Trego v. Cunningham's Estate

• Decision Date: 09 April 1915
• Docket Number: No. 9640.,9640.
• Citation: 267 Ill. 367,108 N.E. 350
• Parties: TREGO v. CUNNINGHAM'S ESTATE.
• Court: Illinois Supreme Court

267 Ill. 367

108 N.E. 350

TREGO

v.CUNNINGHAM'S ESTATE.

No. 9640.

Supreme Court of Illinois.

Feb. 17, 1915.

Rehearing Denied April 9, 1915.

Error to Appellate Court, Third District, on Appeal from Circuit Court of Vermilion County; E. R. E. Kimbrough, Judge.

Action by Edward F. Trego, trustee, for the use of William Moore and another, against the estate of James A. Cunningham, deceased. There was a judgment of the Appellate Court (188 Ill. App. 70), affirming a judgment granting insufficient relief, and plaintiff brings error, and defendant assigns cross-errors. Reversed and remanded, with directions.J. B. Mann, H. M. Steely, and H. M. Steely, Jr., all of Danville, for plaintiff in error.

Dyer & Dyer, of Hoopeston, and Lindley, Penwell & Lindley and Rearick & Meeks, all of Danville, for defendant in error.

CARTWRIGHT, J.

Plaintiff in error, Edward F. Trego, trustee for the use of William Moore and Alfred H. Trego, filed in the probate court of Vermilion county two claims against defendant in error, the estate of James A. Cunningham, deceased, for contribution to the amounts alleged to have been paid by the claimant on notes made by the Hoopeston Horse Nail Company, a corporation, payable to itself, and indorsed by the corporation and James A. Cunningham, William Moore, Alfred H. Trego, John L. Hamilton, C. S. Crary, and W. W. Todd. The first claim was for $110,601.58 for one-third of 76 notes alleged to have been paid, amounting, with interest from the time of payment, to $331,804.76. The second claim was for $2,017.61, one-third of four notes aggregating $6,052.84. It was alleged that the indorsers C. S. Crary, W. W. Todd, and John L. Hamilton were insolvent, and that the whole amount of the notes was paid with money furnished by William Moore and Alfred H. Trego. The probate court heard the evidence and allowed the first claim at $81,406.07 and the second at $1,033.33. Each party appealed to the circuit court, where the causes were consolidated, and on a hearing judgment was rendered for $47,626.46 as of the seventh class, to be paid in due course of administration. Each party appealed to the Appellate Court for the Third District, and they filed a joint bill of exceptions. The claimant assigned errors on the record, and defendant assigned cross-errors. The judgment of the circuit court was affirmed by the Appellate Court, and each party petitioned this court for a writ of certiorari to bring the record here for review. The writ was awarded, and the plaintiff in error has assigned errors and the defendant in error has assigned cross-errors. The Hoopeston Horse Nail Company was a corporation engaged in the manufacture and sale at Hoopeston, Ill., of horseshoe nails and the sale of hoof pads and some other articles. William Moore, Alfred H. Trego, James A. Cunningham, John L. Hamilton, C. S. Crary, and W. W. Todd were the stockholders, owning all the stock, and were the directors. Cunningham was accidentally killed in Montana on January 11, 1910, and at that time the corporation, Hamilton, Crary, and Todd were insolvent and have ever since been insolvent. The corporation had been enabled to do business by borrowing money wherever a bank would discount its notes indorsed by said parties who were stockholders and directors, and the notes were held at numerous places in this state and Indiana. The practice had been to make a large number of notes of the corporation payable to its own order, leaving the date and amount blank, and the notes were indorsed and left with Todd, the manager of the corporation, to be filled up and used as occasion required. When it was necessary to obtain money to pay or renew a note that matured, one of the notes would be filled up by Todd and used to renew the maturing note, if a party would take it, or to be discounted for money to make payment. At the date of Cunningham's death his name appeared as indorser, with the other five stockholders, on 80 notes, for sums aggregating $315,318.23. The notes were in the following form:

‘$5000.00

Hoopston, Ill., July 16, 1909.

‘Six months after date, we, or either of us, promise to pay to the order of ourselves five thousand and no/100 dollars, value received, with interest at seven per cent per annum from maturity, payable annually at Hoopeston National Bank, Hoopeston, Illinois.

‘Hoopeston Horse Nail Company, [Seal.]

‘By A. H. Trego, Pres. [Seal.]’

Indorsed as follows:

‘Hoopeston Horse Nail Company,

‘By A. H. Trego, Pres.

‘C. S. Crary. William Moore. A. H. Trego. John L. Hamilton. J. A. Cunningham. W. W. Todd.’

Upon learning of Cunningham's death the corporation sent out a circular letter to all the holders of its notes, stating the fact of his death; that in the future it would be necessary for the corporation to put out its paper without his indorsement, and that he was worth approximately $500,000 and the other indorsers approximately $1,500,000, and asking the creditor to accept new notes of the corporation indorsed by the remaining five. All of the notes on which Cunningham's name appeared as indorser were afterward taken up and retired. Notes were coming due within a few days after the death of Cunningham, and six of them, amounting to $27,500, were taken up from January 13 to January 17, 1910. During that brief period after his death the same methods were pursued as before, except that he was not an indorser. Notes were made indorsed by the remaining five and were accepted by the creditors in place of those taken up. The new notes were rejected by the circuit court as constituting payments by the corporation of its own notes and not payments by the indorsers. There were ten notes, aggregating $40,500, as to which the bookkeeper said that he could not be certain where the funds came from with which the notes were paid-whether they were discharged out of cash on hand or receipts from the business or in what manner. These notes were rejected by the circuit court. There was a note for $2,500, on which Cunningham was indorser, which was filled up and mailed at Hoopeston to the Citizens' Bank of Peotone on the day of his death. It was dated January 12, 1910, and was received and discounted by the bank on January 12th. The circuit court rejected this note on the ground that Cunningham's death put an end to any agency of Todd to fill up and deliver the note. The remaining notes of the corporation outstanding at the death of Cunningham and upon which he was an indorser were taken up with notes, or the proceeds of notes, executed by the five surviving indorsers as principal makers, on which the name of the corporation did not appear. These notes are called by the counsel ‘joint notes,’ and they were made out in blank and signed by the five remaining indorsers and left with Todd to be used in taking up the notes on which Cunningham's name appeared as an indorser. If the holder of one of the notes would accept a joint note Todd would fill up one and give it to him. If he would not accept the note of the individuals the money was borrowed elsewhere on one of the notes filled up by Todd, and he was paid. Most of the notes were taken up in that way, but William Moore and Alfred H. Trego furnished cash to pay some of them. They had a plan of doing the business by which the proceeds of joint notes were deposited to the credit of the corporation and the corporation made its check to the trustee and the trustee gave his check to the creditor, but the method by which ti was done is of no importance, if the fact was that William Moore and Alfred H. Trego in the end furnished the money that paid and satisfied the obligations. The circuit court took an account of all these 73 notes, the principal of which amounted to $247,818.23. The interest to April 18, 1913, was $37,940.58, making a total of $285,758.81. The claimant offered, and the circuit court held, propositions stating the law to be that the loss must be apportioned among the solvent indorsers and that each should bear one-third part thereof, with interest, but the court did not follow the law as so declared, but divided the amount by six, and thereby reached the sum of $47,626.46, for which judgment was rendered.

[2] Where there are sureties for the same principal debtor and for the same debt or obligation and one or some of them have paid or satisfied more than his or their proportionate share of the debt or obligation, he or they are entitled to contribution from the other sureties in order to equalize the common burden. The right to contribution is based on the principles of equity and natural justice, and although contribution may be enforced in a court of law on the theory of an implied contract, the doctrine originated with courts of equity, and they still have jurisdiction. The contract implied by law when one becomes a surety is that he engages to contribute his proportion according to the number of sureties, without reference to the solvency or insolvency of either of his cosureties, but a court of equity, applying the fundamental rule that equality is equity, will apportion the loss among the solvent sureties. Sloo v. Pool, 15 Ill. 47; 1 Story's Eq. § 486; 1 Parsons on Contracts (5th Ed.) 35.

The claimant alleged the insolvency of the principal maker and of the sureties C. S. Crary, W. W. Todd, and John L. Hamilton, and asked for contribution of one-third of the amounts of the notes, with interest from the time of payment. That was an appeal to the equitable powers of the probate court, and that court, although without general chancery jurisdiction, has equitable jurisdiction in the settlement and allowance of claims. To avoid the delay, expense, and embarrassment in the settlement of estates by requiring a resort, in the first place, to a court of equirty, it will proceed, in a case of an equitable character, as though a bill in chancery has been filed, and will hear the evidence, investigate the claim, and apply equitable rules in determining the judgment. Moore v....