text:
    Ideal Building Material Company, Appellee, v. Benson Concrete Company, Appellant.
    Gen. No. 36,771.

      Opinion filed February 7, 1934.
    Rehearing denied February 26, 1934.
    Jaffe & Green, for appellant.
    Frank J. Jacobson, for appellee; John B. King, of counsel.
   Mr. Justice Wilson

delivered the opinion of the court.

Plaintiff brought suit to recover the sum of $2,967.68, for crushed stone, bank sand, torpedo sand and gravel alleged to have been sold and delivered to the defendant in Chicago, Illinois. Defendant filed its affidavit of merits which was stricken by the trial court and the defendant electing to stand on its defense as set out in its affidavit of merits, judgment was entered against it, from which judgment this appeal has been perfected.

The affidavit of defense charges that part of said account was satisfied by the acceptance of a promissory note issued to the defendant by others and indorsed by it to the plaintiff upon which the plaintiff had collected $450; that the defendant was entitled to a discount because of special arrangements; that the defendant returned part of the material to the plaintiff, for which the defendant should receive credit.

Defendant in this court relies entirely upon the proposition that certain ordinances of the City of Chicago were in full force and effect at the time of the delivery of the goods in question, which ordinances were violated by the plaintiff and therefore, as a matter of law, the plaintiff is not entitled to recover.

The Cities and" Villages Act, chapter 24, Article V, sec. 55, Cahill’s Ill. Rev. St. 1933, ¶ 65 (55), grants to Cities and Villages the right and power “to provide for the inspection and sealing of weights and measures. ’ ’ The ordinances of the City of Chicago in force during the time of the transactions in question and covering* sales and deliveries made within the city limits, as charged in the affidavit of merits filed in this cause, provide as follows:

(a) Section 2929 requires that every person using weights for weighing articles intended to be sold, shall do so on scales that have been inspected and sealed by the inspector of weights and measures.

(b) Section 2937 provides that all sales of crushed stone, bank sand, torpedo sand and gravel in wagon load lots shall be weighed on a scale that has been duly inspected and sealed.

(c) Section 2938 provides that in all sales of crushed stone, bank sand, torpedo sand or gravel sold in wagon load lots or less, a written or printed memorandum showing the date of the weighing, gross weight, tare and net weight, the name and address of the seller and purchaser, the number of the wagon or other conveyance and the name of the teamster shall accompany the delivery and be delivered to the purchaser.

Section 2947 provides that every load of any commodity sold in load lots by weight, delivered by wagon or truck shall be weighed by a public weighmaster and his certificate for each load delivered to the purchaser at the time of delivery.

Section 2940 of said ordinances provides for a fine for a violation of any of the foregoing provisions.

Section 2941 provides for a fine for the weighing or measuring of any article on any scale which has not been sealed or for which a certificate has not been obtained from the inspector.

Sections 2957 and 3623 contain other provisions relating to the duty of the seller of commodities of the class and character enumerated in plaintiff’s statement of claim.

The affidavit of merits charges that all of the sales and deliveries of the materials set forth in the statement of claim were made in the City of Chicago in wagon load lots according to weights and without any compliance with the aforesaid ordinances.

Defendant relies upon the fact that a violation of these ordinances is subject to a penalty and, therefore, such ordinance has the same binding effect as the statute and unless observed precludes a right of recovery.

Under the Cities and Villages Act the power was granted to the City of Chicago, by its city council, to pass ordinances providing for and regulating the inspection and sealing of weights and measures. The ordinances in question were passed pursuant to this power and have been in full force and effect in Chicago for a number of years. Where an ordinance is passed by a city council, within the legislative power conferred by the legislature, it has the same force and effect within the corporate limits as a law passed by the State legislature. Hope v. City of Alton, 214 Ill. 102.

The purchase and sale of the materials and commodities in this case were made in accordance with the ordinances in effect in the City of Chicago and they thereby became and were incorporated as a matter of law in the purchase and sale agreement. The ordinary purchaser of commodities and material has no means of ascertaining the real weight of such commodities and material when delivered in wagon lots and is com-polled to rely upon the honesty and integrity of the vendor. It is for that reason that cities have recognized this fact and have endeavored to protect its inhabitants by requiring the vendor to first weigh said articles upon a scale inspected by the city and to furnish to the purchaser or vendee a certificate of that fact, together with a written statement as to the actual gross and net weight of the commodity or material sold. It is with a full reliance on that provision of the ordinance that people accept material which is delivered in wagon lots or in other large quantities. It is a question of important public policy that the vendee be protected to the full extent of the law and the vendor made to observe it in every respect. The fact that there is a penalty attached to illegal transactions is not in itself sufficient ofttimes to prevent the attempt of a vendor to over-reach his vendee. A delivery of material such as is designated in the ordinances and without observance of the regulatory measures passed by the city council is illegal and such agreement and deliveries so made in violation of law have repeatedly been held to vitiate the contract and preclude a recovery. Such an interpretation of the law also lends to its enforcement and strengthens its purpose. Vendors of such materials might evade the penalty provided for by ordinance, but would be less liable to resort to a violation of the regulatory measures if the risk of recovery in an action at law for the recovery of the purchase price was prohibited. This rule is recognized in the Restatement of the Law of Contracts, Vol. II, sec. 580, p. 1087, which follows:

“Bargain and Violation of a Statute.

“1. Any bargain is illegal if either the formation or the performance thereof is prohibited by constitution or statute.

‘ ‘ 2. Legislative intent to prohibit the formation of a bargain, or an act essential for its performance, may be manifested by

(a) express prohibition, or

(b) making the formation of the bargain or the performance thereof a crime, or

(c) imposing a penalty . . ., or

(d) requiring a license, inspection, or something «similar from persons mailing such bargains or doing acts essential for their performance, ...” Example of void contract:

“Illustrations of Clause (c):

“4. A sells goods to B by weight, using weights that have not been sealed. A statute imposes a penalty for selling goods by such weights. The sale is illegal, and the price cannot be recovered.”

The transaction involved in this proceeding comes within the interpretation set out in the Restatement of the Law of Contracts and, under that interpretation the entire proceeding alleged here would be illegal. It was in violation of an ordinance which imposed a penalty and it comes within the illustration of clause (c), as goods sold by the use of weights not sealed. This rule has been recognized in a long line of decisions. Levin v. Strempler, 194 Ill. App. 299; International Coal & Mining Co. v. Industrial Commission, 293 Ill. 524; Ellison v. Adams Express Co., 245 Ill. 410; 6 Ruling Case Law, page 699, par. 105; Union Nat. Bank v. Louisville, N. A. & C. R. Co., 145 Ill. 208; Gammon Co. v. Standard Trust & Savings Bank, 327 Ill. 489; Keenan v. Tuma Bros., 240 Ill. App. 448; American Tank & Installation Co. v. Rudolph Wurlitser Co.., 254 Ill. App. 514.

A case very much in point is Cundell v. Dawson, 136 Eng. Rep. 552 (Common Pleas Book 14). This was an action to recover the purchase price of coal sold and delivered to the defendant. At the time of the sale there was in existence a statute which required the seller of coal in a certain amount delivered in wagons within the City of London, to deliver to the purchaser on delivery a ticket according to the form prescribed and upon failure so to do the seller to pay a fine. It was held in that case, that the neglect of the plaintiff to deliver a ticket was a bar to an action for the price of the coal. The court in its opinion said:

“The statutes which have given rise to the question of the right to recover the price of goods by sellers or vendors who have not complied with the terms of such statutes, are of two classes, — the one class of the statutes having for their object the raising and protection of the revenue,- — the other class of statutes being directed either to the protection of buyers and consumers, or to some object of public policy. The present case arises upon a statute included in the latter class.

“It is obvious, from the contents of the statute, that its provisions are directed to the purpose before mentioned, viz., to secure the purchasers of coals from fraud in respect of quantity and quality of the coals; and that the delivery of the ticket is required as a part of the means for the attainment of that object; and that such was the object of the statute, was determined in the case of Little v. Pool (9 B. & O. 192).”

The general rule appears to be that any act forbidden by statutory law, if passed for the protection of the public and which provides for a penalty, cannot be the foundation of a valid contract. It is not essential that the act- provided directly that such agreement be void, but it becomes so by reason of the fact that it is in violation of a prohibited act and is, therefore, illegal and unenforceable in and of itself. An act may be rendered illegal either by express prohibition or the imposition of a penalty as in the case at bar.

The municipal court erred in striking defendant’s affidavit of merits and entering judgment, and for the reasons expressed in this opinion the judgment is reversed and the cause is remanded with directions to proceed in accordance with the views herein expressed.

Judgment reversed and cause remanded with directions.

Hall, P. J., and Hebel, J., concur.


source: Caselaw Access Project

author: Mr. Justice Wilson

license: Public Domain

text:
    Mary Rooth and Fred C. Ulrich, Complainants, v. Harry J. Kusel et al., Defendants. Mary Rooth and Harry J. Kusel, Appellants, v. Fred C. Ulrich, Appellee.
    Gen. No. 37,410.

      Opinion filed February 14, 1934.
    Isadore Fishman, for appellant Mary Booth.
    Winston, Strawn & Shaw, for appellant Harry J. Kusel; Richard H. Holden and George W. Ott, of counsel.
    Shulman, Shulman & Abrams and Frisch & Frisch, for appellees; Meyer Abrams, of counsel.
   Mr. Justice Wilson

delivered the opinion of the court.

This is an interlocutory appeal from an order appointing a receiver. The appeal is by Mary Booth, the original complainant, and Harry J. Kusel, the owner of the property. From the facts it appears as follows:

April 21, 1933, the complainant, Mary Booth, filed her bill of complaint in the superior court of Cook county to foreclose the lien of a trust deed, alleging that she was the holder and owner of certain bonds maturing July 1, 1936, and coupons which had become due January 31, 1933. The total bond issue aggregated $210,000. Nothing was done with this bill and no receiver appointed nor asked for.

November 7, 1933, The First National Bank of Chicago, as successor trustee under the trust deed, filed a bill of complaint in the circuit court of Cook county to foreclose the lien on the same property. The bill filed by Mary Booth was on behalf of herself and other bondholders similarly situated.

November 21, 1933, solicitors for the defendant in the cause pending in the superior court appeared in that court and presented a consent order dismissing the suit. On the same day Fred Ulrich, a bondholder, served notice that he would appear in the superior court on the following day and present his petition praying to be permitted to join as cocomplainant. Pursuant to this petition Ulrich, by his counsel, appeared in the superior court and filed his petition in which it was asserted that the suit was dismissed after notice had been received by the complainant of the intention of the petitioner Ulrich to be joined as co-complainant. Thereupon the chancellor vacated the order dismissing the suit, permitted the petitioner to be made an additional party complainant and appointed Oscar Weiner receiver for the premises, as prayed for in the petition.

November 24, 1933, solicitors for the original complainant, Mary Booth, and the defendant presented their petition to the Honorable Judge John P. McG-oorty, before whom this cause was pending, praying that the order of Judge Bobert E. Grentzel be vacated and this matter was referred to Judge Grentzel who had entered the order vacating the order of dismissal.

On December 9,1933, the matter was heard by Judge Bobert E. Gfentzel on the sworn petitions filed therein, evidence taken, and arguments of counsel, and the motion to vacate was denied.

From the record as shown by the verified petition of the complainant Mary Booth and the defendant Kusel and the testimony taken, it appears that by agreement of the trustee, the complainant in the suit pending in the circuit court, and the defendant Kusel, the appointment of a receiver was waived upon condition that the rents and profits of the property which might accrue be paid to the complainant, as trustee, and that a monthly accounting be made of the rents together with all the expenditures made in the operation of the premises by the defendant Kusel. It also appears that as part of this agreement and understanding, the complainant Mary Booth in the suit pending in the superior court was to dismiss that proceeding without costs. This agreement was entered into on November 11, 1933, and an order of dismissal of said cause in the superior court prepared. From this it appears that the agreement between the parties had been entered into several days prior to the time notice was served by Ulrich, in which he asked to be made a cocomplainant in the suit in the superior court.

The rights of the defendant in the proceeding seem to have been lost sight of in the desire of certain parties and counsel to control the litigation.

It is insisted that the appeal should have been from the order dismissing the cause in the superior court and not from the order appointing a receiver. With this, however, we are unable to agree. The defendant has a right to be heard on the question of the appointment of a receiver and has some rights as well as the bondholders.

If the order vacating the order dismissing the cause was erroneous, then the court should not have appointed a receiver. It is well recognized as a matter of law that a complainant has a right to dismiss his bill at any time. It is also undoubtedly the rule that the original complainant had the right to dismiss her proceeding in the foreclosure suit in the superior court unless others, for whose benefit the suit was brought, had already intervened.

The sole question for determination before us is whether or not by the service of notice, the new party seeking to be made a cocomplainant had secured rights by reason thereof" which entitled him to have the order of dismissal vacated and continue the proceeding on his own behalf. Up to the time of making the motion in open court and an order permitting this new co-complainant to intervene, he had not subjected himself to the payment of any of the costs of the prosecution of the proceeding and assumed no liability for its expenses. The mere service of notice did not make him a party of record. The original complainant, Mary Booth, still had the right to dominate the proceeding in any way she desired, even to the extent of dismissing the suit. The original complainant had entered into an agreement with the defendant to dismiss the suit because of the understanding that the rents and profits were to be turned over to the trustee in the proceeding in the circuit court for the benefit of all the bondholders, and this agreement was not a nullity. This understanding, entered into before the service of notice and -in good faith, should have been carried out. Agreements between parties to a litigation should be recognized by the court, especially where it would result in a saving to the litigants.

In the case of Piedmont & Arlington Life Ins. Co. v. Maury, 75 Va. 508, it appears that certain petitions had already been filed in the cause brought on behalf of the complainant and others similarly situated, but no order had been entered thereon. The complainant Maury then moved to dismiss the suit, which was allowed, and an appeal taken from that order on the ground that the petitioners were in court asking to be made cocomplainants. The court in its opinion says:

“But it is thoroughly well settled, that while such a bill may be filed as a matter of convenience to prevent a multitude of suits and accumulation of costs, and for the ascertainment, adjustment and payment of all claims chargeable on the common fund, and where a sale is necessary that such sale may be so made as to be most advantageous, yet the creditors described but not named in the bill are not parties thereto in any sense, nor do they become so unless and until further action be had in the cause. Until such action the suit is the suit of the plaintiff on the record — he is sole dominus litis — has the absolute dominion of the- suit —and therefore may dismiss it at his will and pleasure. But this sole dominion ceases when and as soon as the creditors become parties. They become parties in a general sense as soon as a decree or order for a general account is entered under which they may come in and prove their demands. Until such decree is made, unless previously admitted as parties on the record upon special application, they have no such interest in the suit as entitles them to any control of it.

“The contention of the appellants, that the mere filing of the petitions made the petitioners parties, and put it out of the power of the original plaintiff then to dismiss, cannot be maintained upon either principle or authority. It is conceded, so far as. the petitioners are concerned, that up to the very instant of the application to be made parties, Maury had the indubitable right to dismiss his bill. When they made their application to come into the cause, Maury at once announced his purpose to dismiss, and asked liberty to do so. If he had suffered the petitions to be filed without objection, and the cause had been subsequently proceeded in as if the petitioners had been duly admitted parties, though no order to that effect had been made, by acquiescence he might have lost his right to dismiss at a subsequent time. Such was the case in Myers v. Fenn, 5 Wall. 205, 207.” To the same effect see Beadleston v. Alley, 7 N. Y. S. 747; Lee v. City of Casey, 269 Ill. 604.

We are of the opinion that the original complainant, Mary Booth, had the right to control the litigation including the agreement of settlement with the defendant, the'owner of the property, and to dismiss her bill at any time up to and until the other cocomplainants had been created as a matter of record or until a final decree had been reached. Such being the view reached by this court, in our opinion the chancellor of the superior court was without power to appoint a receiver upon the petition of the intervening cocomplainant. As a matter of equity there is no reason why the cause should be pending in two courts. The circuit court, which has jurisdiction under the bill filed by the trustee for the benefit of all the bondholders, can do complete justice as between all parties. As we have already stated, the defendant is entitled to some consideration where his property is involved and should not be harassed by constant litigation and numerous foreclosure proceedings. Ulrich was not an indispensable party to this proceeding and therefore had no right other than that proffered him by the original complainant.

For the reasons stated in this opinion the order of the superior court appointing a receiver is reversed.

Order reversed.

Hall, P. J., and Hebel, J., concur.


author: Mr. Justice Dove

text:
    T. H. Decker, Appellee, v. Ernest E. West, Appellant.
    Gen. No. 8,509.

      Opinion filed February 19, 1934.
    McGilvray, Eames, Vaughan & Tilley, for appellant; Franklin E. Vaughan, of counsel.
    Decker & Decker, for appellee; Bernard M. Decker and Robert S. Cushman, of counsel.
   Mr. Justice Dove

delivered the opinion of the court.

The original bill in this case was filed by T. H. Decker, appellee, against Ernest E. West, appellant, on the 24th day of August* 1931. It alleged that on June 1, 1924, appellee, appellant and Andrew E. Decker, all of the City of Highland Park, Illinois, entered into an oral partnership agreement to carry on a plumbing and heating business in said city. The bill further alleged that in case of a dissolution it was agreed that the said Andrew E. Decker and Ernest E. West were not to enter into the plumbing and heating business in any locality in which they would be brought in direct competition with any plumbing and heating business carried on by complainant for a period of at least five years from the date of such dissolution; that the partnership continued to do a general heating and plumbing business until June 1, 1929, when Andrew E. Decker sold his interest to appellee; that appellee and appellant continued to carry on said business in Highland Park until April 29, 1931, when appellant, without cause, ceased to employ himself in said partnership business, and has set up and established in direct competition with appellee’s business, a plumbing and heating business at 381 Elm Place in the City of Highland Park, known as West Plumbing Company; that appellant has written letters to certain of appellee’s customers announcing that he is now conducting a plumbing’ and heating business and said acts have caused and threatened to cause a loss of patronage, general depreciation and loss of earnings and profits in appellee’s business, thereby causing him irreparable and irremediable injury. The purpose of the bill was for a partnership accounting, and it contained a prayer for a temporary injunction to be issued without notice, restraining appellant from engaging in or maintaining a plumbing and heating business within the corporate limits of Highland Park and from soliciting any of the customers of appellant or interfering with his plumbing and heating business until the further order of the court.

Upon the filing of the bill on August 24, 1931, a preliminary injunction was issued according to the prayer of said bill, without notice, on appellee entering into a bond in the sum of $1,000. On the same day the injunction bond was filed and approved.

Appellant, on November 30, 1931, filed his motion to dissolve the temporary injunction, setting forth that Andrew E. Decker was a necessary party to the bill, that the oral agreement set up in the bill of complaint was within the statute of frauds, Cahill’s St. ch. 59, and that there was no equity on the face of the bill. This motion was argued on December 7, 1931 and denied, and a cross motion of the appellee to amend the bill on its face by adding Andrew E. Decker as a party defendant was allowed.

Subsequently and on January 19, 1932, upon leave being granted, appellant filed his motion to vacate that portion of the order of December 7, 1932, denying his motion to dissolve the preliminary injunction and also moved the court to dissolve the temporary injunction upon the grounds that the order granting a preliminary injunction was void because the bill of complaint was not sufficiently or properly verified, that the oral agreement set forth in the bill of complaint, not to engage in the plumbing and heating business, was void and contrary to public policy because it contained no limitation as to place or space, and that it was an error to issue an injunction in this case without notice to the appellant, because no facts were set up in the bill of complaint or affidavit supporting the same showing that the rights of appellee would be unduly prejudiced if the injunction had not issued without notice. At the same time, appellant filed his motion to increase the injunction bond to at least $6,000 and filed a general and special demurrer to the bill.

On February 5, 1932, an order was entered granting appellant, on his motion, leave to answer the bill within 20 days, his general and special demurrer being by him withdrawn. Leave was also given appellee to amend the verification of his bill of complaint without prejudice to the preliminary injunction issued on August 24, 1931. The court also denied appellant’s motion to dissolve the temporary injunction and denied his motion to vacate the order of December 7, 1931, which denied appellant’s motion of November 30, 1931, to dissolve the preliminary injunction. The court at this time heard the motion of appellant to increase the amount of the bond and entered an order requiring appellee to file an additional injunction bond, within 10 days, conditioned according to law and with surety to be approved by the court. This bond was never given by the appellee and the injunction was dissolved by the court on February 23,1932.

From the order of February 5, 1932, an appeal was granted appellant and perfected, and the record is brought to this court for review.

Appellant contends first, that the preliminary injunction was issued upon a bill of complaint with a defective verification and that the order of February 5, 1932, granting appellee leave to amend the verification could not cure the error in granting the preliminary injunction on August 24,1931, upon a bill of complaint defectively verified. Second, that no sufficient showing was made by the bill of complaint which justified the court in issuing the preliminary injunction without notice to appellant. Third, that the verbal partnership agreement, as set forth in the bill, providing that appellant could not engage in the plumbing and heating business for a period of-five years after the dissolution of the partnership, was unenforceable as within the provisions of the statute of frauds and fourth, that such provisions in the partnership agreement were void and unenforceable as they are contrary to public policy.

The affidavit which accompanied the original bill of complaint is as follows, viz.:

“State of Illinois )

County of Lake ss.

“T. H. Decker, complainant in the above entitled cause, being first duly sworn upon oath deposes and says that he has read the above and foregoing bill of complaint by him subscribed and knows the contents thereof, and that the same is true of his own knowledge except as to those matters which are stated upon information and belief and as to those matters he believes it to be true; that he is advised and informed and so states the fact to be that his rights will be unduly prejudiced if the injunction in this cause is not issued immediately and/or without notice to the defendant.

T. H. Decker

“Subscribed and sworn to before me, this 24th day of August, A. D. 1931.

W. B. Brazell,

(Notarial Seal) Notary Public.”

As amended, omitting the signature and jurat, the affidavit is as follows, viz.:

“T. H. Decker, complainant in the above entitled cause, being first duly sworn upon oath deposes and says that he has read the above and foregoing bill of complaint by him subscribed, and knows the contents thereof, and that the same is true of his own knowledge except as to those matters which are stated therein to be upon information and belief, and as to those matters he believes it to be true: that he is advised and informed and so states the fact to be that his rights will "be unduly prejudiced if the injunction in this cause is not issued immediately and/or without notice to the defendant. ’ ’

It will be seen that the amendment consisted of the addition of the three underscored words, therein to he. Without these words the verification was insufficient. Neil v. Oldach, 86 Ill. App. 354 ; Roman v. Humphreys, 220 Ill. App. 502. And it is therefore insisted by appellant that the motion of January 19,1932, to dissolve the injunction should have been allowed as the order of February 5, 1932, granting appellee leave to make this amendment could not have a retroactive effect. In support of that contention appellant cites the cases of Stirlen v. Neustadt, 50 Ill. App. 378, and Cook County Brick Co. v. Bach & Sons Co., 93 Ill. App. 88. The court held in the Stirlen case that the verification was insufficient, but as no attempt was made to amend it until after the appeal was perfected, the defect could not be remedied in that way. In the Cook County Brick Go. case, an appeal was perfected from an order granting a temporary injunction on October 6, 1900. Subsequently on December 22, 1900, the jurat was amended by leave of the lower court and a transcript of a supplemental record was filed in the Appellate Court showing the order of December 22, 1900, "which was made after the order appealed from was pending in the Appellate Court. Neither of these cases sheds any light upon the question presented by this record. Our statute of amendments is very liberal and the chancellor did not err in permitting this amendment to be made without prejudice to the injunction theretofore granted. Counsel have not cited and we have not found any case in this State precisely in point, but in other States having similar liberal statutes on amendments it has been held that it was proper to allow such amendments to be made and that when made they related back to the commencement of the action. Glaus sen v. Chapin, 69 Mont. 205, 221 Pac. 1073; Kent Oil Co. v. Waddill, 127 Kan. 704, 274 Pac. 1113. See also Rickerman v. German Mut. Life Ins. Co., 172 Ill. App. 189.

On January 19, 1932, appellant filed Ms general and special demurrer to the bill. Upon this day he also filed his motion to vacate the order of December 7, 1931, and another motion to dissolve the preliminary injunction. . Under the authorities, by filing his demurrer, appellant thereby admitting all the well pleaded facts, it was immaterial whether the verification was sufficient or insufficient. Fowler v. Fowler, 204 Ill. 82; Sharples v. Baker, 100 Ill. App. 108; Keach v. Hamilton, 84 Ill. App. 413. There was no error therefore in denying the motion to dissolve the temporary injunction on the ground that the verification was defective, nor is the objection that the injunction was issued without notice to appellant tenable. In the instant case, appellant not oMy appeared, but he filed his first motion to dissolve without raising the question of want of notice. It was not until January 19, 1932, that he included in his objections the failure of the court to require notice before issuing the preliminary injunction. Oh that day he also filed his special and general demurrer to the bill which he subsequently withdrew and procured leave to answer. In Williams v. Chicago Exhibition Co., 188 Ill. 19, in considering the effect of a motion to dissolve upon the objection that the preliminary injunction was issued without notice, the court said: “If, however, there was any irregularity in the original issuance of the injunction, such as failure to give notice, such irregularity was waived by the motion to dissolve upon the face of the bill, inasmuch as such motion operated as a demurrer to the bill.” To the same effect is O’Beirne v. City of Elgin, 187 Ill. App. 581, and many other cases. While it is true that a motion to dissolve was made in Parish v. Vance, 110 Ill. App. 50; Sanganois Club v. Lane, 145 Ill. App. 475, and Johnson v. Crouch, 224 Ill. App. 105, the point that the motion to dissolve constituted a waiver was not passed upon by the court in any of these cases and it cannot therefore be said that these cases are in conflict with those heretofore cited.

It is next insisted that the verbal partnership agreement was within the statute of frauds and therefore unenforceable. Counsel for both parties agree that the chancellor in overruling this contention of appellant relied upon the case of Osgood v. Skinner, 111 Ill. App. 606. In their argument, counsel for appellant concede that this case is in point, but that it is not founded upon good reason or good law and should not be followed by this court. We have carefully considered the arguments advanced and the cases from other jurisdictions relied upon by appellant, but we believe the decision in the Osgood case, supra, should be adhered to, supported as it is by many cases from other states. In 25 R. C. L. 470, it is stated: “According to the better view, a contract not to engage in a business for a stated number of years, more than one, is not within the statute, as it may be fully performed by the death of' the promisor within a year. Some cases, however, hold that if the contract expressly states a period longer than a year, it will fall within the statute.” Dickey v. Dickinson, 105 Ky. 748. See also Erwin v. Hayden (Tex. Civ. App.), 43 S. W. 610; Doyle v. Dixon, 97 Mass. 208. Furthermore the motion of January 19, 1932, to dissolve did not include among its reasons this ground, although the motion of November 30, 1931, which was denied on December 7, 1931, did and inasmuch as section 123 of the Practice Act then in force, Cahill’s St. 1933, ch. 110, ¶ 122 (App’x) provided that an interlocutory appeal must be taken within 30 days after the order appealed from and as no appeal was perfected from the order of December 7, 1931, this question may not be presented to this court upon this record, but we have nevertheless considered it.

It is finally insisted that the provisions of the partnership agreement not to engage in the plumbing and heating business are contrary to the public policy of this State, inasmuch as there is no limitation as to place or space. According to the allegations of the bill, these parties mutually agreed that in the event the partnership was dissolved, neither appellant nor Andrew E. Decker would enter into the heating business. in any locality in which they would be brought in direct competition with any heating or plumbing business carried on by appellee for a period of at least five years. Under these provisions, appellant insists that he might be enjoined anywhere in the United States from entering into the plumbing and heating business if appellee would be engaged in that business at the same place. The authorities relied upon by appellant all hold that the language employed in a contract of this character must be construed by the court, and if it is found to be reasonable, partial and. founded upon a good consideration, it will be enforced, otherwise it will be held to be in general restraint of trade and therefore against public policy and void. Harding v. American Glucose Co., 182 Ill. 551; Hursen v. Gavin, 162 Ill. 377. There are two principal grounds on which this doctrine is founded. “One is the injury to the public by being deprived of the restricted party’s industry; the other is, the injury to the party himself by being precluded from pursuing his occupation and thus being prevented from supporting himself and his family. It is evident that both these evils occur when the contract is general, not to pursue one’s trade at all, or not to pursue it in the entire realm or country. The country suffers the loss in both cases, and the party is deprived of his occupation or is obliged to expatriate himself in order to follow it. A contract that is open to such grave objection is clearly against public policy.” Gibbs v. Consolidated Gas Co. of Baltimore City, 130 U. S. 396, 409.

In Pelc v. Kulentis, 257 Ill. App. 213, the contract was limited as to territory, but unlimited as to time, and the court, after stating that the law relating to contracts in restraint of trade had undergone definite changes and development coextensive with the progress of trade and commerce, sustained the contract there under consideration, saying that the tendency of the modern decisions was to sustain contracts which impose a reasonable restraint on business, and that the test applied to the question of reasonableness is whether the restraint is such only as affords a fair protection to the interests of the party in whose favor it is given and not so large as to interfere with the interests of the public. The opinion then proceeds: “Considered with reference to the situation, business and objects of the parties, and in the light of all the surrounding circumstances "with reference to which the contract was made, if the restraint contracted for appears to have been for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them, and not injurious to the public, the restraint will be held valid.”

This contract, like all others, must be construed according to the intention of the parties. The intention of the parties must be arrived at by an examination of all the language used in the written instrument to which they subscribed their names. It is properhowever, for the court, as pointed out in numerous decisions, to bear in mind the entire subject matter of the contract, the situation of the parties thereto, the nature and extent of the business, the objects and purposes sought to be accomplished by the restriction clause of the contract and all the surrounding circumstances. The bill in the instant case discloses that for three years prior to 1924 appellee and Andrew E. Decker had carried on a plumbing and heating business in Highland Park, a city of approximately 10,000 inhabitants, as copartners, appellee being the owner of three-fourths of the assets and Andrew E. Decker the owner of the remaining one-fourth; that on or about June 1, 1924, appellant, Andrew E. Decker, and appellee entered into an oral partnership agreement by the terms of which, among other things, appellee and Andrew E. Decker agreed to convey to appellant a one-fourth interest in the assets of the partnership in consideration of the payment to appellee of $10,500, with interest thereon from November 1, 1923, until paid; that this agreement was carried out and the copartnership continued in business until June 1,1929, when Andrew E. Decker sold his interest to appellee, and appellant and appellee continued to carry on the business in Highland Park until April 29, 1931, when appellant, in violation of the provisions of the agreement and without cause, withdrew from the partnership business and thereafter established a plumbing and heating business in his individual capacity, and in direct competition with appellee’s business, which he has continued to carry on in Highland Park, within a few blocks of appellee’s location.

The express contract, according to the allegations of the bill, provided that upon a dissolution of the partnership, appellant would not enter into the plumbing and heating business in any locality in which he would be brought in direct competition with any plumbing and heating business carried on by appellee for a period of at least five years. The preliminary injunction only restrained appellant from engaging in or maintaining a plumbing and heating business in Highland Park. Taking into consideration the express wording of the agreement, the situation of the parties at the time the agreement was made, the subject matter with which the contract dealt, the nature and extent of the business, the objects and purposes sought to be accomplished by the employment of the restriction clause, we do not believe it was within the expressed intention of the parties to say that this restriction covers the entire world as insisted upon by appellant. The agreement is not that appellant would not engage in any plumbing and heating business in any locality in the world or in any locality where he would be brought into direct competition with any plumbing and heating business carried on by appellee, but that he would not enter into any such business in any such locality. It means, in the instant case, /that since appellee was already engaged in this business in Highland Park at the time appellant entered into a competing business, that he, appellant, was violating the expressed intention of the parties by so doing, and as thus interpreted, the agreement is reasonable and consistent with the public policy of this State and valid under all the authorities as it affords a fair protection only to the interests of appellee in whose favor it was drawn. Andrews v. Kingsbury, 212 Ill. 97, and cases therein cited.

In our opinion the mutual promises of the parties to this agreement as therein expressed are a sufficient consideration to support the provisions of this contract as we have construed it, and the chancellor did not err in entering the order appealed from.

Order affirmed.


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    In re Receivership of The National Bank of Ottawa. Charles Eichelkraut and William Eichelkraut, Trading as Eichelkraut Brothers, Defendants in Error, v. Urban Tracey, Receiver of The National City Bank of Ottawa et al., Plaintiffs in Error.
    Gen. No. 8,688.
    Opinion filed February 19, 1934.
    H. L. Richolson, for plaintiffs in error.
    Hibbs & Pool, for defendants in error.
   Mr. Justice Dove

delivered the opinion of the court.

On September 30, 1931, The National City Bank of Ottawa suspended business and subsequently Urban Tracey, plaintiff in error, was appointed receiver thereof. On January 4, 1932, as such receiver, he filed in the circuit court of LaSalle county, at the direction of the comptroller of the currency, his petition praying for an order authorizing him to sell certain bonds of the bank, some of which had been pledged in the trust department of the bank and others deposited with the auditor of public accounts of this State. A hearing was had upon" this petition and the prayer thereof granted. Subsequently and upon notice to the receiver, leave was granted Charles H. Eichelkraut and William Eichelkraut, partners, doing a general contracting business as Eichelkraut Brothers, to intervene and file a cross petition and their cross petition was filed and subsequently amended. To this cross petition Urban Tracey, the receiver, and Oscar Nelson, auditor of public accounts of the State of Illinois, were made parties defendant. Separate answers were filed by each defendant, to which replications were filed and the cause set for hearing. Thereafter, but before a hearing was had upon the merits of the cross petition, the receiver filed his petition in the circuit court, by which he sought to remove the cause to the United States District Court for the Northern District of Illinois. The circuit court denied the prayer of this petition, and the receiver then caused a transcript of the record to be filed in the United States District Court, but that court remanded the cause to the circuit court of LaSalle county. Subsequently, a hearing was had upon the cross petition, and a decree rendered, granting defendants in error the relief sought in the cross petition and the record is brought to this court for review by writ of error.

The cross petition, as amended, alleged that in April, 1931, Eichelkraut Brothers entered into a contract with the Ottawa Building Corporation, by which they undertook to reconstruct the Gayety Theater in Ottawa, and were to receive therefor $28,420; that this contract price was to be deposited by the Ottawa Building Corporation in The National City Bank of Ottawa, and was there to remain intact as a trust fund until the final completion of the contract and until E. P. Rupert, the architect, furnished a certificate showing its completion in accordance with the reconstruction plans and specifications, and that upon the furnishing of such certificate, the bank should thereupon pay to Eichelkraut Brothers said contract price.

The cross petition further alleged that the Ottawa Building Corporation deposited said sum with said bank in trust and that the same was so received by the bank, as evidenced by the following instrument directed to Willard S. Gay and Dorothy Mills Gay, owners of the real estate upon which the theater was to be reconstructed, viz.:

‘ ‘ Ottawa, Illinois, May 12, 1931.

“To Willard S. Gay and Dorothy Mills Gay:

“As Cashier of the National City Bank of Ottawa, Illinois, the undersigned hereby certifies that there is on deposit at this time a certain trust account in the National City Bank of Ottawa, Illinois, known as the ‘National City Bank, Trustee, Ottawa Building Corporation,’ in the sum of Twenty-eight thousand four hundred twenty Dollars ($28,420.00), which has been deposited in said trust account to guarantee the rebuilding of the burned building on the real estate known as Lot One (1) and the North Sixty (N. 60) feet of Lot Two (2), in Block Eighty-five (85), in the State’s Addition to the City of Ottawa, in the County of La Salle and State of Illinois.

“I further certify that said sum of Twenty-eight thousand four hundred twenty Dollars ($28,420.00) will remain intact in such trust fund until the final completion of the remodeling, reconstruction or rebuilding of said structure, as per the terms of a certain lease agreement recorded on February 5, 1931, in the Recorder’s Office of said La Salle County, Illinois, in Book 687 of records, page 308, and as is more fully set out in detail in a contract now on file with said National City Bank in connection with said trust account, and which said contract is executed by Charles Eichelkraut and William Eichelkraut, doing business as Eichelkraut Brothers, of the one part, and the Ottawa Building Corporation, of the other part, and until E. P. Rupert, the architect of said building, or his successor, shall have furnished a certificate showing the final completion of said structure, in accordance with the provisions of the contract therefor. Upon the furnishing of said certificate by said architect, the said National City Bank, of Ottawa, Illinios, will pay to- said Eichelkraut Brothers the said sum of Twenty-eight Thousand Four Hundred Twenty Dollars ($28,420.00).

“S. R. Lewis,

“Cashier, National City Bank”

The cross petition further alleged that petitioners complied with their contract in every particular, and received a certificate from the architect on September 29,1931, and by and with the consent of Willard S. Gay and Dorothy Mills Gay, the bank paid petitioners $18,714.25 by crediting that amount upon notes of petitioners which the bank then held, and that there remains in said account the sum of $9,705.75; that on November 7, 1931, petitioners delivered to the receiver a final certificate from the architect, together with a written instrument executed by Willard S. Gay and Dorothy Mills Gay, by which they consented to the payment of this balance to petitioners.

The cross petition further alleged that the National City Bank was a national bank and qualified under the laws of the United States to act as trustee and in other fiduciary capacities and so acting, it did segregate from time to time from the general assets of the bank, certain bonds and securities as required by law. The petition charges, however, that the bank did not segregate any of its assets in order to protect and secure the money so held by it on deposit as trustee for petitioners. The cross petition further alleged that under the laws of this State, said bank also qualified to carry on a general trust business, and that at the time it suspended business it had on deposit with the auditor of public accounts bonds in the principal sum of $50,000, issued by the sanitary district of Chicago, which were held by the auditor for the benefit of petitioners and other trust creditors. The cross petition prayed that these bonds be sold for the benefit of petitioners and other trust creditors and the proceeds applied toward the payment of their respective claims.

The answer of the auditor of public accounts admits that he has in his possession and control, as auditor, bonds in the principal sum of $50,000 held by him to secure the trust creditors of the bank, but he neither admits nor denies the other allegations' of the cross petition.

The answer of Urban Tracey, receiver, denies that the Ottawa Building Corporation deposited in The National City Bank the sum of $28,420 at the time of the execution of the contract as set forth in the petition, admits that said bank was qualified under the laws of the United States and the laws of Illinois to carry on a general trust business and admits that said bank kept bonds on deposit with the auditor of public accounts of the value of $50,000, but denies that said bonds or any bonds held by the bank were held for the benefit of petitioners, but alleges that the relationship of debtor and creditor existed between petitioners and said bank, and that the deposit of petitioners was a commercial deposit, did not constitute a trust fund and was not one which the banlc was required to protect with a deposit of bonds.

Upon the hearing the court entered a decree finding that the $28,420 deposited with the National City Banlc constituted a special trust fund, and that the portion thereof remaining on deposit at the time the banlc suspended business, amounting to $9,705.75, is protected by and secured under the laws of this State by the bonds of the sanitary district of Chicago, deposited by the bank with the auditor of public accounts, and ordered that said bonds be sold at the current market price and the proceeds paid pro rata to defendants in error, and the receiver, for the benefit of other trust creditors of the bank, to the extent of any deficiency which might be due them after the bonds and securities which had been segregated by the bank as security for other trust creditors had been applied in payment thereof, and in the event the proceeds of sale from said bonds were insufficient to pay the trust creditors in full, that then petitioners should have a general claim for the amount of such deficiency.

The evidence discloses that Willard S. Gay and Dorothy Mills Gay were the owners of certain improved premises in Ottawa, known as the Gayety Theater and which had been damaged by fire. These premises had been, by the owners, leased to the Ottawa Building Corporation, and under the terms of its lease, the Ottawa Building Corporation undertook the reconstruction of the theater. In order to guarantee the full and complete performance of the reconstruction work in accordance with the plans and specifications therefor, which had been prepared by E. R. Ruppert, architect, the lease provided that the lessees should place in escrow a sum of money equal to the estimated cost of construction. Defendants in error are general contractors, and on April 7,1931, they entered into a contract with the said Ottawa Building Corporation to reconstruct said building according to said plans for a consideration of $28,420. By a supplemental agreement it was provided that the Building Corporation should deposit with the National City Bank of Ottawa the full contract price, which was to remain intact as a trust fund until the final completion of the building and until the architect furnished a certificate that the structure has been completed in accordance with the provisions of the contract, and at that time the bank should pay defendants in -error the contract price.

On April 30, 1931, the bank opened an account upon its books designated as “National City Bank, Trustee, Ottawa Building Corporation” and the Ottawa Building Corporation transferred to that account $16,000 which it had on deposit with said bank. On the following day the bank loaned defendants in error $12,420 upon their note and the proceeds thereof was placed in this account. As a part of the same transaction, the bank, by its cashier, executed and delivered the instrument dated May 12, 1931, addressed to Willard S. Gay and Dorothy Mills Gay, hereinbefore referred to.

The evidence further discloses that defendants in error rebuilt the theater building in accordance with their contract, and on September 29,1931, the architect issued his certificate that the work had been completed and waivers of liens executed and delivered by all contractors and subcontractors, except certain ones who had claims aggregating $9,705.75. Upon the execution and delivery of this certificate, and by and with the consent of Willard S. Gay and Dorothy Mills Gay, the bank withdrew from said account the sum of $18,714.25, so held by it on its books to the credit of itself as trustee, and notes of that amount of defendants in error, which the bank held were canceled and discharged. This transaction left a balance in this account of $9,705.75. On the following day the bank suspended business.

On November 17, 1931, the architect issued his final certificate to the effect that all material and labor had been paid for and that defendants in error were entitled to receive the balance of the fund on deposit in the bank. This certificate, together with a statement of the owners of the premises to the same effect, was delivered to the receiver in December, 1931, and subsequently a preferred claim was filed by defendants in error, but was disallowed by the comptroller of the currency.

It is first contended by plaintiff in error that his petition for an order authorizing him to sell the bonds of the bank which he was liquidating had been heard and disposed of by the court entering an order of sale in accordance with the prayer of his petition and that the filing of the intervening- petition by defendants in error was equivalent to filing a suit against plaintiff in error as receiver, and that the circuit court should not have permitted the cross petition to have been filed as the questions presented therein were cognizable only in the federal court to which court this cause should have been transferred. It will be observed that the receiver, under authority of the comptroller, submitted himself to the jurisdiction of the circuit court of LaSalle county and obtained an order therefrom authorizing the sale of the bonds, a portion of the proceeds of which are ordered in this proceeding to be paid defendants in error. Before any sale was had of these bonds, however, defendants in error, upon notice to the receiver, were granted leave to file their intervening or cross petition. No objection was made by the receiver to the entry of that order. The intervening or cross petition was filed. The auditor of public accounts and the receiver filed separate answers thereto and no question of jurisdiction was raised by either of the respondents in their several answers. It was after the issues had been made up and the cause set for trial that the receiver filed his petition and'bond for removal of the cause to the United States District Court, and because it came too late, the circuit court properly denied the prayer of the petition. A transcript of the record, however, was filed by the receiver in the District Court, and that court, upon a motion by defendants in error, remanded the cause to the circuit court. The United States Code, sec. 71 of Title 28, provides that whenever any cause shall be removed from any State court to a District Court, and the District Court shall decide that the cause was improperly removed and order the same remanded, no appeal or writ of error from the decision of the District Court shall be allowed.

In Missouri Pac. Ry. Co. v. Fitzgerald, 160 U. S. 556, it was held that an order of a District Court of the United States remanding a cause to the State court cannot be reviewed by appeal, writ of error or in any manner, but that a remanding order of such District Court is final and conclusive. See also Pacific Live Stock Co. v. Lewis, 241 U. S. 440.

It is true that prior to the application of defendants in error to intervene, an order had been entered upon the original petition of plaintiff in error, but among the bonds sought to be sold by plaintiff in error were those deposited with the auditor of public accounts to secure trust creditors of the bank, and defendants in error, by their intervening petition, insist that they belonged to that class of creditors. In our opinion, inasmuch as plaintiff in error had submitted himself to the jurisdiction of the lower court and sought an order granting him authority to sell certain assets of the bank, it was eminently appropriate for defendants in error to invoke the jurisdiction of the same court to determine the issues raised by their intervening petition. Furthermore, the motion to intervene was allowed, only after notice and a full hearing, and no objection thereto was made by plaintiff in error. The answer of both respondents to the intervening petition raises no question as to the right of defendants in error to intervene and submit their controversy to the circuit court. Of course the matters sought to be adjudicated in this proceeding are cognizable in a federal court, but we know of no reason why they cannot be adjudicated in a State court when the parties voluntarily submit themselves to the jurisdiction of a State court. Inasmuch as plaintiff in error made no objec-. tion to the filing of the cross petition, hut filed his answer thereto in which he did not question the right of defendants in error to intervene, plaintiff in error cannot, for the first time, raise in this court a question which was not presented to the court below. Ortmeier v. Ivory, 208 Ill. 577.

Plaintiff in error next contends that, for two reasons, the transaction in question did not create a special deposit or trust fund: First, because the money, at the time it was deposited, was not the money of defendants in error, and second, no effort was made by any of the parties to have the money segTegated, hut all the parties contemplated, at the time the fund, amounting to $28,420, was created, that it was to he mingled with the general funds of the hank. The evidence discloses that the Ottawa Building Corporation had $16,000 on deposit in the bank on April 30, 1931,. and by its act that sum was placed to the credit of the account designated on the books of the bank as “National City Bank, Trustee, Ottawa Building Corporation.” All the parties to this transaction knew that the Ottawa Building Corporation had contracted with defendants in error to reconstruct the theater building, and the building corporation was to be the beneficiary of the work done by defendants in error. In fact, this was a payment in escrow upon this contract. On the next day, defendants in error executed their note to the bank for $12,420. The bank accepted their note and credited the proceeds thereof to this account, and these two credits aggregate the $28,420. Plaintiff in error insists that the assets of the bank were not increased by either of these transactions, but he is clearly in error. The law does not require useless things to be done, but had the Ottawa Building Corporation withdrawn its $16,000 which it had on deposit on April 30, 1931, and on the same day returned that amount to the bank, no one would contend that the assets of the bank would not have been increased to the extent of $16,000 when that amount was returned, and certainly the assets of the bank were increased the next day when defendants in error executed and delivered their note to the bank for the sum of $12,420. The assets were not only increased, but the evidence discloses that the note evidencing this indebtedness was subsequently paid by défendants in error, and that at the time their cross petition was filed, they were not indebted to the bank in any amount. That this $28,420 was a trust fund and was so regarded by all the parties, including the bank, cannot be doubted. The written instrument executed by the bank designates this account as a trust account, and the bank certifies that the sum of $28,420 will remain intact in this trust fund until the completion of the reconstruction of the burned building. It is immaterial how this fund came into the bank, and it does not matter how the bank saw fit to carry it on its books. The bank obtained the fund. It executed a written declaration of trust. A trust relationship was created, the balance of $9,705.75 concededly belongs to defendants in error, and they are entitled to it under the provisions of the trust agreement, and having determined that it was a trust fund, the next inquiry is to determine whether it is protected by the bonds which the bank had deposited with the auditor of public accounts.

Under the laws of this State, it would have been unlawful for the National City Bank to accept this trust without procuring from the auditor of public accounts a certificate of authority stating that it had complied with the requirements of the Trust Company Act, Cahill’s Ill. Rev. St. 1933, ch. 32, ¶ 345 et seq. This certificate of authority is obtained by depositing with the auditor $50,000 in bonds or mortgages upon real estate as in the act provided. The National City Bank complied with this statute, deposited bonds of the sanitary district of Chicago as required, and received its certificate of authority. The statute provides that these bonds should be registered in the name of the auditor officially and held by him for the benefit of the creditors of the bank. In our opinion defendants in error are creditors of this bank within the meaning of this act, and are entitled to have their trust claim, along with all other trust claims so protected, satisfied out of the proceeds of these sanitary district bonds so held by the auditor.

The object and purpose of the Trust Company Act, as suggested by counsel for defendants in error, is to afford trust creditors a measure of protection at least that is not afforded general creditors of the bank. The creditors protected by the securities in the hands of the auditor are those whose claims arise because the bank accepted an appointment which it was authorized to accept by virtue of this act. The right to resort to these securities depends upon whether the bank was in possession of and liable for trust funds by virtue of an appointment it was authorized to accept under the act regulating trust companies.

The decree in this case properly protects the interests of all trust creditors, is in accordance with the law and the evidence and is affirmed.

Decree affirmed.


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    Idah Culhane and Ernest C. Stokburger, Trustee, Appellees, v. Arthur Layman et al., Appellants.
    Gen. No. 8,718.
    Opinion filed February 19, 1934.
    William L. Pierce, for appellants.
    Hinchcliff, Miller & Thomas, for appellees; Charles A. Thomas, of counsel.
   Mr. Justice Dove

delivered the opinion of the court.

This is a suit filed by appellees to foreclose a trust deed executed by Arthur Layman and Anna Layman, his wife, to secure the payment of a note for the sum of $2,500, payable to the order of themselves, three years after date, with six per cent interest, payable semiannually, both principal and interest being payable at the office of the E. C. Stokburger Agency in Rockford. The original trust deed and note were dated May T9, 1924, and Ernest C. Stokburger was named as trustee therein. From a decree of foreclosure and sale rendered in favor of complainants below, appellees here, the record is brought to this court for review; by the defendants below, appellants here.

It appears from the evidence that Ernest C. Stokburger, in 1924, had an office in the Forest City Bank Building in Rockford, and styled himself a realtor and mortgage broker, doing business under the name of the E. C. Stokburger Agency. On May 19, 1924, appellants borrowed from him $2,500 and executed the note and trust deed referred to. In April, 1926, appellee, Idah Culhane, acting through her agent and representative, E. P. Barrett, a real estate agent, purchased this note and trust deed from Stokburger, and from that time she has had possession of the note, trust deed and abstract of title. On May 19, 1927, an extension agreement was executed by appellants and the trustee, extending the time of payment for two years. On May 18, 1929, appellants paid Stokburger $1,000 and another extension was executed extending the time of payment for a period of three years from May 19, 1929. On November 18, 1929, appellants paid Stokburger, at his place of business, $400 to apply on this note and on May 20,1930, the further sum of $100. Appellants regularly paid the interest to Stokburger, as the interest became due, including the interest payment due November 18, 1931. Thereafter, and prior to the 19th of May, 1932, Stokburger disappeared and his agency office closed. After appellee became the owner of the note in 1926' and until Stokburger absconded, he, Stokburger, would send the interest payments to Barrett and Barrett in turn would send them to Dr. Culhane, husband of appellee Idah Culhane, who acted as her agent. When the $1,000 on the principal was paid in May, 1929, that amount was sent by Stokburger to Barrett and by Barrett to Dr. Culhane, but Stokburger converted to his own use the $500 subsequently paid by appellants, and neither Barrett or the Culhanes knew anything of these payments until after Stokburger left. After this $500 was paid on the principal sum, Stokburger continued to send to Barrett, upon the respective interest dates, the interest on the full $1,500.

The master found from the foregoing evidence that there was a course of dealing on the part of appellee by which appellants were led to believe that Stokburger was at all times the owner and holder of the note and trust deed, and that by reason thereof, appellants were justified in making the principal payments to Stokburger, who, in receiving the same, acted as agent for appellee. Objections to the master’s findings having been overruled, they were renewed as exceptions, and sustained by the court, and a decree of foreclosure and sale rendered in accordance with the prayer of the amended bill.

The only issue in this case is whether or not these two payments, aggregating $500, made by appellants to Stokburger, constituted payment to appellee, Mrs. Culhane.

It is earnestly insisted by counsel for appellants that appellee, Mrs-. Culhane, by her course of conduct, impliedly created Stokburger her agent, and is now estopped from denying Stokburger’s authority to receive these principal payments, and directs our attention to the fact that the note provided that both the principal and interest thereon were payable at the office of the Stokburger agency and that on the back of the note appeared this indorsement: “The Stokburger Agency invests its own money in all its loans, which is evidence of its faith in the Trust Deeds offered you. Since 1906 not a dollar has been lost on a Stokburger Loan. ’ ’ Counsel also directs our attention to the fact that both extension agreements recite that the principal note and trust deed “are now owned and held by Ernest C. Stokburger, trustee” and to the further fact that the principal payment of $1,000 was paid to Stokburger and received by appellee, who thereby ratified appellants ’ action in so paying Stokburger. And in this connection, appellants direct our attention to the cases of Linowiecki v. Wisniewski, 249 Ill. App. 474, and King v. Harpster, 306 Ill. 202, and insist that these cases support their contention.

In the Linowiecki case, it appeared that the defendants executed a series of 20 notes, secured by a trust deed, in which the defendants were grantors and Max Weber was named as trustee. The notes were payable to the order of the makers and indorsed by them and were identical except as to the amounts therein stated and the dates payable, and each of said notes was made payable at the office of Weber & Weber, of which Max Weber, the trustee, was a member. As 10 of the notes became due, they were paid by defendants at the office of Weber & Weber. On January 15, 1924, the trustee sold the last 10 notes of the series to the plaintiff, and they were delivered to the plaintiff, who retained them in his possession. As each of these last 10 notes became due, the plaintiff presented them at the office of Weber & Weber and permitted them to accept the money due thereon, and then Weber & Weber would take the money so received from the defendants to the plaintiff, and the plaintiff thereupon delivered the note to them, and they, in turn, forwarded the note to the defendants. On January 31, 1925, the defendants paid the last note at the office of Weber & Weber and Max Weber, the trustee, released the trust deed. Having failed to turn over to the plaintiff the amount collected on January 31, 1925, the plaintiff obtained a judgment by confession against them, which was, after a hearing, vacated and set aside. In affirming the judgment of the trial court, the Appellate Court said: “The original loan, for which the trust deed was given as security, was made at the office of Weber & Weber, which was a firm engaged in the real estate and loan business, and the notes were made payable at the office of that firm. These facts, standing alone, might not be sufficient to authorize Weber & Weber to make collections on these notes, but the fact is to be considered together with all the-other facts and circumstances of the case. An agent authorized to make a transaction is not necessarily authorized to collect by reason thereof, and a person paying a note, except to the owner, ordinarily does so at his peril. The holder and owner of a note, however, may by his conduct impliedly create an agency, and it is not necessary that the agency be constituted by a direct authorization. ’ ’ The opinion then quotes an excerpt from the opinion in the case of James v. Conklin & Hill, 158 Ill. App. 640, and continues, “From the facts in this case it is apparent that not only were the notes made payable on their face at the office of Weber & Weber, but that plaintiff had allowed and permitted the nine notes previously due to be paid at that office and accepted by Weber & Weber, and, himself, turned over said notes to Weber & Weber for delivery to the defendants. There was nothing different in the course of conduct in regard to these nine previous notes than there was to note No. 20, except that Weber & Weber failed to remit to the holder of the note the money collected by him for its payment. The notes were to bearer and, while it might have been possible for the makers of said notes to have discovered by inquiry who the owner was, the makers also had the right to rely upon the course of conduct of the owner of the notes in permitting them to pay at the place named in the notes, without objection. On the other hand, if the payee did not desire the collection to be made by Weber & Weber, he had ample opportunity to have notified the makers of said notes that they should be paid to him directly and not through an intermediate person or agency. Moreover, the plaintiff, by his course of conduct, had agreed to the payment of the notes, without their production, at the office of Weber & Weber by the defendants, as it appears from his own testimony that he would not deliver the notes until he had first received the money and, for that reason apparently, would not deposit them with that firm.” In the LinowiecM case, the conduct of the plaintiff in permitting Weber & Weber to make collections upon nine similar notes at their respective maturities and his course of conduct in turning over to Weber & Weber these nine principal notes for delivery to the defendant, together with the fact that the loan was originally made by Weber & Weber and all the notes were expressly made payable at the office of that firm, created Weber & Weber an agency for the purpose of collecting the tenth note. In the instant case, Stokburger never had possession of the note or the trust deed. Appellee, Mrs. Culhane, at all times retained possession of them, and never turned over to Stokburger any note, principal or interest, at any time. True, appellants did pay $1,000 upon the principal sum of $2,500 at the time of the maturity of that obligation, and this was paid Mrs. Culhane, but at that time the principal was extended and it was before the maturity of the note, as so extended, that these two payments aggregating $500 were made. The Linowiecki case is clearly distinguishable from the instant case.

An examination of the case of King v. Harpster, 306 Ill. 202, discloses that King, on January 17, 1909, borrowed $2,500 from Bice, and as evidence thereof he and his wife executed a note for that sum, payable to the order of themselves and dne January 1, 1914, which they indorsed and delivered to Bice. To secure the payment of this note, they executed a trust deed on their farm to Rice as trustee. Mrs. Augusta Miller owned and had possession of this note and trust deed and Rice himself had no interest therein. On December 9, 1912, King sold to Harpster a portion of the land covered by the trust deed for $2,000 and executed a deed therefor, leaving the deed with Rice to be delivered to Harpster upon the payment of the consideration therefor. At the time King and his wife executed the deed to Harpster, they executed a new trust deed to Rice as trustee on the remaining portion of the farm not sold to Harpster to secure the payment of a note for $900. Of this amount $500 was to be applied with the $2,000 to be paid by Harpster and the trust deed of $2,500 was tó be thereby satisfied. The remaining $400 was paid to King. On December 17, 1912, Harpster went to Rice’s office and gave him a check for $2,000, payable to him as trustee. Rice thereupon executed a release for the portion of the farm sold to Harpster. Mrs. Miller retained her note and trust deed, but finally left it with the State National Bank of Mattoon for collection. On January 13, 1913, Rice, who was a customer of that bank, gave to the bank his individual note for $2,500 and as collateral security therefor lodged with the bank the $900 note and trust deed and the $2,500 note and mortgage which the bank had received from Mrs. Miller for collection, and in exchange therefor the bank credited Mrs. Miller’s account with $2,500. In disposing of this case, the Supreme Court held that the payment of $2,000 by Harpster to Rice was not a payment on the $2,500 note which belonged to Mrs. Miller, and her rights were in no way affected by such payment; that Rice could not have foreclosed the trust deed because he had received the money with which to pay it; that the bank, in accepting the trust deed as collateral security for Rice’s note, acquired no rights which Rice did not possess and since in equity Rice could not foreclose the trust deed, neither could the bank; that as between King, the mortgagor, and Rice, the debt was extinguished and could not have been enforced by Rice against King, and the bank being only Rice’s equitable assignee could not enforce it. The holding of the court as announced in the King case, so far as applicable to the instant case, is that the payments by appellants to Stokburger of the $500 after the second extension was executed was not a payment on the amount due appellee, Mrs. Culhane, as evidenced by the note which she held. It will be noted that in the King case the trustee Rice reacquired the note and trust deed from Mrs. Miller and then pledged them to the bank as collateral security for the obligation which he gave the bank, the proceeds of which Mrs. Miller received in exchange for the note and mortgage she held.

“The owner and holder of notes secured by a trust deed is not bound by unauthorized payments to the trustee before maturity, and the payor is not justified in relying upon representations made by the trustee when the trustee has neither the actual nor implied authority to receive such payments and where the notes are not surrendered but remain in the hands of the owner and holder, who had no knowledge of the payments. If one pays to the trustee named in a trust deed the debt secured thereby before maturity, which the trustee is not authorized to receive, and the trustee releases the trust deed, but does not have possession of the notes, which are owned by and in the possession of a third party, the person so paying is chargeable with notice of the trustee’s want of power to receive payment. The inference of authority to receive payment arises from the possession of the trust deed and notes by the person to whom the payment is made, the inference of authority is founded upon such possession and it does not exist without such possession.” “The word ‘trustee,’ when appended to the name of a payee, is sufficient to charge persons dealing with the trustee with notice of restrictions and limitations on the trustee’s power over the instrument. The term is a warning and a declaration to everyone who reads it that the person so named is not the owner of the property to which it relates, that he holds it for the use and benefit of another, and that he has no right to deal with it except in accordance with the terms of the trust.” Kennell v. Herbert, 342 Ill. 464.

It is insisted, however, by counsel for appellants, that appellants are common laboring people and did not know or understand the meaning of the word trustee, but were faithful to every requirement in relation to the payment of interest and the repayment of the principal, were careful to take receipts, and that equity should protect them because they relied in confidence upon the apparent authority of Stokburger, with whom they dealt. It is a doctrine too well known to require the citation of authority that where one of two innocent persons must suffer loss, he, who, by his negligent conduct, made it possible for the loss to occur, must bear it. The difficulty in all cases is to determine whose negligent conduct made the loss possible. In the instant case, appellants executed the trust deed. They conveyed their property to Stokburger as trustee. They executed a negotiable note payable to the order of themselves and indorsed that note. Prior to its maturity, appellee, Mrs. Culhane, became the owner thereof, and continued to own and hold it until the decree in this proceeding was rendered. Appellants never saw the note or trust deed after it was executed. They had confidence in Stokburger. They accepted Stokburger’s receipt for the money they paid. They knew their note and trust deed were outstanding. They paid their interest promptly and made payments upon principal. If Stokburger was the owner and holder of the note and trust deed, the payments they made were being made to the proper party; if not, they were trusting Stokburger to see to it that the money they paid would be by him paid to the parties rightfully entitled thereto. Not to have informed themselves that Stokburger was the actual owner and holder of the note and mortgage and by turning their money over to him, made it possible for him to practice a gross fraud on the person who actually owned and held the note and trust deed. They knew their note was not due when these payments were made, and in making the payments upon the principal, they acted at their peril. Appellee, Mrs. Culhane, did not expressly make Stokburger her agent to receive any principal payments upon this note and her conduct was not such, as in our opinion, impliedly authorized appellants to make these payments, and by their negligence appellants, having made it possible for this loss to occur, must bear it.

The decree is in consonance with the authorities and must be affirmed.

Decree affirmed.


author: Mr. Justice Huffman

text:
    Board of Education of Deerfield-Shields Township High School District No. 113, Lake County, Illinois, Appellant, v. Board of Education of the Non-High School District, Lake County, Illinois, Appellee.
    Gen. No. 8,530.
    Opinion filed February 19, 1934.
    Richard F. Locke, Gale C. Marquess and Max F. Allaben, for appellant.
    Runyard & Behanna, for appellee.
   Mr. Justice Huffman

delivered the opinion of the court.

Appellant brought its suit in assumpsit against appellee, in the circuit court of Lake county, seeking to recover a balance claimed due for tuition of pupils living in appellee district, for the years from 1923 to the month of June, 1930. In each of the respective years, the appellant district billed appellee district with an itemized statement showing the manner, method, and amounts by which appellant arrived at the tuition cost per pupil, which it therein claimed due from appellee. Appellee district by its duly constituted board considered and audited the yearly statements as received from appellant district.

Each year appellee district allowed the claim of appellant for a less amount than therein claimed, and tendered to appellant the amount so allowed by appellee district, which amount appellant district each year accepted. Appellant made no complaint regarding these amounts as paid it each year by appellee. Appellant on the succeeding years did not include in any annual statement any part of the tuition cost claimed in former years, which appellee had failed to pay. This condition continued until 1930, with appellant rendering its itemized statement to appellee for each year’s tuition, and with appellee paying to appellant a lesser amount each year than claimed due in appellant’s statement.

Appellant instituted its suit in February, 1931, against appellee, seeldng a recovery of the unpaid portions of its annual statements rendered appellee. The appellee at the time of its audit of the various annual statements claims that certain items were included by appellant in arriving at the tuition costs per pupil, which were not proper and fit charges, and which did not constitute any part of the expenses in conducting and operating the school or the maintenance of school property, as provided by the statute in reference thereto.

Jury was waived, and the cause was heard by the court, upon a stipulation of facts. The court found the issues in favor of the appellee district. Judgment was entered against appellant district, from which judgment appellant brings this appeal.

Appellee urges several reasons why it should not now be held liable for the unpaid portion of the amounts as evidenced by appellant’s annual statements. For the purpose of this opinion, we deem it necessary to consider only one of appellee’s contentions, namely, that where an allowance of a claim is to be paid from funds derived by taxation made by the proper administrative officers or board, authorized by law to audit and make such allowances, and the claim is allowed in a lesser amount than submitted, and the claimant accepts the reduced amount, that he may not thereafter seek or recover the balance of his claim.

It was stipulated by both the appellant and appellee that each was a duly constituted school district during all this time. Appellant urges the above rule should not apply, claiming that before such rule would apply, the appellant should have understood it was abating its claim to the amount paid each year.

We do not believe this argument of appellant applies to cases of this nature. There never had been any agreement reached between appellant and appellee as to the annual statement rendered each year by appellant district to appellee. The fact that appellee district over such an extended period of time paid to appellant each year a lesser amount than that claimed by appellant was sufficient to put appellant upon notice that its claim as submitted was not agreed to by appellee; and the only logical deduction to be reached was that the amount of the reduction of each annual statement was disputed by appellee, and therefore, rejected to that extent by appellee in its audit of appellant’s claim. Certainly there was no other conclusion that appellant could have reached, because the reduction of appellant’s yearly,claims bore no relationship to each other from one year to the next and were not based upon any percentage basis, nor upon any grounds of comparison as between the several years.

We do not consider that the statement as rendered by appellant to appellee district each year was a liquidated claim. There was no meeting of the minds, and the respective boards of education representing these districts did not at any time meet and agree on the yearly claims. They were purely the calculations madé by appellant, to which calculations appellee on its part indicated its disapproval and objection thereto, by its audit óf such claims and the allowing of same at a reduced amount, and tendering to appellant such reduced amount each year, which amount the appellant accepted.

Claims presented against a body politic may be audited by the proper authorities and allowed in full, or allowed in part, or disallowed. When an unliquidated claim is audited at a less sum than the amount claimed and a warrant or payment is accepted for the amount so allowed, such acceptance is presumed to be in full payment of the claim, and the claimant cannot after such acceptance sue for the balance rejected, 7 R. C. L. 962; 15 C. J. 660, 661; Calkins v. State, 13 Wis. 389; Massing v. State, 14 Wis. 502; Sharp v. City of Mauston, 92 Wis. 629; Brick v. Plymouth County, 63 Iowa 462; Hunt v. Franklin County Com’rs, 100 Me. 445; Perry v. Cheboygan, 55 Mich. 250; Davey v. Big Rapids, 85 Mich. 56; Browne v. Livingston County, 126 Mich. 276; King v. New Orleans, 14 La. Ann. 389; Butler v. Board of Com’rs Lawrence County, 177 Ind. 440; Western Const. Co. v. Board of Com’rs Carroll County, 178 Ind. 684; Callahan v. New York, 6 Daly (N. Y.) 230, affirmed in 66 N. Y. 656; Paulson v. Ward County, 23 N. D. 601, 42 L. R. A. (N. S.) 111, and annotations.

We are of the opinion that the acceptance of a reduced amount allowed by a body politic upon a claim filed concludes the claimant as to such portion of the claim as rejected, and the amount accepted by such claimant should be considered satisfaction for the whole. If the claimant desires to contest the. action of the administrative officers, he should repudiate the allowance and refuse to accept the amount allowed, and bring his action for the amount claimed. When he accepts payment for the reduced amount after his claim has been audited, he must be held to have acquiesced in the settlement thus made, and he should be deemed to be estopped by accepting such payment, from making any further claim for the same services upon which the claim was based.

School districts secure their funds by public taxation and they are obliged to know from year to year what the approximate yearly expenses will be in order that they may determine the amount of funds to be raised by their taxing authority. Appellant district was as cognizant of this fact as appellee. It is a salutary rule that requires the claimant in cases of this kind, if he be dissatisfied with the allowance of his claim by the body politic, to either forego the part rejected or submit his claim as a whole to the courts.

Appellant should not be allowed to accept each year that portion of its claim as audited and approved by appellee board, thus taking that amount to appellant’s advantage, and then make the rejected amounts of its claims a subject of litigation. Appellant had notice each year that its claim was being only partially allowed, and the duty devolved upon appellant to either accept the part so allowed and tendered, in satisfaction of its whole claim, or to litigate its claim as an entirety.

The acceptance by appellant of the amounts each year as audited and paid by appellee was a waiver of any further claim by appellant against appellee district. Appellant’s action in so doing amounted to an executed agreement to receive the lesser amount than that claimed, and appellant is now precluded from asserting any right to claim the rejected portions.

The judgment of the circuit court of Lake county is affirmed.

'Judgment affirmed.