Penn v. Fogler

• Decision Date: 25 October 1899
• Parties: PENN et al. v. FOGLER et al.
• Court: Illinois Supreme Court

182 Ill. 76

55 N.E. 192

PENN et al.

v.FOGLER et al.

Supreme Court of Illinois.

Oct. 25, 1899.

Appeal from appellate court, Fourth district.

Bill by W. M. Fogler and others against John Penn, trustee, and others. From a judgment of the appellate court (77 Ill. App. 365), affirming a decree of the circuit court in favor of complainants, defendants appeal. Reversed.Merrills & Mooneyham and G. A. Koerner, for appellants.

Patton, Hamilton & Patton, for appellees.

This is a bill in chancery, filed September 1, 1896, by W. M. Fogler and George W. Brown, the latter being administrator with the will annexed of the estate of Nathaniel M. McCurdy, deceased, and others, stockholders or partners in a certain banking firm known as the ‘Bank of Vandalia,’ against certain other stockholders or partners therein, and Imogene Marr, Harrietta Marr, McKendree College, and the Church Extension Society of the Methodist Episcopal Church, beneficiaries under the will of the said Nathaniel M. McCurdy, deceased, for the purpose of winding up the partnership affairs of said firm under the direction of the court, and for the appointment of a receiver of the firm assets, and for the distribution thereof after the payment of the firm liabilities, and for general relief.

The bill sets up the existence of the National Bank of Vandalia in Vandalia prior to April 2, 1883, and alleges that it did a general banking business under the charter issued to it under authority of the national banking act, with a paid-up capital stock of $100,000; that on April 2, 1883, the stock was controlled and owned in certain proportions by certain persons, and that among them the Nathaniel M. McCurdy estate, of which George W. Brown was the administrator with the will annexed, owned $40,000 of the stock; that the bonds deposited for the guaranty of the circulating currency were called in for redemption; that, the premiums on the bonds being at that time very high, the stockholders surrendered the charter, and continued the banking business as a co-partnership from April 2, 1883, to May 1, 1895, with the same persons and the same capital, with certain exceptions therein set forth; that the partners were to share in the losses and profits in proportion to the amount invested by each, respectively; that Lydia A. Fogler withdrew on June 8, 1887, her capital stock of $15,000; that certain stockholders died in 1890, 1894, and 1895, leaving heirs and representatives, upon whose estates administratorsand executors were qualified; that certain stock was sold, and the purchasers admitted as partners; that, on the dissolution of the firm, the interests of its members were two-fifths thereof, or $40,000, in the McCurdy estate, and the other three-fifths in certain other persons, whose respective interests are named; that real estate was taken in settlement of bad debts; that the firm has notes and other evidences of indebtedness; that the assets should be reduced to money to pay creditors and to make distribution; that no settlement of the partnership affairs has ever been made; that the will provides for the payment of an annuity to Harrietta and Imogene Marr during their lives out of the earnings of the capital invested in the banking business, and that at their death such capital is to be divided between said college and said church extension society. A decree was made, appointing a receiver, and ordering him to take charge of the partnership assets.

One John Penn, trustee, who had been appointed trustee in a proceeding in chancery commenced by McKendree College and the board of church extension against George W. Brown and the annuitants as defendants, and to whom, as such trustee, George W. Brown was ordered to account for such fund and pay the same over, was made a party defendant to the original bill, and granted leave to answer and file a cross bill. John Penn, trustee, in his answer, alleged that, when the partnership was formed, on April 2, 1883, Brown was admitted as a general partner, and held the stock of the National Bank as an administrator of the estate, or the proceeds thereof, and contributed it to, and it was received by, said partnership as assets; that the persons composing the firm at that time knew that said fund did not belong to Brown, but was held by him as administrator, and was subject to the order of the county court of Fayette county. The answer further avers that Brown had no authority to make such investment, denies the dissolution of the firm, admits that the co-partners agreed to share the profits and losses, but denies that the legatees of McCurdy made any such agreement.

Penn filed a cross bill, praying that the said sum of $40,000, together with lawful interest thereon, be decreed to be a liability of said partnership, and a prior lien on the firm assets, and that, if the assets are insufficient to discharge the liabilities, a money decree be rendered against the defendants to the cross bill for the residue, and prayed for general relief. The cross bill makes parties defendant thereto all the parties to the original bill, except McCurdy's legatees. The cross bill avers that Nathaniel M. McCurdy died testate, September 29, 1876; that his will was admitted to probate; that, at the time of his death, he owned 400 shares of the capital stock of the National Bank of Vandalia, which he bequeathed to McKendree College and the Board of Church Extension of the Methodist Episcopal Church, subject to the payment of certain legacies and annuities out of the earnings of the stock; that at his death said shares of stock were worth no less than $100 per share; that no trustee was appointed to execute said trust; that Mary K. Marr was to be paid an annuity from the earnings of the stock during her life, and at her death the same was to be paid to her two daughters, Harrietta and Imogene, in equal parts, and at the death of either, the survivor was to receive the whole during life; that Mary K. Marr is dead, and her daughters still survive; that George W. Brown has been appointed and is acting as administrator with the will annexed; that the estate is still unsettled; that the stock came into Brown's hands as administrator, and, when received by him, was worth no less than $40,000; that the charter of the bank was surrendered on April 2, 1883, and a partnership was formed by said stockholders and Brown to transact a banking business; that the said firm had a partnership fund called ‘capital stock’; that Brown contributed the proceeds of said 400 shares to the partnership; that the same was received by said partners, and each of them knew that no part thereof belonged to Brown, but was the property of McCurdy's legatees; that Brown was the cashier of said National Bank and of the Bank of Vandalia, and continued as such until the firm ceased doing business, in May, 1895; that said firm has assets and liabilities; and that among its liabilities is the said sum of $40,000, with lawful interest up to the filing of the cross bill, which is due cross complainant, as trustee.

Answers were filed by all the defendants to the cross bill of John Penn, trustee, but the answer of George W. Brown thereto was separate from the others. The joint and several answer of the defendants, except Brown, to the cross bill, sets up that the National Bank of Vandalia ceased to do business, but that the same business was carried on, with the same directors and the same stockholders, at the same place, and with the same assets, and with no charge except in name; that the continuation of the business by the partnership was in accordance with the will. The answer denies that Brown contributed to the firm $40,000 belonging to the McCurdy estate, or that defendants had notice thereof, or that the partnership is indebted to the beneficiaries of McCurdy, or that the defendants agreed to pay the liabilities of the bank existing when they became interested therein, except ordinary deposits, or that the cross complainant is entitled to a prior lien on the assets or to any relief whatever. The answer further avers that whatever use was made of said fund by either of the banks or the firm was well known to McKendree College and to the board of church extension; that the latter consented thereto and acquiesced therein. The answer also sets up laches and the 10-year and 5-year statute of limitations as a defense. George W. Brown, in his separate answer, avers that, at the time of the surrender of its charter, the National Bank had a large amount of real estate taken for bad debts, which had depreciated, and that by reason thereof the McCurdy stock was not worth $40,000; that the charter was surrendered because the bonds securing the bank's circulation were called in for redemption, and it would have been detrimental to buy other bonds, on account of the high preminum they commanded; that the total amount received on the sale of the bonds when the charter was surrendered was less than $10,000; that the organization of said partnership and the continuation of the banking business were what prudent and careful business men would have done; that the college and the board of church extension consented to and acquiesced in and ratified the investment of the funds in the copartnership. An amendment was filed to the answer of W. M. Fogler to the cross bill of John Penn, which sets up that at the February term, 1877, of the circuit court of Fayette county, George W. Brown, administrator, etc., filed a bill for the construction of the will, and for the appointment of a trustee to sell the real estate and carry out the provisions concerning the bank stock; that the college and the church extension society were defendants thereto, and entered their appearances; and that a decree was entered therein on March 10, 1877, the substance of which is set out in the opinion.

Upon the hearing of the case, the court below made a final decree, sustaining the investment made by Brown in the...