author: Mr. Presiding Justice Wolee

text:
    William L. O’Connell, Appellant, v. Samuel T. Nelson et al., Appellees.
    Gen. No. 8,930.
    Dove, J., dissenting.
    Opinion filed July 30, 1935.
    Virgil H. Duvall, of Aledo, for appellant.
    Harry M. Schriver, of Rock Island, and Samuel R. Kenworthy, of Moline, for appellees.
   Mr. Presiding Justice Wolee

delivered the opinion of the court.

On February 28, 1934, William L. O’Connell, as receiver of the Aledo State Bank, filed a complaint in chancery, in aid of execution, in the circuit court of Mercer county, Illinois, against Samuel T. Nelson et al. In this complaint is was alleged that said receiver had previously recovered a judgment against said Samuel T, Nelson, in the circuit court of Mercer county, Illinois, on November 24,1933, to the amount of $8,322.64 and costs; that previous to the rendition of said judgment said Nelson had conveyed a large amount of real estate and personal property to the defendants; that' said conveyance was' not bona fide, but was a sham and made for the purpose of defrauding plaintiff and was not supported by any valuable consideration; that the notes on which said judgment was based had been executed by said Samuel T. Nelson prior to the time the Aledo State Bank closed for business on December 21, 1931, and that plaintiff, William L. O’Connell, was the duly qualified and acting receiver of said bank.

It was further alleged that said Samuel T. Nelson had no property, real or personal, liable to levy and sale excepting that which had been conveyed to the defendants, and the complaint prayed that the deed of conveyance be set aside and that the defendants be enjoined from selling or in any manner interfering with the said real and personal property. All defendants were duly served with summons.

Defendant, Samuel T. Nelson, filed an answer and counterclaim in which the entry of the judgment against him as stated above for $8,322.64 and costs was admitted. He also stated that previous to the rendition of said judgment he owned the real estate mentioned in the complaint, and that he, together with his wife, Amanda J. Nelson, conveyed the same as alleged. The allegations that the conveyance was a sham and fraud were denied. This defendant made further denial that there was anything due from him to plaintiff because of said judgment, but claimed a set-off thereto because of the facts set up in his counterclaim, and denied that plaintiff was entitled to any relief.

The counterclaim of said Samuel T. Nelson states that said receiver was indebted to him to the sum of $8,504.34, with interest from January 26, 1934, for money laid out and expended by said defendant, Nelson, for the Aledo State Bank, at its request, under the following circumstances: On January 17,1929, the United States District Court for the Southern District of Illinois, Northern Division, appointed the Aledo State Bank a depository for funds of estates in bankruptcy, and on January 21,1929, the Aledo State Bank, as principal, and S. T. Nelson (who is the same person as defendant, Samuel T. Nelson) and others, as sureties, entered into a bond in the penal sum of $50,000, payable to the United States of America, to protect deposits of bankruptcy funds in said bank, which bond was approved by said court January 22, 1929; that moneys belonging to a large number of estates in bankruptcy were deposited in said bank and withdrawn therefrom from time to time until January 26, 1932, when said bank was declared insolvent by the auditor of public accounts and a receiver appointed. The deposits of bankruptcy funds in said bank when it closed aggregated $8,364.85.

Suit was brought on this bond in the United States District Court January 9, 1933, and a judgment entered against said Nelson (a surety on said bond), for $8,506.34, on May 11,1933. Samuel T. Nelson paid and discharged said judgment on January 26, 1934, and thereby discharged the obligation of the Aledo State Bank on said bond. Samuel T. Nelson charges that said sum of $8,506.34 was due him from the Aledo State Bank, and that said amount was due to him from said bank when it closed its doors and suspended payment December 21, 1931. The counterclaim prayed judgment against plaintiff for $8,506.34, with interest from January 26, 1934, and asked to have $8,322.64 credited for the discharge of the judgment which the receiver of said bank held against him. It was further asked that said judgment be canceled and that a judgment for the excess be rendered in favor of said defendant and against plaintiff.

The defendants, Amanda J. Nelson et al., being all defendants except Samuel T. Nelson, Jr. (the minor), answered. Their allegations were substantially the same as set forth in the answer and counterclaim of Samuel T. Nelson. Samuel T. Nelson died May 19, 1934, and Virgil A. Nelson, as administrator of his estate, was substituted as a defendant and also as connterclaimant. A guardian ad litem was appointed for defendant Samuel T. Nelson, Jr., and he filed a formal answer.

Plaintiff filed a motion directed to the answer and counterclaim of all the defendants. This motion, which operated as a demurrer under the Civil Practice Act, Cahill’s St. ch. 110, U 129 et seq., raised several questions, some of which pertained to form chiefly and which were obviated by amendment. The principal question raised by the motion was that because Samuel T. Nelson had paid the judgment entered in the United States District Court against him, on the bond in which he was a surety for Aledo State Bank, subsequént to the closing of Aledo State Bank and subsequent to the principal’s insolvency, he was not entitled to set off the amount which he paid, against the judgment which the receiver of the Aledo State Bank had obtained against him.

After a hearing on the questions raised by the pleadings, no evidence being taken, the court entered a final decree on November 9, 1934, denying and overruling the motions to strike the answers and counterclaims. Appellant refused to plead further and the court found that appellant, as receiver of the Aledo State Bank, was justly indebted to Virgil A. Nelson, as administrator of the estate of Samuel T. Nelson, deceased, to the amount of $8,506.34; and that Samuel T. Nelson was justly indebted to Aledo State Bank at the time of the institution of this suit to the sum of $8,322.64, and that defendant, Virgil A. Nelson, administrator of the estate of Samuel T. Nelson, is entitled to set off the indebtedness owed by plaintiff to Samuel T. Nelson and that the sum of $8,322.64 be credited to plaintiff in satisfaction of the amount due from Sapiuel T. Nelson to plaintiff; that plaintiff should be ordered to satisfy his judgment against defendant as described in the complaint which was entered November 24, 1933, in favor of William L. 0 ’Connell, as receiver of Aledo State Bank, and against Samuel T. Nelson, named as S. T. Nelson, and further found that Virgil A. Nelson, as administrator of the estate of Samuel T. Nelson, deceased, have and recover from plaintiff the balance, being $183.70, to be paid by plaintiff out of the assets of Aledo State Bank in due course of administration of said assets. An order was entered in conformity to the above findings. Plaintiff was enjoined from asserting any rights against any of the defendants by reason of said judgment. The complaint of the plaintiff was dismissed and costs assessed against him, to all of which plaintiff excepted. The appeal from said final decree was then perfected to this court.

The facts are not in dispute in this case. The only question before this court for decision is one of law raised solely on the pleadings. This question is conceded to be, ‘1 Can a debtor to a bank, on an obligation incurred prior to the bank’s insolvency, set off against this obligation, reduced to judgment by the receiver of said bank after its insolvency, a claim of said debtor against a receiver arising out of the fact that the debtor paid a judgment entered against him after the bank’s insolvency based on a depository bond executed by said bank as principal and said debtor claiming a right of set off, as one of the sureties; said bond being executed prior to the bank’s insolvency?”

The plaintiff obtained a judgment at law by confession against Samuel T. Nelson. In his petition he avers he is unable to collect by means of an execution and he brought that judgment into a court of equity by a creditor’s bill to obtain equitable relief, by setting aside a conveyance made by Samuel T. Nelson prior to judgment in question, on the alleged ground that the conveyance was fraudulent as to the plaintiff. Under these circumstances it is a question of law whether equity principles shall prevail, and if so whether the defendant is entitled to the set-off as claimed. In the case of Quick v. Lemon, 105 Ill. 578, the question was raised whether the case should be decided according to equitable principles or to the strict interpretation of the law. The court in their opinions say, “The case then stands in this position: The complainant has recovered 'a judgment at law against defendant, which he carries into a court of equity to enforce. The defendant has a demand against complainant which grew out of the same transaction, which has not been reduced to judgment, and which was not pleaded in the action at law wherein complainant obtained judgment. Can this demand be set off in equity when the plaintiff in the judgment comes into a court of equity to collect his judgment? If the judgment had been paid after it was rendered, the defendant might defeat the bill by showing that fact. If it has á legal demand against complainant large enough to liquidate the judgment, although it existed when the judgment was rendered, as it was not bound in law to plead that demand in the action at law, when sued in equity we perceive no reason why the demand may not be relied upon as a set-off to the judgment, if the corporation can show equitable ground for relief.” It appears to this court that there is no question but that since the appellant chose a court of equity in which to enforce his claim, the whole proceeding should be governed by equitable principles.

The appellee cites the case of Hynes v. Illinois Trust & Savings Bank, 226 Ill. 95, in which it has said: “The rights and liabilities of creditors and debtors of an insolvent corporation are fixed and determined at the time of the appointment of the receiver.” This case is cited for the purpose of showing that before the receiver was appointed in the present case the appellee had a piatured claim against the bank for the amount that was found due on the bond in question, and therefore became a creditor of the bank prior to the appointment of the receiver. It is questionable whether the language used by the Supreme Court is applicable to the case we are now considering, but for reasons which will be discussed later, we think it is of little importance whether this ruling is applicable.

Neither our Supreme or Appellate Court has passed upon the principle of law we are now considering, but the Supreme Courts of many of the other States have passed upon it and are in hopeless conflict in regard to it. In the case of Kilby v. First Nat. Bank, 66 N. Y. S. 579, at 583, the court in passing upon the identical question that we now have before us, use this language: “But it is urged that, although plaintiff made the payments on account of these three deposits before the defendant receiver was appointed, still it was after the bank had suspended, and that therefore they are not available to him, as against what he owed at the date when the bank suspended. Davis v. Knipp, 92 Hun, 297, 36 N. Y. Supp. 705. The case presented in and covered by that decision is different from this one. There the debtor owing the bank went onto the street after its suspension, and bought up a claim to which he had held no previous relation, for the express purpose of using it as an offset. To allow such a procedure would manifestly be unjust to other creditors, and should not be tolerated. But that is not this case. If I have been right in my prior conclusions, the defendant bank, at the moment when it suspended, owed three accounts, which in this action are to be deemed then due and payable. It was insolvent and could not pay them, and plaintiff, by express agreement and otherwise, was individually liable to make good every dollar of every deposit. He had a right to treat his responsibility as then accrued and fixed, and could have pursued the bank for the total amount of all the deposits. As a matter of fact, some time was taken to adjust his liability with the parties to whom he was bound to make good the deposits, and to fix and liquidate his individual responsibility in the case of two of them. This, however, was all done in pursuance to and in recognition of a liability which existed at the date of suspension; and for the purposes of this action the payments will be deemed to relate back, and to have been made as of that date. So that, in conclusion, we have plaintiff, as of the date when the bank suspended, becoming liable for the amount of three deposits which he was bound to make good when the bank defaulted, and in liquidation of that liability paying the sum of $3,785.55, which he asks to have offset on what the bank or its receiver holds against him. It seems to me that he is entitled to this relief; that whether it be regarded that as a surety for the bank he has paid up in part these deposits, and become subrogated to the rights and claims of those to whom they belonged, or simply that by the failure and default of the bank he became liable for a certain amount, which he has liquidated and paid, in either event equity will give him credit upon his indebtedness for his payment thus made.”

In the case of City of Rice Lake v. Citizens’ State Bank of Rice Lake, 204 Wis. 228, the Supreme Court of the State of Wisconsin in holding that a surety for the bank which had been compelled to pay because of the insolvency of the bank, use this language: “It is objected by appellants that to permit the set-off operates unfairly to the depositors, of the bank, in that its effect is to insure to the depositor who has insisted on such a bond a return of his deposits, not at the expense of the sureties, but at the expense of the depositors; that this is true because the sureties on such a bond may borrow money sufficient to recover their liability and thus provide themselves with an offset. That there is something to be said for this position may easily be conceded. It is the basis of the cases denying a set-off in such a situation. However, it has always been the rule that a surety could exact security from his principal, and that is virtually what has been done in this case. Nor does there seem to be any fundamental distinction between the surety situated as are the defendants, and the depositor who borrows and thereby protects his deposit, yet the right of the borrowing depositor to off-set is unquestioned. It is further to be considered that section 62.12 (7), Stats., contemplates that depository bonds be exacted to secure the deposit of municipal funds. It is by no means clear that sureties on such bonds could be obtained without a contract reserving some such security as was here exacted. It is our conclusion that the defendants, except Hansen, are entitled, upon payment of the judgment in favor of the city, to an offset against their indebtedness to the extent of such payments.”

In the case of Leach v. Bassman, 208 Iowa 1374, 227 N. W. 339, the same question was before the Supreme Court of Iowa, and in deciding the case the court use this language: “It is also conceded that, if the claim of appellee to a set-off rests wholly upon the equitable doctrine of subrogation, no such right exists. Appellee concedes that the holding of this court in Leach v. Commercial Savings Bank, 205 Iowa 1154, 213 N. W. 517, is conclusive on this point. Appellant, however, argues that the decision in that case goes much further than appellee is willing to admit. The proposition relied upon by appellee for affirmance is that the relation of creditor and debtor arose between himself as surety on the bond and the bank as principal immediately upon its execution; that the law implies an obligation on the part of the principal to pay the debt or to reimburse the surety if he is compelled to do so. The right of a creditor of an insolvent bank to set-off is limited to a pre-existing indebtedness; that is, the insolvent must have been indebted to the person claiming a right of set-off at the time the insolvency occurred. This is well settled in this state.

“There is some diversity of judicial opinion as to whether the relationship of creditor and debtor arises between principal and surety immediately upon the execution of the instrument. . . . The exact question before us has not previously been passed upon by this court, but it seems to us in harmony with the overwhelming weight of authority that the relation of creditor and debtor arises immediately upon the signing by the surety of the obligation because of the implied promise of the principal to reimburse him in case he is compelled to pay the same.

“As was said by the Massachusetts court in Rice v. Southgate, 16 Gray, 142:

“ ‘It is clear that the contract of a principal with his surety to indemnify him for any payment which the latter may make to the creditor in consequence of the liability assumed takes effect from the time when the surety becomes responsible for the debt of the principal. It is then that the law raises the implied contract or promise of indemnity. No new contract is made when the money is paid by the surety, but the payment relates back to the time when the contract was entered into by which the liability to pay was incurred. The payment only fixes the amount of. damages for which the principal is liable under his original agreement to indemnify the surety.’ ” In this case the court cites many other cases that support the ruling as laid down by that court.

In the case of State v. Bank of Magdalena, 33 N. M. 473, 270 Pac. 881, the court held that an indemnitor of a surety on a depository bond, having paid the depositor after insolvency of the bank, may set off Ms claim against his indebtedness to the bank on promissory notes. This case also contains an exhaustive reference to cases that adhere to this theory of the law, and also many that are contrary.

The Supreme Court of Virginia in the case of Barnes v. Barnes, administrator, in discussing the right of a surety to a set-off to an insolvent estate, used the following language: “We are further of the opinion, even if this demand had been satisfactorily establisted as due and owing by the appellant, the decree against him for the amount of that would still be erroneous in view of the agreed fact that the estate of M. C. Barnes deceased is insolvent and that appellant is responsible as surety for M. C. Barnes to the Peninsular Bank of Williamsburg for a sum largely in excess of appellee claim.” In this case it will be observed that this surety had not at the time of the claim for a set-off paid the amount of the bond, but the court held that he was entitled to a set-off because of his being a surety and the principal being insolvent. In the case of Johnson’s Ex’rs v. Johnson Heirs, 83 W. Va. 593, 98 S. E. 812, the Supreme Court of West Virginia in discussing a right of set-off held that a debtor of an insolvent estate may, in a court of equity, set off his liability as surety for the deceased, and is entitled to withhold payment of his debt until the amount of his liability is determined.

The appellant has cited numerous cases that hold that a set-off under such circumstances cannot be allowed. Some of these cases are based solely upon a statutory provision, others under the right of subrogation and others, that a surety does not become a creditor of the insolvent corporation until it had paid the obligation and as that happened after the appointment of the receiver the right of set-off does not exist.

Our Supreme Court in the early case of Choteau v. Jones, 11 Ill. 300, held, “The relation of debtor and creditor between principal and surety, so as to entitle the surety to avoid a voluntary conveyance, made by his principal, commences at the date of the obligation by which the surety becomes bound, and not from the time he makes payment.” Our Supreme Court in the case of Hatfield v. Merod, 82 Ill. 113, in deciding when a surety on note becomes a creditor against his principal, use this language: “At the time of the making of the deed, Merod was bound as the security of Hatfield upon a promissory note to Dunn. Afterwards, Merod was compelled to pay Dunn, and brought -suit against Hatfield for the money so paid, and recovered judgment against Hatfield. This proceeding is for the satisfaction of that judgment. Merod was then a creditor, in the sense of the statute, at the time of the making of the deed, and has a right, as such, to call in question the deed. ’ ’

In the case of Estate of Ramsay v. Whitbeck, 183 Ill. 550, at page 567, the court in discussing a similar matter says, “When a surety signs a bond the law raises an implied promise by the principal to reimburse the surety for any loss which he may sustain, and when a loss occurs this implied contract of indemnity relates back and takes effect from the time when the surety became responsible. Under this rule, when the sureties signed the bond of Ramsay the law implied a promise on his part to indemnify and save them harmless from all loss which they might sustain by reason of such signing, and when they made up the deficit this implied promise related back to the date of bond. ’ ’

In the later case of Evans v. Ilinois Surety Co., 298 Ill. 101, the court in discussing when one becomes a creditor of another on account of signing as a surety on a bond, says: “The liability under the bond was created prior to the appointment of the receiver, on the execution and delivery of the bond. The cause of action accrued on that liability when there' was a breach of the bond. The binding force of the contract between the company and claimant could no more be changed by the death of the company or the appointment of a receiver than could that of an individual surety. The State of Ohio was a creditor at the time of the appointment of the receiver as the word ‘creditor’ is usually understood in law. The relation of debtor and creditor between principal and surety commences at the date, of the obligation by which the surety company becomes bound and not from the time it makes a payment.”

It seems to be the universal rule that where an insolvent bank holds a note of a depositor who had on deposit money in the bank at the time it became insolvent the right of set-off then exists. The allowance as a set-off of a claim acquired prior to the insolvency proceeding is based upon the idea that where the right of set-off exists at such time the debtor equitably owes only the balance over and above the amount which the insolvent owes him, and this is the debt that passes to the trustee in insolvency for the creditors, or the receiver; and hence, that the allowance of the set-off does not amount to a preference.

It is our opinion that the court properly found that the appellee had a just claim for a set-off against the claim of the receiver of the insolvent bank. The judgment of the circuit court of Mercer county is hereby affirmed.

Judgment affirmed.

Dove, J., dissents.


source: Caselaw Access Project

author: Mr. Presiding Justice Wolfe

license: Public Domain

text:
    Charles L. Combs, Administrator of the Estate of Charles Combs, Jr., Deceased, Appellee, v. Jacob Younge, Appellant.
    Gen. No. 8,946.

      Opinion filed July 30, 1935.
    Howard White and E. Bentley Hamilton, both of Peoria, for appellant.
    Cassidy & Knoblook, of Peoria, for appellee.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

The plaintiff secured a verdict and judgment against the defendant for $9,500' in an action wherein the petition alleges that the defendant negligently drove his automobile against the minor son of the plaintiff and thereby caused his death. The accident occurred about nine o’clock a. m. on April 28, 1934, on U. S. Eoute No. 24 between Peoria and Pekin. The decedent, Charles Combs, Jr., was about 15 years old at the time in question. He was riding his bicycle southward on the edge of the pavement or on the shoulder of the road on the west side, on his way to Pekin, when the defendant driving his automobile toward Pekin approached him. When the defendant first saw the decedent, before the accident, he was driving his car on the east side of the concrete. A short time before the defendant came up to the decedent, these two persons changed their positions in such a manner that the car and the bicycle collided. The defendant and one John W. Addler, who was driving a delivery truck about 50 feet behind and following the defendant’s car, were the only eyewitnesses to the accident.

The plaintiff sues as the administrator of the estate of Charles Combs, Jr., deceased. Section 2 of the Evidence Act (Cahill’s St. 1933, ch. 51, If 2) provides in part as follows: “No party to any civil action . . . shall be allowed to testify therein of his own motion, or in his own behalf when any adverse party sues as the administrator of any deceased person, unless when called as a witness by such adverse party so suing or defending.”

Section 1 of the Evidence Act provides, in general, that no person shall be disqualified as a witness in any civil action, except as in the act stated, by reason of his interest in the event thereof. The act enlarges the competency of witnesses so that, with the exceptions as therein limited, all persons may testify in an action. The principal reason for the disqualification of a party as a witness on his own behalf as provided by section 2 of the act is the supposed inability of the administrator to oppose the statements of his adversary, or to meet evidence with counter evidence. (VanMeter v. Goldfarb, 317 Ill. 620.) Section 2 provides that the party suing or defending against an administrator is not a competent witness, “unless called as a witness by such adverse party so suing or defending.” The general design and purpose of the act, including the statutory exceptions as appears from their terms, is to place the parties to a civil action in a position of equality, or equal opportunity to introduce testimony to effect a full and fair trial. This view of the statute is the reason or foundation for the decision in the case of VanMeter v. Goldfarb, supra. In that case the Supreme Court construed the third exception of the statute and the court held if the real party in interest testifies as an occurrence witness and gives his version of the accident, in an action for wrongful death under the Injuries Act, Cahill’s St. ch. 70, the defendant is permitted to testify and give his version of the accident. Also, consistently with this view of the statute, if the party is called by the adverse party who sues or defends as administrator, the party does not become a competent wdtness for all purposes or upon all the issues of the case, but his disqualification as a witness is removed to the extent that he may testify in his own behalf concerning the subject matter about which he was examined by the administrator This is the rule in Illinois, regardless of what the rule, of broader import, may be in other jurisdictions. Garrus v. Davis (1908), 234 Ill. 326; Grace v. Grace (1915), 270 Ill. 558; Chalkowski v. Szafranski, 250 Ill. App. 339. This statutory right of a party to a civil action to testify as a witness on his own behalf after having been called by the adverse party who appears as administrator, and within the rule as pronounced by the Supreme Court, cannot be taken from such party by the courts; the only question is what is the extent and limitation of his right as a witness on his own behalf to testify “concerning the subject matter about which he was examined by the administrator. ’ ’

Before considering the inquiry stated in the foregoing paragraph, it is necessary in this case to give attention to section 60 of the Civil Practice Act (in force Jan. 1, 1934), Cahill’s St. eh. 110, 188, which is as follows: “Examination of parties at instance of adverse party. Upon the trial of any case any party thereto or any person for whose immediate benefit such action is prosecuted or defended, or the officers, directors, or managing agents of any corporation which is a party to the action, may be examined as if under cross-examination at the instance of the adverse party or parties or any of them, and for that purpose may be compelled, in the same manner and subject to the same rules for examination as any other witness, to testify, but the party calling for such examination shall not be concluded thereby but may rebut the testimony thus given by counter testimony.” Before the enactment of section 60, if one party called as a witness the other party, the calling .party was not bound by the testimony of his adversary and might introduce evidence to contradict it, but he could not call in question his adversary’s credibility. Chance v. Kinsella, 310 Ill. 515. In fact, section six of the Evidence Act, which section was expressly repealed by the Civil Practice Act, provided that a party to a civil action might compel his adversary to testify as a witness at the trial-in the same manner, and subject to the same rule, as other witnesses. The adverse party (under section six) became the witness of the calling party and was subject to cross-examination by the attorney for the adverse party; the testimony of the adverse party stood as true unless contradicted by other evidence. Section 60 of the Civil Practice Act gives a party the right to call the adverse party and examine him as on cross-examination, or by means of leading questions. There is nothing in said section 60 either expressly or impliedly repealing or modifying sections one and two of the Evidence Act. The fact that the party calling his adversary may under section 60 examine him by leading questions is all the more reason why the adverse party should have the right to testify within the rule above announced and which has for its purpose the maintenance of the equal opportunity to introduce evidence by all parties to the action. In the following cases from States which have statutory provisions similar to section 60 of our Civil Practice Act, the courts of those jurisdictions have held that if the adverse party to an action is called under the statute, for cross-examination by an administrator suing or defending the action, the statutory bar, similar to our section two of the Evidence Act, is removed. McCoy v. Ferguson, 249 Ky. 334, 60 S. W. (2d) 931; Bishop v. Shurly, 237 Mich. 76, 89, 211 N. W. 75; Frink v. Taylor, 59 N. D. 47, 228 N. W. 459; Zackheim v. Zackheim, 75 Colo. 161, 225 Pac. 268; Alger v. Alger, 10 Ohio App. 93; Currie v. Michie, 123 Wis. 120, 101 N. W. 370.

During the trial in this action, and as part of his evidence in chief, the plaintiff called the defendant for examination under section 60 of the Civil Practice Act and by leading questions examined him fully and with exactness upon the disputed and material issue of the actionable negligence of the defendant. During* such cross-examination the defendant was prevented by objections of the plaintiff to make explanations to several of his answers, although the defendant desired and attempted to do so. After the plaintiff finished his examination of the defendant, the attorney for the defendant demanded that he be permitted to cross-examine the defendant on the same matters to which he had testified on examination by the plaintiff’s attorney. The demand was refused by the trial court upon objection by counsel for the plaintiff. Under section 60 of the Civil Practice Act the party called at the instance of the adverse party for examination does not become the witness of the calling party as he is called for examination and not as a witness in the true sense. The attorney for the defendant did not have the right to cross-examine the defendant. Barton v. Dyer, 38 Idaho 1, 220 Pac. 488; Scarborough v. Walton, 36 Ga. App. 428, 136 S. E. 830; Merritt v. Hummer, 21 Colo. App. 568, 122 Pac. 816. The defendant’s counsel also claims that he should have been permitted to examine, or re-examine, the defendant at once at the close of the cross-examination by the plaintiff’s attorney. Although it is contended otherwise by counsel for the plaintiff, we are of the opinion that the record shows that the trial court denied the defendant’s attorney the right to examine the defendant at the close of such cross-examination.

Section 60 of the Practice Act is similar to section 33 of the Municipal Court Act of Chicago, Cahill’s St. ch. 37, Ti 421. Section 33 of said act was copied from the Minnesota Code. Illinois Malleable Iron Co. v. Brennan, 174 Ill. App. 38. Speaking of this provision of the Code, the Supreme Court of Minnesota in the case of Jones v. Bradford, 79 Minn. 396, 82 N. W. 651, say: “The method to be pursued under this statute rests in the reasonable discretion of the court. The most natural and logical way would be to reserve examination of witness by the opposite party until his case proper is reached. . . . But there can be no hard and fast rules laid down in this respect.” Later cases of the Supreme Court of Minnesota are to the same effect. Olson v. Aubolee, 92 Minn. 312, 99 N. W. 1128; Miller v. Carnes, 95 Minn. 179, 103 N. W. 877. In the case of O’Day v. Meyers, 147 Wis. 549, 133 N. W. 605, it was held: “Where a party is properly called under the statute for cross-examination, his counsel has no right to re-examine him at the close of such cross-examination. The statute contemplates no re-examination; and if one were allowed it would permit the adverse party to prove his case, or at least a portion thereof, as a part of the opponent’s case.” In the later case of Guse v. Power & Mining Machinery Co., 151 Wis. 400, 139 N. W. 195, the Supreme Court of Wisconsin say: “The trial court accepted too literally the language of the opinion of this court in O’Day v. Meyers, 147 Wis. 549, and when one of the employees of the defendant was called by the plaintiff as an adverse witness, under the provisions of section 4068, Stats. (Laws of 1911, ch. 291), and examined by plaintiff’s counsel, the court refused to permit any re-examination by defendant’s counsel, apparently holding that if the latter desired the testimony of such witness he must call his witness as his own witness when his time came to put in evidence. This was too strict. Under such circumstances the defendant has a right to re-examine such witness immediately after the examination by plaintiff’s counsel as to all matters tending to explain or qualify the testimony already given, but not as to new matters not brought out by plaintiff’s counsel, and constituting part of the defendant’s defense. So he may ask the witness questions proper for the purpose of impeachment upon a statement that he does not thereafter intend to make the witness his witness. The scope of such re-examination is largely in the discretion of the trial judge, but it should not be so extended in any case as to interject the defense into the plaintiff’s case at this stage of the hearing. So far as O’Day v. Meyers, supra, may be understood to the contrary, it must be deemed modified by this decision.”

In the case of Merritt v. Hummer, 21 Colo. App. 568, 122 Pac. 816, the court say: “Plaintiff’s counsel called the defendant as a witness and examined him as upon cross-examination, under section 7284, R. S. At the conclusion of defendant’s examination by plaintiff’s counsel, his own counsel asked and was denied the privilege of examining him at that time; the trial court holding that the aforesaid statute gave the defendant no right to testify further until plaintiff had closed his case, and he (the defendant) had been regularly called to the stand in his own defense. This was error. While the statute does not permit defendant’s examination by his own counsel to proceed beyond the scope of his examination as conducted by his adversary, nor permit leading questions to be propounded to him by his counsel, it does not by its terms, nor by a proper construction, deny his right at once to give further testimony within the limit indicated. ’ ’

In the case of Jonescu v. Orlich, 208 Mich. 89, 175 N. W. 174, the Supreme Court of Michigan while it had under consideration section 12,554 of its Compiled Laws of 1915, which is similar to section 60 of our Practice Act, say: “While this statute was designed to protect estates, the plaintiff, as representative of the deceased, was privileged to call the defendant and compel him to testify, and by thus doing she opened the door to a further examination by defendant’s own counsel as to all matters relative to which he had been interrogated.”

In the case of Colekin v. Bamborough, 159 Ill. App. 130, the plaintiff called one of the defendants to testify during plaintiff’s case in chief under section 33 of the Municipal Court Act. After being examined by the plaintiff, the trial court refused to permit the defendant’s counsel to immediately cross-examine or re-examine the defendant. The court there said, “We cannot assent to the construction of section 33 of the Municipal Court Act which denies to defendants the absolute right to cross-examine, or further examination, and relegates them to the sound judgment and discretion of the trial court.” We are of the opinion that the trial court in the case at bar erred in denying counsel for the defendant the right to examine the defendant at the close of defendant’s cross-examination by the plaintiff’s counsel.

The attorney for the defendant called the defendant as a witness after the plaintiff had closed his evidence, but the court held him incompetent as a witness under section 2 of the Evidence Act. The defendant’s counsel then made an offer of what he intended to prove by the defendant, which offer of testimony followed closely the facts that the defendant had testified to on cross-examination by the plaintiff’s attorney. It is contended by the plaintiff that the offer of proof of the defendant being the same as the facts testified to by the defendant on his cross-examination, by the plaintiff, the ruling of the trial court in refusing the defendant to testify on his own behalf was not reversible error. With this contention of the plaintiff we cannot agree. On cross-examination the plaintiff asked the defendant if the brakes on his car were in good condition, to which the plaintiff replied, ‘1 They were in fairly good condition.” There is no other evidence in the record relative to the conditions of the brakes. The attorney for the defendant in his offer of proof stated that he expected to prove by the defendant ‘ ‘that his brakes were in good working condition and there was nothing defective in the mechanism or operating parts of the car and that when he applied the brakes, the car responded.” It is also contended by the defendant that the decedent drove his bicycle almost directly in front of the approaching car of the defendant. The question of contributory negligence of the decedent is sharply contested. In his offer of proof the defendant offered to prove: “That previous to the turning on the hard road by the boy, there was no indication of any kind that the boy would not continue straight ahead as he had done for two hundred feet or more and that there was no apparent reason for the boy to turn across the hard road from the shoulder or edge thereof.”

It is sufficient for us to say at this time that the defendant and the decedent immediately before the collision were in such positions that negligence, whether of the defendant or the decedent, depended upon a variety of circumstances, considered not as isolated occurrences, but altogether, and in view of their relation to, and reaction upon each other.

We are of the opinion that where an administrator sues or defends a civil action and he calls the opposite party for examination at the trial for cross-examination under section 60 of the Civil Practice Act, and such party is used as an occurrence witness by the administrator, such party becomes a competent witness to testify, on his own behalf as part of his defense, to all primary and material facts directly determining the issues in the action, which facts are designated as the res gestae. (VanMeter v. Goldfarb, 317 Ill. 620; Rouse v. Tomasek, 279 Ill. App. 557; Dunham Towing & Wrecking Co. v. Christiansen, 44 Ill. App. 523; Pennington v. Rowley Bros. Co., 241 Ill. App. 58; Bitsekas v. Parechanian, 67 Cal. App. 148, 226 Pac. 974.) Such facts, concerning which the other party may so testify, should be held within the scope of the facts testified to by him when examined by the calling party under cross-examination as determined by the judgment and discretion of the trial court. Such a rule, in our opinion, maintains the rule of equal opportunity to offer evidence and results in a full disclosure of the relevant and material facts, having a direct bearing on each other, so that a fair trial is accorded to both parties.

We have no doubt that the rejected offered testimony of the defendant that his car responded when he applied the brakes before he struck the bicycle and that the conduct and acts of the decedent ’immediately prior to and at the time of the accident were res gestae. We have endeavored to give section 2 of the Evidence Act and section 60 of the Civil Practice Act .such a construction as will prevent injustice and unfairness. That section 2 of the Evidence Act has in some cases prevented a full and fair investigation of the facts in specific cases, we had occasion to consider in the case of Ogden v. Keck, 253 Ill. App. 444. In the case at bar the eyewitness John W. Addler was not called by the plaintiff but he was called by the defendant and cross-examined by the plaintiff. We apprehend that the primary purpose of section 60 of the Civil Practice Act is to enable a party to introduce essential testimony on his side of the case which the other party has under his control or within his knowledge and not available to the calling party, and not to permit a party to make a bold stroke before the court or jury by calling his adversary and directing at him leading questions concerning which his adversary is not permitted to explain or testify. It should not be understood that by this remark we mean to criticise counsel in this case.

As the record stands we are convinced that the defendant was not accorded a full and fair trial. The case is reversed and remanded for a new trial.

Reversed and remanded.


author: Mr. Justice Huppman

text:
    Edith L. Belding, Individually and as Administratrix of the Estate of Wilbert D. Belding, Deceased, Appellee, v. Harlow H. Belding et al., Appellants.
    Gen. No. 8,954.

      Opinion filed August 14, 1935.
    Thoma, Linden & Hutchinson, of Wheaton, for appellants; Roy S. G-askill, of Chicago, of counsel.
    Nelson, Miller & Boodell and Walter E. Moss, all of Chicago, for appellee; B. Blakeney Harris, of Chicago, of counsel.
   Mr. Justice Huppman

delivered the opinion of the court.

This cause comes to' this court by appeal from a decree of the circuit court of DuPage county, entered in compliance with an opinion of the Supreme Court of this State, reversing and remanding the cause to the trial court with directions to enter a decree in accordance with the views expressed in such opinion. Belding v. Belding, 358 Ill. 216.

It is not contended by appellants that the decree entered by the trial court is not in conformity with the mandate of the Supreme Court. This was an action originally commenced by Edith L. Belding, individually, and as administratrix of the estate of her deceased husband, Wilbert D. Belding, for an accounting, settlement, and division of partnership property, under the Uniform Partnership Act, Cahill’s St. 1933, ch. 106a. Two questions were involved in the cause affecting appellee’s rights to participate in the partnership assets. The Supreme Court in the above case found that the original articles of copartnership as entered into between the father and his two sons, wherein the father was the owner of a 60 per cent interest, and each of the two sons the owner of a 20 per cent interest, had been modified by a subsequent parol agreement between the father and the sons, whereby they became equal owners in the partnership property.

Eighteen contracts had been completed by the partnership subsequent to the death of appellee’s husband. The court in the above opinion found that the sum of $4,915.52 had accrued to the partnership as net profits upon the said 18 contracts, and that at the time of the death of appellee’s husband, the sum of $3,097.03 had been earned. The court therein by computation appearing upon page 221 of its opinion found the total net partnership assets at the time of the death of appellee’s husband, to have been the sum of $51,325.96; that the interest of appellee as administratrix therein was an equal one-third thereof; that such one-third share was subject to a deduction of $7,127.11, which sum had already been paid by way of advancement; and that upon the balance due upon such share, appellee was entitled to receive interest at five per cent from the date of the death of her said husband.

Where a judgment is reversed and the cause remanded with directions as to the decree or judgment to be entered by the trial court, it is the duty of that court to follow such instructions, and it cannot err in doing so. Trustees of Schools v. Hoyt, 318 Ill. 60. Upon appeal from the decree of a lower court so entered, the only question presented by such appeal is whether the decree entered is in accordance with the mandate and directions of the court of review. Trustees of Schools v. Hoyt, supra; Smith v. Dugger, 318 Ill. 215; Wolkau v. Wolkau, 217 Ill. App. 471; Dunlap v. Peirce, 260 Ill. App. 149, 154; Chicago Ry. Equip ment Co. v. National Hollow Brake Beam Co., 239 Ill. 111, 115.

We have examined the decree as entered by the trial court, from which appellants prosecute this appeal, and we find that such decree follows strictly the directions and views expressed by the Supreme Court in its opinion.

The judgment of the circuit court of DuPage county is therefore affirmed.

Judgment affirmed.


author: Mr. Presiding Justice

text:
    The People of the State of Illinois ex rel. Oscar Nelson, Auditor of Public Accounts of the State of Illinois, and Edward Barrett v. Farmers and Merchants State Bank of Mendota. J. E. Steupfert, Intervening Petitioner, Appellee, v. William L. O’Connell, Receiver of the Farmers and Merchants State Bank of Mendota, Appellant.
    Gen. No. 8,938.

      Opinion filed August 19, 1935.
    George V. B. Weeks, of Ottawa, for appellant.
    Paul D. Perona and D.' J. Campeggio, both of La Salle, for appellee.
   Mr. Presiding Justice

Wolfe delivered the opinion of the court.

This is an appeal from a decree entered in the circuit court of La Salle county, Illinois, on the 28th day of January, 1935, allowing J. E. Steupfert, the intervening petitioner and appellee, a preferred claim against the receivership of the Farmers & Merchants State Bank of Mendota, in the sum of $1,000 and a general claim against said bank in the sum of $1,000. Said decree vacated, set aside and held for naught a former decree entered in said court on the 31st day of October, 1932, allowing the intervening petitioner, J. E. Steupfert, a general claim in the sum of $2,001.54.

The auditor of public accounts of the State of Illinois, on or about the 13th day of January, 1932, took possession and control of the Farmers & Merchants State Bank of Mendota, Illinois, an Illinois state banking corporation. On the 18th day of February, 1932, he found that said bank could not be reorganized and should be liquidated through a receivership. On the same day he appointed Vincent J. Beam who duly qualified as receiver of said bank. A decree of dissolution and confirmation of the appointment of said receiver was entered in the circuit court of La Salle county, Illinois, on the 18th day of July, 1932.

On February 18, 1932, subsequent to the closing of said bank and the appointment of said receiver, the notice required by statute, that all persons having claims against said bank be notified and requested to present the same to said receiver and make legal proof thereof, was published under the signature of Oscar Nelson, auditor of public accounts of the State of Illinois, in the Mendota Beporter. This notice was published for 12 weeks, as provided by statute. This is shown by the auditor’s notice, affidavit of publisher, and finding in decree approving claims.

The intervening petitioner, J. E. Steupfert, on the 27th day of April, 1932, presented his claim, in writing, duly executed by him and properly sworn to, in the sum of $2,001.54, as a general claim, which was designated claim 892. Said claim as so presented was filed with other claims in said receivership proceedings pending in the circuit court of La Salle county, Illinois. A decree allowing appellee’s claim as a general one with numerous other general claims was entered in the circuit court of La Salle county on the 31st day of October, 1932.

On March 16,1934, J. E. Stenpf ert filed his intervening petition in the circuit court of La Salle county in the receivership proceedings. He .subsequently amended his petition on July 2, 1934. The amended petition alleges that prior to the time said bank suspended business on January 12,1932, he had on deposit in said bank the sum of $2,000, represented by a certificate of deposit for that amount; that on January 12, 1932, he withdrew said deposit and afterwards purchased a draft in the sum of $1,000 drawn by the Farmers & Merchants State Bank on the First National Bank of Chicago, Illinois, payable to himself, and on January 12, 1932, indorsed said draft in blank and turned it over to Dorsey S. Dayton, of LaMoill'e, Illinois, receiver of the LaMoille State Bank; that on January 13,1932, the said Dorsey S. Dayton presented it for payment and was advised it could not be paid because the Farmers & Merchants State Bank did not open for business on January 13,1932. Said draft was afterwards returned to the appellee by the said Dorsey S. Dayton; appellee also had on deposit $1,000 in said bank.

Said amended petition further alleges that appellee’s claim was erroneously allowed in the amount of $2,001.54 as general claim 892; that $450.34, as dividends, was paid on said claim; that the amount of said draft in the sum of $1,000 should be allowed as a preferred claim, less the payment of $225 heretofore paid as dividends thereon. The petition prays that said draft purchased on January 12, 1932, for $1,000 be allowed as a preferred claim to be paid in the due course of administration in this cause, less the payment of dividends of $225 heretofore paid thereon.

Appellant receiver answered said petition demanding strict proof of the allegations therein and denied that appellee was entitled to a preferred claim. This stood as an answer to said amended petition.

The cause was thereafter referred to the master in chancery of La Salle county to report his findings of law and fact. A stipulation as to facts was filed with the master July 13,1934. It is in accord with the facts alleged in the amended petition and sets forth that William L. 0 ’Connell is now the receiver of said bank; that the claim of J. E. Steupfert was No. 892 and allowed by an order of the court on October 31, 1932, for $2,001.54 as a general claim; that dividends of 31% per cent had been paid on the claim.

The master in chancery found the facts the same as stipulated by the parties. He recommended to the court that appellee be allowed a claim against said receivership in the sum of $1,000 'as a general claim, and $1,000 as a preferred claim; that the general claim be credited by said receiver with $225.17 as dividends paid to appellee on said general claim, and that the preferred claim be credited with $225.17 as a payment from the receiver to appellee on the preferred claim; that the general claim heretofore allowed in the court in the sum of $2,000 in favor of said claimant be disallowed.

Appellant receiver filed objections to the master’s report, objecting to the allowance of said preferred claim based on said draft in the sum of $1,000 and further objecting that the preferred claim in the sum of $1,000 allowed by the master was a vacation of the decree entered at a previous term of court allowing said claim, based on said draft, as a general claim, and that more than one year had elapsed since said decree was entered allowing said claim of $1,000 on said draft as a general claim. The master overruled the objections filed by the appellant receiver. An order was entered by the court that the objections filed to the master’s report stand as exceptions thereto in said court. On January 28, 1935, after a hearing thereon, the court entered a decree approving the master’s report and vacated the decree entered October 31, 1932, allowing said claim of appellee as a general claim, and by said decree entered January 28,1935, allowed appellee’s claim in the sum of $1,000 evidenced by said draft, as a preferred claim to be credited with the payment of $225.17 in dividends, and allowed the balance of appellee’s claim in the sum of $1,000 as a general claim to be credited with the payment of dividends in the sum of $225.17, the said preferred claim to be paid in due course of administration. From this decree the appellant receiver has appealed.

The appellant contends that the court erred in allowing appellee’s claim as a preferred claim, as under the law he was entitled only to a general, or a common claim. It is our opinion that if the appellee at the time he filed his claim with the receiver of the closed bank had asked for a preference he would have been entitled to have his claim allowed as a preferred one. The appellant also insists that the appellee is guilty of laches by waiting until March 16, 1934, to file his intervening petition to vacate the decree of October 31,1932, which decree allowed the claim founded on the draft as a general claim. Because of the conclusion which we have reached on a different point raised in this case, we refrain from discussing this assignment of error.

The most serious question raised by the appellant in this case is that the court was without jurisdiction to pass upon the intervening petition because the order or decree entered by the court October 31, 1932, was res judicata as to the rights of the parties and if the appellee did not wish to be bound by the order of the court on that date he should have appealed from that decision, but having failed to do so he is now bound by the former decision.

A part of paragraph 11 of ch. 16a, Cahill’s Til Statutes, which is a part of the general Banking Act of this State, provides as follows: “The Auditor of Pub-lie Accounts, shall, upon appointing a receiver, cause notice to be given by advertisement in such newspaper as he may direct, once each week for twelve consecutive weeks, calling on all persons who may have claims against such bank to present the same to such receiver and to make legal proof thereof, and in case the Auditor of Public Accounts, represented by the Attorney General’s office, has instituted suit or proceedings for the dissolution or winding up of the affairs of such bank in the Circuit Court of the county where the bank is located, such persons or the receiver to whom such persons have presented their claims may present the same to the clerk of such court and the allowance or disallowance of such claims by said court in connection with the said proceedings shall be deemed an adjudication in a court of competent jurisdiction.”

Neither our Supreme Court nor Appellate Courts have had this question presented to them for adjudication or decision. The appellant and appellee have cited cases which have been of assistance to this court in arriving at a decision, but none of them has decided the precise question presented to this court for decision on this appeal. It is conceded that in this case several terms of the circuit court had elapsed between the time that the order allowing the claim as a general one was entered and the time the intervening petition was filed. It is the general rule that during the term at which a decree or judgment is entered the court has control over the record and for cause appearing it may amend its judgments, orders or decrees or set them aside, but after the term has expired it has no power to make any substantial amendment or set them aside. Becker v. Sauter, 89 Ill. 596. “After the. term has elapsed a decree may be corrected, upon motion, in matters.of form or for mere clerical errors; but the court cannot after the term change the decision, set aside, modify or annul its decree.” Tosetti Brewing Co. v. Koehler, 200 Ill. 369.

Our attention has been called to cases arising in the county court in the matter of heirship, widow’s award, and claims against estates, in which the court has held that under certain conditions it can vacate or modify its finding at a subsequent term other than the date of the original orders. In the case of In re Estate of Turner, 275 Ill. App. 366, the court was considering whether an order of a probate court setting aside its former order of heirship was an appealable order. They held in that case that it was not. The court in their opinion say: “The jurisdiction of the probate court over the estate of a deceased person is a continuing jurisdiction which remains with it until the estate is finally closed and distributed to the parties entitled to such distribution.” It will serve no useful purpose for the court in this opinion to review the numerous cases, both Supreme and Appellate, that have passed upon this question. They all seem to agree that the county or probate court has generally unlimited jurisdiction in the matters of administration and in exercising such equity powers as are adapted to its organization and mode of proceeding. Such court, in the exercise of an equitable jurisdiction, may on motion at a subsequent term set aside its own order allowing a claim against an estate when a mistake or fraud has intervened. We have been unable to find any case in which a claim filed and allowed against an estate at one term, has at a subsequent term, been vacated or modified by the trial court except for fraud or mistake.

The appellant does not contest the appellee’s contention that a claimant is not barred from filing a claim, after the order of court requiring claims to be filed. The court usually allows this to be done provided no rights have intervened that would be prejudiced by the allowance of the claim. This is allowed on the theory that the claim has not been presented to the court for adjudication.

Our attention has been called to the case of Miller v. Farmers’ Exchange Bank of Gallatin, a Missouri case reported in 67 S. W. (2d) 528. The Kansas City Court of Appeals in this case held that the claimant was not barred from having his claim changed- from a common to a preferred claim after the lapse of two years from the date of allowance of the claim. An examination of this case discloses that there never had been an adjudication of his claim either as a common or preferred one by a court of competent jurisdiction. The practice in the State of Missouri is for the claimant to file his claim with the commissioner of finances who allows it either as a general or a preferred claim. His finding is recorded in the office of the recorder of deeds wherein the defunct bank is located. If the claim is not contested it is never presented to a court, for adjudication.

The case most often cited as sustaining the contention that the claimant can have his claim changed from a common to a preferred claim at a term of court subsequent to the time the order was made allowing the claim as a common one is Standard Oil Co. of Kentucky v. Hawkins, reported in 74 Fed. 395. The case of Gwynn v. Spurway, 28 F. (2d) 37, is also cited for the same purpose. These cases hold that the plaintiff having filed a claim as a general creditor of the bank and having received and accepted dividends as such, has not waived his right to claim that he is entitled to a preference in the assets of the bank and is not estopped thereby, from maintaining his suit to establish his claim as a preferred one. It will be observed that in each of these cases national banks were being liquidated. The rule for filing claims against a defunct national bank is entirely different from that which is provided by statute in this State. The proper procedure in filing a claim against a national bank is to file it with the receiver who in turn presents it to the comptroller of the currency who either allows or rejects it as a proper claim against the defunct bank. The procedure as stated in the case of Knox v. United States, 111 U. S. 784, is, “If the Comptroller is satisfied with the proof which is furnished to him, he can allow the claim, and when the allowance is made the creditor becomes entitled at once to participate in all dividends that may be declared. If the Comptroller declines to recognize the claim as valid, it must be established by the adjudication of some competent court before it can share in the distribution of assets. When adjudicated in favor of the creditor, it is established as a claim against the bank, and must be treated accordingly by the Comptroller.” In the two federal cases just referred to it will be observed that there was no adjudication by a court of competent jurisdiction of the rights of the parties. Their claims had simply been filed and allowed by the comptroller as common claims.

Printed on the claim of the appellee filed with the receiver is the following: “This instrument is filed with the above named Vincent J. Beam, Beceiver, as a claim against the Farmers & Merchants State Bank, Mendota, Illinois, pursuant to the provisions of the banking laws of the State of Illinois. In the event that at any time hereafter, Oscar Nelson as Auditor of Public Accounts of the State of Illinois (or his successor in office) shall begin any suit in the Circuit Court of La Salle County, Illinois, upon the chancery side thereof, for the purpose of securing the aid and direction of said court in the settlement of matters incident to the liquidation of the above named bank, the undersigned claimant does now hereby state and agree that this instrument may be held, taken and considered as a general entry of appearance in any such cause by the undersigned claimant for the purpose of permitting the above named Receiver to have the hereinabove claim adjudicated^ approved and passed upon by said Court, and the pro rata dividend of the undersigned claimant thereon determined and or declared, and for all purposes in connection with the Receivership of said above named bank. ’ ’ It will be noted that the appellee by signing this claim entered his appearance and consented to have his claim adjudicated in the circuit court of La Salle county.

A reference to the latter part of the statute before quoted discloses that when the claims are presented to the court for allowance or disallowance by said court “the said proceedings shall be deemed an adjudication in a court of competent jurisdiction.” Webster’s Unabridged Dictionary defines adjudication to be, “a solemn'or deliberate determination by a judicial power. To adjudicate means to make a judicial decision.” In the case of Owners of Land v. People, 113 Ill. 296, 312, it is defined as follows: “By adjudication is meant an application of the law to the facts; an authoritative declaration of results.” When the legislature passed the law stating that when a receiver presented claims to the court for allowance or disallowance that the same should be deemed an adjudication in a court of competent jurisdiction, they must be deemed to have had in mind the legal effect of the word adjudication. When so used, this court will give the word adjudication the legal effect of a judgment.

The appellee in his intervening petition does not allege there was any fraud or mistake made in the allowance of his claim. He claims that the same was erroneously allowed as a general instead of a preferred claim. The appellee may not have been fully advised of his legal rights at the time he filed his claim or when the same was allowed as a general claim. He is not entitled to relief on account of being mistaken in regard to Ms legal rights. The mistake must he one wMch concerns the entry of the order or judgment itself, rather than the erroneous conclusions as to the law or facts in the case.

It is our opinion that when the appellee, J. E. Steupfert, filed his claim with the receiver of the defunct bank and the same was allowed by the circuit court as a general claim, it was an adjudication of the rights of the parties and was a final and appealable order, and that the circuit court of La Salle county was without jurisdiction to vacate or set aside this order at a subsequent term of court.

The judgment of the circuit court of La Salle county is hereby reversed.

Reversed.


author: Mr. Justice Allaben

text:
    Central Republic Bank and Trust Company v. Horatio C. Bent et al. Metropolitan Life Insurance Company and Central Republic Trust Company, Appellants, v. Celia Behr and Robert F. Empson, Receiver, Appellees.
    Gen. No. 8,881.

      Opinion filed April 12, 1935.
    Rehearing denied and modified opinion filed October 1, 1935.
    CoSTIGAH & WoLLRAB, WlLLIAM J. BaCH and WlLLIAM R. Bach, all of Bloomington, for appellants.
    Mártir, Hoose & DePew, of Bloomington, for appellees.
   Mr. Justice Allaben

delivered the opinion of the court.

The defendant appellee, Celia Behr, filed a hill to foreclose a trust deed in the nature of a mortgage which constituted a junior incumbrance upon premises owned by the plaintiff appellant, Horatio C. Bent. The appellant, Metropolitan Life Insurance Company, then the holder of a senior incumbrance on the same premises, was not made a party to this suit. A decree was entered and a sale had pursuant thereto, and a deficiency decree in favor of Celia Behr against Horatio C. Bent and Daisy C. Bent, his wife, was entered. Upon the petition of Celia. Behr one Robert F. Empson was appointed receiver of the mortgaged premises to collect rents, issues and profits during the period of redemption under the junior mortgage foreclosure. Prior to the expiration of this period of redemption the Metropolitan Life Insurance Company and the Central Republic Bank and Trust Company filed their bill to foreclose this trust deed which was a first lien. Celia Behr was made a party defendant and defaulted for want of amu^r. Subsequently the Central Republic Bank and^JEist Company, individually, and as trustee, withdrew as a party complainant in the senior mortgage foreclosure suit, became a party defendant, and filed an answer but no cross-bill. The senior mortgage which was foreclosed contained the following provision: “That if the maker of the evidence of indebtedness hereinabove referred to and hereby secured, or some person liable for payment thereof, shall not, on maturity thereof or any part thereof, promptly pay the same or any installment thereof or interest thereon, any agent for collection of any part thereof, may (and is requested by the person or persons liable for payment thereof to) advance or cause to be advanced the amount necessary to meet such maturing indebtedness and money so advanced shall be deemed to be on account of purchase and not of voluntary payment thereof, the agent or other purchaser and persons claiming through or under such agent or other purchaser, being invested with, or subrogated to, all rights of the holder at maturity of such maturing indebtedness, provided that the lien of said trust deed as to such maturing indebtedness so purchased shall be subordinated to its lien as security for any and all then unpaid indebtedness hereby secured maturing after the maturity of the indebtedness so purchased, and provided, further, that the holder of said subordinated indebtedness shall not have the right, without trustee’s written consent, to mature any indebtedness secured hereby, held or owned by others. ’ ’

Under the quoted provision of the trust deed the Chicago Trust Company, the trustee named therein, and its successor in trust by merger and change of name, the Central Republic Bank and Trust Company, made advances for maturing interest and principal amounting to $1,075.70. An application was made subsequent to the filing of appellants’ bill to foreclose for the appointment of a receiver, and Robert F. Empson, the same person appointed as receive^*der the junior mortgage foreclosure was appointecPffceiver under appellants’ bill. A decree was entered upon appellants’ bill to foreclose, containing the following provisions : ‘ ‘ The Court finds that the Central Republic Bank and Trust Company as agent of Metropolitan Life Insurance Company, and at the request of mortgagors, advanced a previous principal and interest payment of $540.00 and $442.80 respectively, to Metropolitan Life Insurance Company, and has a lien on the mortgaged premises, subject to the prior lien of Metropolitan Life Insurance Company, but a prior lien to the liens of the second and third mortgages and judgment and lien creditors, and that there is due to it . . . the sum of $1,075.70 which is superior to all claims against the property except that of Complainant” (appellant).

The premises conveyed by the trust deed were sold under the decree, and the master reported a deficiency 'in favor of the complainant, Metropolitan Life Insurance Company, in the amount of $1,815.92. Subsequently the receiver filed his report showing total receipts of $5,444.25, and after setting out expenditures reported the payment to the complainant in the senior mortgage foreclosure suit of the full amount of its deficiency, and that he had paid the balance in his hands, amounting to $526.58, to Celia Behr, to apply on her deficiency decree under the junior mortgage foreclosure. Upon the filing of this report objections thereto were filed by the Metropolitan Life Insurance Company and the Central Republic Bank and Trust Company, setting up that one item of $150.02 was not a proper item for credit and that the money paid to Celia Behr under her deficiency decree belonged to the Central Republic Bank and Trust Company under the decree of foreclosure; and that the second mortgagee had no interest in the fund. The defendants, Horatio C. Bent and Daisy Bent, and Ada S. Bent then filed their objectiragMk) said report. Subsequent to the filing of these ^Mj^ctions the Metropolitan Life Insurance Company by assignment succeeded to all of the rights in the decree owned by the Central Republic Trust Company, successor to Central Republic Bank and Trust Company. A hearing was then had and evidence heard by the court, and petitions for the entering of a deficiency decree and for the payment of these surplus rents to the Metropolitan were made, the assignment to the Metropolitan being set up. The court refused to award the deficiency upon petition; overruled all objections to the receiver’s report, and ordered the $676.78 in controversy to be paid over to Celia Behr. From the action of the trial court in refusing to grant a deficiency decree to the Central Republic Bank and Trust Company, and in failing to order the controverted amount to be paid over to the Metropolitan Life Insurance Company, as assignee, this appeal is taken.

It is the contention of appellant that the fund in controversy should be distributed to the lienor named in the decree or its assignee before any money can be distributed to a junior incumbrancer or to the owner of the equity of redemption. The appellee contends that while the decree finds the lien in favor of the Central Republic Bank and Trust Company there is no adjudication of personal liability of the mortgagors pursuant thereto, and that until such an adjudication is made nothing is decided by the recitals in the decree in the nature of findings. Both parties to this appeal are in accord upon the proposition that whatever rights the Metropolitan Life Insurance Company has are confined to the terms of the decree entered in its foreclosure. It is quite clear to this court from the case of First Nat. Bank of Joliet v. Illinois Steel Co., 174 Ill. 140, that where the rents, issues and profits of mortgaged premises are pledged as additional security to the physical premises themselves for the payment of the indebtedness secured by mortg^^that if upon sale of the mortgaged premises a sufficient sum is not realized to pay the indebtedness a deficiency decree can be satisfied out of the rents, issues and profits accumulated during the period of redemption.

Thé next question which is presented is whether or not the advancements made by the trust company and assigned to the Metropolitan Life Insurance Company and for which a lien was found in the decree are part of the indebtedness for which the Metropolitan mortgage was foreclosed. It appears to us that this question is answered by the terms of the deed itself, and as is found by the decree. These advancements were not part of the principal indebtedness for which the premises were ordered sold. The amount found due for the advancements was separated from the principal indebtedness in the decree, and a separate lien was given for this amount which was specifically by the terms of the decree declared to be subordinate to the principal indebtedness found due the Metropolitan Life Insurance Company. The ordering part of "the decree does not contain any language which provides a method by which the lien for the advancements is to be satisfied. It has been held that “The recital of certain findings in a decree does not adjudicate anything. These findings correspond to the verdict of a jury. Nothing is decided by the verdict until a judgment is entered on it, and so nothing is decided by the recitals in a decree until the questions at issue are adjudicated in the ordering part of the decree.” Chechik v. Koletsky, 305 Ill. 518; Weberpals v. Jenny, 300 Ill. 145. Likewise with the decree in the instant case, so far as concerns the recitals in the finding portion of the decree as to the lien in favor of the Central Republic Trust Company and the amount due it for advancements made and the failure of the decree to order any satisfaction to be made for the amount so found due, the same is true.

The receiypr¡' lyhose report is questioned in this proceeding, was 'originally appointed to collect the rents, issues and profits for the purpose of applying them upon the deficiency decree rendered in the junior mortgage foreclosure, and before the period of redemption had run in the junior mortgage foreclosure, he was appointed under the senior mortgage foreclosure to collect the rents, issues and profits for the purpose of applying them upon any deficiency which might be rendered upon a sale of the premises under that mortgage. His report showed that he collected sufficient funds to satisfy the deficiency rendered upon the senior mortgage foreclosure in full. The receiver then applied additional funds which he collected, to the deficiency decree rendered in the junior mortgage foreclosure, and so indicated in his report, to which objections were made. In overruling these objections in the trial court that tribunal said that there was no authority contained in the trust deed to the Central Republic Bank and Trust Company for a lien in its favor for advancements made, for defaulted principal and interest, for which it was given a lien in the decree. In this we think the trial court erred, since the trust deed by its terms expressly gave the trust company this right.

While it may be conceded that if in a decree various persons are given liens, even though the property may not be sold for all of the lienors, yet if there is a surplus upon the sale of the premises, above the amount for which they were sold, other lienors in a decree for whose benefit the property was not sold might claim an interest in the surplus because such proceeds of the sale stand in lieu of the premises which were decreed to be sold. That is not the situation in the instant case, however, since the premises sold for less than the amount found due.

By the sale in this case all of the liens found in the decree were discharged so far as the premises were concerned, and by the terms of the decree the party for whose benefit the premises were sold was entitled to and did obtain a deficiency judgment, which created an instrumentality by which it could reach the proceeds of the premises. Normally if the sale of mortgaged premises brings enough to satisfy the debt the surplus would go to the owner of the equity of redemption. In the event, however, that a judgment was obtained against these owners it would be effective to reach the funds to which they would thus become entitled. In the instant case the deficiency decree obtained by the Metropolitan Life Insurance Company was effective to reach the proceeds of the property before the owners of the equity of redemption became entitled thereto, until the said deficiency was satisfied in full. When the deficiency had been paid the rest of the proceeds would have gone to the owners of the equity of redemption, except for the fact that the defendant, Celia Behr, had acquired a judgment against them which though a deficiency decree in a junior mortgage foreclosure suit, was, nevertheless, an effective instrument by which she could reach the funds in the receiver’s hands. The lien which had been given to the Central Republic Bank and Trust Company had never matured into a judgment by which it could reach these funds, a contingency which could have been provided for, had the decree provided that the premises be sold for the benefit of all of the parties given a lien therein.

Our Supreme Court has held in the case of Bouton v. Cameron, 205 Ill. 50:

“That a money decree can be rendered, in a foreclosure suit, for a deficiency only, has beén decided by both this court and the Appellate Court. In Cotes v. Bennett, 183 Ill. 82, it was declared: ‘It is only in virtue of power conferred by the statute a money decree can be rendered by a court of chancery in a foreclosure proceeding against the mortgagor or other person liable for the mortgage debt. 8 Am. & Eng. Ency. of Law, 264. Section 16 of chapter 95 of the Revised Statutes, entitled “Mortgages,” authorizes courts in this state to render such decrees “for any balance of money that may be found due to the complainant over and above the proceeds of the sale or sales” of the mortgaged premises, and provides that such a decree may be conditionally rendered at the time the decree of foreclosure and sale is entered, or that it may be entered after the sale and ascertainment of the balance due. It is to be noted this statute authorizes such decrees to be rendered only “for any balance of money that may be found due to the complainant over and above the proceeds of the sale or sales” of the mortgaged premises.’ ”

The paragraph of the statute cited in the above quotation of opinion is now chapter 95, section 17, Ill. State Bar Stats. 1935.

In the case at bar, since the premises were not sold for the lien given the Central Republic Bank and Trust Company for its advances, it did not become entitled under the statute to have a deficiency decree rendered in its favor. In both cases cited by appellants in their petition for rehearing, to support the proposition that it was unnecessary for them to have a deficiency decree, to obtain the rents in question, we desire to draw attention to the fact that both these cases involve the rights of persons who were judgment creditors, and not merely given a lien in a decree.

For the reasons hereinbefore set forth the order of the trial court approving the final report of the receiver and his distribution of the sum of $526.58 to Celia Behr was correct, and said order is hereby affirmed. This opinion, as modified, is filed in lieu of the opinion heretofore filed which is hereby withdrawn, and the petition for rehearing filed by the Metropolitan Life Insurance Company, and Central Republic Trust Company, is hereby denied.

Order affirmed, and petition for rehearing denied.


text:
    H. H. Messick and B. B. Liggett, Trading as State Loan Company, Appellants, v. Winfield H. Darnall and Nettie E. Darnall, Appellees.
    Gen. No. 8,900.

      Opinion filed July 17, 1935.
    Rehearing denied October 1, 1935.
    Cotton &} Nichols, of Paris, for appellants.
    Charles P. Ttm, of Paris, for appellees.
   Mr. Justice Allaben

delivered the opinion of the court.

H. II. Messick and B. B. Liggett, as partners, licensed to do business under the firm name of State Loan Company, on or about December 20, 1932, made a loan in the amount of $300, to Winfield H. Darnall and Nettie E. Darnall, the defendants appellees. The defendants appellees executed a note in this amount, and delivered it to plaintiffs appellants, securing the same by executing and delivering a chattel mortgage on certain personal property of defendants appellees. At the same time defendants appellees delivered to plaintiffs appellants a note in the amount of $500, purported to be secured by a mortgage on real estate. Sometime later the defendants appellees delivered to plaintiffs appellants three other notes, one of Charles Nicholson in the amount of $68.69, one of Ralph Bussart, in the amount of $115.53, and one designated as W. D. Bottom, in the principal amount of $44.

Through various means plaintiffs appellants realized $71.27 on the latter notes, $25 ■ of which was obtained after this suit was started, and all of which was credited on defendants appellees’ indebtedness. Liggett testified that he made several attempts to notify Miller, the maker of the $500 note and mortgage, that he held the same as collateral security but he could not find Miller. Later the defendant appellee Dar nail told Liggett that Miller had agreed to deed the land back to him. Liggett testified that Dar nail asked him' if he would just as soon hold the deed as a note and mortgage; that the deed was executed and delivered but not recorded. Both Mr. and Mrs. Dar nail testified that Liggett demanded the deed, and in consideration therefor agreed to release the chattel mortgage. Subsequently, on the 6th day of February, 1934, plaintiffs appellants filed complaint in the circuit court of Edgar county to foreclose the chattel mortgage securing- the $300 note. To this complaint defendants appellees filed an answer and counterclaim, alleging that certain property was included in the chattel mortgage that did not belong there, that defendants appellees had delivered certain notes to plaintiffs appellants, and they should receive face value of these notes as a credit; that the deed given to Liggett had been accepted by him in lieu of their indebtedness, and that the defendants appellees were entitled to credit on account of sale of stock in a certain corporation. To this answer and counterclaim plaintiffs appellants replied, admitting that certain notes were delivered to plaintiffs appellants as additional collateral security, and averring that the amounts collected on these notes had been applied to their indebtedness, and averred that at no time did plaintiffs appellants receive the deed or other items in satisfaction of the debt owed by defendants appellees. Upon trial by the court, a judgment was entered that the deed should be accepted by plaintiffs appellants in full satisfaction of defendants appellees’ indebtedness; that the note should be returned to them, and the chattel mortgage released and canceled. A motion for new trial was made and overruled, and this appeal is prosecuted from that judgment.

It appears to us that the' only question to be decided in this case is whether the deed given by Darnalls to Liggett can be construed either by the evidence in this case or the acts of the parties to have been given in satisfaction of the chattel mortgage, or whether it was taken as collateral security thereto. As has been pointed out the testimony of Darnall and his wife is to the effect that Liggett agreed to take the deed in satisfaction of the chattel mortgage and notes, and this testimony is contradicted by Liggett. So far as the testimony is concerned there is a direct conflict, and while both Darnall and his wife testify to the same thing, they both have an identity of interest and feeling in the case. This is clearly expressed in the case of Knowles v. Knowles, 86 Ill. 1, 6: “Identified in feeling and interest as are the defendants, as husband and wife, we do not regard their evidence alone as sufficient to overcome the equally positive evidence of the complainant, supported as it is by the absolute form of the deed and the fact that no written evidence was made either of a condition of defeasance or of the existence of a debt. There is no testimony given by an entirely disinterested witness, conclusive in its character, as to what the transaction was.” It would, therefore, appear that this case resolves itself into a situation where the intention of the parties must he determined from their acts, rather than from the conflicting testimony relative to their intentions.

It appears that when Liggett took the deed to the land which was a warranty deed, absolute on its face, the defendants appellees got back the $500 note and the mortgage securing the same, but they did not get back the chattel mortgage, or the note it secured, or the other notes held as collateral. This would seem to support the testimony of Liggett that when he was asked it he would not just as leave have the deed in place of the mortgage and note he took the deed to the premises and gave back the $500 note, and the mortgage which secured it, which was allegedly a lien upon the premises conveyed. We are led to inquire further why the defendants appellees did not demand the chattel mortgage and note when they delivered the deed, if it was the intention of the parties that the deed should be given in satisfaction of these items. It is noteworthy we think that no explanation of this is given by the defendants appellees, and that the chattel mortgage and note were still in the possession of Liggett at the time he commenced his suit.

It appears to be the well settled law in this State that until the contrary is shown the presumption is that an indebtedness is not satisfied by a conveyance where the creditor retains the evidence of indebtedness. This rule has been laid down in the case of Sutphen v. Cushman, 35 Ill. 186, in which the court said: “We are of the opinion that the deed . . . should be regarded as a mortgage from the facts in relation to which there is no controversy. The appellant was indebted to the appellee at the time the conveyance was made, and there is no evidence whatever of the discharge of that indebtedness. The bond and note . . . were retained by the appellee, as well as the Lighthall notes which had been pledged as security; and the payment of the indebtedness might have been enforced at any time thereafter. Until the contrary is shown, the presumption is that the indebtedness was not satisfied by the conveyance; and absolute certainty in regard to the fact takes the place of presumption in case the creditor retains the evidence of the indebtedness, the securities pledged for its payment, and collects the money due upon such securities. We have not considered whether the transaction was a profitable one for the appellee, or such as a business man would be likely to make. It is sufficient for us to know that when he took the conveyance on account of a pre-existing indebtedness, without in any manner canceling or discharging it, that equity will regard the deed as a mortgage, whether he so regarded it or not.”

The holding in this case has been specifically approved in the case of Wallace v. Greenman, 321 Ill. 423, wherein the court cited the Sutphen case, and said: “The facts in this case are aided by the presumption long existing in this State, that where the grantor is indebted to the grantee at the time of the conveyance and the note evidencing such indebtedness is retained by the grantee, such indebtedness was not satisfied by the conveyance, and, until the contrary is shown, the presumption is that the instrument, though a deed absolute on its face, is a mortgage; and this applies whether the transaction was one profitable to the grantee or not.”

It is contended on behalf of the defendants appellees that the various notes, in addition to the chattel mortgage note were to be taken at face value by plaintiffs appellants in payment, and that this accompanied by an alleged credit due as a commission for selling certain stock would constitute payment of the $300 note. The contention of $200 due as commission is not' well founded since the trial court did not find for the defendants appellees on this claim, and no cross errors were assigned by them. As to the other items suffice it to say that the rule appears to be in this State that where a written instrument calling for the payment of money is in the hands of the payee and is uncanceled, it raises a rebuttable presumption that the debt evidenced by the document representing the obligation has not been paid, except in so far as it shows payments credited upon it. (Steumbaugh v. Hallam, 48 Ill. 305; Douglas v. Pfeiffer, 46 Ill. 102.) Credit for these various notes was not shown upon the chattel mortgage note. There appears to be nothing in the evidence in this case upon behalf of defendants appellees to explain why they were not so credited, if that was in fact the intention.

Following the authorities cited we believe that the trial court erred in entering judgment directing the plaintiffs appellants to return the property described in the chattel mortgage to the defendants appellees, and in holding that the deed to the land in question constituted payment for the chattel mortgage and notes, and of the other items held as collateral by plaintiffs appellants.

The judgment of the trial court is, therefore, reversed, and the cause remanded with directions to the trial court to enter judgment for foreclosure for the plaintiffs appellants on the chattel mortgage for the full amount thereof, less a credit of $71.27, admitted by plaintiffs'1 appellants.

Reversed and remanded with directions.