179 Ill. 377 | Ill. | 1899
delivered the opinion of the court:
The original bill, filed in this case, will first be considered without reference to its alleged character as a bill to enforce an equitable set-off. Can the bill be maintained aside from any question of set-off? The bill seeks in behalf of a simple contract creditor to reach a trust fund belonging to a deceased insolvent debtor. The defendant in error alleges, that she is the owner of a note executed to her by her deceased brother, John T. Houston. She further alleges, that John T. Houston took out a policy of insurance upon his own life for the benefit of his wife, the plaintiff in error, in the sum of $5000.00, and that the premiums of $189.60 each, paid upon that policy during the period of five years before the filing of the present bill, were so paid with intent to defraud creditors. Section 19 of an act approved March 26, 1869, entitled “An act to organize and regulate the business of life insurance,” provides as follows: “It shall be lawful for any married woman, by herself and in her own name, or in the name of any third person, with bis assent as her trustee, to cause to be insured, for her sole use, the life of her husband, for any definite period or for the term of his natural life; and in case of her surviving such period or term, the sum or net amount of the insurance becoming due and payable by the terms of the insurance, shall be payable to her, to and for her own use, free from the claims of the representatives of the husband or of any of his creditors: Provided, however, that if the premium of such policy is paid by any person with intent to defraud his creditors, an amount equal to the premium so paid, with interest thereon, shall inure to the benefit of said creditors, subject, however, to the Statute of Limitations.” (2 Starr & Curtis,—2d ed.—p. 2259). This statute is in the nature of an exemption law and should be liberally construed. (Cole v. Marple, 98 Ill. 58). Hence, it contemplates and includes cases where the husband procures for his wife a policy on his own life. In such case he is presumed to act for her and as her agent. (Felrath v. Schonfield, 76 Ala. 199). The evidence shows that, when John T. Houston paid the premiums in 1889,1890 and 1891 upon the policy taken out by him, he was insolvent.
In determining the meaning of the words, “with intent to defraud his creditors,” as used in said section 19, the same rule of construction applies, as is applicable in other cases of fraudulent voluntary conveyances. If the conveyance or transfer is voluntary and results in hindering, delaying or defrauding creditors, it is regarded as fraudulent in law without reference to the motive or actual intention of the party making the conveyance or transfer. Every payment of an insurance premium, made by John T. Houston, within the time limited by the statute, while he was insolvent, was an unlawful diversion of his property from his creditors; and the amounts so paid must, under the statute, inure to the benefit of his .creditors. (Marmon v. Harwood, 124 Ill. 104; Cole v. Marple, 98 id. 58; Wagner v. Koch, 45 Ill. App. 501).
The case of Cole v. Marple, 98 Ill. 58, is in many of its features similar to the case at bar. There, a creditor’s bill was brought by Marple against the widow of one Cole and two life insurance companies, who had issued a life policy to Cole. Cole had died, and his estate was insolvent. It was there held, that, as Cole was insolvent, all premiums, paid by him on the policy within five years next before the action was brought, with interest thereon from the dates of payment, could be recovered by the creditors under the statute. The case, however, of Cole v. Marple, supra, differs from the present case in the fact that, there, the creditor, who filed the bill to reach the fund, had had his claim allowed against the estate of Cole. Here, the defendant in error, Mrs. Maddux, did not file her claim against the estate of John T. Houston, deceased, nor have it allowed in the probate court. It appears, that no administration was ever taken out upon the estate of John T. Houston. The present bill was filed more than two years after his death. Under the statute, administration could have been taken out upon his estate after the lapse of the time, during which it was allowable for the widow or other relatives to apply for administration. Defendant in error took no steps to have the estate of her deceased brother administered upon.
The question then arises, whether a bill will lie to reach the fund here in controversy, when filed by a creditor holding a simple promissory note, which has never been allowed against the estate of the deceased debtor. In Steere v. Hoaglancl, 39 Ill. 264, this court said that, where a fund is only accessible through a court of chancery and cannot be reached at law, and where the debtor is deceased, creditors may resort to chancery in the first instance without having first recovered a judgment at law. Later decisions of the court, however, have taken the ground that, in such cases, the creditor must have his claim allowed against the estate before a bill can be filed to reach such a fund. It is not necessary to issue execution and have the same returned unsatisfied, as is required by the Chancery act in relation to creditors’ bills, when the judgment is a claim against the estate of a deceased person, because, under our statutes of wills and judgments and executions, an execution cannot issue against an administrator, so as to reach personal assets. In the case of Steere v. Hoagland, supra, the cases of McDowell v. Cochran, 11 Ill. 31, and Bay v. Cook, 31 id. 336, are referred to, as sustaining the doctrine that an execution is unnecessary where the judgment is against the estate of a deceased person. But, in the cases thus referred to, it appears that judgments were rendered against the estates or, in other words, that the claims were allowed by the probate court.
The case of Steere v. Hoagland, supra, was substantially overruled in the subsequent case of Scripps v. King, 103 Ill. 469. In the latter case, a bill was filed by a simple contract creditor to set aside a conveyance made in fraud of creditors by a deceased debtor in his lifetime; and it was there held that, where there has been a fraudulent conveyance to hinder and delay creditors, and the claim has been reduced to judgment so as to become a lien on the property, chancery will afford relief under section 49 of the Chancery act. But it was there said: “When the claim is against an insolvent estate, the creditor must have it properly allowed against the estate before he can remove a fraudulent conveyance to reach the property to satisfy his demand. He, in other words, must exhaust his legal remedies. (See McDowell v. Cochran, 11 Ill. 31; Armstrong v. Cooper, id. 560; VanSyckle v. Richardson, 13 id. 174; Bay v. Coole, 31 id. 336, and numerous other cases in our Reports). If any proposition can be settled, this is the settled law in this jurisdiction. In this case the demands are simple debts, not reduced to judgments nor allowed against the estate in the probate court, or in any manner a lien on the property. The creditors had the right under the statute to have obtained administration on the estate, and have their claims allowed, and, from the evidence in the record, they could have obtained satisfaction of a considerable portion of their debts, but this they failed to do, and having slept on their legal rights, they are in no position to assert them in a court of equity. The cases cited above are conclusive of this question, and they render the other questions discussed by counsel unimportant in this case.” It is a mistake to suppose that the case of Steere v. Hoagland, supra, was endorsed in Blair v. Illinois Steel Co. 159 Ill. 350, so far as the right to go into chancery without obtaining judgment is concerned. The Blair case approves only that part of the decision in the Steere case, which holds that an execution need not be required in case a claim is allowed against an estate, because an execution cannot issue against an administrator so as to reach personal assets. The Blair case does not hold that a judgment is not necessary. Even the claims in the Steere case had been reduced to judgment in the Federal court; and the main point decided in that case was, that a judgment in a Federal court cannot be used as the basis of a creditor’s bill in a State court. (Goodman v. Kopperl, 67 Ill. App. 42; Dilworth v. Curts, 139 Ill. 508).
In Smith v. Goodrich, 167 Ill. 46, it was held, that the holder of an intestate’s note could not maintain an intervening petition to reach a fund realized from the sale of the intestate’s real estate in the hands of a master in chancery for distribution, when the claim evidenced by the note had not been allowed by the county court. In Goodman v. Kopperl, 169 Ill. 136, where the bill was filed by a creditor, whose claim had not been allowed against the estate of a deceased person by the probate court, it was said: “There are no instances, in which resort to a court of equity has been recognized under our later decisions before the claim of the creditor has been allowed against the estate by the probate court. Then, if special reasons exist why that court cannot afford relief, the creditor may call on a court of equity to aid him to secure such relief, but not otherwise.” A large number of cases are there referred to sustaining the doctrine announced in this quotation. (See also Smith v. Smith, 174 Ill. 52).
Inasmuch as the present bill, under the views already presented, cannot be maintained aside from any question of set-off, the further question arises, whether or not the bill can be maintained as one, which seeks to enforce an equitable set-off, notwithstanding the objections to it, when standing alone, which have been above stated. Mrs. Maddux, the defendant in error, filed the original bill herein to enjoin an action of assumpsit, pending in the superior court of Cook county, which had been brought against her by her sister-in-law, Mrs. Houston, the present plaintiff in error. She sought to enjoin the action of assumpsit, brought against her upon an account stated, in order to set off ag'ainst the claim, made in such action, her alleged equitable right, as a creditor of Mrs. Houston’s deceased husband, to reach the fund in Mrs. Houston’s hands, consisting of premiums paid by her husband within the period of the Statute of Limitations while he was insolvent. The note held by her is not a note made by Mrs. Houston, who brings the suit at law, but a note made by the deceased Mr. Houston. A claim against the estate of Mr. Houston cannot be set off against a claim held by Mrs. Houston in her own right. The contention is that Mrs. Houston holds a fund belonging to Mr. Houston’s creditors. It is only judgement creditors who can reach this fund. Defendant in error has no judgment, but only a note. For aught that appears, the estate of Mr. Houston may have a good defense to that note if it should be presented to the probate court.
This court has held in a number of cases, that a court of equity will set off an equitable demand against a legal demand. (Downs v. Jackson, 33 Ill. 464; Raleigh v. Raleigh, 35 id. 512). But “courts of equity will not enforce a set-off not allowed by law, unless the party seeking it can show some equitable ground for being protected against his adversary’s demand. The mere existence of cross-demands is not sufficient.” (Ransom v. Samuel, 1 Craig & Phil. 161; Downs v. Jackson, supra; Raleigh v. Raleigh, supra.)
At first, courts of equity assumed jurisdiction in matters of set-off, because natural equity seemed to require, that one demand should compensate another, and that it was iniquitous to attempt at law to enforce more than the balance. But now courts of equity only exercise this jurisdiction when a legal demand is interposed to an equitable suit; or when an equitable demand cannot be enforced at law and the other party is suing therein; or where the demands are purely legal and the parties seeking the benefit of the statute can show some equitable ground for being protected. (Tate v. Evans, 54 Ala. 16). The insolvency of the party, against whom the set-off is claimed, is a ground for the exercise of equitable jurisdiction. (Gay v. Gay, 10 Paige, 376; Raleigh v. Raleigh, supra). In the case at bar, the plaintiff in error, Mrs. Houston, who commenced the action at law is the party, against whom the set-off is claimed, but no evidence whatever was introduced below to show that Mrs. Houston was insolvent. It is true that the bill alleges that she has no property which can be reached by execution. That allegation, however, if amounting to a charge of insolvency, was not sustained by any testimony. The demands sought to be set off against each other must be connected with each other. In other words, to warrant the interference of equity, there must be circumstances from which it can be inferred that one debt was contracted on the faith of the other. (Tate v. Evans, supra; 2 Story’s Eq. Jur. secs. 1436, 1436a, 1437). Here, however, the claim of the plaintiff in error in the suit at law arises out of an account stated in the settlement of partnership transactions, while the claim of the defendant in error arises out of her alleged right to reach a trust fund, consisting of insurance premiums in the hands of the plaintiff in error. The demands were not necessarily connected with each other. Ho agreement or understanding was shown between the parties, that the one demand should be set off against the other, and there is no equity shown for blending the two matters together, contrary to the agreement of the parties. (Downs v. Jackson, supra).
The demand, which Mrs. Maddux, the defendant in error, seeks to set off against the action at law brought by the plaintiff in error, cannot be said to be such an equitable demand as can be set off against a legal demand. This is true, because the case, as made by the bill of the defendant in error, does not present such an equitable claim as she can enforce in a court of equity." If the claim of Mrs. Maddux, founded upon the note against her brother, had been allowed in the probate court, then a court of equity would enforce it against the trust fund sought to be reached. But, inasmuch as it is merely a simple contract claim, not reduced to judgment, a court of equity will not aid the defendant in error in enforcing it against the fund in the hands of the plaintiff in error. The bill here does not present the case of a complete equitable demand on the part of the defendant. in error. There must be some intervening equity which renders the interposition' of a court of equity necessary for the protection of the demand sought to be set off. (Tate v. Evans, supra). If it be true, that a mere contract creditor cannot reach such a fund, as that which is here involved, through a court of equity, then he has not such an equitable claim as can be made the subject matter of an equitable set-off.
We are, therefore, of the opinion that the present bill cannot be maintained, either as a bill filed to reach the fund independently of the question of set-off, or as a bill filed to enforce an alleged equitable set-off against a legal demand.
It is said, however, that the plaintiff in error has waived her right to object to the jurisdiction of a court-of equity in this case by reason of the fact that she filed a cross-bill against the defendant in error. It will be observed, however, that the cross-bill asks for no equitable relief. In the cross-bill the plaintiff in error merely sets up her pending suit at law, and the nature of her claim in that suit, and asks that it be enforced. The prayer of the cross-bill is: “That the said Ann S. Maddux be decreed to pay your oratrix the sum of $875.57. with legal interest thereon from July 1, 1894, and the further sum of $46.85 for fees paid accountants as aforesaid, together with all costs suffered by your oratrix in her said action at law,” etc. It has been held that, when the original bill is without equity, a cross-bill, founded on matters of equitable cognizance, will cure the defect so as to give the court jurisdiction. But where the cross-bill is merely defensive in its character, the defective jurisdiction under the original bill is not cured by it. Where the original bill lacks equity because there is an adequate remedy at law, a cross-bill, containing matters of equitable cognizance, may cure the defect, but where the cross-bill only seeks such relief as can be had at law, it does not cure such defect. (3 Ency. of Pl. & Pr. p. 657, and cases in notes; Sayer v. McLean, 29 Ark. 612; Wachter v. Blowney, 104 Ill. 610; 1 Beach on Modern Eq. Pr. sec. 425). The objection to the original bill in this case is, that the defendant in error had a remedy at law by obtaining judgment on her note in the probate court. Inasmuch as the cross-bill in the present case seeks only such relief as can be had at law, it does not cure the defect in the original bill as thus indicated.
It is unnecessary to consider or discuss any of the other questions made by counsel as, for the reasons already indicated, we are of the opinion that a court of equity had no jurisdiction to entertain the bill and cross-bill in this case.
Accordingly, the judgment of the Appellate Court and the decree of the circuit court are reversed, and the cause is remanded to the circuit court with directions to dismiss the bill and"cross-bill.
Reversed and remanded.