Hegeler v. First National Bank of Peru

Citations

• 129 Ill. 157
• 21 N.E. 812

Syllabus

<p>X. Fraud—as between creditors—a prior creditor omitting to disclose his claim or his security. The fuere failure of a creditor to disclose the fact that he has been secured by the debtor’s notes, with power of attorney to confess judgment, and the creditor failing to enter up judgment for several months after his debt is due, will not constitute a fraud against other persons who may afterwards give the debtor credit on the faith of his apparent solvency. Even if such preferred creditor had knowledge of his debtor’s insolvency, he would not be bound to disclose that fact, or the amount due from such debtor.</p> <p>2. But if the prior creditor, having knowledge of the insolvency of a person, loans him a large sum, taking notes, with a power of attorney for the confession of judgment thereon, as a security, and such creditor at the time agrees to conceal the fact of the loan and the security so given, and allow the debtor to retain the full control of his property, free from any record or known lien, and in pursuance of such agreement does conceal the facts in relation to such indebtedness for nearly a year, with the intention of allowing the debtor new and further credit elsewhere and to defraud other creditors, it seems that such prior creditor would be guilty of a fraud, for which he should be postponed to the rights of other creditors.</p> <p>3. In this case, a bank loaned an embarrassed or failing corporation a large sum of money, taking its notes due one day after date, secured by a power of attorney authorizing the confession of judgment on the notes at any time thereafter, and retained such notes for nearly a year after their maturity without disclosing to the public the fact of the loan or the existence of the bank’s security, during which time the corporation, on the faith of its solvency and property in its use and control, was enabled to, and did, obtain other considerable loans. The bank never agreed to conceal its claim, and there was no evidence tendi