# Chicago Title & Trust Co. v. Central Trust Co.

> Illinois Supreme Court · April 14, 1924 · 312 Ill. 396

URL: https://www.frixlaw.com/law-library/cases/6981461

## Case

- **Full name:** The Chicago Title and Trust Company, Receiver v. The Central Trust Company of Illinois, Appellee The Chicago Title and Trust Company v. The Central Trust Company of Illinois
- **Court:** Illinois Supreme Court
- **Decided:** April 14, 1924
- **Citations:** 312 Ill. 396; 144 N.E. 165
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Duncan
- **Judges:** Duncan
- **Cited by:** 21 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/6981461

## Opinion text

Mr. Justice Duncan delivered the opinion of the court:
Some of the questions involved in this appeal have heretofore been considered by this court in the case of Golden v. Cervenka, 278 Ill. 409 . A sufficient statement of the pleadings of the parties on the present appeal and the history of the litigation are to be found in the former decision of this court. As in that case stated, the original bill of John F. Golden and the Importers and Manufacturers’ Company, as amended and supplemented, was a bill to enjoin the prosecution of the suits against the stockholders of the LaSalle Street Trust and Savings Bank, (hereafter referred to in this opinion as the trust and savings bank,) brought by one Cervenka, and the institution or prosecution of other suits of like character to ascertain the creditors of the bank and its liabilities, as well as its stockholders and the extent of their liabilities to the creditors, for a decree for the amount of the stockholders’ liability and the distribution of such amount among the creditors of the bank and for the appointment of a receiver to collect such amount from the stockholders. The receiver, William C. Niblack, appointed by the court under the bill previously filed by the State Auditor, after filing his answer filed a cross-bill containing the same allegations and asking the same relief as was asked in the original bill, a part of the relief asked being a decree against the Central Trust Company because of certain of its acts in connection with the organization of the trust and savings bank. This cross-bill was answered by the Central Trust Company, as well as the original bill. On the hearing as the case then' stood in the circuit court a decree was rendered against the Central Trust Company for $1,487,854.16, and against the stockholders for an amount equal to the par value of the respective shares of stock held by them. That decree was reversed by this court. For the reasons stated in the case cited aforesaid, this court held that the act of the Central Trust Company in allowing the Auditor to count $1,250,000 of its money as the money of the trust and savings bank and as its cash capital and surplus upon which to start its business as a bank, and thereby inducing the Auditor to issue his certificate of authorization to the trust and savings bank to conduct its banking business, estopped the Central Trust Company, as against all persons giving credit to the trust and savings bank, to deny that that money was the money of the trust and savings bank and for the purposes of the bank in the due course and transaction of its business as a bank. In other words, the sum of money aforesaid was a trust fund for the benefit of the creditors in satisfaction of all their losses by reason of the acts of the Central Trust Company aforesaid and its subsequent withdrawal of that money from the trust and savings bank. A number of authorities were cited by this court in that case sustaining the court in that holding, and that decision is not only the law of that case but is also the law of the case now in hand. We further decided in that case that if the entire assets or resources of the LaSalle Street National Bank (herein referred to as the National Bank) assigned and turned over to the trust and savings bank as assets and as capital and surplus were equal to the amount in value at which they were carried on the books of the National Bank, then the capital stock and surplus of the National Bank would not be impaired, but if the capital stock and surplus of the National Bank were impaired at that time the Central Trust Company was liable to the creditors of the trust and savings bank to make good the deficiency, and also for the interest on such deficiency from the time of demand upon it or from the time the receiver, Nib-lack, filed his cross-bill, which was September 24, 1915? and that the receiver could maintain that suit for the creditors. It was also decided in the same suit that the stockholders of the trust and savings bank were also liable to the creditors of the bank under the original bill brought in the former suit but that their liability was different from and had no relation to the liability of the Central Trust .Company to receiver Niblack for the creditors, and that the issues in the two suits, the one against the Central Trust Company and the other against the stockholders, should be separated for the purposes of trial and upon remandment by this court should be referred to different masters in chancery for the reasons stated in our former decision. We also Held in that decision that the Central Trust Company was only bound to account to the receiver for the benefit of the creditors of the trust and savings bank and that there was no liability on its part to the stockholders; that the trust and savings bank, by the action of the Central Trust Company and the stockholders and officers of the trust and savings bank, was only provided with a capital stock and surplus by the assets of the National Bank assigned to it, and that if those assets fell short of $1,250,000 in value, (the amount with which the trust and savings bank was to begin its business as capital and surplus,) the creditors, by the receiver, have the right, to the extent of the deficiency, to complain of the Central Trust Company and of the stockholders and to require them to make good the deficiency. We also said in that case: “Whether or not this amount [the capital and surplus] had been impaired depends upon the collectibility of the loans which constituted a large part of the resources of the bank.” The word “loans” in that sentence, as used by this court, means all bills receivable and bonds and securities held by the bank, and it is important in this consideration to have an accurate understanding of the holdings of this court and the law of the case as set forth in our former decision.
We have gone into the details of our former decision because of the fact that in the consideration of the case now before us many of the same points that were decided in that case are re-argued and the correctness of the" holdings are thereby challenged. We are satisfied with our rulings in that case as above explained and do not deem it necessary to further consider them. Most of the propositions of law contended for by the parties to this suit are discussed in the beginning parts of their briefs and arguments. Some of them we may have occasion to consider in connection with the items of account to which they are applied, but we make the distinct point here that the law of the case now in hand, so far as announced in our former decision, is still the law of the case, and our former decision must be taken as a complete answer to all arguments against its correctness.
After the cause was remanded to the circuit court of Cook county by our former decision, the Central Trust Company on October 19, 1917, filed a cross-bill and. on April 29, 1918, its amended cross-bill, making the stockholders and others parties defendant thereto, in which it made claim that “in equity the stockholders of the trust and savings bank ought to make good its capital and surplus and asking that they be required to pay whatever amount the trust company should be held liable for and to thus exonerate it in the premises, and that if prior to such payment on the part of the stockholders any part of such liability should be satisfied by the trust company, the stockholders be required to reimburse the trust company therefor.” On April 29, 1918, the circuit court entered an order striking the cross-bill from the files on motion of William C. Niblack, as receiver, on the ground that it did not state a case which entitled the Central Trust Company to any relief in the court of equity and that it could not be helped by further amendment. From the order of the circuit court the Central Trust Company prosecuted an appeal to the Appellate Court for the First District, and that court on January 28, 1920, affirmed the decree of the circuit court. It does not appear from this record that any attempt was made by the Central Trust Company, by appeal or by petition for certiorari, to have reviewed the decision of the Appellate Court affirming the order of the circuit court aforesaid, except that the trust company has filed a separate transcript of the record in this court containing the proceedings of the circuit court of Cook county with reference to the filing of the cross-bill, the motion and order of the circuit court dismissing the same, and the record and opinion of the Appellate Court affirming the order of the circuit court, etc., together with an assignment of errors, setting forth in the assignment certain reasons why it claims the Appellate Court erred in affirming the order of the circuit court. It is clear from the foregoing that this court has no jurisdiction to review the order of the Appellate Court affirming the order. Nevertheless, a purported appeal from that order, entitled “Chicago Title and Trust Company, as receiver, appellee, vs. Central Trust Company of Illinois, appellant,” and bearing our general docket No. 14,703, was docketed in this court. This appeal, by order of this court, was consolidated with No. 14,702 for hearing, the latter cause being the main cause now presented for hearing. A motion by the receiver was allowed by this court at our June term, 1922, based upon the facts above stated, to strike from the files of this court the record in appeal case No. 14,703. The allowance of that motion virtually disposes of this appeal, and the same is now by the order of this court dismissed for want of jurisdiction in this court to further consider the same.
In pursuance of our order of remandment in the former case, the matters relating to the Central Trust Company were referred to a master in chancery to take the evidence on behalf of the respective parties and to determine the assets of the National Bank assigned to the trust and savings bank and their cash value for banking purposes, and also to determine the liabilities of the National Bank assumed by the trust and savings bank. This reference was under the cross-bill of the receiver, Niblack, in the former suit, which is treated in this case as an original bill, and also the answer to the cross-bill by the Central Trust Company and the replication thereto. The original bill in the former suit against the stockholders and others, and their answers thereto, were treated as another and distinct part of the suit, and the issues thus formed were referred to another and different master and have no connection with the matters now before this court and no further reference thereto will be made. The master reported the evidence to the court with his conclusions, holding that the Central Trust Company, appellee in this proceeding, was liable to the receiver, the Chicago Title and Trust Company, appellant, for the creditors, in the sum of $79,198.42, with interest thereon at five per cent per annum from September 24, 1918. Objections to the master’s report were overruled and stood as exceptions before the circuit court, which were also overruled. A decree was entered by the circuit court against the Central Trust Company in the sum of $101,691.05, including the interest, and for costs of suit. On appeal to the Appellate Court for the First District the second branch of that court modified the decree of the circuit court and as modified affirmed the decree in the sum of $978,029.11, including interest, and it was further decreed by the Appellate Court that the Central Trust Company pay the costs in both the circuit court and in the Appellate Court. During the pendency of the suit in the circuit court the receiver, Niblack, died, and the Chicago Title and Trust Company was appointed in his stead and prosecuted the appeal to the Appellate Court. It has prosecuted a further appeal to this court, and makes the claim that the evidence taken before the master showed that the capital and surplus of the National Bank on October 21, 1912, were entirely lost. The Central Trust Company’s claim is that the evidence in the record shows that on October 21, 1912, there was no impairment of the capital and surplus of the National Bank, and it has assigned cross-errors on this appeal.
The questions involved in this appeal are in the main very simple, and the action in the circuit court may be properly characterized as a bill for an accounting to determine the liability of the Central Trust Company to the Chicago Title and Trust Company, as receiver and appellant, for the benefit of the creditors of the trust and savings bank. To determine this liability it was necessary to ascertain the cash value of the entire resources or assets of the National Bank and the entire liability of that bank on October 21, 1912, the day on which the National Bank was denationalized and its assets turned over to the trust and savings bank and its liabilities assumed by the trust and savings bank. The difference between the value of the resources of the National Bank and the liabilities of that bank on said day, when properly stated and valued, must necessarily be the liability of the Central Trust Company, as that difference would necessarily show the amount of the depreciation, if any, of the assets of the National Bank, which would also constitute the amount of the liability of the Central Trust Company, hereinafter referred to as appellee!
The record in this case is very voluminous and consists of 13,571 typewritten pages. The master’s report contains 525 printed pages and the opinions of the Appellate Court 337 pages. The printed abstracts contain 4176 pages, not including the index, in a special volume of 191 pages. The appellant’s brief and argument and its reply contain 771 pages and appellee’s brief 699 pages. There are a great number of items constituting the assets or resources of the National Bank, and more than 200 of them are contested in the printed briefs and arguments. The three Appellate Court judges all differed in their findings as to the amount of the impairment of the capital stock and surplus of the National Bank. The presiding justice, who wrote the opinion of the court, reached the conclusion that the amount of such impairment was $737,220.54. Another one of the justices, who disagreed with the presiding justice only as to three items of assets and two items of alleged liabilities, reached the conclusion that such impairment amounted to $597,411.94. The other judge reached the conclusion that the capital stock of the National Bank was worth $72,520.06 less than nothing, and that the bank was insolvent and tliat the capital stock and surplus were impaired to the extent of $1,250,000, which amount he fixed as the liability of appellee, with five per cent interest thereon from September 24, 1915, while the master and the circuit court fixed the amount of such impairment at $79,198.42.
Early in our consideration of this case it became very apparent that we could not sustain the judgment of the circuit court or of the Appellate Court, or the findings of the master or any member of the Appellate Court, as to the amount of the liability of the Central Trust Company, because of the fact that their findings were against the manifest weight of the evidence. Our finding on that question as to the amount does not differ very materially from that of the master and the circuit court, but there are quite a number of the contested items in which our judgment differs radically from that of the master as well as from the different members of the Appellate Court, and the reasons therefor will later appear. We have given due consideration to the evidence in the record on the contested items, and also to the opinion of the Appellate Court and the two dissents on particular items of the account, and to the briefs and arguments of counsel. Wherever a debt to the National Bank has been paid in full, either to the trust and savings bank or to the receiver after the closing of the bank, and without any outlay to the bank or to the receiver for attorneys’ fees or other extra expense in collecting the same, we have allowed the claim in full, no matter by whom paid. The main business of a bank is loaning money at interest for profit, and if a debt is paid in full, every object for banking purposes is realized out of that asset if paid in full without unnecessary expense. There is simply one good and sufficient reason for our ruling in this matter, and that is the simple fact that the receiver, for the creditors, is not entitled to a double satisfaction of any debt, and a debt paid by an honest poor man who pays because he is honest is worth just as much to the creditors as the debt of a millionaire who pays because he is solvent, provided the debts are the same amount. We regard it also as true that a debt paid by a rascal, if such appears in the evidence, is just as good money to the creditors or to the receiver as the money of any other man, and one satisfaction is all they are entitled to or should demand.
There are instances in this record where certain debtors did not pay their debts either to the bank or to the receiver and were shown to be insolvent when the debts came into the hands of appellant. Wherever the evidence in such cases shows that the debtor was solvent and the debt collectible on October 21, 1912, that debt we also regard as a good asset on this inquiry and one that should be allowed in full. The question in such a case, as was stated in our former opinion, is not as to the collectibility of the note when it came into the hands of the receiver, but as to its collectibility when it came into the hands of the trust and savings bank. The Central Trust Company in this case is not to be prejudiced by any failure of the trust and savings bank, or by appellant, to use proper diligence in the collection of the assets turned over to them. If the debt was as good on that day as cash for banking purposes, we regard it as a good debt and have allowed it. It was this ruling that we made in the former case that is used by appellant in its contention that all debts, whether they have been paid or otherwise, must be determined as to their worth on October 21, 1912. This very argument has occasioned the great difference in the finding of one of the Appellate Court judges and the other two judges, the holding of the dissenting judge in many instances being to the effect that the debt should be regarded as worthless although paid, because of the fact that there was no evidence tending to show that it was good and collectible when it came into the hands of the trust and savings bank. .The receiver has also taken the position in some instances in this case that a debt of a debtor is not to be regarded as a good asset in a bank for banking purposes unless the trust and savings bank could have re-discounted that note to another bank had it attempted to do so. We do not regard such proof necessary in this case, but the simple question is, Were the assets collectible in the ordinary course of business, principal and interest? — and if so, we have regarded the assets as good and worth full value for banking purposes because they have served the purposes of the bank in reaping a profit on them by collecting the principal and interest. No bank would discount any paper for cash without a profit on the cash invested in the purchase. This court never meant to indicate in its former decision that a debt paid was not to be regarded as a good and collectible asset. Payment of such an asset is the very best evidence that it was good, and where a note is paid it is immaterial whether or not another banker would have discounted it for cash or otherwise, or whether or not it was good or bad within the judgment of bankers on October 21, 1912.
. The expert accountants, in listing the resources or assets of the National Bank, have not listed them at their face values, in many instances, as such face values appear in the original instruments. This is notably true of bills receivable. The face value of all notes for the purpose of this accounting the experts valued as of October 21, 1912. In those instances in which the face of the original note was drawing interest to a date after October 21, 1912, the value for this accounting is the face value of the note plus accrued interest to said date, following the methods of the experts in this particular; and in the case of other notes in which their faces express the principal and interest for a given time after October 21, 1912, their due date, the face values of those notes we give at face, less accrued interest, and for the same reason. So, if in our accounting we find a note to be worthless, the total loss or depreciation of assets for that note is its face value less its accrued interest or plus accrued interest, according to the class to which it belongs, and if we find the note good and collectible we allow it for its face value less accrued interest or plus accrued interest, according to the class to which it belongs. On a number of no'tes contested in this record only part payment was made and the remainder of the notes was held to be worthless. In all such instances the value of the notes for banking purposes is not the amount of the payments on the notes but the present worth of the payments on October 21, 1912, unless interest was also paid to date of the payments. In other such instances payments are made, and at the date of the payments all interest on the notes was paid up to the date of the payments. In such cases the payment or payments represent a complete discharge of the debt to the amount of the payments, and the note or notes would in such cases be worth the amount of the payments or the total amount of the debt discharged, with interest, if the debtors were insolvent and the notes not collectible. In still other instances payments were made on other notes, and also interest on them up to a certain date prior to the last payment. In such cases the amount of the payments made up to the time the interest was paid in full discharged completely the amount of the debt to the extent of the payments, and payments thereafter made are accounted for at present value from the time the interest was completely paid on the note to the date of the payments, to ascertain the full amount of the debt discharged by such latter payments. The reasons for our action in this regard are, that a partial payment on a note or claim cannot be regarded as the same as cash in the trust and savings bank except to the extent that that note or claim is completely discharged as to both principal and interest. There will be found in our accounting a number of instances in which we have allowed less on notes on which partial payments have been made than either the master, the circuit court or the Appellate Court. We make all the foregoing explanations in this part of our decision so that our accounting may be understood without going into details in every instance when we come to our consideration and explanation of particular items passed on by us in this accounting. In counting present worth or value as to partial payments made we have used the rate of six per cent per annum.
In the following tabulations we give the itemized resources or assets of the National Bank turned over to the trust and savings bank and our valuations of the same, and also a complete list of the liabilities of the National Bank assumed by the trust and savings bank, together with the total values or amounts of such resources and liabilities as we have found them, and the difference between the same, which is our finding as to depreciation of the assets of the National Bank and also for that reason the liability of the Central Trust Company to appellant on September 24, 1915, the date of the filing of the cross-bill, to-wit:
Resources
1. Cash in bank.................................. $231,555.91
2. Exchange for clearing house.................... 47,386.36
3. Redemption fund in U. S. treasury............... 32,500.00
4. Due from national banks....................... 313,305.46
5- Due from State banks.......................... 151,010.01
6. Accrued int. on amt. due from Nat. and State banks 206.09
7. Cash items ................................... 426.88
8. Overdrafts................................... 3,265.92
9. U. S. bonds to secure circulation................. 659,663.25
10. Bonds to secure postal savings deposits.......... 78,409.76
11. Other stocks and bonds......................... 191,572.52
12. Furniture and fixtures.......................... 5,950.00
13. Loans and discounts............................ 2,299,274.27
14. Funds in transit............................... 305,247.32
15. Account new bank building..................... 50,000.00
16. Good will .................................... 65,000.00
Total •_....................................$4,434,77375
Liability of appellee to balance............. 108,055.78
Liabilities
. 1. Capital stock .................................$1,000,000.00
2. Surplus...................................... 250,000.00
3. Individual deposits............................ 1,852,969.64
4. Accrued interest on individual deposits........... 941.51
5. Savings deposits.............................. 109,903.36
6. Accrued interest on savings deposits............. 720.00
7. Postal savings deposits......................... 58,011.89
8. Accrued interest on postal savings deposits....... 425.05
9. Due national banks............................. 192,886.52
10. Due State banks............................... 200,768.70
11. Accrued int. on amt. due Nat. and State banks.... 468.96
12. Time certificates of deposit..................... 98,727.50
13. Accrued interest on time certificates of deposit____ 683.78
14. Demand certificates of deposit................... 4,000.00
15. Accrued interest on demand certificates of deposit. 6.01
16. Marginal certificates of deposit.................. 27,500.00
17. Accrued interest on marginal certificates of deposit 15.79
18. Cashier’s checks .............................. 41,461.93
19. Certified checks ............................... 50,440.32
20. Expense vouchers.............................. 39.25
21. Circulation................................... 647,495.00
22. Circular expenses............................. 2,109.89
23. Certain liabilities not shown on the books........ 3,254.43
Total.....................................$4,542,829.53
It has occurred to us that we can better make ourselves understood in this accounting by first considering the liability side of the account we have just stated, although it may seem like considering the matters somewhat out of their natural order.
In all well regulated banks, whether State, national or private, in which their books are properly kept, the assets and liabilities as carried on their books exactly balance. The liabilities to stockholders are generally, and we think universally, placed at the head of the tabulations representing the liabilities of the bank, although in case of dissolution and winding up of the affairs of any of the banks aforesaid, for whatever cause, the stockholder is the last to receive consideration in the distribution of the proceeds realized from the asset side of the account. Generally three terms are used to express this liability to stockholders: First, capital stock; second, surplus; and third, undivided profits. The item designated as “surplus” represents permanent surplus or a liability that is carried permanently on the books and is rarely ever decreased or increased except by necessity, in case of a loss to the bank or in case of an increase by reason of a new declaration of a permanent fund to be carried under that designation. The undivided profits are the funds usually drawn on to pay the declared dividends of the bank. The term “capital stock” requires no explanation. The liabilities other than capital stock, surplus and undivided profits carried on the books, represent, of course, the amount of liabilities owed to the real creditors of the ba'nk by the bank, and by the stockholders as well, under such laws as ours, where stockholders are bound to the creditors in a double liability in case of insolvency, etc. The National Bank carried on the liability side of its account capital stock and surplus in the same amounts that we have above listed on the liability side of our account in this case. It also carried on that side of the account undivided profits to the amount of $17,815.72. We have omitted this last named item from the liability side of our account for two reasons. In the first place, the liability of the Central Trust Company in this case, as we have already declared it, was simply to make good the capital stock and surplus of the trust and savings bank, amounting-to $1,250,000. If the assets of the National Bank would pay off its entire liability to its real creditors and leave $1,250,-000 for its stockholders, its capital stock and surplus transferred to the trust and savings bank would not have been impaired for the purpose of this accounting, because its entire assets transferred to the trust and savings bank would upon such supposition be worth in cash the amount due both creditors and stockholders. It must therefore be clear that for the purpose of this accounting the liability side of our account should not contain an item of undivided profits. The second reason for not including it is the fact that the National Bank did not have the amount of undivided profits carried on its books that was backed or secured by good and collectible assets above its other liabilities as listed by us. In making up the liability side of its account in this case the Appellate Court omitted the items of capital stock and surplus. We think that this is one of. the causes that led it into error in its consideration and reasoning as to other items of the liability account which the attorney urged on the part of the receiver should be included on that side of the account. It seems to us that a moment’s reflection ought to convince anyone that we have included on the liability side of our account every liability to stockholders, but we will now proceed to consider other such items which it is urged by the receiver should go into the account, and only very briefly, because the questions are so simple.
As was disclosed in our former opinion, there were a number of stockholders of the National Bank who were not willing to, and did not, exchange their National Bank stock for shares of the trust and savings bank. The receiver insists there should be included on the liability side of the account an amount necessary to settle with those stockholders. There were 426 shares held by such stockholders, and two members of the Appellate Court have charged up in this accounting $53,250, or $125 per share. The other member of the Appellate Court reduced this amount to $21,202.02, and all of them treated these stockholders as creditors, simply. These stockholders are not to be considered at all as creditors of the trust and savings bank and entitled to share in the proceeds of what the receiver shall realize out of the assets of the trust and savings bank, and neither is their assignee of these shares entitled to be rated as such a creditor. This record shows, without dispute, that C. B. Munday purchased the shares of the dissenting stockholders at about $125 per share and thereby canceled all claim against the trust and savings bank as to those creditors, and it will certainly not be urged that Mun-day, as their assignee, has any standing as a first creditor of the bank. There is no more reason for considering or treating the amount due said stockholders as an extra item in the liability account, than there is for considering any other stockholder of the National Bank as a creditor to the extent of the value of his stock and who exchanged his National Bank stock for stock in the trust and savings bank. Under the evidence in this record there is no liability of the Central Trust Company, and could be no liability, to stockholders'of the National Bank, or their assignees, on account of the fact that they held such stock at any time. It will be noticed that we carry the entire amount of liability to the stockholders of the National Bank ($1,250,000) in the first two items of our liability account. That liability as to said stockholders ceased the very moment they accepted stock in the trust and savings bank, and as to the dissenting stockholders the very moment that Munday purchased their stock. The liability as to these latter stockholders passed to Munday when they assigned their shares to him, and this liability is a liability of the trust and savings bank, which amounts to nothing until all the creditors of that bank are satisfied. The liability of the Central Trust Company is to creditors of the trust and savings bank to make good the $1,250,000 of capital stock and surplus of the National Bank assigned to the trust and savings bank. We therefore place as their liability $1,250,000 for these two items, and after satisfying all the other creditors on the liability side of the account out of the assets, if the remainder is less than said liability the actual liability is the difference, and nothing more. So in reality the entire liability of our side of the account, so far as this accounting is concerned, is a liability of the Central Trust Company to the creditors of the trust and savings bank, and never can become a liability to the stockholders of the trust and savings bank, assignees of the stockholders of the National Bank. The assets of the Central Trust Company for the purpose of this accounting are represented on the side of the account which we have headed “Resources.” In other words, although they were the assets of the National Bank on the day it assigned them to the trust and savings bank, they are now to be considered as the assets of the Central Trust Company for this accounting, to pay off the liabilities on the other side of the account. The amount that such resources are insufficient to satisfy the liabilities is the amount that the Central Trust Company shall pay from its own bank to satisfy such liabilities.
For similar reasons mentioned in the preceding paragraph there is no liability of the Central Trust Company for the taxes assessed against the individual stockholders of the National Bank on their stock, amounting to $12,182.24. The National Bank, apparently as all other national banks usually do, was accustomed to pay the taxes of its stockholders on their National Bank stock. The reason for this custom in this State is apparent. By section 35 of our Revenue law the stockholders of the bank are personally assessed for their shares, and, of course, are primarily liable therefor and bound to pa}'- the same. By section 39 of the Revenue act it is the duty of every bank and its managing officers or officer to retain so much of any dividend or dividends belonging to such stockholders as shall be necessary to pay taxes levied upon the stockholders’ stock. The officers of the bank are personally made liable for these taxes if they do not conform to section 39 in paying the tax out of the stockholders’ dividends. Accordingly the National Bank on October 21, 1912, carried an item in its liability account in this language: “Reserved for taxes, $6000.” That sum was almost one-half of the taxes, and if the Na- 1 tional Bank had continued in business it is probable that this item would 'have been doubled or fixed at the amount of the taxes at tax-paying time after it had ascertained the correct amount. The trust and savings bank paid a dividend .in 1913, and should have deducted this tax from that dividend just the same as would the National Bank have done had it been in business at tax-paying time and at the time of the declaration of the dividend in 1913. This liability was clearly a liability of the stockholders of the National Bank. Because the National Bank took steps to protect itself against liability for said taxes, and also its officers, in the manner above stated, the taxes did not become its obligation primarily. The Central Trust Company is under no obligation to pay the taxes of the stockholders of the National Bank. The trust and savings bank assumed no obligation to pay such taxes. Its contract was that it would “assume all the indebtedness of the National Bank of every kind and agree to pay such indebtedness in the manner and form in which the National Bank agreed to pay the same.” There is no proof of any special agreement to pay these taxes, as the trust and savings bank was only under obligation to the State to pay these taxes, as the National Bank would have done, out of the dividends of the stockholders. Two of the Appellate Court judges erred in including in the liability account of the Central Trust Company $6000, the amount carried on the books of the bank and reserved to pay taxes. The mere fact that this item was carried on the liability side of the account of the National Bank did not make it a real obligation of the bank and consequently not an obligation of the Central Trust Company.
The receiver makes the further claim that the expenses in carrying on the trust and savings bank from its organization to its close were $316,104.17, and that the total expenses of the receiver were $274,170.45, making a total of v $590,274.62, which should be considered as a liability of the National Bank and as a liability of the Central Trust Company. We think the mere statement of this claim ought to be sufficient to refute its correctness. No reasonable theory is advanced or can be advanced for charging these amounts in the liability account of appellee. Appellee cannot be charged for any mismanagement of the bank or for the expenses of the receiver in winding up its affairs, because it was in no way responsible for the same.
The master and the circuit court, and also the Appellate Court, have charged appellee in its liability account a $500 fee paid to Joseph O. Morris for legal services rendered by him prior to October 21, 1912, to the National Bank on a claim placed in his hands by that bank. It was paid to him by the trust and savings bank on November 30, 1912. At that time Morris owed the National Bank a $600 note due on demand. The trust and savings bank, had it seen fit to do so, could have set off this $500 claim with Morris’ note, and should have done so. Morris also owed the National Bank another note, which made his total indebtedness on October 12, 1921, $2079.45, and we have allowed nothing on this claim against Morris. We do not dispute the propriety or correctness of the courts in charging this on the liability side of the account, but the Appellate Court erred in not crediting a like amount on the debt of Morris to the bank for reasons aforesaid. We have disregarded this item as charged for the reason that we would simply have to give credit on the other side of the account and reduce Morris’ indebtedness to the bank that much.
It appears from the evidence that C. B. Munday, after the close of the trust and savings bank, made a claim against the trust and savings bank in his bankruptcy schedule for $20,125 as salary due him as president of the National Bank. It further appears from the evidence that he received payment on his salary up to December 31, 1910, and that he thereafter relinquished his salary and made no further claim therefor until after the close of the trust and savings bank. Our conclusion is that the master and the Appellate Court both properly refused to charge said sum as a liability in this accounting.
We also think that the master and the Appellate Court properly refused to charge as a liability in this accounting the claim for the unexpired term of the lease of the Rookery building by the National Bank, and which claim the receiver alleges amounts to $211,500.03. Both the master and the Appellate Court declined to allow this claim of the receiver on the ground that the trust and savings bank was substituted as lessee in lieu of the National Bank, and that the lessor thereby released the National Bank from its obligation. The evidence supports that finding.
The Appellate Court properly allowed the receiver’s contention that there were certain liabilities not shown on the books of the bank and estimated these liabilities to amount to $3254.43. The master charged on the liability side of the account for those items $5364.32. This action is accounted for on the part of the master by reason of the fact that he included circular expenses to the amount of $2109.89, thereby duplicating the charge for circular expenses by oversight. There is no contention that this charge is not correct as made by the Appellate Court, and we allow the same. The liability side of the account from item No. 1 to item No. 22, inclusive, as we have above stated them, are conceded to be correct by both appellant and appellee.
In our consideration of the side of the account which we have above designated as “Resources,” we will follow the same order in considering it that the Appellate Court did in its discussion. The master and every member of the Appellate Court agreed as to the amount that should be allowed for the first seven items of resources as numbered by us and also as to item 12. The evidence amply supports them upon every item, and we will make the same allowance without further discussion. For the eighth item, overdrafts, we have allowed full value, $3265.92, as did the master, for the reason that the record discloses that they were all paid, and without contradiction. The Appellate Court allowed the same except the overdrafts of William Lorimer, Jr., and Josephine Lorimer, amounting to $313.24. We will further consider this item when we come to consider two bills receivable that were paid by Lorimer at the same time that he paid the overdrafts and which were also disallowed by the Appellate Court. The master and all members of the Appellate Court found the value of the ninth item, United States bonds to secure circulation, to be the sum of $658,018.75. We are compelled to disagree with this allowance upon the testimony of C. Frederick Childs, a specialist in government bonds officing in Chicago, and of expert accountant Hawkins. Childs sold 13,000 of the Panama 2’s at 101% on October 21, 1912. On that same date United States consols 2 per cents were offered at ioij4> and 101 1/16, plus accrued interest, was bid, and as we understand the evidence there was no sale at the latter price. Hawkins valued these bonds at 101.1875, plus accrued interest, and found the value of all of the bonds to be $659,663.25, and we have allowed the same. The master and the Appellate Court allowed for the bonds the amount they sold for about three days after October 21, 1912. For. item 10, bonds to secure postal savings deposits, the master allowed $78,434.91. We approve the finding and allowance of the Appellate Court on the evidence of Holtz and Hawkins and allow $78,409.76. The master seems to have erred in counting interest on this item.
Under the-designation “Other stocks and bonds,” item 11, there are a number of stocks and bonds considered: (a) Artesian Stone and Lime Works bonds, which we value at $79,469, which is the same value given them by the master and all members of the Appellate Court, (b) City of Chicago special assessment coupons we value at $3767-33; the same as did the master, because it appears from the evidence that they were redeemed at full face value, plus accrued interest, by the city in the regular course of business as they came due, and that the receiver could have realized the same for those that came into his hands had he presented them to the city for payment instead of selling them at a lower price. It is our constant holding all through this opinion that the Central Trust Company is not bound by the action of the receiver in selling any of the assets for less than their proved value when the evidence is clear that there was a want of due diligence in finding out their value. There was no reason whatever to doubt that these instruments would be paid in full when due or a reasonably short time thereafter, (c) Florida Indian River Land Company bonds were collected in. full by the bank when they were due, plus six per cent interest. We therefore value them at $8028, being face and accrued interest, and thereby approve the master’s finding. There is no dispute on the evidence, (d) McGuire gold bonds we value at $12,319, face value and accrued interest. The bank also sold these bonds at full face value, plus interest, according to the testimony of Radish, and we therefore agree with the master’s finding, (e) Rock Island Southern railway bonds were proved to have been sold in the month of October, 1912, at 94^, and just before and after that month at from 93 to 94 *4- The Appellate Court valued these bonds at 90 and the master at 70. We value them at 94, plus accrued interest, or $39,489.42. (/) United Gas and Electric Company bonds were valued by the Appellate Court at $19,072.23, and it is amply supported by the testimony in the record that these bonds were worth 93, the valuation placed on them by that court, (g) Western Stoneware Company bonds were valued by the master at $5357. The Appellate Court valued them at $5082, being the same valuation given them by the Central Trust Company’s witness. We concur in the finding and allowance of the Appellate Court. There are a number of other items carried under the designation “Other stocks and bonds,” the aggregate value of which is $24,345.54, which is the value given them by the master and all members of the Appellate Court. They are not contested and we value them at the same aggregate amount.
The Appellate Court has considered the loans and discounts of the National Bank in fourteen divisions or groups, and it appears from the opinion of that court that in the discussion of the loans and discounts before it the parties to this suit presented them in the same manner as the court has considered them. For convenience of the parties we will therefore consider them in the same manner, taking up each division separately.
Division 1.
Bills receivable of J. G. Munday, the Bank of Smithboro, the People’s Bank of East Alton, the Litchfield Mill and Elevator Company, John K. Seagrave, and J. K. Sea-grave & Co.
C. B. Munday was vice-president of both the national and trust and savings banks during their entire existence, May, 1910, to June 12, 1914. Prior to that time he resided at Litchfield, Illinois, where his principal business had been the operation of a mill at Litchfield and the purchase and sale of grain and flour. He did a very large business in exporting- grain in addition to his local grain trade and also purchased and sold grain in Chicago and other large cities of this country. He owned elevators at Litchfield and at many other points near there, and continued to conduct his grain business during the existence of the banks. C. B. Munday & Co. was a co-partnership, consisting of C. B. Munday and his son, J. G. Munday, and carried on business at Litchfield and elsewhere. It was controlled by C. B. Munday. After the organization of the banks in Chicago this company continued under the name of J. G. Munday & Co. The Litchfield Mill and Elevator Company was a corporation organized under the laws of 'Illinois, with a capital stock of $200,000. Its stock was owned entirely by C. B. Munday and his family and Munday controlled its operation. The Bank of Smithboro and the People’s Bank of East Alton were private banks of C. B. Munday & Co. for carrying on a private banking business at Smithboro and East Alton, Illinois. John K. Seagrave was in the employ of C. B. Munday & Co. as manager of the Litchfield Mill and Elevator Company, C. B. Munday & Co., the Litchfield Drug Company, and a business carried on under the name of J. K. Seagrave & Co. J. G. Munday appears to have had no property in his own name. All of the foregoing debts to the National Bank under Division 1 are for the foregoing reasons treated in this record as the debts of C. B. Munday, and there is no contention to the contrary. The personal indebtedness of C. B. Munday to the National Bank is treated by the Appellate Court in its Division 15 under the head of “Transit items,” and under the accounting in that division Munday is charged on the liability side of his account with all the debts considered under this division. This brief explanation will serve to shorten our discussion under this and other divisions, for the reason that under our finding from the evidence in this record Mun-day was undoubtedly solvent on October 21, 1912, as was found by the master. The Appellate Court found that Munday on October 21, 1912, had good assets amounting to $800,295.88, and also found that his total liabilities were $937,080.60. The court has treated him and all his concerns in the name of which he did business as totally insolvent on that date, in all its considerations of his indebtedness to the bank and to others, and, unless his indebtedness has been found by the court to have been actually paid in whole or in part, has found his debts to the bank and to others worthless, although the court found in an actual finding that his assets were about 85 per cent of his liabilities. But on the very facts considered by the Appellate Court, if we value the assets of Munday as to the particular items as the court valued them, there should be added to the asset side of Munday’s account $30,235 for the notes and accrued interest of William Lorimer, Sr., secured by a mortgage on his Michigan farm, which were unquestionably good and which were actually paid by Lorimer on April 8, 1914. There should also have been deducted by the Appellate Court from the liability side of Munday’s account the notes of John K. Seagrave and J. K. Sea-grave & Co., which, with accrued interest on October 21, 1912, amounted to $40,611.26, because he was charged, twice with these items. So under the Appellate Court’s facts and valuations Munday’s assets should have been found by it to have been $830,530.88 and his liabilities $896,469.34. These facts will clearly appear when we come to discuss the National Bank’s claim against Munday in Division 15. Errors in book-keeping similar to the fore-, going and similar conclusions of the Appellate Court account largely for the great discrepancies between the judgments of the Appellate Court and circuit court in this case. It was clear oversight on the part of the Appellate Court to reach the conclusion that Munday having good assets to the amount of more than $830,000, and which were more than 92 per cent of his liabilities, was totally insolvent and without financial ability to pay any part of his obligations that were unpaid in whole or in part.
After considering the evidence in the record we find that all six of the debts aforesaid to the National Bank were good and collectible on October 21, 1912, and we have allowed them in the following amounts, being the notes plus accrued interest to that date, to-wit: J. G. Munday, $14,-049; Bank of Smithboro, $51,474.75; People’s Bank of East Alton, $16,841.90; Litchfield Mill and Elevator Company, $120,578.68; John K. Seagrave and J. K. Seagrave & Co., combined, $40,611.26; which makes a total allowance for this division of $243,555.59.
As to the indebtedness of J. G. Munday, both the master and two members of the Appellate Court have found that it was amply secured by shares of stock in the banks of Oconee, Alhambra, Marine and Bethalto, of the aggregate market value of $16,575. 'The claim made by the receiver is that the foregoing securities or collateral were withdrawn from the bank before October 21, 1912. The evidence amply sustains the master and the Appellate Court. This debt is treated by all parties as a debt of C. B. Mun-day, who was solvent on said date, and no further comments are necessary.
The first item of indebtedness of the Bank of Smithboro is referred to in the record as its indirect liability of $5034.39, which was all entirely paid in due course of business, as found by the master and as testified to by Radish, the expert accountant who was employed by the receiver in this litigation and who was the witness of the Central Trust Company. This indirect liability consisted of a certificate of deposit of the Bank of Smithboro of the value of $3077.92 and eleven other items or notes discounted by the Bank of Smithboro, amounting to $1956.47. The witness testified that the certificate of deposit was carried as an indirect liability, possibly for the purpose of concealing its identity. As the record discloses that the paper discounted by the Bank of Smithboro in this account, and without contradiction, was paid by the direct obligors in full in the ordinary course of business, we have credited the amount of those items on the asset side of Munday’s account. The next item, the note of Fred and Bessie Ahlers, for $2007, was discounted by the Bank of Smithboro to the National Bank and was actually paid by them just prior to the suspension of business of the trust and savings bank. It was carried as a direct liability of the Bank of Smithboro to the National Bank, but, in fact, was indorsed to the Bank of Smithboro and by it to the National Bank, and as it was unquestionably good we have also credited the asset side of Munday’s account to the National Bank with this item, as will hereafter appear. The third item was a certificate of deposit of the Bank of Smithboro, No. 6867, for $5125, and was paid November 23, 1912, by charging it to the deposit account of the Bank of Smithboro, which was at that time $22,924.06. The next item, No. 7657, was a certificate of deposit for $10,250, which, after being renewed, was sold to the Ashland Twelfth Bank on January 5, 1914, and charged to the deposit account of the latter bank'. It remained a liability to the latter bank until the closing of the trust and savings bank, June 12, 1914. The remaining three items were Nos. 8345, 8346 and 8347, and were certificates of deposit for $5000 each. The first two of these items, after renewals, were on April 14, 1914, sold and transferred to the A. H. Hill & Company State Bank and charged against the credit balance of the latter bank and later re-transferred to the trust and savings bank and by the latter to the State Bank of Calumet and were charged against the credit deposit of that bank. The indebtedness represented by these two certificates of deposit remained as an obligation in the Bank of Calumet on June 12, 1914. Certificate of deposit No. 8347 was renewed for $5125 and on January 5, 1914, transferred to the Ashland Twelfth Bank, where it remained until the closing of the trust and savings bank. It was charged to the credit balance of the Ashland Twelfth Bank. The banks to whom the certificates of deposit aforesaid were transferred by the trust and savings bank are those known in this record as subsidiary banks, which will be discussed in a later part of our opinion. We have treated none of these notes thus transferred as paid for reasons hereinafter stated. The total amount of the indebtedness above listed to the Bank of Smithboro is $36,462.24, which amount was allowed in full by the master. Two members of the Appellate Court allowed on the total indebtedness aforesaid, indirect liability $1989.23, although the testimony of Radish shows it all paid in due course of business. It allowed on the direct liability $17,-019.51, which was paid.
Three of the certificates of deposit above discussed, and which were numbered 8345, 8346 and 8347, and three other certificates of deposit aggregating $15,012.51, including accrued interest, were all certificates of deposit issued to William Lorimer, Sr., by the Bank of Smithboro as a loan. Lorimer gave a mortgage on his Michigan farm to secure the $30,000 in certificates to C. B. Munday, which is the same mortgage heretofore spoken of and hereinafter more fully considered. This mortgage was paid, as heretofore stated, and Lorimer’s indebtedness to Munday entirely canceled. Lorimer discounted the certificates of deposit to the National Bank and thereby got the money which he had borrowed. For unexplained reasons the National Bank charged three of these certificates of deposit to Lorimer and three of them to the Bank of Smithboro. Lorimer’s liability was only as an indorser. All of them should be charged to the Bank of Smithboro, and in this accounting we have charged them all to the Bank of Smithboro as a direct liability, and when we come to consider Lorimer’s indebtedness we deduct them from his obligations for reasons which will appear later. We have therefore allowed the debt of the Bank of Smithboro in the sum of $51,474.75 as good and collectible, because it is all a direct liability of C. B. Munday. C. B. Munday & Co., as already explained, owned this private bank. It was a going concern and according to the appearances in this record a very thriving country bank from the time of the organization of the National Bank to the day it was denationalized, and continued as a going bank until the closing of the trust and savings bank, on June 12, 1914. In addition to the fact that a portion of this obligation was paid and Munday good for the remainder of it, it is clear from the evidence in this record that the entire sum could by proper diligence have been collected by the trust and savings bank long before the bank was closed, even if the Appellate Court’s showing that Munday’s assets only equaled a little more than 92 per cent of his liabilities on the day the trust and savings bank began business. The Bank of Smithboro is shown to have been a thriving country bank at that time and did considerable business, as already stated. There was not a breath of suspicion, so far as this record discloses, that Munday was insolvent or without ability to pay his obligations in full. On the other hand, he was reputed by his neighbors and by all the business men in the country who knew him or knew of him, to be worth at least a half million dollars above his indebtedness. He had unlimited credit, and all that the trust and savings bank would have had to have done to collect this indebtedness would have simply been to have made demand and insisted on payment when due. The appellee in this case is not to be prejudiced as to any debt considered in this record by the fact that Munday, the vice-president and managing head of the trust and savings bank, had allowed collectible debts to the National Bank to go uncollected until the trust and savings bank was finally closed for business.
The Bank of East Alton was another private bank, — a partnership composed of C. B. Munday and J. G. Mun-day, — and on October 21, 1912, was indebted to the National Bank on three demand notes aggregating $15,052.50, including accrued interest, and also as indorser on eight notes of its customers re-discounted to the National Bank, aggregating $1789.40. Radish testified that the eight notes representing the indirect liability “were cleaned up and paid in the regular and ordinary course of business,” as the books of the bank showed, and that he knew of no reason why they were not good on October 21, 1912. This testimony is undisputed, and two members of the Appellate Court have given the notes representing the indirect liability full value while the third member of that court dissented and found them worthless. Two of the demand notes were renewed April 24, 1913, and were sold to the Broadway State Bank in December, 1913, and there remained, the same being charged to the deposit account of the latter bank. The third note was renewed April 24, 1913, and was sold to the State Bank of Calumet on January 5, 1914, and was charged to the deposit account of that bank. There is no showing in the record that any one of these three notes was collected or pressed for collection until after the notes came into the hands of the receiver. The further showing in the record is to the effect that the People’s Bank of East Alton had on deposit with the National Bank on October 21, 1912, the sum of $2940.30, and that after that date its deposit balances in the trust and savings bank often exceeded the indebtedness it owed to that bank, and as the notes were demand notes they could have been collected by simply offsetting them against the deposit account. The sum and substance of the receiver’s contention is that these notes must all be regarded as worthless because of Munday’s connection with this bank and the trust and savings bank. Every member of the Appellate Court found these three notes to be worthless. We have allowed full value, as did the master. We have also credited C. B. Munday in his personal account with $1789.40, the amount of the discounted notes aforesaid, as they were his property when discounted and were unquestionably good assets, and we have also charged him with $16,841.90, the entire amount of the three notes and the indirect liability. The notes represented by the indirect liability were, of course, paid by the makers to the trust and savings bank, as shown by its books. We will reserve further comments on this indebtedness until we consider Munday’s individual liabilities.
The Litchfield Mill and Elevator Company owed the National Bank on October 21, 1912, a number of notes, aggregating $120,578.68, less unearned interest. Two members of the Appellate Court found from their consideration of the evidence that $22,009.65 of the total liability of the company had been discharged by actual payments, and they only allowed this amount of the entire debt while the other, member of the Appellate Court allowed nothing. The master allowed the full value of the claim. We will not go into the full details of this indebtedness or consider the question as to how much ought to be allowed by actual payments made. We allow full value on the ground that a large portion of the debt was paid and that the remainder of the debt was good and collectible because of the fact that C. B. Mun-day was responsible therefor.
Both the Appellate Court and the master listed what ■ they found to be the liabilities and assets of the Litchfield Mill and Elevator Company. We have examined the record eviderce and from the same find the liabilities of this company to be the following:
Notes held by National Bank.........................$120,578.68
Bonds sold to Rosehill cemetery...................... 100,000.00
Notes held by Colonial Trust and Savings Bank........ 40,000.00
Notes held by Bank of Marine....................... 4,000.00
Notes held by Bank of Alhambra.............■........ 3,500.00
Notes held by Bank of Bethalto.......................3,500.00
Debt due Shearson, Hammill & Co................... 19,131.25
J. K. Seagrave note to National Bank................. 15,654.60
J. K. Seagrave & Co. note to National Bank........... 24,956.66
Bonds sold to Bank of Marine........................ 500.00
Bonds sold to Bank of Bethalto....................... 2,500.00
Total..............................t.......... $334,32!-19
The master found the liabilities the same as above, except that he omitted from his list of liabilities $3000 in bonds sold to the Marine and Bethalto Banks. He also made an error of $10 in addition of the liabilities. The Appellate Court added $50,000 to the master’s finding and adopted his error in addition. The evidence shows that $150,000 of bonds were authorized by the company, but only $103,000 of them were outstanding • on October 21, 1912, as above shown. So far as we can ascertain from the record, the testimony of J. G. Munday in the first instance was to the effect that all of the $150,000 of bonds were outstanding, but his examination in full shows that he had no actual knowledge upon the subject and his statement a mere assumption on his part. The evidence does clearly establish the liabilities as we have above shown them, and there is no dispute as to the liabilities except on the question whether or not $47,000 of the bonds, in addition to what we have found, were outstanding.
The total assets as found and valued by the Appellate Court are the following:
Physical assets .....................................$250,000.00
Flour and grain on hand.................. 75,000.00
Bills receivable and cash in bank.................... 11,274.33
Good will.......................................... 25,000.00
Total.........................................$361,274.33
In valuing the assets of this company we have adopted the views and values of the two concurring members of the Appellate Court. The witness Seagrave testified that the physical assets, not including good will, were in his judgment worth $225,000. C. B. Munday valued the property at from $240,000 to $300,000. Expert Seward, who in October, 1915, examined the property at Litchfield and all the other elevators and prepared complete statements as to the value of the physical property at that time, valued the physical assets at $259,932.03. In this, valuation he included nothing for good will, and omitted the elevator at McVey for the reason that it was not in existence at that time. He also valued another elevator in his valuation that was not in existence in 1912 but which was of less value than is given for the one at McVey. He was three weeks in making his examinations and estimates. He arrived at the value of buildings by standard methods used by engineers and architects in determining costs of buildings and equipment, making allowance for depreciation. He estimated the value of the real estate by inquiries in the neighborhood. While there is no question as to the ability of the expert, we think the Appellate Court was justified in considering his testimony in connection with all the other evidence, and also in taking into consideration the fact that the expert did not see the property and was not acquainted with it in 1912, and was warranted in placing the value at $250,000 exclusive of good will. Other witnesses valued this property much lower. One of them shows from his testimony that he was a prejudiced witness against the Mun-day concerns, and the others, with possibly one exception, clearly showed by their testimony that they were not sufficiently posted to give correct conclusions as to valuations.
The evidence in the record discloses that Munday & Co. had been running a flour mill in connection with warehouses and the various elevators and were engaged in buying and selling grain and in producing and selling flour. They did a large domestic and export business and also had a good local trade. During the seasons of 1911 and 1912 their business was unusually large. They purchased from one broker in Chicago more than $658,000 worth of grain. Seagrave’s testimony was that their profits were from $30,-Ó00 to $50,000 a year. Another witness testified that their profit on domestic business was from $50,000 to $60,000 a year but that in 1912 they suffered a loss of from $43,000 to $100,000 on their export trade. Some idea may be had of the magnitude of their business by their deposits in the National Bank, which were more than $2,900,000 covering a period of two years and five months, and in the Litchfield bank approximately $3,000,000. We have recited these facts as our reason for approving the Appellate Court’s finding that the good will of the concern was worth at least $25,000. Nothing was allowed in this accounting by the Appellate Court for grain in transit. The firm was justly entitled to a credit of at least $32,496.42 on the asset side of this account, but as that court has considered transit items under its Division 15, we have reserved the consideration" of this item for our discussion of transit items, in connection with which Munday’s liabilities and assets are considered, and for the further reason that Munday & Co., the Litchfield Mill and Elevator Company and all other Munday concerns are considered as Munday individually.
The master finds that of- the John K. Seagrave and J. K. Seagrave & Co. indebtedness $10,013.13 was paid or canceled September 23, 1913, by charging that amount to the deposit account of C. B. Munday & Co. in the trust and savings bank, which was on that date $15,314.46; that $22,500 thereof was credited out by a charge to cash on October 6, 1913, which was taken up with a check or draft on October 7, 1913, and that the remainder of the debt was exchanged December 30, 1913, for two notes of the Litchfield Mill and Elevator Company, which, together with three other notes of that company, were exchanged for a certificate of deposit for $25,000 of the East Alton Bank, which was afterwards paid. Both the master and the Appellate Court twice charged this entire indebtedness to C. B. Munday. All members of the Appellate Court found that this debt was worthless, either as a debt of John K. Seagrave, of J. K. Seagrave & Co. or of C. B. Munday.
Division 2.
The bills receivable of this division consist of the paper of the following banks in the following amounts: Citizen’s State Bank of Alhambra, $6986.58; Farmer’s Bank of Bethalto, $11,242.93; Bank of Marine, $10,202.26; First National Bank of Mt. Olive, $15,052.50; and State Bank of Oconee, $10,050.88. The aggregate amount of these debts is $53,535.15, and we have allowed them all in full as good and collectible assets. The evidence amply supports the master in his finding, who also allowed them in full. All members of the Appellate Court agreed that the debts of the Bank of Alhambra and the First National Bank of Mt. Olive were paid in full according to the record evidence and allowed both of these debts. Two members of the Appellate Court allowed in full the debt of the Bank of Oconee for the same reason, — that it was paid in full according to the testimony of Radish. The other member of the Appellate Court dissented and held that this claim was worthless. Two members of the Appellate Court only allowed $9805.68 for the debt of the Farmer’s Bank of Bethalto, which amount they found was actually paid according to the evidence, and the remainder of the debt they found to be worthless, while the third member of the Appellate Court found the entire debt to be worthless. The direct liability of the Bank of Marine was on a certificate of deposit for $10,000, dated June 2, 1912, and payable January 2, 1913, the unearned interest thereon being $95.83. The indirect liability was for $298.09 on a note of F. H. Rohmeyer and others discounted by the Bank of Marine to the National Bank, and which note was paid in the usual and ordinary course of business, according to the evidence. All members of the Appellate Court agree in allowing the indirect liability in full because it was paid, but hold that the direct liability is worthless.
The record evidence shows that the five banks were very prosperous down-State banks in October, 1912, and had been for years prior to that date, and continued as going banks during the existence of the trust and savings bank. The master and the Appellate Court both found, when considering Munday’s assets, that on October 21, 1912, the market value of the stock of the Bank of Marine was $150 per share, the stock of the Farmer’s Bank of Bethalto $120 per share, the stock of the Citizen’s Bank of Alhambra $15° per share, and the stock of the State Bank of Oconee $125 per share. Munday had stock in all of the banks except the First National Bank of Mt. Olive, and this was one of the principal grounds of the receiver’s contention that none of the debts of the five banks were good. We do not deem it necessary to at this time further discuss the liabilities of the three of these banks whose debts were given full value by the Appellate Court. We will have occasion to consider the receiver’s other ground of objection when we come to consider Munday’s indebtedness to the National Bank.
The indebtedness of the Farmer’s Bank of Bethalto was a certificate of deposit dated September 25, 1912, due on demand. It never was collected in full. After the receiver was appointed he applied the final deposit balance of this bank in the trust and savings bank on this debt to the amount of $9305.68. Afterwards the bank paid the receiver $500 in part payment of the balance. The uncontradicted evidence in this record is that on October 21, 1912, the Bank of Bethalto had on deposit in the National Bank $6798.55. On October 11, 1912, its deposit account was $14,947.67; on January 23, 1913, $28,823.56; in February of the same year $32,685.69; and in March of the same year its deposit account reached as high as $32,479.26. It is thus shown conclusively that if demand had been made on this note or certificate of deposit it could have been easily collected on any one of the above dates except October 21, 1912, by charging it to the deposit balance of the Bank of Bethalto. There is no reasonable theory from the evidence in this record upon which to base a conclusion that this debt was not a good and collectible debt on October 21, 1912, so far as we are able to see. It is simply another case in which the trust and savings bank made no effort to urge or press the debt for collection. Had such effort been made, this bank, whose stock was selling at $120 per share at that time, would undoubtedly have paid off the certificate. It could not have afforded to do otherwise. It was only the closing of the trust and savings bank that ever at any time rendered this debt uncollectible, if it is really uncollectible at this time.
The certificate of deposit of the Bank of Marine was eliminated from the National Bank on November 21, 1912, by the substitution of three notes of H. W. Huttig and the Huttig Manufacturing Company, and the canceled certificate of deposit was returned by the trust and savings bank to the Bank of Marine. The claim for disallowing the debt of the Bank of Marine is that the Huttig notes were never paid.. The real question on this record is whether or not the certificate of deposit on the Bank of Marine was good and collectible on October 21, 1912, and if it was, this is the end of the inquiry so far as the Central Trust Company is concerned. There is no contention that the Bank of Marine was insolvent and its paper worthless on that date. The actual showing is that its deposit account in the National Bank in January, 1913, was not less than $19,532, and that the high point of that account was $45,581.65, and that the certificate of deposit was due in that month. Its deposit account after January, 1913, and up to April, 1914, was not less than $17,700, and there was no month within that time that its deposits did not reach as high as $36,362, and within that time the high point was $170,889.63. This evidence settles it beyond question that this debt was first class and could have been collected at any time after due up to May, 1914. . . -r
Division j.
There are seventeen debts or claims in this division, numbered by the Appellate Court from 1 to 17, inclusive. We find the aggregate valúe of all these bills receivable to be $294,231.84. The master and two members of the Appellate Court have allowed in full under this division the following claims in the following amounts: Granville W. Browning, $5454.35; William Carey, $2482.10; Collie Clavin, $10,033.05; William DeBuhr, $7696.23; Frank J. Delaney, $8688.79; John R. Farthing, $14,570.72; Annie V. McComb, $1968; William J. Moxley, $54,912.49; and Walsh Bros. Western Securities Company, $49,144.83. The other member of the Appellate Court agreed with the master and the other members of the court as to only four of the above mentioned claims, to-wit, those of Browning, Delaney, Moxley and Walsh Bros. Western Securities Company. The principal question passed on by the master and the Appellate Court is whether or not payment was made in full on the same as disclosed by the record. As to one or more of these claims there was a further question whether or not the claims were good and collectible on October 21, 1912. The evidence sustains their finding in every instance as to the claims allowed, and we do not deem any further comment necessary.
Item No. 1 under this division was a note of $3010.50. including accrued interest, of the Bethalto Lumber Company, dated August 13, 1912, due on demand. The evidence is to the effect that it was a partnership, consisting of C. B. Munday, or C. B. and J. G. Munday, and E. R. Starkey. Starkey owned a half interest. The proceeds of this loan appear to have been credited to the account of the Litchfield Mill and Elevator Company. The trust and savings bank sold and transferred this note to the Farmer’s Bank of Bethalto, and it was not in the trust and savings bank afterwards. The testimony of H. H. Starkey, brother of E. R. Starkey, deceased, is to the effect that this was the only note or obligation of the lumber company, and that the company had sufficient stock or lumber in the yard at all times to pay this debt, and his testimony is uncontradicted. This note was collectible at least a year or more after it was given, as the lumber company was a going concern until after the trust and savings bank closed. J. G. and C. B. Munday were,liable to the National Bank for any part of it not paid by the lumber company, under the law of partnerships. We have therefore allowed this claim in full, charged the same to C. B. Munday in his account and also given him credit for an equal amount of assets, as, the partnership is shown to have been solvent on October 21, 1912.
David Davis was indebted to the National Bank on his notes amounting to $30,217.83 and as an indorser in the further sum of $10,110. The m?.ster found that he was solvent October 21, 1912, and well able to have paid this indebtedness, and that in the opinion of prudent and conservative bankers acquainted with his financial condition he was worth from $20,000 to $25,000 over and above his debts. One member of the Appellate Court approved this finding. Another member of the court allowed the sum of $10,035 on the direct liability, which the record' positively shows, without contradiction, was paid by Davis. The third member of the court allowed nothing. The master’s finding is sustained by the evidence. The receiver offered no testimony. A banker living in Litchfield, well acquainted with Davis and who knew all about the properties that he owned, testified positively that on said date Davis was worth $15,000 or more over and above his indebtedness, and his testimony is uncontradicted. The receiver offered no rebutting evidence. The evidence satisfies us that all of Davis’ indebtedness to the bank could and would have been collected if the bank had made proper effort to do so. We know of no rule of law by which we are permitted to disregard the prima facie case made by appellee.
Claim No. 9 in this division was a note of John M. Lavin for $2000 which he had executed to the bank to settle his liability as an indorser of certain notes of the Federal Fuel Company. This note came into the hands of the receiver and there was paid thereon to him $280. The receiver compromised the indebtedness to the bank for $1000 in addition to the amount already paid. The master applied the $280 credit on Lavin’s note and only allowed that sum as the value of his note. He applied the other $1000 payment to two other notes of Lavin for $2500 each, which were given in payment for stock of the National Bank. Two members of the Appellate Court applied this latter payment, and also the payment of $280, on Lavin’s $2000 note and allowed $1280 as the value of the note. We approve the Appellate Court’s action in applying both credits on the $2000 note, and we value the note at $1140, — the amount of the debt completely discharged by the payments. The Appellate Court failed to recognize the fact that simple payment on a note does not reduce the total indebtedness to the amount of the payment unless the interest on the note is paid up to the date of the payment, in accordance with the rule that we have already announced as to partial payments. ' The two notes of Lavin for $2500 each were sold to the trust and savings bank on March 10, 1913, by the Bank of Bethalto and remained in that bank until it closed, according to the testimony of Radish, and were not a liability of Lavin to the Bank of Bethalto at any time thereafter. According to the testimony of Radish, and other evidence in the record, these notes of Lavin for $5000 were liabilities of Munday, and should be included among his liabilities because the notes were given for bank stock which Mun-day got and did not credit to Lavin’s account. We have therefore charged them as liabilities against Munday, as will later appear.
As to item No. 11 in this division, the master and two members of the Appellate Court found that Sims Maguire’s demand note No. 8029, for $25,000, and his indirect liability of $332.32, amounting to $25,419.82, to the National Bank was completely discharged by payments. The other demand note for $18,540, dated October 14, 1912, was not paid in full, but there was a total reduction of this debt of $615.50 by payments to the bank before it came into the hands of the receiver. The receiver has collected nothing ón the notes. Maguire had a deposit balance on October 21, 1912, in the National Bank of $1010.75, which could have been applied by the bank on this demand note, and the master finds that the indebtedness on this note should be further reduced by that sum, making a total reduction thereof of $1626.25. We sustain the finding of the master and find the value of this item to be $27,046.07, the amount of the first note plus the total amount paid on the second note, because the evidence clearly sustains him. The Appellate Court allowed nothing for the second note and the dissenting member of the Appellate Court found both notes to be worthless.
Item No. 13 of this division was a demand note of the Pleasant Valley Land Company for $10,035, dated July 22, 1912. On January 13, 1913, this note was paid by charging it against the credit balance of C. B. Munday & Co., and the note was eliminated from the bank. The proceeds of the note when given were credited to the Litchfield Mill and Elevator Company. There was no evidence as to the financial condition of the Pleasant Valley Land Company on October 21, 1912. The payment of the note by C. B. Munday & Co. was a recognition of the fact that they were liable for this note to the bank, either directly or indirectly. The result would not have been different had C. B. Mun-day & Co. borrowed the money themselves July 22, 1912, on their own note and paid it January 13, 1913, by having it charged to their deposit account. It made no difference where the money came from so the bank actually received payment. It was their liability and they were solvent on that date, and the argument by the receiver that Munday & Co. were insolvent on October 21, 1912, cannot be sustained by the record. We have allowed this debt in full and have also charged it as a liability to C. B. Munday. The Appellate Court found the note to be worthless.
Item No. 14 consisted of two notes aggregating $1051.43 including accrued interest, given by Lloyd J. Smith. The small note, of $300, was a demand note and was collected in full- after it came into the hands of the receiver. The other note was due on October 18, 1912. The undisputed evidence in the record is that Smith’s entire indebtedness could have been collected from his deposit account, notably in November, 1912, when his deposit account ran as high as $2481.33. In May, June and July, 1913, his deposit account exceeded the total amount that he owed. His indebtedness at no time exceeded $1550.50 up to August 30, 1913. Thereafter his indebtedness rose to $6400, and because this entire indebtedness was not collected and there was due a remainder of $1115.44 at the time the master took the evidence, the receiver contends, and the Appellate Court finds, that nothing should be allowed on this debt. We sustain the master in allowing this debt in full.
Item No. 15 is represented by five notes, aggregating $25,764.46,-of Clinton S. Woolfollc, and two demand notes of the Texas Gulf Realty Company, aggregating $50,175. Woolfolk’s note for $10,035, including accrued interest, was reduced to another note of $4500 May 3, 1913. This reduction was made by Woolfolk giving the bank a note and mortgage of Hudson D. North for $5500 of the debt. The note and mortgage were unquestionably good and collectible. The $4500 note was taken up by a note of the UlinoisLouisiana Land Company on October 11, 1913. Note No. 8123, for $2496.67, was secured by collateral and was charged to his account on the day it was due. No. 8124, for $2485, less unearned interest, was collateraled, and the books of the bank show that it was paid on its due date, November 25, 1912. No. 8125, due December 27, 1912, for $2471.67, less unearned interest, was secured by collateral and shown to be paid on its due date. The last note was a demand note for $8276.12 and was also secured by collateral. It was reduced on November 11, 1912, by credits to the sum of $6166.66. The remainder of this note is shown to have been paid in full. Most of the payments on the above notes may have been made, as contended by the receiver, out of the proceeds of $75,000 worth of notes of the Illinois-Louisiana Land Company and the proceeds of a $50,000 loan to the Texas Gulf Realty Company, but the record does show that Woolf oik was the owner at those times of $33,057.50 of certificates of deposit of the National Bank and that the bank might have charged his indebtedness against these certificates, or at least have made the money out of Woolf oik by pressing the claims for collection. He was undoubtedly well able to pay the debts to the bank at the time they were due and had the confidence of the banks and business men generally and appears to have had almost unlimited credit. The Texas Gulf Realty Company maintained a deposit account on October 21, 1912, and up to November 25, 1912, which was not less than $2115.89 between those dates. It was over $4000 on four different days between those dates, and there were six other days between those dates when it was over $3000. It was $3363.87 on October 22, 1912, and the bank could have collected this last amount by applying the amount of the deposit on the demand notes. We agree with the finding of the Appellate Court that nothing further could have been realized, with anything like certainty, on these notes and that their value should only be $3363.87. The master allowed full value for the same, and the Appellate Court only allowed full value for one of the small notes of Wool-folk, which was found to have been collected. Our total valuation for these two claims is $29,128.33.
Item No. 16 is represented by six $5000 notes of the Topeka Milling Company, aggregating $29,742.12, less unearned interest. All were dated August 14, 1912. Two were due November 12, 1912, three December 16, 1912, and one February 14, 1913. The milling company received for these notes three certificates of deposit of the Bank of East Alton and three of the Bank of Smithboro, for $5000 each. The six notes held by the bank were executed to Munday and he discounted the notes to the National Bank, and the proceeds of five of them were credited to the First National Bank of Litchfield and one of them to the Litchfield Mill and Elevator Company. All six of these certificates of deposit were charged to the liability account of C. B. Munday. On January 28, 1913, the milling company returned to Munday two of the certificates of deposit and directed him to return to it two of its notes, which was done and the obligation of the milling company was extinguished on these two notes. Munday at the same time paid off these two notes in the trust and savings bank by his check drawn on the Bank of East Alton, which was paid in due course of business. The foregoing facts are undisputed, and it must be held that there was a complete discharge of the milling company’s liability as to two of the notes, the bank having received full payment thereof. The other four notes were twice renewed and. were in the bank on July 24, 1913, when the milling company went into the hands of a receiver. Thereafter the trust and savings bank and its receiver collected an aggregate of $18,502.50 on the notes, leaving a balance due of $1497.50. In making this collection the receiver paid an attorney fee of $1500. The net result to the creditors was $17,002.50. Much of the testimony in the record tends to show that the milling company was solvent October 21, 1912, and that its assets amounted to about $60,000 over its liabilities. It had $109,-393.40 of liabilities on October 21, 1912. None of the notes to the National Bank were then due and the last note was not due until February 14, 1913. The evidence is also to the effect that at the time the milling company borrowed the money from Munday in August, 1912, it had exhausted its credit in the banks of its home State, Kansas, and was not making any money at that time, for which reason the Kansas banks had refused to loan it money and were demanding payment of the amounts due them. This state of affairs continued until it went into the hands of a receiver. It is apparent that in order for all creditors to have collected their money in October, 1912, or at any time thereafter, legal proceedings would necessarily result, and did result by throwing it into the hands of a receiver. Only ninety per cent of its indebtedness was paid by the receiver after its affairs were wound up. This showing is not inconsistent with the fact that it might have been able to pay all its debts if it could then have made a sale of its assets at a reasonable price, and it is not an unusual circumstance that at forced sale made by the receiver it fell short by ten per cent of paying its indebtedness. We do not think that we are warranted, under the evidence, in allowing more than has been actually collected on this claim less actual attorney fees paid in collecting the same, and in addition thereto whatever the evidence shows with reasonable certainty the receiver will collect on the balance due less attorney fees. On this latter question the evidence is to the effect that all four of the notes that were unpaid were guaranteed by the written guaranty of Herbert and George W. Hackney, president and vice-president of the company and residents of Kansas. The undisputed evidence is that they were worth $25,000 over and above liabilities. Suit has been brought against them by the receiver, and it appears reasonably certain from the testimony of the receiver’s attorney, Edwin A. Austin, that a judgment will be obtained against the guarantors and the same collected. From the nature of the litigation it is probable that about one-half of the remaining amount, or near that sum, will be expended in collecting the remainder unpaid. We have no means of knowing what the attorney fee will be, but a fee of $700 ought to be amply sufficient to pay the same. Therefore we allow the entire claim of this debtor, $29,742.12, less attorney fees already paid and to be paid of $2200, or $2yj-542.12. The master allowed the full amount of this debt. Two members of the Appellate Court allowed $18,502.50,— the amount actually collected by the receiver, less the $1500 attorney fee for collecting the same, — and allowed nothing on the remainder. The third member of the Appellate Court found the claim to be worthless.
Division 4.
There are eleven bills receivable in this division, designated by the receiver as “Lorimer paper.” The following are the names of the debtors, which are followed by the amounts they owed the National Bank on October 21, 1912, to-wit: John A. Cooke, $10,238.33; Federal Improvement Company, direct liability $6117.15, indirect liability $357-83; George J. Fitzpatrick, $790.67; Joseph P. Gallagher, $49,171.50; W. T. Keating, $2508.75; William Lorimer, $15,012.51; Lorimer & Gallagher Company, $104,865.75; Albert G. Sebillo, $300.85; E. W. Sebillo, president, and Sebillo Bros:, $6522.75; Adam Sebillo, $3846.90, and Helen Sebillo, $5017.50. We have allowed on all of the foregoing claims the aggregate amount of $189,737.98.
The first note under this division is that of John A. Cooke for $10,238.33, including accrued interest. This debt is the debt of William Lorimer and is listed as a liability of Lorimer by both the master and the Appellate Court. At the time Cooke gave this note Lorimer gave him ample collateral security to secure it. Later Cooke returned the collateral to Lorimer in consideration of Lorimer’s agreement to pay the note to the bank. The bank recognized it as Lorimer’s debt by receiving from him interest on the note. It is the law of this country and of this State that a third party may maintain an action on a promise made to another for his benefit. (Bristow v. Lane, 21 Ill. 194 ; Eddy v. Roberts, 17 id. 505; Thompson v. Dearborn, 107 id. 87.) There is no dispute about the foregoing facts as testified to by both Lorimer and Cooke. We allow full value for this claim, for the reason that Lorimer was solvent on October 21, 1912, as will later appear.
The following claims under this division were allowed in full by the master and two members of the Appellate Court on the ground that they were paid in full or that the debts were good and collectible on October 21, 1912, to-wit: Those of the Federal Improvement Company, Joseph P. Gallagher, W. T. Keating, the Lorimer & Gallagher Company, E. W. Schillo, president, and Sebillo Bros., Adam Schillo and Helen Schillo. The third member of the Appellate Court agreed with the other members of that court and the master as to the claims of Joseph P. Gallagher, the Lorimer & Gallagher Company, and E. W. Schillo, president, and Schillo Bros., and also agreed with them as to the indirect liability of the Federal Improvement Company. The remainder of these claims he found to be worthless. We have allowed full value for all of them.
As to the claims of George J. Fitzpatrick and Albert G. Schillo, and the overdrafts of William Lorimer, Jr., and Josephine H. Lorimer, which overdrafts have heretofore been allowed in full by us, we consider them together at this time for reasons now given. The overdraft of Josephine H. Lorimer of $46.12 on October 21, 1912, was increased to $178.55 on November 15, 1912, and. continued in this amount until November 30, 1912. On the last named date the overdraft in the latter sum and the overdraft of William Lorimer, Jr., which had increased from $267.12 to $288.12, were both eliminated by a check of William Lorimer, Jr. On the day this check was drawn, November 30, 1912, William Lorimer, Jr., gave a note for $3000, and the overdrafts were paid out of the proceeds of that note. The $3000 note was paid December 28, 1912, by William Lorimer, Jr., by discounting a note of William Lorimer, Jr., trustee, which was secured by a mortgage on the Pistakee Bay property, which had been previously deeded to him by his father, William Lorimer. The note and mortgage were for $20,000. The note and mortgage were subsequently paid in full. The foregoing facts are testified to by Spohr and are uncontradicted. Spohr, who is an expert accountant employed by the receiver and who had been, general auditor of the National Bank and of the trust and savings bank during their entire existence, further testified that about July 24, 1913, the $790.67 note of Fitzpatrick and the note of Albert G. Schillo for $300.85 treated under this division were charged against the deposit account of William Lorimer, Jr., and that at the beginning of business on that day his deposit account was $33,049.11 and at the close of business on that day $21,777.89. These credit balances were obtained by Lorimer, Jr., on July 23, 1913, by two credits, one of $24,250 and another of $24,-338.54, which were obtained by the sale of two notes and mortgages, for which he received cash, and the proceeds were passed to his credit on the books of the bank. The foregoing testimony settles beyond question that the overdrafts and the Fitzpatrick and Schillo notes were paid with real cash deposited in the bank. The testimony of Spohr is also corroborated by Radish, and on this testimony we have allowed the overdrafts and the two notes in full, as did also the master. The Appellate Court allowed nothing on the overdrafts and found the two notes to be worthless.
As to Lorimer’s paper in this division a great deal has been said by the receiver, but it will only be necessary to confine our consideration of the same to the facts in the record. The plain, simple facts shown by the record are to the effect that on September 16, 1912, Lorimer informed C. B. Munday that he desired to borrow $30,000, and Munday informd him that he could get it for him at one of his down-State banks. Thereupon Lorimer executed to him his notes for $30,000, secured by a mortgage on his Michigan farm of 670 acres, and upon delivering these instruments to Munday the latter gave him six certificates of deposit of the Bank of Smithboro, which Lorimer indorsed and discounted to the National Bank. Three of these certificates of deposit were dated September 16, 1912, and were due September 12, 1913, and they bore the National Bank’s numbers 8345, 8346 and 8347, and have heretofore been considered by us in our consideration of the indebtedness of the Bank of Smithboro. The other three were dated October 15, 1912, and were due September 12, 1914, and bore the National Bank’s numbers 8698, 8699 and 8700 and constitute the indebtedness charged to Lorimer in this division. It thus appears that all these certificates of deposit were the direct liability of Munday and that Lorimer was only liable to the National Bank as indorser. '
About the strangest feature that we are able to note about this whole transaction is, that only three of the certificates were charged to the Bank of Smithboro, the direct debtor, while the other three were charged to Lorimer, the indirect debtor, upon the books of the National Bank and were not charged to the Bank of Smithboro at all. We have regarded them all as the direct liability of the Bank of Smithboro and have allowed them all as good assets against that bank under Division 1, and we will therefore allow nothing as against Lorimer for the three certificates here considered for the reason already stated, and for the further reason that the record shows that Lorimer in April, 1914, sold his Michigan farm for $42,500 in cash and with the money paid off his notes and mortgage given to Mun-day and received his notes and mortgage from the trust and savings bank, which had custody of them and was at that time the owner of them. So far as Lorimer was concerned, this canceled all his direct liability to either the National Bank or to the trust and savings bank concerning this loan. On October 23, 1912, Munday discounted the notes of Lorimer to the trust and savings bank after the National Bank had been denationalized and the proceeds were credited to his account, and this is the full explanation of how the trust and savings bank came into possession of these notes and mortgage. It appears from the evidence that Lorimer did not know anything about this latter transaction of Munday until quite a while thereafter. The notes and mortgage of Lorimer were good security for his debt and no one questions that fact. They were the property of Munday on October 23, 1912, and the trust and savings bank being a State bank, was permitted, under the law, to buy the same, and there was absolutely no prohibition against Munday selling the same, and the endless argument to the effect that the two banks “thus lost” $60,000 upon the worthless paper aforesaid cannot be made effective under the facts in this record. The fact is, Lorimer discharged all of his direct obligation in this transaction and Munday owed his direct obligation on the certificates of deposit to the trust and savings bank or its assignees, and they are all properly charged to him in his liability account. The master found three of these certificates of deposit good and collectible assets on the ground that Munday was solvent and liable on the same, and this was one of his reasons for allowing these claims against the Bank of Smithboro. He has allowed the claims on the other three their full face value against Lorimer under this division on the ground that he was solvent and liable for the same. The Appellate Court allowed three of them against the Bank of Smithboro and allowed the other three against Lorimer under this division on the theory that the certificates of deposit were good and collectible because secured by Lorimer’s notes and mortgage, and has refused to allow any of them on the ground of the solvency of either Munday or Lorimer and found both of them to be insolvent. As a matter of fact, the certificates of deposit never were secured by the mortgage of Lorimer. It was the notes of Lorimer that were secured by the mortgage,— in the first instance a debt to Munday. The certificates of deposit must be held good upon the solvency of Munday or of Lorimer, as the National Bank and its assignees had to depend entirely upon the obligation of Munday as maker and Lorimer as an endorser.
It will be necessary to consider the question of Lorimer’s solvency only because of the fact that he was liable to the National Bank on two other notes which we have allowed in full, to-wit, the note of John A. Cooke, considered under this division, and the note of William Webb, to be considered under a subsequent division. The Central Trust Company admitted that the liabilities of Lorimer on October 21, 1912, are as charged to him by the Appellate Court, and are the following:
To National Bank on Smithboro certificates........... $30,000.00
To National Bank on John A. Cooke note............. 10,238.33
To National Bank on William Webb note.............. 1,987.67
To Munday on notes................................ 22,000.00
To Munday on open account......................... 65,646.32
To Moxley on note.................................. 90,000.00
To Moxley other than on note........................ 15,000.00
To Ernest Magerstadt............................... 12,000.00
To Lorimer & Gallagher Company.................... 4,429.27
Other indebtedness, general.......................... 18,000.00
Total.........................................$269,301.59
It will be noted that Lorimer’s indirect liability on the certificates of deposit is charged to him in this list of liabilities, and that the notes and mortgage to Munday, which were a direct liability of his on October 21, 1912, are not charged as a liability. The Appellate Court found Lorimer’s resources or assets, and their values, on October 21, 1912, to be the following:
Michigan farm (equity)............................. $12,500.00
Bittersweet property (equity)........................ 10,000.00
Ridgeway avenue property........................... 17,000.00
Pistakee Bay property............................... 40,000.00
Cash in bank....................................... 5,008.97
Half interest in Lorimer & Gallagher Company........ 47,892.48
900 shares of stock in National Bank................. 94,500.00
Total.........................................$226,901.45
It will be noted that in the above list of assets the Appellate Court gave Lorimer no credit for the $30,000 certificates of deposit or Munday’s liability thereon, which we have found to be of full value. We do not controvert the proposition that for a proper casting of Lorimer’s assets and liabilities his indirect liability on the certificates of deposit is properly charged to him as a liability, but if that is done he should have credit for his right against Munday to make the certificates of deposit good. Our accounting as to this item of liabilities and the corresponding assets would simply offset each other, but our accounting as to the notes and mortgage and the corresponding assets makes $30,000 difference in favor of Lorimer. In other words, we would charge to Lorimer as a liability $30,000 for the notes and mortgage given to Munday on his Michigan farm, and we would give him as an asset against that liability not simply an equity in the farm less Munday’s mortgage, but the value of the farm itself. By the Appellate Court’s method of accounting Lorimer has suffered a $30,000 loss by a simple error in book-keeping or in casting the accounts, because the Appellate Court found as a matter of fact that Lorimer’s farm in October, 1912, was worth just the amount Lorimer obtained in cash for it in April, 1914, ($42,500,) as it only gave him an allowance on the farm of $42,500, less the notes and mortgage, or $12,500. In other words, it only gave him credit for the equity instead of the value of the farm. We are in doubt as to whether or not the Appellate Court has made a similar error in accounting as to the Bittersweet property. The facts are, that Lorimer paid for this property $10,000 in cash and assumed a mortgage thereon of $12,500, making the cost price to him $22,500, the latter sum being the value the Appellate Court actually found the property to be worth October 21, 1912. The evidence does not show whether or not the note and mortgage are charged to Lorimer in his liabilities.
On the valuations of Lorimer’s assets we are forced to disagree with the Appellate Court as to three of those items. Lorimer was forced to sell his Michigan farm in 1914 at a time, as all the evidence in the record shows, when property in this country was selling much lower than in 1912. The record shows that about the highest time for real estate in this country for several years prior to and after 1912 was in October, 1912, the time at which this property is to be valued. Lorimer testified that this property was worth $75,000 on October 21, 1912. There were two other witnesses, who were farmers in the neighborhood of the land, who valued it considerably higher than Lorimer, but the basis of their valuations was erroneous and improper. The master valued the farm at $68,300. We feel sure that this land ought to be valued at least at $50,000.
The testimony shows that Lorimer bought the Bittersweet property in 1912, while it was in litigation, and at a very low figure. This property was sold in the summer of 1914 for about $30,000 at a time when real estate values were lower than in 1912. A competent witness as to the value of this land testified it was worth $53,750 in October, 1912. One witness by the name of Mullaley testified that he bought part of this land from Lorimer in August, 1914, for $12,000, and that he sold the same part in October, 1916, for $30,000, without additional improvements. The master found the value of the property as of October 21, 1912, to be $38,125, and we sustain his finding, as the evidence in the record amply sustains his valuation, and even a higher one. We have only given a value to the equity in this property in our accounting and have deducted from the full value the $12,500 mortgage, and value the equity at $25,625 under the assumption that the mortgage was not charged by the Appellate Court.
The testimony in the record bearing on the value of, the Ridgeway avenue property shows that property was at least of the value of $25,000 on October 21, 1912. Two expert real estate men in Chicago, Levy and Pace, valued this property, respectively, at $46,500 and $40,000. Lorimer valued the property at $35,000. This was Lorimer’s home. Lorimer sold this property in 1913 for $17,000, at a time when real estate was lower in Chicago than in 1912. Both the master and the Appellate Court valued it at $17,-000, the price for which it was sold in 1913, and refused to consider the evidence as to what it was worth on October 21, 1912. The value of the real estate on that date is what we are to ascertain in this case, and we are not content to value it at less than $25,000, and would value it at $35,000 if a higher valuation made any material difference in this case, because we must be controlled by the evidence. The receiver had the option to introduce further testimony if he saw fit to do so, and his failure in that particular warrants us in the conclusion that his effort to lower the value fixed by the witnesses would have been unavailing. For the reasons aforesaid we find the assets of Lorimer and their values on October 21, 1912, to be the following:
Michigan farm ........ $50,000.00
Bittersweet property (equity)........................ 25,625.00
Ridgeway avenue property........................... 25,000.00
Pistakee Bay property........................... 40,000.00
Cash in bank............... 5,008.97
Interest Lorimer & Gallagher Company............... 47,892.48
National Bank stock....................... 94,500.00
Munday’s.obligation on certificates of deposit.......... 30,000.00
Total.............. $318,026.45
We add to Lorimer’s liabilities as found by the Appellate Court $30,235 for his notes and mortgage on the Michigan farm to Munday and find his total liabilities to be $299,536.59. As we have found Lorimer to be solvent we have allowed the John A. Cooke note in full, and will also allow the William Webb note in full for $1987.67 when we come to consider it in a subsequent division. The evidence clearly shows that Lorimer was liable on the Webb debt, and he states in his testimony that he was so liable. The receiver applied a credit balance of $194.62 on Cooke’s note when it came into his hands, and he also realized a substantial credit by compromise with Cooke, the total sum thus collected being $4044.25. The master allowed this latter sum on Cooke’s indebtedness and found the remainder worthless, and two members of the Appellate Court did likewise. The third member of the court allowed nothing. On the Webb note the master allowed $22.82, being the amount of his deposit account when the note came into the receiver’s hands, and found the remainder of the note worthless. The Appellate Court found the entire note worthless.
. Division 5.
The bills receivable under this division are owed by the following named debtors in the following amounts: H. W. Huttig $39,136.60; Huttig Manufacturing Company, direct liability $2560.80, indirect liability $7096.58; and John R. Norris $1000.51. We have allowed full value for all these items, amounting to $49,794.49. The master also allowed full value on all three of these items. Two members of the Appellate Court allowed on the Huttig claim $35,000, allowed the debts of the Huttig Manufacturing Company in full, and on the Norris claim only $500. The third member of the court found all three of the claims to be worthless.
The note of H. W. Huttig was secured with notes of F. J. Moss of the face value of $39,600, 350 shares of the American Sash and Door common stock, and Huttig’s trust receipt for 320 shares of stock in the Omaha State Bank. On October 25, 1912, Huttig put up 40 more shares of said bank stock as collateral. On December 21, 1912, John R. Norris, an insurance salesman, borrowed $50,000 from the trust and savings bank and took up Huttig’s $39,000 note. He did this for Huttig and gave as collateral to the latter note 360 shares of the bank stock of the Omaha State Bank and 26 bonds of the Motzorongo Company, par $500 each, and also a note of the Cemetery Securities Company for $47,000, all of which was obtained by him from Huttig. In May, 1914, the trust and savings bank gave all of the above collateral and the Norris note, together with other paper, to the city treasurer of Chicago, Flynn, as security for the deposits of the city. The Omaha State Bank was organized in September, 1912, with a capital stock of $300,000 and $75,000 surplus, and the shares of stock were paid for at $125 per share. The undisputed testimony of Robert S. Drusdow is that he sold stock of said bank in November, 1912, at $130 per share. This bank stock was therefore worth on October 21, 1912, the amount paid for it, $125 per share, and Huttig’s 360 shares must have been worth $45,000 on the date Norris put them up as security for the $50,000 loan. Receiver Niblack, for the trust and savings bank, on application to the Cook county circuit court, secured an order authorizing him to sell to Huttig for $35,000 cash the $50,000 note of Norris, together with all the above collateral which secured the same. Joseph O. Morris, a Chicago attorney, gave the uncontradicted testimony that he told Huttig he ¿could get Niblack to sell the . Norris note and the collateral thereto for less than its face. Huttig thereupon gave Morris $40,000 cash and told him he could have the difference between that sum and the amount he could get Niblack to accept for said note and collateral. Morris talked with Niblack and got him to take $35,000 cash for the note and collateral, and in pursuance of this agreement Niblack secured the order of court. The witness Drusdow further testified before the master that the lowest price he had ever sold bank stock of the Omaha State Bank was $117.50 per share, and that sale occurred in February, 1915, about the time the court order was entered; that in 1914 he sold this bank stock for $122.50 per share, and within the last year (the year in which he testified) as high as $132.50 per share. Huttig’s bank stock of 360 shares was worth at least $42,300 at the very time Niblack made the above agreement. Bonds of the Motzorongo Company were worth par according to the uncofitradicted testimony of the manager of that company, Alfred M. Turner, and the company had assets on July 15, 1912, of $2,009,567.10, on which there was a first lien to secure $167,300 of bonds. Those held by the receiver as collateral were part of those bonds, and in 1915, when the collateral was sold back to Huttig, the profits of the company were $65,561.50. Under this evidence the 26 bonds held by the receiver were of the value of $13,000. The undisputed evidence also shows that Huttig, in order to raise the $40,000 that he paid Morris to compromise with the receiver at $35,000, borrowed $40,000 from the Omaha State Bank upon 360 shares of stock of that bank as collateral, being the same number of shares held to secure the $50,000 note. It is upon the above evidence that we allow full value for this note.
The master and two members of the Appellate Court found from the evidence that the liability of the Huttig Manufacturing Company was paid, and the record evidence sustains that finding. The vice-president of the First National Bank and the First Trust and Savings Bank of Muscatine, Iowa, testified that on October 21, 1912, the Huttig Manufacturing Company owed his bank $52,000, unsecured, and that the indebtedness was all subsequently paid. He regarded the paper as perfectly good in October, 1912. He was familiar with the company, its plant and its business and kept in close touch with its affairs. It carried a large stock of merchandise of about $150,000, and its volume of business ran from $50,000 to $70,000 per month. The company paid dividends for a number of years and was still a going concern in 1918, when this evidence was taken, and was in all respects prosperous and earned for the year 1917 about $50,000 net profits. There is absolutely no testimony that the company was not financially good and its debt collectible in 1912, whatever might have been its condition when the trust and savings bank closed in June, 1914, or later. In conclusion we again announce that there is no reason or law for the receiver’s proposition that the Central Trust Company is bound by the action of the receiver in compromising Huttig’s indebtedness for less than its value on October 21, 1912, and this rule applies to any debt considered in this record.
The undisputed evidence in the record is that a payment of $500 was made on John R. Norris’ indebtedness November 23, 1912. Accountant Kadish testified that the books of the bank showed that the remainder of the debt was paid one day after its due date, February 15, 1913, and that he knew of nothing to indicate that it was not paid in cash in the usual and ordinary course of business.
Division 6.
The bills receivable under this division are those of the Commercial Bond and Investment Company and the Catholic Bishop of Bismark, who owed the National Bank $50,-033.19, including accrued interest, and $39,088.68, including accrued interest, respectively. We have allowed upon these two claims the aggregate sum of $69,609.49, being full value for the debt of the Catholic Bishop of Bismark and $30,520.81 for the debt of the Commercial Bond and Investment Company. The master allowed full value for both claims. All members of the Appellate Court allowed full value for the debt of the Catholic Bishop of Bismark and two members of the court allowed $17,239.28 on the other claim, while the third member found it worthless.
The Appellate Court and the master properly allowed $17,239.28 on this indebtedness, which was realized out of the notes of the Sisters of the Holy Child of Jesus, which notes had been obtained in exchange for note No. 6940, amounting to $17,239.28, including accrued interest. The remainder of the debt ($32,793.91) went into four notes, three for $25,000 each and one for $50,000, aggregating $125,000. One of these $25,000 notes was transferred to the Ashland Twelfth Bank on December 29, 1913, and while there there was a reduction of it of $1015. Another of the $25,000 notes was credited or paid in full according to the testimony of Kadish. The other $25,000 note was reduced by payments of $4593.30, and the balance of the note went into the hands of the receiver as a note of $20,-406.70. The $50,000 note was credited with a $20,000 reduction and the remainder of $30,000 went into the receiver’s hands. The foregoing evidence shows a total reduction of the $125,000 indebtedness of $50,608.30, or 40.5 per cent, of the entire $125,000 debt. Giving the old notes proper proportion of this reduction, we find that the $32,793.9! that went into the $125,000 was reduced by said payments by the sum of $13,281.53, and this further amount should be added to the amount of the old note that was paid, which amounts to the sum of $30,520.81, which we have allowed as the value of this debt.
The record evidence amply supports the master and the Appellate Court in finding that the debt of the Catholic Bishop of Bismark was a good and collectible debt on October 21, 1912, and that the note was paid in full.
Division 7.
The bills receivable of the Cemetery Securities Company are the only ones treated under this division. They consist of six notes, one for $100,000 and five for $5000 each, aggregating a net face value on October 21, 1912, of $121,-413.25. We have allowed full value for these notes. The master allowed full value. Two members of the Appellate Court allowed for this item $77,106.43 and the other member allowed nothing. The large note was dated June 3, 1912, due June 3, 1913. The unearned interest on that note was $3055. The other five notes were dated September 25, 1912, and were due March 25, 1913, the unearned interest on each note being $106.25, all of which were paid on the dates when they were due. There can be no serious question about the payment of the five notes under the evidence, and both the master and two members of the Appellate Court so found. The $100,000 note was renewed and came into the hands of the receiver on July 20, 1914, and he applied the sum of $1781.43, the deposit bal

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6981461. Public record. Not legal advice.