Paddock v. Bates

• Decision Date: 31 May 1886
• Citation: Paddock v. Bates, 19 Ill.App. 470, 19 Bradw. 470 (Ill. App. 1886)
• Parties: ANNE G. PADDOCKv.EUGENE C. BATES, Assignee, etc.
• Court: Appellate Court of Illinois

19 Ill.App. 470

19 Bradw. 470

ANNE G. PADDOCK

v.EUGENE C. BATES, Assignee, etc.

Appellate Court of Illinois, Second District.

May Term, 1886.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Bureau county; the Hon. GEORGE W. STIPP, Judge, presiding. Opinion filed June 8, 1886.

July 2, 1883, the firm of Sower Brothers, of Princeton, Illinois, executed their promissory notes to appellant, Anne G. Paddock, and secured the same by their trust deed of even date therewith, on their mill property in Princeton.

April 26, 1884, said Sower Bros. being insolvent, executed their deed of assignment of all their property to Eugene C. Bates, for the benefit of all their creditors, and mentioned appellant's claim at $1,000 in the list of creditors attached to said deed of assignment.

May 15, 1884, said assignee notified all creditors of said firm to present their claims within three months thereafter.

August 14, 1884, said Anne G. Paddock proved and presented her claim for $1,017, under oath, to said assignee, being the balance owing her upon said notes.

August 18, 1884, said assignee filed with the clerk of the county court a list under oath of all such creditors as had proven and presented their claims to him, which list included the claim of appellant for $996.08 and interest thereon from April, 26, 1884, at seven per cent., and a statement that said claim was secured by said trust deed; and no person interested as creditor or otherwise within thirty days thereafter, made any objection or filed any exception to appellant's claim, as the same was proven, presented and reported.

December 30, 1884, appellant's claim amounted to $1,043.33, and the value of the property securing the same by said trust deed was only $765.75 (the mill having been destroyed by fire).

December 30, 1884, said assignee made a report to the county court, and therein prayed for an order of distribution of thirty per cent. among the creditors, except to appellant, and asked for an order to pay to her thirty per cent. on the excess of her claim over and above said $765.75, and to hold in his own hands thirty per cent. on said $765.75, until her rights in the mortgaged property should be determined and realized upon.

Anne G. Paddock and her trustee, prior to and at the hearing of said cause, offered to surrender or assign her claim and her security to said assignee and the other creditors of said insolvent estate on payment in full of her claim as proven, presented and reported; or if preferred, to release her claim and said trust deed to said assignee or creditors, or to both, on such payment being made to her, and such offers were refused.

At the hearing appellant moved for a dividend upon the full amount of her claim as proven, presented and reported.

The court overruled appellant's said motion and granted said prayer of said assignee, and ordered such distribution as prayed by said assignee.

Anne G. Paddock appealed, and the cause was heard by the circuit court upon an agreed state of facts substantially as aforesaid, and upon said report and said prayer therein, and upon the motion of appellant in said circuit court for a dividend of thirty per cent. on the full amount of her said claim as aforesaid.

The decree of the circuit court was substantially the same as the order that had been entered in the county court.

Messrs. SKINNER BROTHERS and Messrs. KENDALL & LOVEJOY, for appellant; cited Morrison v. Kurtz, 15 Ill. 193; Evertson v. Booth, 19 Johnson, 486; Brinkerhoff v. Marvin, 5 Johnson's Ch. 320; Woolcocks v. Hart, 1 Paige Ch. 185; Morris v. Olevine, 22 Penn. 44; Brown v. Cozard, 68 Ill. 178: Findley v. Hosmer, 2 Conn. 330; West v. Bk. of Rutland, 19 Vt. 403; Graeff's Appeal, 79 Penn. 146.

An assignee, under a voluntary assignment for the benefit of creditors, does not represent the creditors, but is the exclusive representative of the assignor: Hawks v. Pritzloff, 51 Wis. 162; Easterbrook v. Mississmitt, 18 Wis. 551; Heinricks v. Woods, 7 Mo. Ap. 236; Morris' Appeal, 88 Penn. St. 382.

Messrs. ECKELS & KYLE, for appellee; that the general principle is that if one party has a lien on or interest in two funds for a debt, and another party has a lien on or interest in one only of the funds for another debt, the latter has a right in equity to compel the former to resort to the other fund, in the first instance, for satisfaction, cited 1 Story Eq. Jurisprudence, Sec. 633; Wise v. Shepherd, 13 Ill. 41; Hurd v. Eaton, 28 Ill. 122; Marshall v. Moore, 36 Ill. 321; Morrison v. Kurtz, 15 Ill. 193; Doyle v. Murphy, 22 Ill. 502; Sweet v. Redhead, 76 Ill. 374; Rogers v. Meyers, 68 Ill. 92; Hords v. Burton, 79 Ill. 508.

BAKER, J.

The claim of appellant was duly established in the county court as a valid claim against the estate of the insolvents. The main question at issue in this litigation is whether, the value of the collateral security held by her being insufficient to pay her debt in full, the dividends to be paid her out of the general assets in the hands of the assignee should be upon the basis of the whole of her claim, or upon the basis of the unsecured excess of her claim.

The ground taken by appellee is, that the rule in equity requires that if one party has a lien on or interest in two funds for a debt, and another party has a lien on or interest in one only of the funds for another debt, then the former should be compelled to resort to the fund upon which only he has a lien or in which only he has an interest, in the first instance, for satisfaction; and that the true doctrine is that when a debtor has made an assignment for the benefit of creditors, a creditor having a special security should be required to first exhaust such security, and should receive a dividend only upon the unsatisfied or unsecured portion of his debt. The ground taken by appellant is, that there will be no marshaling of assets, and this rule in equity will not be enforced when it trenches upon the rights, or operates to the prejudice of the party entitled to the double fund; and that the orders of distribution made by the county and circuit courts do trench upon her rights and operate to her prejudice.

Upon the particular point in controversy, as to whether the dividend paid to appellant, her security not being sufficient to satisfy her entire debt, should be a pro rata dividend on the whole amount of her claim, or upon the residue only after deducting the value of the security held, the authorities are in conflict, and a plausible reason can be given for either view. We think the weight of authority is in favor of the proposition that the dividend should be allowed on the whole claim, and that seems to be in accordance with the doctrine as held in...