Henry v. Caruthers

63 N.E. 629, 196 Ill. 136

Opinion

Mr. Justice Boggs

delivered the opinion of the court:

The defendant in error filed a claim against the plaintiff in error administratrix in the county court of Morgan county. The judgment in that court was adverse to the claimant. He brought the cause by appeal into the circuit court of Morgan county, and the venue of the cause was subsequently changed to the circuit court of Sangamon county, where, on a hearing, judgment was rendered in favor of the claimant, the defendant in error, in the sum of §14,983.33. The plaintiff in error prosecuted an appeal to the Appellate Court for the Third District, and a judgment of affirmance having been entered in that court, she caused the record to be brought in review in this court by this writ of error.

The intestate of the plaintiff in error, one Levi H. Henry, now deceased, during his lifetime was a member of a co-partnership composed of himself and seven other members engaged in the business of banking at Waverly, Illinois, under the firm name and style of “The Bank of Waverly.” During the lifetime of said Henry the defendant in error deposited with said banking firm the sum of §12,000 of his individual moneys and the sum of §2900 which he held as conservator. The deposits were for definite periods of time, and bore interest at an agreed rate, and the defendant in error received certificates of deposit evidencing the transactions. Before the expiration of the period for which the deposits were made the said Levi H. Henry departed this life. The surviving partners continued to conduct the business of banking under the same name and style, it being claimed the articles of co-partnership authorized them to pursue that course. The defendant in error, after the death of Mr. Henry, surrendered the certificates of deposit to said surviving partners and accepted other certificates therefor. The banking firm subsequently failed and proceedings by way of involuntary bankruptcy were instituted against the co-partnership. The defendant in error filed his claim in the bankruptcy court, and also in the probate court of the county of Morgan, against the plaintiff in error, who had been appointed'administratrix of the estate of the said Levi H. Henry, deceased.

The defense sought to be interposed by the adminis- ■ tratrix was, that a new obligation and a new debtor had been substituted for the old obligation with intent to relieve the deceased from all liability, and that all the requisites of a novation were established by the proofs.

The defendant in error urges that the affirmance by the Appellate Court of the judgment entered in the circuit court implies findings of fact in the same way as the trial court found them, and that such findings are, under paragraph 90 of the Practice act, conclusive on this court. This insistence cannot be maintained. The provisions of the Practice act have no application to causes in chancery. Fanning v. Russell, 94 Ill. 386; City of Belleville v. Citizens’ Horse Railway Co. 152 id. 171.

At the common law a demand against a co-partnership was regarded as a joint debt, and after the death of one of the co-partners the right of action at law was against the surviving partner or partners. Equity, however, afforded a remedy against the estate of the deceased partner in the event of the insolvency of the surviving partner or partners. The common law rule was subsequently modified, and the rule established in equity that all partnership debts should be deemed joint and several, and that a right of action existed at law against the surviving partners, and an election also to proceed in equity against the estate of the deceased partner, whether the survivors be insolvent or not. Mason v. Tiffany, 45 Ill. 392; Doggett v. Dill, 108 id. 560.

The probate court of Morgan county, in which the case originated, in the adjustment and allowance of claims against the estate of deceased persons, is invested with equitable jurisdiction. As the claim of the defendant in error against the personal representatives of the deceased partner is enforceable only upon equitable principles and not by an action at law, the adjudication of the claim in the probate court must be regarded as a proceeding in chancery, so far as the question of the power of this court to investigate as to the facts is concerned. Doggett v. Dill, supra; Cheney v. Roodhouse, 135 Ill. 257.

There seems, however, to be no controversy as to the facts material to the rights of the litigants. In brief the facts are: A co-partnership bank, doing business under the firm name of “The Bank of Waverly,” at Waverly, Illinois, and composed of Levi H. Henry (intestate of the plaintiff in error) and seven others, some time prior to August 17, 1897, issued two certificates of deposit to George W. Caruthers, "defendant in error, one for §12,000 to him individually, and another to him as conservator, for §2900, each falling due in a specified time, respectively. On August 17,1897, Levi H. Henry died. The defendant in error was advised of his death. The surviving partners continued to conduct the business under the same firm name of “The Bank of Waverly.” On or about October 12,1897, the defendant in error came to the bank and said to the cashier that he had heard that the bank would be closed up on account of the death of Mr. Henry. The cashier, Mr. Hutchinson, who was also one of the surviving partners, told the defendant in error “that that could not happen, as the partnership contract provided the business should continue,” and that the bank would settle with the Henry estate in a short time. The defendant in error asked about the liability of the Henry estate, and was told that as for old contracts and moneys on deposit at the time of Mr. Henry’s death the estate would doubtless be liable, but would not be bound for new contracts, new business and new indebtedness. A statement of the liabilities of the bank and the individuals thereof was then given to the defendant in error, which statement contained no reference to the estate of Henry or of one James Nevins, a partner who had withdrawn. Defendant in error said “he thought the bank was all right with Henry and Nevins out of it.” Defendant in error surrendered his certificates, they being overdue, received the interest thereon and the certificates were canceled by the bank and new certificates for the respective amounts were issued to and accepted by him. The certificates recited the deposit by the defendant in error of the respective amounts in the Bank of Waverly, as did the certificates he surrendered. They were dated back to the time when the former certificates ceased to bear interest, bore interest from date, and were due, respectively-, in three and six months from date. When the new certificates became due, in the early part of 1898, the interest thereon was paid and they were surrendered and other certificates of like character were issued and accepted by defendant in error. These latter certificates further extended the time of payment for fixed periods and provided for the payment of interest for such periods of time. On the 11th day of August, 1898,—a little less than a year after the death of Mr. Henry,—the surviving members of the firm made an assignment of the affairs and business of the bank for the benefit of creditors, in pursuance of the statute of the State, and were subsequently adjudged to be bankrupts, in a proceeding instituted in the courts of the United States under the Bankruptcy act of Congress. The defendant in error filed his claim in the court of bankruptcy, and also the claim against the estate of the deceased partner here now under consideration.

The surrender by the defendant in error of the certificates issued to him while the deceased was a member of the banking firm and the acceptance by him of other certificates of deposit after the death of Mr. Henry from the surviving members of the firm, whereby the time of payment of the deposits was extended, it is insisted, were in fact payments of the original certificates held by the defendant in error; that thereby the old obligations were canceled and the obligations of the surviving members alone of the old firm accepted as the debtors. It is not contended there was any express agreement to accept the surviving members of the firm as sole debtors and release the estate of the deceased partner, but that such agreement or assent is to be implied from the acts and conduct of the defendant in error. We agree with the circuit and Appellate Courts that there was no such novation of the debt. The surviving partners, to whom the old certificates were surrendered and with whom the contracts were made for an extension of the time of payment of the deposits and for the payment of interest thereon, had the right, as surviving partners, to continue in the possession of the partnership effects, and, under the special agreement between them and their deceased co-partner, to continue to transact the business of banking, in which the firm was engaged at the time of the death of Mr. Henry. The articles of co-partnership provided that “the death of any partner shall not dissolve the partnership between the surviving partners, but the business shall be continued by the surviving partners and such others as may thereafter be admitted to said firm. The surviving partners shall settle with the administrator, executor or legatee of any deceased partner as soon after his death as practicable, and pay over to him, in money, the value of his interest in the business, as shown by the books of the firm, and no allowance shall be made nor compensation paid to the representative of any deceased partner for the good will of the business or the continued use of the firm name by the surviving partners.” Under this article of agreement it was entirely competent for thé surviving partners to take up the certificates issued by the firm prior to the death of Mr. Henry and issue new certificates payable in the future, in accordance with the rules and customs pertaining to the business of banking. The certificates so issued were properly regarded, not as instruments extinguishing the indebtedness evidenced by the former certificates, but as evidencing a transaction entered into in the course of the continuation of the business of the firm after the death of Mr. Henry, in pursuance of the provisions of the articles of co-partnership.

In Hayward v. Burke, 151 Ill. 121, the authorities bearing upon the question whether the creditor of a firm has deprived himself of the right to look to the assets of a deceased member of the firm by the course of dealing pursued as to the demand with the surviving members of the firm, were reviewed and the conclusion declared that though a creditor of a firm knows of the death of one of the members thereof and continues to deal, as before, with the survivors, he does not lose the remedy which he had against the estate of the deceased partner unless there is evidence showing an intention to abandon the right of having-recourse thereto for payment, and that the onus of showing an extinguishment of the debt of the firm and to convert a partnership debt into a debt of the surviving partners lies upon those who allege it; that there must be a deliberate assent upon the part of the creditor in order to release the deceased member, and that the fact that the creditor has taken the separate liability of the surviving member does not necessarily extinguish the liability of the estate of the deceased member of the firm. In the case at bar the surviving partners, after the death of Mr. Henry, acting under the authority resting in them by law, as enlarged by the provisions of the articles of agreement, had, as we think, full power and authority to take up the certificates of deposit issued prior to the death of Mr. Henry, and, acting within the purposes of the agreement and the scope and usages of the banking business, to issue new certificates therefor. We see no reason why parties who desire to engage as co-partners in the business of banking may not incorporate in their articles of agreement a provision which will prevent the closing of the bank in the event of the death of a member of the firm, by authorizing the surviving partners to continue to conduct and carry on the business. Such a provision is intended to influence those having money to deposit in a bank to entrust it to the banking firm, which they might be loth to do unless assured that provision had been made to avoid closing up the doors of the bank in the event of the death of any member of the firm. No reason appears why the courts should refuse to enforce such an agreement, at least until the representatives of the deceased partner take some steps to bring the affairs and business of the partnership to a termination.

The certificates of deposit issued after the death of Mr. Henry were, in form, obligations of the firm of which he was a member, and, considered in connection with the agreement between the partners, constituted an obligation against his estate as well as the surviving partners. The acts and conduct of the defendant in error were not inconsistent with the view that he accepted the later certificates as binding the assets of the old firm and of the estate of each member thereof, whether living or dead, and as but a mere renewal of the obligations evidenced by the original certificates.

The judgment of the Appellate Court is affirmed.

Judgment affirmed.