Hulse v. Mershon

Citations

• 125 Ill. 52
• 17 N.E. 50

Syllabus

<p>1. Insolvent debtors—preference of creditors—to what extent allowable—as to attorneys’ fees included in judgment by confession. While a debtor in failing circumstances, who does not seek the benefit of the general Assignment act, may prefer one creditor to the exclusion of others, when he does so in good faith, it is also true that a gift or voluntary conveyance by an insolvent debtor is presumptive evidence of fraud, and void.</p> <p>2. The right of an insolvent debtor to give a preference among his creditors can only be exercised as to the amount actually and lawfully due, as against the rights of his other creditors who are not preferred. It is only “for a debt bona fide due,” that a person may confess judgment.</p> <p>3. In this case, a failing debtor gave certain of his creditors his notes for the sums actually due them, and about fifteen per cent of their amount in addition, as attorneys’ fees, with a power of attorney to confess judgment for the full amount of the notes, including the attorneys’ fees. The attorneys knew, at the time the notes were given, that the debtor was insolvent: field, that as to the other creditors not preferred, the amount of the attorneys’ fees was a gift to the preferred creditors, and fraudulent and void.</p> <p>4. The moral obligation resting upon a debtor to see that his creditor gets all his money without the deduction of fees, is a sufficient consideration for a contract between a solvent debtor and his creditor to have judgment confessed for a reasonable attorney’s fee, in addition to the debt, but this can not be done to the prejudice of other equally meritorious creditors.</p>