author: Mr. Justice F. A. Smith Mr. Justice Clark

text:
    Chicago Title & Trust Co., Trustee of Alexander Rodgers, Bankrupt, Appellant, v. The First National Bank of Chicago, Appellee.
    Gen. No. 17,380.
    1. Bankruptcy—jurisdiction. Jurisdiction, in bankruptcy over property in a warehouse, the receipts for which were pledged as security for a loan, depends on whether possession thereof was with the bankrupt or with persons claiming adversely at the time the petition was filed.
    2. Bankruptcy—determination as to jurisdiction of property is res adjudicata. On petition in bankruptcy the court has jurisdiction to determine whether it has jurisdiction of certain property, and its decision and the facts necessary to be passed upon to determine the question are res adjudicata.

    3. Bankruptcy—when determination of jurisdiction of property is res adjudicata. The determination in bankruptcy proceedings that property in a warehouse, the receipts for which were given by the bankrupt to secure a loan, was not in the possession of the bankrupt when the petition was filed, is res adjudicata on assumpsit by the trustee and receiver for the proceeds of the sale of such property, where the parties are the same or in privity or represented by them.
    4. Bankruptcy—what provision of decree does not change effect of determination as to jurisdiction. The legal effect of a decree in bankruptcy proceedings that certain property was not in possession of the bankrupt when the petition was filed is not changed by words “Without prejudice to the rights of the trustee, if this court shall authorize, to litigate in any proper court the question of the right of the said trustee to recover said fund as a part of the bankrupt estate.”
    5. Pledge—on whom pledge to creditor binding. If personal property is delivered as a pledge to a creditor or to a third person for him, the pledge is binding on all persons claiming under or against the pledgor who have no special liens on the property.
    6. Pledge—when substitution of property does not affect pledgee’s rights. Where warehouse receipts for certain seed are given as security for loans, substitutions of the lots of seeds, when made without their knowledge or consent, do not affect the pledgees.
    7. Bankruptcy—question as to bona fides of a pledge left open by determination that pledged property was not in bankrupt’s possession. Though it was decided in bankruptcy proceedings that possession of certain property was not in the bankrupt when the petition was filéd, on assumpsit by the trustee and receiver for the proceeds of a sale thereof by a creditor who held warehouse receipts for the property, questions concerning such creditor’s right to the proceeds may be litigated and the proceeds may be recovered by the trustee if the creditor was not bona fide or if an unlawful preference was given him.
    8. Assumpsit—nature of. Assumpsit by the trustee and receiver of a bankrupt against creditors for the proceeds of the sale of certain property is in the nature of an equitable action.
    9. Bankruptcy—fraud. No actual fraud can be predicated on transactions whereby bona fide creditors of a bankrupt become pledgees of warehouse receipts to secure liens for their claims without knowledge of his insolvency and long before bankruptcy proceedings.
    10. Liens—when secret. Liens of creditors with whom warehouse receipts for property of the debtor are pledged as security, are secret liens which do not comply with the chattel mortgage statute.
    11. Bankruptcy—section 70 (a) construed. The bankruptcy Act, § 70 (a), vests the trustee with only such title tó property as the bankrupt had, burdened with all equities, charges and liens.
    12. Bankruptcy—what proceeds cannot be recovered by trustee. The trustee stands in the shoes of the bankrupt and cannot recover in assumpsit the proceeds of a sale of property which was in the possession of a warehouseman when the petition was filed, and the receipts for which were held by bona fide creditors who became pledgees thereof without knowledge of insolvency and long before bankruptcy proceedings and without intention to defraud.
    Clark, P. J., dissenting.
    Appeals from the Circuit Court of Cook county; the Hon. Thomas G. Windes, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1911.
    Affirmed.
    Opinion filed November 12, 1912,
    Newton Wyeth, for appellant.
    Orville Peokham and Carnahan, E-lsdon & Slusser, for appellees.
   Mr. Justice F. A. Smith

delivered the opinion of the court.

This case (No. 17380) and Nos. 17381 and 17382 were consolidated for trial before the court without a jury, and have been consolidated for hearing in this court. The actions are assumpsit. The declaration in the bank case contains seven special counts and the common counts. The first four special counts set out that Alexander Eodgers, a seed merchant, became bankrupt and the plaintiff was appointed trustee of his estate by the United States District Court, sitting in bankruptcy; that as such trustee, the plaintiff received certain seed from the bankrupt who was in lawful and exclusive possession thereof when he filed his petition in bankruptcy; that the defendant afterwards, without the consent of plaintiff, took possession of said seed, sold it and kept the proceeds; that the plaintiff has demanded said proceeds of the defendant, etc.

In the remaining three special counts, the plaintiff avers that the seed, which was the property of the bankrupt, passed to the trustee, and that the proceeds had come into the hands of the bank.

The defendant bank pleaded, first,—the general issue, and, secondly,—res judicata or estoppel by verdict, on the question of possession as to whether at the time of the bankruptcy the bankrupt had possession of the seed. This plea set up an adjudication of that question of fact between the parties in the bankruptcy court. As • this second plea is important, and was indeed the center of the contention in the trial court, and the case was virtually determined by it, it is here given in full.

“That as to each and all of the several supposed causes of action, except the fifth, sixth, and seventh counts, defendant says plaintiff ought not to have its action, etc., because the defendant says that the plaintiff on, to-wit, May 13, 1901, being then receiver of said bankrupt appointed by said District Court, etc., presented its petition as such receiver in said bankruptcy court, in and by which petition it represented and claimed that as receiver it had taken and held possession of certain property of the bankrupt, including that for the proceeds whereof this suit is brought, and prayed for an order allowing said receiver to sell said property, and made defendant a party defendant to said petition; thereupon the defendant appeared specially and denied the jurisdiction of said, bankruptcy court to interfere with said property or to order the sale thereof, for the reason that said property was not and had not been in the possession of said bankrupt at the time the petition in bankruptcy was filed, and had not afterwards come into said .receiver’s possession, but since prior to the filing of said petition in bankruptcy had been in possession of the National Storage Company for the use and benefit of the holders of warehouse receipts for said property, which prior to the filing of said petition in bankruptcy had been issued by said storage company and which were then and there held and owned by defendant; that thereupon evidence was heard and said bankruptcy court found, adjudged and decreed that said property at the time when the petition in bankruptcy was filed was not in possession of said bankrupt, and had not since the issuing of the said warehouse receipts been in possession of said bankrupt, but that said property had since the issuance of said warehouse receipts always been in the full possession and control of said storage company for the use and benefit of defendant as the holder of said receipts; which said judgment and decree still remains in full force; this the defendant is ready to verify by the record of the proceedings, etc. ’ ’

After the plaintiff’s demurrer to this plea was overruled, he took leave to file four replications to the plea as follows: First,—mil tiel record; second,—that the decree in the court of bankruptcy was without prejudice. to the right of the trustee in bankruptcy to litigate in a proper court.

The third replication alleges, in substance, the same matters averred by the second.

In the fourth replication the plaintiff seems to set up two different answers to the plea; first,—that inasmuch as the court in bankruptcy found against the plaintiff on the question of jurisdiction, the very lack of jurisdiction cut it off from entering a decree even to that effect, and hence the decree is void; and, second,—that the real issue tried- in the court of bankruptcy was whether the receiver had possession of the seed,—not at the time of bankruptcy, but at the time when it filed its petition for leave to sell the seed.

An issue was joined on the first of these replications (nul tiel record); demurrers to the other three replications were sustained; plaintiff elected to stand by the replications.

The declaration in the Rogers and Brother case, No. 17381, consists of three special counts and the consolidated common counts. Each of the three special counts alleges that Alexander Rodgers, a seed merchant, became bankrupt; that the plaintiff was appointed trustee of his estate by the United States District Court, sitting in bankruptcy, and the giving of a preference to the defendants by the bankrupt, and the plaintiff had reasonable cause to believe a preference was thereby intended.

The pleadings in the Rogers & Brother case and the National Storage Company, case No. 17382, are similar in form and substance to those in the bank case, and need not be stated.

The contents of the bills of exceptions in the three cases are identical, except as to the propositions of law held at the request of defendants, and as to findings and matters incident to taking the respective appeals.

It appears that on May 9, 1901, Alexander Rodgers filed his petition in bankruptcy in the District Court of the United States for the Northern District of Illinois, and the Chicago Title & Trust Co. was forthwith appointed receiver of the property and estate of the bankrupt, and so continued as receiver until it was appointed trustee on July 5, 1901. Rodgers was adjudged a bankrupt on May 10, 1901. On May 13, 1901, the receiver filed its petition in the District Court, alleging that it had taken possession of the property and assets of the bankrupt at his premises, Nos. 220-230 Johnson street, Chicago, consisting of seed, and praying for direction of the court as to the sale of same.

On May 16, 1901, the First National Bank of Chicago entered its special appearance and denied the jurisdiction of the District Court to enter an order as prayed for, and as ground alleged that the bank was the holder of thirteen warehouse receipts for seed on the said premises, issued by the National Storage Company to the bankrupt, and by the bankrupt hypothecated with the bank as security for indebtedness of the bankrupt to the bank, and alleged that the seed described in the receipts was not and had not been in possession of the receiver, and was not at the time of the bankruptcy or at any time since the issuance of the receipts in the possession of the bankrupt, but had been in the exclusive possession and control of the storage company, and denied the jurisdiction of the court and prayed that the receiver’s petition be dismissed so far as the seed represented by said receipts held by the bank was concerned.

On the same day, H. W. Rogers & Brother appeared specially for the purpose of objecting to the jurisdiction of the court, so far as the same related to the seed covered by five like warehouse receipts which had been delivered by the bankrupt to them as security for a loan of $5000, by them to the bankrupt, and made allegations as to possession of the seed similar to those made by the bank, and denied that same was then in the possession of the receiver, and prayed that the court would adjudge that it had no jurisdiction to proceed further in such summary manner.

On the same day, the National Storage Company entered a like special appearance, and objected to the jurisdiction of the court on similar grounds, alleging that it entered into the said premises under lease dated August 31, 1900, and had continued in such possession, and denied that the receiver at any time took possession of the premises or the part thereof included in its lease, and alleged that prior to the filing of the petition in bankruptcy, the storage company had possession of and stored in said premises the goods and chattels described in the answers of the bank and of Rogers & Brother, and some other lots of-seed; alleged that it was a warehouseman of Illinois of Class C, and that it and other storage companies doing business in Chicago and elsewhere in like manner have been in the habit of issuing warehouse receipts for property so in their possession, and that any attempt on the part of the receiver to take and sell the property would work irreparable injury to the company.

Evidence was taken in the bankruptcy court on the issues thus presented, and a decree was entered October 29, 1902. Before the decree of the bankrupt court was entered, on a stipulation of the parties in open court, the District Court made an order on August 5, 1901, whereby the bank was allowed to make a sale of the seed in question and hold the proceeds derived therefrom subject to the further order of the court; and the seed was thus sold; reports of sale being filed by the bank September 13, 1901, showing that the proceeds of the five lots of seed claimed by H. W. Rogers & Brother produced the net amount of $7,230.43, and the proceeds of the seed claimed by the bank produced the net amount of $15,773.41. The reports were approved by the court on September 23,1901. Out of the gross amount, by order of the court, $5,000, was paid over by the bank to the trustee pending proceedings.

The decree entered October 29, 1902, found that the receiver had not, at the time of the filing of its petition, to-wit, May 13, 1901, the right of possession of the property involved, and that the National Storage Company was at said date, and also at the time of filing the petition in bankruptcy, entitled to the possession and had possession of the said property. The court further found and decreed that the First National Bank was entitled to be paid out of the fund realized from the sale of the seed, $9,854.15', with interest, according to promissory notes held by it and secured by the thirteen warehouse receipts or warrants (describing them); and that H. W. Rogers & Brother were entitled to be paid $5,000 with interest, according to the promissory note held by them and secured by five storage receipts or warrants (describing them); and that the storage company was entitled to $14.99, for storage charges upon said property due at the time of the filing of the petition in bankruptcy,—and decreed that the bank retain the said $9,854.15 and interest, and pay said $5,000 with interest, over to H. W. Rogers & Brother, and the sum of $14.99 to the storage company, and the balance of the proceeds of the sale to the trustee, and ordered that certain costs be paid by the trustees, including $212.50 for printing of testimony expended by the storage company.

From this decree the trustee and James A. Patten, a large creditor, took an appeal to the Circuit Court of Appeals for the Seventh Circuit, which reversed the decree of the District Court and gave diof Appeals, that I quote his language, as follows In re Rodgers, 60 C. C. A. 567, 125 Fed. 169.

The case was taken to the Supreme Court of the United States by certiorari, which resulted in a reversal of the Circuit Court of Appeals’ decree and modification of the decree in the District Court. First Nat. Bank v. Chicago Title & Trust Co., 198 U. S. 280. Later, on a review of the subsequent action of the Circuit Court of Appeals, the Supreme Court approved of the first decree of the District Court, and in its opinion said that it declared in its first opinion, perhaps unnecessarily, that the decree was to be without prejudice, etc. Ex parte First Nat. Bank, 207 U. S. 61.

Appellant contended by its petition for ah order of sale of the property in question in the bankruptcy court, that Rodgers, the bankrupt, was in possession of the seed when he filed his petition in bankruptcy, and that appellant succeeded as receiver to such possession. The appellees contended in that court that the bankrupt was not in the possession of the seed when he filed his petition in bankruptcy, but on the contrary he had theretofore transferred the possession to appellee, National Storage Company, for the use and benefit of the holders of warehouse receipts for the property, which receipts had been issued by the Storage Company prior to the filing of the petition in bankruptcy and were held and owned by appellees, The First National Bank arid Henry W. Rogers & Brother as security for an indebtedness of the bankrupt to the bank and to Rogers & Brother, respectively. The same contention as to the possession of the seed described in the receipts are made and the same issue is presented in these cases, and upon the same evidence which was presented and received in the bankruptcy court, the testimony in the cases of the individual witnesses'being introduced from the printed transcript of testimony which was taken in the bankruptcy proceedings. Appellees further contended in the District Court upon these pleas, and now contend here, that the specific fact of possession of the seed was material to be determined in the bankruptcy proceedings, and in these actions, and that question was adjudicated upon in the bankruptcy proceedings, and cannot be again litigated in these actions between the same parties. The trial court held with appellees in the 1, 2, 3 and 5 propositions of law requested by appellees and error is assigned on the holdings of law. The propositions of law so held by the trial court are as follows:

“1. The court holds as a matter of law that under the pleadings it must be taken as conclusively proven that_neither the plaintiff nor the bankrupt was in possession of the seed in question at the time of the bankruptcy and that, therefore, there can be no recovery under the first, second, third or fourth counts of the declaration, nor can there be a recovery under the common counts on any theory which requires such possession in the plaintiff or in the bankrupt to be assumed or proven.

“2. All evidence offered by the plaintiff to prove or as tending to prove that either the plaintiff or the bankrupt was in possession of the seed in question at the time of the filing of the petition in bankruptcy is held as a matter of law to be irrelevant, incompetent and immaterial.

“3. The court holds as a matter of law under the pleadings and evidence in this ease that the plaintiff acquired no right or title to the seed in question.

“4. The court holds as a matter of law that the plaintiff acquired no better title to the seed in question than the bankrupt had at the time of the filing of the petition in bankruptcy and that as against the bankrupt the lien acquired by the defendant by virtue of the storage warrants was good, and, therefore, is good also against the plaintiff.

‘ ‘ 5. The court holds as a matter of law that the decree of the United States District Court introduced in evidence is res adjudicata on the question of possession, and the possession of the National Storage Company for the benefit of the defendant cannot, therefore, be controverted by the plaintiff in this action.

“6. The court holds as a matter of law that money on deposit in a bank, payable on demand, may be appropriated by the bank and applied by way of set-off on the indebtedness of a bankrupt due to the bank at the time of the bankruptcy, and such appropriation will not be a preference under the Bankruptcy Act; and that, therefore, no recovery can be had in this case on account of the $1,296.82 retained and applied by the defendant by way of set-off.

‘ ‘ 7. The court holds as a matter of law that the payments shown to have been received by the defendant on account of the indebtedness of the bankrupt did not constitute preferences under the Bankruptcy Act because the same were in every instance proceeds of property which had been pledged to the defendant by the bankrupt as collateral security at times when the defendant had no suspicion or reasonable ground to suspect that preferences were intended; consequently, such payments cannot be recovered as preferences in this action.

“8. The court holds as a matter of law that under the pleadings and evidence in this cause the plaintiff is not entitled to recover. ’ ’

The jurisdiction of the bankruptcy court depended upon the bankrupt having actual possession of the seed at the time the bankruptcy proceedings intervened. Had such possession been with the bankrupt at the time he filed his petition in bankruptcy, it would have passed to the plaintiff as receiver and trustee, and the court would have had full jurisdiction to deal with the seed as part and parcel of the bankrupt estate. If such possession was not with the bankrupt at that time, but with persons claiming adverse rights, then the bankruptcy court had no jurisdiction. Sec. 23, clause b, of the Bankruptcy Act; Bardes v. Hawarden Bank, 178 U. S. 524; Mitchell v. McClure, 178 U. S. 539; Hicks v. Knost, 178 U. S. 541; Louisville Trust Co. v. Comingor, 184 U. S. 18; First Nat. Bank v. Chicago Title & Trust Co., 198 U. S. 280.

In the last case the court said (p. 290) :

“The question is whether the District Court had jurisdiction to finally adjudicate the merits in this proceeding.* * *
“In many cases jurisdiction may depend on the ascertainment of facts involving the merits, and in that sense the court exercises jurisdiction in disposing of the preliminary inquiry, although the result may be that it finds it cannot go farther. And where, in a case like that before us, the court erroneously retains jurisdiction to adjudicate the merits, its action can be corrected on review.”

And the court then adds:

_ “But nevertheless, the District Court had jurisdiction to determine whether it could or could not proceed further.” (Citing numerous cases.)

The controlling fact or matter material to the determination of the question of jurisdiction of the bankruptcy court in the proceedings for the sale of the seed was possession by the bankrupt at the time he filed his petition in bankruptcy, and the District Court had jurisdiction to consider and adjudicate that fact in the determination of its jurisdiction. That court found as follows:

“And the court further finds that the receiver in this case had not, at the time of the filing its petition herein, to-wit, on May 13,1901, the right of possession designated in the answers of the National Storage Company. The First National Bank, H. W. Rogers & Bro., Small & Co., and Kirkpatrick & Co. thereto.
“And the court further finds that the National Storage Company was at the said date and also at the time of the filing of the petition in bankruptcy herein, entitled to possession of said property.”

In the opinion of a majority of the court, a court has jurisdiction to decide whether it has jurisdiction, and that, such decision, and the facts which the court must pass upon to determine that question, are res adjudícala. In the very nature of things, some court must have this power, and we think the bankruptcy court before which the proceedings were had was the court in the first instance. This question' was so decided in T. E. Hill Co. v. Contractors’ Supply & Equipment Co., 249 Ill. 304. See also First Nat. Bank v. Klug, 186 U. S. 202; Louisville Trust Co. v. Comingor, supra; First Nat. Bank v. Chicago Title & Trust Co., supra. We hold, therefore, that the District Court had jurisdiction or power to determine the fact of possession of the property by the bankrupt in the proceedings pending before it. The jurisdiction of the court was invoked by appellant in its capacity of receiver of the bankrupt’s estate, and the decree entered decided and adjudicated upon the jurisdictional fact.

We here notice, before passing to the next question, appellants’ contention that the decree of the District Court is not res adjudicata, or estoppel by verdict, because it contains the words, unnecessarily suggested by the Supreme Court. Ex parte First Nat. Bank, 207 U. S. 61): “Without prejudice to the rights of the trustee, if this court shall so authorize, to litigate in any proper court the question of the right of the said trustee to recover said fund as a part of the bankrupt estate.” In our opinion, these words neither add to nor subtract from the decree. Its legal effect is not changed thereby.

We now come to the effect, if any, of this decree upon the issues in the cases before us.

In City of Chicago v. Partridge, 248 Ill. 442, the rule of estoppel by verdict, whereby some controlling fact or matter material to the determination of a case which has been adjudicated by a court of competent jurisdiction, and holding such adjudication conclusive in a subsequent action when the same fact or matter is again in issue, is clearly stated. It is there held that this rule is not dependent upon whether the cause of action is the same in both actions, but that it does require that both actions be between the same parties, or persons in privity with, or represented by them. The general principle is also stated and applied in Southern Pac. R. v. U. S., 168 U. S. 1, at page 48. The conclusiveness of the former judgment is upheld in People v. Hill, 182 Ill. 425; Hanna v. Reed, 102 Ill. 596; Reynolds v. Mandel, 175 Ill. 615; Louisville, N. A. & C. R. Co. v. Carson, 169 Ill. 247; People v. Chicago, B. & Q. R. Co., 247 Ill. 340, and many other cases. The doctrine is held in the Southern Pacific Railroad case, supra, to be a beneficent one, which the courts interpose to secure the peace and repose of society by the settlement of matters capable of judicial determination.

The parties before the District Court are the same, or in privity 'with or represented by them, as the parties to the actions now before us; and the majority of the .court is of the opinion that the doctrine applies to these cases; and that the bankrupt did not have possession of the seed described in the receipts of the National Storage Company at the time of filing his petition in bankruptcy must be held to be an adjudicated fact, and appellant is estopped from again litigating that fact in the cases before us. The holdings of the trial court to that effect, and excluding all evidence offered upon that question were not erroneous.

It having been conclusively adjudicated that the bankrupt was not in, possession of the seed, it follows necessarily and the evidence shows, that the National Storage Company was in possession as bailee for appellees, First National Bank and H. W. Rogers & Brother, at the time of filing the petition in bankruptcy, and also at the time of filing the petition to sell the seed, for two different persons cannot be in the actual adverse possession of the same property or premises at the same time. When personal property is delivered to a creditor, or to a third person for the benefit of such creditor as a pledge such pledge is binding as against the world, and is binding on all persons claiming under or against the pledgor who have not special liens on the property. Union Trust Co. v. Trumbull, 137 Ill. 146 ; Taylor v. Turner, 87 Ill. 296. There is no contention here, nor was there in the trial court, that the Frist National Bank or Rogers & Brother were not bona fide creditors of the bankrupt. The evidence is undisputed that Rogers & Brother loaned the bankrupt $5,000 and took as security certain receipts issued by appellee, National Storage Company. It is likewise undisputed that appellee Bank loaned the bankrupt ón November 1, 1900, $2,300; and "on December 24, 1900, $3,500; and on January 5,1901, $2,250; and on March 1, 1901, $1,200; and on February 27, 1901, $1,200; and on January 21, 1901, $4,500, and the bankrupt gave his notes therefor, payable on demand, and, as collateral security therefor, gave to the bank receipts of the National Storage Company shown in the evidence. The indebtedness to appellees, Rogers & Brother, was not paid at the time of bankruptcy; and that to the bank was not fully paid. The mere substitution of one receipt for another, or of one lot of seed for another, as shown by the evidence, did not in any manner affect the validity of the pledges as to appellee, for the substitutions of the lots of seed were without the knowledge or consent of appellees. Union Trust Co. v. Trumbull, supra; Hoffman v. Schoyer, 143 Ill. 598; Simmons v. Jenkins, 76 Ill. 479.

While the question of possession is a vital one in these cases, and by the adjudication in the bankrupt court it was settled that the bankrupt was not in possession, and, therefore, that the National Storage Company was in possession of the property, for one or the other concededly was in possession, the question as to whether appellant is entitled to the proceeds of the sale of the seed notwithstanding such possession is still open. If appellees, the bank and Rogers & Brother, or either of them, were not bona fide creditors of the bankrupt, or if an unlawful preference of appellees, or either of them, had been shown, appellant would be entitled to the proceeds of the sale and might, recover in these cases, or either of them, according to such proof. These questions, and any other question involving appellees’ right to retain the proceeds of the seed may be litigated notwithstanding the decree of the Federal Court, save only the question of possession. But, inasmuch'as “the action of assumpsit is an equitable action, the judgment in such action should be entered only for the sum which ought to be paid,” (Smith v. Riddell, 87 Ill. 165) and as appellant is entitled to recover for money had and received by appellees, if in equity it belongs to him, the action being in the nature of an equitable demand (Bennett v. Connelly, 103 Ill. 50), we are brought to a consideration of the rights of the trustee in bankruptcy in these cases to the money sued for, the adjudication of the question of possession of the property being taken into consideration.

There is no pretense in the proofs in these cases that there was an unlawful preference made by the bankrupt, either in the original pledges or in the substitution. All the evidence offered by appellant is based on the theory of possession of the seed by the bankrupt, as it was in the bankruptcy court, at the time of the adjudication of bankruptcy. The argument and contention of appellant in this court is mainly upon that theory. The question of any unlawful preference may, therefore, be dismissed without further discussion.

Nor do we think that the evidence shows there was any fraud in fact intended by the .parties. The most that can be claimed is that the making of the pledges was tantamount to creating secret liens. The bank and Rogers & Brother were bona fide creditors of the bankrupt and became pledgees of the bankrupt long before bankruptcy proceedings intervened, and without any knowledge that the bankrupt was insolvent. This was done not with the motive of defrauding creditors, but for the purpose of securing liens for their claims, and no actual fraud can be predicated upon the transactions. So that all that can be claimed, leaving out of consideration the adjudicated question of change of possession, is that the liens created were secret liens under the laws of Illinois, and did not comply with the chattel mortgage statute of this state and are, therefore, invalid in law, as against creditors “armed with an execution or writ of attachment, or other process of court.” The trustee represents no such creditors, but general creditors only. In these cases there was a pledge accompanied with a change of possession and the pledges were good and valid. Union Trust Co. v. Trumbull, supra; Barchard v. Kohn, 157 Ill. 579; Hoffman v. Schoyer, supra; Hooven, Owens & Reutschler Co. v. Burdette, 153 Ill. 672.

In the opinion of a majority of the court, appellant stands in the shoes of the bankrupt, and, therefore, took no better title than the bankrupt had to the seed in question, and has no greater rights as against appellees than the bankrupt would have had were he the plaintiff and appellant here.

Appellant took the title to the bankrupt estate subject to all the liens, equities and burdens to which it was subject in the hands of the bankrupt, there being no creditors who, before the filing of the petition in bankruptcy, had fastened upon the property by some specific liens.

Section 70 (a) of the Bankruptcy Act appears to provide explicitly and definitely that the title the trustee takes is no better than that the bankrupt had, except where property has been transferred by him in fraud of his creditors. That section provides as follows :

“ (a) The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, if he shall have one or more, upon his or their appointment and qualification shall in turn be vested by operation of law with the title of the bankrupt, * * * to all * * * (5) property which prior to the filing of the petition he could by any means have transferred, or which might have been levied upon and sold under judicial process against him.”

That section, as we read it, does not vest the trustee with a better title than the bankrupt had, but the title of the bankrupt to any and all such property. The section, we think, provides for the trustee taking only such title as the bankrupt had, burdened with all equities, charges and liens upon the property. The trustee does not take absolute title, therefore, to such property but merely the title of the bankrupt, the reference to such property as the bankrupt might have transferred or which might have been levied upon and sold being not to the kind of title, but to the kind of property which the trustee takes, the kind of title being that only which the bankrupt had.

The above is the construction given by the court in Hewit v. Berlin Mach. Works, 194 U. S. 296. The court in that case say (page 302):

“The District Court, Hazel, J., held that the reasonable construction of this provision (Section 70'-a of the Bankruptcy Law quoted above) was that the trustee was vested with the title which the bankrupt had to property situated as described, and not otherwise, and quoted from the opinion of the Circuit Court of Appeals for the Second Circuit in the case of re New York Economical Printing Co., 49 C. C. A. 133, 110 Fed. 514; upholding that view, as follows: ‘The Bankrupt Act does not vest the trustee with any better right or title to the bankrupt’s property than belongs to the bankrupt or to his creditors at the time when the trustee’s title accrues. ’ ’ ’

In York Mfg. Co. v. Cassell, 201 U. S. 344, there was a contract of conditional sale made for certain machinery. The contract was made in Ohio, and failed, as the court held, to comply with the laws of Ohio, in that such contract was not filed for record. Section 4155 of the Revised Statutes of Ohio provides that where personal property is sold upon installments with an agreement that the title shall remain in the vendor until the payments shall be completed, such provision should be void as to all subsequent purchasers and mortgagees in good faith and creditors, unless such condition should be evidenced by a writing signed by the purchaser, with a statement under oath, and the same deposited with the clerk of the township in one case, or with the county recorder in the other. After making such a contract the purchaser was declared a bankrupt, and thereupon the vendor, the York Manufacturing Company, intervened and prayed that it might be allowed to enter the premises of the bankrupt and remove the machinery so sold. The court, through Mr. Justice Peckham, say (page 350):

“The question is simply whether the York Manufacturing Company has a right, under its conditional sale of the machinery to the bankrupt corporation, to take the machinery out of the premises where it was placed, as against all except judgment or other creditors by some specific lien. There are no judgment creditors in the case and no attachment has been levied, and the question is simply whether the adjudication in bankruptcy is equivalent to a judgment or an attachment on the property, so as to prevent the York Manufacturing Company from asserting its right to remove the machinery by virtue of the reservation of title contained in its contract.”

The court then refers to the case of Wilson v. Leslie, 20 Ohio 161, construing the language of the Ohio statute relating to chattel mortgages, and say:

“We have not been referred to any decision of the Supreme Court of Ohio as to the meaning of the statute requiring the filing of. contracts of conditional sales, but we concur with the Circuit Court of Appeals in this ease, that the statute would render the unfiled contract void as to the same class of creditors mentioned in the chattel mortgage statute. Therefore, the contract would be void as to creditors who, before its filing, had ‘fastened upon the property’ by some spe: eific liens. As to creditors who had no such liens, being general creditors only, the statute does not avoid the sale, which is good between the parties to the contract.
“There are no creditors with any specific liens, nor is there any other mortgage, and there is no attachment.
“We come, then, to the question whether the adjudication in bankruptcy was equivalent to the judgment, attachment or other specific lien upon the machinery. The Circuit Court of Appeals has held herein that the seizure by the court of bankruptcy operated as an attachment and an injunction for the benefit of all persons having interests in the bankrupt’s estate.
“We are of the opinion that it did not operate as a lien upon the machinery as against the York Manufacturing Company, the vendor thereof. Under the provision of the Bankrupt Act the trustee in bankruptcy is vested with no better right or title to the bankrupt’s property than belonged to the bankrupt at the time when the trustee’s title accrued. At that time the right, as between the bankrupt and the York Manufacturing Company, was in the latter company to take the machinery on account of default in the payment therefor. The trustee, under such circumstances, stands simply in the shoes of the bankrupt, and, as between them, he has no greater right than the bankrupt. This is held in Hewit v. Berlin Mach. Works, 194 U. S. 296, 48 L. Ed. 986, 24 Sup, Ct. Rep. 690. The same view was taken in Thompson v. Fairbanks, 196 U. S. 516, 49 L. Ed. 577, 25 Sup. Ct. Rep. 306. It was there stated that ‘under the present Bankrupt Act the trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same plight and condition that the bankrupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt.’ See Yeatman v. New Orleans Sav. Inst., 95 U. S. 764, 24 L. Ed. 589, Stewart v. Platt, 101 U. S. 731, 25 L. Ed. 816; Hauselt v. Harrison, 105 U. S, 401, 26 L Ed. 1075. The same doctrine was reaffirmed in Humphrey v. Tatman, 198 U. S. 91, 49 L. Ed. 956, 25 Sup. Ct. Rep. 567. The law of Ohio says the conditional sale contract was good between the parties, although not filed. In such case the trustee in bankruptcy takes only the right of the bankrupt, where there are no specific liens, as already stated. ’ ’

In Thomas v. Taggart, 209 U. S. 385, the question arose as to the validity, as against trustees in bankruptcy, of a lien in favor of one Taggart upon certain certificates of stock intended to be pledged to her, the contention being made in that case that the lien was not good as against the trustees. The court, follow-lowing the Cassell case, say (page 389): .

“It was the evident purpose of the parties that the eighty-three shares of United States Steel stock, preferred, were to he held, as the receipt shows, as security for losses in purchase or sale of stocks, bonds or securities on account of the customer, and the separate paragraph of the receipt, giving the right to re-pledge, etc., and substitute similar stocks, bonds and securities, had reference to the stocks, securities, etc. obtained in executing the orders for purchase made by the customer.
“This being the situation as to Mrs. Taggart’s claim, we think the court properly held that she was entitled to recover her shares of stock. They were not the property of Berry & Company, but were held as collateral to her account, upon which she is not indebted to the brokers. The certificates were returned to the trustees, who had no better right in them than the bankrupt.
“The rule is generally recognized that if the title to property claimed is good as against the bankrupt and his creditors at the time the trustee’s title accrued, the title does not pass, and the property should be restored to its true owner; or, if the property has been sold, the proceeds of the sale take the place- of the property.” (Citing authorities.)

Security Warehousing Co. v. Hand, 206 U. S. 415, turned on the fact that there was no change of possession, and the Knitting Company was therefore in possession. In this case (page 423), it was said:

“It is no new doctrine that the assignee or trustee in bankruptcy stands in the shoes of the bankrupt, and that the property in his hands, unless otherwise provided in the bankrupt act, is subject to all of the equities impressed upon it in the hands of the bankrupt. This has been the rule under former acts and is now the rule.”

It follows, we think, from the authorities above cited that the bankrupt, suing appellees in assumpsit for money had and received, could not recover because it would be inequitable to permit such a recovery; and, if the bankrupt could not recover, the trustee, standing in his shoes, cannot recover in these cases.

The judgments of the court below, being in accordance with the principles above announced, are affirmed.

Affirmed.

Mr. Justice Clark

dissenting:

I do not think the doctrine of estoppel by verdict or that of res adjudicata applies. In my judgment a trustee is in a different position than the bankrupt or a receiver of a bankrupt. The receiver could only have sold the property if it was in the possession of the bankrupt. The trustee, on the other hand, may proceed in the same way that an attaching or execution creditor could have proceeded prior to the adjudication of the insolvency of the bankrupt. In the case last referred to in the majority opinion, Security Warehousing Co. v. Hand, 206 U. S. 415, Mr. Justice Peckham sets forth the views of the court as to the powers of a trustee. On page 425 it is said:

“By section 70a, the trustee in bankruptcy is vested by operation of law with the title of the bankrupt to all property transferred by him in fraud of his creditors, and to all property which, prior to the filing of the petition, might have been levied upon and sold by judicial process against him; and by subdivision (e) of the same section the trustee in bankruptcy may avoid any transfer by the bankrupt of his property, which any creditor of the bankrupt might avoid, and may recover the property so transferred, or its value. Here are special provisions placing the title to the property transferred by fraud, or otherwise as mentioned, in the trustee in bankruptcy, and giving him the power to avoid the same.”

In Mueller v. Nugent, 184 U. S. 1, it is said:

“It is as true of the present law as it was of that of 1867, that the filing of the petition is a caveat to all the world, and in effect an attachment and injunction. ’ ’

The question of whether or not the National Storage Company was in rightful possession of the seed was not determined in the Federal Court. The District Court undertook to determine that question, but it was held by the Supreme Court that it had no jurisdiction so to determine. First Nat. Bank v. Chicago Title & Trust Co., 198 U. S. 280. It was, doubtless, with the thought in mind that the receiver and trustee held different relations to the estate that the suggestion was made by the Supreme Court that the order should have been without prejudice to the trustee to begin proceedings in a court having jurisdiction, namely, the state court. It is impossible for me to reach the conclusion from the evidence that the Storage Company was in possession of the property. The facts, as well as the view of the law which I think should control, are so succinctly stated in the opinion of Mr. Justice Jenkins in the futile appeal to the Court of Appeals, that I quote his language, as follows In re Rodgers, 60 C. C. A. 567, 125 Fed. 169, 177:

“The bankrupt was largely engaged in purchasing seed upon credit, storing the property purchased in his warehouse. He occupied the premises as a place of business, maintaining an office there, with clerks to assist in the management of the business, and with porters to handle the seed. The premises were subject to a rental of $250 a month. He arranged with the storage company, which had no warehouse of its own, that it would issue warehouse warrants or receipts to the bankrupt for property upon the bankrupt’s premises for a certain small charge per month upon the value of the property covered by the receipts. He executed a lease of the premises to the storage company, to continue so long as the bankrupt should desire, and so long as property remained thereon for which warrants or receipts had been issued; and this without any payment of rent by the storage company, the rental in fact being paid by the bankrupt. The storage company neither required, nor was it given, any key to the premises. The bankrupt remained in possession of the premises as before the agreement, continuing to transact his business there as he had formerly done. There were certain signs placed upon the different floors of the building, indicating that the storage company controlled the premises. These were small and obscure signs, not likely to attract attention, and most of them hidden behind piles of bags of seed. No sign was displayed upon the exterior of the building indicating any proprietorship of the storage company, or giving notice to the world that any other than the bankrupt had possession and control. There was no open, notorious manifestation of a change of possession, none was intended, and there was none in fact. Upon each pile of bags of seed for which the warehouse receipts or warrants were issued there was placed a small tag, which might be discovered upon careful search. The bankrupt substantially treated this property as his own, at times going through the forms prescribed by the storage company, and, whenever he found it necessary, ignoring them. We do not find that the storage company had knowledge of this action of the bankrupt, but it certainly knew that it was possible under the circumstances for the bankrupt to do with the property as he would, since' it was left within his control.
“It is difficult for us to look upon this transaction as a warehousing of property. The storage company assumed no liability to the bankrupt, and assumed only such responsibility as the law imposes upon it with respect to those advancing money upon the faith of its warehouse warrants or receipts. The name of the company is in itself, under the circumstances, a false pretense. It did not store property. It had no premises upon which to store property. The bankrupt stored the property. The bankrupt paid the rental of the premises. It is true that an agent of the storage company occasionally visited the premises and inspected the property in a sort of a way, but exercised no supervision or control that would prevent the bankrupt from doing ivith it as his will might dictate or his financial necessities might require. We cannot but regard this arrangement as a subterfuge, a mere device to enable the bankrupt to hypothecate the warehouse warrants or receipts, and so to raise money upon secret liens upon property in his possession and under his control. The written agreement indicates this. It is somewhat startling to learn that a warehouse company should store goods of this character for another upon the premises of that other, taking compensation for storage, not related to the cost of storage, or to the expense of receiving and delivering the property, not according to the space occupied by the property, but according to the value of the property. The fact here is patent that the storage company assumed to the bankrupt no liability, and that the sole purpose was to issue warehouse warrants or receipts, making such inspection only as, in its judgment, would protect it from liability to third persons by reason of the issue of its warrants. To uphold such a scheme would permit every merchant in the state, notwithstanding the de-' dared policy of the state to the contrary, to have possession of large stocks, thereby inducing credit, and to cover them with secret liens, thereby deceiving creditors. It would, in effect, permit such merchant to pledge his entire stock without change of possession, without record of it, and without notice to the world. Such a scheme is disapproved by the law of the. state of Illinois, which in this instance we are bound to uphold, however specious may be the device or however attractive may be the form by which it is cloaked. Such a scheme within the state of Illinois is constructively fraudulent as to creditors, and voidable by creditors.
“Nor can we uphold this transaction as a pledge of the property to the bank and to H. W. Rogers & Brother. Actual or symbolical possession of personal property in the pledgee is essential to its pledge. It is true that when the actual delivery is to a carrier or warehouseman, and bill of lading or warehouse receipt is given therefor, the transfer of the instrument and its delivery to the pledgee is regarded in the law as delivery of possession to the pledgee of the property represented by the instrument; but it is a necessary condition to the existence of such symbolical possession by the pledgee that the property itself be in the possession of some person other than the pledgor. Two different persons cannot be in the actual adverse possession of the same property or premises at the same time, and, as we find the actual possession and actual control of the property in dispute to have been in the bankrupt, the transfer of these warehouse receipts to bona fide holders for value, even without notice of the fact, cannot constitute a valid pledge of the goods, as the storage company had not possession and control of the goods. Union Trust Company v. Trumbull, supra(137 Ill. 146).

The language of Mr. Justice Peckham in Security Warehousing Co. v. Hand, supra, might be well' applied to this case:

“There was scarcely^ a semblance of an attempt at such change of possession from the hands of the knitting company to the hands of the warehousing company. Actual possession of the property in question was exercised by and existed with the knitting company substantially the same after the issuing of the receipts as before. It is a trifling with words to call the various transactions between the knitting company and the warehousing company a transfer of possession from the former to the latter. There was really no delivery, and no change of possession, continuous or otherwise. The alleged change was a mere pretense, a sham.”'

In my opinion a trustee, unlike a receiver in bankruptcy, has not only the title to the property which the bankrupt has, but he may also, in his capacity and as acting for creditors, who are powerless to pursue and enforce their rights, assail all transfers and incumbrances to the same extent as could such creditors. It may be admitted that the First National Bank and H. W. .Bogers & Brother are bona fide holders for value, and without notice, of the warehouse receipts, having given therefor a full consideration; but these warrants were not commercial paper,. and the bank and Bogers & Brother should not be allowed to profit by a secret lien, apparently entered into for their benefit by the bankrupt in fraud of the rights of his other creditors. We should not be led astray by the fact that the Chicago Title & Trust Company acted both as receiver and trustee. Its powers in the latter capacity are distinctly different from its powers in the former capacity.


source: Caselaw Access Project

author: Mr. Justice F. A. Smith

license: Public Domain

text:
    Chicago Title & Trust Co., Trustee of Alexander Rodgers, Bankrupt, Appellant, v. Henry W. Rogers and James C. Rogers, Trading as H. W. Rogers & Brother, Appellees.
    Gen. No. 17,381.
    Affirmed for reasons given in case No. 17,380, ante, p. 339.

      Assumpsit. Appeal from the Circuit Court of Cook county; the Hon. Thomas G. Windes, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1911.
    Affirmed.
    Opinion filed November 12, 1912.
    Clark, P. J., dissenting.
   Mr. Justice F. A. Smith

delivered the opinion of the court.

For the reasons given in our opinion filed in case No. 17380, ante, p. 339, the judgment in this case is affirmed.

Affirmed.

Mr. Presiding Justice Clark dissents.


text:
    Chicago Title & Trust Co., Trustee of Alexander Rodgers, Bankrupt, Appellant, v. The National Storage Company, Appellee.
    Gen. No. 17,382.
    Affirmed for reasons given in case No. 17,380, ante, p. 339.

      Assumpsit. Appeal from the Circuit Court of Cook county; the Hon. Thomas G. Windes, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1911.
    Affirmed.
    Opinion filed November 12, 1912.
    Clark, P. J„ dissenting.
   Mr. Justice F. A. Smith

delivered the opinion of the court.

For the reasons given in our opinion filed in case No. 17380, ante, p. 339, the judgment is affirmed.

Affirmed.

Mr. Presiding Justice Clark dissents.


text:
    Frank Damrow, Appellee, v. Sanitary District of Chicago, Appellant.
    Gen. No. 17,492.
    1. Master and servant—what evidence and allegations raise question of assumed risk. Evidence that a work train of dump cars with an engine in the rear and a crew consisting of an engineer familiar with the method of work and a helper, was standing still, and that a similar train coming from behind collided with it and injured the engineer, together with allegations that sufficient and competent help was not employed to properly warn, guard and protect the plaintiff and to operate the trains, raises a question of assumed risk.
    2. Master and servant-—when assumed risk is for the jury. Where an engineer in an engine at the rear of a work train is injured by a similar train coming up from behind, and the accident is caused by the operation of trains without a sufficient number of men, if the engineer had been doing the work for a month knowing the condition and acquiescing therein, it is a question of fact whether he assumed the risk,
    3. Master and servant—when instruction as to sufficient averments ignores question of assumed risk. Where a question of assumed risk is raised in a case where an engineer in an engine at the rear of a work train was injured by a collision with a similar train coming up from behind, and it is averred in sundry ways that sufficient and competent help was not employed to properly warn, guard and protect the plaintiff and to operate the train, an instruction that the plaintiff need not prove all the averments of negligence and that if there is sufficient evidence of any one of the allegations of negligence he may recover, is improper in ignoring the question of assumption of risk.
    4. Master and servant—where particular phraseology in instruction ignores question of assumed risk. Where an engineer in an engine at the rear of a work train is injured by a similar train coming up from behind, and a question of assumed risk is involved, an instruction directing a verdict, detailing the risks that are assumed and permitting recovery if the plaintiff was injured in an accident the risk of which he had not assumed “or” that was due to defendant’s failure to use ordinary care, is defective • in ignoring the question of the assumption of risk, in that the word “or” conveys the idea that if the plaintiff was injured by the defendant’s failure to use reasonable care he should recover.
    5. Master and servant—when defective instruction cannot he aided hy other instructions given. An instruction in a master and servant case that is erroneous in ignoring a question of assumed risk and directing a verdict cannot be aided by other instructions given.
    6. Master and servant—when instruction on duty of master ignores questions of assumed rislc. Where an engineer in an engine at the rear of a work train is injured by a similar train coming up from behind, and from the evidence and a declaration charging a failure to furnish sufficient and competent employees a question of assumed risk is raised, an instruction directing a verdict if an adequate number of fit and competent men was not employed to safeguard the plaintiff is erroneous in ignoring the question of assumed risk.
    Appeal from the Superior Court of Cook county; the Hon. Richard E. Burke, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1911.
    Reversed and remanded.
    Opinion filed November 12, 1912.
    F. J. Canty and P. L. McArdle, for appellant; J. C. M. Clow, of counsel.
    Otto Gr. Ryden, for appellee; Norman A. Beck and Beck & Mies, of counsel.
   Mr. Justice F. A. Smith

delivered the opinion of the court.

The plaintiff was injured on October 21, 1908, while working for the Sanitary District. He brought suit January 28,1909, and on December 24, 1910, recovered a verdict for the sum of $999, upon which judgment was entered.

The Sanitary District was, at the time of the injury, engaged in excavating the north branch of the Sanitary channel at Wilmette, Cook County. This channel connected with Lake Michigan at one end and the north branch of the Chicago river at the other. The point at which they were working when the accident in question happened was near Sheridan Eoad at Wilmette. The channel at this point runs north and south and Sheridan Eoad runs parallel with it a little distance to the east. The dirt was taken to a dump which was located on the shore of the lake near the mouth of the channel. The dirt was loaded upon little dump cars in the ditch and then, by means of a dinky steam engine, the cars were pushed along the tracks to the dump. ,The railroad tracks ran north from the place where the dirt was dug a short distance, and then turned to the right or east and crossed Sheridan Eoad, and then again at a point a short distance east of Sheridan Eoad, the tracks again turned to the left or north and ran up on the dumps. There were two dumps; one of them known as the high dump and the other as the low dump. The high dump was about twenty feet above the low dump. At about the point east of Sheridan Eoad, where the track made the curve to the north, the track ran off into three branches. There was a switch at this point by the movement of which trains could be run out on whichever branch it was desired. The physical situation there and the surroundings are described by plaintiff, and his description is admitted to he substantially correct.

In regard to the occurrences leading up to the accident, the plaintiff said:

“There were six other work trains at that time. I continued handling one of the work trains to the 21st of October; that was when I got hurt. At that time I was standing with my train on what they call the high dump. My train was stopped. This high dump was also called the short dump. I had brought my train from Central street. I had a train of seven cars ahead of my engine and I was headed in on the short dump. I had these seven cars ahead of me shoving them in on the short dump. I had made several trips. I think about five or six that day before the accident happened. The trains made on an average seven or eight trips a day. On the day of the accident I was running one of the work trains and when I came up Center to Sheridan Eoad I got a signal to pull ahead and I pulled ahead into the short dump. I went in about two hundred feet. When I got up that far I stopped the train. I was stopped by the flagman, that is, by my helper and the dump boss. The track was blocked and they were clearing it so I could shove ahead. While they were doing that I was in the cab of my engine; was watching for a signal to push ahead; was on the right hand side of the engine cab. The cars were ahead of the engine, that is, to the north. From the engine back to the switch in Sheridan Eoad it was down hill a little and from the switch the other way to Sheridan Eoad it was up hill. The track was not straight but it curved about forty-five degrees: along the curve was some lumber, timber and a lot of big dirt and boulders. The lumber was in the curve. It was about fifteen feet high and the dirt was seven or eight feet high. While standing there the engine was facing north. The cab of the engine was facing south. While I was there I felt the vibration of the track and I looked back and saw a train on top of me. I went to the window on the side of the cab, got to the window, took a hold of the roof of the cab and was trying to get out of the window when they struck and I fell down the dump a distance of about thirty feet. Dan Carey was the engineer on the train that came up behind me while I was standing there on the short dump. The speed at which he was coming was about ten miles an hour. The cars in Dan Carey’s train were ahead of his engine. It was the first car of his train that struck my engine, that is the seventh car from his engine. The train crew of my train consisted of myself and a helper; the train crew on Carey’s train consisted of a helper and himself. There were no other men engaged in the operation of my train or Carey’s train. There was no one else anywhere along the track east of Sheridan Eoad engaged in the operation of those trains. Dan Carev’s engine at the time of the accident had no brake on it at all. The cars themselves had no brakes on them. I had been engaged in the operation of one of these trains upon the drainage canal at the time of this accident about a month. During that month I had been constantly engaged each day in the operation of one of these trains, and during that month I worked as an engineer all of the time, every day. During that time I had occasion to and did observe the manner of operating those trains. I am familiar with the manner of operating those trains.”

On September 19, 1901, plaintiff filed an amended declaration consisting of six counts. After a demurrer to the declaration was overruled, the defendant filed the plea of general issue and, in addition thereto, a special plea setting up that the defendant was a public quasi corporation created under the general laws of the state of Illinois for governmental purposes only and was not subject to a suit for damages such'as claimed in this case. The issues were joined on these pleas.

The court instructed the jury for the defendant that there should be no recovery under counts 1, 2, 4 and 5, and told the jury to disregard all the allegations in those counts. The case was, therefore, submitted to the jury on counts 3 and 6.

Count three charges the defendant with failing to employ sufficient and competent help. The allegations in this count are, after stating the character of the defendant and its business and the nature of the work which was in progress at the time, and plaintiff’s particular duties as a servant of the defendant, that the defendant failed and neglected to perform its duty, in that it did not use and employ enough and competent help in and about the running and operation of said work trains, so as to be able to run and operate them with reasonable safety to the men engaged in that work, and in that it then, and there ran its said trains when loaded by having the said engines or locomotives push or back up said trains over and along said tracks, curves and switches without a lookout or flagman on the first or foremost car of said train to signal the engineer and to give warning in case of danger and without placing a switchman or flagman to tend the switches and to direct the course of said trains at the switches; and, also, in that it employed unskilled and incompetent help to operate some of said trains, one of said trains and engines being then and there operated by an engineer in the employ of defendant who was inexperienced, careless, reckless and incompetent.

In the sixth count, the negligence of some other servant of the defendant, not a fellow-servant of the plaintiff, in operating the train without ringing the bell and without the proper lookout, by reason whereof the plaintiff was injured, is alleged.

Under the averments of the third count and upon the evidence offered in support thereof, the question of assumed risk was raised. Ross v. Chicago, R. I. & P. R. Co., 243 Ill. 440; Kath v. East St. Louis & S. R. Co., 232 Ill. 126; Illinois Cent. R. Co. v. Fitzpatrick, 227 Ill. 478.

Error is assigned upon several instructions, in that the assumption of risk is ignored. Instruction No. 2, which directs a verdict, is criticised by appellant upon the ground that it ignores the question of assumed risk. The instruction is as follows:

“The court instructs the jury that it is not incumbent on the plaintiff to prove all the averments in the declaration relative to the negligence of the defendant, and if you believe from the evidence that the plaintiff has proved by a preponderance of the evidence that the defendant was negligent in any one of the ways averred in the declaration, then, in such case, as to that averment, you should find in favor of the plaintiff.”

The instruction, in our opinion, ignores the question of assumption of risk, an element involved in the third count of the declaration and the evidence offered in support thereof.

Instruction No. 4, also given at the request of plaintiff, is as follows:

“The court instructs the jury that while the plaintiff assumed the ordinary, obvious or known risks of his employment, he assumed only such risks as were usual, ordinary and incident to his employment, and which remained so incident after the defendant had taken reasonable care to prevent them. And if you find from the evidence that the plaintiff was injured in an accident, the risk of which he had not assumed, or, that was due to the defendant’s failure to take reasonable care to prevent it, and that the plaintiff was in the exercise of ordinary care for his own safety at or before" the said accident, then you may return a verdict for the plaintiff. ’ ’

In our opinion the instruction is erroneous in that it ignores the question of assumed risk. The word “or” after the word “assumed” conveys the idea and the instruction to the jury that if the jury find from the evidence that the plaintiff was injured in an accident that was due to defendant’s failure to take reasonable care to prevent it, etc., they should return a verdict for the plaintiff. The word “or” cannot be read as “and” in this instruction so that it includes the hypothesis that the risk which the plaintiff had not assumed was excluded. The instruction was erroneous, and, inasmuch as it directed a verdict, cannot be aided by other instructions given.

Instruction No. 5, in our opinion, is bad because it is not based upon evidence.

Instruction No. 6, requested by the plaintiff, reads as follows:

“The court instructs the jury as a matter of law that it was the duty of the defendant to exercise ordinary care to supply for the running and operating of its said work trains an adequate number of fit and competent servants to run and operate the said work trains with reasonable safety to the men engaged in and about the operation of the same, and if you find from the evidence in this case that the defendant failed to perform its duty in this respect, and that in consequence of such failure the plaintiff was injured, as charged in his declaration while he was in the exercise of due care and caution for Ms own safety, then the defendant is liable, and you may return a verdict for the plaintiff. ’ ’

Instruction No. 7 also directs a verdict and is along the same lines as Instruction No. 6. These instructions are both erroneous under the third count of the declaration, and upon the evidence offered, in that they ignore the question of assumed risk.

The plaintiff had been operating the train under the conditions set forth in his evidence for a month. These conditions show that the same method of operating the trains with a lack of sufficient number of men to properly conduct the business, had existed during all the period of one month during which the plaintiff had been employed in turning a locomotive and train. The evidence does not disclose that the plaintiff made any objections to this method of conducting the business, but acquiesced therein. It is, therefore, a question of fact whether the plaintiff assumed the risks of the method of running the trains shown by the evidence, and that question should have been submitted to the jury, by proper instructions.

Other instructions are criticised, and justly we think; but we do not deem it necessary to discuss them specifically as they will probably not be given on a new trial of the case, which, in our opinion, must be granted.

For the errors indicated in the instructions, the judgment is reversed and the cause remanded.

Reversed and remanded.


text:
    Delos Hull & Company, Defendant in Error, v. F. E. Pray et al., Plaintiffs in Error.
    Gen. No. 17,537.
    Account stated—when defense of, not established. In an action for goods sold and delivered, a defense of account stated held not established.

      Error to the Municipal Court of Chicago; the Hon. Arnold Heap, Judge, presiding. Heard in the Branch Appellate Court at the October term, 1911.
    Affirmed.
    Opinion filed November 12, 1912.
    Edward D. Pray, for plaintiffs in error.
    Cameron & Matson, for defendant in error.
   Mr. Justice F. A. Smith

delivered the opinion of the court.

Delos Hull & Co., defendant in error, brought suit against P. E. Pray & Sons, plaintiffs in error, in the Municipal Court of Chicago. The claim of the plaintiff was for $64.79 for seven items of coal sold and delivered in September, October and November, 1907. No question was made as to the sale and delivery of the coal. Nor was there any claim that the coal was paid for. The plaintiffs in error claim that an account was stated between the parties which prevents the plaintiffs in error from recovering for the coal. On the trial the jury found the issues for the defendant in error, and assessed the damages at $64.79; and in response to the following interrogatory, “shortly after the accrual of plaintiff’s present claims against the defendants did the parties to this suit state the account between them?” answered, “No.”

The argument of plaintiffs in error is directed to the proposition that the verdict and special finding of the jury is against the law and the weight of the evidence. Upon a consideration of the evidence we do not find that the verdict is against the clear preponderance of the evidence.

The judgment is affirmed.

Affirmed.


text:
    Gamble-Robinson Commission Company, Appellee, v. Oregon Short Line Railroad Company, Appellant.
    Gen. No. 17,557.
    1. Carriers—condition of fruit prior to shipment. In an action for damages to fruit during shipment, the admission of testimony by the buyer as to its condition while on the trees when inspected some time before shipment, if error, will not reverse.
    2. Carriers—what exhibits properly admitted. On assumpsit for damage to fruit shipped, it is proper to admit in evidence pages of a book containing entries of the car numbers, contents, number of packages, date and point of shipment, prepared by one who testified that he saw the fruit on the trees and when brought to the packing house, that he inspected each car prior to shipment and made a record in the book which was true and correct, that by closing the book he could not give the information contained therein and that some of the entries- were made directly and others were copied from a memorandum or from bills of lading.
    3. Appeals and errors—when alleged errors in instructions not preserved. On appeal instructions and errors assigned thereon need not be passed upon where such alleged errors are not preserved for review as required by - municipal court rule 8.
    Appeal from the Municipal Court of Chicago; the Hon. Freeman K. Blake, Judge, presiding. Hoard in the Branch Appellate Court at the March term, 1911.
    Affirmed.
    Opinion filed November 12, 1912.
    Davis & Rankin, for appellant.
    Charles A. Butler, for appellee.
   Mr. Justice F. A. Smith

delivered the opinion of the court.

This action was brought by Uamble-Bobinson Commission Company, appellee, in the Municipal Court of Chicago to recover loss and damages on shipments of a number of cars of fruit from different points in Utah in the fall of 1907, on the defendant’s line of railway to various eastern points. The greater portion of the fruit so shipped was Utah Elberta peaches. It was complained that the loss and damage of the fruit was incurred by reason of the defendant’s failure to exercise proper care of the fruit, and because of unreasonable delay in furnishing equipment for the shipment and transportation.

It appears from the evidence that David S. Gamble, vice-president of the plaintiff, had personally to do with the buying of the fruit handled by the plaintiff in .1907, and with the inspection of the fruit on its arrival. Mr. Gamble went to Ogden about August 1, 1907, and contracted for the purchase of about fifty cars of peaches. He inspected the peaches in the orchards on the trees just prior to their shipment. This inspection was made during the month of August, and at that time the peaches were not quite matured in color and ripeness, but were firm and in first-class condition.- They were on.the trees, located within a mile or two of the shipping point.

Mr. Gamble also arranged with the agent of the defendant company for supplying and furnishing refrigerator cars and equipment for the shipments of the peaches; the defendant company agreeing, through its agent, to furnish as required the cars for the shipments and make due transportation thereof.

The amended hill of particulars, or statement of claim, filed, covers nineteen cars of the shipments of fruit made by the plaintiff over the line of the defendant company. Evidence was offered tending to show that the fruit shipued in these cars was at the time of shipment in good first-class condition, and that upon the arrival of the cars at their destination, the fruit was rotten, mushy and greatly damaged.

The trial was before the court and jury, and the jury rendered a verdict finding the issues for plaintiff, and assessing plaintiff’s damages at $5,350, and judgment was entered on the verdict after overruling a motion for a new trial.

Errors are assigned on the record on the admitting of improper and incompetent evidence, and the rejection and refusal to admit proper and competent evidence, and in denying defendant’s motion for a new trial of the cause. Subsequently, by leave of court, additional errors were assigned relating to the giving of erroneous, contradictory and misleading instructions, and other alleged errors which are not argued in the briefs.

Appellant urges that the witness Gamble, after describing the nature and extent of the plaintiff’s business and the buying and contracting for about fifty cars of fruit including that involved in this case, was permitted to testify over the objection of the defendant below that he first inspected the fruit in the orchards while on the trees, and was permitted to describe the appearance and condition of the fruit with reference to its color, size, firmness and general appearance and the quality of the fruit so inspected. This testimony was objected to by the defendant on the trial upon the ground that it was incompetent, irrelevant and immaterial, as none of the fruit was presented to the defendant for shipment until September 5, 1907, sometime after its inspection on the trees. The court, in overruling defendant’s objection to the evidence, stated that he would allow the evidence for the purpose only of showing the character and keeping qualities of the fruit, and for the purpose of assisting the jury in determining what its condition was when delivered to the defendant; and thereupon the witness proceeded to describe the peaches as they appeared on the trees in the orchards as to their color, ripeness, maturity, quality and condition, concluding with the statement that the peaches were free from any mark or trouble of any kind, whether from insects, spots or defects.

It is contended by appellant that the admission of this evidence constitutes reversible error because it has absolutely no tendency to elucidate any fact or facts necessary for the proper determination of the case by the jury, and because the defendant’s liability as a carrier did not attach at the time the fruit was inspected. In other words, it is contended that the evidence as to the condition of the fruit was too remote to be of any aid to the jury in determining the condition of the fruit at the time of its delivery to defendant.

We are unable to say that the evidence received and complained of was absolutely without value or did not tend in any way to prove the condition of the fruit at the time it was delivered to the defendant for shipment. Standing by itself, without other proof in the case, it might be considered to be very weak and unsatisfactory testimony in view of the fact that the condition of fruit is liable to change very rapidly, and may be easily injured in the picking, transportation and packing before shipment. As a general rule, evidence tending to prove the condition of property prior to the time of shipment is competent and admissible; if, however, it is so remote that it does not appear to have any obvious tendency to elucidate the question in dispute, it should be rejected as calculated to confuse the case and unnecessarily encumber the record. Union Nat. Bank of Chicago v. Baldenwick, 45 Ill. 375. But we cannot say that the evidence of the condition of the fruit in the orchards on the trees within two or three miles of the point of shipment did not tend to prove in some degree the condition of the fruit at the point of shipment. However that may be, the evidence in this case of the condition of the fruit at the time of shipment is reasonably clear, and it tends to prove that the fruit was in good, first-class condition at the time it was packed and shipped in the various cars referred to in the plaintiff’s statement of claim. If, therefore, the evidence of the condition of the fruit on the trees did not tend to show its condition later when it was delivered to the defendant for transportation, we do not see that it tended to confuse the issue upon that question; for the reason that the evidence seems to be clear and satisfactory that its condition at the time of shipments corresponded with its condition on the trees. . We do not think that the admission of the evidence of the condition and character of the fruit on the trees was material error,—if it can be regarded as error at all.

It is further urged that the court erred in admitting plaintiff’s Exhibits “A” and “B” and the testimony concerning the same. Plaintiff’s Exhibits “A” and “B” are statements of the cars containing fruit shipped from Utah, in which the date of shipment, car numbers, point of shipment, contents of the cars and number of packages appear. These exhibits were prepared by the witness E. L. Robinson, who testified that he saw the peaches on the trees and afterwards saw them when brought to the packing house at Five Points and at the McGriff Fruit Company at North Ogden, from which latter packing house fourteen cars were packed and shipped; that he inspected the fruit in each car just prior to its shipment on the same day it was shipped, and made a record in a book at the time of shipment of each car purchased from the McGriff Fruit Company, and produced the book. He testified that he made the entries in the book at the time of shipment, and that it was a true and correct record and an honest recital of the facts which it contains as to each car. By closing the book, he could not give the car numbers, dates, contents, etc. The page numbers in the book were pages 182 and 183, and these pages of the book were marked respectively plaintiff’s Exhibits “A” and “B,” and were offered in evidence by the plaintiff. The defendant objected to the evidence upon the ground that no sufficient foundation had been laid; that it had not been shown that the entries in the exhibits were original entries, or from what the information was obtained on which the entries were made. Upon examination by the court as to the sources of his information upon which he made the entries, the witness testified that in some instances the numbers were copied right from the cars, in others they were copied from a memorandum which the witness made of the car numbers and the contents, and that in a few instances they were copied from the bills of lading at the time they were shipped. He testified that the numbers of the cars mentioned in the book are true and correct and were at that time. In some instanées he got the number of boxes as entered in the book by taking the book with him to the car and counting up the tiers and number of boxes; sometimes hé made a memorandum of those items and copied it after he got to his office; that he did not make a count of the boxes of all the cars; that the cars shipped from the McGriff Fruit Company were counted by them but not always in the witness ’ presence; that the numbers giving the number of boxes as entered in the book are correct and were correct at that time. Thereupon the court overruled the objection and the exhibits were admitted in evidence. In our opinion Exhibits “A” and “B” wére "properly admitted in "evidence under the rule announced in Diamond Glue Co. v. Wietzychowski, 227 Ill. 338, and other cases.

The witness Bobinson testified that the facts noted down in the exhibits were so entered at the time the cars were loaded and at the times he made his counts or took the count from defendant’s bills of lading; that they were correctly made by him and that he knew they were correct at the time. The bills of lading issued by the defendant show that the car numbers given in Exhibits “A” and 11B” are correct, and that the "contents of each car were correctly given in the exhibits. The evidence, therefore, furnished by the defendant corroborates and substantiates the correctness and accuracy of the exhibits, and the case, so far as the car numbers are concerned and the contents of each car, does not rest entirely upon the exhibits and the testimony of the witness Bobinson as to the correctness of the exhibits,—but it is supported by the bills of lading of the defendant company itself.

Error is assigned upon the giving to the jury of instructions by the court in its oral charge which were both erroneous and prejudicial to appellant, and argument is made in the briefs supporting certain objections to certain instructions so given. We are not called upon to pass upon the instructions and the errors assigned thereon for the reason that such errors, if there were any, were not preserved for review as required by rule 8 of the Municipal Court. The instructions complained of here were not objected to by appellant in the trial court. Other parts of the charge were pbjected to and were corrected by the court before the case was finally submitted to the jury. We have, however, examined the portions of the charge to which objection is made in argument, and we do not consider the objection well founded.

Finding no reversible error in the record, the judgment is affirmed.

Affirmed.