International Trust Co. v. First National Bank

Mr. Justice Waterman delivered the opinion of the court. Before a debtor has entered upon a course of conduct looking to the surrender of all his estate by. means of an assignment for the benefit of his creditors, he may in good faith, sell or mortgage any part thereof, confess judgments and execute warrants of attorney to confess the same, and the transactions will be valid. But when he has begun to make arrangements for the transfer.of all his estate to an assignee for the benefit of his creditors, under and by virtue of the assignment law of this State, if he thereafter confesses a judgment in favor of one creditor, or gives him a judgment note for the purpose of enabling such creditor to acquire a prior lien, or transfer a portion of his property to a creditor for the purpose of excepting the same from the operations of the contemplated assignments, such acts are treated and regarded as a part of the assignment and scheme by which he surrenders his estate to his creditors, and all preferences so by him gi ven are treated as within the assignment and held void, as giving unlawful preferences; that is to say, as preferences, in and by the deed of assignment itself, are directly forbidden, the creditor may not do indirectly what the statute forbids his doing directly. A judgment confessed shortly before the making of an assignment is not, nor is a transfer of property, or a payment of money to a creditor, a brief time before the making of an assignment, necessarily void. . . To render the same nugatory, as against the assignee, the burden of proof is upon whomever may assail such judgment, transfer or payment, to show that the same was made in contemplation of the assignment and for the purpose of giving a preference. Preston v. Spaulding, 120 Ill. 208; Hide & Leather Bank v. Rehm, 126 Ill. 461; Hanford Oil Company v. First National Bank, 126 Ill. 584; Home National Bank v. Sanchez, 131 Ill. 330; Hanford v. Prouty, 133 Ill. 339. Appellant insists that such proof has not been made in this case. Appellant’s contention in this regard is based largely upon its insistence that the testimony of Braslan a,nd Goodwin, directors of the insolvent corporation, the NorthrupBraslin-Goodwin Company, upon citation to them issued, taken July 14th, 16th, 18th, 20th and 21st, 1896, is to be considered in this case. The present proceeding was begun by petition filed September 22, 1896, two months after the taking of such testimony. This is an independent suit in which pleadings were had, issues formed and evidence heard as in chancery. Only evidence taken in this proceeding can be considered for the determination of the issues here involved. Counsel for appellant seem, during the course of this cause, to have so considered, as they herein cross-examined Braslan as to what he had stated under the citation. If all that he stated in July, when appearing in response to the citation, is admissible and to be considered here, such cross examination was idle; for there can be no reason for twice placing in this record evidence given under the citation. The testimony of Braslan in this suit, if to be believed, is undoubtedly conclusive as to the intention of the insolvents to give to appellant and other creditors a preference by confession of judgments. Is Braslan to be believed ? Is he in any way corroborated ? Is his testimony in harmony with or repugnant to that beyond dispute ? In all litigation it is proper to consider not only the evidence introduced, but that which, if existing, might have *been given. Braslan’s testimony herein, is replete with narratives of things said by A. JEL Goodwin, one of the insolvent’s directors, and Barrow, its attorney, as to which of the creditors should be preferred and how this should be done. According to Braslan, he, Goodwin and Barrow, frequently talked of these things. If his testimony is in this regard false, why did not appellant place Goodwin and Barrow upon the witness stand % If Barrow was not, up to the assignment, insolvent’s attorney, daily advising it about the making of the assignment, and the giving of the preferences—if he did not state to Braslan that it “wouldn’t appear right in the eyes of the court for him to represent so many of these judgment creditors and that Mr. Foster would represent the International Trust Company, ” and if he did not, the night before the assignment, say that he was going to telegraph Mr. Graham, to wire Mr. Foster, so that it would reach Mr. Foster before ten o’clock next morning, and if he did not tell Braslan that two replies had been received, why did not appellant refute this by its attorney, Mr. Darrow? The president of appellant testifies that Mr. Darrow remained its attorney up to the 28th of May, 1896; and that he was never discharged; but the president declines to give contents of the communications between him and Darrow relative to the employment by appellant of Mr. Foster, and also declines to give its correspondence with Mr. Foster. We do not regard the interview between the president of appellant and Mr. Braslan, at which the latter promised that upon appellant’s request a judgment note should be given to it, as an arrangement for a preference. The subject of an assignment was considered as far back as the 18th of April; it probably was not fully decided upon by all the directors until the evening of May 27th, but for some time it had been definitely agreed by Braslan, Goodwin and Darrow that if an assignment were made, appellant and four other creditors should be preferred by confessions of judgment, and that appellant’s judgment should stand first. This, Braslan testifies. From appellant’s contention that this is untrue, it must appear to it a strange coincidence that this is exactly what was done. Most graciously, Darrow and Irwin, for the other judgment creditors, gave way, and appellant’s execution was placed in the hands of the sheriff one minute before that of the FTational Bank of Waterville for $12,057.84; two minutes before that of Samuel W. Goodwin for $8,162.42; three minutes before that of the Lake Manawa Land Company for $860.61, and four minutes before that of F. H. How-croft for $5,099.33; most strange of all, the deed of assignment was filed just four minutes after the last execution reached the sheriff’s hands Nearly all that is in this record is corroborative of Braslan’s testimony. We have examined the excerpts from the citation testimony of Braslan and Goodwin, contained in appellant’s brief. Such excerpts show that under the citation Braslan did not testify fully; he said as little as he could as to the arrangements for preferences; he testified in this case freely as to this matter; there are inconsistencies between the two statements. The County Court and this, believe that which he has said in this suit; because it is borne out by substantially all else, and no attempt to contradict him by those who might, if he has not told the truth, was made. The evidence does not merely show that appellant might have found out that an assignment was about to be made, and consequently had judgment entered up; it shows, clearly, that Barrow, appellant’s attorney, not only knew when the assignment was to be made, but that he and insolvent’s directors arranged for the preference to be given appellant and the manner in which this should be accomplished. This is not a case of a preference obtained by the diligence of a creditor without collusion with the insolvent. Neither Barrow nor the president of appellant, nor any one, has appeared in this proceeding and testified that by diligence, and without collusion, was appellant’s execution placed in the sheriff’s hand before the assignment was recorded. The decree of the County Court is affirmed.