Clemmer v. Drovers' National Bank

Mr. Justice Carter delivered the opinion of the court: Hanna, Son & Co. were factors, engaged in selling live stock on commission at Chicago, and transacted their banking business with appellee. Appellants were shippers of stock, having no business relations with each other, but each shipping separately on his own account from Iowa. On June 9,1890, Hanna, Son & Co. received and sold for the several appellants certain lots of live stock at the Union Stock Yards. For each lot sold the factors received from the purchaser a ticket, which stated the kind of stock, the weight, price, the total amount to be paid, and that it was for deposit in appellee’s bank, but did not state who the consignor was. According to the custom of business between appellee and Hanna, Son & Co., the clerk of the former called for and obtained from the latter these tickets, collected the money and deposited it to the credit of Hanna, Son & Co. When sales were made, the proceeds, except a certain amount allowed for commissions and expenses, belonged to the owners of the stock, and it was the duty of Hanna, Son & Co. to pay over the same to them or on their order, or, as to some of the appellants, to deposit in other designated banks, as directed. The aggregate amount' appellants should have received was §4859. A few hundred dollars of this was for one lot sold on June 7. Appellee knew this money was the proceeds of sales of stock consigned for sale on commission, but did not know who the consignors were. Hanna, Son & Co. had been transacting business in this way with appellee for several years, but appellants had no knowledge of their business relations. The total deposits of Hanna, Son & Co, made with, appellee bn June 9 amounted to $12,379.21, but they checked out on the same day all but $3475, and on the morning of June 10 appellee applied this balance on an over-due note of Hanna, Son & Co., and it is this balance, which the circuit court decreed that appellee should pay to appellants pro rata, according to their respective demands, over which this controversy arises. John S. and "William P. Hanna constituted the firm, and as such firm, or as members of another firm, had been in the same business for many years. As members of another firm they had become liable, as sureties of one Clark, to appellee, for upwards of $12,000, and later, with one Sinclair, gave their note to appellee for $7135.86 of this indebtedness, which note, by successive renewals, appellee carried several years, and until it applied the above mentioned balance of $3475, standing to the credit of Hanna, Son & Co., towards its payment on June 10, 1890. We think the evidence fairly shows that Hanna, Son & Co. had been for several years, and were at the time of the application of said balance by the bank, unable financially to pay this indebtedness, and that appellee well knew their financial condition. They failed in business June 10,1890, and have since remained wholly insolvent. Upon receiving notice from the bank, on June 10, that it had applied this balance on the note, Hanna, Son & Co. protested against any such application, and stated to appellee that the money did not belong to them, but belonged to their consignors. They also notified appellants, who soon thereafter severally came and demanded from the bank payment to them as the real owners of the fund. Appellee contends that the relation of trustee and cestui que trust did not exist between the consignees and the consignors, but the relation of debtor and creditor only, and that when the moneys in question were deposited the bank became simply a debtor therefor to the depositors, and had the right, in accordance with a previous agreement attached to the note in question, to apply such deposits toward the payment of the note. The theory of appellee on appeal, and the one on which the Appellate Court seems to have reversed the decree, was and is, that whether the proceeds of these sales were, or were not, a trust fund, still, when they were deposited in the bank with other moneys of Hanna, Son & Co., and mixed with a mass of other money in the bank, they lost their identity and could not be followed as a trust fund; that “the right to follow a trust fund ceases when the means of ascertainment and identification fail, as where the subject matter is turned into money and mixed and compounded in a general mass of property of the same description.” And the contention of appellee now is, that whatever remedy appellants may have, it is not by bill in equity to fasten a trust upon this balance in appellee’s bank and compel its distribution to appellants according to their respective interests, and it is insisted that this contention and the judgment of the Appellate Court are in strict conformity to the previous decisions of this court, as announced in the following cases: School Trustees v. Kirwin, 25 Ill. 62, Union Nat. Bank v. Goetz, 188 id. 127, Wetherell v. O’Brien, 140 id. 146, Mutual Accident Ass. v. Jacobs, 141 id. 261, Svanoe v. Jurgens, 144 id. 507, and Doyle v. Murphy, 22 id. 502. On the other hand, it is insisted by appellants that the precise question here involved was not presented by the cases cited, nor by any case heretofore decided by this court adversely to appellants’ contentions. It is said that in School Trustees v. Kirwin, supra, much relied on by appellee, it did not appear that there was any balance or fund in the bank standing to the credit of French, the depositor, upon which a trust could have been impressed in favor of the trustees of schools, and that in all the cases cited the rights of creditors were involved, and as presented the question was not, as in the case at bar, whether there was a general liability of the bank, or receiver of the fund or property, to the complainant, but whether the complainant was entitled to a preference over other creditors. Appellants cite, among other cases, Union Stock Yards v. Gillespie, 137 U. S. 411, where a bill based upon facts very similar to those here involved was sustained by the Supreme Court of the United States. We are, however, clearly of the opinion that the decree of the circuit court should be sustained upon other grounds, and that it does not become necessary to determine whether or not appellants have pursued precisely the proper remedy to recover the moneys justly belonging to them. It is well settled that a factor has no right to pledge, deposit or apply the property of his principal to secure or pay his own debt. (First Nat. Bank v. Schween, 127 Ill. 573; 3 Am. & Eng. Ency. of Law, 345.) Appellee knew that the moneys collected and deposited by it on the tickets received from Hanna, Son & Co. were the proceeds of the sales of stock consigned to them for sale on commission, and was bound to know it had no right to apply these moneys in payment of its own demands against the commission merchants. As to the contention that it cannot be known that this balance applied by appellee on the note was the moneys of appellants, and that all of appellants’ moneys may have been drawn out by Hanna, Son & Co. and embraced in the $9000 checked out on the 9th of June, it is sufficient to say that it must be presumed that they checked out their own moneys to others, rather than the moneys of appellants. Knatchbull v. Hallett, (In re Hallett’s Estate,) 13 Ch. Div. 696. We think it clear, from the evidence, that this balance really belonged to appellants, and that they had the right' to recover it in some appropriate action cannot well be doubted. And if it should be conceded that, in following previous decisions of this court, technically appellants’ bills could not be maintained on such a state of facts, but that their remedy lay in some other form of action, yet appellee is in no position to take advantage of the error. When its demurrer to the bill was overruled, appellee not only answered to the merits, claiming the right to apply the fund in question towards the payment of its own demands against Hanna, Son & Co., and denying that appellants had any right to or interest in the fund, but the answer contained no allegation that there was an adequate remedy at law, nor any other allegation distinctly challenging the equitable jurisdiction of the court. More than this: Appellee itself invoked the equitable jurisdiction of the court, and upon its own motion, by an amendment filed to its answer, which it asked to be treated as a cross-bill, compelled the complainant to amend his bill and make Hess Bros, parties thereto, and to continue the case that these new parties might be summoned in. Hess Bros, had, since the filing of the bill, brought a suit at law against appellee, based upon a check drawn upon the bank by Hanna, Son & Co. for §3300, whereby they claimed that much of the fund in controversy. Upon this amended answer, treated as a cross-bill, appellee obtained, in the decree on final hearing, (whether erroneously or not it is not necessary in this case to consider,) affirmative relief, by having it adjudged that Hess Bros, had no claim against it, and that they be perpetually enjoined from prosecuting said suit or any other against appellee on account of said matter. On such a record it would be highly inequitable to allow appellee to deny, on appeal, that equitable jurisdiction which it had itself invoked in its own behalf, and by which it had obtained relief. It has been said by courts of high authority that there is no adequate remedy at law in such' a case. (National Bank v. Insurance Co. 104 U. S. 54; Union Stock Yards v. Gillespie, 137 id. 411.) But whether there is or not, if appellee desired to avail itself of such an objection on the hearing, in a case not wholly foreign to the jurisdiction of a court of equity, it should have set it up in its answer, and should not itself have invoked the same equitable jurisdiction in its own behalf which it now seeks to have denied to appellants. If any valid objection might have been raised, by demurrer or answer, to the granting of the equitable relief on the bills and cross-bills of appellants, as prayed, it has been waived by appellee, and cannot be availed of on appeal. Stout v. Cook, 41 Ill. 447; Magee v. Magee, 51 id. 500; Kimball v. Walker, 30 id. 482; Ohling v. Luitjens, 32 id. 23; Colton v. Hanchett, 13 id. 615 ; Comstock v. Henneberry, 66 id. 212; Gridley v. Watson, 53id. 186; Dodge v. Wright, 48 id. 382; Hickey v. Forristal, 49 id. 255; Knox County v. Davis, 63 id. 405; Gage v. Griffin, 103 id. 41; Richards v. Lake Shore and Michigan Southern Railway Co. 124 id. 516; Ryan v. Duncan, 88 id. 144; Gordon v. Reynolds, 114 id. 118; Brill v. Stiles, 35 id. 305;. Snowdon v. Tyler, 21 Neb. 199; 108 N.Y. 504; Niles v. Williams, 24 Conn. 279; Edgett v. Douglass, 22 Atl. Rep. (Pa.) 868; 1 Beach on Mod. Eq. Prac. sec. 13. Substantial justice is done by the decree of the circuit court, and we see no sufficient reason, on the record as it stands, for reversing it and remitting the parties to some other remedy by which the same ends might possibly be reached but no more just results attained. The judgment of the Appellate Court is reversed and the decree of the circuit court is affirmed. Judgment reversed.