Chicago Title & Trust Co. v. Central Trust Co. (312 Ill. 396, 1924)

Mr. Justice Duncan

delivered the opinion of the court:

Some of the questions involved in this appeal have heretofore been considered by this court in the case of Golden v. Cervenka, 278 Ill. 409. A sufficient statement of the pleadings of the parties on the present appeal and the history of the litigation are to be found in the former decision of this court. As in that case stated, the original bill of John F. Golden and the Importers and Manufacturers’ Company, as amended and supplemented, was a bill to enjoin the prosecution of the suits against the stockholders of the LaSalle Street Trust and Savings Bank, (hereafter referred to in this opinion as the trust and savings bank,) brought by one Cervenka, and the institution or prosecution of other suits of like character to ascertain the creditors of the bank and its liabilities, as well as its stockholders and the extent of their liabilities to the creditors, for a decree for the amount of the stockholders’ liability and the distribution of such amount among the creditors of the bank and for the appointment of a receiver to collect such amount from the stockholders. The receiver, William C. Niblack, appointed by the court under the bill previously filed by the State Auditor, after filing his answer filed a cross-bill containing the same allegations and asking the same relief as was asked in the original bill, a part of the relief asked being a decree against the Central Trust Company because of certain of its acts in connection with the organization of the trust and savings bank. This cross-bill was answered by the Central Trust Company, as well as the original bill. On the hearing as the case then' stood in the circuit court a decree was rendered against the Central Trust Company for $1,487,854.16, and against the stockholders for an amount equal to the par value of the respective shares of stock held by them. That decree was reversed by this court. For the reasons stated in the case cited aforesaid, this court held that the act of the Central Trust Company in allowing the Auditor to count $1,250,000 of its money as the money of the trust and savings bank and as its cash capital and surplus upon which to start its business as a bank, and thereby inducing the Auditor to issue his certificate of authorization to the trust and savings bank to conduct its banking business, estopped the Central Trust Company, as against all persons giving credit to the trust and savings bank, to deny that that money was the money of the trust and savings bank and for the purposes of the bank in the due course and transaction of its business as a bank. In other words, the sum of money aforesaid was a trust fund for the benefit of the creditors in satisfaction of all their losses by reason of the acts of the Central Trust Company aforesaid and its subsequent withdrawal of that money from the trust and savings bank. A number of authorities were cited by this court in that case sustaining the court in that holding, and that decision is not only the law of that case but is also the law of the case now in hand. We further decided in that case that if the entire assets or resources of the LaSalle Street National Bank (herein referred to as the National Bank) assigned and turned over to the trust and savings bank as assets and as capital and surplus were equal to the amount in value at which they were carried on the books of the National Bank, then the capital stock and surplus of the National Bank would not be impaired, but if the capital stock and surplus of the National Bank were impaired at that time the Central Trust Company was liable to the creditors of the trust and savings bank to make good the deficiency, and also for the interest on such deficiency from the time of demand upon it or from the time the receiver, Nib-lack, filed his cross-bill, which was September 24, 1915? and that the receiver could maintain that suit for the creditors. It was also decided in the same suit that the stockholders of the trust and savings bank were also liable to the creditors of the bank under the original bill brought in the former suit but that their liability was different from and had no relation to the liability of the Central Trust .Company to receiver Niblack for the creditors, and that the issues in the two suits, the one against the Central Trust Company and the other against the stockholders, should be separated for the purposes of trial and upon remandment by this court should be referred to different masters in chancery for the reasons stated in our former decision. We also Held in that decision that the Central Trust Company was only bound to account to the receiver for the benefit of the creditors of the trust and savings bank and that there was no liability on its part to the stockholders; that the trust and savings bank, by the action of the Central Trust Company and the stockholders and officers of the trust and savings bank, was only provided with a capital stock and surplus by the assets of the National Bank assigned to it, and that if those assets fell short of $1,250,000 in value, (the amount with which the trust and savings bank was to begin its business as capital and surplus,) the creditors, by the receiver, have the right, to the extent of the deficiency, to complain of the Central Trust Company and of the stockholders and to require them to make good the deficiency. We also said in that case: “Whether or not this amount [the capital and surplus] had been impaired depends upon the collectibility of the loans which constituted a large part of the resources of the bank.” The word “loans” in that sentence, as used by this court, means all bills receivable and bonds and securities held by the bank, and it is important in this consideration to have an accurate understanding of the holdings of this court and the law of the case as set forth in our former decision.

We have gone into the details of our former decision because of the fact that in the consideration of the case now before us many of the same points that were decided in that case are re-argued and the correctness of the" holdings are thereby challenged. We are satisfied with our rulings in that case as above explained and do not deem it necessary to further consider them. Most of the propositions of law contended for by the parties to this suit are discussed in the beginning parts of their briefs and arguments. Some of them we may have occasion to consider in connection with the items of account to which they are applied, but we make the distinct point here that the law of the case now in hand, so far as announced in our former decision, is still the law of the case, and our former decision must be taken as a complete answer to all arguments against its correctness.

After the cause was remanded to the circuit court of Cook county by our former decision, the Central Trust Company on October 19, 1917, filed a cross-bill and. on April 29, 1918, its amended cross-bill, making the stockholders and others parties defendant thereto, in which it made claim that “in equity the stockholders of the trust and savings bank ought to make good its capital and surplus and asking that they be required to pay whatever amount the trust company should be held liable for and to thus exonerate it in the premises, and that if prior to such payment on the part of the stockholders any part of such liability should be satisfied by the trust company, the stockholders be required to reimburse the trust company therefor.” On April 29, 1918, the circuit court entered an order striking the cross-bill from the files on motion of William C. Niblack, as receiver, on the ground that it did not state a case which entitled the Central Trust Company to any relief in the court of equity and that it could not be helped by further amendment. From the order of the circuit court the Central Trust Company prosecuted an appeal to the Appellate Court for the First District, and that court on January 28, 1920, affirmed the decree of the circuit court. It does not appear from this record that any attempt was made by the Central Trust Company, by appeal or by petition for certiorari, to have reviewed the decision of the Appellate Court affirming the order of the circuit court aforesaid, except that the trust company has filed a separate transcript of the record in this court containing the proceedings of the circuit court of Cook county with reference to the filing of the cross-bill, the motion and order of the circuit court dismissing the same, and the record and opinion of the Appellate Court affirming the order of the circuit court, etc., together with an assignment of errors, setting forth in the assignment certain reasons why it claims the Appellate Court erred in affirming the order of the circuit court. It is clear from the foregoing that this court has no jurisdiction to review the order of the Appellate Court affirming the order. Nevertheless, a purported appeal from that order, entitled “Chicago Title and Trust Company, as receiver, appellee, vs. Central Trust Company of Illinois, appellant,” and bearing our general docket No. 14,703, was docketed in this court. This appeal, by order of this court, was consolidated with No. 14,702 for hearing, the latter cause being the main cause now presented for hearing. A motion by the receiver was allowed by this court at our June term, 1922, based upon the facts above stated, to strike from the files of this court the record in appeal case No. 14,703. The allowance of that motion virtually disposes of this appeal, and the same is now by the order of this court dismissed for want of jurisdiction in this court to further consider the same.

In pursuance of our order of remandment in the former case, the matters relating to the Central Trust Company were referred to a master in chancery to take the evidence on behalf of the respective parties and to determine the assets of the National Bank assigned to the trust and savings bank and their cash value for banking purposes, and also to determine the liabilities of the National Bank assumed by the trust and savings bank. This reference was under the cross-bill of the receiver, Niblack, in the former suit, which is treated in this case as an original bill, and also the answer to the cross-bill by the Central Trust Company and the replication thereto. The original bill in the former suit against the stockholders and others, and their answers thereto, were treated as another and distinct part of the suit, and the issues thus formed were referred to another and different master and have no connection with the matters now before this court and no further reference thereto will be made. The master reported the evidence to the court with his conclusions, holding that the Central Trust Company, appellee in this proceeding, was liable to the receiver, the Chicago Title and Trust Company, appellant, for the creditors, in the sum of $79,198.42, with interest thereon at five per cent per annum from September 24, 1918. Objections to the master’s report were overruled and stood as exceptions before the circuit court, which were also overruled. A decree was entered by the circuit court against the Central Trust Company in the sum of $101,691.05, including the interest, and for costs of suit. On appeal to the Appellate Court for the First District the second branch of that court modified the decree of the circuit court and as modified affirmed the decree in the sum of $978,029.11, including interest, and it was further decreed by the Appellate Court that the Central Trust Company pay the costs in both the circuit court and in the Appellate Court. During the pendency of the suit in the circuit court the receiver, Niblack, died, and the Chicago Title and Trust Company was appointed in his stead and prosecuted the appeal to the Appellate Court. It has prosecuted a further appeal to this court, and makes the claim that the evidence taken before the master showed that the capital and surplus of the National Bank on October 21, 1912, were entirely lost. The Central Trust Company’s claim is that the evidence in the record shows that on October 21, 1912, there was no impairment of the capital and surplus of the National Bank, and it has assigned cross-errors on this appeal.

The questions involved in this appeal are in the main very simple, and the action in the circuit court may be properly characterized as a bill for an accounting to determine the liability of the Central Trust Company to the Chicago Title and Trust Company, as receiver and appellant, for the benefit of the creditors of the trust and savings bank. To determine this liability it was necessary to ascertain the cash value of the entire resources or assets of the National Bank and the entire liability of that bank on October 21, 1912, the day on which the National Bank was denationalized and its assets turned over to the trust and savings bank and its liabilities assumed by the trust and savings bank. The difference between the value of the resources of the National Bank and the liabilities of that bank on said day, when properly stated and valued, must necessarily be the liability of the Central Trust Company, as that difference would necessarily show the amount of the depreciation, if any, of the assets of the National Bank, which would also constitute the amount of the liability of the Central Trust Company, hereinafter referred to as appellee!

The record in this case is very voluminous and consists of 13,571 typewritten pages. The master’s report contains 525 printed pages and the opinions of the Appellate Court 337 pages. The printed abstracts contain 4176 pages, not including the index, in a special volume of 191 pages. The appellant’s brief and argument and its reply contain 771 pages and appellee’s brief 699 pages. There are a great number of items constituting the assets or resources of the National Bank, and more than 200 of them are contested in the printed briefs and arguments. The three Appellate Court judges all differed in their findings as to the amount of the impairment of the capital stock and surplus of the National Bank. The presiding justice, who wrote the opinion of the court, reached the conclusion that the amount of such impairment was $737,220.54. Another one of the justices, who disagreed with the presiding justice only as to three items of assets and two items of alleged liabilities, reached the conclusion that such impairment amounted to $597,411.94. The other judge reached the conclusion that the capital stock of the National Bank was worth $72,520.06 less than nothing, and that the bank was insolvent and tliat the capital stock and surplus were impaired to the extent of $1,250,000, which amount he fixed as the liability of appellee, with five per cent interest thereon from September 24, 1915, while the master and the circuit court fixed the amount of such impairment at $79,198.42.

Early in our consideration of this case it became very apparent that we could not sustain the judgment of the circuit court or of the Appellate Court, or the findings of the master or any member of the Appellate Court, as to the amount of the liability of the Central Trust Company, because of the fact that their findings were against the manifest weight of the evidence. Our finding on that question as to the amount does not differ very materially from that of the master and the circuit court, but there are quite a number of the contested items in which our judgment differs radically from that of the master as well as from the different members of the Appellate Court, and the reasons therefor will later appear. We have given due consideration to the evidence in the record on the contested items, and also to the opinion of the Appellate Court and the two dissents on particular items of the account, and to the briefs and arguments of counsel. Wherever a debt to the National Bank has been paid in full, either to the trust and savings bank or to the receiver after the closing of the bank, and without any outlay to the bank or to the receiver for attorneys’ fees or other extra expense in collecting the same, we have allowed the claim in full, no matter by whom paid. The main business of a bank is loaning money at interest for profit, and if a debt is paid in full, every object for banking purposes is realized out of that asset if paid in full without unnecessary expense. There is simply one good and sufficient reason for our ruling in this matter, and that is the simple fact that the receiver, for the creditors, is not entitled to a double satisfaction of any debt, and a debt paid by an honest poor man who pays because he is honest is worth just as much to the creditors as the debt of a millionaire who pays because he is solvent, provided the debts are the same amount. We regard it also as true that a debt paid by a rascal, if such appears in the evidence, is just as good money to the creditors or to the receiver as the money of any other man, and one satisfaction is all they are entitled to or should demand.

There are instances in this record where certain debtors did not pay their debts either to the bank or to the receiver and were shown to be insolvent when the debts came into the hands of appellant. Wherever the evidence in such cases shows that the debtor was solvent and the debt collectible on October 21, 1912, that debt we also regard as a good asset on this inquiry and one that should be allowed in full. The question in such a case, as was stated in our former opinion, is not as to the collectibility of the note when it came into the hands of the receiver, but as to its collectibility when it came into the hands of the trust and savings bank. The Central Trust Company in this case is not to be prejudiced by any failure of the trust and savings bank, or by appellant, to use proper diligence in the collection of the assets turned over to them. If the debt was as good on that day as cash for banking purposes, we regard it as a good debt and have allowed it. It was this ruling that we made in the former case that is used by appellant in its contention that all debts, whether they have been paid or otherwise, must be determined as to their worth on October 21, 1912. This very argument has occasioned the great difference in the finding of one of the Appellate Court judges and the other two judges, the holding of the dissenting judge in many instances being to the effect that the debt should be regarded as worthless although paid, because of the fact that there was no evidence tending to show that it was good and collectible when it came into the hands of the trust and savings bank. .The receiver has also taken the position in some instances in this case that a debt of a debtor is not to be regarded as a good asset in a bank for banking purposes unless the trust and savings bank could have re-discounted that note to another bank had it attempted to do so. We do not regard such proof necessary in this case, but the simple question is, Were the assets collectible in the ordinary course of business, principal and interest? — and if so, we have regarded the assets as good and worth full value for banking purposes because they have served the purposes of the bank in reaping a profit on them by collecting the principal and interest. No bank would discount any paper for cash without a profit on the cash invested in the purchase. This court never meant to indicate in its former decision that a debt paid was not to be regarded as a good and collectible asset. Payment of such an asset is the very best evidence that it was good, and where a note is paid it is immaterial whether or not another banker would have discounted it for cash or otherwise, or whether or not it was good or bad within the judgment of bankers on October 21, 1912.

. The expert accountants, in listing the resources or assets of the National Bank, have not listed them at their face values, in many instances, as such face values appear in the original instruments. This is notably true of bills receivable. The face value of all notes for the purpose of this accounting the experts valued as of October 21, 1912. In those instances in which the face of the original note was drawing interest to a date after October 21, 1912, the value for this accounting is the face value of the note plus accrued interest to said date, following the methods of the experts in this particular; and in the case of other notes in which their faces express the principal and interest for a given time after October 21, 1912, their due date, the face values of those notes we give at face, less accrued interest, and for the same reason. So, if in our accounting we find a note to be worthless, the total loss or depreciation of assets for that note is its face value less its accrued interest or plus accrued interest, according to the class to which it belongs, and if we find the note good and collectible we allow it for its face value less accrued interest or plus accrued interest, according to the class to which it belongs. On a number of no'tes contested in this record only part payment was made and the remainder of the notes was held to be worthless. In all such instances the value of the notes for banking purposes is not the amount of the payments on the notes but the present worth of the payments on October 21, 1912, unless interest was also paid to date of the payments. In other such instances payments are made, and at the date of the payments all interest on the notes was paid up to the date of the payments. In such cases the payment or payments represent a complete discharge of the debt to the amount of the payments, and the note or notes would in such cases be worth the amount of the payments or the total amount of the debt discharged, with interest, if the debtors were insolvent and the notes not collectible. In still other instances payments were made on other notes, and also interest on them up to a certain date prior to the last payment. In such cases the amount of the payments made up to the time the interest was paid in full discharged completely the amount of the debt to the extent of the payments, and payments thereafter made are accounted for at present value from the time the interest was completely paid on the note to the date of the payments, to ascertain the full amount of the debt discharged by such latter payments. The reasons for our action in this regard are, that a partial payment on a note or claim cannot be regarded as the same as cash in the trust and savings bank except to the extent that that note or claim is completely discharged as to both principal and interest. There will be found in our accounting a number of instances in which we have allowed less on notes on which partial payments have been made than either the master, the circuit court or the Appellate Court. We make all the foregoing explanations in this part of our decision so that our accounting may be understood without going into details in every instance when we come to our consideration and explanation of particular items passed on by us in this accounting. In counting present worth or value as to partial payments made we have used the rate of six per cent per annum.

In the following tabulations we give the itemized resources or assets of the National Bank turned over to the trust and savings bank and our valuations of the same, and also a complete list of the liabilities of the National Bank assumed by the trust and savings bank, together with the total values or amounts of such resources and liabilities as we have found them, and the difference between the same, which is our finding as to depreciation of the assets of the National Bank and also for that reason the liability of the Central Trust Company to appellant on September 24, 1915, the date of the filing of the cross-bill, to-wit:

Resources

1. Cash in bank.................................. $231,555.91

2. Exchange for clearing house.................... 47,386.36

3. Redemption fund in U. S. treasury............... 32,500.00

4. Due from national banks....................... 313,305.46

5- Due from State banks.......................... 151,010.01

6. Accrued int. on amt. due from Nat. and State banks 206.09

7. Cash items ................................... 426.88

8. Overdrafts................................... 3,265.92

9. U. S. bonds to secure circulation................. 659,663.25

10. Bonds to secure postal savings deposits.......... 78,409.76

11. Other stocks and bonds......................... 191,572.52

12. Furniture and fixtures.......................... 5,950.00

13. Loans and discounts............................ 2,299,274.27

14. Funds in transit............................... 305,247.32

15. Account new bank building..................... 50,000.00

16. Good will .................................... 65,000.00

Total •_....................................$4,434,77375

Liability of appellee to balance............. 108,055.78

Liabilities

. 1. Capital stock .................................$1,000,000.00

2. Surplus...................................... 250,000.00

3. Individual deposits............................ 1,852,969.64

4. Accrued interest on individual deposits........... 941.51

5. Savings deposits.............................. 109,903.36

6. Accrued interest on savings deposits............. 720.00

7. Postal savings deposits......................... 58,011.89

8. Accrued interest on postal savings deposits....... 425.05

9. Due national banks............................. 192,886.52

10. Due State banks............................... 200,768.70

11. Accrued int. on amt. due Nat. and State banks.... 468.96

12. Time certificates of deposit..................... 98,727.50

13. Accrued interest on time certificates of deposit____ 683.78

14. Demand certificates of deposit................... 4,000.00

15. Accrued interest on demand certificates of deposit. 6.01

16. Marginal certificates of deposit.................. 27,500.00

17. Accrued interest on marginal certificates of deposit 15.79

18. Cashier’s checks .............................. 41,461.93

19. Certified checks ............................... 50,440.32

20. Expense vouchers.............................. 39.25

21. Circulation................................... 647,495.00

22. Circular expenses............................. 2,109.89

23. Certain liabilities not shown on the books........ 3,254.43

Total.....................................$4,542,829.53

It has occurred to us that we can better make ourselves understood in this accounting by first considering the liability side of the account we have just stated, although it may seem like considering the matters somewhat out of their natural order.

In all well regulated banks, whether State, national or private, in which their books are properly kept, the assets and liabilities as carried on their books exactly balance. The liabilities to stockholders are generally, and we think universally, placed at the head of the tabulations representing the liabilities of the bank, although in case of dissolution and winding up of the affairs of any of the banks aforesaid, for whatever cause, the stockholder is the last to receive consideration in the distribution of the proceeds realized from the asset side of the account. Generally three terms are used to express this liability to stockholders: First, capital stock; second, surplus; and third, undivided profits. The item designated as “surplus” represents permanent surplus or a liability that is carried permanently on the books and is rarely ever decreased or increased except by necessity, in case of a loss to the bank or in case of an increase by reason of a new declaration of a permanent fund to be carried under that designation. The undivided profits are the funds usually drawn on to pay the declared dividends of the bank. The term “capital stock” requires no explanation. The liabilities other than capital stock, surplus and undivided profits carried on the books, represent, of course, the amount of liabilities owed to the real creditors of the ba'nk by the bank, and by the stockholders as well, under such laws as ours, where stockholders are bound to the creditors in a double liability in case of insolvency, etc. The National Bank carried on the liability side of its account capital stock and surplus in the same amounts that we have above listed on the liability side of our account in this case. It also carried on that side of the account undivided profits to the amount of $17,815.72. We have omitted this last named item from the liability side of our account for two reasons. In the first place, the liability of the Central Trust Company in this case, as we have already declared it, was simply to make good the capital stock and surplus of the trust and savings bank, amounting-to $1,250,000. If the assets of the National Bank would pay off its entire liability to its real creditors and leave $1,250,-000 for its stockholders, its capital stock and surplus transferred to the trust and savings bank would not have been impaired for the purpose of this accounting, because its entire assets transferred to the trust and savings bank would upon such supposition be worth in cash the amount due both creditors and stockholders. It must therefore be clear that for the purpose of this accounting the liability side of our account should not contain an item of undivided profits. The second reason for not including it is the fact that the National Bank did not have the amount of undivided profits carried on its books that was backed or secured by good and collectible assets above its other liabilities as listed by us. In making up the liability side of its account in this case the Appellate Court omitted the items of capital stock and surplus. We think that this is one of. the causes that led it into error in its consideration and reasoning as to other items of the liability account which the attorney urged on the part of the receiver should be included on that side of the account. It seems to us that a moment’s reflection ought to convince anyone that we have included on the liability side of our account every liability to stockholders, but we will now proceed to consider other such items which it is urged by the receiver should go into the account, and only very briefly, because the questions are so simple.

As was disclosed in our former opinion, there were a number of stockholders of the National Bank who were not willing to, and did not, exchange their National Bank stock for shares of the trust and savings bank. The receiver insists there should be included on the liability side of the account an amount necessary to settle with those stockholders. There were 426 shares held by such stockholders, and two members of the Appellate Court have charged up in this accounting $53,250, or $125 per share. The other member of the Appellate Court reduced this amount to $21,202.02, and all of them treated these stockholders as creditors, simply. These stockholders are not to be considered at all as creditors of the trust and savings bank and entitled to share in the proceeds of what the receiver shall realize out of the assets of the trust and savings bank, and neither is their assignee of these shares entitled to be rated as such a creditor. This record shows, without dispute, that C. B. Munday purchased the shares of the dissenting stockholders at about $125 per share and thereby canceled all claim against the trust and savings bank as to those creditors, and it will certainly not be urged that Mun-day, as their assignee, has any standing as a first creditor of the bank. There is no more reason for considering or treating the amount due said stockholders as an extra item in the liability account, than there is for considering any other stockholder of the National Bank as a creditor to the extent of the value of his stock and who exchanged his National Bank stock for stock in the trust and savings bank. Under the evidence in this record there is no liability of the Central Trust Company, and could be no liability, to stockholders'of the National Bank, or their assignees, on account of the fact that they held such stock at any time. It will be noticed that we carry the entire amount of liability to the stockholders of the National Bank ($1,250,000) in the first two items of our liability account. That liability as to said stockholders ceased the very moment they accepted stock in the trust and savings bank, and as to the dissenting stockholders the very moment that Munday purchased their stock. The liability as to these latter stockholders passed to Munday when they assigned their shares to him, and this liability is a liability of the trust and savings bank, which amounts to nothing until all the creditors of that bank are satisfied. The liability of the Central Trust Company is to creditors of the trust and savings bank to make good the $1,250,000 of capital stock and surplus of the National Bank assigned to the trust and savings bank. We therefore place as their liability $1,250,000 for these two items, and after satisfying all the other creditors on the liability side of the account out of the assets, if the remainder is less than said liability the actual liability is the difference, and nothing more. So in reality the entire liability of our side of the account, so far as this accounting is concerned, is a liability of the Central Trust Company to the creditors of the trust and savings bank, and never can become a liability to the stockholders of the trust and savings bank, assignees of the stockholders of the National Bank. The assets of the Central Trust Company for the purpose of this accounting are represented on the side of the account which we have headed “Resources.” In other words, although they were the assets of the National Bank on the day it assigned them to the trust and savings bank, they are now to be considered as the assets of the Central Trust Company for this accounting, to pay off the liabilities on the other side of the account. The amount that such resources are insufficient to satisfy the liabilities is the amount that the Central Trust Company shall pay from its own bank to satisfy such liabilities.

For similar reasons mentioned in the preceding paragraph there is no liability of the Central Trust Company for the taxes assessed against the individual stockholders of the National Bank on their stock, amounting to $12,182.24. The National Bank, apparently as all other national banks usually do, was accustomed to pay the taxes of its stockholders on their National Bank stock. The reason for this custom in this State is apparent. By section 35 of our Revenue law the stockholders of the bank are personally assessed for their shares, and, of course, are primarily liable therefor and bound to pa}'- the same. By section 39 of the Revenue act it is the duty of every bank and its managing officers or officer to retain so much of any dividend or dividends belonging to such stockholders as shall be necessary to pay taxes levied upon the stockholders’ stock. The officers of the bank are personally made liable for these taxes if they do not conform to section 39 in paying the tax out of the stockholders’ dividends. Accordingly the National Bank on October 21, 1912, carried an item in its liability account in this language: “Reserved for taxes, $6000.” That sum was almost one-half of the taxes, and if the Na- 1 tional Bank had continued in business it is probable that this item would 'have been doubled or fixed at the amount of the taxes at tax-paying time after it had ascertained the correct amount. The trust and savings bank paid a dividend .in 1913, and should have deducted this tax from that dividend just the same as would the National Bank have done had it been in business at tax-paying time and at the time of the declaration of the dividend in 1913. This liability was clearly a liability of the stockholders of the National Bank. Because the National Bank took steps to protect itself against liability for said taxes, and also its officers, in the manner above stated, the taxes did not become its obligation primarily. The Central Trust Company is under no obligation to pay the taxes of the stockholders of the National Bank. The trust and savings bank assumed no obligation to pay such taxes. Its contract was that it would “assume all the indebtedness of the National Bank of every kind and agree to pay such indebtedness in the manner and form in which the National Bank agreed to pay the same.” There is no proof of any special agreement to pay these taxes, as the trust and savings bank was only under obligation to the State to pay these taxes, as the National Bank would have done, out of the dividends of the stockholders. Two of the Appellate Court judges erred in including in the liability account of the Central Trust Company $6000, the amount carried on the books of the bank and reserved to pay taxes. The mere fact that this item was carried on the liability side of the account of the National Bank did not make it a real obligation of the bank and consequently not an obligation of the Central Trust Company.

The receiver makes the further claim that the expenses in carrying on the trust and savings bank from its organization to its close were $316,104.17, and that the total expenses of the receiver were $274,170.45, making a total of v $590,274.62, which should be considered as a liability of the National Bank and as a liability of the Central Trust Company. We think the mere statement of this claim ought to be sufficient to refute its correctness. No reasonable theory is advanced or can be advanced for charging these amounts in the liability account of appellee. Appellee cannot be charged for any mismanagement of the bank or for the expenses of the receiver in winding up its affairs, because it was in no way responsible for the same.

The master and the circuit court, and also the Appellate Court, have charged appellee in its liability account a $500 fee paid to Joseph O. Morris for legal services rendered by him prior to October 21, 1912, to the National Bank on a claim placed in his hands by that bank. It was paid to him by the trust and savings bank on November 30, 1912. At that time Morris owed the National Bank a $600 note due on demand. The trust and savings bank, had it seen fit to do so, could have set off this $500 claim with Morris’ note, and should have done so. Morris also owed the National Bank another note, which made his total indebtedness on October 12, 1921, $2079.45, and we have allowed nothing on this claim against Morris. We do not dispute the propriety or correctness of the courts in charging this on the liability side of the account, but the Appellate Court erred in not crediting a like amount on the debt of Morris to the bank for reasons aforesaid. We have disregarded this item as charged for the reason that we would simply have to give credit on the other side of the account and reduce Morris’ indebtedness to the bank that much.

It appears from the evidence that C. B. Munday, after the close of the trust and savings bank, made a claim against the trust and savings bank in his bankruptcy schedule for $20,125 as salary due him as president of the National Bank. It further appears from the evidence that he received payment on his salary up to December 31, 1910, and that he thereafter relinquished his salary and made no further claim therefor until after the close of the trust and savings bank. Our conclusion is that the master and the Appellate Court both properly refused to charge said sum as a liability in this accounting.

We also think that the master and the Appellate Court properly refused to charge as a liability in this accounting the claim for the unexpired term of the lease of the Rookery building by the National Bank, and which claim the receiver alleges amounts to $211,500.03. Both the master and the Appellate Court declined to allow this claim of the receiver on the ground that the trust and savings bank was substituted as lessee in lieu of the National Bank, and that the lessor thereby released the National Bank from its obligation. The evidence supports that finding.

The Appellate Court properly allowed the receiver’s contention that there were certain liabilities not shown on the books of the bank and estimated these liabilities to amount to $3254.43. The master charged on the liability side of the account for those items $5364.32. This action is accounted for on the part of the master by reason of the fact that he included circular expenses to the amount of $2109.89, thereby duplicating the charge for circular expenses by oversight. There is no contention that this charge is not correct as made by the Appellate Court, and we allow the same. The liability side of the account from item No. 1 to item No. 22, inclusive, as we have above stated them, are conceded to be correct by both appellant and appellee.

In our consideration of the side of the account which we have above designated as “Resources,” we will follow the same order in considering it that the Appellate Court did in its discussion. The master and every member of the Appellate Court agreed as to the amount that should be allowed for the first seven items of resources as numbered by us and also as to item 12. The evidence amply supports them upon every item, and we will make the same allowance without further discussion. For the eighth item, overdrafts, we have allowed full value, $3265.92, as did the master, for the reason that the record discloses that they were all paid, and without contradiction. The Appellate Court allowed the same except the overdrafts of William Lorimer, Jr., and Josephine Lorimer, amounting to $313.24. We will further consider this item when we come to consider two bills receivable that were paid by Lorimer at the same time that he paid the overdrafts and which were also disallowed by the Appellate Court. The master and all members of the Appellate Court found the value of the ninth item, United States bonds to secure circulation, to be the sum of $658,018.75. We are compelled to disagree with this allowance upon the testimony of C. Frederick Childs, a specialist in government bonds officing in Chicago, and of expert accountant Hawkins. Childs sold 13,000 of the Panama 2’s at 101% on October 21, 1912. On that same date United States consols 2 per cents were offered at ioij4> and 101 1/16, plus accrued interest, was bid, and as we understand the evidence there was no sale at the latter price. Hawkins valued these bonds at 101.1875, plus accrued interest, and found the value of all of the bonds to be $659,663.25, and we have allowed the same. The master and the Appellate Court allowed for the bonds the amount they sold for about three days after October 21, 1912. For. item 10, bonds to secure postal savings deposits, the master allowed $78,434.91. We approve the finding and allowance of the Appellate Court on the evidence of Holtz and Hawkins and allow $78,409.76. The master seems to have erred in counting interest on this item.

Under the-designation “Other stocks and bonds,” item 11, there are a number of stocks and bonds considered: (a) Artesian Stone and Lime Works bonds, which we value at $79,469, which is the same value given them by the master and all members of the Appellate Court, (b) City of Chicago special assessment coupons we value at $3767-33; the same as did the master, because it appears from the evidence that they were redeemed at full face value, plus accrued interest, by the city in the regular course of business as they came due, and that the receiver could have realized the same for those that came into his hands had he presented them to the city for payment instead of selling them at a lower price. It is our constant holding all through this opinion that the Central Trust Company is not bound by the action of the receiver in selling any of the assets for less than their proved value when the evidence is clear that there was a want of due diligence in finding out their value. There was no reason whatever to doubt that these instruments would be paid in full when due or a reasonably short time thereafter, (c) Florida Indian River Land Company bonds were collected in. full by the bank when they were due, plus six per cent interest. We therefore value them at $8028, being face and accrued interest, and thereby approve the master’s finding. There is no dispute on the evidence, (d) McGuire gold bonds we value at $12,319, face value and accrued interest. The bank also sold these bonds at full face value, plus interest, according to the testimony of Radish, and we therefore agree with the master’s finding, (e) Rock Island Southern railway bonds were proved to have been sold in the month of October, 1912, at 94^, and just before and after that month at from 93 to 94 *4- The Appellate Court valued these bonds at 90 and the master at 70. We value them at 94, plus accrued interest, or $39,489.42. (/) United Gas and Electric Company bonds were valued by the Appellate Court at $19,072.23, and it is amply supported by the testimony in the record that these bonds were worth 93, the valuation placed on them by that court, (g) Western Stoneware Company bonds were valued by the master at $5357. The Appellate Court valued them at $5082, being the same valuation given them by the Central Trust Company’s witness. We concur in the finding and allowance of the Appellate Court. There are a number of other items carried under the designation “Other stocks and bonds,” the aggregate value of which is $24,345.54, which is the value given them by the master and all members of the Appellate Court. They are not contested and we value them at the same aggregate amount.

The Appellate Court has considered the loans and discounts of the National Bank in fourteen divisions or groups, and it appears from the opinion of that court that in the discussion of the loans and discounts before it the parties to this suit presented them in the same manner as the court has considered them. For convenience of the parties we will therefore consider them in the same manner, taking up each division separately.

Division 1.

Bills receivable of J. G. Munday, the Bank of Smithboro, the People’s Bank of East Alton, the Litchfield Mill and Elevator Company, John K. Seagrave, and J. K. Sea-grave & Co.

C. B. Munday was vice-president of both the national and trust and savings banks during their entire existence, May, 1910, to June 12, 1914. Prior to that time he resided at Litchfield, Illinois, where his principal business had been the operation of a mill at Litchfield and the purchase and sale of grain and flour. He did a very large business in exporting- grain in addition to his local grain trade and also purchased and sold grain in Chicago and other large cities of this country. He owned elevators at Litchfield and at many other points near there, and continued to conduct his grain business during the existence of the banks. C. B. Munday & Co. was a co-partnership, consisting of C. B. Munday and his son, J. G. Munday, and carried on business at Litchfield and elsewhere. It was controlled by C. B. Munday. After the organization of the banks in Chicago this company continued under the name of J. G. Munday & Co. The Litchfield Mill and Elevator Company was a corporation organized under the laws of 'Illinois, with a capital stock of $200,000. Its stock was owned entirely by C. B. Munday and his family and Munday controlled its operation. The Bank of Smithboro and the People’s Bank of East Alton were private banks of C. B. Munday & Co. for carrying on a private banking business at Smithboro and East Alton, Illinois. John K. Seagrave was in the employ of C. B. Munday & Co. as manager of the Litchfield Mill and Elevator Company, C. B. Munday & Co., the Litchfield Drug Company, and a business carried on under the name of J. K. Seagrave & Co. J. G. Munday appears to have had no property in his own name. All of the foregoing debts to the National Bank under Division 1 are for the foregoing reasons treated in this record as the debts of C. B. Munday, and there is no contention to the contrary. The personal indebtedness of C. B. Munday to the National Bank is treated by the Appellate Court in its Division 15 under the head of “Transit items,” and under the accounting in that division Munday is charged on the liability side of his account with all the debts considered under this division. This brief explanation will serve to shorten our discussion under this and other divisions, for the reason that under our finding from the evidence in this record Mun-day was undoubtedly solvent on October 21, 1912, as was found by the master. The Appellate Court found that Munday on October 21, 1912, had good assets amounting to $800,295.88, and also found that his total liabilities were $937,080.60. The court has treated him and all his concerns in the name of which he did business as totally insolvent on that date, in all its considerations of his indebtedness to the bank and to others, and, unless his indebtedness has been found by the court to have been actually paid in whole or in part, has found his debts to the bank and to others worthless, although the court found in an actual finding that his assets were about 85 per cent of his liabilities. But on the very facts considered by the Appellate Court, if we value the assets of Munday as to the particular items as the court valued them, there should be added to the asset side of Munday’s account $30,235 for the notes and accrued interest of William Lorimer, Sr., secured by a mortgage on his Michigan farm, which were unquestionably good and which were actually paid by Lorimer on April 8, 1914. There should also have been deducted by the Appellate Court from the liability side of Munday’s account the notes of John K. Seagrave and J. K. Sea-grave & Co., which, with accrued interest on October 21, 1912, amounted to $40,611.26, because he was charged, twice with these items. So under the Appellate Court’s facts and valuations Munday’s assets should have been found by it to have been $830,530.88 and his liabilities $896,469.34. These facts will clearly appear when we come to discuss the National Bank’s claim against Munday in Division 15. Errors in book-keeping similar to the fore-, going and similar conclusions of the Appellate Court account largely for the great discrepancies between the judgments of the Appellate Court and circuit court in this case. It was clear oversight on the part of the Appellate Court to reach the conclusion that Munday having good assets to the amount of more than $830,000, and which were more than 92 per cent of his liabilities, was totally insolvent and without financial ability to pay any part of his obligations that were unpaid in whole or in part.

After considering the evidence in the record we find that all six of the debts aforesaid to the National Bank were good and collectible on October 21, 1912, and we have allowed them in the following amounts, being the notes plus accrued interest to that date, to-wit: J. G. Munday, $14,-049; Bank of Smithboro, $51,474.75; People’s Bank of East Alton, $16,841.90; Litchfield Mill and Elevator Company, $120,578.68; John K. Seagrave and J. K. Seagrave & Co., combined, $40,611.26; which makes a total allowance for this division of $243,555.59.

As to the indebtedness of J. G. Munday, both the master and two members of the Appellate Court have found that it was amply secured by shares of stock in the banks of Oconee, Alhambra, Marine and Bethalto, of the aggregate market value of $16,575. 'The claim made by the receiver is that the foregoing securities or collateral were withdrawn from the bank before October 21, 1912. The evidence amply sustains the master and the Appellate Court. This debt is treated by all parties as a debt of C. B. Mun-day, who was solvent on said date, and no further comments are necessary.

The first item of indebtedness of the Bank of Smithboro is referred to in the record as its indirect liability of $5034.39, which was all entirely paid in due course of business, as found by the master and as testified to by Radish, the expert accountant who was employed by the receiver in this litigation and who was the witness of the Central Trust Company. This indirect liability consisted of a certificate of deposit of the Bank of Smithboro of the value of $3077.92 and eleven other items or notes discounted by the Bank of Smithboro, amounting to $1956.47. The witness testified that the certificate of deposit was carried as an indirect liability, possibly for the purpose of concealing its identity. As the record discloses that the paper discounted by the Bank of Smithboro in this account, and without contradiction, was paid by the direct obligors in full in the ordinary course of business, we have credited the amount of those items on the asset side of Munday’s account. The next item, the note of Fred and Bessie Ahlers, for $2007, was discounted by the Bank of Smithboro to the National Bank and was actually paid by them just prior to the suspension of business of the trust and savings bank. It was carried as a direct liability of the Bank of Smithboro to the National Bank, but, in fact, was indorsed to the Bank of Smithboro and by it to the National Bank, and as it was unquestionably good we have also credited the asset side of Munday’s account to the National Bank with this item, as will hereafter appear. The third item was a certificate of deposit of the Bank of Smithboro, No. 6867, for $5125, and was paid November 23, 1912, by charging it to the deposit account of the Bank of Smithboro, which was at that time $22,924.06. The next item, No. 7657, was a certificate of deposit for $10,250, which, after being renewed, was sold to the Ashland Twelfth Bank on January 5, 1914, and charged to the deposit account of the latter bank'. It remained a liability to the latter bank until the closing of the trust and savings bank, June 12, 1914. The remaining three items were Nos. 8345, 8346 and 8347, and were certificates of deposit for $5000 each. The first two of these items, after renewals, were on April 14, 1914, sold and transferred to the A. H. Hill & Company State Bank and charged against the credit balance of the latter bank and later re-transferred to the trust and savings bank and by the latter to the State Bank of Calumet and were charged against the credit deposit of that bank. The indebtedness represented by these two certificates of deposit remained as an obligation in the Bank of Calumet on June 12, 1914. Certificate of deposit No. 8347 was renewed for $5125 and on January 5, 1914, transferred to the Ashland Twelfth Bank, where it remained until the closing of the trust and savings bank. It was charged to the credit balance of the Ashland Twelfth Bank. The banks to whom the certificates of deposit aforesaid were transferred by the trust and savings bank are those known in this record as subsidiary banks, which will be discussed in a later part of our opinion. We have treated none of these notes thus transferred as paid for reasons hereinafter stated. The total amount of the indebtedness above listed to the Bank of Smithboro is $36,462.24, which amount was allowed in full by the master. Two members of the Appellate Court allowed on the total indebtedness aforesaid, indirect liability $1989.23, although the testimony of Radish shows it all paid in due course of business. It allowed on the direct liability $17,-019.51, which was paid.

Three of the certificates of deposit above discussed, and which were numbered 8345, 8346 and 8347, and three other certificates of deposit aggregating $15,012.51, including accrued interest, were all certificates of deposit issued to William Lorimer, Sr., by the Bank of Smithboro as a loan. Lorimer gave a mortgage on his Michigan farm to secure the $30,000 in certificates to C. B. Munday, which is the same mortgage heretofore spoken of and hereinafter more fully considered. This mortgage was paid, as heretofore stated, and Lorimer’s indebtedness to Munday entirely canceled. Lorimer discounted the certificates of deposit to the National Bank and thereby got the money which he had borrowed. For unexplained reasons the National Bank charged three of these certificates of deposit to Lorimer and three of them to the Bank of Smithboro. Lorimer’s liability was only as an indorser. All of them should be charged to the Bank of Smithboro, and in this accounting we have charged them all to the Bank of Smithboro as a direct liability, and when we come to consider Lorimer’s indebtedness we deduct them from his obligations for reasons which will appear later. We have therefore allowed the debt of the Bank of Smithboro in the sum of $51,474.75 as good and collectible, because it is all a direct liability of C. B. Munday. C. B. Munday & Co., as already explained, owned this private bank. It was a going concern and according to the appearances in this record a very thriving country bank from the time of the organization of the National Bank to the day it was denationalized, and continued as a going bank until the closing of the trust and savings bank, on June 12, 1914. In addition to the fact that a portion of this obligation was paid and Munday good for the remainder of it, it is clear from the evidence in this record that the entire sum could by proper diligence have been collected by the trust and savings bank long before the bank was closed, even if the Appellate Court’s showing that Munday’s assets only equaled a little more than 92 per cent of his liabilities on the day the trust and savings bank began business. The Bank of Smithboro is shown to have been a thriving country bank at that time and did considerable business, as already stated. There was not a breath of suspicion, so far as this record discloses, that Munday was insolvent or without ability to pay his obligations in full. On the other hand, he was reputed by his neighbors and by all the business men in the country who knew him or knew of him, to be worth at least a half million dollars above his indebtedness. He had unlimited credit, and all that the trust and savings bank would have had to have done to collect this indebtedness would have simply been to have made demand and insisted on payment when due. The appellee in this case is not to be prejudiced as to any debt considered in this record by the fact that Munday, the vice-president and managing head of the trust and savings bank, had allowed collectible debts to the National Bank to go uncollected until the trust and savings bank was finally closed for business.

The Bank of East Alton was another private bank, — a partnership composed of C. B. Munday and J. G. Mun-day, — and on October 21, 1912, was indebted to the National Bank on three demand notes aggregating $15,052.50, including accrued interest, and also as indorser on eight notes of its customers re-discounted to the National Bank, aggregating $1789.40. Radish testified that the eight notes representing the indirect liability “were cleaned up and paid in the regular and ordinary course of business,” as the books of the bank showed, and that he knew of no reason why they were not good on October 21, 1912. This testimony is undisputed, and two members of the Appellate Court have given the notes representing the indirect liability full value while the third member of that court dissented and found them worthless. Two of the demand notes were renewed April 24, 1913, and were sold to the Broadway State Bank in December, 1913, and there remained, the same being charged to the deposit account of the latter bank. The third note was renewed April 24, 1913, and was sold to the State Bank of Cal