Phenix Milling Co. v. Anderson

Mr. Presiding Justice Glenn delivered the opinion of the court. It is conceded by the stipulation upon which this cause was tried, that Walter Fristoe, at the time he purchased the flour in controversy, did it in pursuance of a conspiracy entered into between him and one Chronister with the preconceived intention of not paying for it, and also with the intent to have it seized and sold under a fraudulent execution, in favor of Chronister and against him, and that the appellant had no knowledge or notice of the fraud intended, to be practiced on it, or of Fristoe’s insolvency, until after the flour came into the possession of him and that of his assignee. The appellant, on the 27th day of December, 1896, having received knowledge of Fristoe’s fraud upon it and finding all of its flour sold to Fristoe in his store in the possession of his assignee, immediately rescinded the sale and demanded the possession thereof from Anderson, the assignee, who refused to give up the flour. The appellant filed its petition in the County Court on the 7th day of January, 1897, praying the court to order the assignee to deliver up*, the flour to appellant, and in the meantime to restrain the assignee from selling it. That the appellant had the right to rescind the contract for the sale of the flour, under the facts and circumstances in this case, is so well settled by an unbroken line of authorities that a citation of them would seem unnecessary. It is claimed by appellee, that as it is admitted by the stipulation that appellant, at the time of the filing of its petitions in the County Court, had no evidence of the facts by which the Chronister judgment could be shown to be fraudulent, that the right of rescission did not exist. This position is not well taken. The vendor desiring to rescind must do it within a reasonable time after the discovery of the fraud. This does not refer to the knowledge of the fraud he must possess, but the time he must take action. - If the vendor is compelled to wait until he could procure the evidence of the fraud before he could rescind, he would as a rulé be unable to accomplish the desired result. The evidence of the fraud is not easily obtained, and frequently-must be obtained from those who are guilty of committing it. Information concerning fraudulent conduct is not usually voluntarily given. Under such a rule as contended for by appellees the evidence of the fraud could not be obtained until the trial of the case had taken place. Appellant had no notice or knowledge of Fristoe’s fraud upon it until the 27th day of December, 1896, when action was immediately taken, rescinding the contract for the sale of the flour, and demanding the possession thereof of the assignee, which was certainly within a reasonable time after the knowledge of the fraud was received by appellant. The fraud had been committed at this time, and the evidence of the fraud then existed. What it was at that time was not known to any one but Chronister and Fristoe until it was disclosed on the trial of the case of Chronister v. Anderson, assignee, reported in 73 Ill. App. 524. The action of appellant in declaring the contract for the sale of the flour rescinded and demanding the possession thereof of the assignee, was not premature. When appellant elected to disaffirm the contract for the sale of the flour and reclaim it, because the purchase was fraudulent, he invoked a legal right that he possessed and had a right to pursue. After -he had taken this action Chronister filed a petition in the County Court asking to have the levy of his execution against Fristoe declared a first lien. To resist this the honest creditors of Fristoe, including appellant, joined, insisting that the execution and levy as to them was fraudulent and void. In this insistence they were sustained, and the execution and levy were declared fraudulent and void by the court. * This action of the court would enable appellant to reclaim his property and the others to secure the remaining' property to be applied on their claims. It is urged by the appellees that the appellant is seeking a preference in the distribution of the funds rescued from the levy of the fraudulent execution in favor of Chronister. Appellant is not asking this. It is asserting its legal right to its property, the title of which never passed to Fristoe or the assignee, and the proceeds of which are now in the. hands of the assignee. If Fristoe had no right to this prop< erty, his assignee, Anderson, never acquired any title to it. The assignee took no greater interest or better title to the property than Fristoe possessed. Davis, Carey & Co. v. Chicago Dock Co., 129 Ill. 180; O’Hara v. Jones, 46 Ill. 292. The rule which prevails in equity—that when a creditor has, through the instrumentalities of a court of equity, sought out and discovered property which he had been unable before to discover and seize, upon execution at law, that he becomes entitled to a preference over other creditors to have his judgment paid first—does not apply to the assignment law of this State for the benefit of creditors. If only one of Fristoe’s creditors had resisted Chronister’s petition to have his execution and the levy thereof declared a first lien on the estate of the insolvent, and had been successful,, he would not have been entitled to a preference over the other creditors to have his claim satisfied first. He would have been entitled to be reimbursed his expenses, and the funds rescued would be distributed pro rata among the creditors. The parties resisting Chronister’s claim had a common purpose in view—to have the execution and levy under which he was claiming the property declared fraudulent and void—whether creditors, lienholders or owners—not their right to, or the disposition or distribution of the property. His action in that proceeding does not prevent him from maintaining this suit. The assignee took the flour in controversy under the assignment, and after appellant had demanded the possession of it, and over appellant’s protest'sold it, and has the money received for it in his hands. That he could not have maintained replevin for the property against the assignee is well settled, but may present his claim by petition to the County Court, as appellant has done in this case. Hanchett v. Waterbury, 115 Ill. 220; Frydendall v. Baldwin et al., 103 Ill. 325. We do not think appellant waived his right to maintain this proceeding by waiting a few months, until the case of Chronister v. Anderson was disposed of, which settled the question as to whether the judgment and execution of Chronister against Fristoe was void or not. . ■ This case is reversed and remanded, with directions to the court below to 'enter an order directing the assignee to pay appellant $546.11, the net proceeds of all the flour, and its costs in this proceeding.