Court Opinion

ID: 6965241
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:52:40.526403+00
Date Added: 2024-06-11T09:12:02.264105
License: Public Domain

Mr. Justice Bailey delivered the opinion of the Court: We are of the opinion that the decree, so far as it relates to the claim of the First National Bank of Chicago and of Beveridge, Bickords & Co., is correct. No question is made that when the warehouse receipts held by these parties were issued, E. A. Schoyer & Co. had in store in the warehouses issuing them the packages of tea and coffee therein mentioned, nor that said receipts were duly assigned to said parties by E. A. Schoyer & Co. as security for loans of money made in good faith by the former to' the latter. It is admitted that while E. A. Schoyer & Co. were permitted by the proprietors of the warehouse to withdraw, from time to time, portions of the merchandise covered by said receipts, upon depositing other like merchandise in its place so as to keep constantly on hand the number of packages called for by the receipts, the fact of such withdrawal was not known to the holders of said receipts. They had a right to suppose, and doubtless did suppose, that the property thus pledged to them remained in the warehouse, subject to their order at any time on surrender of said receipts. It can not be doubted that the acts.of both the warehouseman and of E. A. Schoyer & Co., in thus disposing of portions of the property for which the warehouse receipts were given, were plain violations of the statute as well as frauds upon the receipt holders, and we are inclined to the opinion that, in consequence of such fraud, said receipt holders, as against E. A. Schoyer & Co., were entitled to at least an equitable lien upon the merchandise deposited in lieu of, and thus sought to foe substituted for, that taken away and disposed of. On this subject we need only refer to what we said in Union Trust Co. v. Trumbull, 137 Ill. 146. But the equities of the First National Bank and of Beveridge, Rickords & Co. rest upon a more specific appropriation by E. A. Schoyer & Co. to the satisfaction of said warehouse receipts of the merchandise in said warehouse. It is admitted that, shortly before their failure, E. A. Schoyer & Co., in view of their approaching failure, made out a list of the merchandise then in the warehouse, designating the same by marks, brands and numbers, and in such lists specifically apportioned said merchandise among the holders of said receipts, designating which were to- go to the First National Bank and which to Beveridge, Rickords & Co. The mode in which such appor tionment was made was by ascertaining, so far as possible, tbe packages still remaining in the warehouse which were originally pledged to the respective receipt holders, and also those which had been substituted in place of the original packages which had been withdrawn, thus seeking by express appropriation to give effect to the receipts as creating liens upon both. There can be no doubt that, under these facts, the receipt holders became entitled, as against B. A. Schoyer & Co., to an equitable lien on said merchandise, such lien arising, if on no other ground, at least upon the ground of estoppel. Union Trust Co. v. Trumbull, supra. Whether the warehouse receipts created a lien on the substituted property of their own force or not, E. A. Schoyer & Co., after substituting it for that unlawfully and fraudulently withdrawn, and after making a specific allotment of it to the several outstanding receipts, were, on the plainest principles of equity, estopped to deny the equitable rights of the receipt holders. If alter said allotment and before the appointment of the receiver, said receipt holders had instituted proper proceedings for the assertion of their lien, they would clearly have been entitled to have it enforced. The rule is well settled that the appointment of a receiver in a suit between partners for a dissolution and accounting will not affect the claims of creditors which have previously become liens. High on Receivers, sec. 495; Beach on Receivers, sec. 576. Such liens must be recognized and enforced to the same extent as though no receiver had been appointed. Nor are the .appellants in any better position to resist the enforcement of the appellee’s lien than were E. A. Schoyer & Co. before the appointment of the receiver. They were simple contract creditors, and as such, had no lien on the firm assets of their debtors. The equitable rule which requires the assets of a firm to be first applied to the payment of firm debts, is founded, not upon the equities of the creditors, but upon the equities of the partners, and the right of creditors who have secured no lien to have the firm assets so marshaled as to satisfy their debts first, can only be worked out through the equities of the partners. Hanford v. Prouty, 133 Ill. 339; 1 Bates on Partnership, sec. 560 et teq. Partnership creditors can become entitled to the benefit of these equities only by virtue of a species of subrogation, which courts of equity, of insolvency or of bankruptcy will grant, when called upon to wind up the affairs of a partnership and distribute its assets on equitable principles. Bates on Part. 825. The utmost then which the appellants are entitled to claim through the receiver is to be subrogated to the equitable right of the members of the firm of E. A. Schoyer & Co. to have the firm assets first applied to the payment of the firm debts. But the right of subrogation only places the appellants in the shoes of the members of said firm, and enables them to assert no equity which said members could not have asserted themselves. As therefore the members of the firm of E. A. Schoyer & Co. were estopped to deny the appellees’ right to their lien, the appellants for the same reason and to the same extent are also estopped. But it is objected that because the warehouse receipts held by the First National Bank and by Beveridge, Rickords & Co., or at least the greater part of them, failed to state on their face the brands or distinguishing marks upon the property therein mentioned, as required by section 24 of the act of April 25, 1871, they were issued in violation of law and are therefore void. Said section 24 provides that: “All warehouse receipts for property stored in public warehouses of class C shall distinctly state on their face the brands or distinguishing marks upon such property. ” There is no provision, however, in said act, or in any other statute, so far as we are aware, prescribing any consequences, penal or otherwise, for a failure to state on the face of a receipt, the distintinguishing marks or brands upon the property. Section 25 of said act makes it a felony, punishable by imprisonment in the penitentiary, for any warehouseman of any public warehouse, to issue any warehouse receipt for any property not actually in store at the time of issuing the same, or to issue any warehouse receipt fraudulent in its character, either as to its date, or the quantity, quality or inspected grade of such property, or to remove any property from store (except to preserve it from fire or other sudden danger,) without the return and cancellation of any and all outstanding receipts that may have been issued to represent such property. Similar provisions against issuing fraudulent warehouse receipts, and against fraudulent removals of property for which warehouse receipts have been given, are found in sections 125 and 126 of the Criminal Code. But there is no statute imposing any penalty for issuing warehouse receipts for property stored in Warehouses of Class C which do not state on their face the brands or distinguishing marks on said property, nor is there any statute declaring receipts thus issued to be in any respect invalid. Under these circumstances we should be reluctant to hold a receipt of that character to be void as against an assignee for value. But it is further urged that, as said receipts stated no brand or distinguishing mark on said property, the lien asserted must fail because of the impossibility of distinguishing or separating the property covered by said receipts respectively from the general mass of similar merchandise with which it was mingle,d. If the question were one arising between an execution or attachment creditor and the receipt holders the question might perhaps be an embarrassing one. But here it is to be viewed precisely as though the issue were made between the receipt holders and the members of the firm of E. A. Schoyer & Co. As the appellants are seeking, through the receiver, to be subrogated to the equities of the members of said firm, the question is to be viewed in the same light that it would if it were being litigated by them. Whatever uncertainty there may have been as to the identity of the property upon which the lien of the receipt holders rested before E. A. Schoyer & Co. specifically set apart and allotted the merchandise in the warehouse to these receipts, it must be held, as against the members of said firm and as against the appellants who litigate in their right, that such appropriation and allotment put an end to all uncertainty on that subj eet, and that the property to which the lien of the receipts must, as between the present parties, be held to apply, thereby became separated from the mass and precisely identified. The point is also made and strenuously insisted upon, that the specific appropriation and allotment by E. A. Schoyer & Co. of property in the warehouse to the several warehouse receipts held by the First National Bank and Beveridge, Rickords & Co., though made prior to the appointment of the receiver, was not communicated to or accepted by said receipt holders until afterwards, and that such allotment was incomplete and therefore ineffectual at the time the receiver was appointed and the rights of the general creditors of said firm became fixed. If the rights of said receipt holders rested solely upon contract, this contention apparently would not be without force. Contracts can be formed and contract rights acquired only by the assent of both the contracting parties. But here the right of the receipt holders to the substituted property rests, not upon contract involving acceptance and mutual assent but upon estoppel. Portions of the property covered by the receipts having been unlawfully and fraudulently disposed of by E. A. Schoyer & Co. and like property substituted and specifically appropriated by them in its place, they are estopped to deny that such substitution and appropriation was consummated and effectual, even though it was done without the knowledge or assent of the receipt holders. But we are of the opinion that the decree, so far as it relates to the rights of the other receipt holders is not sustained by the evidence. The stipulations as to the facts are expressly limited to such facts as relate to the warehouse receipts held by the Eirst National Bank and Beveridge, Rickords & Co., and have no application to the receipts held by the Bank of Montreal, the Illinois Trust and Savings Bank, or the foreign banking corporations whose default was entered. As to those receipts, the case rests mainly if not entirely upon the allegations and admissions made by the pleadings. . The amended cross-bill, so far as it relates to the rights of the defendants here referred to, alleges, in substance, that the warehouse receipts held by them, failed to state upon their face the brands or distinguishing marks upon the property for which they were given whereby, said property could he identified or distinguished from other similar property of E. A. Schoyer & Co. in the same warehouses, and that the property covered by the receipts was mingled in a common mass with such other property, and was therefore incapable of identification; also that most if not all of the property covered by said receipts was removed from said warehouses and disposed of by E. A. Schoyer & Co. after the receipts were issued. The Bank of Montreal and the Illinois Trust and Savings Bank, by their demurrer to so much of the amended cross-hill as relates to the form of said warehouse receipts, admitted that said receipts failed to state on their face the brands or distinguishing marks upon the property. By their answers to the residue of said cross-bills, they admit that portions of the property covered by the receipts were removed from the warehouses and disposed of by E. A. Schoyer & Co. after the receipts therefor were issued. The result arising from these admissions, taken by themselves, would seem to be, first that as the receipts were originally issued, the property intended to be included therein was not so described as to be capable of identification, and that the receipts therefore failed to create any specific lien in favor of the receipt holders, and, second, that so far as said property was removed and disposed of, any lien that might otherwise be claimed by virtue of the receipts was destroyed and lost. To obviate and repel this result, however, said answers alleged that, in every instance, where property was removed and disposed of, other like property was deposited in the warehouse and substituted for that removed. But of the truth of this allegation the record furnishes no proof. The stipulation as to the facts entered into on behalf of the First National Bank and Beveridge, Rickords & Co. can not be resorted to as furnishing such proof, as the other defendants were not parties to such stipulations, and said stipulations related to a wholly different subject matter, viz., the property covered by the receipts held by the First National Bank and Beveridge, Rickords & Co. While the admissions of an answer are evidence and usually conclusive evidence against the defendant answering of the truth of the facts admitted, mere allegations of an unsworn answer are not evidence in favor of such defendant. To make out the defense thus set up if it is to be regarded as a sufficient defense, evidence should have been introduced supporting said allegations, and this was not done. The only evidence on this point to which we are referred is that furnished by the statements of the petition filed by the receiver asking for authority to receive from the secured creditors the merchandise covered by said receipts, and to carry on the business of the firm for purposes of liquidation. In said petition, which was introduced in evidence by the complainants in the cross-bill, it is stated, in substance, that almost the entire amount of the personal property in which E. A. Schoyer & Co. had any interest was held by various banks as collateral security for loans or drafts against the same, and that the Illinois Trust and Savings Bank held 3905 packages of tea and coffee, and the Bank of Montreal 7562 packages. Doubtless said petition was properly admitted in evidence as showing one of the steps which had been taken in the case which the plaintiffs in the cross-bill were seeking to have modified, viz, the order of February 10, 1888, directing the receiver to pay over the proceeds of the merchandise claimed under said warehouse receipts to the receipt holders. But it is, to say the least, doubtful whether the complainants, by offering it in evidence, became bound by it as tending to prove the truth of the various statements therein contained. But however that may be, said statements come far short of proving the allegations of the answer. Said statements are merely that, at the date of the petition, these two banks held certain numbers of packages of merchandise as security for loans, but furnish no evidence as to the validity of the title under which said merchandise was so held, that being the question raised by the pleadings. Nor do we think the decree sustainable as against the foreign corporations whose default was entered. By the default the averments of the amended cross-bill were taken pro confesso as against the defendants defaulted, and said cross-bill being sufficient on its face to sustain the contention of the complainants therein and to entitle them to the relief thereby prayed for, a decree dismissing the bill for want of equity should not have been entered in favor of the defendants who by their default had confessed the bill. True, it is a matter of discretion with the court, even after default, to require proof of the averments of the bill, and we are not prepared to say that if the complainants, on being required by the court to furnish proofs of the allegations of their bill had failed to do so, their bill might not properly have been dismissed for want of such proofs. But it does not appear that any such requirement was made in this case, dr that the bill was dismissed as to the defendants defaulted on that ground. The decree, so far as it relates to the First National Bank and to Beveridge, Rickords & Co., will be affirmed, but so far as it relates to the other defendants it will be reversed and the cause will be remanded for further proceedings not inconsistent with this opinion, leave being given to the parties to introduce further evidence, and leave also being given to the defendants whose default has been entered to apply to have their defaults set aside and for leave to answer. Decree affirmed in part and in part reversed.