Union Nat. Bank of Chicago v. Goetz

• Decision Date: 15 June 1891
• Citation: 138 Ill. 127,27 N.E. 907
• Parties: UNION NAT. BANK OF CHICAGO v. GOETZ.
• Court: Illinois Supreme Court

138 Ill. 127

27 N.E. 907

UNION NAT. BANK OF CHICAGO

v.GOETZ.¹

Supreme Court of Illinois.

June 15, 1891.²

Appeal from appellate court, first district.

The original bill in this case was by appellee, Goetz, against Louis W. Reiss, to settle a copartnership between them in a mercantile business in the city of Chicago, under the firm name of John W. Goetz & Co. The bill alleges the insolvency of the firm, prays the appointment of a receiver, and that all the effects of the copartnership be ordered to be turned over to and sold by him, and the debts of the copartnership paid under the directions of the court. Subsequently appellant by leave of the court became a party defendant to said bill, and filed a cross-bill, alleging, in substance, as follows: That on January 23, 1888, the defendants Goetz and Reiss were, and for a long time prior had been, partners in business in the city of Chicago under the firm name of John W. Goetz & Co., and that the cross-complaint during the same time was, and still is, engaged in the business of banking, and is a corporation organized under the laws of the United States, known as the ‘National Bank Act;’ that on January 23, 1888, said Goetz & Co., for the purpose of establishing a credit with said bank, and of inducing it to loan to said firm money from time to time, as desired by them, represented and stated in writing to said bank as follows:

‘Chicago, Ill., January 23, 1888. John W. Goetz & Co., of Chicago, county of Cook, state of Illinois, for the purpose of obtaining a credit with the Union National Bank of Chicago, Ill., do make the following statement and representations of our present true financial circumstances, wealth, and mercantile respectability, which said representations shall be the basis of our credit with the Union National Bank, both for our present credit and for all credits for and during the period of two years from this date, agreeing to immediately notify them of any material change in or of our business matters during the period above mentioned. In case of failure or insolvency it is agreed that all notes shall be considered then due. A copartnership of John W. Goetz and Louis W. Reiss.

+-----------------------------------------+
                ¦ASSETS.                                  ¦
                +-----------------------------------------¦
                ¦                                ¦Amount. ¦
                +--------------------------------+--------¦
                ¦Stock of goods on hand, at value¦$114,000¦
                +--------------------------------+--------¦
                ¦                                ¦        ¦
                +-----------------------------------------+
                

+--------------------------------------+
                ¦LIABILITIES.                          ¦
                +--------------------------------------¦
                ¦                             ¦Amount. ¦
                +-----------------------------+--------¦
                ¦For merchandise not to exceed¦$ 8,000 ¦
                +-----------------------------+--------¦
                ¦For borrowed money           ¦$ 15,000¦
                +--------------------------------------+
                

[Signed]

‘JOHN W. GOETZ,

For J. W. G. & Co.'

Whereby said bank and its officers were informed by said firm that their capital was $81,000 over and above all liabilities. That at various times since that date said John W. Goetz & Co. have for the same purpose made to said bank oral statements of their financial condition, all of which were to the effect that they were doing a large and profitable business, and were rapidly increasing their net capital, as shown by said written statement. The last of these oral statements was made on the 1st day of April, 1889. That, relying upon this statement of January 23, 1888, and the subsequent confirmatory statements so made, and believing them to be true, said bank gave to said John W. Goetz & Co. a line of credit for money loaned from time to time, and among others loaned to them the following named sums at the dates stated, to-wit: February 14, 1889, $2,500; February 20, 1889, $5,000; March 8, 1889, $5,000; April 1, 1889, $2,500; amounting to the sum of $15,000. Upon the loan first above stated there has been credited the sum of $524.10, leaving the amount still due from said firm to said bank the sum of $14,475.90. That the statement so made by Goetz & Co. to said bank were false and fraudulent when made, and well known by them to be false and fraudulent. That in fact the defendants at the time of making said written statement did not have on hand a stock of goods of the value of $114,000, and owed in fact for merchandise many thousands of dollars in excess of $8,000, and many thousands of dollars for borrowed money in excess of $15,000, and were in fact at all times insolvent. By means of which said false and fraudulent representations said bank was deceived, cheated, and defrauded, and so continues to be, and said defendants came into possession of the money so obtained by fraud. That, having acquired said money by such fraud, the defendants became, and still are, trustees of the cross-complainant in respect to the same, and accountable for said moneys, either in specie or in whatsoever else they placed or invested it. That said trust funds were by said defendants invested and paid out from time to time for merchandise which was by them brought into their store on State street, in the city of Chicago, and there so mixed and commingled with other merchandise, bought with other funds, or procured by other means, that the cross-complainant is now unable to identify the same, but avers that said merchandise so purchased and paid for by said trust funds, or other merchandise bought with the proceeds thereof, to which said trust also attached, were in the store of said defendants when the same was taken possession of by the receiver, as hereinafter mentioned, and passed into his possession, and so remain, unless disposed of by said receiver, in which case the proceeds thereof are in his hands, subject to said trust. That J. S. Huey was appointed receiver upon April 10, 1889, under the original bill, and now has the custody and control of the property and effects of said firm. That by reason of the facts aforesaid, the cross-complainant is entitled in equity to pursue said trust money into the property now in the hands of said receiver, and is entitled, by reason of the confusion of goods, brought about by said defendants, to a lien upon the whole stock of merchandise now in said receiver's possession for the restoration of the money out of which it has been defrauded. Prayer for relief, and that the moneys so loaned by the cross-complainant, and unpaid, may be decreed to have been obtained by the defendants by fraud, and that they may be held liable as trustees of the cross-complainant in respect to the same; that said trust money may be decreed to have been invested by the defendants by successive and continuing transactions in the merchandise now in the possession of the receiver, and to have become, by the act of the defendants, so confused with the general bulk of such merchandise that the cross-complainant is entitled to a lien upon the whole for its reimbursement; that such lien and reimbursement may be decreed accordingly; and that in the mean time the receiver be directed to retain all the merchandise which came to his possession, and the proceeds of any that has been sold, to abide the final decree. Thereupon other creditors of said firm were allowed to become parties defendant to said cross-bill; and they, together with the receiver and Goetz, filed a general demurrer to the same, which the superior court of Cook county sustained, and entered an order dismissing the cross-bill at the cost of the complainant therein. That decree has been affirmed in the...