Gallagher v. Brennan

Mr. Presiding Justice Windes delivered the opinion of the court. We find it unnecessary, in view of the conclusion we have reached, to consider the first two points in appellant’s argument, viz., that the court admitted incompetent evidence and that the incompetent evidence so admitted had no probative value, since, even if the evidence was competent, it would not change the result reached by us. The finding in the decree that the appellant paid to the union, on account of shares of stock owned by him in said union, is not strictly accurate. As appears from the foregoing statement of facts, appellant made payments to the union from time to time, upon fifty shares of stock purchased by him from it; that on or about December 12,1894, said fifty shares of stock having matured, he presented it for payment, when there was an adjustment between him and the union of the amount due him thereon; he surrendered the certificate of stock to the union, and it was then canceled, he being paid on account by check of the union §610.25, but no more, and being charged upon the books of the union with certain items shown thereon, which left a balance due him of $3,800 on that date, on which it appears that he was paid interest at the rate of six per cent per annum up to July 1, 1895. Appellee’s c'ounsel in their argument, assert that the stock was surrendered and canceled December 12, 1894. Gallagher was induced by the secretary of the union to leave this amount, which was due him on account of his stock, with the union, and he was then given what is termed a pass or deposit book, which shows the union in account with Gallagher under that date on the debit side a deposit of §3,800, and a payment of interest July 1, 1895, of §133, and a credit of a like amount for interest. It does not appear that after this transaction appellant, as to these fifty shares of stock, enjoyed any rights or privileges of a stockholder in the union, and we are of opinion that by the surrender to the union and cancellation of the certificate of these shares, and payment of interest thereafter to appellant upon the indebtedness of the union then acknowledged, he thereby severed his relations with the union as a stockholder and became and was, from the 12th day of December, 1894, a creditor of the union, upon the same basis of any outside creditor, and is entitled to be preferred as to this claim above stockholders whose stock had not matured at the time the union was declared insolvent, which was long after December 12, 1894, and after the payment of interest. It is clear from the evidence that at the time of the adjustment between the union and appellant, no money passed to appellant except the amount which was paid him on account. The form that the transaction took, viz., giving a receipt for the amount due him on. the stock and taking a pass-book showing a deposit of the amount due him on the settlement, does not change the facts of the transaction. Equity will always disregard the form and look to the substance of a transaction in order to prevent an injustice. ' Appellant is not in the position of having, as an original transaction, deposited money with the union as his banker, but he merely left with it the balance due him upon his stock, the certificate of which was then surrendered and canceled. His position as to the union is clearly different from that of “ Kriete and his class ” in the very recent case of Columbus, etc., Ass’n v. Kriete, 192 Ill. 128, relied upon by appellees’ counsel. Kriete and his class simply deposited their money with the secretary of the association — did not buy stock and did not become stockholders. He also differs from “ Truka and his class,” in the Kriete case, in that he surrendered his stock to the union and the certificate was canceled, thereby, from that time, severing his relation as stockholder to the union; whereas Truka and his class were holders of matured stock which had not been surrendered to the association nor canceled. The very able argument of appellees’ counsel that it would be inequitable and not in accord with the weight of authority to allow appellant a preference, fails to convince us of the correctness of their position. The most, if not all, of the cases on which reliance is placed, are not, as we believe, analogous in their facts. They all seem to be based on the theory that there should be no preference between stockholders, whether they hold paid up, matured or unmatured stock in an insolvent association, which became insolvent either before the stock was paid up or matured, or before they received what was due them, the relation of stockholder to the association at no time having ceased. This case is entirely different. The stock here had been surrendered and canceled. Appellant no longer had any voice as to this stock in the management of the association, and the relation of creditor of the association had been effectually established for nearly three years before it became insolvent, and one installment of interest on the debt had been paid to him. The position of appellant is also different from that of the appellant in Stefan v. Brennan, 92 Ill. App. 291, who was either simply a depositor, as was Kriete and his class, or a stockholder. The court held that he was a stockholder because he was in fact, and the evidence tended to show his money was deposited with the association as advance payments on the stock owned by him in the event of its being needed for that purpose, and for that reason this court held that he had no good ground of complaint. The evidence in this case does not, in our opinion, show that appellant left his money with the union by way of advance payments on stock in case it should so be needed. The decree of the Superior Court is reversed and the cause remanded, and that court is directed to enter a decree in appellant’s favor for $3,800, with interest from July 1, 1895, at five per cent per annum, and that he be preferred over the claims of stockholders for money paid on shares scheduled in the decree appealed from. Reversed and remanded, with directions.