text:
    W. S. Sparr, trading as Sparr Fruit Company, Appellee, v. Southern Pacific Company, Appellant.
    Gen. No. 25,637.
    1. Carriers, § 66

      —when goods may be diverted in transit. At common law and under the Interstate Commerce Act, a consignee, consignor or owner of a shipment, has a right during the transit thereof to divert it to a new destination, and upon receipt of an order to that effect, the carrier is obligated to carry the shipment to the diverted destination.
    2. Carriers, § 188*—what is effect of diversion in transit as to liability of initial carrier. Where the initial and connecting carriers are parties to a transcontinental tariff which provides for a right of diversion to a new destination and the shipment is moved under such tariff, the original contract of shipment is not terminated by the exercise of such right by the shipper, and the initial carrier remains liable to final destination, even though the order for the diversion'is given to the connecting carrier.
    3. Carriers, § 141*—when instruction as to injury to goods is hot erroneous. The phrase "in good merchantable shipping condition,” used in an instruction, is not erroneous where the jury are informed by the evidence or the instruction what is meant by the phrase.
    4. Carriers, § 123*—when carrier is liable for improper ventilation. Where goods are shipped under “standard ventilation” and instructions of the shipper with reference to such ventilation are not carried out, the carrier is liable for damages resulting from such failure regardless of whether or not it was in the exercise of due care in handling the ventilation appliances, since its obligation as to “standard ventilation” is a contractual one and its liability is not based on a theory of negligence.
    5. Carriers, § 138*—what evidence is admissible to show injury to goods. Evidence of the examination of 13 boxes of different brands of oranges out of a total of 396 shipped is admissible to show the condition of the balance of the car where a thorough inspection of the entire car is impracticable.
    6. Carriers, § 138*—when evidence of market value is admissible in action for injury to goods. Evidence as to the market value of fruit at destination, without making any allowance for natural deterioration during the course of transportation, is admissible where it has been shown that but for the failure of the carrier to comply with standard ventilation instructions given by the shipper the fruit would have arrived in the good marketable condition in which it was delivered.
    Appeal from the County Court of Cook county; the Hon. J. J. Cooke, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1919.
    Affirmed.
    Opinion filed November 30, 1920.
    John A. Sheean, for appellant.
    Charles A. Butler, for appellee.

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

   Mr. Justice Matchett

delivered the opinion of the court.

Plaintiff sued in assumpsit alleging that defendant, a common carrier, had agreed to safely and securely carry for plaintiff 396 boxes of oranges, delivered by plaintiff to it at Fillmore, California, to be carried to Chicago, Illinois; an additional count charged that defendant was negligent. The defendant filed a plea of the general issue, with notice that it would rely on the bill of lading, federal laws, etc. The cause was tried before a jury, which returned a verdict for plaintiff in' the sum of $222.69, on which the court entered judgment, from which defendant appeals.

Upon the trial the plaintiff proved delivery of the oranges in good condition at Fillmore, California, March 10, 1914; that the bill of lading acknowledged receipt of the same in “apparent good order except as noted, contents and condition of contents of packages, unknown,” “which said company agrees to carry to its usual place of delivery at said destination if on its road, otherwise to deliver to another carrier on the route to said destination.” There was also noted on the bill of lading that the fruit was consigned to the Pacific Coast Fruit Auction Company, Kansas City, Missouri, and that it was to move under “standard ventilation.”

It appeared that the car left Fillmore, California, at 1 p. m., March 10, 1914, and arrived in Chicago, Illinois, at 7 a. m. March 21, 1914; that the consignees were informed of its arrival on the same day; that the purchaser began unloading the car on March 23, 1914; that the car arrived at Kansas City at 11:25, March 17, 1914; that the consignee there was notified thereof at 3 p. m. of the same day, and on the next day at 6 p’. m. March 18, the consignee ordered the Rock Island Company, on whose tracks the car stood, to forward the same to Chicago.

It was stipulated by the parties that the shipment moved between the point of origin and Chicago on the through rate provided by the transcontinental eastbound tariff, No. 3 k, in effect at the time the shipment moved, and which provided that the shipments made thereunder should be subject to the charges and privileges provided for by tariffs on the individual lines of the parties -thereto, and to the further fact that the different lines involved in the particular transit under consideration were parties to such tariff, and that the Chicago, Rock Island & Pacific Railway Company tariff applicable to the shipment provided for reconsignment of carload shipments of the kind in question via lines over which it, in fact, moved, and that the Sparr Fruit Company’s portion of the through rate to ultimate destination on the shipment in question was less than its proportion of the rate to Kansas City would have been, had the shipment terminated there.

The Chicago, Rock Island & Pacific tariff filed with the Interstate Commerce Commission, and duly published, was in part as follows:

“A. Reconsigning will be permitted on carload shipments of fruits * * * and all Pacific Coast traffic, except as provided in section B, at through published rate, without reconsigning charge; and, provided there is a published through rate via any route from point of origin through point of diversion or reconsignment- to final destination, without hack or out-of-line haul charge, notwithstanding back or out-of-line haul may be necessary, plus any demurrage and terminal charges at original or subsequent destination.”

The notation on the original bill of lading that the car should be ventilated through side doors for 30 minutes at all diversion terminals was canceled by wire upon order of the shipper at El Paso, Texas, where the car arrived March 14, 1914, and the instructions were there changed to read “standard ventilation” which contemplates keeping the ventilation appliances open, while the outside temperature is above 32 degrees, and keeping them closed during the time the outside temperature is below 32 degrees.

No evidence was offered to support the allegations of negligence contained in the second count of the declaration that the shipment was not transported within a reasonable time.

The plaintiff proved that the fruit was in good condition when delivered into the car at Fillmore, and was in a damaged and deteriorated condition upon its arrival at destination. Defendant offered and the court received evidence tending to show due care of the shipment during the period of transportation. Evidence was offered tending to show that refrigeration was superior to ventilation as a method of preventing deterioration during transit, and plaintiff offered, and the court received, evidence of the market value of the fruit at its point of origin, and its market value in the damaged condition in which it was received at its destination

The principal contention of appellant is that the court erred in submitting the case to the jury on the theory that the defendant as initial carrier was liable beyond the point named in the original bill of lading, and in receiving evidence against the defendant of damages sustained at the destination to which it was reconsigned, and in instructing the jury at the request of the plaintiff:

“The court instructs the jury that a consignee, consignor or owner of a shipment has a right during the transit thereof to divert said shipment to a new destination, and that upon receipt of any order for said diversion by the said common carrier, the said common carrier is obligated to carry said shipment to the diverted destination.”

The shipper had such right at common law, and it has been expressly held in Gulf, C. & S. F. Ry. Co. v. Texas Packing Co., 244 U. S. 31, that the shipper has such right under the Interstate Commerce Act and decisions of the federal court construing the same. In that case poultry was shipped from Temple, Texas, to St. Louis, Missouri, under a bill of lading similar to the one in this case. While the poultry was in transit, and when the cars were on a sidetrack in St. Louis of the consignee, it was sold to a party in Chicago, and the shipper asked the initial carrier to divert the ears to Chicago. The agent of the initial carrier then telegraphed its representative in St. Louis to divert the cars, as requested. No new bills of lading were issued. The court there said:

“It is fairly inferable from the evidence that the bills of lading * * * were continued in force by the action of the parties, simply changing the place of destination, and remained binding contracts when the Santa Fe Company accepted the diversion of the shipment from St. Louis to Chicago.”

It is insisted that the instant case is distinguishable from that one by the fact that the order for the diversion of the car here was given to the connecting carrier, that is, the Rock Island Company, rather than to the initial carrier, the Southern Pacific Company. And we are cited to a number of cases, Deatwyler v. Oregon Ry. & Nav. Co., 176 Ill. App. 597; Fish v. Pere Marquette R. Co., 169 Ill. App. 629; Crutchfield, Woolfolk & Clore v. Atlantic Coast Line R. Co., 214 Ill. App. 664, which it is claimed sustain the contention of appellant.

The decisions of the federal courts are, of course, controlling, and, at any rate, we think there are material facts in this case which distinguish it from those cited. All the carriers involved here were parties to the transcontinental tariff filed with the Interstate Commerce Commission, under which the shipment moved, and this tariff provided for a through rate to Chicago on shipments of this character, with the right of diversion. In other words, at the time the contract of shipment was entered into it was within the contemplation of all the parties that such a diversion might be made at the option of the shipper. Obviously the notice of that diversion by the shipper would necessarily ultimately be given to the carrier party having the possession of the goods, and that the shipper saw fit to give the order directly to such party in possession rather than through the initial carrier would not, we think, be material.

The original contract was not in any way terminated by this exercise of an option of the shipper, which was granted by stipulations which must be considered as of the very terms of the contract.

We think there was no error either in submitting the case on the theory that the initial carrier was liable to destination or in receiving evidence on that theory or in instructing the jury to that effect. Gulf, C. & S. F. Ry. Co. v. Texas Packing Co., supra; Gamble-Robinson Commission Co. v. Union Pac. R. Co., 262 in. 406.

It is next contended that the court erred in giving the following instruction:

“The court instructs the jury that in the event you find the goods in question were when delivered to the said defendant at point of origin of said shipment in good merchantable shipping condition, and when delivered by the delivering carrier thereof, at the destination of said shipment, were not in good marketable condition, then, and in that event, as a matter of law, the negligence of said defendant and the carriers engaged in said transit is presumed therefrom, and the burden is thereupon on the said defendant to rebut said presumption.”

A similar instruction it is argued has been held erroneous by this court in Crutchfield, Woolfolk & Clore v. Atlantic Coast Line R. Co., supra. In that case the language used was “in good sound merchantable or shipping condition,” and the court said that neither by the instruction nor the evidence was the jury informed as to what was meant by the phrase “good shipping condition.” The evidence which was apparently absent in that case was in this case submitted to the jury, and we do not think the instruction was erroneous as applied to the facts of this case.

Complaint is also made that the court instructed the jury:

“That in.the event you find from all the evidence in this case the said goods in question were shipped under standard ventilation, and that standard ventilation means that the hatch covers of the car must be kept open and the plugs out when the outside temperature is above 32 degrees above zero and closed and in, respectively, when below 32 degrees above zero; and in the event that you further find from all the evidence in this case that the said instructions, if any, of the said shipper, with reference to the said ventilation, were not carried out by the carriers, in said transit, and that damage resulted to the contents of said car by reason thereof, then, and in that event, the defendant is liable herein for such damage.”

Appellant says this instruction is objectionable because it carries the implication that if the carriers did not close or open the ventilation appliances at the very moment the outside temperature fell below or rose above freezing, they were responsible for any damages resulting from such failure, regardless of the question as to whether or not they were in the exercise of due care in handling the appliances under all the circumstances of the case. And in this connection appellant also complains that its requested instruction No. 1 was refused to the effect that the standard ventilation requirements, under which the shipments in question moved, should not be construed as meaning that the carriers “shall necessarily be required to close the vents immediately upon the temperature falling below the freezing point, and to open them immediately upon the temperature rising above freezing point, but these requirements will be considered by you as placing upon the carriers the duty only of exercising a reasonable degree of care in manipulating said vents, and the duty of complying with such ventilation requirements only in a manner as .nearly as practicable consistent with the railroad operation of fruit trains.”

We think the court did not err in these respects. Defendant’s obligation as to ventilation was a voluntary, contract obligation on its part. Its liability, if any, in this respect was not based on the theory of negligence.

Appellant further contends that the trial court erred in admitting the testimony of one Battistini, who said that he had examined 13 boxes of the different brands of oranges out of a total of 396 boxes shipped, and from such examination was able to tell what the condition of the balance of the load was. No authorities are cited which would indicate that the admission of this sort of testimony was, under the circumstances, erroneous. It is apparent that a thorough inspection of the entire car was impracticable. Similar testimony has been held admissible in this and other States. Perkett v. Manistee & N. E. R. Co., 207 Mich. 32, 173 N. W. 359; Gallagher v. Grand Trunk Western Ry. Co., 207 Ill. App. 316.

Nor do we think the further contention that the court erred in admitting testimony as to the market value of the fruit at destination, without making any allowance for the natural deterioration in the fruit, during the course of its transportation, can he sustained. There was evidence tending to show that if the vents and plugs had been manipulated in accordance with the standard ventilation directions given, the fruit would have arrived in the good merchantable condition in which it was delivered. The jury had a right to so find. Under a similar bill of lading, evidence of this sort was received by the trial court, and the trial court was sustained by the reviewing court. Gulf, C. & S. F. Ry. Co. v. Texas Packing Co., supra.

Other alleged errors are argued, which we have considered, but think there is no. error in this case which would require its reversal. The judgment will therefore be affirmed.

Affirmed.

Barnes, P. J., and Gridley, J., concur.


source: Caselaw Access Project

author: Mr. Justice Matchett

license: Public Domain

text:
    S. Valentine & Company, Appellee, v. Atchison, Topeka & Santa Fe Railway Company, Appellant.
    Gen. No. 25,517.
    1. Commerce, § 5

      —what rules govern interstate shipments. In an action against a carrier involving an interstate shipment, the rights of the parties must be determined by the Interstate Commerce Act, the contract of the parties, and the decisions of the federal courts.
    2. Carriers, § 69*—what is extent of liability of, carrier of goods. A common carrier is liable as an insurer for the safe transportation of goods except where the loss happens, by the act of God, by the act of the public enemy, by the act of public authority, by the fault of the shipper, or by the inherent vice or infirmity in the goods shipped.

      3. Carriers, § 48

      —when oral evidence is admissible to contradict bill of lading. A bill of lading acknowledging the receipt of goods in apparent good condition is nevertheless only a receipt and can be contradicted by other evidence.
    4. Carriers, § 138*—what evidence is admissible in action for injury to goods. In an action against a carrier for loss of oil in transit, evidence showing that the barrels used absorbed a certain amount of oil, and testimony of experts that the inevitable effect of heat upon the oil was to cause it to expand in a way which would make the staves of the barrels give way was competent to show that the wooden barrels used were improper vessels for carrying the oil.
    5. Carriers, § 130*—what carrier may show to avoid liability for injury to goods. Where defects in a shipment are perfectly apparent, it is the carrier’s duty to refuse the shipments, and, having elected to carry them in a defective condition, the carrier will not be allowed to urge these defects as a defense; but this does not preclude the carrier from showing that the loss proceeded from a cause which existed but was not apparent when he received the goods.
    6. Carriers, § 140*—when injury to goods is question of fact. In an action against a carrier for loss of oil in transit, evidence tending to show that the loss was due to inherent nature of the oil and by defects in the barrels which were not apparent to the carrier raised an issue of fact for the jury and a directed verdict for plaintiff was improper.
    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, 1919.
    Reversed and remanded.
    Opinion filed November 30, 1920.
    Homer W. Davis, John R. Ong and Sloans Turgeon, for appellant.
    Fisher, Boyden, Kales & Bell, for appellee; Walter T. Fisher, 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. Justice Matchett

delivered the opinion of the court.

The plaintiff in this case recovered a judgment for the sum of $1,821.83 entered upon the verdict of a jury, returned under an instruction of the court so to do, all the evidence offered on behalf of the defendant having been stricken by the court on plaintiff’s motion.

The plaintiff sued for damages alleged to have been sustained by it on 150 barrels of China wood oil, shipped by the lines of defendant, a common carrier, from San Francisco, California, to Chicago, Illinois.

The declaration alleged default in the promise of defendant to safely and securely carry the same, and in an amended bill of particulars as filed, plaintiff claimed as damages the “reasonable cash market value at Chicago, Illinois, on August 25, 1916” of the difference between the number of pounds of oil delivered to the defendant at San Francisco and the number of pounds of oil delivered in Chicago, less shrinkage by absorption, at the price of 11¾ cents per pound. The defendant filed a plea of the general issue.

The plaintiff offered evidence tending to show that the oil was in barrels, which on arrival at the port leaked somewhat; that the same were recoopered and delivered to the defendant in apparent good order; that the defendant received the same after inspection issuing therefor a standard form of bill of lading signed by its agent, which acknowledged the receipt of the same “in apparent good order, except as noted. Contents and condition of contents of packages, unknown.” It was stipulated by the parties:

“Car C. B. & Q.-106310, containing 75 barrels of China wood oil referred to in plaintiff’s declaration herein, was loaded at San Francisco, California, on, to wit, August 2, 1916; and was thereupon transported by the plaintiff to Amarillo, Texas, arriving at 5:20 a. m. - August 12, 1916, at which point the contents of said car was transferred into car T. & N. O.-35108. Said car was delivered to and unloaded by the consignee, the plaintiff in this case, August 25, 1916. * * * Car AT—61926, containing 75 barrels or the balance of the shipment referred to in the declaration herein, was loaded at San Francisco, California, on, to wit, August 2,1916, and was thereupon transported by the defendant to Chicago, Illinois, arriving August 15, 1916, at 6 p. m., at which point it was delivered to the Chicago & North Western Railroad, and placed by said company on the unloading tracks of the consignee, and unloaded by it, the plaintiff in this case, August 25, 1916.”

It was also proved that the barrels of oil arrived in bad condition. The testimony of plaintiff’s superintendent on that point is not contradicted in any material matter. It is to the effect: “The oil was dripping along the side of the car; alongside of the rail there were puddles of oil, and the tracks of the cars were covered with it, and between the tracks there was a puddle of oil, perhaps an inch deep, and when you looked into the interior of the car, the floor was completely covered with oil, and every barrel was covered with oil. Some of the barrels had no heads in them. Practically all of the barrels had hoops off of them; they had dropped off. A few of the staves were knocked in. ’ ’

The net weight of the shipment at points of origin and destination showed a loss in weight of 16,734 pounds out of a total shipment of 58,351 pounds.

Plaintiff also introduced evidence showing the amount of damage computed in conformity with the provisions of the bill of lading ‘‘ on the value of the property at the place and time of shipment,” deducting from the loss the amount which was found to be the usual loss from absorption of the oil from the barrels in which it was contained.

The defendant then offered evidence tending to show that the shipments, originated in China, traveled from three to four thousand miles to San Francisco; that some of the barrels leaked upon arrival there; that these were recoopered; that the recooperage consisted in driving, flagging and reheading, that is, in driving the hoops tight in the barrels, filling up the spaces between the staves with flagging, which is a dry corn husk with pibete cells; that in any shipments of this kind of oil there are a certain number of hoops and staves damaged; and that practically every shipment required recoopering at San Francisco; that these were oriental barrels, the barrels being of wood and rattan; that the nature of the oil was such that it would absorb into the wood itself and cause the hoops in some cases to slip; that when oil of this kind is subjected to the heat of the sun’s rays it will dry up the barrels and cause them to leak. That after the shipment was placed into the car, it was inspected by defendant and found to be in good condition, and that it was loaded in a proper manner so as to prevent shifting, and braced by timbers and cleats; that the cars themselves were in good condition and of the kind usually used for such transportation.

A chemical expert testified:

“That China wood oil comes from a nut which is about two or three inches in diameter and contains from two to five seeds from which the oil is extracted, and that he made a physical and chemical test of China wood oil, to ascertain how it would act under varying temperatures; also an expansion test to ascertain how the volume of oil would vary with the heat. He did not make a test of any of the oil in these shipments, but all China wood oil has the same properties. He found that the oil would expand 1 per cent of its volume for every 20 degrees rise Fahrenheit. For this expansion test, he started with 50 degrees of temperature and went as high as 130 degrees, so that when it reached 100 degrees in temperature, it had expanded per cent.

“He also made tests to determine the rate of flow and viscosity, which is the readiness or rather the property of the oil that regulates the flow. He used the standard instrument to determine the viscosity, and found that it decreased very rapidly as the oil was heated, which indicated that the oil would flow more readily under heat. As a. comparison, at 60 degrees, water will flow 23.46 times as fast as oil through the same opening; at 120 degrees the water will flow 4.99 times as rapidly as the oil. In actual figures the increase in the rate of flow in cubic centimeters at 70 degrees is .169 cubic centimeters of oil a second would flow through this orifice, and at 120 degrees .602 cubic centimeters would flow through.”

It appeared also from a stipulation of the parties, offered by defendant, that in the course of transportation the cars encountered temperatures as high as 108 degrees, and evidence was offered to the effect that no wooden container could have held the oil without loss in August, 1916, when it was shipped.

It is admitted by all the parties that their rights must be determined by the Interstate Commerce Act, the contract of the parties, and the decisions of the federal courts declaring the law on this subject. Adams Exp. Co. v. Croninger, 226 U. S. 491; Atchison, T. & S. F. Ry. Co. v. Harold, 241 U. S. 371.

We understand the rule to be that a common carrier is liable as an insurer for the safe transportation of goods except where the loss happens, first, by the act of Cod, second, by the act of the public enemy, third, by the act of public authority, fourth, by the fault of the shipper, and fifth, by the inherent vi<?e or infirmity in the goods shipped.

The defense here interposed is that the shipper was at fault in that it failed to place the oil in suitable containers; that the wooden barrels used were wholly unsuited for the purpose; and further that the shipper was at fault in that the barrels were shipped 'too full, thus failing to provide for the expansion of the oil, and thus causing damage.

While the bill of lading acknowledges the receipt of the goods in apparent good condition; we think in this respect the bill of lading is only a receipt and can be contradicted by other evidence. Cunard S. S. Co. v. Kelley, 115 Fed. 678; Nelson v. Woodruff, 1 Black (U. S.) 156; King v. Barbarin, 249 Fed. 303; Clark v. Barnwell, 12 How. (U. S.) 272.

Appellee says there is no competent evidence in the record that these wooden barrels were. improper vessels for carrying the oil, but with this contention we cannot agree. There was evidence in the record that these barrels would inevitably absorb a certain amount of oil, and in making its proof of damages the plaintiff proved the proper deduction to be made on that account. In addition to this there was evidence of those having experience that the inevitable effect of heat upon the oil was to cause it to expand in a way which would make the staves of barrels, such as these, give way, thus causing loss of the oil.

The testimony of the expert chemist as to the nature of the oil indicated that this was necessarily so. The defendant tried to prove that the barrels were made of green lumber, but the evidence was excluded, and we think properly so, because it was mere hearsay.

Appellee contends as the defendant had carried oil of this kind prior to this shipment, we must assume it had actual knowledge of the qualities and behavior; that it also knew about barrels, their nature, capacities, etc.; that their alleged defects, being perfectly apparent, it was defendant’s duty to refuse the shipments, which as it did not do, and, having elected to carry the oil in the condition in which it then was, the carrier will not now be allowed to urge these defects as a defense. Northwestern Marble & Tile Co. v. Williams, 128 Minn. 514; Hannibal & St. J. R. Co. v. Swift, 12 Wall. (U. S.) 262; Alabama Great Southern R. Co. v. Morris & Co., 249 Fed. 312. This is also the rule in Illinois, Elgin, J. & E. R. Co. v. Bates Machine Co., 200 Ill. 636, and the English rule in Higinbotham v. G. N. Ry., 10 W. R. 358.

In Nelson v. Woodruff, 1 Black (U. S.) 156, the federal court adopted the statement of the law applicable, as made by Chief Justice Shaw in Hastings v. Pepper, 11 Pick. (Mass.) 43, as follows:

“It may be taken to be perfectly well established, that the signing of a bill of lading, acknowledging to have received the, goods in question, in good order and well conditioned, is prima facie evidence that, as to all circumstances which were open to inspection and visible, the goods were in good order; but it does not preclude the carrier from showing, in case of loss or damage, that the loss proceeded from some cause which existed, but was not apparent when he received the goods, and which, if shown satisfactorily, will discharge the carrier from liability.”

We think the proof offered for defendant at least made issues of fact for the jury as to whether the loss which occurred was or was not the result of the inherent nature or vice of the article shipped; was or was not caused by defects in the barrels which were not apparent to the carrier. The case should, therefore, have been submitted to the jury under proper instructions as to the law.

Appellee cites a line of authorities following the rule laid down in Hannibal & St. J. R. Co. v. Swift, 12 Wall. (U. S.) 262, where the railroad company was held liable for the loss of plaintiff’s baggage which had, with the knowledge of the carrier, been placed in a car with other goods shipped, although there was plenty of room in the baggage car for it.. That case is clearly distinguished from this one. There were there no questions of proper container or inherent nature of the goods. Nelson v. Woodruff, supra, seems to be controlling here.

Reversed and remanded.

Barnes, P. J., and Gridley, J., concur.


text:
    G. E. Hammans, trading as Hammans Land & Lumber Company, Appellee, v. Powell Myers Lumber Company, Appellant.
    Gen. No. 25,618.
    1. Set-off and recoupment, § 2

      —what is nature of right of set-off. The right of a defendant to set off is purely statutory.
    2. Set-off and recoupment, § 10*—what damages are not subject of set-off. Unliquidated damages arising out of a subject-matter not connected with the subject-matter of plaintiff’s claim do not form a proper matter of set-off, in an action at law under sections 33 and 47 of the Practice Act, Hurd’s Rev. St. ch. 110 (J. & A. ¶¶ 8570, 8584), and the nonresidence of any of the parties is immaterial.
    Appeal from the Municipal Court of Chicago; the Hon. John Richardson, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1919.
    Affirmed.
    Opinion filed November 30, 1920.
    Pomeroy & Martin, for appellant.
    Herbert A. Schryver, for appellee.

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

   Mr. Justice Matchett

delivered the opinion of the court.

On July 18, 1918, plaintiff, who is appellee in this court, sued out a writ of attachment against defendant on the ground that defendant was its debtor and a nonresident of the State.

September 16, defendant entered a general appearanee and demand for trial by jury and having presented a bond, which was approved, the attachment was dissolved and the garnishee, who had been summoned, discharged. An amended statement of claim was filed by plaintiff setting up the sale of certain lumber to defendant of the value of $1,319.60, which amount it was claimed was still due and unpaid. The defendant filed an affidavit of merits admitting that the sum of $1,175.02 was due on account of plaintiff’s claim and offering to allow that amount out of a claim of offset pleaded by it for the. sum of $2,185. The claim of offset alleged such amount to be due by reason of unliquidated damages arising out of plaintiff’s failure and refusal to ship to the defendant certain other orders for lumber alleged to have been accepted by the plaintiff. It alleged that after allowing all just credits, deductions and set-offs, there was due to defendant from plaintiff the sum of $1,009.98.

This amended set-off whs on motion of plaintiff stricken by the court. The cause was submitted to the court for trial, the issues were found for plaintiff with damages assessed at $1,239.13, and judgment) entered on the finding.

The amended plea of set-off, which was stricken, set up that the plaintiff was a nonresident of the State of Illinois, and that his residence was in the State of Arkansas, and that the defendant was a corporation organized and existing under the laws of the State of Indiana.

It is argued the court erred in striking the claim of set-off and appellant cites authorities which it is claimed hold that unliquidated damages arising out of a different subject-matter may in this State be set off against a nonresident plaintiff. These cases are Ideal Coated Paper Co. v. Samuel Cupples Envelope Co., 169 Ill. App. 484, and Nissly v. Wainer, 211 Ill. App. 254. As we understand the law the right to set-off in this State in purely statutory. At common law a defendant could not set off his demand against plaintiff’s debt. Morton v. Bailey, 2 Ill. 213; Replogle v. Toledo, St. L. & W. R. Co., 184 Ill. App. 339.

The statutes with reference to this subject will be found in section 33 of the Practice Act, chap. 110, Hurd’s Rev. St., page 2239 (J. & A. ¶ 8570), and section 47 of said chapter, page 2241 (J. & A. ¶ 8584).

It is well settled by many decisions of our Supreme Court construing these and similar statutes(that unliquidated damages such as were here set up, arising out of a subject-matter hot connected with the subject-matter of plaintiff’s claim, do not form a proper Waiter of set-off under this statute) Hawks v. Lands, 8 Ill. (3 Gil.) 227; DeForrest v. Oder, 42 Ill. 500; Clause v. Bullock Printing Press Co., 118 Ill. 612; Higbie v. Rust, 211 Ill. 333; Selz v. Stafford, 284 Ill. 610.

Nor are we cited to any decision of our Supreme Court holding that in an action at law the residence or nonresidence of any of the parties is material. It is true there is language in Ideal Coated Paper Co. v. Samuel Cupples Envelope Co. and Nissly v. Wainer, supra, which might be construed to so hold, but an examination of these cases indicates that the authorities relied upon were decisions of courts of other States construing statutes essentially different from the statutes which control here, and, further, that these courts were evidently not required as we are to distinguish between set-off at law and equitable set-off. In equitable set-off the residence of the plaintiff and his insolvency are usually material.

We think the court did not err in striking the plea and the judgment will therefore be affirmed.

Affirmed.

Barnes, P. J., and Gridley, J., concur.


text:
    H. H. Evans et al., v. Illinois Surety Company. State of Ohio, Claimant, Appellant, v. James S. Hopkins, Receiver of Illinois Surety Company, Appellee.
    Gen. No. 25,686.
    1. Corporations, § 557

      —jurisdiction to appoint receiver in voluntary proceeding. Independently of statute, a court of chancery is without jurisdiction to appoint a receiver for a corporation upon a bill and petition which is essentially voluntary by the parties to it, consisting of the stockholders and the corporation, without bill or process as against creditors.
    2. Receivers, § 22*—authority to terminate contract. A receiver for a surety company appointed under the Act of July 1, 1874, Hurd’s Rev. St. 1917, ch. 73, sec. 2, p. 1680 (J. & A. ¶ 6682), could not terminate the contracts of the company as of the date of his appointment, without the consent or acquiescence of the other parties to the contract, and his mere appointment would not have the effect of terminating the contracts of the company.
    3. Corporations, § 567*—appointment of receiver as terminating contracts. The provisions of section 12 of the General Act concerning corporations, Hurd’s Rev. St. 1917, ch. 32, p. 701 (J. & A. ¶ 2429), that dissolution shall not take away or impair any remedy given for any liabilities incurred previously to its dissolution; of section 4 of the Act of July 1, 1874, Hurd’s Rev. St. 1917, p. 1680, ch. 73 (J. & A. ¶ 6684), providing that corporations shall continue for 2 years but not for the purpose of continuing business, and of section 6 of chapter 32, Hurd’s Rev. St. 1917, p. 740 (J. & A. ¶ 2548), requiring a deposit with the superintendent of insurance, are inconsistent with the theory that the filing of a bill, appointment of a receiver and the issuance of an injunction restraining the corporation from doing further business should cancel all contracts outstanding on which causes of action had not then accrued.
    4. Corporations, § 572*—fixing time for exclusion of claims on insolvency. Under the statutes relating to the dissolution of insolvent insurance companies, an order may not be made fixing a time for the exclusion of claims at less than 2 years from and after the date of the dissolution of the corporation.
    5. Corporations, § 588*—what claim should he allowed on insolvency. In proceedings for the dissolution of an insolvent surety company, a claim of a sister State upon the bond of a contractor who defaulted subsequently to the appointment of a receiver, should be allowed.
    6. Corporations, § 572

      —when claims prematurely filed on insolvency. Claims presented by a State against an insolvent surety company upon bonds, of contractors issued by such company, but upon which no default had occurred, were prematurely filed.
    Appeal from the Superior Court of Cook county; the Hon. Denis E. Sullivan, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1919.
    Reversed and remanded with directions.
    Opinion filed November 30, 1920.
    Pratt & Zeiss, for appellant; John G. Price and William J. Meyer, of counsel.
    A. J. Hopkins, for appellee.

      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 Matchett

delivered the opinion of the court.

April 19, 1916, a bill and petition were filed in the superior court of Cook county by fifty-four stockholders of the Illinois Surety Company. These set up that the corporation was organized under the laws of the State of Illinois for the purpose of doing a surety business, but that it was, in fact, insolvent. The bill prayed for the appointment of a receiver, and that upon a final hearing a decree dissolving the corporation and providing for the distribution of its assets to its creditors might be entered.

The Surety Company alone was made defendant to the bill and petition. On the same day it entered its appearance and answered admitting the facts as set forth in the bill, and thereupon an order was entered by the court appointing James S. Hopkins receiver, with power to do all acts necessary for the marshalling and distribution of its assets and the closing of its concerns. The order also enjoined further transaction of business by the corporation.

By the terms of this decree, the court expressly retained jurisdiction over all said parties until final hearing and settlement thereafter of all unfinished business of said Illinois Surety Company and the receivership therein.

March 1, 1917, an order was entered by the court directing that creditors of the Illinois Surety Company file their claims with the receiver on or before September 1, 1917.

The State of Ohio, appellant, filed with the receiver certain claims Nos. 371, 1080 and 1241. The receiver listed these as exhibit B, and reported them to the court as unliquidated claims, requiring proof. All of these claims were based on certain bonds executed by the Surety Company for principals who were at the time of the execution thereof about to contract for the construction of certain highways in the State of Ohio. The conditions of these bonds were that the principals would enter into the contracts, and would perform each and all the terms, covenants and conditions of the same, including the doing by them of the work contracted for, the payment of materialmen, subcontractors, etc., and that they would hold the State of Ohio harmless from all claims arising by reason of these contracts.

These claims, with others, were referred to a master who .reported as to claims Nos. 1080 and 1241, that no breach of the said bonds or any or either of them had been proved. As to claim No. 371, the master found that the contractors for whom the company became surety failed to comply with and carry out the provisions of their contract, and that said default occurred subsequently to the appointment of the receiver; that no breach of said bond occurred prior thereto, or existed at the time of the appointment of said receiver. The master, therefore, recommended that all the claims be disallowed, overruled objections to his report, and the chancellor, upon the hearing, overruling exceptions by the State of Ohio, confirmed the master’s report.

In support of that decree the receiver here contends:

“The decree of the Superior Court of Cook County, Illinois, that declared the Illinois Surety Company insolvent and enjoined it from transacting any further business, and appointed a receiver to take charge of its property and assets, and administer the sáme under the direction of the court, on the 19th day of April, 1916, canceled all outstanding obligations of the Illinois Surety Company, and that no claim can be maintained for the breach of any bonds that occurred subsequent to that date. In other words, he maintains that the rights and liabilities of creditors and debtors of the Surety Company are fixed and determined at the time of the declared insolvency of the company, and the appointment of the receiver. ’ ’

In support of this view we are cited to Carr v. Hamilton, 129 U. S. 252, where the court said:

“By that act (insolvency and going into liquidation) the company becomes civiliter mortuus. Its business is brought to an absolute end, and the policyholders become creditors to an amount equal to the equitable value of their respective policies,” etc.

We are also cited to the decisions of the courts of many of the States asserting the same doctrine, and we think, it may be conceded, that the general rule as to life insurance and similar companies is correctly stated in the note to Fuller v. Wright, L. R. A. 1917 E. p. 1341, as follows:

“That an adjudication of insolvency of the insurer and the making of an order of liquidation terminated its policies, so that a claim for a loss accruing thereafter was not provable, is in accord with the weight of authority.”

The same rule has been held to be the law of the State of New York, applicable not only to insurance corporations, but also as to other companies writing contracts of the same nature as are involved in this case. People v. Globe Mut. Life Ins. Co., 91 N. Y. 174; People v. Commercial Alliance Life Ins. Co., 154 N. Y. 98; People v. Metropolitan Surety Co., 205 N. Y. 135; In re Empire State Surety Co., 216 N. Y. 273.

It is important, however, to notice that a statute exists in that State which provides, in substance, that the rights and liabilities of corporations and others interested, unless otherwise directed by the court, shall in such cases be fixed as the date of the entry of the order, directing the liquidation of the corporation. See Birdseye, Cummings & Gilbert’s Consolidated Laws of New York (2nd Ed.) vol. 4, p. 3907.

Indeed, it would not be a difficult matter to distinguish most of the cases cited from the instant one, for the reason that the decisions are based on statutes of the several States, in whose jurisdictions the proceedings took place. We, therefore, think a safe guide in determining this question can only be found in the statutes of our own State, under which the Illinois Surety Company was organized, and in conformity with which it has been asked that it be dissolved.

It is pointed out that no decree of dissolution has yet been entered; that the decree appointing the receiver does not find that the corporation is insolvent, and that no order has been made distributing the assets of the corporation. No persons interested, other than the corporation, are made parties defendant to the bill, or have been summoned to defend it. Stockholders alone petitioned for the appointment of a receiver. The corporation on the same day entered its appearance, confessed the allegations of the bill, and consented to the appointment. It was, essentially, a voluntary proceeding by the parties to it, stockholders and corporation, without bill or process, as against creditors.

That, independently of the statute, a court of chancery in this State is wholly without jurisdiction to appoint a receiver upon such a bill and petition, as was filed in this case, has been decided by the Supreme Court in People v. Weigley, 155- Ill. 491. It therefore becomes most important to examine the provisions of the statute to ascertain therefrom, if possible, whether the correct rule of law has been applied.

Authority for the organization of the Surety Company is provided for by the Act in force April 17, 1899, Hurd’s Rev. St. 1917, pp. 739-741. By the 14th section of that Act (J. & A. ¶ 2556) it is provided:

“Corporations formed under this act shall be subject to all laws of this State governing corporations for pecuniary profit, as provided for in an act entitled, ‘An act concerning corporations,’ approved April 18, 1872, in force July 1, 1872, and amendments thereto, in force July 1, 1897, and the duties thereof, and shall have the powers thereof, so far as the same are not inconsistent with the provisions of this act. Such companies shall also be subject' to the provisions and requirements of an act entitled, ‘An act in regard to the dissolution of insurance companies,’ approved February 17, 1874, in force July 1, 1874.”

Section 1 of said Act of July 1, 1874, provides for involuntary dissolution of insurance companies, upon proceedings brought by the auditor of State. Section 2, Hurd’s Rev. St. 1917, p. 1680, ch. 73 (J. & A. ¶ 6682) provides:

“When a majority, in number, or interest, of the members or stockholders of any insurance company incorporated in this State, desire to close its concerns, they may apply by petition to the circuit court of the circuit in which the company is located, setting forth in substance the grounds of their application; and the court, after due notice to all the parties interested, may proceed to hear the matter, and for reasonable cause decree a dissolution of. the corporation; and corporations so dissolved shall be deemed and held extinct, in all respects as if their charters had expired by their own limitation, subject, however, to the provisions hereinafter prescribed.”

Section 4 of the same Act (J. & A. ¶ 6684) provides:

“Insurance companies whose charters expired by their own limitation, or become forfeited by non-user, or are dissolved by decree of court, or otherwise, shall, nevertheless, be continued bodies corporate for the term of two years after such expiration, forfeiture or dissolution, for the purpose of prosecuting and defending suits by or against them, and of enabling them gradually to settle and close their concerns, to dispose of and convey their property, and divide their capital stock and assets, but not for the purpose of continuing the business for which they were organized.”

And by section 5 (J. & A. ¶ 6685) it is provided:

“When the charter of any such insurance Company expires, is forfeited or annulled, or the corporation is restrained from the further transaction of its business, or is dissolved, as hereinbefore provided, the court, upon application of the auditor, or of a member, stockholder or creditor, may, at any time before the expiration of said two years, appoint one or more persons to be receivers, to take charge of the estate and effects of the company, including such securities as may be deposited with the Auditor or Treasurer of State, and to collect the debts due, and property belonging to it, with power to prosecute and defend suits in the name of the corporation, or in their own names, to appoint agents under them, and to do all other acts necessary for the collection, marshaling and distributing of the assets of the company, and the closing of its concerns; and when necessary for the final settlement of its unfinished business, the powers of such receiver may be continued as long as the court deems necessary therefor.”

By section 6 of said Dissolution Act (J. & A. ¶ 6686) it is provided:

“The receiver shall pay all debts due from the company, if the funds in his hands are sufficient therefor, and if not, he shall distribute the same ratably among the creditors who prove their debts, in such manner as the court may direct. * * * If there is a balance remaining after the payment of the debts, the receiver shall distribute the same among those who are justly entitled thereto, as members, stockholders, or otherwise, or their legal representatives.”

By section 9 (J. & A. ¶ 6689) it is provided:

“The mode of summoning parties into court, the rules of practice, course of procedure, and powers of courts, in cases arising under this Act, shall be the same as in ordinary proceedings in equity in this State, except as herein otherwise provided.”

Section 10 of the General Act concerning corporations, in force July 1, 1872, Hurd’s Rev. St. 1917, ch. 32, sec. 10, p. 701 (J. & A. ¶ 2427), provides:

“All corporations organized under this law whose powers may have expired by limitation or otherwise, shall continue their corporate capacity during the term of two years, for the purpose only of collecting the debts due said corporation, and selling and conveying the property and effects thereof.”

It should also be noted that section 6 of chapter 32, Hurd’s Rev. St. 1917, p. 740 (J. & A. ¶ 2548), provides:

“Every such corporation before commencing business shall, in addition to other requirements of law, deposit with the insurance superintendent, in trust, for the special and sole benefit and security of all its creditors and holders of its obligations and contracts of suretyship, guaranty and indemnity not less than $100,000 of its paid-up capital in bonds of the United States or State or municipal bonds, or in mortgages on improved or productive real estate in this State, being first lien thereon, and the real estate being worth at least twice the amount loaned thereon.”

The bill alleges that such securities at the time of the filing thereof were on deposit with the insurance superintendent of the State of Illinois, and that other assets of the corporation were in the hands of officials of other States under similar statutes.

Section 1 of the said Act (J. & A. ¶ 6681), in regard to the dissolution of insurance companies, has been construed with reference to the powers of a receiver appointed under that section in Republic Life Ins. Co. v. Swigert, 135 Ill. 150.

The opinion points out that sections 5 and 6 of the act, providing for the appointment of receivers, and stating their duties, do not increase the powers given to receivers according to the usual course of practice, and that these two sections contain all the powers that are expressly given to the receiver by the statute. It says:

“He is ordinarily, in respect to his title and in respect to the litigations in which he may engage' merely the representative of the owners of the property submitted to his control.”

It is difficult to understand how such a receiver, with powers as there defined, could terminate the contracts of the company as of the date of his appointment, without the consent or acquiescence of the other parties to the contract; and we believe no case will be found, holding that the mere appointment of a receiver, would have the effect of terminating the contracts of the company.

Moreover, section 10 of chapter 32, above cited, has been construed in Life Ass’n of America v. Fassett, 102 Ill. 315, and the effect of that provision continuing the life of" the corporation after the time of its dissolution construed. The court said:

“ * * * With respect to the effects of a defunct corporation, the legislature of this and most, if not all, the other States of the union, have, by appropriate legislative enactments, provided for just and equitable distribution of their assets in cases of insolvency, or sudden dissolution from any cause; and our own act on the subject contains a provision which in express terms extends their corporate existence 2 years after the date of their dissolution for such purpose. * * * From these and other provisions of the statute it clearly appears that it is a part of the settled policy of the State, at least, so far as domestic corporations are concerned, that upon their dissolution, however, that may be effected, they shall, nevertheless^ be regarded as still existing for the purpose of settling up their affairs, and having their property applied for the payment of their just'debts.”

See also Commercial Loan & Trust Co. v. Mallers, 242 Ill. 50; Malicki v. Bulkley, 206 Ill. 249.

Again it has also been held in this State that insolvency of a corporation, even if established, does not discharge the company from its liabilities then existing or which may thereafter accrue. In Chicago Fire Place Co. v. Tait, 58 Ill. App. 293, this court said in a case where a receiver has been appointed for an insolvent book company:

“The insolvency of tjie book company did not discharge it from its liabilities existing at the time the receiver was appointed, nor from such as might thereafter accrue.”

And in the case of Chemical Nat. Bank of Chicago v. Hartford Deposit Co., 156 Ill. 522, in a case where the court had before it the liability of an insolvent lessee, for which a receiver had been appointed, the court said:

“It will be observed that nothing was done by the lessor to terminate the lease. The receiver gave notice of his election to terminate the lease on July 31, so far as he, as receiver, was concerned. This action, however, on his part, had no effect on the lease as respects its validity or binding force between the lessor and the Chemical National Bank. There was a contract in writing existing between these parties, which fixed their obligations and determined their rights and liabilities, and the receiver was clothed with no power to do any act which would impair the obligation of that contract.”

This case was affirmed in Chemical Nat. Bank of Chicago v. Hartford Deposit Co., 161 U. S. 1.

In City Ins. Co. of Providence v. Commercial Bank of Bristol, 68 Ill. 348, it was held, with respect to a foreign corporation, that though extinct and dissolved, the obligations of its contracts survive.

It has also been decided in this State that the death of an individual surety does not cancel his liability, but that, on the contrary, his estate is liable. See Rapp’s Estate v. Phœnix Ins. Co., 113 Ill. 390.

We think the statutes and decisions cited are inconsistent with the contention of the receiver and the rule applied by the chancellor.

The provisions of section 12 (J. & A. ¶ 2429), that dissolution “shall not take away or impair any remedy given * * * for any liabilities incurred previous to its dissolution”; of said section 4, that, notwithstanding dissolution, corporations shall continue 2 years, “but not for the purpose of continuing the business for which they were organized”; of said section 6, requiring a deposit with the superintendent of insurance “for the special and sole benefit and security of all its creditors and holders of its obligations and contracts of suretyship, guaranty and indemnity,” seem to be wholly -inconsistent with the theory that the filing of a bill, appointment of a receiver and injunction, such as was provided for in the order entered in this case, should cancel all contracts outstanding on which causes of action had not then accrued. No such narrow meaning can be given to the words “creditors” or “liabilities,” as such a construction would seem to' require. Choteau v. Jones, 11 Ill. 300; Parker v. Hull, 46 Ill. App. 471; Cochran v. United States, 157 U. S. 296; Home Ins. Co. of New York v. Peoria & P. U. Ry. Co., 178 Ill. 70.

But we are cited to certain Illinois cases which it is said support the contention of the receiver; to Hynes v. Illinois Trust & Savings Bank, 226 Ill. 95, where the court said:

“The rights and liabilities of the creditors and debtors of the insolvent corporation are fixed and determined at the time of the appointment of the receiver.”

To Gillett v. Chicago Title & Trust Co., 230 Ill. 373, where the court said:

'“The rights of all the creditors are fixed when the court takes jurisdiction of the property.”

To Blanchard Bro. & Lane v. S. G. Gay Co., 289 Ill. 421, where the court said:

“Appointing a receiver to take possession of the assets of a corporation and to distribute them is tantamount to dissolving the corporation by decree in equity.”

An examination of these cases discloses that the issues therein were quite different from those involved here. All these suits were brought by creditors "under section 25 of the General Incorporation Act (J. & A. ¶ 2442). In the Hynes case the question was whether a creditor, who held bonds of the company at the time the receiver was appointed and' was also liable for unpaid stock, could transfer the bonds so as to avoid set-off, and the court held the creditor could not do this. The language quoted was used in that connection. In Gillett v. Chicago Title & Trust Co., supra, the general rule was announced that:

‘‘ Where the assets of a corporation, including stock liability, are less than its indebtedness, and it passes into the control of a court of chancery for the administration of its assets and for dissolution, the general rule is that interest is not allowed on claims against the funds. The delay in distribution is the act of the law.”

It was pointed out that under the circumstances there shown to exist, the allowance of interest would be inequitable as between the creditors. In Blanchard Bro. & Lane v. S. G. Gay Co., supra, it was held that parties claiming the property of a corporation under a receiver appointed, upon a bill filed by a stockholder, where the allegations of the bill were insufficient to confer jurisdiction on the court, could not hold the property as against creditors who had filed a bill under section 25, and who prayed to have the former proceedings set aside.

It is apparent that the court in these cases was con-„ sidering proceedings which were in the nature of creditors’ bills, in which the filing of the bill and the appointment of a receiver have usually been held to be equivalent to an equitable levy by the creditors, and the language used would not be applicable to proceedings of the kind here under consideration. Pennsylvania Steel Co. v. New York City Ry. Co., 198 Fed. 740; William Filene’s Sons Co. v. Weed, 245 U. S. 597. We think the last named case states the law which should control, as follows:

“When a statutory system is administered, the only question for the courts is what the statutes prescribe. But when the courts without statute take possession of all the assets of a corporation under a bill like the present, and so make it impossible to collect debts except from the court’s hands, they have no warrant for excluding creditors, or for introducing supposed equities, other than those determined by the contracts that the debtor was content to make and the creditors to accept.

“In order to make a distribution possible, they must, of necessity, limit the time for the proof of claims. But they have no authority to give to the filing of the bill the effect of the filing of a petition in bankruptcy, so as to exclude any previously made and lawful claim that matures within a reasonable time before distribution can be made.”

We realize that a time must be fixed for the distribution of assets, if not by statute then by order of the court, and that when so fixed contingent claims must necessarily be excluded, but we think under these statutes such an order may not fix a time for exclusion at less than 2 years from and after the date of the dissolution of the corporation. We think that provision of the statute analogous to provisions of the Insolvency and Administration Acts which prescribe the time within which claims must be filed against the estate. The rules applicable to proof of contingent claims in such cases have been often stated by the courts. Chicago Title & Trust Co. v. Fine Arts Bldg. Corporation, 288 Ill. 142; Suppiger v. Gruas, 137 Ill. 216; Snydacker v. Swan Land & Cattle Co., 154 Ill. 220; Joliet Nat. Bank v. O’Donnell, 165 Ill. 32; Hoyle v. Scudder, 32 Mo. App. 372.

As to claim No. 371 of the State of Ohio, we think under the proofs the same should have been allowed in the sum of $3,281.35. As to claims Nos. 1080 and 1241, an examination of the evidence submitted by the State of Ohio indicates that these were prematurely filed.

The decree of the superior court will therefore be reversed and the cause remanded with directions to allow said claim No. 371, in the sum of $3,281.35, and for other proceedings consistent with the views herein expressed.

Reversed and remanded with directions.

Barnes, P. J., and Gridley, J., concur.


text:
    The People of the State of Illinois ex rel. Catherine Sides, Defendant in Error, v. Walter Johnson, Plaintiff in Error.
    Gen. No. 25,858.
    1. Bastards, § 10

      —when prosecution may he brought. Section 16 of the Bastardy Act, Hurd’s Rev. St. ch. 145 (J. & A. ¶ 718), providing that no prosecution shall he brought under the act, “after two years from the birth' of the bastard child provided the time any person accused shall be absent from the State shall not be computed,” is a condition of liability rather than a statute of limitations.
    2. Bastards, § 10*—what limitation statutes apply to prosecutions. The provision of the general statute of limitations which gives to the plaintiff a year after involuntary nonsuit to begin his action anew is not applicable to a bastardy proceeding.

      3. Bastards, § 10

      —what evidence is insufficient to show absence from, State. Evidence by a prosecutrix in a bastardy proceeding tending to show that a prior warrant had been sworn out and that the police officer was unable to find the defendant is insufficient to show defendant’s absence from the State.'.
    4. Bastards, § 21*—what evidence is admissible. In a prosecution on the charge of bastardy, commenced after the 2-year limitation provided for in the Bastardy Act, Hurd’s Rev. St. ch. 148, sec. 16 (J. & A. ¶ 718), evidence tending to show the presence of the defendant in the State during the 2 years from the birth of the child is material and its rejection is error.
    Error to the Municipal Court of Chicago; the Hon. John Stele, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1920.
    Reversed and remanded.
    Opinion filed November 30, 1920.
    McDonnell & McDonnell, for plaintiff in error.
    Maclay Hoyne and Edward E. Wilson, 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 Matchett

delivered the opinion of the court.

The relatrix filed a complaint in the municipal court of Chicago July 14, 1919, in which she alleged she was an unmarried woman and that plaintiff in error was the father of her bastard child. A warrant thereupon issued for the arrest of defendant. After various motions plaintiff in error filed a plea of “not guilty,” and the case was tried before a jury.

The complainant testified in her own behalf that she had sexual intercourse with the defendant the first time August 15, 1915, the last time on May 26, 1916; that she became pregnant on October 23, 1915, at her home in Chicago, Illinois, and the child was born in Chicago, Cook county, Illinois, July 31, 1916; that she was a single woman when the child was born. She further testified: “I told him I was in the family way, and I asked him what he intended to do, and he said he did not have a good position, and he did not know what to do.” She also testified that he told her he did not have enough money and he did not know what to do, and he kept telling her that until the child was born in 1916. That after the birth of the child she saw him in his own home and asked him what he intended to do; that he said he would be over to the house that evening; he did not come.

The relatrix also offered evidence tending to show that a prior warrant had been sworn out by her and that the police officer was unable to find the defendant. At 'the conclusion of the evidence for the prosecutrix defendant moved for a directed verdict in his behalf. The motion was denied by the court, whereupon the defendant offered the evidence of witnesses to the effect that they knew him in 1916 and saw him in the City of Chicago in that year, and the defendant offered to show by these witnesses that he had been in the City of Chicago, Cook county, Illinois, all his life up until the month of September, 1918, and that he was never out of the jurisdiction of the State of Illinois. The court sustained objections to this and similar evidence offered. Thereupon the defendant rested his case and the court, at the request of the prosecutrix, instructed the jury to return a verdict in her favor.

The plaintiff, in error contends that the trial court erred in overruling the defendant’s motion to direct a verdict in favor of the defendant at the close of the People’s case, and that it erred in refusing to admit evidence tending to prove that the defendant was within the jurisdiction of the State of Illinois during the years 1916. and 1917 and up to September, 1918.

The theory of plaintiff in error seems to be that the limitation provided for by section 16 of the Bastardy Act, Hurd’s Rev. St. 1917, ch. 148 (J. & A. ¶ 718), is a condition of liability rather than a statute of limitations; that defendant was, therefore, entitled to his discharge under the rule laid down in Carlin v. Peerless Gas Light Co., 283 Ill. 142, where it was held that the time fixed by the statute for bringing an action under the Injuries Act, as amended, was such a condition. Section 16 of the Bastardy Act is as follows: “No prosecution under this Act shall be brought after two years from the birth of the bastard child: Provided, the time any person accused shall be absent from the State shall not be computed.”

Similar provisions in analogous statutes have been construed by our Supreme Court in harmony with the contention of plaintiff in error. Sharp v. Sharp, 213 Ill. 332; Spaulding v. White, 173 Ill. 127; O’Leary v. Frisbey, 17 Ill. App. 553; Carlin v. Peerless Gas Light Co., supra.

Apparently it was the theory of the trial judge not only that section 16 was a statute of limitations, but that the provision of the general statute of limitations which gives to the plaintiff a year after involuntary nonsuit to begin his action anew was applicable. We think, however, it did not apply. Heimberger v. Elliott Frog & Switch Co., 151 Ill. App. 318. If we are correct in these views it was necessary for the relatrix to sustain the allegation made in her complaint to the effect that the defendant had been absent from the State. We think the proof offered in her behalf on this point was insufficient to establish that fact.

But, even conceding that it was sufficient, the court erred in rejecting and refusing to receive evidence to the contrary offered on behalf of the defendant. For the error in rejecting this evidence the judgment will be reversed and the cause remanded.

Reversed and remanded.

Barnes, P. J., and Gridley, J., concur.


text:
    H. H. Evans et al., on appeal of Grand Lodge Ancient Order of United Workmen of Nebraska, Appellant, v. Illinois Surety Company and James S. Hopkins, Receiver, Appellee.
    Gen. No. 25,868.
    1. Receivers, § 22

      —what is effect of receiver’s appointment as to contracts. The appointment of a receiver for a surety company does not cancel the contracts and obligations of the company then in force, although they are not at that time absolute and liquidated demands.
    2. Indemnity, § 11*—when statements in application are complied with. Where an application for a surety bond contained answers stating that the books and accounts of the officer would be audited and verified monthly, and yearly, by a finance committee and expert auditor, and the evidence showed that monthly statements of a bank were .checked by the finance committee as well as monthly reports by the officer, the promises as made were substantially kept and the surety company could not contend that the insured could not recover, even if it was conceded that the application was a part of the contract.
    3. Principal and surety, § 8*—what is liability of surety for damages. Where the surety bond provided that the principal would “render a true account of his office, and of the doings therein, * * * to the proper authority when required,” and that he would “faithfully account for all balances of money remaining in his hands at the termination of his office and deliver the same to his successor or to the person or persons authorized to receive the same,” the liability of both- principal and surety for dámages arising from breaches of these provisions was not conditional but absolute, and no demand on the principal for the money which he failed to pay was necessary to establish such liability.
    4. Principal and surety, § 37*—what does not operate as discharge of surety. Where plaintiff, who was secured by the bond of the defendant surety company, secured an additional bond in another company when a. receiver was appointed for the defendant, plaintiff’s action did not operate as a release of the security held from defendant.
    Appeal from the Superior Court of Cook county; the Hon. Denis E. Sullivan, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1920.
    Reversed and remanded with directions.
    Opinion filed November 30, 1920.
    Bulkley, More & Tallmadge, for appellant.
    A. J. Hopkins, for receiver.

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

   Mr. Justice Matchett

delivered the opinion of the court.

The claimant, Grand Lodge of the Ancient Order of United Workmen of Nebraska, appeals from a decree entered by the superior court of Cook county dismissing a claim filed by it against James S. Hopkins, as receiver of Illinois Surety Company.

The claim was for the amount of $13,000 and the basis of the alleged liability was two bonds given by Edward L. Dodder, now deceased, but at the time the bonds were given, treasurer of the appellee order, These bonds were executed by said debtor as principal, and the Illinois Surety Company signed with him as his surety. Each of the bonds is for the sum of $100,000, the first one covering the period from the 1st day of July, 1913, to the 30th day of June, 1915, inclusive, the second covering the period from the 1st day of July, 1915, to the 30th day of June, 1917, inclusive. Each of the bonds was joint and several and bound the personal representatives and successors of the signers. In each case the condition of the bond was: “If the said Edward L. Dodder shall render a true account of his office, and of the doings therein,” for the respective dates covered as above set forth, “to the proper authority when required thereby, and shall promptly pay over to the persons or officers entitled thereto all moneys which may come into his hands by virtue of said office, and shall faithfully account for all balances of money remaining in his hands at the termination of his office and deliver the same to his successor or to the person or persons authorized to receive the same, then this bond to be void, otherwise to be and remain in full force and effect.”

On April 19, 1916, appellee James S. Hopkins was appointed receiver of the. Illinois Surety Company. On July 18 thereafter appellant secured an additional bond for Dodder with the National Surety Company as surety. The condition of this bond was that if Dodder should, on and after the 1st day of July, 1916, well and faithfully perform all the duties of said office and account for and turn over all moneys and property coming into his hands as such officer, then the obligation was to be void, otherwise to remain in full force and effect.

Dodder died by his own hand on the 4th day of January, 1917. It was alleged by the claimant that the examination of his accounts disclosed a shortage of $16,000. The National Surety Company made good $3,000 of this amount, and appellant’s claim against receiver herein is for the balance of $13,000. A claim for that amount in favor of appellant has been allowed against the estate of Dodder by the county court of Douglas county, Nebraska.

The claim filed against Hopkins as receiver was referred to a master, who took the evidence and reported, recommending disallowance thereof for the reason, among others, that he found no breach of the bonds occurred prior to the 19th day of April, 1916, or prior to the 1st day of July, 1916. The master proceeded upon the theory that the appointment of the receiver had the effect of canceling the contracts and obligations of the Illinois Surety Company then in force, and which were not at that time absolute and liquidated demands.

We have already discussed this point at length in the case of the State of Ohio v. Hopkins, No. 25,686, ante, p. 199, in an opinion this day filed, in which this court holds adversely to the contention of the receiver on a similar state of facts appearing in that case. It will therefore be unnecessary to again discuss that point in this opinion, and unless it appears that there are other controlling reasons in this case on account of which the decree must be sustained, it also must be reversed.

It is contended by the receiver that the claimant cannot recover at any rate because that in its application for the second surety bond certain answers were made by the claimant which were warranted to be true and which were not in fact true. These answers were to the effect that the books and accounts of Dodder would be audited and verified with the funds on hand and in the bank by the finance committee of the order monthly, and that at the end of the year an expert auditor would be employed to go over the books and accounts of the treasurer and have them verified with funds on hand and in the bank. It is claimed that the finance committee did not comply with these statements or conditions and that if it had done so the loss would not have occurred, and that for that reason the claimant may not be permitted to recover, citing United States Fidelity & Guaranty Co. v. Downey, 38 Colo. 414, 10 L. R. A. (N. S.) 323; Hunt v. Fidelity & Casualty Co. of New York, 99 Fed. 242; Rice v. Fidelity & Deposit Co. of Maryland, 103 Fed. 432.

Even if it is conceded, as the'receiver contends, that the application for the surety bond in which these answers occur is a part of the whole contract (which appellant, relying on Spence v. Central Acc. Ins. Co., 236 Ill. 444, contends is not the case), we think the contention of the receiver with respect thereto cannot be sustained because it appears from undisputed evidence that the promises as made were substantially kept. This evidence shows that the banks with which Dodder deposited the funds of the order were in the habit of sending a statement the first of each month showing the funds in their hands on the last day of the preceding month, and that these were checked up |>y the finance committee with the reports of Dodder made monthly to that committee; that all the funds received by Dodder came from the grand recorder of the order and his predecessor and that Dodder’s monthly statement was also checked against the grand recorder’s cash book by the finance committee. These facts clearly distinguish this case from that of the United States Fidelity & Guaranty Co. v. Downey, supra, on which the receiver relies.

The receiver next contends that, as the undertaking of the bonds was that Mr. Dodder would- render a true account of his office from the 1st day of July, 1913, to the proper authority when required, and promptly pay to the persons or officers entitled thereto all moneys which came into his hands at the termination of his office, it was necessary that a demand be made on Dodder for the money which he failed to pay before the surety would be liable. It is pointed out that Mr. Dodder paid every demand made on him for money by the claimant during his lifetime, and that the monthly reports made by him accounted for every dollar he received from the claimant. Therefore it is contended a demand was a necessary preliminary to recovery. Citing Morley v. Town of Metamora, 78 Ill. 394; Roper v. Sangamon Lodge No. 6, I. O. O. F., 9.1 Ill. 518; Cowden v. Trustees of Schools, 236 Ill. 604; Town of Cicero v. Grisko, 240 Ill. 220.

The master not only found that such demand was necessary but that it should have been made prior to April 19, 1916 or July 1, 1916, but in view of our conclusion in the State of Ohio v. Hopkins, supra, this finding was erroneous. Moreover, we think the evidence shows that Mr. Dodder breached provisions of the bonds which would not require, any demand to be made upon him to establish them. These provisions are that he would “render a ¡true account of his office, and of the doings therein, * * * to the proper authority when required,” and that he would “faithfully, account for all balances of money remaining in his hands at the termination of his office and deliver the same to his successor or to the person or persons authorized to receive the same.” By the terms of the bonds the liability of both principal and surety for damages arising from these breaches was. not conditional but absolute and no demand was necessary to establish it. Brandt on Suretyship and Guaranty (3rd Ed.), sec. 110; Byrne v. Ætna Ins. Co., 56 Ill. 321; Hough v. Aetna Life Ins. Co., 57 Ill. 318; Winslow v. People, 117 Ill. 152. Moreover, it appears from the evidence that demand was made upon Dodder’s estate prior to the filing of the claim herein.

It is also argued for the receiver that the action of the claimant in securing the bond of the National Surety Company amounted to a release of the Illinois Surety Company from its obligations, but we find no evidence in the record tending to show that such was the fact. We can see no reason why upon the appointment of the receiver appellant might not take additional security if it saw fit so to do, or how such action on its part could operate as a release.of security already held. Oxley v. Storer, 54 Ill. 159; Pearsall v. Elgin Nat. Bank, 182 Ill. App. 553; Trustees of Presbyterian Board of Publication v. Gilliford, 139 Ind. 524; Champion Ice Mfg. & Cold Storage Co. v. American Bonding & Trust Co., 115 Ky. 863, 75 S. W. 197; Citizens’ Bank v. Whinery, 110 Iowa, 390, 81 N. W. 694.

We think the court erred in approving the report of the master disallowing appellant’s claim and the decree will be reversed and the cause remanded with directions to allow the claim.

Reversed and remanded with directions.

Barnes, P. J., and Gridley, J., concur.


author: Mr. Presiding Justice Taylor

text:
    F. H. Hill Company, Defendant in Error, v. Anna M. Barmore, Plaintiff in Error.
    Gen. No. 25,342.
    1. Husband and wife, § 147

      —when wife is not liable for money received though husband overdrew account. A wife who receives from her husband, a salaried officer and a director of a corporation, from time to time throughout a period of 10 years, checks drawn on that corporation signed with the company’s name, and by its secretary and countersigned by her husband, as president, and payable to her order, and uses them to defray the family penses, cannot upon the death of her husband, and the discovery that his account was, during all that time overdrawn, be held liable for the amount of all she has so received and spent, where she had no knowledge of the state of her husband’s private account with the corporation, and she was justified, considering the number of checks and the long period of time covered and the habit established, in believing that every check she received was for corporate purposes in payment of her husband’s salary.
    2. Corporations, § 387*—when directors of. corporation are charged with notice of overdrawing of account. Where the books of the corporation showed that for 20 years the account of its president was continuously overdrawn, the directors, as trustees of the corporation, must be charged with a reasonable knowledge of its accounts.
    Error to the Municipal Court of Chicago; the Hon. Bernard P. Barasa, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1919.
    Reversed and judgment here.
    Opinion filed December 22, 1920.

      Certiorari denied by Supreme Court (making opinion final).
    Helmer, Moulton, Whitman & Whitman, for plaintiff in error.
    Adams, Childs, Bobb & Wescott, for defendant in error; James B. Wescott and George B. McKibbin, of counsel.

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

   Mr. Presiding Justice Taylor

delivered the opinion of the court.

The plaintiff, F. H. Hill Company, a corporation, brought suit on April 16, 1917, against the defendant, Anna M. Barmore, for the amount of 106 checks which were drawn in its name and given from time to time by N. L. Barmore, who was president and general manager of the corporation, to the defendant, his wife. Its claim is that the money paid out to her on the checks was paid out from the corporate funds of the F. H. Hill Company without any authority from the stockholders or directors of the company.

The defense is that the defendant’s husband, N. L. Barmore, who died in January, 1917, was the .president and general manager of the plaintiff company; that he had a salary account, and from tinje to time drew, or directed the secretary and treasurer to draw on Eis account, checks payable to the order of his wife; that by such checks he paid over to her a certain portion of his salary each year and that it was charged to his account; that from time to time he drew currency and had it charged to his account; that he drew checks to his own order and paid bills in the regular course of business; that the checks were signed by the secretary and countersigned by the president and general manager of the company and charged to his account; that the fact that the account of her husband, N. L. Barmore, was overdrawn at the time the checks, signed by the. secretary and treasurer of the company and countersigned by him, were drawn and charged to him, an officer of the company, on his regular credit and debit account with the company, could give rise to no liability on the part of the defendant, his wife, who knew nothing about the state of his account and who used the checks in payment of their domestic expenses. In addition to that defense the defendant filed a set-off upon a note of $3,700 which had been given to her by the plaintiff company for money which she had loaned it, on September 2, 1914, at the request of her husband.

The F. II. Hill Company, the plaintiff, is a corporation which was organized on June 3, 1886, with a capital stock of $250,000. N. L. Barmore owned 30 shares and his wife, the defendant, 40 shares. The chartered purpose of the company is the manufacture and sale of all kinds of undertakers’ supplies. Its place of business is Chicago, Illinois. One Hill was president of the company until his death in 1907. Nearly all the directors of the company lived in Cleveland, Ohio. They met generally about once a year. N. L. Barmore, the husband of the defendant, had an account on the books of the company for over 20 years, and during all that time he was one of the directors of the company, and after the death of Hill in 1907, having been vice president, he became president and' general manager of the company and acted as such until his own death in the year 1917.

Under the presidency and general managership of N. L. Barmore the plaintiff was a successful, going concern, and paid large dividends on its stock. The salary of N. L. Barmore was $9,000 in 1912; $10,000 in 1913; $12,000 in 1914; the same in 1915, and $13,500 in.1916.

The .personal account of N. L. Barmore, the credits on which were made up almost entirely of his salary account, was kept, as were other accounts of a similar nature such as those of employees generally, in a private ledger of the company. That book and the accounts it contained were accessible at ..all times to the directors of the company; it was kept in the office in the daytime and in the safe at nighttime.

One Traquair, who was also a stockholder of the plaintiff and' who had been in the employ of the plaintiff for some years, became its secretary in 2906 and 1907. According to the evidence of Traquair the salary account of N. L. Barmore—we entitle it that because that was at all times its substance—in the private ledger, which was one of the regular books of the plaintiff, shows that he was overdrawn for a period of 20 years prior to his death in 1917; that Hill, the former president, knew of the state of Barmore’s salary account up to the time he, Hill, died in 1907.

On January 1, 1907, according to the books of the company, N. L. Barmore’s account was overdrawn $38,144.11, Between January 1, 1907, and January 1, 1917, checks were drawn in the name of the plaintiff, F. H. Hill Company, signed by the secretary and countersigned either by Hill or N. L. Barmore as president and general manager, payable to the order of Mrs. N. L. Barmore, the defendant, aggregating $68,936.59. From time to time, in the course of those 10 years, those checks were given to the defendant by her husband and were used by her to defray their domestic expenses. During the same time, cash was drawn by him to the extent of $42,355.49, and checks to his own order in the total of $28,229.41. The checks making up the latter amount were drawn to the order of different people at N. L. Barmore’s direction to pay his personal bills. His total withdrawals during that period, together with the amount of his overdraft as of January 1, 1907, were $177,665.60. On the other hand, the amount of his salary, together with certain small amounts as dividends and other credits shown on the private ledger account, amounted to $114,042.35, leaving a debit in his account as of January 17, 1917, of $63,623.25.

The plaintiff offered in evidence copies of 106 checks with their indorsements, all of which are practically in the same form, being signed by the plaintiff, F. H. Hill Company, W. M. Traquair, secretary, and then countersigned by N. L. Barmore, president and general manager, all payable to and indorsed by the defendant. Checks that were made prior to 1907 were signed F. H. Hill Company, N. L. Barmore, secretary, and countersigned F. H. Hill, president and general manager. The first of the 106 checks was dated January,!, 1907, and the last December 30, 1916. The total amount of the 106 checks is $68,936.59.

The following is a schedule showing (1) the credits of N. L. Barmore with the plaintiff during the 10 years, and (2) the amounts drawn by checks to Mrs. Barmore, the defendant, in the course of the same years:

Tear

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

Credits to N. L.'B.

$ 8,295.85

9,359.38

8,680.00

12,025.00

12,949.16

9,857.61

11,050.00

13,050.00

13,050.00

15,250.00

Checks to Mr». B.

$ 4,800.00

3,040.00

6,400.00

4,800.00

9,000.00

7,000.00

5,300.00

5,114.49

8,297.10

15,085.00

$ 113,567.00 $ 68,836.59.

It is the evidence of the defendant that the following amounts which she received in checks of the company, $7,000 in 1912; $5,300 in 1913; $5,114.49 in 1914; $8,297.10 in 1915 and $15,085 in 1916, she used for household expenses. It is, also, the evidence of the defendant, Mrs. Barmore, that she had no knowledge of the condition of her husband’s account on the books of the company; that she had no “knowledge at any time prior to January, 1917, that Mr. Barmore had overdrawn his account with the F. H. Hill company.”

At the trial, which was before the court without a jury, the plaintiff introduced the" 106 checks, proof of the incorporation of the plaintiff and of a demand upon the defendant for payment of the amount of the 106 checks, and .rested. There was then a motion made by defendant’s counsel to exclude all checks prior to April 18, 1912, on the ground that they were outlawed, and that motion was sustained. Counsel for the defendant then moved to exclude all the evidence on the ground that the plaintiff had failed to make out a prima facie case. That motion was denied.

Evidence was then introduced on behalf of the defendant and at the close of all the evidence the trial judge held that the defendant, having received the checks of the plaintiff, payable to her own order, she was charged with notice that the money obtained upon them was that of the plaintiff, and having failed to show by the evidence any indebtedness to her as consideration therefor, she had failed in her defense. Accordingly, giving her credit for the amount of the note of $3,700, together with interest, which she had .pleaded as a set-off, he entered judgment against her for $41,459.76. This writ of error is prosecuted for a reversal of that judgment.

That a wife who receives from her husband, a salaried officer, and a director of a corporation, from time to time throughout a long period of years, checks drawn on that corporation signed with the company’s name, and by its secretary and countersigned by her husband as president and payable to her order, and uses them to defray the family expenses, may upon the death of her husband, and the discovery that his account was, during all that time, overdrawn, be held liable for the total amount of all she had so received and spent even though she had no knowledge of the state of her husband’s private account with the corporation and even though the total amount she received was not equal to his total salary for the time in question, is a somewhat startling proposition.

Counsel for the plaintiff rely almost entirely on the case of Leigh v. American Brake-Beam Co., 205 Ill. 147. In that case, the plaintiff, a corporation, brought suit against one Leigh for two checks, one for $1,000 and one for $2,500, claiming that they had been issued by one Laughlin, the general manager of the plaintiff, without authority or consideration. In the trial court in that case the defendant made an offer of proof which was rejected and that rejection was sanctioned by the Supreme Court. The offer was' as fallows: “That he (Leigh) and Laughlin (general manager of the plaintiff), with Atkins and Milliken, were jointly interested in mining enterprises; that Laughlin offered to furnish Atkins and Milliken money, up to $10,000, to carry on the work of those enterprises; that Laughlin said he could obtain money from his corporations, one of which was the plaintiff, and would furnish such money to Atkins and Milliken; that the checks were given to defendant for the purpose of using the money in that way for the joint benefit of Laughlin, Atkins, Milliken and defendant in their private enterprise, to which the plaintiff was not a party and in which it was not interested in any way; that the moneys were transferred by defendant to Atkins and Milliken for said purpose and applied to that object, and that Laughlin was the president of the plaintiff and the owner of fifteen-seventeenths of its stock.”

In commenting upon the proffered evidence, which was rejected, Mr. Justice Cartwright said: “It need scarcely be said that the president and general manager of a corporation has no authority, by virtue of his office, to appropriate the money of the corporation to the use of himself and his partners in his private business. The defendant had full, notice, both by the checks and the agreement which he offered to prove, that the money of the plaintiff was being taken by its president, -acting in the interest of himself and his associates, to be used for their joint benefit, and not for any purpose or business of the corporation.” Further, in that opinion it stated that the ‘ ‘ defendant admitted that he had full knowledge that the checks were not given for any corporate purpose, and therefore knew the want of power of Laughli'n to bind the corporation.”

There are a number of striking differences between the facts set forth in the evidence offered in the Leigh case and that introduced in the instant case. For example, in the Leigh case, Laughlin told Leigh that he could obtain money from his corporations, one of which was the plaintiff, and would furnish such money to Atkins and Milliken for certain private enterprises in which the plaintiff had and would have no interest and to which it owed no obligation; whereas, in the instant case, as far as the evidence shows, the defendant was entitled to assume that the checks which her husband gave her were for his salary and paid out for “the purpose or business of the corporation.” There is no evidence here, such as there was in the Leigh case, that the defendant had any knowledge that the money was taken without consideration and not for corporation purposes. On the other hand, it is a reasonable inference, considering the number of checks and the long period of time covered, and the habit established, that the defendant was justified in firmly believing that every check she received from her husband, even though the drawer was the plaintiff company, was in payment of part of his salary. In the Leigh case the court said that, “The defendant had full notice, both by the checks and the agreement which he offered to prove, that the money of the plaintiff was being taken by its president, acting in the interest of himself and his associates, to be used for their joint benefit, and not for any purpose or business of the corporation.” Here, in the instant case, the only reasonable notice that we may infer that the defendant had was that the checks which were given to her in the course of so many years were actually given for the “purpose or business of the corporation.” Counsel for the plaintiff urge that the checks were not given for any corporate purpose. With that we are unable to agree. There is no evidence but that every check Barmore gave his wife was, or at least purported to be, for part of his salary. In the 10 years from 1907 to 1916, inclusive, his account showed credits of $113,567, practically all of which was for salary which he had earned, and. that during that time the debits for checks given to the defendant were only $68,836.59; and, further, in no one of those 10 years, save 1916, did the total of a year’s checks given to the defendant equal the amount of his salary for the particular year; and even in 1916, his salary and dividend credits exceeded the checks he gave his wife that year.

i The plaintiff offered in evidence the 106 checks and evidence of a demand for payment, but that evidence, that of the checks, does not prove either that tke__de-fendant knew that her husband’s account was overdrawn or that the checks were not for his salary.

Certainly there is no equity in favor of the plaintiff’s claim. The books of the corporation, accessible to the directors at all times, showed that for 20 years the account of Barmore was continuously overdrawn, and, although, most of the directors lived in Cleveland, they, as trustees of the corporation and responsible for its conduct, must be charged with a reasonable knowledge of its accounts. Traquair, the secretary and a stockholder^knew, and so did Hill, who was the president until his death in 1907. It was a going* concern and, while under the management of Barmore, made large profits, and although the director? may not have thought it worth while or necessary to investigate the books sufficiently to become familiar with the account of Barmore in the private ledger, still that does not relieve them of their duty as directors' nor justify them now, after his death, in charging* the defendant. We are of the opinion that the evidence fails to make out a case and that, therefore, the judgment must be reversed, and judgment entered here in favor of the defendant and against the plaintiff on her set-off in the sum of $3,700, with interest thereon at the rate of 5 per cent per annum from September 2, 1916, to date, together with costs in both courts.

Reversed and judgment here.

O’Connor and Thomson, JJ., concur.