author: Mr. Presiding Justice O’Connor Mr. Justice Thomson

text:
    Adolph Wilke, Appellee, v. City of Chicago et al., Appellants.
    Gen. No. 23,839.
    1. Trial, § 288

      —when propositions of law are proper. Propositions of law are proper only when a right to trial by jury exists and has been waived.
    2. Jury, § 8a

      —right to trial by jury. Proceedings brought under the Mandamus Act may be regarded as an action in which the parties are entitled to trial by jury.
    3. Trial, § 295

      —when propositions of law are filed too late. Propositions of law filed after the entry of a judgment in mandamus proceedings are filed too late and, hence, cannot be considered on appeal.
    4. Municipal corporations, § 143

      —when writ of mandamus to compel payment of pension is proper. Where one had been a city fireman for upwards of 10 years, was injured in the line of his duties, and because of such injuries was compelled to resign, had paid all dues and assessments, made application for a pension, which was denied by the Fire Pension Board without allowing or permitting the applicant to present his case, or hearing any evidence whatever, and without investigating in any manner the right of applicant to a pension, the board was without any authority to deny him a pension, and a writ of mandamus to compel the payment of such pension was proper.
    5. Municipal corporations, § 143

      —saving of right of fireman to pension by Act of 1887. The right of a city fireman to a pension under the Act of 1877 was saved to him by the provisions of the Act of 1887 (J. & A. ¶ 1888 et seq.).

    Thomson, J., dissenting.
    Appeal from the Circuit Court of Cook county; the Hon. Charles M. Walker, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1917.
    Affirmed.
    Opinion filed November 6, 1918.
    Samuel A. Ettelson, for appellants; Leon Horn-stein, of counsel.
    William A. Doyle, for appellee.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

Adolph Wilke filed a petition for a writ of mandamus to compel the Trustees of the Firemen’s Pension Fund of the City of Chicago to enroll his name as one of the pensioners, and asked that the respondents be ordered to pay him out of the fund $37.50 monthly. To the petition the respondents filed a general demurrer, which was overruled. They elected to stand by their demurrer, and an order was entered awarding the writ as prayed for. An' appeal was prayed and allowed to this court, but was not perfected.

Afterwards certain persons of the Chicago Fire Department, who were receiving a pension from the fund, filed a bill against the board of trustees, the petitioner and others, to restrain the further payment of a pension to them. Demurrers were filed to the bill and sustained, and the bill dismissed. An appeal was prosecuted to this court where the decree was affirmed. O’Connor v. Board of Trustees of Firemen’s Pension Fund of City of Chicago, 155 Ill. App. 460.

In that case this court passed upon the merits of Wilke’s claim and held that he was entitled to a pension. A further appeal was taken to the Supreme Court where the judgment of this court was affirmed. The Supreme Court, however, did not pass upon the merits of Wilke’s claim, but held that the demurrers were properly sustained, and the bill dismissed, for the reason that the judgment and order of the court in the mandamus proceeding could not be collaterally attacked. O’Connor v. Board of Trustees of Firemen’s Pension Fund of City of Chicago, 247 Ill. 54.

A writ of error was then sued out of this court to reverse the judgment in the mandamus proceeding. The petition was held insufficient, the judgment reversed and the cause remanded with directions to sustain the demurrer. Wilke v. Wilson, 176 Ill. App. 319. The cause was redocketed, and upon leave of court the petition was amended. To the amended petition respondents interposed a demurrer, which was overruled, and they filed their answer. The cause was heard before the court on. its merits, and judgment entered awarding the writ, to reverse which this appeal is prosecuted.

Since this appeal has been pending Wilke died, and his widow has been substituted.

None of the evidence that was introduced on the trial is in the record. The judgment in this case was entered July 19, 1917, and on August 17th following, by agreement, an order was entered allowing the respondents to file propositions of law nunc pro tunc as of July 18, 1917. They were accordingly filed, but the court refused to pass upon them. Propositions of law are proper only where the right to a trial by jury exists and has been waived. Grabbs v. City of Danville, 166 Ill. 441; section 61, Practice Act (J. & A. ¶ 8598). Proceedings brought under the Mandamus Act have always been regarded as an action in which the parties are entitled to trial by jury. People v. City of Alton, 233 Ill. 542; People v. Town of Waynesville, 88 Ill. 469; People v. City of Chicago, 209 Ill. App. 586. But, of course, these propositions of law cannot be considered, as they were filed, too late. Mann v. Learned, 195 Ill. 502.

The respondents contend that the petition as amended is insufficient, in that it. failed to set forth facts which entitled Wilke to a pension. Wilke, in his petition, averred that he was 73 years old and had been a resident of Chicago for the past 64 years; that in 1852 he was a member of the volunteer Fire Department of Chicago and served as such for 7 years and 3 months, at the end of which period, January 4, 1859, he became a paid member of the Fire Department of Chicago and continued as such until the winter of 1868; that in the month of March, 1867, while he was responding to a fire alarm, he was thrown from the hose cart which he was driving and severely injured, and was laid up for a period of about 21/2 months, during which time he was under the care of physicians; that he then returned to the fire department and performed his duties until his health became such that his physician advised a furlough; that he was then out of service on furlough for a year and a half, during which time he was under the care of a physician, and that this furlough was rendered necessary on account of the injuries received in 1867; that he again resumed his duties in the fire department, September 12, 1877, and performed them until 1881; that he was again obliged, on account of the injuries he received in the accident, to discontinue his work; that at the time he retired he was receiving $75 per month; that he paid into the pension fund all the regular fees, dues and assessments required of him, or assessed against him; that he complied with all rules and regulations established by the trustees; that he never at any time received any notice from the trustees or from any one acting for them requesting paytnent of dues and assessments that he did not promptly pay; that because of ill health brought about by hardship and exposure while engaged in the service, and physical disability, he was in need of a pension; that at various times he made application to the trustees to be placed on the pension roll and be given a pension of $37.50 per month, but that his application was refused.

After the reversal of the case by this court (Wilke v. Wilson, supra), Wilke by leave of court amended Ms petition. In the amendment he averred that he had been in the fire department for upwards of 10 years before his retirement, and that he continued payment of all dues and assessments of which he had notice after his retirement and complied with all rules and regulations of the board; that he was denied a pension without having been allowed or permitted to present his claim; that he was at no time permitted to give evidence before the board; that the board did not investigate his right to a pension; that they did not hear any evidence or statement of his case, as to the payment of dues and assessments by him, or as to his physical condition, or any other matter; that a pension was denied him by the board without any consideration. A further amendment was afterwards made by leave of court, where he averred that the Corporation Counsel of Chicago, whose duty it was to pass upon his claim, upon investigation of the merits, rendered a written opinion to the board, in which he found that Wilke had complied with all the rules and regulations and was entitled to a pension; that notwithstanding the report and opinion of the corporation counsel, and although Wilke presented himself at different meetings of the board and asked to be allowed to present his case, the board arbitrarily refused to hear him, or recognize the opinion of the corporation counsel, and denied him a pension. Other matters were averred in the amendment which took place subsequently to the filing of the original petition, which under an elementary rule of pleading cannot be considered.

Eespondents, in their answer, admitted that Wilke was 73 years old and that he had been a resident of Chicago for the past 64 years; that in 1852 he commenced service in the volunteer Fire Department of Chicago and served 7 years and 3 months, but denied that he became a paid member of the fire department in 1859 and continued to act as such until 1868. The answer further denied that he was injured as averred in the petition, and also , denied that he had paid his dues and assessments. They admitted that “ at. various times petitioner made application to be placed on the pension roll,” and that the board refused to award him a pension, but averred that such refusal was after they had fully considered his case. They denied that he had been in the service for 10 years before his retirement, and there was a denial of substantially all the other averments of the petition as amended. To this answer a replication was filed and the cause was heard before the court, upon evidence presented and argument of counsel.

The court found the facts in detail, as set forth in the petition as amended; that Wilke had been a member of the fire department for upwards of 10 years; that he was injured in the line of his duties and because of such injuries he was compelled to resign; that he paid all dues and assessments; that he made application for a pension, which was denied by the board without ever having allowed or permitted Wilke to present Ms case, or hearing any evidence whatever, and without investigating in any manner the right of Wilke to a pension; that the board abused its discretionary powers, and that Wilke was entitled to a pension of $37.50 per month from January, 1913, and the writ was accordingly awarded.

When the case was before tMs court on the former appeal (Wilke v. Wilson, supra) it was said that the only averment of the petition as to what was before the board of trustees was that at various times Wilke made application to be placed on the pension roll, “ ‘showing that at the time of Ms retirement Ms salary was $75 per month, and that he was entitled to a pension of $37.50 per month.’ The averment that he was entitled to such pension, of course, is a conclusion. His petition contains no averments with respect to the action of the board from wMch it could be determined that it exceeded its powers, or that it did not properly refuse his application.” These defects have all been obviated by the specific finding of the trial court. We think that the facts as found by the court entitle Wilke to a pension, under the Act of 1877; that his rights were saved by the Act of 1887 (J. & A. ¶ 1888 et seq.), and that he was entitled to a pension when the latter Act went into effect. O’Connor v. Board of Trustees of Firemen’s Pension Fund of City of Chicago, 155 Ill. App. 460. As the record shows Wilke was a member of the fire department for more than 10 years, had paid all dues and assessments, was injured in the line of his duties and as a result was permanently disabled, he was entitled to a pension under the statute, and the board was without authority to deny him a pension, and the writ was therefore properly awarded. Stiles v. Board of Trustees of Police Pension Fund of West Chicago Park Com’rs, 281 Ill. 636.

It is also insisted that the judgment is wrong in requiring the payment of the pension from January, 1913, since the judgment order was not entered until July, 1917, as Wilke in his original petition had expressly waived all claims for any amount due him prior to the entry of the judgment. As the writ of mandamus was awarded on the original petition, we must presume that until the judgment of the court awarding the writ was set aside by this court in January, 1913, the pension was paid. We must also assume in the state of the record that there was sufficient evidence before the court to warrant the order for payment from January, 1913.

The judgment of the Circuit Court of Cook county is affirmed.

Affirmed.

Mr. Justice Thomson

dissenting.

I am unable to concur in the foregoing opinion. The order of the trial court, directing that the writ of mandamus issue as prayed by the petitioner, contains among its findings of fact one to the. effect that the Board of Trustees of the Firemen’s Pension Fund had denied the petitioner’s right or claim to a pension, without giving him an opportunity of presenting his claim or in any manner investigating his right to a pension and without hearing any evidence of the petitioner or any one in his behalf.

The law under which the petitioner seeks a pension at the hands of the Board of.Trustees of the Firemen’s Pension Fund provides that the said board “shall hear and decide all applications for relief under this act, and its decisions on such applications shall be final and conclusive and not subject to review or reversal except by the board.” Section 3, Firemen’s Pension Act, Hurd’s Rev. St. 1908, 398 (J. & A. ¶ 1890).

Under this provision it becomes the duty of the board of trustees to “hear and decide” a petition for a pension, whenever one may be presented, but under the law the board is left to its discretion as to how it shall decide any application for a pension. Under the finding of fact made by the trial court as quoted above, it would have been proper to enter an order directing that a writ of mandamus issue commanding the board of trustees to “hear and decide” the case in question, but it was error, in my judgment, to direct that a writ of mandamus issue commanding said board to decide the case as specified in the court’s order. In People v. State Board of Dental Examiners, 110 Ill. 180, our Supreme Court said: “A subordinate body can be directed to act, but not how to act, in a matter as to which it has the right to exercise its judgment. * * * Where a subordinate body is vested with power to determine a question of fact, the duty is judicial, and though it can be compelled by mandamus to determine the fact, it cannot be directed to decide it in a particular way, however clearly it be made to appear what the decision ought to be.” The following decisions are to the same effect. McCann v. Harris, 114 Ill. App. 308; County of St. Clair v. People, 85 Ill. 396, 401; People v. City of Chicago, 234 Ill. 416, 421; People v. Henry, 236 Ill. 124, 127; People v. Webb, 256 Ill. 364, 373.

Additional reason is furnished for following and applying this rule in a case, such as the one at bar, in which the statutes creating and prescribing the duties and functions of the board of trustees provide that their decisions on applications for a pension ‘ ‘ shall be final and conclusive, and not subject to review or reversal except by the board.” Eddy v. People, 218 Ill. 611, 615, 616; Calder v. City of Chicago, 176 Ill. App. 313, 316, 317; Benner v. City of Chicago, 176 Ill. App. 317, 318; Wilke v. Wilson, 176 Ill. App. 319, 321. O’Connor v. Board of Trustees of Firemen’s Pension Fund of City of Chicago, 247 Ill. 54, contains nothing to the contrary.

The fact as recited by the trial court in its order, that the Corporation Counsel of the City of Chicago may have submitted an opinion to the board of trustees to the effect that the petitioner was entitled to the pension for which he had applied, does not alter the situation. People v. Board of Trustees of Firemen’s Pension Fund, 95 Ill. App. 300, 302.

For this reason, I am of the opinion that the order appealed from should be reversed.


source: Caselaw Access Project

author: Mr. Presiding Justice O’Connor

license: Public Domain

text:
    The People of the State of Illinois ex rel. Rufus M. Potts, etc., and United States Fidelity & Guaranty Company, Appellees, v. Continental Beneficial Association, Adelaide Weiger, Clara Weiger and David Phillips, as Receiver, Appellants.
    Gen. No. 23,989.
    1. Insurance, $ 737

      —when appointment of receiver to take charge of local assets of foreign fraternal association is proper. Where a foreign fraternal association licensed to do business in the State is conducting its business in violation of the law, making worthless the rights of members who are citizens of the State, and is spiriting away its assets, the Attorney General', through the Insurance Superintendent, has the right to apply to the courts to have the local assets sequestered and the association enjoined from conducting further its illegal business in the State, and, to effectually accomplish this, the appointment of a receiver is proper.
    2. Appeal and error, § 1733

      —when decision on former appeal is law of ease. The decision on a former appeal, that the appointment of a receiver to take charge of the local assets of a foreign fraternal association doing business in the State was proper, is the law of the case on the second appeal.
    3. Insurance, § 737

      —when intervention "by judgment creditor in suit to enjoin dissipation of local assets of foreign association and for appointment of receiver unnecessary. A suit to enjoin a foreign insurance association licensed to do business in the State from dissipating its local assets, to restrain it from carrying on business in the State and for the appointment of a receiver, which was brought by the People, on the relation of the Insurance Superintendent, was sufficient to take care of all of the interests of all parties, and it was unnecessary that a fidelity and guaranty company, which was the assignee of two judgments against the association, intervene to have its rights protected, but such intervention was not prejudicial error.
    4. Insurance, § 737

      —what does not affect power of local court to appoint receiver of local assets of foreign association. The power of a court of the State to appoint a receiver of the local assets of a foreign insurance association licensed to do business in the State was not affected by the subsequent appointment of a receiver - by the courts of the State in which the corporation was incorporated.
    5. Insurance, § 737

      —what are rights of domestic and foreign receivers as to administering of local assets. Where a receiver is appointed by the courts of the State to take charge of the local assets of a foreign insurance association licensed to do business in the State, such assets may be administered among the persons equitably entitled thereto without turning them over to a receiver subsequently appointed by the courts of the foreign State in which the association was incorporated.
    6. Appeal and error, § 365

      —when point not advanced "before chancellor not considered on appeal. The contention that the local assets of a foreign insurance association licensed to do business in the State should not be administered by the local receiver, but by the subsequently appointed receiver in the foreign State in which the association was incorporated, cannot be advanced on appeal where not made before the chancellor.
    Appeal from the Superior Court of Cook county; the Hon. Augustus A. Partlow, Judge, presiding. Heard in the Branch Appellate Court at the June term, 1917.
    Affirmed.
    Opinion filed November 6, 1918.

      David K. Tone, for appellants.
    E. J. Brundage, Church, Shepard & Day and Ryan, Condon & Livingston, for appellees; Irvin I. Livingston, of counsel.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

The decree sought to be reversed by this appeal perpetually enjoined the Continental Beneficial Association from carrying on or conducting any business in this State, and made permanent the interlocutory decree enjoining the association from removing, carrying away or disposing of its property located here. It also confirmed the appointment of the Chicago Title & Trust Company as receiver of the assets of the association located in this State, and continued the appointment of such receiver with power to receive any and all assets, to marshal and distribute them under the directions of the court among the creditors of the association within this State, and among such other persons as might be entitled to share in the same, according to their respective rights. The decree also made permanent a temporary order for injunction restraining Adelaide Weiger, Clara Weiger and David Phillips, as receiver, from prosecuting a suit instituted by them in the Circuit Court of Cook county.

The record discloses that after the interlocutory order for the writ of injunction restraining the association from removing, carrying away or disposing of its property located in this State, and appointing a receiver, was entered, an appeal was taken to this court, where upon consideration the order was affirmed. People v. Continental Beneficial Ass’n, 204 Ill. App. 501. Afterwards an amended and supplemental bill was filed, to which the association filed an answer. There was a hearing upon the merits in open court, and the decree appealed from entered.

The association is a beneficial fraternal association, incorporated under the laws of Pennsylvania, for the purpose of effecting beneficial life insurance, and was licensed to do business in this State in 1912. It proceeded to do business and had a membership of about 12,000, many of whom were residents of this State, but by reason of gross mismanagement of its affairs it became insolvent. Other facts appear in the former opinion of this court, which are unnecessary to be set forth here.

The defendants contend that the Superior Court of Cook county- was without jurisdiction to appoint the receiver of the local assets of the association, for the reason that the Attorney General has no authority, either at common law or by virtue of the statute of this State, to maintain such a suit. We think it clear that where a foreign fraternal association licensed to do business in this State is conducting its. business in violation of the law, making worthless the rights of members who are citizens of this State, and is spiriting away its assets, the Attorney General through the Insurance Superintendent has the right, and it is his duty, to apply to the courts, as was done in this case, to have the local assets sequestered, and the association enjoined from conducting further its illegal business in this State. This cannot be effectually accomplished without the appointment of a receiver, and therefore the court rightfully appointed the receiver. This is what we held on the former appeal, and of course it is the law of this case in this court.

It is also contended that the decree is wrong and should be reversed for the reason that there is a misjoinder of parties complainant. , The suit was brought by ,the People on the relation of the Insurance Superintendent, on behalf of the State and all others entitled to join. Afterwards, by leave of court, the United States Fidelity & Guaranty Company intervened as a complainant. This company was the assignee of two judgments against the association. We think the suit as brought by the People was sufficient to take care of the interests of all parties, and that it was unnecessary for the United States Fidelity & Guaranty Company to intervene to have its rights protected, but the intervention in no way prejudiced the rights of the defendant. - '

After the receiver was appointed in the instant case, proceedings were instituted in Pennsylvania to wind up the corporation, and a receiver was there appointed. Subsequently the receiver brought suit in the Circuit Court of Cook county, asking that he be appointed ancillary receiver. The prosecution of that suit was enjoined by the decree in the instant case.

It is contended that the assets here should have been turned over to the Pennsylvania receiver. The power of the Superior Court to appoint a receiver was in no way affected by the appointment of the receiver by the Pennsylvania court, and, under the facts, we think the Superior Court was warranted in administering the Illinois assets among the persons equitably entitled thereto. Moreover, so far as the record discloses, no suggestion was made to the chancellor that the assets should be administered as defendants now contend.

The decree of the Superior Court of Cook county is affirmed.

Affirmed.


author: Mr. Justice Taylor

text:
    Elizabeth Medenwald, Appellant, v. John J. Walton and T. A. Somerville, trading as Hunter, Walton & Company, Appellees.
    Gen. No. 23,878.
    L Gaming, § 47

      —when recovery of treble damages not proper on ground that transaction relates to. Where butter is bought from brokers on margins and the purchaser makes a certain initial payment per tub on butter actually in a definite warehouse and gives his notes for the balance of the purchase price, secured by warehouse receipts for the butter, which are pledged as collateral to the amount of the notes, storage charges, insurance and interest, with the right to sell in case of a declining market, and the butter is sold, as the result of a declining market, leaving a balance due the brokers, the intentions of the parties will not be considered, and the seller will not be held liable under section 132 of the Criminal Code (J. & A. ¶ 3735) for treble the value of the money lost on the ground that the transaction was a gambling one.
    2. Gaming, § 51

      —when question for jury whether there should be actual delivery of butter by broker and settlement of resulting , mutual accounts. In an action on notes given by the purchaser of butter to brokers in alleged payment of part of the purchase price of the butter, which was purchased by paying a certain initial sum per tub on the butter, which was actually in a designated warehouse, by giving notes for the balance and by pledging the warehouse receipts as collateral security for the amount of the notes, storage charges, insurance and interest, it was a question for the, jury, on conflicting evidence, whether it, was the intention that there should be an actual delivery of the butter and a settlement of the resulting mutual accounts.
    Appeal from the Superior Court of Cook county; the Hon. Joseph B. David, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1917.
    Affirmed.
    Opinion filed November 6, 1918.
    William E. Jordan and George S. Marks, for appellant ; Hoag & Ullmann, of counsel.
    Frank Schoenfeld, for appellees.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

   Mr. Justice Taylor

delivered the opinion of the court.

The plaintiff, Elizabeth Medenwald, brought suit on behalf of herself and Cook county against the defendants, John J. Walton and T. A. Somerville, copartners as Hunter, Walton & Company, under section 132 of the Criminal Code (J. & A. ¶ 3735) for the sum of $18,984.63, which was “treble the value of the money” claimed by the plaintiff to have been lost by her husband in certain gambling transactions in butter, carried on with the defendants in the years 1910 and 1911. The cause was tried before the court without a jury and judgment entered against the plaintiff for costs. From that judgment this appeal is taken.

Henry Medenwald, the husband of the plaintiff, for 2 or 3 years prior to 1910 conducted a small neighborhood store. For 27 years prior to that time he had been a tailor. The defendants were engaged in the butter business in Chicago and had been for a great many years.

It is the theory of the plaintiff that her husband, Henry Medenwald, between July 1 and July 18, 1910, entered into certain gambling contracts, involving the buying on margin from the defendants, certain quantities of butter; that he made certain payments or advances to the defendants by way of margin, and that it was understood between them that at some uncertain time in the future they would settle on the difference between the then market price and that agreed upon at the time the various contracts were made; that it was never the intention of Medenwald or the defendants that the butter should be received by or delivered to Medenwald. On the other hand, it is the theory of the defendants that it was a simple case of merchandising; that Medenwald bought the butter at a certain price and paid in cash a certain portion of the purchase price and gave promissory notes for the balance; that the particular butter purchased was either then in their place of business or already stored in a warehouse; that warehouse receipts for the particular tubs of butter purchased were made out and delivered, at the time of the purchases, to Medenwald, and that Medenwald then turned over the warehouse receipts—and the promissory notes for the balance of the purchase price—to the defendants as collateral security for the amount of the notes, storage charges, insurance and interest; that afterwards, as the market price of the tubs of butter represented by the warehouse receipts declined, and as it was provided in the promissory notes, that if the security depreciated in value, it— the butter in storage—might be sold and the proceeds applied in liquidation of the amount of the notes and the other charges; and as the market did decline, the butter was accordingly sold and the proceeds applied on the notes.

The evidence shows that on or about June 13, 19.10, Medenwald bought of defendants 301 tubs of butter for $5,343.38; on June 25, 1910, 437 tubs of butter for $7,677.33; on July 7, 1910, 444 tubs of butter for $8,050.96; and on July 15, 1910, 434 tubs of butter for $7,978.32. On July 2, 1910, Medenwald paid $2,214 on account; and on July 14, 1910, $1,332; and on July 19, 1910, $1,302, all of which together amounted to a payment of $3 a tub on each of the total 1,616 tubs which Medenwald purchased. For the amount of balance of the purchase price Medenwald gave the defendants four promissory notes, each dated July 1, 1910, and each payable on demand. In each of said notes it was recited (1) that Medenwald had deposited with the defendants as collateral security certain warehouse warrants for butter, and (2) that the defendants “in the event of said securities depreciating in value” in the opinion of the defendants, they were entitled at their discretion, without demanding payment or giving any notice, to sell the collateral security or any part thereof and apply the proceeds to the payment of the notes. A warehouse receipt, representing certain specified tubs of butter stored in a named warehouse was attached to each promissory note. On December 30, 1910, the defendants wrote Medenwald informing him that they were closing up their accounts to January 1, 1911, and inclosing a statement of storage, interest and insurance charges up to January 1, 1911, and, further reciting, ‘ ‘ on butter we are holding for you. Kindly look the statement over and send us check at your earliest convenience.” On January 16, 1911, defendants again wrote to Medenwald'as follows: “Due to the rapid decline in the butter market, and to the unsatisfactory condition of the same, we feel obliged at this time to ask you to give us more margin on the butter we are holding for you. We are sorry to have to do this, but under the circumstances we are sure you will appreciate our position in this matter. Kindly send us your check for $1,616, which is at the amount of $1 a tub. We, of course, trust that the present slump in the market is only temporary and that there will be a turn for the better before long. ’ ’ On February 8,1911, the defendants again wrote Medenwald: “Holders of storage stock are getting uneasy and are now anxious to unload. * * * About six weeks more will see the end of the season. We therefore think it advisable to sell your butter as we find opportunity. We will get you the best price we can for your holdings.” Subsequently the butter was sold by the defendants and a statement was sent by them to Medenwald. That statement is as follows:

“Mar. 23,1911.
“1910
June 13, to 301 T. Br..........$5,343.38
June 25, to 437 T. Br.......... 7,677.33
July 7, to 444 T. Br.......... 8,050.96
July 15, to 434 T. Br.......... 7,978.32
1911
Jan. 3, Stge., Int. & Ins., J an. lst.$l,480.21
J an. 31, Stge., Int. & Ins., Feb. 1st. 299.89
Mar. 23, Stge., Int. & Ins., Mar. 1st. 299.89 $31,129.98
1910
July 2, By ck. on aect...........$2,214.00
July 14, By ck. on acct........... 1,332.00
July 19, By ck. on acct........... 1,302.00
1911
Jan. 3, Ck. Stge., Ins., Int., Jan. 1. 1,480.21
Mar. 18,1,182 T. Br.............16,512.87
Mar. 18, 434 T. Br............. 5,834.47 $28,675.55
Mar. 23 to balance due ns.................$2,454.43”

The evidence of Medenwald—that they were gambling contracts—is that about June 13, 1910, he was in the office of the defendants and that one Somerville, a member of the firm, asked him if he had made up his mind to buy any butter, and that he, Medenwald, replied that he could not buy the butter as he did not have any money, that the only thing he could buy was a margin on butter the same as he had in 1908; that Somerville said, “we will call it margins; how much margins do you want to buy today”; that he told Somerville that it would depend upon how much margin he would have to put up per tub, “that all the money I had was $6,000, and I would have to govern myself accordingly”; that Somerville replied, “it will be $3 per tub, the same as I had put up in 1908”; that Somerville said he would buy the butter back again the same as he did in 1908. Further, that, after he began buying the butter, as he claims, on margin—having reference apparently to the first purchase, made on June 13, 1910—Somerville handed him a piece of paper and asked him to read it over; that Medenwald told him he thought it was all one sided, and that Somerville made the reply that it was only a matter of form. The evidence of Somerville, one of the defendants, is that in June, 1910, Medenwald went to the office of the defendants and said that he wanted to buy some butter and place it in cold storage; that accordingly, at that time, he, Medenwald, bought about 300 tubs, and they were placed in cold storage; that he said he would pay $3 in advance on each tub and give a collateral note for the balance; that the butter was in the place of business of the defendants at that time; that that particular lot of butter was taken to the Booth cold storage warehouse; that Medenwald looked over the warehouse receipt, read the note and signed it, and gave them back to the defendants; that substantially similar proceedings took place in regard to each of the other three purchases.

According to the statement of March 23, 1911, covering the purchases of butter made on June 13 and 25, 1910, and July 7 and 15,1910, those purchases, together with storage, interest and insurance charges, aggregated a total of $31,129.98; that the amount paid thereon in cash by Medenwald was $6,328.21, and that the amount received by the defendants for the sale of the butter as collateral was $22,347.34, leaving a balance due from Medenwald to the defendants of $2,454.43. His loss on the transaction therefore was $6,328.21, which he paid to the defendants, and $2,454.43, the amount of his present indebtedness.

It seems that some years earlier, on July 3, 1908, Medenwald had bought 125 tubs of butter of the defendants and it was placed in Booth’s cold storage warehouse and that Medenwald paid in advance $375, or $3 a tub for that butter; that on October 1,1908, the defendants wrote to him, stating: “We sold you over 100 tubs of butter for storage this summer and are writing you so you will bear us in mind, and as soon as you are ready to sell this butter or any other butter you may have in storage, let us know, giving us your lowest price and we will try and deal with you”; that, subsequently, in the fall of the year the defendants bought it from him, agreeing as to the price, after charging Medenwald storage and cartage charges, and that he made $294.27 on the transaction. In the same year the defendants bought 123 tubs of butter from Medenwald which the latter had bought from M. L. Brown & Company and which was in storage in the Monarch warehouse, and on the instructions of Medenwald the defendants paid the Monarch Warehouse Company the amount they had advanced on that butter, and paid Medenwald the difference between that amount and the amount of the purchase price; that they, the defendants, also bought another lot of 150 tubs that Medenwald had purchased from G-eorge W. Linn & Son and which was stored at the Western Cold Storage Company’s warehouse. They paid Linn & Son the storage charges and paid Medenwald the difference, being something over $2,200. Evidence of the three transactions just mentioned was admitted on the theory that they would help in determining the intention of the parties in 1910.

It is the contention of the plaintiff, as stated above, that the four contracts for the sale and purchase of the butter, all made in 1910, were gambling contracts. The cases of Jamieson v. Wallace, 167 Ill. 388, and R. E. Pratt & Co. v. Ashmore, 224 Ill. 587, are chiefly relied upon. It will be observed, however, that in the former case, Mr. Justice Magruder, who delivered the opinion of the court, said: “They (referring to certain stock brokers who purported to have bought 200 shares of stock for a customer) never tendered to her at any time the stocks, which they claim to have purchased for her, nor asked her for any money to pay the purchase price of such stocks.” Where, in making a contract concerning personal property, it is the intention of the seller not to deliver and that of the purchaser not to receive—and no actual receipt and delivery takes place—and it is the intention of both to settle the resulting mutual account by the payment of the mere abstract mathematical difference, such contract, generally, is void and may not be enforced. In the instant case, no matter what was the psychological intention of either the purchaser or the seller, the evidence shows that when the warehouse receipts were made out and attached to the promissory notes, the title to certain specific tubs of butter in a definite warehouse passed from the seller to the purchaser. When Medenwald paid $3 a tub in cash and gave his notes for the balance of the purchase price he became the owner of a specific, segregated quantity of butter. Although the notes were payable on depiand they nevertheless became outstanding evidence of an indebtedness of Medenwald to othe defendants. The specific butter, itself, had been paid for in full and the original obligation to pay for it had become extinguished; and there then existed a new obligation by Medenwald, evidenced by the promissory notes, the consideration for which was the title to the butter which had passed from the defendants to Medenwald, who then owned it. The fact that he pledged it as security for his promissory notes is conclusive evidence that it had been delivered by the defendants and received by Medenwald. To argue that the defendants still owned the butter which Medenwald admittedly agreed in writing, under his own signature, should be held by them as collateral security for his notes leads to a reductio ad absurdmn. When, as a commercial transaction, a purchase and sale is completely consummated, the law is not then interested in the intentions of the parties which inspired it. The statute which was passed to prevent gambling contracts was not intended to punish a seller of merchandise where the thing sold has not only been delivered and the title passed but the contract of sale has been completely executed and there has arisen as an outgrowth a new and different obligation on the part of the purchaser, evidenced by promissory notes.

In the instant case, however, apart from the consideration of the matter as a pure question of law upon the facts admitted by Medenwald, himself, the evidence on the subject of the actual intention of the parties, at the time of the purchases and sales, was conflicting, and it became, as said in Jamieson v. Wallace, supra, “a question for the jury or for the court, to be determined by a consideration of all the evidence”; and as the trial judge found for the defendants, and we believe now justifiably, there is no sufficient reason to set the judgment aside.

Finding no error in the record the judgment is affirmed.

Affirmed.


text:
    Frank Mladich, Plaintiff in Error, v. Thomas McEneely, Defendant in Error.
    Gen. No. 23,993.
    1. Municipal Court of Chicago, § 13

      —when error to strike out amended statement of claim without plea or affidavit of merits. Where it is contended by the defendant, in an action in the Municipal Court of Chicago for an alleged breach of contract for the sale of real estate, that plaintiff’s action will not lie because of the Statute of Frauds, it is error for the court, on such ground, to strike out an amended statement of claim making out a prima facie case, without a plea or affidavit of merits being filed by defendant.
    2. Frauds, Statute of, § 69

      —what is sufficient memorandum relating to sale of realty. The requirements of the Statute of Frauds as to a contract for the sale of real estate are met by a memorandum signed by a third person acknowledging the receipt from the purchaser of a specified sum to be paid on the specified purchase price of certain described premises to the seller as' soon as the abstract is examined, and providing that the balance is to be paid when the deed is passed, and by a memorandum indorsed on the written memorandum and dated 19 days later, by which the seller, over his signature, acknowledges receipt of the payment of a certain sum of money.
    3. Frauds, Statute of, § 82

      —what is function of. It is the function of the Statute of Frauds to prevent certain unwritten agreements from being legally binding.

      4. Fbattds, Statute of, § 62

      —when memorandum relating to sale of realty is sufficient. The facts recited in a memorandum, taking a contract for the sale of real estate out of the Statute of Frauds, need not be set forth in any formal or logical order, and it is sufficient if all the necessary elements are present, in writing.
    Error to the Municipal Court of Chicago; the Hon. Wells M. Cook, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1918.
    Reversed and remanded.
    Opinion filed November 6, 1918.
    Harry C. Leemon, for plaintiff in error.
    Thomas J. Young, for defendant in error.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

   Mr. Justice Taylor

delivered the opinion of the court.

Frank Mladieh, the plaintiff, brought suit in the Municipal Court against Thomas MeEneely, the defendant, for damages for an alleged breach of a contract for the sale of certain real estate. On September 11, 1917, the plaintiff filed a statement of claim. Subsequently, on motion of the defendant, that statement of claim was stricken, and on November 21, 1917, the plaintiff filed an amended statement of claim. The latter precipitates the issues involved. No plea nor affidavit of merits was filed.

The amended statement of claim is as follows:

“Plaintiff alleges: That July 7, 1917, the plaintiff, Frank Mladieh, agreed to buy and the defendant, Thomas MeEneely, agreed to sell, for the sum of $1,550, the following described property, to wit: Lot 17 in Block 60 in that certain subdivision made by the Calumet and Chicago Canal and Dock Company, of parts of fractional Sections five and six, Township 37 North, Range 15 East of the Third Principal Meridian, in Chicago, Cook county, Illinois.
“That plaintiff agreed to pay for examination of abstract and preparation of deed, and agreed to deposit in escrow on account the sum of $250, which sum was to be applied on the purchase price when the abstract was examined and found merchantable, and agreed to pay the balance of $1,300 on delivery of deed. That the defendant agreed to furnish abstract brought down to date and a good and merchantable title to the real estate, and it was agreed between the parties that neither one was to pay any real estate commissions.
“That parties went together to the office of Harry C. Leemon, who agreed to act. That plaintiff handed Harry C. Leemon $250 to be held in escrow. That defendant handed said Harry C. Leemon an incomplete abstract, and asked him to have the Chicago Title and Trust Company bring same down to date. That parties asked for a memorandum of the agreement, which Harry C. Leemon drew up, and handed each of the parties a copy as follows:
“ ‘ Chicago, July 7th, 1917. Received of Frank Mladich the sum of two hundred and fifty dollars to be applied on the payment of $1,550.00 for property known as Lot 17 in Block 60 in that certain subdivision made by the Calumet and Chicago Canal and Dock Company of parts of fractional Sections five and six, Twp. 37 North, Range fifteen East of the 3rd Principal Meridian, to Thomas McEneely as soon as abstract is examined and passed, balance of purchase price to be paid when the deed is passed. H. C. Leemon.’
“That July 26, 1917, defendant asked plaintiff for a payment on account and plaintiff handed defendant $50, which defendant credited on the written memorandum as follows:
“ ‘July 26-17. By cash $50.00. Thomas McEneely.’
“That thereafter defendant recovered his abstract from the Chicago Title and Trust Company; he refused to have the same brought down to date; he refused to furnish a signed deed; he informed plaintiff he would not comply with his contract, or go on with it; he returned plaintiff a post office money order for $50 paid him July 26, 1917, which plaintiff holds subject to orders of defendant.
“That, notwithstanding, plaintiff has at all times been ready, willing and able to carry out all the terms of Ms contract and has offered to do so, but the defendant has utterly refused to go bn with his contract, to the damage of plaintiff in the sum of one thousand and one dollars ($1,001.00).. Harry C. Leemon, Attorney for Plaintiff.”

The trial was before the court without a jury, and on the motion of the defendant the court, “being of the opimon that the plaintiff’s cause of action would not lie under the Statute of Frauds and Perjuries,” entered an order striMng the plaintiff’s amended statement of claim from the files and dismissing the suit at the plaintiff’s costs.

The question arises whether the statement of claim states a cause of action. It alleges that the plaintiff agreed to buy and the defendant agreed to sell for the sum of $1,550, a certain piece of real estate; that a certain sum of money was deposited in escrow which was to be applied on the purchase price when the abstract was examined and found merchantable, and that the balance of $1,300 was to be paid on the delivery of the deed. Also, it recites, verbatim, the contents of a memorandum, part of which was written on July 7, 1917, and part of which was written on July 26, 1917, and then alleges that the defendant refused to carry out the alleged contract, although he, the plaintiff, has at all times been ready and willing to carry it out.

Inasmuch as this is a suit for damages for breach of contract and as a contract—even though not in writing —for the sale of real estate is merely voidable, and as the statement of claim made out a prima facie case, it was error for the trial court on motion of the defendant, without plea or affidavit of merits, to strike the second amended statement of claim. “Where a contract is alleged to be invalid as being in violation of the Statute of Frauds, it is merely voidable, and may be enforced as made, unless the defendant takes advantage of the statute by setting it up as a defense either by demurrer, plea or answer. ’ ’ Koenig v. Dohm, 209 Ill. 468.

But even though the Statute of Frauds had been pleaded, we are of the opinion that the memorandum of July 7,1917, together with the memorandum, “July 26-17. By cash $50.00. Thomas McEneely,” sufficiently fulfil the requirements of the Statute of Frauds. The memorandum dated July 7, 1917, taken together with that of July 26, 1917, must be looked upon as one instrument; that of July 26, 1917, being, from its nature, a ratification and adoption of the one of July 7, 1917. The fact that the memorandum of July 26,1917, was not made until 19 days after the original memorandum of July 7, 1917, does not prevent it from being considered as a compliance with the statute. It is sufficient if the memorandum is executed at any time subsequently to the making of the contract and prior to the date when action is brought.

When the defendant wrote the words “July 26-17. By cash $50.00. Thomas McEneely,” it is only reasonable to assume that it was his intention, then, not only to have them considered as evidence of the payment of part of the purchase price, but as evidence that the terms of the contract were as set forth in the accompanying memorandum, and that the latter was authentic and admittedly binding on him. As to the original memorandum of July 7, 1917, which according to the amended statement of claim was drawn up by Harry O. Leemon, and a copy of which was given to each of the parties, it may be doubtful whether that would be sufficient by itself to bind the defendant under the Statute of Frauds. Of course, it did not contain the signature of the defendant, nor does the statement of claim show that Harry O. Leemon was authorized in writing to execute that memorandum. When, subsequently, however, defendant himself wrote on that memorandum the words “July 26-17. By cash $50.00. Thomas McEneely,” there was then a writing, signed by the defendant, which had but one meaning, and that meaning was to be reached only by considering all the contents of that paper or memorandum. The words “By cash $50.00” would he meaningless unless understood as relating to and ratifying and adopting all the words of the memorandum of July 7, 1917, part of which expressed, e. g., the price of the property as being $1,550. His obligation of $1,550 was reduced to the extent of $50. That is what he wrote and that is what he must be considered as having intended. It is the function of the Statute of Frauds to prevent certain unwritten agreements from being legally binding. Clinan v. Cook, 1 Sch. & Lef. 22; Browne, on the Statute of Frauds, sec. 344. The facts recited need not be set forth in any formal or logical order. It is sufficient if all the necessary elements are present, in writing. And the signature “may be at the top, or in the body, of the memorandum as well as at the foot.” Browne, Statute of Frauds, sec. 357. If it is so placed as to show it was the intention of the signer to admit his liability upon the contract, it is sufficient.

As the statement of claim stated a good cause of action it should not have been stricken.

For the error above mentioned, the judgment is reversed.

Reversed and remanded.


author: Mr. Justice Thomson

text:
    F. Mayer, Plaintiff in Error, v. Hirsch, Stein & Company, Defendant in Error.
    Gen. No. 23,984.
    Frauds, Statute of, § 69

      —what is sufficient memoranda to taJce contract for purchase of merchandise out of operation of. An oral contract for the purchase of merchandise is taken out of the operation of the Statute of Frauds by memoranda, one of which consists of a purchase memorandum of a designated number containing all the terms of the contract and which is sent to the purchaser in duplicate with the request that one copy be signed by him and returned, and the other of which consists of a letter in reply signed by the purchaser and reading, “Referring to your contract No. 3543, please be advised we have cancelled this contract.”
    Error to the Municipal Court of Chicago; the Hon. Wells M. Cook, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1918.
    Reversed and remanded.
    Opinion filed November 6, 1918.
    George B. Cohen, for plaintiff in error.
    Stein, Mayer & Stein, for defendant in error; Sigmund W. David and John J. Dever, of counsel.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

   Mr. Justice Thomson

delivered the opinion of the court.

This was a suit brought in the Municipal Court of Chicago, in which the plaintiff, Mayer, sought to recover from the defendant, Hirsch, Stein & Company, damages in the sum of $400 for an alleged breach of contract. After the filing of an amended statement of claim by the plaintiff, and an affidavit of merits thereto by the defendant, there was a motion by the latter to dismiss the suit on the pleadings, which motion was allowed and judgment entered for the defendant, from which the plaintiff has appealed.

The contract set forth in the plaintiff’s amended statement of claim was an oral contract. In its affidavit of merits the defendant set up the Statute of Frauds and alleged that the contract in question was void and unenforceable because it was within that statute.

In his statement of claim the plaintiff set forth that following the making of the alleged oral contract he had sent the defendant a written confirmation of it, a copy of which was attached to the amended statement of claim, as exhibit A, and that he had later received a communication from the defendant canceling the contract, a copy of which communication was also attached as exhibit B.

The sole question presented by this appeal is, whether the writings as contained in exhibits A and B, attached to plaintiff’s amended statement of claim, amounted to sufficient memorandum of the contract to take it out of the operation of the Statute of Frauds.

Exhibit A was a copy of a memorandum in writing sent to the defendant by the plaintiff which was headed “Purchase memorandum No. 3543,” and contained all the terms of the alleged verbal contract. It was sent to the defendant in duplicate with the request that one copy be signed by the defendant and returned, which was not done.

Exhibit B was a copy of a letter sent to the plaintiff by the defendant some time later, and read as follows: “Referring to your contract No. 3543, please be advised we have cancelled this contract. ’ ’ This was signed by the defendant.

In our opinion it was error on the part of the trial court to dismiss the plaintiff’s suit and hold as a matter of law that the writings set forth in the foregoing exhibits did not constitute a sufficient memorandum to take the contract out of the Statute of Frauds.

It is admitted by the defendant that the memorandum need not be made apthe time of the oral agreement, and further that it may be composed of different papers and need not be contained in one document. It is, of course, necessary that the memorandum be signed by the party to be charged (the defendant in the case at bar), and it must contain all of the terms of the alleged contract. If the memorandum is made up of several writings, that one which is signed by the.party to be charged must so clearly refer to the ones not so signed, that no other document or thing could be intended by the reference. The connection between them must appear from evidence derived solely from the document or writing which has been signed. In our opinion this was true of the document involved here. The letter signed by the defendant refers to “your contract No. 3543,” clearly meaning the written memorandum of the terms of the contract which had been received from the plaintiff. This was true notwithstanding the fact that the document referred to was not a contract, but rather a memorandum of its terms. The term used by the defendant in describing the thing referred to is not so important as the number by which he describes it, a number which, of course, was not attached to the contract which admittedly,, from the pleadings, was oral, but was attached to the written purchase memorandum. The fact that this memorandum was sent in duplicate and that the defendant did not sign and return one copy to the plaintiff as requested, but instead wrote the letter set forth in plaintiff's exhibit B, does not alter the situation. The language employed by the defendant in writing the letter is the same as if it had said, “we admit there was such a contract as set forth in your purchase memorandum No. 3543 but we wish to advise you that we have can-celled it. ’ ’ The language used by the defendant clearly admits the existence of a contract. If there was a cancellation, a fortiori, there must have been something to cancel, namely, a contract. The case would be different, of course, if the defendant's letter denied the making of the contract at all, or contended for additional or different terms than those contained in the plaintiff’s purchase memorandum referred to.

The purpose of the statute—to prevent fraud and to provide the certainty of written evidence in lieu of the uncertainty of oral evidence, both as to whether a contract exists and as to its terms—is fully met by the defendant’s letter. The fact that the defendant’s letter proceeds to announce the cancellation of the contract does not alter its effect as part of the memorandum sufficient to satisfy the Statute of Frauds. An oral contract may be taken out of the statute by a letter in which the party to be charged admits the making of the contract but, in terms, cancels it, or in which the writer seeks to deny or repudiate his liability under it. Browne on the Statute of Frauds, sec. 354a. Ib the first edition of his work, entitled “Law of Contract of Sale,” Lord Blackburn stated that it had never been decided whether “an admission of the terms of the bargain signed for the express purpose of repudiation can be considered a memorandum to make the contract good; but it seems difficult on principle to say how it can be so considered.” In the second edition of this work, at star page 62, the language of this paragraph as quoted above is repeated, but in parenthesis there also appears the following: “(Since this passage was written the point has been decided and it is now the law that a letter written for the purpose óf repudiating a contract may be good as a memorandum.) ”

Among the authorities to this effect are the following : Wilkinson v. Evans, L. R. 1 C. P. 407, which was an action to recover the price of certain cheese. The plaintiff sent the goods and also an invoice of them in the usual form. The defendant refused the goods, returning the invoice to the plaintiff with the following in writing on the back of it: “The cheese came to-day but I did not take them in for they were very badly crushed, * * Held, a sufficient memorandum. Here, as in the case at bar, there was a constructive admission that there was a contract, the terms being as stated in the invoice, or purchase memorandum; the communication then proceeding to cancel the contract, the reason for the cancellation being given in the case cited, but not given in the case at bar.

Bailey v. Sweeting, 9 C. B. (N. S.) 843, was an action for goods bargained and sold, which were delivered to the defendant but were refused by him because of their damaged condition. Defendant wrote plaintiff a letter saying he had declined to receive the goods and would not have them. The letter did not refer to another document containing the terms of the verbal contract, but itself recited - those terms. It was contended by the defendant that the statement of the terms of the contract in Ms letter did not make it a sufficient memorandum within the statute, because the latter part of the letter contained a repudiation of Ms liability. In holding otherwise, the court said that defendant did not apparently intend by his letter to deny his liability by reason of the absence or insufficiency of the contract but merely the question of the damage of the goods. In concurring, Williams, J., said: “The only question is whether it (the defendant’s letter) is the less a note or memorandum of the bargain, because it is accompanied by a statement that the defendant does not consider himself liable in law for the performance of it. There is nothing in the statute to warrant that * # *. There was a valid contract and the letter was a sufficient memorandum. The intention of the defendant to repudiate or abandon the contract cannot affect the question as to the sufficiency or insufficiency of it.”

Haubner v. Martin, 22 Ont. App. 468, was an action on an oral contract for goods sold. The plaintiff wrote the defendant stating the terms of the sale, inclosing the invoices and advising Mm that he had drawn on him for the purchase price. The defendant wrote in reply that his agent (who had made the contract) had exceeded his authority; that he did not want the goods and would not accept the draft; that “the goods shown by your invoice are not what I wanted and the amount is far in excess of the value of the goods I did want. ’ ’ This was held a sufficient memorandum, the court saying that the defendant must by his letter be considered as having admitted the particulars of the bargain, between the plaintiff and his agent, but denied the latter’s authority to make it. Continuing, the court said “A letter repudiating liability under a contract may nevertheless amount to a memorandum in writing, if there is an admission of the contract and its substantial terms are stated. ’ ’

In Buxton v. Rust, L. R. 7 Exch. 1, the plaintiff bought of the defendant a parcel of wool, “the whole to be cleared in about 21 days.” A memorandum of the terms of the sale was handed to the defendant by the plaintiff. Subsequently the defendant wrote the plaintiff: “It is now 28 days since you and I had a deal for my wool, which was for you to have taken all away in 21 days from the time you bought it. I do not consider it business to put it off like this; therefore, I shall consider the deal off, as you have not completed your part of the contract. ’ ’. Plaintiff requested to see a copy of the contract and the defendant wrote him again,' inclosing a copy of plaintiff’s memorandum, saying: “I beg to enclose copy of your letter of the 11th of January,” etc. It was held that the last letter written by the defendant with its inclosure, taken in connection with his previous one, constituted a recognition of the existence of the contract and its terms, and that there was therefore a sufficient memorandum in writing signed by the defendant to satisfy the Statute of Frauds.

Elliott v. Dean, 1 Cab. & El. 283, was an action to recover damages for breach of an oral contract wherein the defendant agreed to buy certain silks. The plaintiff had sent the defendant an invoice of the silks and the defendant in reply wrote: “I return invoice that you sent us. I must also inform you that it is no use now. We have cancelled the order, and I shall be surprised if you persist in sending either the spun or the invoice again for we shall not have it under any circumstances whatever.” The invoice contained all the terms of the contract. It was argued that the fact that the letter contained the words, “We have can-celled the order” made it an insufficient memorandum to take the alleged contract out of the operation of the Statute of Frauds, because it showed the defendant no longer regarded the contract as an existing one. It was held that this made no difference and that the memorandum was sufficient. The court said: “The true test is, does the defendant, by his writing, recognize and adopt the writing (invoice) as embodying the terms which the parties had previously agreed upon. ’ ’

In Heideman v. Wolfstein, 12 Mo. App. 366, the plaintiff sued for breach of the defendant’s oral contract to sell a quantity of leather. At the time the bargain was made, the defendant handed the plaintiff a memorandum of the leather in question, which he signed. Later the plaintiff wrote the defendant requesting the shipment of the leather and the defendant wrote in reply saying: “Tours of the 2nd inst. to hand. Beason I did not ship the leather is, that I obtained information regarding your standing which exactly did not suit me, and therefore declined the order.” It was held that the original memorandum, with the letters referred to, supplied all that was needed to establish the terms of the alleged contract and that their effect was in no way modified by the defendant’s letter that he ‘ ‘ declined the order. ’ ’ The court added: “ A letter may even repudiate any and all liability in the writer, and yet, by its reference to an oral contract, take it out of the statute.” It was held that the correspondence made sufficient reference to the subject-matter of the original memorandum, which the defendant had also signed, to make it a part of the whole and, when taken together with the letters, satisfied the statute.

As against these decisions the defendant has called our attention to Wilson v. Lewiston Mill Co., 150 N. Y. 314, and Fowler Elevator Co. v. Cottrell, 38 Neb. 512. In our opinion neither of these cases is in point. In the first case the plaintiff’s agent had a talk with the defendant relative to selling them some cotton, after which he communicated with the plaintiff suggesting that he wire the defendant an offer, which was done, after which the agent again called on the defendant, at which time the defendant made a new proposition to pay 10% cents for the cotton in question. The agent of the plaintiff wrote his principal communicating the new bid, whereupon the plaintiff wired the defendant, under date of November 5th, confirming the sale. To this the defendant replied: “We find it will be impossible for us to take the 1,000 bales of cotton mentioned in yours of the 5th ult. as it is impossible to get the funds.” It was held that this latter communication was not a recognition of the existence of the contract; that while it referred to the plaintiff’s communication “of the 5 th ult.” it "did not admit the making of the contract therein alluded to. The case might have been different if that letter had been in the language of the one involved in the case at bar and had said, after referring to “yours of the 5th ult.,” “We beg to advise you that we have cancelled that contract. ’ ’

In the latter case the plaintiff sent the defendant a purchase memorandum, confirming a contract which had been entered into over the telephone, which memorandum contained the terms of the contract. The defendant wrote in reply: “It will be impossible for us to ship you any corn.” The plaintiff replied and protested against the failure of the defendant to carry out the contract. This letter did not contain the terms of the contract. Again the defendant wrote: “Replying to your letter of March 31, at the time corn sale in question was made, we supposed we had control of the com and could handle it and sell it. Since then obstacles have presented themselves, and circumstances over which we have no control will prevent us from filling the sale. We cannot, therefore, fill the sale, much to our chagrin, and you will have to look elsewhere for the com.” It was held that this was an insufficient memorandum to satisfy the Statute of Frauds. The court pointed out that the letters of the defendant in no way referred specifically to the original purchase memorandum which contained the terms of the .contract. In this the case differs from the one at bar. The court did add, however: “It may be observed, further, that had the letters of the defendant referred in the most unequivocal terms to the plaintiff’s communication of March 4 (the original purchase memorandum), the statute is still applicable, since we find therein no acknowledgment • of the alleged parol agreement, but on the other hand an express repudiation thereof.” This is, of course, obiter dictum, and in our opinion against the weight of authority.

For the reasons stated the judgment of the Municipal Court will be reversed and the case remanded to that court for further proceedings not inconsistent with the views herein expressed.

Reversed and remanded.


author: Mr. Presiding Justice Dever

text:
    Granger Farwell, Appellant, v. Pyle-National Electric Headlight Company, Appellee.
    Gen. No. 23,583.
    1. Corporations, § 260

      —when purchase of license to manufacture patented articles given corporation is fraud on stockholders. Where certain persons enter into a contract with a corporation whereby they are to receive, in consideration of a license to manufacture and sell patented articles, a certain per cent of the gross receipts of the articles made under the license, and such license is assigned to a stockholder and director of the corporation, who acquires it for the benefit of himself and another director, and a third director acquires a part of the interest of the second director, which directors own a majority of the stock and control the board of trustees, the purchase of such license contract by the director is a fraud upon the rights of the stockholders, especially where the corporation is financially able to make the purchase, and hence the contract may not be the subject of an accounting in a suit by the director originally making the purchase against the corporation.
    2. Corporations, § 281

      —when burden of proof on director in suit against corporation for accounting. The burden of proof, in an action for an accounting by a director of a corporation, as the assignee of a license contract between third persons and the corporation for the manufacture and sale of patented articles on a roy-alty basis, is on the director to show that his conduct towards the corporation was known to it, its officers and stockholders, and that his actions and dealings were in all respects fair and equitable.
    3. Corporations, -§ 265

      —when corporation not estopped to claim violation of duty by director in taking assignment of license to manufacture goods from third persons. Even though a corporation and its stockholders have for many years acquiesced in a contract for the manufacture and sale of licensed articles on the royalty basis, which was originally made by the corporation with third persons and was subsequently assigned by the latter to a director for the benefit of himself and another director and later held by such two directors and a third director, such directors constituting a majority of the board of directors, and holding a majority of the stock, and large sums of money were paid to such directors as royalties on the contract, neither the corporation nor the stockholders are guilty of any conduct which estops them from setting up as a defense in a suit against the corporation for an accounting, by the director originally taking the assignment, the violation of duty by such latter director.
    Appeal from the Superior Court of Cook county; the Hon. Martin M. Gridley, Judge, presiding. Heard in this court at the October term, 19Í7.
    Reversed and remanded with directions.
    Opinion filed November 11, 1918.
    Jones, Addington, Ames & Seibold, for appellant; Keene H. Addington, W. Clyde Jones, Morris St. P. Thomas, Walter Hamilton and Albert F. Mecklenburger, of counsel.
    Btjtz, von Ammon & Johnston, Miller, Gorham & Wales, Parker & Carter and Hector, Hibben, Davis & Macatjley, for appellee; Francis Lackner, Frederic E. von Ammon, Amos C. Miller, Edward Hector, Francis W. Parker and Donald M. Carter, of counsel.

      See Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number.

   Mr. Presiding Justice Dever

delivered the opinion of the- court.

By bill in chancery filed in the Superior Court of Coolc county, Granger Farwell sought to compel the defendant, Pyle-National Electric Headlight Company, to account to him for certain moneys which it was alleged in the bill were due Farwell from defendant under a contract made by defendant on February 9,1897, with George C. Pyle and Frank H. Ewers, whose interest therein passed by assignment to Farwell in June, 1899.

A decree was entered in the cause by the Circuit Court, which has been appealed to this court by complainant, and defendant has assigned cross errors. The defendant, Pyle-National Electric Headlight Company, was organized in the year 1897, shortly before it entered into the contract with Pyle and Ewers. Under the contract defendant acquired an exclusive license to manufacture and sell articles covered by seven patents owned by Pyle and Ewers, for .which license defendant agreed to pay 5 per cent of the gross receipts from the sale of all articles made under the license. The complainant, Farwell, acquired a stock interest in the company in the year 1898, which he retained up to the time of the bringing of this suit. He became a director of the company in the early part of the year 1899, and remained such for a period of about 13 years. In June, 1899, he purchased the interest of Pyle and Ewers in the license contract for the benefit of himself and Boyal C. Vilas, Sr., who was at the time president and also a director of defendant. While there is some conflict in the record, the evidence satisfactorily shows that Farwell paid Pyle and Ewers for the rights granted under the royalty contract a sum slightly less than $8,000, and that defendant company paid not less than $3,000 royalties under the contract in the year following. The evidence further tends to prove that beginning in the year 1899 and up to the time of the filing of the bill, May 13, 1914, the defendant company has paid to Farwell, Vilas and Perry Trumbull, who had acquired a part of Vilas’ interest, in the contract, and the heirs of the latter two,- an aggregate sum of more than $145,000. In his bill Farwell seeks to recover of defendant a further sum of $300,000 on the theory mainly that he has been underpaid for royalties due him under the license contract. Far-well’s interest in the corporation was acquired as the result of a gift to him by Boyal C. Vilas, Sr., the then president of defendant, of 10 shares of the capital stock of defendant, and a few months following this transaction Farwell took over the interest of Pyle and Ewers in the contract for the benefit of himself and Vilas, who together with Trumbull constituted, for some time thereafter, a majority of the board of directors of defendant. At the date of the assignment of the license contract to Farwell, he, Boyal C. Vilas, Sr., and Perry Trumbull were in control of defendant. Vilas owned a majority of its capital stock and was its president and treasurer; Trumbull was its secretary, vice president and attorney. Within 2 years from the date of the assignment of the contract to Farwell, he and his colleagues were paid by the corporation a sum in excess - of their investment in the contract. Excepting a period of 3 months, Farwell continued to act as director of the corporation from the 11th day of January, 1899, to January 10, 1912. Farwell, Vilas and Trumbull formed a majority of the board of directors of the corporation until February 6, 1901, when the board was increased from five to seven members. All of the powers of this board of directors were, by act of the board, bestowed upon Farwell and Vilas, as an executive committee; an additional member was added to the committee in 1903.

The issues involved were referred by the court to a master in chancery to hear the evidence and report the same to the court with his conclusions on the law and the evidence. Much evidence was heard by the master and he filed his report in the trial court. Later the court reopened the cause for rehearing and additional evidence was submitted to the court without reference. A decree was finally entered in the cause, which is before us in this proceeding for review.

The briefs of counsel present several interesting and difficult questions. It will not be necessary, however, to consider more than one of these questions. Counsel for defendant insist that the complainant Farwell, by accepting an assignment of the license contract in question, placed himself in a position where his rights and privileges under the contract seriously interfered with his duty to defendant as a director thereof; that he should be denied the relief he seeks in that he occupied towards the defendant the position of a fiduciary, and that under the circumstances of the case he was prohibited from acquiring any interest that might tend to deprive defendant of the benefit of his undivided skill and loyalty. We are inclined to agree with this contention. By the purchase of the royalty contract Farwell and Vilas became the owners of a one-half interest each therein. In June, 1899, Vilas owned a majority of the capital stock and was in control of defendant’s business.

The license contract was capitalized in 1899 by the defendant corporation at the sum of $699,550. At this time it owed the sum of $4,500 for royalties under the contract which had become the property of Farwell and Vilas and in which Trumbull later took an interest. It is asserted by counsel for complainant that at this time the corporation was insolvent; that this fact was evidenced in part by the failure to pay royalties as they became due to Pyle and Ewers, and that Farwell, through his friendship with Vilas, had acquired the contract to prevent the corporation from losing its rights thereunder. It is insisted that Pyle and Ewers had the right under their contract, in the event of any default in payments due under it, to declare the contract relationship between them and the defendant at an end. While there is some evidence in support of the assertion that the defendant was in some financial straits in 1899, we are inclined to the view on the whole evidence that it was not by any means insolvent. The theory of complainant is that he took over the contract for the purpose of protecting the business and the existence of the defendant, but the evidence shows that at the time of the purchase of the contract the corporation had net assets over and above all debts and obligations of about $27,000, and that it had more than enough cash and accounts receivable to pay its then existing indebtedness.

The evidence further tends to prove that the defendant in the year 1899, out of the business conducted by it, acquired a profit of at least 3 per cent on its total capitalization, which included the large sum at which the license contract was capitalized. It does not appear from the record "before us that all the stockholders of defendant had notice of the purchase of the contract by Farwell and Vilas, or that defendant or its stockholders ever ratified or approved this purchase.

Gilman, C. & S. R. Co. v. Kelly, 77 Ill. 426, and Pearson v. Concord R. Co., 62 N. H. 537, are both leading cases upon the question of what duties and obligations are imposed by law upon directors who assume to enter into contracts with their corporations.

In the Gilman case, supra, the president and two directors of the railway company became stockholders in the Morgan Improvement Company, which at that time had a contract with the railway company for the construction of a railroad. The contract was approved by the directors of the railway company. The stockholders of the railway company filed a bill to set aside this contract and for an accounting, and the court found in its decree that the contract was fraudulent in law, and ordered such accounting. On page 431 the court said:

1 ‘ On the theory, however, the contract with the Morgan Improvement Company was illegal, as being interdicted by a sound public policy, complainants are entitled to have an account taken of profits, if any were realized, against the participating directors. * * * The court did not, by its decree, find there was any fraud, in fact, in the making of the construction contract with the Morgan Improvement Company. Indeed, the evidence will not justify any such finding. * * # There can be no doubt, the contract * * * was entered into with the utmost good faith. No fraud, in fact, existed, nor was any contemplated by the directors of the railroad company.”

In Klein v. Independent Brewing Ass’n, 231 Ill. 594, the court, referring to the Gilman case, supra, said:

“The rule was announced that the directors of a corporation were to be regarded as trustees for the stockholders, and that it was unlawful for them to act in opposition to the interest of the stockholders or place themselves in a position where their individual interest would interfere with their acting for the best interest of all the stockholders. * * * The rule, in its general sense, embraces every relation in which there may, by any possibility, arise a conflict between the duty to the'person with whom the trustee is dealing or on whose account he is acting, and his own individual interest.”

The case of Pearson v. Concord R. Co., 62 N. H. 537, is a leading case on the question under consideration. In that case a bill was filed by a stockholder in the Concord Railroad Company on behalf of himself and other stockholders against the Concord Railroad Company, its directors and other railroad companies (referred to in the decision as the “upper companies”). A majority of the directors of the Concord Company constituted a majority of the directors of the upper companies. The court held that the stock ownership of the Northern Company, one of the two upper companies, in the Concord Company was illegal; that

“A director of a railroad corporation, though not technically a trustee, stands in a fiduciary relation to the corporation, and is under the disability of a trustee. Practically, the directors are trustees, and the stockholders are the cestuis que trust. Like all other persons where this relation exists, he cannot, as buyer for his corporation, buy of himself against the objection of his cestui que trust, nor as seller for the corporation become the purchaser, nor, being its agent and trustee, contract with himself.”

In Higgins v. Lansingh, 154 Ill. 301, which is also a “director’s” case, the court quoted from Morawetz, p. 365, as follows:

“It is immaterial whether the transaction was fair or not. * * * In many cases it would be impossible to ascertain whether the agent did or did not obtain the best terms for the principal which it was possible to obtain.”

The evidence in the case shows that a majority of the board of directors and of the executive committee of the defendant corporation, for a considerable period of time, were the owners of the license contract; that during this time they acquired from the defendant corporation large profits upon their investment in the contract, and that their dual and conflicting relationship to defendant extended over a period of years. In fact it is evident that royalties were paid to Farwell, Vilas and Trumbull, and the heirs of the latter two, on a construction of the license contract under which royalties were paid upon complete electric locomotive headlights, in the manufacture of which were included the devices covered by the several patents referred to in the license contract, and it is insisted by Farwell that the corporation is now bound by this construction of the contract. Counsel for defendant assert that this construction of the contract was not authorized by the language of the instrument, but was in fact the result of the control exercised by Farwell, Vilas and Trumbull over the affairs of the defendant, and that as a result of their control of the board of directors and of its executive committee they had paid to themselves considerable sums of money which were not equitably due under the terms of the contract. It is not necessary to determine at this time whether defendant’s counsel are right in their contention. The wisdom and value, however, of the rule of law which forbids a majority of a board of directors to deal in their own interest with their corporation clearly appears from the controversy between the parties to this litigation.

Whether the owners of the license contract in question were entitled to the large payments made therii was, as shown by the briefs of counsel, a very difficult and important question which directly concerned the interest of all of the stockholders of defendant. Under the circumstances of the case, it is not surprising that this question was resolved in favor of the complainant and his colleagues.

The record before us discloses that Farwell continued to receive his share of payments made under the license contract until about the year 1912, at which time Boyal C. Vilas, Jr., who with other members of his family had succeeded to the ownership of the stock formerly owned by Boyal C. Vilas, Sr., caused the defendant to manufacture certain articles which were intended'to be used in headlights in substitution of those which had been manufactured by defendant under the patents referred to in the license contract. When this practice began, a conflict of interests at once appeared between Farwell and the persons who succeeded to the interest of Boyal O. Vilas and Perry Trumbull under the contract. It is obvious that the persons in interest with Farwell in the license contract, and who owned and controlled a majority of the capital stock of defendant, found it, for some reason, more profitable to cease the manufacture of articles and devices authorized by the license contract. Had Farwell and the other directors and officers of the defendant been regardful of their duty to defendant from the beginning, no such conflict of interests would have or could have occurred.

In the Gilman case, supra, the Supreme Court said:

“That no director could rightfully become a member of the improvement company, with whom the railroad company had a contract to furnish the means with which to build the road, with a view to share in the profits, and that if any gains should be realized in the enterprise, they would belong to the railroad company, upon the equitable principle which forbids the trustee, or person acting in a fiduciary capacity, from speculating out of the subject of the trust.”

We think it fairly appears from the whole record that the purchase of the license contract by Farwell was a fraud in law of the rights of the corporation; that it was plainly evident at the time this contract was acquired that the assignment should have been made in the interest of and for the benefit of defendant, and there is ample evidence in support of the claim that the corporation was financially able to acquire the rights under the contract which were purchased by Farwell and Vilas. It is fairly inferable from the evidence in the case that the highly profitable interest which Far-well and Vilas acquired was due to the knowledge obtained by them as a result of their connection with defendant, and under the authorities Farwell will not be permitted to receive further profits as a consequence of his violation of his fiduciary obligations to it.

Under the peculiar facts of the case there could have been no ratification of or acquiescence in the conduct of complainant in acquiring the royalty contract. In the Gilman case, supra, it was attempted to show that the corporation had ratified the conduct of a director who, in violation of a fiduciary obligation, had entered into relations in conflict with his duty to the corporation, and it was insisted in that case that this conduct was ratified at a stockholders’ meeting. In passing on the point the Supreme Court said:

“"Whatever was done at that meeting was not done with a full knowledge of all the facts. It was not then known the president and two of the directors would become members of the Morgan Improvement Company, with whom the contract had been concluded. Had this important fact been known, it might have changed the conclusion of the stockholders.”

The evidence here does not disclose that all of the stockholders of defendant knew of the relationship which actually existed between certain of its directors, and the corporation. Dealing as we are with the conduct of one who occupies a fiduciary relationship, it must be held that burden of proof rests upon him to show that his conduct towards the corporation was known to it, its officers and stockholders, and that his actions and dealings with the corporation were in all particulars fair and equitable.

In Voorhees v. Campbell, 275 Ill. 325, the Supreme Court said:

“It is insisted, however, that the canse of action is barred by the laches of plaintiff in error. Where a cause of action arises from fraud, laches will not apply in equity until the discovery of the fraud or until the fraud could have been discovered by the exercise of reasonable diligence. The failure to use diligence is excused where there is a relation of trust and confidence which renders it the duty of the party committing the fraud to disclose the truth to the other. (Farwell v. Great Western Tel. Co., 161 Ill. 522; Penn v. Fogler, 182 Ill. 76.) There being here a relation of trust and confidence, the duty to exercise reasonable diligence to discover the fraud did not rest upon the plaintiff in error, and it does not appear that he was in possession of all the facts relative to the fraud which had been practiced upon him until the institution of this suit.”

The record before us is far from showing that complainant’s conduct was either fair to the stockholders of defendant or that it was known to all of them. It is true that the contract which he seeks to enforce against the defendant was in the first instance made with persons who were qualified to deal with the corporation, but we can see no essential difference between the circumstances of the instant case and those cases where direct dealings between directors and their corporations have been condemned. Gilman, C. & S. R. Co. v. Kelly, supra; Charter Gas Engine Co. v. Charter, 47 Ill. App. 36.

It should be kept in mind that we are considering here, a relationship which is continuing in its nature. Whether there be force or not in the suggestion that the defendant corporation and its stockholders have for many years acquiesced in the contract in question and .the payments which have been made to Farwell and his colleagues, it does not follow as a consequence of this that the corporation itself is bound to continue a relationship which is essentially unfair to its stockholders. The wrong in its nature is continuing, and while the record shows that the defendant, because of the control of its affairs by Farwell and Vilas, has paid out large sums of money which might have been saved to its stockholders, there is no equitable reason why this conduct should be. continued. In George v. Central Railroad & Banking Co., 101 Ala. 607, the court said:

“The abuses committed in the past are the very grounds .and causes of their present interposition, to the end that future similar abuses may be prevented. The use of the stock is continuing, and we can conceive of no just reason why a party interested, and otherwise entitled to interfere, may not interfere, at any period of such use, and object to its continuance. As well might it be said that a person who has for a long time suffered, without objection, continued trespasses upon his property, is obliged, by reason of his silence, to submit to all future trespasses which the wrongdoer may be disposed to commit.”

Klein v. Independent Brewing Ass’n, 231 Ill. 594.

There is no merit in the contention that the defendant corporation, under the circumstances of the case, was called upon to sever the relationship which was established by the unlawful conduct of its directors. This question has been elaborately argued by counsel for complainant, and while some of the eases relied upon support their argument, we are of opinion that the evidence does not show that the defendant or its stockholders were guilty of any conduct which now estops them from setting up Farwell’s violation of his duty as a director as a defense.

In Dunbar v. American Telephone & Telegraph Co., 238 Ill. 491, the Supreme Court said:

“A court of equity may, in furtherance of justice and of a sound public policy, aid the one who is comparatively the more innocent, and may grant him full affirmative relief by canceling an executory contract, by setting aside an executed contract, conveyance or transfer, by recovering back money paid or property delivered, as the circumstances of the case shall require, and sometimes even by sustaining a suit brought to enforce the contract itself.”

The trial court did not err in granting leave to defendant to amend its answer after the hearing had before the master. While the question under consideration does not appear to have been raised before the master, it became a question for decision by the chancellor at the time the decree was entered. It is not necessary, nor is it proper, that we discuss other questions raised, as in view of what has been said the decree of the Superior Court must be reversed and the cause remanded with directions to dismiss complainant’s bill for want of equity.

Reversed and remanded unth directions.