author: Mr. Presiding Justice Matchett

text:
    The Independent Order of Svithiod, Defendant in Error, v. Ring Lodge No. 8, Independent Order of Svithiod et al., Plaintiffs in Error. Louis Biegler Company v. Ring Lodge No. 8, Independent Order of Svithiod et al., Plaintiffs in Error.
    Cen. No. 34,553.

      Opinion filed April 6, 1931.
    McKinney, Lynde & Grear, for plaintiffs in error; George H. Greab and Joen H. Smalley, of counsel.
    Joseph G. Sheldon, for defendant in error.
   Mr. Presiding Justice Matchett

delivered the opinion of the court;

This writ is prosecuted by Fred Person and Union Foundry Works, defendants, to reverse a decree entered in favor of complainant, Independent Order of Svithiod, upon a bill to foreclose a trust deed. The cause was consolidated with another suit brought to foreclose an alleged mechanic’s lien in favor of Louis Biegler Company against the same premises. The principal defendant was Ring Lodge No. 8, a corporation, one-of the subordinate lodges of the complainant, to which a loan was made by complainant for the purpose of providing funds for the construction of a building.'

The consolidated causes were put at issue and referred to a master, who reported in favor of complainant, finding an indebtedness due to complainant secured by a trust deed in the sum of $223,424.82. There were a number of defendants claiming liens. As to some of these it was found that they had no liens, and as to all who were held to have liens it was found that the same were subordinate to the lien of complainant under the trust deed.

The money loaned was a part of a so-called “reserve fund” raised by complainant through the levy of assessments upon its members, and defendants contend here, as they contended in the trial court, that complainant is without power to levy such assessments and without power to lend the money so accumulated. In other words, these lien claimants urge the defense that the loan, the notes representing the indebtedness, and the trust deed securing the same, are ultra vires the, powers of the complainant corporation, and that the exercise of these powers is ultra vires to such an extent that they, the lien claimants, have the right to raise the question collaterally. A second contention is made that the loan is a mere fiction because the defendant Ring Dodge is an integral part of the complainant corporation, and that the loan in substance was made to complainant itself. The defense, however, upon which these defendants rely, is that of ultra vires, and for a proper consideration of that defense it is necessary that the facts which for the most part are uncontradicted should be recited.

The Independent Order of Svithiod is a corporation organized under the General Incorporation Daw of the State of Illinois pertaining to corporations not for pecuniary profit, approved April 18, 1872, and in force July 1, 1872, Cahill’s St. eh. 32, ft 159 et seq. It was incorporated in August, 1881, and a charter was issued to it which stated that the objects for which it was incorporated were as follows:

“First. For the purpose of assisting its members when sick and during its continuance, in accordance with By-laws to be established hereafter.

“Second.. Upon the decease of any member to levy an assessment upon every member of any amount to be established by the By-laws to be hereafter enacted as aforesaid, said amount payable to the widows, orphans and devisees of said member.

“Third. And for educational and social purposes which trustees hereinafter mentioned may see fit to establish.”

At the time this Order was incorporated the statutes of the State of Illinois contained no provisions for the organization or control of what is now known as fraternal beneficiary societies other than the provisions in the statute of July 1, 1872, under which complainant was incorporated. That statute, however, provided in substance that societies which were intended to benefit orphans, widows, heirs and devisees of deceased members thereof where no annual dues or premiums were required and where the members received no money as profit or otherwise, should not be deemed insurance companies — meaning, as we think it must be agreed, that such a corporation should not be under the control of the State to the extent of being subject to the supervision of the insurance department.' No amendment to the charter of the complainant corporation has ever been filed in the office of the Secretary of State of the State of Illinois. Complainant has functioned as a fraternal order from the time of its incorporation, and has now become an organization composed of a grand lodge which has many subordinate lodges whose members are members of the complainant organization.

In April, 1901, complainant filed an application with the insurance department of the State of Illinois for a license to do business under the Fraternal Societies Act of 1893, and the license was granted. Thereafter regular monthly assessments were levied upon all members of the complainant society upon a level rate basis and the excess over the amount required to pay current death benefits was deposited by the complainant organization in a reserve fund. Since 1914 complainant has been collecting monthly assessments from all its members based upon the rates of the fraternal insurance companies and has been actually engaged in doing a mutual benefit'or fraternal insurance business. Through the retention and accumulation of the excess of such regular monthly assessments over the amount required to pay current death benefits, a reserve fund of about $1,250,000 has been created and is now held by such complainant organization.

Section 1 of the act of June 22, 1893 (see Laws of Illinois, 1893, p. 130, Cahill’s St. ch. 73, ¶ 488 et seq.) provided:

“That a fraternal beneficiary society is hereby declared to be a corporation or association, formed or organized and carried on for the sole benefit of its members and their beneficiaries, and not for profit. . . . All such societies shall be governed by this act, and shall be exempt from the provisions of all insurance laws of this State, and no law hereafter passed shall apply to them unless they be expressly designated therein. ’ ’

The second section provided:

“All such societies coming within the description as set forth in section 1 of this act, organized under the laws of this or any other State, province or territory, and now doing business in this State, shall be considered duly organized and may continue such business : Provided, that they hereafter make application for such permission and comply with the provisions of this act regulating annual reports, and the designation of the Auditor of Public Accounts as the person upon whom process may be served as hereinafter provided. ’ ’

Section 13 thereof provided:

“Any person who shall act within this State as an ■officer, agent or otherwise, for any society which shall have failed, neglected or refused to comply with, or shall have violated any of the provisions of this act, or shall have failed or neglected to procure from the Auditor of Public Accounts .proper certificate of authority to transact business as provided for by this act, shall be subject to the penalty provided in the last preceding section for the misdemeanor therein specified. . ."

The preceding section referred to provided for a fine of not less than $25, nor more than $200, or by imprisonment in the county jail for not less than 30 days nor more than one year, or by both such fine and imprisonment, in the discretion of the court. Section 14 of the act repealed all laws or parts of laws in conflict therewith.

When in April, 1901, complainant made application to the proper authority of the State for license to continue transacting business under the provisions of this act, the license being granted, the constitution of the complainant society was changed with reference to beneficiaries and death benefit certificates so as to comply with the provisions of the act in question. Paragraph 5 (a) of Article XYI was amended so as to provide:

“The person or persons named in the death beneficiary certificates are primarily entitled to the death benefit, still a member shall have the right to designate as beneficiary only a member of the family, some person or persons related by blood or dependent upon the member for support.”

The act of 1893 contained no specific provision which authorized the creation and maintenance of a reserve fund. In 1901 section 1 of the Fraternal Beneficiary Societies Act was amended so as to provide:

“Any such society, order or association may create, maintain and disburse a reserve fund in accordance with its constitution and by-laws. Such reserve fund, if any, shall represent certain prescribed accumulations or percentage retained for the benefit of its members or their beneficiaries, and no part thereof shall be used for expenses, nor for any purpose except the payment of death and disability claims.”

Thereafter laws were passed by the legislature regulating and controlling the investment of this fund (see Cahill’s St. ch. 73, if 512). By an act approved May 20, 1907, Cahill’s St. ch. 73, H 519, such societies were authorized to provide for and furnish a free home for certain members, and by another act approved May 10, 1909 (see Cahill’s St. ch. 73, )f 526) such societies were authorized to create, maintain and operate hospitals, asylums and sanitoriums for the benefit of sick, disabled or distressed members. Paragraphs 2 and 3 of Article XVII of the constitution of complainant as amended provide:

“Par. 2. All receipts from assessments under Art. XVI, Par. 2 (a) not required to pay current death benefit claims shall, by the Treasurer of the Grand Lodge, by order of the Board of Directors, be turned over to the Investment Committee for investment and be added to the reserve fund. Provided, however, that the amount in the mortuary fund shall not be less than $10,000.00.”

“Par. 3. If the funds remaining in the mortuary fund are not sufficient to pay accrued death claims, the Board of Directors shall transfer from the Reserve Fund to the mortuary fund an amount sufficient to pay all accrued death claims.”

The subordinate lodges of the complainant are composed of individual members of complainant and constitute a division, or part of the complainant organization. Most of these subordinate lodges are unincorporated. The subordinate lodge through its financial secretary collects all payments which are made by its members, and such portion as under the constitution and by-laws belongs to complainant is turned over to it. The lodge dues are retained by the subordinate lodge for the purpose of meeting sielc benefits, funeral benefits, officers’ salaries and other incidental expenses. Certificates of membership are issued to the individual members by complainant and bear the counter-signature of the chairman and secretary of the local or subordinate lodge to which the member belongs. The constitution and by-laws of the complainant govern the individual members of the complainant organization and its subordinate lodges as well. The complainant grand lodge is given authority therein to prescribe the ritual and ceremonies, to establish and charter local or subordinate lodges, to raise moneys necessary for the maintenance of the grand lodge by a per capita tax, to make charges for the granting of’ charters and to raise the moneys necessary to provide and maintain an old members ’ home by annual assessment to be levied on each member of the Order. Such constitution and by-laws provide that each new member shall pay a membership initiation fee of not less than $2 per member. The grand lodge is given the power to recall and declare null and void the charter of any subordinate lodge and to annul or change at will the by-laws of its subordinate lodges. The constitution and by-laws authorize the complainant grand lodge to issue death benefit certificates for $1,000,.$500 or $250, according to the amount designated in the application of each applicant for membership. Each member is required to pay monthly payments in the form of a level rate assessment according to age and amount of death benefit. The constitution and by-laws further provide that if the beneficiaries named in the death benefit certificate are not living upon the death of the member, such benefit shall be paid first to the member’s surviving wife or husband; second, to the member’s children; and third, to the next of kin of the member according to the laws of the State of Illinois.

Subordinate lodges of the complainant organization by such constitution and by-laws are given only such powers and privileges as allowed by complainant, and all by-laws of subordinate lodges must be submitted for approval to the complainant grand lodge before becoming effective.

The defendant Bing Lodge No. 8 is a corporation not for profit organized under the laws of the State of Illinois and is a subordinate lodge and part of the organization of the complainant grand lodge. It was incorporated shortly before the real estate in question was purchased by it and thereupon made an application to its parent organization for a loan of $200,000 with which to erect a building. The plans submitted by Bing Lodge No. 8 were examined by the board of directors of the complainant and the loan was granted. Four per cent commission was charged by complainant upon the loan, which was evidenced by promissory notes bearing interest at the rate of 6% per cent per annum. Practically all money paid out by the complainant on such loan was paid directly to the various contractors constructing the building in question and was disbursed by the complainant directly to such contractors upon architect’s certificates passed upon by complainant. The sum of $8,497.93 was deducted from the principal sum of $200,000 for interest, and the sum of $8,000 was deducted as a commission. The balance, amounting to approximately $183,500, was paid out by the complainant directly to the contractors. In addition to the $200,000 real estate loan, $5,000 was loaned by the complainant to defendant Bing Lodge No. 8 on a chattel mortgage covering all furniture in the building. The proceeds of this mortgage were paid directly to the contractors by complainant.

The building as completed is located on Clark Street and Bacine Avenue in Chicago and is four stories high. It contains two lodge halls on the top floor, one small hall and an apartment for the janitor on the first floor, and other halls and stores. The lodge halls and stores are rented as far as possible.

The foreclosure was brought about by default in the payment of interest note No. 4, and in the payment of interest notes Nos.'5 and 6, secured by the trust deed, on account of which complainant determined to declare the entire indebtedness due and instituted proceedings to foreclose.

Defendant Person is a member of the complainant Order, a chairman of one of the local lodges and a delegate to its grand lodge, and was one of its directors when the loan was decided upon and made. He was also at that time a member of the investment committee of five directors, whose duty it was to see to it that the interests of the Order in making this loan were fully protected. He was also the president and a stockholder of the Person Construction company, which company had a contract with Bing Lodge No. 8 to furnish the concrete, brick and terra cotta work, and the masonry on the building for the sum of $132,299. Person’s claim for a mechanic’s lien, which was allowed, for $1,113.08 was founded on his claim for services rendered in issuing the architect’s certificates in connection with the building in question, and he received $2,000 out of the $5,000 which was obtained by a chattel mortgage.

The defendants who complain cite many authorities and argue much to the point, that complainant by reason of its failure to amend its charter is without power to create or maintain a reserve fund. We cannot regard that as an issue here nor as an appropriate fact to consider in considering the plea of ultra vires. This suit to foreclose the trust deed is not brought upon any contract either express or implied to pay any assessment for the creation or maintenance of any reserve fund or any other fund. Neither Person nor the Union Foundry Works has any standing to raise that question in this suit. Assuming the funds loaned were obtained unlawfully from members of the Order, this would not in any way affect the right of complainant to maintain its suit upon the promise of Ring Lodge No. 8 to repay the money borrowed or its right to enforce the security as provided by the deed of trust.

There is, no doubt, abundant authority in Illinois to the effect that a contract which is ultra vires the power of a corporation in the true sense (that is, a power wholly outside of and beyond the purpose for which the corporation was organized) will be held void in any suit brought upon such contract. It was so held in National Home Bldg. & Loan Ass’n v. Home Sav. Bank, 181 Ill. 35; Calumet, etc., Dock Co. v. Conkling, 273 Ill. 318; McIlvaine v. Forman, 292 Ill. 224, which are cited by defendants and upon which they rely. Many other cases might have been cited to the same effect, but as was held by the court in Leigh v. American Brake-Beam Co., 205 Ill. 147, the application of the doctrine of ultra vires is limited to those cases where the party suing relies upon the ultra vires contract. The borrower of money cannot ordinarily, upon default in payment, successfully resist a suit upon the theory that the lender obtained the money loaned in an illegal manner. It would be as reasonable to suppose that a similar defense might be interposed by a defendant to an indictment charging embezzlement; and it has been expressly held that such defense will not avail in People v. Nachowicz, 340 Ill. 480.

The collection of this reserve fund by complainant was not malum in se. It was not at the time complainant collected it malum prohibitum, and the suit complainant brought to foreclose the mortgage was not based upon any promise connected with the collection of any such assessment fund. The plea of ultra vires therefore cannot be interposed on that theory by these defendants. They have no standing to make a collateral attack under these circumstances. Rector v. Hartford Deposit Co., 190 Ill. 380; People v. Shedd, 241 Ill. 155; Golconda Northern Ry. v. Gulf Lines Connecting R. R., 265 Ill. 194.

There is left for consideration, however, the further question (which, we think, is the controlling one in the case) whether the power to loan its own money is wholly ultra vires the complainant corporation, (not simply an abuse of a power) but the assumed exercise of a power wholly wanting. If the making of this loan is ultra vires in the sense just described and wholly without the powers either express or implied granted by the State to the corporation in the charter which gave being to it, then the authorities already cited would be applicable and would, if followed, compel a reversal of the decree.

The real question therefore is whether at the time the loan was made by complainant to Ring Lodge No. 8, the whole transaction was wholly without complainant’s corporate powers either express or implied. Defendants maintain the affirmative of this proposition and with care and diligence have collected the authorities which they contend compel that conclusion..

It is asserted that the powers of a corporation are derived solely from its articles of incorporation as limited by the act under which it was authorized. Rockhold v. Canton Masonic Mut. Ben. Soc., 129 Ill. 440; People v. Chicago Gas Trust Co., 130 Ill. 268, and National Union v. Keefe, 263 Ill. 453, are cited to this proposition and sustain it. It is asserted that where the powers enumerated in the articles of incorporation are not so broad as they could be under the statute authorizing incorporation, the corporation will be restricted to those powers stated in its articles. Rockhold v. Canton Masonic Mut. Ben. Soc., cited above; Norwegian Old People’s Soc. v. Wilson, 176 Ill. 94, and Danielson v. Wilson, 73 Ill. App. 287, are cited to this proposition and we think so hold. Defendants also contend that the constitution and by-laws of a corporation cannot extend or increase the powers granted to such corporation by the state. Grimme v. Grimme, 198 Ill. 265, and National Union v. Keefe, 263 Ill. 453, are cited, and we think so hold. It is urged that a corporation has only those powers specificially enumerated in its articles of incorporation and such others as are necessary to carry those express powers into effect. To this effect Rockhold v. Canton Masonic Mut. Ben. Soc., above cited, People v. Pullman’s Palace Car Co., 175 Ill. 125, Murphy v. Nowak, 223 Ill. 301, Calumet, etc., Dock Co. v. Conkling, 273 Ill. 318, and Society of St. Stephen v. Sikorski, 141 Ill. App. 1, are cited and so hold. Defendants urge further, that in determining the extent of the powers of a corporation, the statement of such powers in the articles of incorporation and the statute permitting organization will be strictly construed against the corporation. To this point we are referred to Calumet, etc., Dock Co. v. Conkling, above cited; First M. E. Church v. Dixon, 178 Ill. 260; Fritze v. Equitable Bldg. & Loan Ass’n, 186 Ill. 183; Knights Templars’ & Masons’ Life Indemnity Co. v. Vail, 206 Ill. 404, and we think it may be assumed that these decisions sustain the proposition to which they are cited.

However, if all these propositions are conceded to be correct, there remains for consideration the simple question of whether the negotiation of this loan is wholly outside the purpose for which the complainant was incorporated and therefore illegal and void. To the proposition that the amendment of the by-laws would not extend or increase the powers granted this corporation, the cases on which defendants rely as controlling are Grimme v. Grimme, 198 Ill. 265, and National Union v. Keefe, 263 Ill. 453. We have given careful consideration to both these cases, and without undertaking to state the facts in detail (which would unduly extend this opinion) it will be sufficient for our purpose to point out that in each case the actual question decided was that the objects for which the corporation was organized could not be extended without amendment of the charter, although permission to enlarge was given by the statute. In other words, the question in each of those cases was whether the classes of persons for whose benefit the charter was granted and which classes were specifically enumerated and limited in the charter were ipso facto extended by a statute enlarging its powers to such an extent as to increase these classes. There is no claim of that kind or nature here. The classes of persons to be benefited are stated in the charter of the society. The objects for which it is incorporated are (1) to assist all its members when sick in such manner as may thereafter be determined by the by-laws; (2) upon the decease of any member to levy an assessment of an amount to be established by the by-laws to be thereafter enacted, the amount to be payable to the widows, orphans and devisees of the deceased member; (3) for educational and social purposes such as its trustees might thereafter see fit to establish. These objects have not been changed in any way by any amendments made to the charter. It is true that in carrying out the objects for which the Order was formed, the law of the land placed certain restrictions which have since by appropriate legislation been removed, but this legislation would not render any amendment of the charter necessary unless it was desired to change in some material way the objects stated therein.

We are therefore narrowed down to the more precise question of whether the loaning of money which the Order had in its possession was an appropriate exercise of any power for the attainment of the object or objects for which the Order was incorporated. Upon this precise point defendants rely upon two cases — Leigh v. American Brake-Beam Co., 205 Ill. 147, and Calumet, etc., Dock Co. v. Conkling, 273 Ill. 318. In the Leigh case the corporation whose money was loaned was a business corporation organized for pecuniary profit and, as the opinion states, “to manufacture and sell or otherwise dispose of brake-beams and other railroad appliances.” The power to make the loan of its money was held to be wholly beyond the objects of its. charter, and it was held that a recovery could - not be. made upon the contract although the plaintiff was permitted to recover the amount of money loaned upon the common counts. In Calumet, etc., Cock Co. v. Conkling, the corporation in question had been created by a special act of the legislature of 1869. The object of its creation was to construct a canal from some point on the Calumet River to the South branch of the Chicago River, or the Illinois and Michigan canal, which the corporation might determine, and to construct, use, operate, employ and maintain docks, slips, basins, shipyards, dockyards, dry docks, warehouses and piers which the corporation might deem necessary and proper. The corporation was given the right to condemn land for its corporate purposes and to intersect any road, highway or railroad with its canal. It was given perpetual succession and the usual corporate powers to contract and be contracted with, to sue and be sued, etc., and to “purchase, possess and occupy real and personal estate, and may sell, lease and employ the same in such manner as it shall determine . . . and have and exercise all the powers necessary as a corporation to carry out the objects of this act.” The corporation never constructed the canal but acquired land of considerable value. Its assets were shown to be worth about $3,000,000. Its only source of income was from the sale of real estate. The claim made by the dock company was that in view of the powers expressly granted, it had implied power to loan money when the loaning was incidental to the exercise of its express powers or where the corporation had surplus funds not required for use in its business. The court said that the express power to loan money had not been given and that the power to loan money could not be implied from those which had been granted. In that case, the purchaser of a block of the corporation’s land for $15,000 obtained a loan of $50,000 in order to enable him to make the purchase. Such dealing in land was contrary to the public policy of the State, and the loan to the extent of $35,000 was held to be ultra vires the corporation. The decision, however, was by a divided court. There was an able and vigorous dissenting opinion by Mr. Justice Carter in which two other judges concurred.

We do not regard either one of these cases as at all controlling here. The corporations in those cases and the objects and purposes for which they were formed are entirely different in their nature from the complainant organization. The purpose for which the Independent Order of Svithiod came into being was a social purpose and substantially that of furnishing life insurance to its members, although the statute expressly declared that it should not be subject to requirements usually imposed upon such companies. In Jenkins v. Talbot, 338 Ill. 441, where a society was organized under a different but quite similar act, it was said: “The early policy pursued by this society spelled certain ruin. Surely no one can have a vested right in a disaster.” The creation of a reserve fund and the loaning of the same under the circumstances which would assure an income with safety for the principal was not only appropriate to the stated purposes for which this Order was organized, but, as experience has demonstrated, was absolutely necessary if its functions were to be performed. The distinction between a corporation organized for pecuniary profit and one organized for social welfare is distinct and fundamental, and it by no means follows that the rule applied to a corporation organized for pecuniary profit, or to one such as the Calumet, etc., Dock Co. case, which was created by a special act of the legislature, should be applied to a society such as the complainant Order.

Section 31 of the statute under which complainant society was organized (see Cahill’s St. ch. 32, U 161; Hurd’s Ill. Rev. Stats. 1874, chap. 32, p. 291) provides that corporations organized thereunder should be bodies corporate and politic capable of suing and being sued; that they might have power to make and enforce contracts in relation to the legitimate business of their corporation, society or association; that they might have and use a common seal, and that they and their successors, by their corporate name, should in law “be capable of taking, purchasing, holding and disposing of real and personal estate for purposes of their organization;” that they might make by-laws not inconsistent with the laws of this state or of the United States, in which by-laws should be described the duties of all officers of the corporation, society or association, and the qualification of members thereof. It further stated:

“Associations and societies which are intended to benefit the widows, orphans, heirs and devisees of deceased members thereof, and where no annual dues or premiums are required, and where the members shall receive no money as profit or otherwise, shall not be deemed insurance companies.”

Section 32 (Cahill’s St. ch. 32, ft 162) provided that these corporations might elect trustees, directors or managers, “who shall have the control and management of the affairs and funds of the corporation society or association. ’ ’ Upon the consent of the corporation the directors were given the further power to “borrow money, to be used solely for purposes of their organization, and may pledge their property therefor.” In Fletcher Cyc. of Corporations, vol. 2, sec. 948, p. 1900, the general rule applicable is stated as follows: -

“Whenever a corporation has the right to hold funds for which there is no present use, it may loan them, in the absence of express restriction, in order to invest them, instead of allowing them to remain idle and unproductive. This is true of insurance companies, annuity companies, benevolent associations, manufacturing companies, railroad companies, etc., having surplus funds.”

The doctrine of the text is sustained by numerous authorities, among which are Farmers’ Loan & Trust Co. v. Clowes, 3 N. Y. 470; Farmers’ Loan & Trust Co. v. Perry, 3 Sanford, Ch. (N. Y.) 339; Western Boatmen’s Benev. Ass’n v. Kribben, 48 Mo. 37. The doctrine of the cases cited is approved in Thompson on Corporations, vol. 3, pp. 2180-2184. In Fletcher Cyc. of Corporations, vol. 3, sec. 1619, p. 2701, the author discusses at length the effect of an illegal or prohibited contract, stating in substance that there is a direct conflict in the decisions as to the effect of a charter or statutory prohibition against discounting or lending money on certain securities. The author states that if the statute expressly declares that the securities taken in violation of the prohibition shall be void, the same may not be enforced; that some courts have gone further and held that the mere fact of prohibition renders them void and unenforceable, “but this construction is not supported by the weight of authority.” He further says:

“The better opinion is that where the charter of a corporation of some other statute prohibits it from lending money on certain kinds of security, but does not declare that prohibited securities taken by it shall be void, they are not void, and may be enforced by it. The taking of such security is a misuser of the powers conferred upon the corporation by its charter, for which the state may enforce a forfeiture, but the misuser cannot be set up by the borrower to prevent the corporation from enforcing the security.”

We think the nature of the complainant corporation and the purposes for which it was organized were such that the power to loan its money upon security must be necessarily implied; that at any rate the making of such a loan was at the most a mere abuse of power which it possessed rather than the exercise of a power wholly beyond the objects for which it was formed. In the former case the contract would be legal and enforceable, and in the other case, under the rule laid down in Rector v. Hartford Deposit Co., 190 Ill. 380, defendants would be without standing to insist that it was ultra vires. For a court of equity to hold that a corporation organized for fraternal and benevolent purposes cannot recover money which it has loaned in order to conserve the same for the benefit of widows and orphans of its deceased members, would have the moral quality of licensing piracy on the high seas to which this court cannot give its approval.

A further contention is made by defendants that the loan of the complainant to its subordinate lodge is in effect a loan to itself, and it therefore cannot be enforced to the injury of creditors. In view of the circumstances which we have already related showing that these defendants who complain were parties to the transaction of making the loan, we think this contention can hardly be given serious consideration. The subordinate lodge was duly incorporated and is a distinct organization, and its identity from a legal standpoint cannot be said to be merged in that of the parent organization. It would be as reasonable to hold that the existence of a local religious organization was merged in that of the general denominational organization to which it is subject.

The decree is affirmed.

Affirmed.

O’Connor and McSurely, jj., concur.


source: Caselaw Access Project

author: Mr. Justice McSurely

license: Public Domain

text:
    Wm. R. Johnston Manufacturing Company, Appellant, v. Hamilton Glass Company, Appellee.
    Gen. No. 34,931.
    Opinion filed April 6, 1931.
    Daniel Webster, for appellant; O. I. Bingaman, of counsel.
    Henry H. Koven, for appellee.
   Mr. Justice McSurely

delivered the opinion of the court.

Plaintiff brought suit claiming $1,250 from defendant as the price of an inventory of glass which plaintiff alleged it had sold to defendant but which defendant failed to take. At the conclusion of plaintiff’s testimony, upon motion, the court instructed the jury to find for the defendant and from the adverse judgment plaintiff appeals.

The defense asserted is that the alleged sale being for more than $500 and the defendant not having accepted nor received the goods nor any part thereof nor given anything as earnest money, and there being no note or memorandum in writing of the contract of sale signed by defendant, plaintiff, under the Statute of Frauds, is not entitled to enforce this action. Chapter 121a, paragraph 7, Illinois Statutes, Cahill, is as follows:

“(1) A contract to sell or a sale of any goods or choses in action of the value of five hundred dollars or upwards shall not be enforceable by action unless the buyer shall accept part of the goods or choses in action so contracted to be sold or sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract or sale be signed by the party to be charged or his agent in that behalf.

“ (2) The provisions of this section apply to every such contract or sale, notwithstanding that the goods may be intended to be delivered at some future time or may not at the time of such contract or sale be actually made, procured, or provided, or fit or ready for delivery, or some act may be requisite for the making or completing thereof, or rendering the same fit for delivery; but if the goods are to be manufactured by the seller especially for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business, the provisions of this section shall not apply.

‘ '(3) There is an acceptance of goods within the meaning of this section when the buyer, either before or after the delivery of the goods, expresses by words or conduct his assent to becoming the owner of those specific goods.”

Plaintiff admits that none of the conditions are present which would take the case out of the statute except it is claimed that there was an acceptance by defendant of the goods and that it actually received the same.

Plaintiff’s testimony was to the effect that on or about May 1, 1928, Mr. Shapiro, president of the defendant company, called at plaintiff’s place of business and told Mr. Johnston, president of the plaintiff company, that he had called to look at some glass which was mentioned in a circular letter sent out by plaintiff. Johnston showed him the glass and after some bargaining Shapiro agreed to buy the same at the price of $1,250 and promised to send plaintiff a 90-day note in payment; that Shapiro inquired, “How long will you give me to pick up the stuff if I buy it?” and in answer to the question as to how long he wanted, inquired, “Can I leave it for three weeks?” and was told this was agreeable; that Shapiro said he would take the goods and send his note just as soon as he got hack to the office. Subsequently, an invoice was sent to defendant by mail. The goods remained with plaintiff. About the middle of June plaintiff upon calling up defendant was informed that Mr. Shapiro had changed his mind and did not want the glass.

The facts in this case are in all essential respects similar to those involved in Chicago Metal Refining Co. v. Jerome Trading Co., 218 Ill. App. 333, where it was held that plaintiff could not maintain its action as the defendant did not at any time “actually receive” the goods, the opinion saying that:

“Actual and intentional receipt of the goods by the buyer is essential to satisfy the provisions of the statute, even though before delivery the buyer expresses by words or conduct his assent to becoming the owner of the specific goods.”

To the same effect is Illinois Meat Co. v. American Malt & Grain Co., 229 Ill. App. 311, where ■ it was held that, although the statement of claim which had been stricken alleged a memorandum of sale, there was no allegation that the memorandum had been signed by the party to be charged and the statement also failed to show that the goods had been accepted and actually received.

We cannot agree with the contention that the agreement testified to by plaintiff that the goods should remain in the possession of the plaintiff for three weeks is an implied delivery to defendant. The language of the statute is that to charge the defendant the goods must be ‘ ‘ actually received. ’ ’ By the second provision the statute is made to apply to every oral contract or sale “notwithstanding that the goods may be intended to be delivered at some future time.” The only exception to the provision requiring actual delivery is where the goods are to be manufactured by the seller especially for the buyer and are not suitable for sale to others.

The cases cited by plaintiff are all distinguishable from the case at bar. A typical case cited by it is Sparta Produce Exchange v. Wilson & Co., 223 Ill. App. 126, where the goods were delivered to a carrier and a 'cold storage plant pursuant to the directions of the buyer. Another typical case is Flanigan v. Waterman, 191 N. Y. S. 646, in which the goods were on a boat belonging to a common carrier and after the oral sale the captain of the boat notified the purchaser, who promised that the goods would be unloaded some time later. Subsequently the purchaser addressed a letter to the seller stating that he would not be able to send the seller any funds for the goods until the unloading had been started and another letter was written by the purchaser complaining of the quality of the goods. The court held that these and other circumstances indicated an acceptance and the receipt of the goods by the purchaser.

Plaintiff suggests that the invoice sent to defendant was such a memorandum as takes the case from without the statute. It has been held otherwise in W. F. Hall Printing Co. v. Wells Warehouse & Forwarding Co., 241 Ill. App. 146, where after extended discussion the court held that such an invoice is not a memorandum of sale and certainly it cannot be held to be a writing signed by the party sought to be charged.

It is asserted that there was a partial delivery of the goods to defendant, but the evidence does not bear this out. Plaintiff’s president testified that the glass was contained in large boxes, some weighing as high as three tons; that there were sixty thousand pounds of glass altogether. The only thing giving any basis for the claim of partial delivery was the testimony that Mr. Shapiro, defendant’s president, asked for a piece of glass and one piece 6x24 inches was wrapped up and given to him. The witness was asked whether or not this was a sample and replied that he did not know. This incident cannot be called a delivery of part of the goods. Compared with the bulk, the small piece taken was simply a sample.

Considering all the evidence, both that admitted and that offered and rejected, we hold that plaintiff was unable to produce sufficient evidence to take the transaction out of the statute of frauds and therefore cannot maintain its action. The peremptory instruction to the jury was proper and the judgment is affirmed.

Affirmed.

Matchett, P. J., and O’Connor, J., concur.


author: Mr. Presiding Justice Wilson

text:
    T. A. Worley, Trading as T. A. Worley & Company, Appellee, v. The Holding Corporation, Appellant.
    Gen. No. 34,541.

      Opinion filed April 15, 1931.
    Rehearing denied April 27, 1931.
    Chapman & Cutler, for appellant; Charles M. Thompson, of counsel.
    Daniel Webster, for appellee.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

Plaintiff brought his action in the municipal court to recover damages for breach of a written contract under which the defendant agreed to purchase certain bonds of the Elmwood Park School District No. 85, at a specified price, but failed to perform. A trial was had with a jury, resulting in a finding in favor of the plaintiff for $3,499.70 and costs, on which verdict judgment was entered and an appeal taken to this court.

Plaintiff’s statement of claim charges that the parties entered into a written agreement whereby the defendant agreed to purchase from the plaintiff certain bonds of the Elmwood Park School District No. 85, at the par value of $79,000 on a 4.20 basis, less 1% points: charges that prior to the time of delivery the said defendant refused to accept said bonds and that plaintiff was compelled to sell them in the open market and thereby sustained a loss for which he brings this action.

Defendant filed an affidavit of merits and subsequently an amended affidavit of merits, in which defendant states that it believes it has a good defense to the action; further that the contract sued upon involved the sale of goods of the value of $500 and that said defendant did not at any time accept any part of said goods or give anything in earnest to bind said contract; further alleges that certain memoranda or letters in writing were written by the defendant, setting forth the terms of said contract under which the plaintiff agreed to sell to the defendant $115,000 worth of Elmwood Park School District bonds, subject to an election within the next few days; further charges that by said agreement, it was incumbent upon the plaintiff to deliver the bonds within a reasonable time, but failed to do so; further charges that the defendant notified the plaintiff in writing that unless they would deliver within the next few days, the contract would be canceled; further alleges a denial that the defendant agreed to purchase bonds of the value of $79,000.

On the trial the court, on motion of counsel for plaintiff, struck from the amended affidavit of merits, paragraph 3, which was the paragraph setting up the statute of frauds, under the Uniform Sales Act, Cahill’s St. ch. 121a, 7. We do not believe this was error on the part of the trial court as there was sufficient evidence in writing as to the contract in question, to take it out of the statute, and moreover there was an acceptance of a substantial part of the bonds enumerated in the contract.

From the evidence it appears that on the 27th of January, 1928, the defendant wrote to the plaintiff confirming the purchase of $115,000 of Elmwood Park School District bonds, together with certain Des Plaines Park District bonds, certain Eiverview South Des Plaines, Cook County School District bonds, and certain School District No. 157, Cook County, Illinois bonds, subject to the election necessary to carry the issuance of said bonds.

January 30, 1928, the plaintiff replied to said communication confirming the sale, but changing the various conditions under which the sale was to be made. As this communication constitutes the basis of plaintiff’s claim, we set it out in full:

“January 30, 1928.

Blyth, Witter & Co.,

105 S. LaSalle Street,

Chicago, Illinois.

Gentlemen:

We are pleased to confirm, sale to you of the following issues, if and when issued.

Approximately $1.15,000 Elmwood Park Sch. Dist. #85, Cook County, 5%% bonds on a 4.20 basis less 1%%-

Approximately $60,000 Des Plaines Park District 5% bonds on a 4.10 basis less 1%%.

Approximately $40,000 Riverview School Dist. #65, Cook County 5%% bonds on a 4.20 Basis less 1%%-Approximately $60,000 Globe School Dist. # 157 Cook County, 514% bonds on a 4.20 basis less 1%%.

This confirmation is made subject to the bonds being voted and in case it is impossible to issue all of said bonds due to insufficient bonding power, we agree to deliver such amount of each issue as can be approved by our attorney, Holland M. Cassidy, whose opinion will be secured in each instance.

Trusting the above is per your understanding and thanking you for this business, we aré.

. Very truly yours,

T. A. Worley

TAWmm T. A. Worley & Co.”

It is insisted on the part of the defendant that by changing the terms of the original offer to purchase, this constituted a new offer and there does not appear to be any acceptance of said communication which would constitute a new agreement. It is true there was no direct acceptance of the counter-proposition, but the parties proceeded to act under it, as evidenced by the fact that $60,000 worth of Des Plaines Park District bonds were offered and accepted and paid for by the defendant; $19,000 worth of Riverview School District No. 65, Cook County, were offered and accepted and paid for by defendant and $26,000 worth of Globe School Dist. No. 157, Cook County bonds were delivered to the defendant and accepted and paid for. The counter-proposal of the plaintiff of January 30, in each instance, contained the provision of approximately the number of bonds named in the counter-proposal which should be delivered and accepted. This was based on the supposition that it was impossible of ascertainment as to the exact amount of bonds that could be issued by each of the various taxing districts enumerated. The acceptance by the defendant of approximately the number of other bonds enumerated in the proposal of January 30, warranted the assumption that the defendant had agreed to the terms set out in the counter-proposition of the plaintiff. It is not necessary that the acceptance be in writing, but it may be evidenced by the conduct of the parties. Anglo-American Provision Co. v. Prentiss, 157 Ill. 506; Ellis v. Hillison & Etten Co., 211 Ill. App. 581; Great Western Coal & Coke Co. v. St. Louis & Big Muddy Coal Co., 140 Ill. App. 368. Moreover, the defendant on June 14, 1928, wrote to the plaintiff as follows:

“June 14, 1928.

T. A. Worley & Co.,

53 W. Jackson Blvd.,

Chicago, Illinois.

Dear Mr. Worley:

With reference to our purchase from you on January 27th, 1928, of $115,000 Elmwood Park School District No. 85 5%% Bonds on a 4.20 basis less 1% points, we beg to advise that unless delivery of these bonds can be made this week we shall have to cancel this purchase from you.

Very truly yours,

Blyth, Witter & Co.

By Wm. T. Jensen.”

By this communication we find the defendant insisting upon delivery of the Elmwood Park School District bonds, thus evidencing their view that there was a contract in effect. While the communication refers to their letter of January 27, nevertheless the parties had been acting under the counter-proposition of January 30, 1928. In the opinion of the court it evidenced the fact that the defendant was of the opinion that the plaintiff was obligated to deliver and the defendant to accept the Elmwood Park District School bonds in question. In view of the fact that they had accepted approximately the amount of the other bonds referred to, we are of the opinion that the defendant recognized its obligation to accept approximately the amount of bonds mentioned in the agreement of January 30. The communication of the plaintiff of January 30, called attention to the fact that, due to the insufficient bonding power of the different taxing districts, it might not be possible to issue all of the bonds in question. It developed as a matter of fact that the Elmwood Park School District was able to issue bonds only to the amount of $79,000.

The plaintiff obligated himself to take these bonds from the school district in full reliance on the agreement that the defendant would in turn accept all, or such amount as was issued of said bonds. This was based upon the counter-proposition made by the plaintiff to the defendant. His right to rely upon the good faith of the defendant was substantiated by the fact that the defendant had previously accepted a less number of bonds of the other issues enumerated in the counter-proposal. The attempt of the defendant to evade responsibility by demanding delivery within a week was unavailing in view of the understanding of the parties as evidenced by the communication of January 30, to the effect that the sale was made subject to the election and the issuance of the bonds. It necessarily followed that the defendant could not accelerate the time of delivery by his communication of June 14, demanding immediate delivery. It was impossible to accelerate the delivery of the bonds as it was dependent upon the holding of the election and the steps necessary thereafter to prepare and issue said bonds.

Thomas Carey, a witness on behalf of the plaintiff, testified that he was a trustee of the Elmwood Park School District 85, and that the bonds were signed June 27,1928, and afterwards turned over to the attorney of the district for disposal.

On June 21, by written communication, the defendant refused to accept delivery. The bonds were subsequently sold on July 1, by the plaintiff. The time from January 30, 1928, to June 14, 1928, at which time the defendant had refused acceptance of the bonds was not an unreasonable length of time for delivery, considering the fact that the bonds first had to be voted upon, then scrutinized and examined and confirmed.

Defendant insists that the plaintiff’s claim for damages is based upon a breach of a contract for the delivery of $79,000 Elmwood Park School District No. 85 bonds. No objection was made however to the introduction of the communication of January 30, signed by the plaintiff, on the ground of variance, but the only objection made was that there was no written acceptance of the offer. Osgood v. Skinner, 211 Ill. 229. As we have already stated, a written acceptance was not necessary as the acts of the parties were sufficient to constitute a waiver of a written acceptance.

Ten instructions were offered by the plaintiff and defendant has excepted to each and every one and argued objections to same in its brief.

There does not appear to be any real dispute as to the facts in the case. Defendant made a proposition to purchase certain bonds; plaintiff replied with a counter-proposition as to the same bonds, but with a proviso that they were to be delivered in approximately the amount enumerated in the counter-proposition and subject to the bonds being voted favorably by the taxing district, and subject to their being delivered by the taxing district to the plaintiff by the proper officials of the taxing district. There is no dispute as to the fact that the defendant proceeded to accept bonds from the plaintiff in approximately the amount enumerated in the counter-proposal, when issued by the other taxing districts named therein; there is no dispute as to the fact that sometime after this counter-proposal the defendant was demanding delivery; there is no dispute as to the amount of damages sustained. There is, however, some evidence in the record to the effect that the price of bonds had fallen after the communication of January 30, from the plaintiff to the defendant.

Where the facts are undisputed, it may become a question of law for the court and, in the case at bar, we feel that the court could have justly directed a verdict, under the facts in this case, in favor of the plaintiff. It necessarily follows that, if such is a correct interpretation of the situation as we see it, there could have been no error in the instructions given. We have examined them, however, and are of the opinion that, in view of all the facts in the case, the judgment should not be reversed because of anything contained in the instructions. There was no such error as would require a reversal. No evidence was introduced on behalf of the defendant and the defense interposed was highly technical.

We see no reason for disturbing the judgment of the municipal court.

For the reasons stated in this opinion the judgment of the municipal court is affirmed.

Judgment affirmed.

Hebel and Friend, JJ., concur.


text:
    Henning Bood and C. H. Farland for use of Noah Simon, Plaintiff in Error, v. James G. Barsaloux, Inc., Defendant in Error.
    Gen. No. 34,565.
    Opinion filed April 15, 1931.

      Pomeroy & Martin, for plaintiff in error.
    Brown, Brown & Brown, for defendant in error.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

Plaintiffs, Henning Bood and C. H. Farland, for use of Noah Simon, filed their amended statement of claim in the municipal court, seeking to recover certain sums of money held and claimed by the defendant, James O. Barsaloux, Inc., as commissions upon the unexpired portions of certain leases which had been procured by them while they were in charge of the property known as 6431-6439 Harper Avenue, Chicago. A jury returned a verdict in favor of the defendant and judgment was entered upon the verdict. This writ of error is sued out to reverse that judgment.

From the essential facts it appears that on and prior to October 15, 1925, Henning Bood was the owner of the flat building located at number 6431-6439 Harper Avenue, Chicago, and that associated with him as a partner was one C. H. Farland, whose name, however, does not appear in the chain of title, although he appears to have been a partner in the ownership of the building in question.

October 15,1925, an agreement was entered into between James Gr. Barsaloux and Henning Bood, which appears to have been the culmination of some oral agreement, and which we set out in full. It seems to be an acceptance of an offer made by Bood. The communication from Barsaloux reads as follows:

‘ ‘ Chicago, October 15, 1925.

Mr. Henning Bood,

Chicago.

Dear Mr. Bood:

In the event the building known as the Parkmere building, located at 6431-39 Harper Ave., is sold and I lose the management of it, or if for any reason you desire to make a change in management, I hereby agree to turn over to you all leases in my possession without charge to you.

Very truly yours,

James G. Barsaloux.”

November 12,1925, the business controlled and operated by Barsaloux was incorporated under the name of James G. Barsaloux, Inc., and continued the business which consisted of a real estate, renting, loan and insurance business under the direction of Barsaloux. This corporation continued in the collection of rents and accounted to Bood for the moneys collected by it as rents.

October 4,1927, Bood and Farland sold the building to one Noah Simon and executed and delivered their deed to the premises. At the same time Bood and Farland took back a second mortgage together with an assignment of the rents and a power of attorney to run and manage the building on Harper Avenue.

April 30,1928, Bood and Farland notified Barsaloux that his agency to collect the rents on the premises was terminated and demanded the leases and an accounting for the rents collected.

May 1, 1928, such an accounting was made and the leases were, at the direction of Bood, transferred to Swan & Lorisch, another real estate agency in the City of Chicago.

May 11, 1928, Bood and Farland assigned to Simon any and all claim they might have against James Gr. Barsaloux, Inc., for any sums held by Barsaloux, Inc. and claimed as commissions on unexpired leases.

From the statement submitted by Barsaloux, Inc. to Bood at the time of the termination of the agency of Barsaloux, Inc., it appears that the commissions on unexpired leases totaled $785.17, and it is to recover this amount that the action was brought.

Plaintiff claims that under the contract of October 15,1925, and the assignment of the rents under the agreement of October 4,1927, Barsaloux, Inc., was precluded from retaining commissions other than those actually collected and was not entitled to anything for the unexpired period of the leases. This is based upon the agreement of October 15, 1925, in which James Gr. Barsaloux, prior to the incorporation, agreed to turn over all leases to Bood without charge. The defendant claims the right to the retention of the amount for commissions on unexpired leases made after the sale of the premises by Bood to Simon on October 4, 1927, on the ground that by reason of the sale of the premises the agreement between himself and Bood was at an end, and that there was no obligation on his part or that of Barsaloux, Inc., to turn over new leases after this sale of the premises, without first deducting commissions, as the new ownership constituted a new agency, and, there being no special agreement, his right to collebt commissions on unexpired leases was governed and controlled by the general custom in force in the City of Chicago at the time the new leases were taken.

We are of the opinion that the position taken by the defendant was correct. The agreement between Barsaloux and Bood was a personal agreement and not assignable. The sale of the premises in question to Simon created a new principal and there was no obligation on the part of the defendant to continue as agent under the agreement of October 15,1925. Under the assignment of the rents to Bood, it is true that Bood became entitled to collect and receive them, but the rentals collected inured to the benefit of Simon, the purchaser of the property, and were retained by Bood for the purpose of decreasing the amount of the indebtedness owing to him under the second mortgage. Each monthly rental retained under the assignment decreased the indebtedness of Simon and was, therefore, primarily for the benefit of Simon, the purchaser of the premises in question. It is true that under the assignment of the rents from Simon to Bood, the owner of the premises deprived himself of these rentals, but this was a contract between those particular parties, to which Barsaloux was not a party, nor by which he could be bound.

A first reading of the agreement of October 15,1925, between Barsaloux and Bood might raise the impression that Barsaloux was bound so long as he did not lose the management of the premises, but upon a closer inspection, it is apparent that the agreement continued in effect so long as the property was not sold or in the event it was terminated by Bood. If the property was sold, Barsaloux necessarily lost the management, unless it was continued by a specific agreement with the new principal, or by implication. By permitting Barsaloux, Inc. to continue to make new leases and collect rents after the purchase of the property by Simon, it became entitled to reimbursement under the general existing custom.

Testimony was introduced during the course of the trial showing a custom among real estate agents in the City of Chicago to collect three per cent upon the unexpired term of leases made by them. In our view of the proper construction of the agreement and the-facts in the case, this testimony was proper. Carroll, Schendorf & Boenicke v. Simons, 245 Ill. App. 586.

During the period when Barsaloux, Inc. collected the rents, the corporation rendered an accounting to Bood & Farland and also to Simon. After the sale there is some evidence that Barsaloux had a talk with a Mrs. Simon, who appeared to be in charge of the office of Simon, located on Wabash Avenue in Chicago, and was told that he could have charge of the building. These facts are important only for the purpose of showing that, after the sale, Barsaloux attempted to make arrangements for the collection of rents under the new landlord.

It appears from the record that the defendant served notice upon the plaintiff to produce the original letters and papers, memoranda and documents in connection therewith, turned over to the plaintiff, upon their demand and that, upon failure so to do, secondary evidence would be offered. On the trial it was stipulated that the leases had been turned over to Swan and Lorisch and that the defendant might offer secondary proof as to these unexpired leases in support of the defendant’s claim that $785.17, had properly been retained by them as commissions. Defendant then offered in evidence an itemized statement for the purpose of showing the number, amount and dates of the leases made, the amount collected and the unexpired portion uncollected. This was objected to on the ground that it was not the best secondary evidence. This statement, however, was admitted in evidence over objection, and in this we believe the court erred. Statements of this kind are properly admissible in evidence when the accounts sought to be proven are complicated, but, before they are admissible, it is necessary to introduce or have in court and offer for inspection, the original documents from which said statements are made up. It appears from the record that the witness testifying to this statement stated that he had checked the records in his office with reference to the leases in question, and that the list presented was correct. The statement would have been admissible if the documents from which the statement was made had been produced for the purpose of cross-examination and introduced in evidence. No such proper foundation, however, was laid for the purpose of making the statement competent. Inter-State Finance Corp. v. Commercial Jewelry Co., 280 Ill. 116.

The only evidence in the record as. to the amount due under the unexpired leases was that contained in the statement, and its introduction in evidence over continued objection, was error which will necessitate a new trial.

For the reasons stated in this opinion the judgment of the municipal court is reversed and the cause is remanded for a new trial.

Judgment reversed and cause remanded.

Hebel and Friend, JJ., concur.


text:
    Richard Young Company, Appellee, v. Meyer-Rudolph Shoe Company, Appellant.
    Gen. No. 34,574.
    Opinion filed April 15, 1931.

      George N. Kotin, for appellant; James B. Cashin, of counsel.
    John J. Sonsteby and Joseph J. Berzin, for appellee.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

The plaintiff, Bichard Young Company, a New York corporation, brought its suit against the defendant, Meyer-Budolph Shoe Company, an Illinois corporation, to recover on its claim for $2,207.94, for goods and mierchandise sold to the defendant at various times and upon an account stated. The defendant filed an affidavit to plaintiff’s statement of claim, alleging that the plaintiff is a foreign corporation and not authorized to do business in the State of Illinois and that, therefore, it should not be permitted to maintain the suit. A jury was waived and the cause submitted to the court and a finding was entered against the defendant, upon which finding judgment was entered in favor of the plaintiff.

The defendant called as its own witness, one Dahm, a leather salesman employed by the plaintiff. This witness testified that he operated a branch office for the plaintiff at 169 North Franklin Street, Chicago; that the New York office paid the rent; that there were two other salesmen and a stenographer; that the other salesmen traveled around the country, outside of Illinois, and that only the samples of the materials sold by the plaintiff were carried at the office, and that sales were made from these samples; that the goods were shipped and sent from New York after the orders were sent in; that these samples were sometimes sent to customers, but that it was not considered as a sale, and the samples were supposed to be returned. All orders that were taken were sent to New York and billed from there and none of the goods were billed from the Chicago office. All payments on goods were made to New York and the company maintained' no bank account in Chicago. The rent for the premises in the City of Chicago was paid for by the New York office.

Anthony, a witness called on behalf of the plaintiff, testified that he was a salesman for the plaintiff and worked out of the Chicago office; that all orders were submitted to New York and that no one in Chicago had any authority to enter into a contract; no bookkeepers were maintained in the Chicago office and no billing done from that point. Payment for goods was made to New York. Goods were sold on samples which were sent to customers and which were supposed to be returned and if not, were charged against the customer. The bills were rendered from New York on the goods sold and the invoices were made out there and mailed to the defendants.

All the correspondence after the sale appears to have been between the plaintiff in New York and the defendant in Chicago. It is insisted on behalf of the plaintiff that the Foreign Corporations Act of this State, Cahill’s St. ch. 32, 1f 80 et seq., applies to only such foreign corporations as are amenable to' that Act, and that corporations engaged in interstate commerce are exempt from its provisions. It is also urged that the plaintiff in this case was engaged in interstate commerce; that the contracts were entered into in New York; that the goods were shipped from there and that payment upon delivery was made to the principal office.of the company at that place; that the maintaining of an office for salesmen in Chicago was for the purpose of facilitating business and that these salesmen operated not only in Illinois, but throughout all the States of the middle west; that no records or books were kept in the Chicago office, and that all the business was transacted between the plaintiff and its customers by correspondence direct with the plaintiff at its principal office in New York,

The right of a foreign corporation to transact interstate commerce and to obtain business through agents in this State, where the contracts are finally consummated in the home State of the corporation, is well recognized. Bamberger-Stern Co. v. Anderson, 207 Ill. App. 222; Lehigh Portland Cement Co. v. McLean, 245 Ill. 326; Cheney Brothers Co. v. Massachusetts, 246 U. S. 147.

The right of a foreign corporation to solicit orders for goods which are manufactured and delivered F. O. B. cars at a point outside the State, although an office is maintained in this State for the use of its salesmen, was recognized in the case of American Art Works v. Chicago Picture Frame Works, 184 Ill. App. 502, affirmed, 264 Ill. 610.

It was held in the case of Thomas Mfg. Co. v. Thede, 186 Ill. App. 248, that recovery could be had by a foreign corporation engaged in interstate commerce, where the goods were shipped by such corporation from a warehouse located in this State, but where the contracts were passed upon, approved and entered into at the office of the foreign corporation at its home in the foreign State. .

A case very similiar to and containing many of the facts involved in the present case before us, was passed upon by the United States Supreme Court in the case of Cheney Brothers Co. v. Massachusetts, 246 U. S. 147. The court in its opinion says :

“This is a Connecticut corporation whose general business is manufacturing and selling silk fabrics. It maintains in Boston a selling office with one office salesman and four other salesmen who travel through New England. The salesmen solicit and take orders, subject to approval by the home office in Connecticut, and it ships directly to the purchasers. No stock of goods is kept in the Boston office, but only samples used in soliciting and taking orders. Copies and records of orders are retained, but no bookkeeping is done, and the office makes no collections. The salesmen and the office rent are paid directly from Connecticut and the other expenses of the office are paid from a small deposit kept in Boston for the purpose. No other business is done in the State.

“We do not perceive anything in this that can be regarded as a local business as distinguished from interstate commerce. The maintenance of the Boston office and the display therein of a supply of samples are in furtherance of the company’s interstate business and have no other purpose. Like the employment of the salesmen, they are among the means by which that business is carried on and share, its immunity from state taxation. McCall v. California, 136 U. S. 104; Norfolk & Western R. R. Co. v. Pennsylvania, 136 U. S. 114; Crenshaw v. Arkansas, 227 U. S. 389; Rogers v. Arkansas, 227 U. S. 401. Nor is the situation changed by inferring, as the State court did, that orders from customers in Connecticut sometimes are taken by salesmen connected with the Boston office and, after transmission to and approval by the home office, are filled by shipments from the company’s mill in Connecticut to such customers. In such cases it doubtless is true that the resulting sale is local to Connecticut, but the action of the Boston office in receiving the order and transmitting it to the home office partakes more of the nature of interstate intercourse than of business local to Massachusetts and affords no basis for an excise tax in that State. International Textbook Co. v. Pigg, 217 U. S. 91, 106, 107. We think the tax on this company was essentially a tax on doing an interstate business and therefore repugnant to the commerce clause.”

There is no presumption raised that the foreign corporation doing business in this State is doing so contrary to the statute, but this is a matter of defense which must be proven and the burden is upon the defendant. Delta Bag Co. v. Kearns, 160 Ill. App. 93.

The cause was tried by the court without a jury, and under the circumstances, the finding of the trial court will not be disturbed unless the finding is against the manifest weight of the evidence. Under, the facts in this cause we see no reason for disturbing the finding nor the judgment of the municipal court entered upon that finding.

For the reasons stated in this opinion, the judgment of the municipal court is affirmed.

Judgment affirmed.

Hebel and Friend, JJ., concur.


text:
    National Lead Company, Appellant, v. James W. Mortell et al., Appellees.
    Gen. No. 34,596.

      Opinion filed April 15, 1931.
    Rehearing denied April 27, 1931.
    England, Dodge & O’Toole, for appellant.
    Meier & Poorman, for appellees.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

The plaintiff, National Lead Company, brought its action in the superior court against James W. Mortell, Edwin E. Mortell, John L. Mortell and James W. Mortell, Jr., doing business as J. W. Mortell Co., to recover on two written contracts for the delivery of certain raw linseed oil.

The first agreement bears date of December 16,1924, and is for the delivery of 32,000 gallons, of which 15,864 and a fraction gallons were delivered and aeeepted. The second contract hears date of January 27, 1926, and is for the delivery of 187,500 pounds of pure linseed oil, of which 171,428 pounds were delivered and accepted. Each contract provided that the buyer was to furnish specifications for shipment and a storage charge of one-half cent per gallon was provided for storage after the date in the contract named for final delivery. Each contract contained the following provision, “The Seller hereby sells and agrees to deliver and the Buyer hereby purchases and. agrees to receive” the goods named in the contract, in the specified amounts.

The service had on the defendants in the proceeding was quashed and an alias summons issued. An amended declaration was filed by the plaintiff, based upon the same contracts hereinbefore enumerated and service being had a judgment was entered by default November 23, 1929.

December 14, 1929, the defendants appeared and entered a motion to vacate the judgment of November 23, 1929, which motion was granted, together with leave to file a plea of the general issue, the judgment to stand as security.

January 16, 1930, a plea of the general issue was filed by the defendants, together with a special plea, charging that the Hirst & Begley Linseed Works, a corporation, did not have on file at the time of the commencement of the suit a copy of its charter, nor did it have any standing to do and undertake to do business in the State. This special plea was stricken from the files, but subsequently permitted to stand. To this special plea plaintiff filed its replication. The cause proceeded to trial and, at the end of plaintiff’s case, the court directed a verdict in favor of the defendants and judgment was entered upon the verdict, from which plaintiff appeals.

The directed verdict appears to have been based, in the opinion of the trial court, upon the fact that the plaintiff had failed to show the difference between the contract price and the market value at the time of the refusal to accept. That consequently no damage was shown.

Plaintiff insists as a ground for reversal that the court erred in vacating the judgment by default after the term had gone by and in permitting the defendants to plead. This is based upon the proposition that the court had lost jurisdiction after the term and that the proper motion was under section 89 of the Practice Act, Cahill’s St. ch. 110, ft 89, which is a motion in the nature of a writ of error coram nobis. We agree with this proposition, but no exception appears to have been taken to the order of the trial court vacating the judgment and permitting the defendants to plead. There is no bill of exceptions before us containing anything that took place at the time the judgment was vacated. The motion itself would be preserved in the common law record but an appeal would be from an order entered thereon and should be taken in order to preserve for review the question of the propriety of the order entered. Domitski v. American Linseed Co., 221 Ill. 161; Central Bond and Mortgage Co. v. Roeser, 323 Ill. 90.

Moreover, the plaintiff waived the question by participating in the trial. The pleadings were settled under an order of court approved by all the parties to the proceeding. The Supreme Court in this State in the case of Central Bond and Mortgage Co. v. Roeser, supra, in its opinion says:

“After the ex parte judgment had been vacated appellant participated in the second trial. The jury’s verdict was in favor of appellee and appellant sought and obtained a new trial. The court had jurisdiction of the subject matter of the action, and appellant by its voluntary and unlimited appearance in these proceedings after the order of May 12, 1923, subjected its person to the court’s jurisdiction. Under these circumstances it waived the right to complain of the order vacating the ex parte judgment. Weisguth v. Supreme Tribe of Ben Hur, 272 Ill. 541; Grand Pacific Hotel Co. v. Pinkerton, 217 id. 61; Herrington v. McCollum, 73 id. 476.”

Upon the trial of the cause plaintiff introduced testimony showing an assignment by the Hirst & Begley Linseed Company, a corporation organized under the laws of New York, of all its property of every kind and description, to the National Lead Company, the plaintiff in this action. This assignment bears date of January 15, 1919.

It appears that plaintiff continued to operate the Chicago plant of the Hirst & Begley Linseed Company, but under the name Hirst & Begley Linseed Works Division. Whether or not the Hirst & Begley Works was still in business and the contract was made with that company instead of the National Lead Company, was a question of fact for the trial court. With this question, however, we are not concerned in view of the directed verdict in the cause.

The sole question we are called upon to answer is whether or not under the contracts in question the plaintiff had the right to and did retain the linseed oil in question for the benefit and use of the defendants and had the right to tender it and demand the contract price therefor, or whether it was required to sell this commodity in the open market and recover for the difference, if any, in price as its damages in the case.

Defendants contend that under the Uniform Sales Act, Cahill’s St. ch. 121a, 4 et seq., plaintiff was bound to resell the goods in the open market and recover only the damages sustained and that the plaintiff not having done so and there being no evidence of damages under such a proceeding, the court properly directed a verdict in favor of the defendants. With this, however, we are unable to agree.

The Supreme Court of this State in the case of Osgood v. Skinner, 211 Ill. 229, in its opinion says:

“If there has been no delivery of personal property, the seller who has offered performance on his part may consider the property as the purchaser’s, and may either sell it and sue for the unpaid balance of the price, or may hold it subject to the call or order of the purchaser and recover the whole price. (3 Parsons on Contracts, — 5th ed. — p. 209.) The difference between the contract price and the market value at the time and place of delivery is a proper measure of damages for a failure to receive personal property, and in very many cases the suits have been brought for such damages. The seller often chooses to retain the title to the property and recover the difference between the value and the contract price, but if the property remains in his hands he is not obliged to consider it as his own. The rule of this court has been that the vendor may elect to sue for damages or to treat the property as the property of the vendee, notwithstanding a refusal to accept it, and sue upon the contract for the whole contract price. In Bagley v. Findlay, 82 Ill. 524, it was said that when a vendee of goods sold at a specific price refuses to take and pay for the goods, the vendor may store them and give notice that he has done so and then recover the full contract price, or he may keep the goods and recover the excess of the contract price over and above the market price of the goods at the time and place of delivery. In Ames v. Moir, 130 Ill. 582, it was held that the vendor has three remedies: First, to store the goods for the vendee, give notice that he has done so and recover the full contract price; second, to keep the goods and recover the excess of the contract price over and above the market price of the goods at the time and place of delivery; and third, to sell the goods at a fair price and recover from the vendee the loss if the goods fail to bring the contract price. The authorities are not uniform on that subject, but the rule stated is the one adopted by this court, and under it there was no error in refusing the instruction.”

This rule has not been changed by the passage of the Uniform Sales Act. In fact, the Uniform Sales Act contains a provision granting to the vendor this particular right, as expressed in the case of Osgood v. Skinner, supra. This question has also been passed upon and decided in this court in the case of Santa Rosa-Vallejo Tanning Co. v. C. Kronauer & Co., 228 Ill. App. 236. Under this rule as announced in the cases cited, the plaintiff had the right to consider the property as the defendants’, and either sell it and sue for the unpaid balance of the price, or hold it subject to the call or order of the defendants and recover the whole price.

There is evidence in the record on the part of the plaintiff showing that the goods were held subject to the shipping orders of the defendants. There was testimony on the part of the plaintiff that the plaintiff had on hand at all times a sufficient amount of oil of the same kind, grade and quality contracted for, to fill the orders of the defendants. The fact that the contracts in question had been entered into a considerable length of time prior to the starting of the lawsuit would not defeat the plaintiff’s claim so long as the statute of limitations had not run against its rights. The question as to whether or not plaintiff had oil of the kind and character contracted for on hand at all times ready for delivery, was a question of fact which should have been submitted to the jury.

We are of the opinion that the trial court was in error in directing a verdict for the defendants and, for the reasons stated in this opinion, the judgment of the superior court is reversed and the cause remanded for a new trial in conformity with this opinion.

Judgment reversed and cause remanded.

Hebel and Friend, JJ., concur.


text:
    Albert Nardoni, Administrator of the Estate of Frank Nardoni, Deceased, Plaintiff in Error, v. Chicago & Eastern Illinois Railway Company, Defendant in Error.
    Gen. No. 34,725.

      Opinion filed April 15, 1931.
    Charles C. Spencer and Bertram H. Montgomery, for plaintiff in error.
    Edward W. Rawlins, for defendant in error; Kenneth L. Richmond and Lee W. Carrier, of counsel.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

Plaintiff, as administrator of the estate of Frank Nardoni, deceased, brought this action under the Federal Employers’ Liability Act against the Chicago & Eastern Illinois Railway Co., defendant, to recover for the death of plaintiff’s intestate. At the close of plaintiff’s evidence the trial court instructed the jury to find the defendant not guilty and judgment was entered on that verdict.

There appears to be no material conflict as to the facts in the case. Plaintiff’s intestate, Nardoni, at the time of his death was 55 years of age and was a track laborer for the defendant company, and part of his duties consisted in walking the tracks for the purpose of inspecting them. He was last seen alive on the morning of September 11, 1927, at 6:05 a. m. and, at the time, was engaged in his duties of inspection and was proceeding in a northerly direction along the southbound track of the defendant company, just west of the depot at Chicago Heights. A passenger train arrived at the depot at 6:09 a. m. and departed at 6:10 a. m., in a northerly direction over the east or northbound track. At 6:18 a m., a freight train passed the depot, proceeding in a northerly direction over the west or southbound track. As this freight train proceeded on its way, a brakeman riding in the cab of the engine which was at the head of the freight train, was looking out of the side window of the cab of the engine and saw plaintiff’s intestate lying on the right of way, about 8 feet west of .the west rail of the southbound track upon which the freight train was running. No one on the freight train saw the deceased struck. Upon the brakeman calling attention to the body, the train was stopped and upon investigation plaintiff’s intestate was found dead, with a gash or hole in the back of his head. The tools belonging to the deceased and used by him in and about his work were found several feet north of the body. The body itself was lying between 150 and 175 feet south of 12th Street in Chicago Heights, a street which intersects the lines of track of the defendant company, running in an easterly and westerly direction. There had been a fog in the morning on the day of the accident which had not entirely cleared at the time the deceased was last -seen alive. There being no eyewitness to the accident itself, evidence was introduced on behalf of the plaintiff showing that he was a man of careful and prudent habits and the cause was tried on the theory that there were sufficient facts and circumstances from which negligence could be inferred on the part of the defendant.

Witnesses on behalf of the defendant testified that at the time of the accident the freight train in question was running at a speed of about 12 miles an hour; that the bell was ringing; that there was some fog around the ground, but that it was fairly clear.

Frank Judy, a witness on behalf of plaintiff, testified that he was the tower man for the defendant com-' pany and had worked for it for 20 years. He testified, on direct examination, that it was usual for freight trains to run north on the southbound track and on cross-examination stated that while it might not be the usual manner of operating the freight trains, still it was frequently done, probably at least two or three times a week; that these trains, when so operated, ran through Chicago Heights on this track to Thornton Junction, which was beyond the place where the accident occurred.

Defendant insists that there is no evidence that the defendant was negligent and that, moreover, plaintiff’s intestate assumed the risk and that there can be no recovery.

It has been agreed in the record that the defendant company was, at the time of the accident, engaged in interstate commerce and that the tracks running through Chicago Heights were used at that time in interstate commerce shipments. Counsel for plaintiff insists that there was sufficient evidence for the trial court to have permitted the cause to go to the jury and that, on a motion to direct a verdict, the most favorable interpretation of the evidence should be in favor of the plaintiff. This evidence consisted of the fact that the plaintiff, at the time of the accident, was a man of careful habits; that he was walking north between the rails of a southbound track; that he had no warning as to any unusual movements of a train following him; that there was a curve in the track near where he was found; that there was a hazy or foggy condition of the weather; that the engineer on the train following him failed to give a warning; that his body was found near the track and his tools scattered.

Defendant insists that there is no evidence of negligence on the part of the defendant; that a jury, if permitted to pass upon the question of fact, could only speculate as to the cause of death and, moreover, that deceased had assumed the risk and it was his duty to look out for trains and not for the trains to look out for him, provided the trainmen were not guilty of carelessly and wantonly running him down.

From the evidence it would appear that the movement of the freight train in a northerly direction over the southbound track was not an unusual manner of operation, but was so frequent that the plaintiff’s intestate must have known of that fact. It is insisted that if the defendant had caused a whistle to be blown as required by statute at least 80 rods from 12th Street the deceased would have had warning of the approaching train. The testimony is uncontradicted that the bell was ringing at all times and, while it is insisted that defendant should have sounded a whistle before reaching 12th Street, nevertheless we cannot agree with this last contention. The statute with regard to trains approaching a street crossing only requires that the company shall ring a bell or sound a whistle. The proof is that the defendant was ringing the bell. Butter v. Illinois Traction, Inc., 253 Ill. App. 135.

Moreover, the Supreme Court of the United States held in the case of Chesapeake & Ohio Ry. Co. v. Mihas, 280 U. S. 102, that such a statutory requirement as to warning is not intended for the benefit of employees, but only for the public. This last case mentioned was a certiorari from the Supreme Court of this State to review a judgment in favor of the plaintiff Mihas. This court held in that case that an employee had a right to rely upon a custom of the railroad to give a warning to the public and a certiorari was denied by the State Supreme Court. The Supreme Court of the United States, however, held otherwise, and. expressly held that a statute giving a right of action to one injured by the neglect of the railroad company to ring a locomotive bell before making a highway crossing, was designated exclusively for persons using the highway, citing O’Donnell v. Providence and Worcester R. Co., 6 R. I. 211.

The case of Chesapeake & Ohio Ry. Co. v. Nixon, 271 U. S. 218, appears to be decisive of the question of assumed risk. In that case it appears that the deceased was an experienced section foreman on the defendant road and that one of his duties was to go over and examine the track and keep it in repair. At the time of the accident he was using a three-wheel velocipede which fitted the rails and which he had obtained from the superintendent of track. The question appeared to be whether the defendant company owed a duty to keep a lookout for the deceased, or whether, on the other hand, the deceased took the risk. At the time of the accident the deceased was not engaged in inspection, but the court held that he had assumed the risk and “stated further in its opinion:

“If the accident had happened an hour later when the deceased was inspecting the track, we think that there is no doubt that he would be held to have assumed the risk, and to have understood, as he instructed his men, that he must rely upon his own watchfulness and keep out of the way. The railroad company was entitled to expect that self-protection from its employees. Aerkfetz v. Humphreys, 145 U. S. 418; Boldt v. Pennsylvania R. Co., 245 U. S. 441, 445, 446. Connelly v. Pennsylvania R. Co., 201 Fed. 54; Davis v. Philadelphia & R. R. Co., 276 Fed. 187; Pennsylvania R. Co. v. Wachter, 60 Md. 395; 4 Elliott on Railroads, 3d. ed., § 1862. The duty of the railroad company toward this class of employees was not affected by that which it might owe to others.”

As we have already stated, the testimony in the record is that it is not unusual to run the northbound freight trains on the southbound track. Even though it were not done so frequently as appears to have been in this case, nevertheless, it was the duty of the deceased to have known that such might be the fact. Winfree v. Seaboard Air Line Ry. (N. C.), 155 S. E. 259.

At common law the rule was settled that the servant assumed the extraordinary, risk incident to his employment. It has not been changed by the enactment of the Federal Employers’ Liability Act in cases of this character. Boldt v. Pennsylvania R. Co., 245 U. S. 441.

It has been the contention of plaintiff that the deceased must have been struck by the freight train. There is no evidence in the record that anyone ■ saw him struck, although the engineer and the brakeman sitting in the cab were in a position to have seen the accident if it had occurred by reason of the freight train striking deceased. While it might appear that the deceased was, in fact, struck by the freight train, it must necessarily be a matter of speculation. There appears to be no facts showing negligence on the part of the defendant. The only fact of negligence that might be urged would be failure to warn the deceased that the freight was proceeding over the northbound track, but, as we have stated, this was not an unusual proceeding and there was no obligation to blow a whistle or ring a bell. Atchison, T. & S. F. Ry. Co. v. Toops, 281 U. S. 351.

For the reasons stated in this opinion, the judgment of the city court of Chicago Heights is affirmed..

Judgment affirmed.

Hebel and Friend, JJ., concur.