Edward C. Hegeler. A Protest against "the Supreme Court of Illinois [rej Hegeler v. 1st Nat'l Bank of Peru, 111 THE UNIVERSITY OF ILLINOIS LIBRARY ..- ' A PROTEST AGAINST THK SUPREME COURT ILLINOIS, AND ALSO AGAINST ITS LEGAL AND MORAL DOCTRINE AS EXPRESSED IN AND ILLUSTRATED IN CONNECTION WITH THE CASE OK * C. HEGELKR vs. THE FIRST NATIONAL, BANK OK PERT. A'cportcti in Illinois A'cport. / 'ol. /-'<;, /(/i,'v 757. BY THE PLAINTIFF IN THE CASE. CHICAGO : Tine OPEN Coi RT PI-BUSHING Co. 1890. A PROTEST AGAINST THE SUPREME COURT OF ILLINOIS, AND ALSO AGAINST ITS LEGAL AND MORAL DOCTRINE AS EXPRESSED IN AND ILLUSTRATED IN CONNECTION WITH THE CASE OF EDWARD C. HEGELER "\ / vs. \. THE FIRST NATIONAL BANK OF PERU. \ Reported in Illinois Report. Vol. 129, Page 757. BY THE PLAINTIFF IN THE CASE. CHICAGO : THE OPEN COURT PUBLISHING Co. \ TO THE PUBLIC:- My objects in publishing this pamphlet are public as well as personal : Firstly The Supreme Court has insinuated a charge against me in deciding the case entitled " Edward C. Hegeler against the First National Bank of Peru," (vol. 129 Illinois Reports, page 157) which I must not suffer to pass unrepelled and whose groundlessness and sophistry I must expose. I owe it to my present and future good name and to my family to correct the misinformation and misrepresentation that as- perses my conduct and reputation in connection with the case in view. It devolves upon me not only to manifest the absolute groundlessness of such charge, but also to express the disdain that I properly and naturally feel for those who assail my honor. Secondly It seems to me a duty I owe to the public to expose the delinquencies of the tribunal that is capable of needlessly and falsely visiting upon those suitors that are com- pelled to appeal to it for justice the burden of imputations that are unmerited and that infringe upon their unsullied charac- ters. Thirdly I deem it proper and of urgent need that certain doctrines and standards of law and morals that receive the sanction of our highest judicial tribunal, should be openly dis- cussed, to the end that the public may understand their de- based character and the moral incompetence of those who sustain them. THE CASE PRELIMINARY. On Dec. 22nd, 1882, the De Steiger Glass Company a corporation of La Salle, Illinois, whose capital stock was $50,000 had been carrying on for several years at that place an extensive glass manfacturing business and had made most of its deposits with and transacted most of its financial affairs through the First National Bank of Peru. On the date mentioned above the bank caused to be entered up against the glass company, in favor of the bank, in the Circuit Court of La Salle county, Illinois, upon corre- 42243 Bought of DE S.TEIGER Cf-LASS COMPANY Manufacturers of Glass, Green and Amber Glassware, Wine, Brandy, Mineral Water and Beer Bottles, Flvisfcs, Fruit Jars me * /' -' I credited this showing, and according to it the total liabilities of the company were $40,660, part of which, viz., the window-house mortgage of $5,000, I was to refund for a longer period, leaving a floating indebtedness of $35,660. Against this the assets showed material and stock partly speci- fied in "Exhibit C" and bills receivable of $33,550, so that the real estate outside of the window-house mortgage ( which was a separate part of the plant of secondary importance) was wholly available as unincumbered assets over and above liabilities to within $2,110 of its value. I was convinced that whatever embarrassments the glass company was suffering were due solely to its lack of a sufficient working capital and that the proposed loan of ten thousand dollars by me would very scantily supply that need. The subject of security for my proposed loan arising, the effect upon the credit of the glass company of a mortgage in my favor was discussed, and the prejudice which the giving of a mortgage (even if small) on its property by a business concern is apt to excite. The supposi- tion of a non-recorded mortgage was mentioned here and I told Mr. De Steiger that I did not want such a mortgage, because I regarded such course as dishonest against the public. And I then suggested to Mr. De Steiger that his proper way was to negotiate a loan from somebody to the amount of forty or fifty thousand dollars by mortgage on the plant so as to make the company independent of credit and do a cash business. As, however, such a measure would require considerable time to consummate and as the glass company represented its needs as immediate, the discussion relating to a large loan by a mortgage on the entire plant was only incidental. There- fore, in conclusion of our negotiations and in full faith in the representations made fo me by the glass company of its finan- cial condition, I loaned to it the ten thousand dollars, taking only the ordinary notes of the glass company endorsed by the members of the De Steiger family, who were apparently its officers and principal stockholders, and who, according to Mr. De Steiger 's statement " Exhibit C," had still an unsettled estate amounting to $35,000 which belonged to the De Steiger family, equal shares among five. These notes were three in number, all of them dated September 2 ist, 1882. Two of them were each for the sum of $2,500, due severally and respectively in six and twelve months after date. The third note was for the sum of $5,000, due eighteen months after date. Each of them was endorsed in guarantee of the payment of the same by Phil R. De Steiger, E. A. De Steiger, A. F. De Steiger, J. L. De Steiger, \V. F. Modes, Chas. C. Modes, George Modes, and May E. Burton. In view of the expedient advised by me of raising an ample working capital for the glass company by a large loan on its entire plant, and as, by the statements, the company would still have to carry a floating indebtedness of $25,660 after receiving the desired loan from me, I required of the glass company as one of the conditions of my $10,000 loan a written promise by it that in case it made resort to a mortgage on its property it would give me a first mort- gage. 'The document expressing this promise obtained in my suit the designation " Exhibit L." The fac-simile following this page is a photographic copy of the same, viz. : Again on November 2oth, 1882, the glass company, through its same officer, asked for assistance by way of a tem- porar}' loan, and I advanced to it the further s.um of $4,500 for twenty days against its plain note, and I renewed this note for another twenty days on December gth, 1882, only thirteen days before the seizure of the whole visible property of the glass company. The renewal of this note was guar- anteed by the same endorsers as before, but as to the original I do not recollect. Now instead of exposing to me its real financial condi- tion at the time of its application for the loan of ten thousand dollars, and instead of having no other liabilities outside of those stated in "Exhibit C" (see p. 4), and instead of being liable to the Peru Bank in only the sum of $4, 300 (see p. 4) and to others outside of the window-house mortgage in the aggregate sum of $31,360 (see p. 4), the glass company was at that time liable to the bank in upwards of the sum of $40,000, and so had been and unable to pay any considerable part of the same for upwards of eight months prior thereto. At the time of the trial the bank presented an additional claim of over $17,000, making its whole claim upwards of $57,000. It was also hopelessly insolvent, owing debts which it was E.TC:HEGELER, F. W. MAT1HIESSEN. Sec'y ^5/ X&rty ^j^^^T^i^T^ 2- ^P^/J--2_-^-^^--'Z--*>T_--'n^x-^^e^-p^<-. > / ^J <5>^* r>o unable to pay, besides its liabilities to the bank, to at least an amount equal to the amount of its bank liabilities. Moreover, and very notable in its relations to my case, the glass company had more than eight months prior to the time of its obtaining my loan of $10,000, viz., on January ioth, 1882, executed and given to the bank the two judgment notes above referred to (see p. 4), upon which the above- mentioned judgments in favor of the bank (see p. 4), were entered; and the same were then at the time of the application of the glass company to me lying hid in the hands of the bank, ready and about to issue for the purpose of transferring the entire visible estate of the glass company to the sole benefit of the bank. Thus the means by which the glass company obtained from me my money was fraud of the most conspicuous sort. At once, upon the entry of the above judgments by con- fession in favor of the bank, it was perceived that proceedings were begun which, in the natural course, must operate to trans- fer to the benefit of the bank alone the entire visible estate of the glass company, and by necessary consequence must defeat all attempts by the unsecured creditors to obtain payment of their dues. Surprised and vigilant inquiry was naturally provoked into the business history of the glass company and especially into the relations and transactions between it and the bank. It was ultimately discovered that they were of a very peculiar description, as follows, viz. : THE CASE AS TO THE BANK. The First National Bank of Peru was organized under the National Banking L,aw, with a capital of $100,000. At the time of the transactions here referred to, Theron D. Brewster was its President and Robert V. Sutherland was its Cashier. It employed regularly as its Attorney and Counsel Judge G. S. Eldredge. The glass company began doing business with the bank about January i, 1879. As early at least as the summer of 1880 the bank was noti- fied that the glass company was in need ; for it failed to meet its notes and obtained from the bank extensions. 8 This need grew rapidly during the rest of i-SSo and in 1881. By the National Banking Law all banks organized under it are forbidden to loan to any single corporation an amount greater than ten per cent of the capital of the bank, which per- centage in this case was $10,000. Still, in spite of this man- date, and during the latter part of 1880 and the first part of 1 88 1, the bank had very largely over-loaned to the glass com- pany this legal limit; and whatever may have been its anxie- ties besides, it was specially anxious to conceal its fault from the National Bank Examiner, who made his visit to the bank in December. Having already in its hands more than $10,000 worth of the delinquent paper of the glass company, a very large amount of which had been from nine months to over a year over-due, the bank during the period from about the middle of August, 1881, to about the middle of December in the same year, ostensibly loaned to the glass company over $30,000 by way of app'arent discounts of one note and thirty drafts accepted respectively by one or the other of various parties. The quality of this paper can.be judged by reference to the remarks of the Circuit Court Judge in his decision of my suit, viz.: " Geer was the only one of the acceptors who was "a business man, and in a business requiring such a product " as the glass company made. Burton was a brother-in-law of " DeSteiger and was a laborer in the glass company's works, " and Munn was a lawyer in Chicago and not a customer of " the glass companv. " It further appears in evidence that Phil. R. DeSteiger " told another member of his company that this was sham and " worthless paper and that Sutherland the Cashier knew it ; but "the glass company had got into the bank so deep that it "could not help itself, and that Sutherland required these ' ' deceptive acceptances to be renewed from time to t> me to 1 ' deceive the bank examiner. ' ' None of this paper was ever paid by the acceptors or by the glass company, but as it fell due it was renewed from time to time by the bank. The bank was well aware of the charac- ter of this paper, for it discounted large amounts of it after the acceptors had failed to pay former acceptances and also even 9 took no pains to send other large amounts to the acceptors for collection. Mr. Brewster, the President of the bank, admitted in his testimony in my suit that he understood that the glass company was really getting its capital from the bank. By the loth day of January, 1882, over $13,000 of these acceptances had become due and delinquent and the rest amounting to over $17,000 were morally sure to follow in the same course, as indeed eventually proved to be the case. The glass company was also liable to tha bank on other paper, so as to make an aggregate liability of about $55,000. About $16,000 of this other paper was considered to have no other value than that lent to it by the credit of the glass company. In this situation the glass company proposed to give a mortgage on its entire plant as security for the liabilities of the glass company to the bank, the same to stand also as security to Dr. Corbus, who was endorser on about $8,000 of the same paper, as well as an endorser on paper of the glass company for about $5,000 at Freeport. This proposition was made at a meeting, held at the bank over the situation, on the above date, January 10, 1882. There were present at this meeting Phil. R. De Steiger, the President of the glass com- pany, Dr. Corbus and the President of the bank (Mr. Brew- ster), its Cashier (Mr. Sutherland), and its Attorney (G. S. El dredge). Mr. De Steiger, himself, on behalf of the glass company,at once and spontaneously, offered to give the wholesale mort- gage. He came to the meeting with Dr. Corbus, his endorser, fully expecting that that measure would be exacted of the glass company by all interested. But it was the bank that demurred and, after private consultation with its lawyer, objected to this. It was the bank that manifested special concern for the credit of the glass company, and thrust for- ward that argument against the giving of the mortgage. Its officers testify in my suit to that effect. Mr. Brewster, the President of the bank, testifies: "He" (that is De Steiger) " came in in a few days with Dr. Corbus and said he came to " give us security and also Dr. Corbus on the paper he was on ' ' at Freeport, that he wanted to give a mortgage on his prop- " erty. We consulted about that and finally we told him that " if we took a mortgage, putting it on record might affect their ' ' credit. I went back and talked with Judge Eldredge, and the "officers of the bank thought best to take a judgment note " instead of a mortgage." "It was for our interest to have them continue." " I agreed that we would try to keep them along." And on cross examination: Q. " And it was first proposed that a mortgage should be given. Who made that proposition ? " A. " Phil R. DeSteiger." Q. " Who raised the objection to giving a mortgage ? " A. "I think Judge Eldredge raised the objection to giv- ing a mortgage." Q. ' ' You said something about placing a mortgage on record would hurt or destroy their credit." "What was it you said on that subject ? " A. "I said that; that I thought it would, if we took a mortgage, meaning if we took a mortgage that effect would follow. To put it on record would injure their credit." Q. " And you thought if you took a mortgage putting it on record would ruin their credit ? " A. "Yes sir." Q. ' ' And that was the reason then why you did not take a mortgage at the time ? ' ' A. " That was one of the reasons ; yes, sir." Q. " And in lieu of the mortgage and putting it on record you took this judgment note of $35,000 and kept that in your safe?" A. "Yes, sir." Q. ' That did not appear in any manner upon your books ? ' ' A. " No, sir." And Mr. Sutherland, the Cashier of the bank, testified: "Philip DeSteiger first suggested giving a mortgage at "the meeting January 10, 1882, and I, Mr. Brewster, and Judge " Eldredge objected because we were afraid it would injure the "credit of the glass company." Q. "You thought that the taking of a mortgage of $35,000 and putting it on record that that would be publish- ing to the world the condition of their accounts with you and 11 the amount of their obligations to you and it would injure their credit ? '* A. " Yes, sir." Q. "And, therefore, instead of taking a mortgage and putting it on record, you took the judgment note of $35,000 ? " A. " Yes, sir. Mr. Phil. R. De Steiger said at the time that we have the total indebtedness of the glass company except such as might have been contracted on account of workmen and material used there in the factory. I supposed at the time he was telling the truth." That the glass company represented at the meeting of January 10, 1882, that it had no considerable indebtedness beyond the liabilities in which the bank was interested except for labor and material, was also testified to by Mr. Brewster, the bank President, who also testified that he then believed the same. So, not according to the purposes of the glass company as it had projected them, but upon the potent persuasions of the bank prompted solely by concern for its own inter- ests, it was tacitly agreed (that is, for reciprocal considerations, mutual assent or coalescence of minds to the same set of exe- cutive doings was mutually affected) between the bank and the glass company that the glass company instead of virtually going into liquidation should continue in business ; that the 'credit of the mutually-recognized-as-insolvent and credit- worthless glass company should be supported and fostered as to others ; that as means to that end no mortgage as proposed should be given, but in lieu thereof that the entire substance of the glass company should be so put into the power of the bank by judgment notes, that while others should be led to believe that good recourse was available for their present and prospect- ive credits on the property of the glass company that belief should always prove disappointed ; that as further means to the same end the existence of such judgment notes should be concealed by the bank, and the glass company allowed to retain the apparent full control of its property as free to the recourse of other present and prospective creditors ; that the bank should further financially assist the glass company, and that the glass company should in the present and future prefer 12 the bank over its other present and future creditors and govern its conduct accordingly. This expedient of taking wholesale judgment notes in place of other security, so proposed by Judge Eldredge, the lawyer of the bank, was the natural advice of a practitioner who based his advice upon the former decisions of the Supreme Court. Pursuant to the agreement thus effected the two judg- ment notes were delivered and carefully concealed. One of them had been given in the usual way of the business of the bank on December 24, 1881, and was for the sum of $5,200 due ten days after date. To this was appended, at the time of the meeting above stated, a warrant of attorney to confess judgment at any time. The other was a regular judgment note for $35,006 dated January loth, 1882, and due one day after date. This done the respective parties to the agreement pro- ceeded to further carry out its stipulations and effected the com- plete concealment of the judgment notes, the apparent full control by the glass company of its property as free to recourse, the obtaining by it of credit, the continuance of its business until the entry of said judgments, the preferment of the bank, and all the other purposes proposed to be attained by it. From February 23, 1882 to March 9, 1882, the glass com- pany had an apparent balance to its credit on the regular books of the bank of nearly $8,000. Yet, although the $5,200 note was overdue, the bank contrary to its otherwise universal custom and without any excuse did not require the note to be taken up. Also, from about July 12, 1882, till the time of the entry of the judgments, the bank cashed the checks of the glass company and instead of entering them all on the books regarded some as cash and carried them along increasing in amount from day to day until at the time of the entry of the judgments these amounted to- over $10,000, and upon them, and perhaps some other claims, a further judgment against the glass company in favor of the bank was rendered for upwards of $17,000. Besides its debt to me the glass company between January loth, 1882, and the time of the entry of the judgments contracted debts to others in large amounts. 13 THE SUIT AND PROCEEDINGS THEREIN. At the time when the bank entered up its judgments against the glass company none of my notes were due, but upon my demand therefor the glass company gave to me on Dec. 30, 1882, a judgment note for the amount owing to me, $14,500, and on the next day I had judgment in my favor entered up and ex- ecution issued and levied on the glass company's plant. As I was, perhaps, the largest unsecured creditor, I filed my bill in equity against the bank in the interest of all the credit- ors as well as myself, and to the best of my advice and ability prosecuted the suit thus begun through the different grades of the courts as long as any legal resource was available. As the case was decided against me in the Circuit Court on the basis of the former decisions of the Supreme Court regarding judg- ment notes, I desired to prosecute the matter in the Appellate and Supreme Courts still in the interest of all creditors who would join with me. However, this representation by me on appeal of other creditors had to be abandoned on the advice of my lawyer that it was impracticable. In every stage of the proceedings under my bill the crit- ical and controlling question has been, as of course I was well aware it would be, the question of fraud, the question of whether or not the relations and transactions between the bank and the glass company, morally fraudulent, were legally so. I was aware to some extent of the narrowing influence that the habitual recourse to precedents rather than to princi- ples admittedly exercises upon the decisions of courts of law, especially those of lower rank, and so I was prepared to sustain without surprise whatever disappointments might be in store for me by the action of the lower courts, but I strongly hoped and expected that the Supreme Court would deal with the question of law involved in my case in a spirit that would recognize its importance. Indeed, I thought myself warranted in expecting from the Supreme Court a marshalling and critical study of the prece- dents as related to the underlying principles which the prece- dents are supposed to exemplify. I believed that such a mode of treatment would lead them to perceive that the business and ethical standards of modern 14 life demand an application of fundamental principles in such a way as still to operate to defeat all the devices of fraud. THE LEADING ALLEGATIONS OF THE BILL. The bill of complaint set out the facts and circumstances heretofore recited at large, and as the gist of its import made averments as follows, viz.: "That although the notes upon which said judgments were confessed in favor of the Peru Bank were dated anterior to the time when the indebtedness for which said judgments were confessed was contracted, still said notes were kept by said bank in its custody and concealed from the knowledge of complainant, and the judgments thereon were confessed after said glass company became indebted to complainant. That it is inequitable and unjust for said bank to assert a lien upon said premises under said judgments as against complainant." "Your orator would further represent that, although said judgments in favor of the First National Bank of Peru were not entered up until December 22, 1882, yet said notes both be- came due in January, 1882, and were each accompanied by power of attorney to confess judgment at any time; that prior to January 10, 1882, the date of execution of each of said powers of attorney, the De Steiger Glass Company was unable to meet its obligations, and was insolvent, which was then, and prior thereto, known by said First National Bank of Peru ; that said bank had cause for so believing ; that just prior thereto said glass company offered to mortgage its property to said bank, but said bank refused, because it would injure the credit of the glass company and prevent it from obtaining else- where further credits and loans ; that thereupon said bank took from said glass company said notes and powers of attorney attached thereto, and agreed to conceal the same and to allow said glass company to retain the full control of the property free from any recorded or known lien; that in pursuance of such agree- ment said First National Bank of P'eru, with the intention of allowing said glass company to obtain new and future credit elsewhere and to defraud its creditors, did keep concealed in its possession for over eleven months, and until December 22, 1882, said judgment notes, when it entered judgment thereon and took out executions and made levies as aforesaid, with the ex- press purpose of defeating the just claims of your orator and 15 other creditors of said glass company incurred during the pe- riod of said concealment, and concealed the amount of indebt- edness from the glass company to it until December 22, 1882." "That your orator advanced $10,000 Sept. 21, 1882, and $4,500 Nov. 20, 1882, on the false and fraudulent statements of the De Steiger Glass Company as to its financial condition, and upon the delusive and fictitious credit given it by said First National Bank of Peru in allowing it to retain all its property apparently free from incumbrance, and that had your orator known or suspected the existence of said judgment notes, he would have given no credits or loans whatever to said glass company; that such concealment enabled the glass company, under the semblance of being the owner of a large amount of unincumbered real estate and personal property, to deceive and mislead your orator and other persons to give it credit that would otherwise have been withheld, by reason of which said glass company did contract the aforesaid debts to your orator, now remaining wholly unpaid." Voluminous testimony was taken, all of which was sup- posed to be relevant to the allegations of the bill of complaint, and in November, 1886, the case was tried in the L,a Salle Cir- cuit Court. From that Court appeals were taken first to the Appellate Court and then to the Supreme Court of Illinois. While my case was pending in the Supreme Court, Mr. E. F. Bull, my senior counsel, who had had the chief manage- ment of my suit and who alone was at the time fitly familiar with the points of law and fact involved, died, and the con- duct of the suit fell upon his surviving partner, Mr. Strawn, who was comparatively uninformed regarding it. On March 5, 1889, Mr. Strawn, in forwarding to me a copy of the brief on my behalf that he was to file on the mor- row of that day, informed me that the other side would now file their brief, after which I would have an opportunity to file a reply brief to whatever should appear to require it in the brief of the other side. The brief of the bank was forwarded by mail on March 13, 1889. On the next day but one I wrote to Mr. Strawn, saying: " I received appellee's brief and I wish an answer to be given to the remarks of counsel on pages 27 and 28." 16 These "remarks" were an impertinent and groundless ad ho mine in argument appended by Judge Eldredge, the law- yer of the bank, to the main body of the suggestions of his brief. Referring to "Exhibit L," and the circumstances under which it was given, he went on to argue or rather in- sinuate that I had done just as the bank had, and he concluded by saying : "So it will be seen that this loan was made upon the ex- press stipulation that he (Hegeler) should have the first ' ' lien by way of a mortgage on the property of the De Steiger " Glass Company when the exigency should occur for its execu- Thus he insinuated that I was. in collusion with the glass company in the same way as was the bank. At the time of the trial of my case in the Circuit Court the counsel for the bank and for the glass company had made an effort to produce an impression to this same effect and had entirely failed therein. This had also been repeated in the Appellate Court. On the next day I received a letter from Mr. Strawn, saying : " Your case with the Peru Bank has been called and taken under advisement by the Supreme Court and the time for fur- ther argument is closed , ' ' It thus occurred that the sophistries as to my conduct insinuated into my case by the lawyer for the bank were not immediately answered and resented. In June, 1889, the Supreme Court filed their opinion adverse to my contention. After reciting the allegations of my bill (see p. 14) as the sole ground on which I expected to prevail they declare as follows, viz.: " It must be admitted that if the averment that ' ' appellee ' agreed to "conceal the same, and to allow said glass 1 ' company to retain the full control of the property, free from ''any recorded or known lien, and that in pursuance of such " agreement it did conceal,' etc., was stricken out of the bill, it ' ' would be demurrable for want of equity appearing in its face " Field etal. vs. Ridgley et al., 116 111., 424." 17 " There is not a particle of evidence in the record to sup- port that averment." It would naturally seem that when a court has concluded that there is no proof whatever of the controlling facts of a case, they were supplied with the very best possible grounds for dismissing it. But evidently such grounds were not sufficient for the Illinois Supreme Court in my case, for they virtually proceed to imply that my own counsel were aware of the utter ground- lessness of the controlling averment and that in arguing the case my counsel virtually confessed a total failure of proof in its support. They go on as follows, viz. : " There is not a particle of evidence in the record to sup- port that averment, nor is it relied upon in the argument as being essential to complainant's cause. On the contrary, the argument proceeds throughout upon the proposition that the bank took its notes and held them under circumstances that made its conduct operate as a fraud upon others. There is no pretense that there was any agreement to conceal its claim against the glass company, much less that any such agreement was made for the purpose of enabling the company to obtain credit from others. No evidence can be found in the record proving or tending to prove acts or declarations on the part of appellee calculated to induce appellant to give credit to the glass company." Considering that a mere reference to the record in the case and to the printed briefs and arguments of my counsel is all that is needed for the flat disproof of these wholesale declara- tions we may say that the same ought to beat least astonishing. The averment in question was precisely the very gist of our reliance. In all stages of my case it w.is pretended by all means that the bank agreed to conceal its claim against the glass company and for the purpose of enabling the company to obtain credit from others. In proof of this I will give some decisive quotations from the brief filed by my counsel in the case. After printing in full the controlling allegations as they are hereinbefore printed (pp. 14-15) the brief goes on : 18 " If these allegations are sufficient in equity to authorize : 'the relief prayed for then the decree must be reversed, for n 3. The words of the court, " he was willing," etc., with their context, might impty that appellant had an agreement with the glass company, that in case they were about to fail, he might be secured by mortgage before the creditors could find out the condition of the company, an implication not war- ranted by the evidence. 4. No secret lien was contemplated by the written agree- ment in any event. Appellant declined to take a secret lien when he might have done so, and thus make himself secure. That he contemplated an unfair preference in the future is in- compatible with his action in declining to take a preference when he lent his money. There was no lien created by the agreement, and no publicity was necessary to be given to it for the protection of anybody. Publicity that appellant had loaned them $10,000 without security, would have enhanced their credit. 5. The judgment note given to the bank was a secret lien actually made. It has no legal or moral resemblance to the written agreement given to appellant. 6. The testimony of appellant concerning the object of the agreement was not brought to the attention of the court, although it appears in the full record of the case. The testi- mony appears in the stenographer's report as follows : Q. What transpired between you and Mr. De Steiger with reference to security on this loan at the time you gave it, if anything? Tell the court just what passed between you and him on that subject. A. Well, we spoke in a general way about it what security he could give me and then it was spoken of if he could perhaps give a mortgage, and then I think I mentioned myself, or he himself, if he gave a mortgage, I think I men- tioned that if he gave a mortgage it would spoil their credit in business ; and then it was spoken of that he perhaps might give a mortgage which was hot recorded the idea suggested itself and then I concluded further and said that would not do because it would be dishonest against the public to hold a mortgage in that way without recording it. Q. (By Eldredge for appellee.) Who said that? (Petition for Rehearing, continued.} A. I said so. I said, take the personal indorsement of the members of the De Steiger family to put upon the back of these notes ; and then before I gave him the money I asked him yet to give me a written promise that in case he should want to give a mortgage should have to give a mort- gage then, before they should give it to anybody else, they should give me a first mortgage. Q. Have you that paper? A. (Producing Ex. L. ) I think this be it. Exhibit L, offered and read in evidence. Cro.ss-examination by MR. DUNCAN. Q. Did you ever inquire, down to the time that you made either of these loans, that is, either the loan of Sep- tember 2ist, or your loan of November 20, 1882 of either Mr. Brewster or Mr. Sutherland, or anybody connected with the First National Bank of Peru, as to whether the De Steiger Glass Company owed them anything or not ? A. I made no inquiry. I have no recollection thereof. Q. They made no representations to you upon the sub- ject, as to whether the De Steiger Glass Company was indebted to them or not ? A. No, sir. I had no intercourse with them, no recol- lection of any intercourse with them whatever. Q. Did you ever tell the Peru bank people, or any of them, that you held this arrangement that is evidenced by this writing, upon which you were to have a first mortgage in case anything should happen ? A. No. Q.. You never communicated that fact to them ? A No, sir ; I did not. MR. HEGELER, recalled. (After argument had com- menced.) Q. Are you hard of hearing ? A. Yes, sir. Q. Difficult to understand frequently ? You have a dif- ficulty of understanding what is said ? 26 (Petition for Rehear uuj, continued.') A. I overhear some. Yes, sir, but specially I don't hear all in detail what is said. I only hear in general any ques- tion. Q: I find here in your testimony which is written out this question : ' ' Did you ever tell the Peru bank people, or any of them, that you made this arrangement that this is evidenced by this writing upon which you were to have a first mortgage in case anything should happen ? ' ' To which you made answer, "No." Is there any misapprehension ? A. I didn't hear the last words ; otherwise I should have resented them on the spot. Q. Did you have any arrangement with them by which you were to have a first mortgage in case anything should hap- pen f A. In case anything should happen ! Nothing ; it was quite another case. In case they should need the money, and the money I was to give them was insufficient to give them running capital that appeared when he brought in a second statement it was to amount I think the debts were $40,000 that was the intention of it ; if he gave me those if I gave him those $r 0,000, and that would not give them sufficient running capital, yet in the ordinary course of business for doing successful business, and it would apparently be or might be, or they might find it was necessary they should have a large loan or a larger amount, it would only be possible on a mort- gage. I suppose he spoke at that time that he might have to get a loan of $50,000 on a mortgage. They could get suffi- cient running capital for their business only on a mortgage. That idea suggested itself to me as far as I recollect ; pretty distinct recollection ; then, in that case, if they should have to give such a large mortgage, in this way, in that case I should be secured on the first mortgage for myself ; that they didn't give a mortgage to anybody, and I was out. Q. There was no arrangement for a mortgage in case anything should happen? A. Never ! I would treat it with contempt ; all other arrangements, except that which appears in the paper as. you have explained it here ; all what is in the paper ; that is all. 27 (Petition for Rehearing, continued.') Cross-Examination by MR. DUNCAN. Q. You took this writing that De Steiger gave you, and that he signed as part of the transaction between you and him ? A. That is the last thing my recollection, the last thing I got- Q. Excuse me ; this writing that De Steiger made to you in which he agreed to give you a first mortgage and put you in ahead of anybody else, you took and kept that paper, didn't you ? A. I have kept the paper put me ahead of anybody else, how do you mean that ? Q: Just what the writing says, that is all I mean. MR. BULL : The writing does not say any such thing. A. In case he should have to give a larger mortgage, that is, what is meant ; we have spoken of that before, that I am confident ; we spoke of that before that I had that writ- ing. I am very certain that we have spoken of that before I had that meeting that I would have to that he would have to take a larger amount on a mortgage larger amount to give him sufficient running capital, and in that case that was referred to, and in that case I should get it that was meant. As the court has made general intimations without defi- nite specifications as to appellant's conduct, appellant is com- pelled, for the purpose of disproving the intimations, to study how the court came to its conclusions and to make definite specifications thereof. From the evidence of Hegeler, it appears that appellant had to draw up a paper which stated that the De Steiger Glass Company promised that as Hegeler loaned it $10,000 without security, on its notes running one, two, three and four years,* it would not mortgage its works during that time, so as to give to any one else a preferred claim on it and its works. Does now * This is an error owing to not having the papers which had been in the hands of the court since the trial of the case in Oct. 1886, about three years. The notes were three only, and ran six, twelve and eighteen months from Sept. 21, 1882. 28 (Petition for Rchoi ri inj, <-<>n tinned.} the paper drawn up by Hegeler have this meaning and only this ? A superficial examination may make the reader believe that the words therein " except him," are unnecessary, and this may have caused the misapprehension of the court that Hegeler may at that time have had an understanding with De Steiger that he was to have a mortgage under certain undefined cir- cumstances. If the court will please read the De Steiger paper (Exhibit L), omitting the words " except him," the court will find that the paper seems liable to be construed to have the meaning that De Steigers will not and are not to mortgage their works to anybody (which words include Hegeler) during four years, except at their oivn pleasure, for the sake of their obtaining a larger running capital. To guard against this meaning Hegeler inserted the words " except him."* The evidence shows that the circumstances at the time of drafting the paper. De Steiger had on the, or a preceding day, applied to Hegeler for a loan, being pressed for money. Upon Hegeler's request, De Steiger had written from memory a statement of their affairs, their assets and liabilities being Exhibit C. (Abst. 16.) Hegeler had then demanded an abstract from their books. At the time Exhibit L was wiitten De Steiger had presented the abstract of the books (Exhibit D), which showed an indebtedness much larger than he had stated from memory. This must have produced in Hegeler the uneasiness that De Steiger might have owed still more than the abstract from the books (Exhibit D) showed, in which case he would not impair his right to demand a mortgage. 8. Appellant's idea was not that he should be a preferred creditor in case the glass company might be about to fail. On the contrary, appellant was willing to take his chances, and did take his chances, with all unpreferred creditors. 9. It is evident the mortgage thought of was a mortgage large enough to raise n sum sufficient to make the glass com- pany independent of credit. : My recollection is that I wrote the agreement on a slip of paper which Mr. De Steiger copied. 29 (Petition, for Rehearing, continued.*) 10. That the court misconstrues this writing is evident from the opinion, where it inserts into the agreement the words " he should be notified." These words do not appear in the writing, and were not within the contemplation of appellant. IV. Presentation of points in support of appellant's petition for a rehearing in the matter of the conclusions dvawn b}^ the court in the following portion of the opinion: " It would certainly be difficult to condemn the transac- tion between appellee and the glass company, without also pronouncing that of appellant fraudulent ; but we know no rule of law, or business, which condemns either." 1. There is no similarity of action between the two cases. Appellant declined a secret lien while appellee accepted one. 2. Appellant declined to occupy the position of a pre- ferred creditor ; appellee demanded and accepted that position. 3. The secret lien given to appellee was to the prejudice and misleading of other creditors of the glass company. The agreement given to appellant could not be to the prejudice of anybody. 4. As the purposes of the respective transactions were unlike, so the consequences were different. The action of appellant did not result in benefit to himself nor injury to others. The reverse was the case as to the action of appellee. 5. In drawing a moral parallel not warranted by the evidence, the court may unwillingly do an injury to appellant more serious than the mere loss of the money involved in the suit. 6. While the opinion disclaims any intention to condemn the transaction assumed by the court between appellant and the glass company, it likens the transaction to the action of the bank, and thereby makes a comparison highly injurious to appellant. (Petition for Rehearing, continued.) V. Presentation of points in support of appellant's petition for a rehearing in the matter of the conclusions drawn by the court in the following portion of the opinion: " It must be admitted that if the averment that appellee 4 agreed to conceal the same, and to allow said glass company to retain the full control of the -property, free from any rec- ord or known lien,,and that in pursuance of such agreement, it did consent] etc., was stricken out of the bill, it would be demurrable for want of equity appearing on its face. . " There is not a particle of evidence in the record to support that averment, nor is it relied upon in the argument as being essential to complainant's cause. * * * There is no pretense that there was any agreement to conceal its claim against the glass company, much less that any such agreement was made for the purpose of enabling the company to obtain credit from others." 1. There is no evidence that the president of the bank said to the president of the glass company: "In consideration of the giving of these judgment notes to us, we agree to con- ceal them;" but that such was the understanding must neces- sarily be inferred from the facts proved. The bank refused to take a mortgage on the express grounds of publicity and accepted the judgment notes on the express grounds of secrecy . How could any argument be more clear and explicit? The arrangement was perfectly un- derstood and mere promises would have been but an idle ceremony. Their minds had met, and that is the gist of an agreement. 2. But this court has frequently said that positive admis- sion of fraud, or of a fraudulent intent, are not to be expected, and many things are indeed fraudulent as to third parties which are not fraudulent as between the original parties. 3. We think it must be error to require us to prove that the parties by words expressed a fraudulent intent when we have proved facts which establish it. 4. In appellant's original argument cases quite similar to the one at bar are cited, where it was held immaterial that the ( Petition for Reliear ing, -continued.} parties had no fraudulent intent in the concealment ; if the con- cealment did, in fact, operate as a fraud on future creditors. 5. Judgment notes given in cases of financial embarrass- ment are fraudulent in case concealment by both maker and payee is an essential condition coupled therewith at the time of execution; that is, the concealment of the indebtedness by both debtor and creditor is in fact the fraudulent part. The judg- ment clause is for the sole purpose of making the conspiracy effective. * * * [Head VI. omitted. It refers to a technical point of prac- tice in error.] * * * VII. Presentation of points in support of appellant's petition for a rehearing in the matter of the conclusions drawn by the court in the following portion of the opinion : " We know of no rule of law or business to condemn the transaction either of appellant or of appellee." 1. Appellant insists that the transaction which the court assumes took place between appellant and the glass company, was fraudulent. If the glass company had found it was insolvent .and came and notified appellant, and agreed or had previously agreed to keep running until appellant could get a mortgage on record, even though the delay had been for a single day only, then for such single day the glass company would have deceived its creditors and appellant be in collusion with it. 2. It may be said that the glass company might have had the private thought, during that single day, to reimburse the creditors it was deceiving, but that does not make the deed undone. 3. It may be said there might be an understanding that the instant the glass company found, or came to the conclusion, it was bankrupt, its first thought and action should be to make appellant a preferred creditor, so that there was no time re- (Petition for Rehearing, continued. > quired for preparing and recording the mortgage. In that case the glass company would, of necessity, have had to secrete such a supposed understanding. It would have constantly asked men to work for it and asked persons to sell it goods on credit impressing the belief upon them that it could and would pay them, while internally saying that it made these men give credit under a peril which it kept concealed .from them, and in such deception appellant would have been a participant. 4. At the same time the bank bought from the De S ei- ger Glass Company the fictitious drafts upon Munn and others, and debited their "Bills Payable" account and credited them to the De Steiger Gla^s Company, the bank lost all claim upon the glass company therefor, so far as the public is concerned. A debt can have remained only to such extent as the law may recognize as existing between two persons jointly occupied in an unlawful transaction. In this view, together with the view that judgment .notes secretly held in cases of approaching insolvency are fradulent, appellant filed his bill of complaint in the Circuit Court. 5. Counsel for appellee say, on page 16 of this brief: " The $14,500 Mr. Hegeler loaned the De Steiger Glass Com- ] any, no doubt, added to their appearance of being men of ample means. Shall it therefore be said he designed to, or did, defraud other creditors? Certainly not." But if Mr. Hegeler under such circumstances knowingly allowed the De Steiger Glass Co. to represent to the public, or other creditors, that all the property in their possession was their own and free from incumbrance, he would have partici- pated in such deception. Much more would this be the case if Hegeler had been their banker who is understood to be always watching his customers' proceedings and particularly so when he believes them to be embarrassed. A banker is the financial sponsor of his customer. The honorable judge who tried this case below said in concluding: "It is a matter of regret that by this hard advan- tage not only Mr. Hegeler, but a number of laboring men are liable to lose their demands, yet the validity and priority of liens thus obtained has b. en too often upheld to be now changed (Petition for Rehearing, continued.} * by anything less than a legislative enactment." Will the court also, in our case uphold such opinion? VIII. CONCLUSION, Appellant respectfully suggests to the court that owing t the death of Mr. Bull, the senior counsel on his side, who had the principal management of it, and who was familiar with the evidence and circumstances, the management of appellant's interest was thrown upon Mr. Strawn, surviving partner, who was uninformed as to the points which appellant particularly wished to urge in this court. On the 5th of March, 1889, a P* pellant received a letter from Mr. Strawn, to the effect that he forwarded a copy to appellant of his brief, which would have to be filed on the then to-morrow, and that after the brief for the other side was filed, appellant would have an opportunity to file a reply brief, containing any additional suggestions that might be necessary, and asking that such suggestions be forwarded. Appellee's brief was forwarded by mail to appellant, March 13.. On the i5th of March, 1889, appellant wrote a letter to Messrs. Brewer and Strawn, saying : " I received appellee's brief and I wish an answer to be given to the remarks of counsel on pages 27 and 28." On the i6th of March, appellant received a letter from Messrs. Brewer and Strawn saying : " Your case with the Peru bank has been called and taken under advisement by the Supreme Court and the time for further argument is closed." This did not allow any time for appellant to present the points he desired to present in answer to the injurious comparisons and suggestions contained in the brief of appellee, which comparisons not being contradicted in the reply brief had probably led the court to adopt them as justified by the testimony, while the testimony completely con- tradicted them. Believing that the Supreme Court wrote the opinion under a misapprehension, and that the court would never treat 34 (Petition for lltltcaruuj, < -out in, tied.} lightly the character of an American citizen, nor of any man, appellant respectfully asked a consideration of this case and particularly of the opinion filed therein. Respectfully submitted, M. M. TRUMBULL, and BREWER & STRAWN, Solicitors for Appellant. (End of Petition for Rehearing.) PART II. The Supreme Court after the full information and sug- gestions of my petition for rehearing made at first only some very unimportant alterations in the verbiage of the obnoxious clause and in their amended opinion filed Oct. 19, 1889, left the body of the same to stand in substantially all its insulting import. Their amended language was as follows : " Months after the transactions between appellee and the company appellant according to his own testimony declined or at least consented not to take mortgage security because it would .injure its credit. He refused to take a mortgage and with- hold it from record because he thought that would be dishonest against the public, but he was willing to and did make an agreement with Mr, De Steiger in case the company desired to give a mortgage on its property he should be notified and have a first mortgage. It would certainly be difficult to condemn the transaction between appellee and the glass company com- plained of without also comdemning that of appellant. We know of no rule of law or business by which either should be pronounced fraudulent or immoral and no reflection vpon the honesty or fair dealing of appellant is hereby made." THE OFFENSIVE CLAUSE CHANGES PLACE. However before the publication of the bound volume of the repor s of their decisions which contains my case, the Supreme Court has seen fit to expunge from their opinion the part that expressed their adoption of the offensive insinuation 36 of the lawyer of the bank, but as it would seem they would not abandon the publication of the same altogether, and so instead of embodying the insinuation in the opinion, it has been in- serted in the report of the points made by the lawyer of the bank. As published in the advance sheets the report of my case did not notice this as a point made by said lawyer. This alteration by the Supreme Court of their opinion does not nullify the wanton injury which the publication of the former opinions have done to me, and which the insertion of the scandalous insinuation in the report of the points made by the lawyer of the bank has perpetuated. In the bound volume one may read as follows, viz.: " (Mr. G. vS. Eldredge for appellee.) ******* " Hegeler made his loan to the glass company upon the "stipulation that he should have the first lien by a mortgage on " the property of the company when the exigency should occur " for its execution," etc. Mr. Eldredge, the lawyer of the bank, however, makes the alleged point in his. brief in the language following, viz.: " Mr. Hegeler said he made these loans upon the faith of "the written representation made by De Steiger as president of "the glass company evidenced by exhibits C and D. The last "exhibit (D) Mr. Hegeler says he received before he paid over "the money. The particular attention of the Court is called to "his direct and cross examination. Mr. Hegeler, it appears, " declined to take a mortgage as security but insisted upon the " personal endorsement of the members of the De Steiger "family and a written promise to execute a first mortgage " whenever the exigencies of the situation should require it, in "the words following: "'LaSalle, 111., Sept. 21, 1882. " ' We the undersigned having this day received a loan of " ' ten thousand dollars from E. C. Hegeler, for which we have " * given our note to that amount, hereby bind ourselves unto him " 'that ive TV ill not mortgage our bottle-glass works and-windoTv- "' glass 'works to any one except him during the time that the "' notes remain unpaid unless giving him a FIRST MORTGAGE " '-for the amount due. And we also bind ourselves not to sell 36 " ' the above glass works or any material part thereof during such " ' time. We also agree to have fire insurance on our property "*to the amount of ten thousand dollars transferred to him and " * keep the same up for his benefit. "