Prouty v. Hanford

Gary, P. J. In 1870 Charles A. Eaton died; at the time of his death he was a partner in the mercantile firm of Eaton & Abbey. By his will 1 e left it to the discretn n of his widow, Emma E., since re-married, and now Burgess, to continue the assets of his estate in the business. Very soon after his death she bought out the partner Abbey, mainly with the proceeds of insurance on the life of her husband, and thereafter conducted the business in her own name as E. E. Eaton. By the will of her husband, the shares in his estate of her two children, the defendants in error, Emma B. Hanford and Harry Eaton, then both minors, were something less than $6,000 each. Both children lived with, and were supported and educated by their mother. In April, 1885, the daughter being about to marry and the son nearly of age, they all met at the office of Messrs. Grant & Brady, attorneys, and the mother and children agreed upon the terms of making her notes for §6,000 to each of the children, in full of all their respective claims. The note to the daughter was then executed; that to the son was deferred to the following December, when he became of age. Both were judgment notes. These notes were left with plaintiff in error, Prouty, who was then, and continued thereafter to be, so long as the business continued, the business manager of Mrs. Burgess. April 21, 1886, the husband of the daughter applied to Prouty and received a statement of the condition of Mrs. Burgess affairs. Mot liking that condition, he told his wife to take her note to Grant & Brady, and do as they advised, and that his judgment was, that judgment should be entered upon the notes. April 22, 1886, Mrs. Burgess, Prouty, Mrs. Hanford and the son, all met at the office of Grant & Brady; judgments were entered upon the notes, executions issued and levied upon all the property of Mrs. Burgess. The next day Mrs. Burgess made a general assignment to Prouty, and by agreement a few days after, the property levied upon by the sheriff was delivered to the assignee, preserving liens. The plaintiffs in error now claim: First: That the property employed in said business under the name and style of E. E. Eaton, being trust property, in part at least, the rights of trade creditors to be paid out of the proceeds of said property so employed in said business, are superior to the rights of the beneficiaries of said trust. Second: That the promissory notes given by the insolvent, Emma E. Burgess, to Emma B. Hanford and Harry Eaton were without consideration and therefore void as to creditors. Third: That the entering up of said judgments by confession, the levying of the executions on said property, and the making of the voluntary assignment by the said insolvent, were all part and parcel of one transaction by which she divested herself and intended to divest herself of all dominion over her property. As to the first point, it has not been deemed necessary to attempt to ferret out from this record what portion of the indebtedness of Mrs. Burgess which existed at the time of the assignment, existed at the date when the notes were given. If the theory of the plaintiffs in error were correct, it could only apply to that class of indebtedness. But the theory is not correct. By the settlement between Mrs. Burgess and her children all the assets of the business became her own in law and equity, and subject to her disposition. The case of Ladd v. Griswold, 4 Gilm. 25, followed under very provoking circumstances in Hapgood v. Cornwell, 48 Ill. 64, and approved in Goembel v. Arnett, 100 Ill. 34, establishes the law of his State, that if there.be a dissolution of partnership, and the remaining partner takes all the assets and agrees with the outgoing partner to pay all the debts, the partnership debts have no preference over the individual debts of the remaining partner in the disposition of the assets which were, before the dissolution, the assets of the partnership. If, as to a formal acknowledged partnership, this be correct doctrine, it applies with greater force to this case, where the interests of the children, whatever its character, was silent and secret, and they were never held out to the world as having any interest. When that settlement was made the parties were all capable, under the law of this State, to make such contracts with reference to the business then in hand as they could agree upon. The second point is not well taken. The defendants in error took their mother’s notes in full of their claims upon her. If that was with honest intentions, which will be presumed unless there is something shown to the contrary, the claims thereby adjusted and liquidated were good and sufficient consideration for the' notes, creating debts of fixed amounts against her. To impeach, as for fraud against other creditors, a note given by the remaining partners to an outgoing partner for his interest in a firm not able to pay its debts, there must be proof of a fraudulent design. Blow v. Gage, 44 Ill. 208. The principle is applicable here. The third point is sustained by the evidence. On the whole evidence it is apparent that the mother and children left all their interests in their pecuniary relations with each other, jointly and severally, with and to the discretion of Grant & Brady. They were intrusted by all with the authority to devise any plan that recommended itself to their judgment. At that time the doctrine of Preston v. Spaulding, 120 Ill. 208, had not been announced. It was supposed by the legal profession generally, that a judgment by confession and levy under an execution issued upon it would take precedence of an assignment for the benefit of creditors following immediately, and that no connection between them would have the effect to make the judgment void as an unlawful preference. The judgment of the Circuit Court directing the payment in full of the executions in favor of the defendants in error will therefore be reversed and the cause remanded to the Circuit Court, with directions to order that the defendants in error bepaidy>ro rata with the other creditors, the amounts due upon their respective notes, without costs, made by entering judgment, etc. And that no costs be recovered by either party from the other at any stage of this litigation, but each pay all their own. Reversed a/nd remanded. Moean, J., does not concur in so much of the opinion as holds that the judgments were an unlawful preference.