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(153 Ill. 663)

WILLARD v. PETTITT.1
(Supreme Court of Illinois. Nov. 27, 1894.)2
WRIT OF
ERROR-EXCEPTIONS-OPINION OF COURT

MALICIOUS PROSECUTION

EVIDENCE

-CONSTRUCtion.

1. An opinion of the Illinois appellate court which states, "We cannot go over the 262 pages of evidence taken on the trial to justify our conclusion; * * the evidence is conflicting and irreconcilable," does not show that that court declined to consider the evidence.

2. Where defendant claims to have acted in good faith on the advice of counsel, evidence that he said before he retained counsel that he wanted to "get a lawyer to do a dirty, mean trick is competent evidence to show malice or bad faith.

3. The admission of evidence in chief, after evidence has been introduced in rebuttal, is a matter of discretion with the trial court.

4. Upon writ of error as upon appeal, error cannot be assigned upon instructions to which no exceptions were taken.

Error to appellate court, First district; Frank Adams, Judge.

Action on the case by Nina Pettitt against Mrs. S. A. Willard. Plaintiff obtained judgment, which was affirmed by the appellate court. 54 Ill. App. 257. Defendant brings error. Affirmed.

L. M. Shreve and W. E. Hughes, for plaintiff in error. Masterson & Haft, for defendant in error.

CRAIG, J. This was an action on the case brought by Nina Pettitt against plaintiff in error to recover damages for an alleged malicious prosecution. On a trial before a jury in the circuit court the plaintiff recovered a judgment, which on error was affirmed in the appellate court; and, for the purpose of recovering that judgment, this writ of error was sued out.

It is first insisted by counsel for plaintiff in error that the appellate court failed to consider the facts, and for that reason the judgment should be reversed, and the cause remanded. It is the duty of the appellate court to consider questions of fact as well as questions of law, but it does not appear from this record that the appellate court failed to consider the facts. In the opinion of the appellate court it is said: "We cannot go over the two hundred and sixty-two pages of evidence taken on the trial to justify our conclusion that upon that evidence the question whether the plaintiff in error maliciously and without probable cause repeatedly prosecuted the defendant in error on the charge of larceny was such a question as the verdict of a jury is final upon. The evidence is conflicting and irreconcilable. The credibility of witnesses is for the jury. Clevinger v. Curry, 81 Ill. 432." From this statement it is argued that the appellate court declined to consider the evidence.

1 Reported by Louis Boisot, Jr., Esq., of the Chicage bar.

2 Rehearing denied March 9, 1895.

ex

We are unable to place that construction on the opinion. How could the court determine that the evidence was conflicting and irreconcilable unless the evidence was amined? The expression, "We cannot go over the two hundred and sixty-two pages of evidence taken in the trial to justify our conclusion," etc., does not warrant the conclusion of counsel that the evidence was not considered. All that the appellate court meant by what was said was merely that it would not repeat or set out the evidence in the opinion to establish the fact that the verdict of the jury was predicated upon such a state of facts as would justify the court to treat it as final. This, in our judgment, is a fair and legal construction of what was said.

On the trial appellee called P. J. Carey as a witness, and he testified: "Q. By appellee's attorney: Did you have any connection with Mrs. Willard in relation to this case? A. She came into J. Underwood's office, and asked where she could get a lawyer to do a dirty, mean trick? I refered her to old Turner. (Objection. Overruled, and exception.) She said she had Pettitt arrested down town, and could not get justice, and she would try it up town. She said Pettitt had stolen from her, and she would make it warm for her." The ruling of the court in the admission of the evidence is pointed out in the argument as error. The defendant claimed that in causing the arrest of the plaintiff she acted in good faith on the advice of counsel. This evidence was no doubt introduced for the purpose of showing malice or bad faith on the part of the defendant, and for that purpose we regard it as competent.

After the evidence had been closed by both parties, the defendant asked leave of court to introduce Mrs. Bremwell, to prove that she on a certain occasion saw appellee steal a pair of shoes. The court denied the

application, and this is relied upon as error.
When the defendant was making out her
case in chief, that was the proper time to in-
troduce this evidence if she desired to rely
upon it.
But after the defendant had in-
troduced her evidence and closed her case,
and the plaintiff had introduced her evidence
in rebuttal, it was then a matter resting in
the sound discretion of the court whether the
case should be reopened and new evidence
introduced, and we do not think that dis-
cretion was abused. The defendant had am-
ple opportunity to introduce the evidence
when she was making out her case in chief,
and no satisfactory reason appears why the
evidence was not then introduced. Some oth-
er minor objections have been made to the
ruling of the court on questions of evidence,
but they are not of sufficient importance to
call for a discussion here.

It is also claimed that two of the instructions, Nos. 3 and 6, given to the jury, are erroneous, and the appellate court erred in re

fusing to reverse the judgment on the ground that these instructions were erroneous. No exception was taken to the decision of the court in giving instructions, and for this reason the appellate court refused to consider the ruling of the circuit court in instructions. It is, however, contended by plaintiff in error that under St. 27 Eliz. c. 8, which is a part of the common law, and as such in force in this state, where a record is brought up on writ of error, and error appears in the record, the error must be reviewed and corrected, although no exception was taken at the time the error was committed in the trial court. It is conceded that, under our practice allowing appeals in civil cases on appeal, instructions will not be reviewed unless objected to in the trial court, and exception preserved to the ruling of the court at the time the instruction may be given or refused, as held in Hilliard v. Walker, 11 Ill. 645, and numerous other cases, following the rule there established. But it is claimed that the rule which governs appeal cases does not apply when the case is removed to the appellate or supreme court by writ of error. We shall not stop to consider the terms and conditions of the statute of 27 Eliz. chapter 8, for the purpose of determining whether the construction contended for by counsel is the correct one or not. The rule of practice requiring exception to be preserved to instructions, both on appeal and writ of error, has been so long established and so uniformly adhered to that it would be unwise now to change the rule, even if it was wrong when first established, which we by no means concede. We will refer to a few of the many cases where the rule has been adopted. As early as 1841, in Leigh v. Hodges, 3 Scam. 17, which was error to Montgomery county, the question arose, and it was then said: "It is a well-settled rule that exceptions to the charge of the judge should be taken at the time the charge is given, and before the jury retire. * It is too late to take exception after the verdict is rendered." In Gibbons v. Johnson, 3 Scam. 61, which was also a writ of error, the same rule was declared. Again in Hill v. Ward, 2 Gilman, 293, a writ of error to Williamson county, the rule was declared in the following emphatic terms: "The court is of opinion that the instructions desired by the plaintiff's counsel in this case were proper and pertinent, and that, if an exception had been taken at the time they were refused, such refusal would have been error. This, as appears from the record, was not done, and it was not until after the jury had returned their verdict that the plaintiff sought indirectly, in a motion for a new trial, to except to the ruling of the court in refusing these instructions, with which at the time of the decision he manifested no dissatisfaction." The doctrine that a party cannot except to the opinion of a court in giving or refusing instructions, except at the time they are given or refused, is distinctly set

tled by this court in Leigh v. Hodges, 3 Scam. 17, and it needs no argument nor anything to prove that a party cannot be permitted to assign for error in this court any decision or opinion of the circuit court made or expressed during the progress of a cause, in the propriety of which at the time of its occurrence he silently acquiesced. In Dickhut v. Durrell, 11 Ill. 72, writ of error to Adams, the same rule was declared. In Sedgwick v. Phillips, 22 Ill. 184, appeal from Rock Island, the same rule adopted in cases on error was adhered to on appeal. Numerous other cases might be cited, both writs of error and appeals, where the same rule has been declared, and in no case has any distinction been made. On the other hand, the same rule adopted on appeals has been established in writs of error, wherever no reason exists why one rule should be adopted on appeal and a different one on error. Here no exception was taken to the decision of the court on instructions, and on the motion for a new trial it was not urged, as a ground for granting a new trial, that the court had erred in giving instructions. It must therefore be presumed that plaintiff in error was satisfied with the decision of the court on instructions; at all events, the objection, urged for the first time on error, comes too late. The judgment of the appellate court will be affirmed. Affirmed.

(154 Ill. 44)

GOTTLIEB et al. v. MILLER et al.1 (Supreme Court of Illinois. Oct. 29, 1894.) * CORPORATIONS-CONFESSION OF JUDGMENT-RE

CEIVER-INTERMIXTURE OF GOODS.

1. An insolvent corporation may confess judgment in favor of bona fide creditors who are not directors or officers, even though this results in the appropriation of all the corporate assets to the payment of such creditors; but such a confession in favor of a creditor whose claim is based on an assignment from some of the corporate officers is void.

2. A receiver of an insolvent cannot assert title to property which the latter has assigned in fraud of creditors, as he has no greater rights than the insolvent.

3. Where property of two insolvents is fraudulently intermixed by them, the creditors of one of them who first attach the entire stock have a right thereto superior to the claim of the creditors of the other.

Appeal from appellate court, First district. Creditor's bill by the Landowners' Building Company against the American Parlor Frame Company, Leopold Miller, and others. Julius Schmits, Rudolph Gottlieb, and others intervened. Defendants obtained a decree, which was affirmed by the appellate court. 47 Ill. App. 588. Interveners appeal. Modified.

Moran, Kraus & Mayer, for appellants. Duncan & Gilbert and Pence & Carpenter, for appellees.

1 Reported by Louis Boisot, Jr., Esq., of the Chicago har.

2 Rehearing denied March 9, 1895.

BAKER, J. On January 10, 1890, the Landowners' Building Company recovered in the Cook circuit court a judgment for $2,665.62 against the American Parlor Frame Company, and Rudolph, Simon, and Joseph Deimel, as the firm of R. Deimel & Bros. The execution issued thereon was levied on property of the frame company, but without resulting in satisfaction, because prior thereto, on January 7, 1890, two judgments by confession had been rendered in said court in favor of Leopold Miller against the American Parlor Frame Company, for $10,225 and $3,000, respectively, and on January 8, 1890, three judgments had been rendered in the same court, by confession, in favor of Ignatz Deimel against said frame company, for $7,560, $5,400, and $4,018, respectively, and the sheriff at the date of the issuance of the execution of the Landowners' Company was already in possession of the property of the frame company under proper executions issued on the judgments of Miller and of Ignatz Deimel, and which executions much more than exhausted all the assets of the frame company. The first step in the litigation certified to this court in this voluminous record was a bill in equity exhibited in the Cook circuit court by the Landowners' Building Company against the American Parlor Frame Company, Leopold Miller, Ignatz Deimel, Canute R. Matson, sheriff, Rudolph Deimel, Simon Deimel, and Joseph Deimel. The bill is a creditor's bill, and it charges conspiracy and that the judgments in favor of Miller and in favor of Ignatz Deimel are fraudulent and void. By leave of court, Thomas Parker, Jr., receiver of the estate and effects of the firm of R. Deimel & Bros., was made a party defendant to the original bill of complaint, and he answered the same, and filed a cross bill. Next came into the litigation Julius Schmits, the American OakLeather Company, and a large number of other creditors of R. Deimel & Bros., who intervened by petition, and were made parties codefendant to the original bill and co cross complainants in the cross bill of Parker, receiver. It is not deemed necessary to set out the pleadings herein, nor is it deemed necessary, for the purposes of the decision, to set out the facts of the case, which are very numerous and very complicated. At the final hearing in the circuit court a decree was rendered dismissing the bill of the Landowners' Company for want of equity, and dismissing the cross bill of the receiver of R. Deimel & Bros., and of Julius Schmits, the American Oak-Leather Company, and others, for want of jurisdiction. It was further decreed that the judgments in favor of Leopold Miller be first paid by the receiver of the American Parlor Frame Company, appointed therein, and that the judgments in favor of Ignatz Deimel be next paid. Pending the litigation in the circuit court Leopold Miller had died, and Charles L. Miller and others had been substituted in his place as y.39N.E.no.13-63

The

codefendants to the bill and cross bill. decree of the circuit court was affirmed in the appellate court.

Appellants in their argument on the facts and the law of the case make three principal points. The first of these they formulate thus: The American Parlor Frame Company, at the time of the confession of the Miller and the Ignatz Deimel judgments, and before the giving of the notes on which such judgments were confessed, and for many months prior thereto, was not a going business concern, but was in fact then an insolvent corporation, which had utterly ceased and long since abandoned its business. We understand that this proposition is admitted by appellees; but, whether this be so or not, we find it to be true as matter of fact. The second of the propositions of appellants runs in this wise: The conditions of abandonment of business and of corporate insolvency which rendered the American Parlor Frame Company in no sense a going business concern were well known to Leopold Miller, to Ignatz Deimel, and to the Deimels who were stockholders and officers of the frame company, at the time when the judgment notes were given by and accepted from the frame company, and when judgments thereon were entered; hence, Leopold Miller and Ignatz Deimel cannot be considered, even if bona fide, diligent creditors. It may be well here to remark, by way of explanation, that the frame company was organized by the members of the firm of R. Deimel & Bros.; that its entire capital stock belonged to Rudolph, Joseph, and Simon Deimel, who were the sole directors of the company, except one share, of the par value of $100, which stood in the name of a traveling salesman of R. Deimel & Bros.-for purposes of convenience, but which he never paid for; and that Joseph Deimel was president and Rudolph Deimel secretary of the company. So far as this second proposition states matters of fact, they are correctly stated; so far as it deduces therefrom conclusions of law, it will be more conveniently considered along with the third proposition of appellants.

And this third proposition, on which hinges the gist of the controversy herein, is thus stated: When a corporation becomes insolvent, abandons business, and ceases to be a going concern; or when, having become insolvent, it is kept in operation, not as an actually going concern, but simply that it may continue in apparent business life, for the purpose of preferring, by security or payment, certain of its creditors who know its true condition,-the preference of creditors chargeable with such knowledge is unlawful in equity, since it violates the equitable principle that the assets of an insolvent corporation are a trust fund to be divided equally among its creditors, for whom its officers are in equity trustees, and to whom persons who take the property of the company from

such officers with notice of the trust are compellable to account. For the purposes of the present inquiry, many of the qualifying phrases found in the proposition as thus formulated may properly be eliminated therefrom; such as "abandons business," "ceases to be a going concern," "is kept in operation," "actually going concern," "apparent business life," "who know its true condition," and "chargeable with such knowledge." These matters so eliminated may be of importance in this suit so far as the supposed cause of action is based on the charge of fraud in fact, but it seems to us that they are of importance no further than that. The proposition speaks of the assets of an insolvent corporation as a "trust fund," and of the officers of the corporation as "trustees." This is not strictly accurate. The supposed trust does not fall within the definition of either an express trust, an implied trust, a resulting trust, or a constructive trust. 1 Perry, Trusts (2d Ed.) §§ 24–27, inc. At most, the assets of a corporation are, under some circumstances, a quasi trust fund, and the directors or officers of the corporation, under some circumstances, quasi trustees. In 3 Pom. Eq. Jur. § 1089, it is said: "The directors and supreme managing officers of corporations are constantly spoken of as trustees. They are not, however, true trustees, with the corporation or the stockholders as their true cestuis que trustent, since they hold neither the legal title to the corporate property nor that to the stock. In fact, directors are clothed at the same time with a double character, that of quasi trustees and that of agents. It is of the utmost importance to discriminate exactly between these two characters, and to determine accurately for whom, over what subject-matter, and to what extent they are thus trustees." Pomeroy further says (volume 2, § 1046): "By analogy, courts regard partnership property, after an insolvency or dissolution of the firm and in the proceeding for widening up its affairs, as a trust fund for the benefit of the firm's creditors; and the capital stock and other property of private corporations, especially after their dissolution, is treated as a trust fund in favor of creditors. These statements may be sufficiently accurate as strong modes of expressing the doctrine that such property is a fund sacredly set apart for the payment of partnership and corporation creditors before it can be appropriated to the use of the individual partners or corporators, and that the creditors have a lien upon it for their own security; but it is plain that no constructive trust can arise in, favor of the creditors unless the partners or directors, through fraud or a breach of fiduciary duty, wrongfully appropriate the property, and acquire the legal title to it in their own names, and thus place it beyond the reach of creditors through ordinary legal means." A natural person has absolute dominion over the disposition of his own prop

erty. It follows from this that an insolvent debtor, in the absence of any intention to hinder, delay, or defraud his other creditors, has the right to prefer one creditor over all others, even if the preference exhausts his whole estate. Such is the rule in this state, and it has been the rule for so long a time, and has been announced in so many cases, that it is wholly useless to cite any authority in that behalf. Blackstone, in his Commentaries (book 1, p. 475), says that it is necessarily and inseparably incident to every corporation aggregate that it has power to sue or be sued, implead or be impleaded, grant or receive, by its corporate name, and do all other acts, as natural persons may. And in Angell & Ames on Corporations (page 158, § 187) it is said that, independent of positive law, all corporations have the absolute jus dis| ponendi,neither limited as to objects nor circumscribed as to quantity. Why, then, may not an insolvent corporation, like an insolvent natural person, in the absence of legislation to the contrary, make a preference among its creditors? Morawetz, in his treatise on the Law of Private Corporations (chapter 10, § 582), says that it is generally considered to be a settled rule of law that a corporation has the same power of making preferences among its creditors that an individual has. In Ragland v. McFall, 137 III. 81, 27 N. E. 75, we held that it was competent for the insolvent corporation (the River Rendering Company) to prefer the wife of the president of the company, and turn its property over to her in payment of her debt, in good faith, and in the absence of any evidence of a fraudulent purpose. In Reichwald v. Hotel Co., 106 Ill. 439, we held that a corporation, like a private individual, independent of any positive law to the contrary, may turn out a part or the whole of its property in payment of its debts, and in doing so may prefer creditors, if done in good faith and not for a fraudulent purpose. To the same effect is the late case of Warren v. Bank, 149 Ill. 9, 38 N. E. 122. And we held the same doctrine in Bouton v. Smith, 113 Ill. 481, in Burch v. West, 134 Ill. 258, 25 N. E. 658, and in Glover v. Lee, 140 III. 102, 29 N. E. 680. In all of these cases the corporations were insolvent. In Fogg v. Blair, 133 U. S. 534, 10 Sup. Ct. 338, the supreme court of the United States say that the doctrine that the property of a corporation is a trust fund for the payment of its debts only means that the property must first be appropriated to the payment of the debts of the company before any portion of it can be distributed to the stockholders; and that it does not mean that the property is so affected by the indebtedness of the company that it cannot be sold, transferred, or mortgaged to bona fide purchasers for a valuable consideration, except subject to the liability of being appropriated to pay that indebtedness; and that such a doctrine as this latter has no existence. The cases of Rich

ardson's Ex'r v. Green, 133 U. S. 30, 10 Sup. Ct. 280; Purifier Co. v. McGroarty, 136 U. S. 237, 10 Sup. Ct. 1017, and Railway Co. v. Ham, 114 U. S. 587, 5 Sup. Ct. 1081, are to the same effect. See, also, Graham v. Railroad Co., 102 U. S. 148. In Roseboom v. Whittaker, 132 Ill. 81, 23 N. E. 339, we held that the creditor of an insolvent corporation may, by attachment or execution, acquire a specific lien upon its property, which will entitle him to a preference over other unsecured creditors; but that, after a court of equity has once acquired jurisdiction of the assets of the corporation, it will be exclusive; and that ordinarily no creditor can pursue a legal remedy in such a way as to obtain for himself a preference. That the doctrine that we have so frequently held, and that we are here so strenuously urged to change or modify, that in the absence of legislation an insolvent corporation may make a preference among creditors, subject to the same restrictions that apply to the individual debtors,— is in accord with the great weight of authority, is indicated by the following list of cases in which a like doctrine is announced: Catlin v. Bank, 6 Conn. 233; Russell v. McLellan, 14 Pick. 63; Revere v. Copper Co., 15 Pick. 351; Glass Manufactory v. Langdon, 24 Pick. 49; Pondville Co. v. Clark, 25 Conn. 97; State v. Bank of Maryland, 6 Gill & J. 205; Warner v. Mower, 11 Vt. 390; Ex parte Conway, 4 Ark. 348; Ringo v. Biscoe, 13 Ark. 563; Dana v. Bank, 5 Watts & S. 223; U. S. v. Bank of U. S., 8 Rob. (La.) 262; Burr v. McDonald, 3 Grat. 215; Bank v. Whittle, 78 Va. 737; Town v. Bank, 2 Doug. (Mich.) 530; Bank of Montreal v. J. E. Potts Salt & Lumber Co., 90 Mich. 345, 51 N. W. 512; Sargent v. Webster, 13 Metc. (Mass.) 497; Arthur v. Bank, 9 Smedes & M. 394; Smith v. Lansing, 22 N. Y. 521; Coats v. Donnell, 94 N. Y. 168; Stratton v. Allen, 16 N. J. Eq. 229; Buell v. Buckingham, 16 Iowa, 284; Dabney v. Bank, 3 S. C. 156; Gould v. Railway Co., 52 Fed. 680. Some few authorities are cited by counsel that apparently announce a contrary doctrine. We are not inclined to follow them; and especially so in view of our former decisions. It was not error in the circuit and appellate courts to hold that the American Parlor Frame Company had the right to secure Leopold Miller and Ignatz Deimel in preference to the other creditors of the company.

In respect to the three judgments of Ignatz Deimel, and the judgment of Leopold Miller for $3,000, and the other judgment in his favor, so far as it was based on the note for $4,207.35, we think the record shows no fraud either in fact or in law. But, to the extent that the judgment in favor of Leopold Miller for $10,225 was based upon the note for $6,000, we think it was a fraud upon the rights and interests of the other creditors of the American Parlor Frame Company. The history of that note is, in substance, as follows: On January 2, 1890, the American Parlor

Frame Company was wholly insolvent, and for a long time had been in that condition. Rudolph, Simon, and Joseph Deimel, who composed the firm of R. Deimel & Bros., were the directors of the company and the owners of its stock; and Joseph Deimel was the president and Rudolph Deimel the secretary of the company. Its insolvency was well known to them, and to each of them; and it was also well known to Leopold Miller. On the date mentioned the company was indebted to R. Deimel & Bros. in a sum exceeding $28,300. At the same time R. Deimel & Bros. were indebted to one Charles H. Schwab on their two notes of $2,934.28 each, and Leopold Miller was guarantor on said two notes. Miller paid them off. On said January 2, 1890, R. Deimel & Bros. made an equitable assignment of $6,000 of their account against the frame company to Leopold Miller. Said assignment was as follows: "Chicago, Jan. 2, 1890. American Parlor Frame Company in Acc't with R. Deimel & Bros., Nos. 381-387 Wabash Ave. 1890, Jany. 2. On Acc't, $6,000. For value received, we hereby sell and assign $6,000, being part of our claim against the American Parlor Frame Co., to Mr. L. Miller. R. Deimel & Bros. Accepted: American Parlor Frame Co., Joseph Deimel, Pt." And on the same day the insolvent American Parlor Frame Company, in consideration of the assigned account of $6,000, gave to Leopold Miller a demand judgment note for $6,000, dated January 2, 1890, payable to the order of Miller, and signed: "The American Parlor Frame Company, by Joseph Deimel, President. Rudolph Deimel, Secretary,"-with the seal of the company attached. In Beach v. Miller, 130 III. 162, 22 N. E. 464, this court held that the directors of an insolvent corporation cannot give away its assets, or use them to exonerate themselves, to the injury of the other creditors; and that, if any of the directors are creditors of the corporation, they cannot secure any advantage or preference in the payment of their claims at the expense of other creditors. The same doctrine has been since held in Roseboom v. Whittaker, 132 Ill. 81, 23 N. E. 339, and in other cases. In such case, as distinguished from the case where the directors apply the assets of the insolvent corporation to the payment of a debt due a third person, there is a trust. This is in accord with the doctrine we have already quoted from section 1046 of 2 Pom. Eq. Jur., where it is said: "It is plain that no constructive trust can arise in favor of the creditor unless the partners or directors, through fraud or a breach of fiduciary duty, wrongfully appropriate the property, and acquire the legal title to it in their own names, and thus place it beyond the reach of creditors through ordinary legal means." In the case at bar the effect of that which was done in regard to the $6,000 was to enable the directors and managing officers of the insolvent corporation to wrongfully appropriate

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