was working for his wife in managing the business. From this they testified she was the owner. Funk testified that the account was carried in the name of Minnie Osborn from about the time the Gibson City State Bank closed. Checks given in payment for purchases of seed at this store were shown to have been made payable, for the most part, to W. A. Osborn. Appellee admitted that some money was made in the seed business, but there was no showing of just what the profits were. She received various sums from the sale of shares of stock in Swift & Co. and Armour & Co., as well as from the sale of a piece of real estate. It is also shown by her testimony and that of her husband that the latter was insolvent.

The appellant's first contention is that the transfer of the seed business to the husband and his management thereof, under the circumstances detailed, amounts to fraud in law, under our holding in Wilson v. Loomis, 55 Ill. 352. In that case, Mrs. Rosette Roe purchased a lumber business with her individual money. For a time she was in partnership with one Howell. Later she bought him out and her husband managed the business as ‘agent.’ The property there in question was sold to Loomis, at which time the sheriff had in his hands an execution against C. S. Roe, the husband. He levied on the property and Loomis sued to repossess it. There was no transfer from husband to wife and there is no mention of any indebtedness between them or of any salary having been paid to the husband. We held that if a wife engages in general trade with her own money and her husband contributes his labor, skill, and ingenuity and increases the business, the original capital and increase are liable for his debts and are not exempt as the property of the wife. In discussing this holding in our decision in Mali v. Spencer, 186 Ill. 363, at page 367, 57 N.E. 1033, 1034, we said: ‘There have been several cases where wives have advanced money to insolvent husbands to enable them to engage in trade, where it has been held that money so advanced must be regarded as a loan to the husband, and that the wife cannot appropriate the entire fruits of his time, skill and industry, as against his creditors. Wortman v. Price, 47 Ill. 22;Wilson v. Loomis, 55 Ill. 352;Robinson v. Brems, 90 Ill. 351. In such a case the wife, of course, knows of the indebtedness and of the insolvent condition of her husband, and the relation affords both motive and opportunity for conducting schemes to defraud creditors. The interest and relation of the parties in such cases may more readily give rise to an inference of fraudulent intent, or justify a conclusion not allowable in the absence of such a relation and interest. Even in the case of a wife, if the agency is actual and bona fide, and not an arrangement by which, under color of an agency, the husband enters into trade with cash furnished by her, the profits will not be subject to claims by creditors. A wife acting in good faith is not obliged to resort to strangers to transact her business, but may make her husband her agent without imperiling her property. Lachman v. Martin, 139 Ill. 450, 28 N.E. 795;Murphy v. Nilles, 166 Ill. 99, 46 N.E. 772.’

In the Mali Case the manager of the business was not a husband but a brother-in-law. But in Alsdurf v. Williams, 196 Ill. 244, 63 N.E. 686, the wife owned a farm and her husband did the work and created the increase and profits in question. The principles just stated were applied in this case and at page 248 of 196 Ill., at page 687 of 63 N.E., we said: ‘A husband cannot rightfully carry on his business in his wife's name under an assumed agency. He cannot use his wife's name as a mere device to cover up his property, or keep from his creditors the profits of a business which is in fact his. A wife cannot hold the property of her husband to delay, hinder, or defraud his creditors. Robinson v. Brems, 90 Ill. 351;Lachman v. Martin, 139 Ill. 450, 28 N.E. 795. But, if the property belongs to the wife, it cannot be taken for the debts of the husband, and all the increase and legitimate outgrowth of the investment are as absolutely hers as the original capital. If a wife owns a farm, she is not required to exclude her husband from it, and employ strangers exclusively, at the risk of losing her property. ...