text:
    West Suburban Finance & Thrift Company, Appellant, v. Harry H. Herbst, Appellee.
    Gen. No. 40,493.

      Opinion filed May 2, 1939.
    Rehearing denied May 20, 1939.
    Max Murdock, of Chicago, for appellant.
    Wm. H. Fischer, of Chicago, for appellee.
   Mr. Justice Friend

delivered the opinion of the court.

In an action at law for breach of defendant’s written contract to purchase certain accounts from plaintiff, the court directed a verdict and entered judgment for defendant. Plaintiff appeals.

The essential facts disclose that Butterfield Memorial Park (formerly Butterfield Cemetery Company), a corporation for profit, was engaged in the business of selling cemetery lots on instalment payments. The defendant, Harry H. Herbst, has been president of the corporation for some six or seven years. Prior to his incumbency the cemetery company had discounted with plaintiff a number of these instalment accounts in a series of transactions evidenced by written assignments, which are referred to by the parties herein as “Notes.” These notes are on printed forms, similar in all respects except as to the dates, amounts and lists of account, and it is stipulated in each note that upon default in the payment of any instalment when due, the cemetery company shall become obligated to pay the entire balance; that the accounts shall remain in the hands of the cemetery company for the purpose of collection; that remittance of payments shall be made to plaintiff; and that the cemetery company may repossess and resell lots on which customers have defaulted. All these accounts have been in default since 1931. April 15 of that year Herbst, being then a large stockholder and an officer of the cemetery company, purchased fifteen of these notes from plaintiff, under a written contract which is the subject of this suit. He agreed to pay the purchase price in stipulated instalments and against this price he was to be credited with any payments thereafter received on the accounts. As collateral security for his undertaking, he deposited certain bonds with plaintiff, which were sold by plaintiff December 31, 1937, after Herbst’s default, for $500, and that amount was credited on the purchase price. The agreement provided that the sale of collateral might be made without notice to defendant; nevertheless, plaintiff served formal notice on him of the time and place of the sale, but he did not appear, bid, or make any effort to procure a bidder. Subsequently, January 11, 1938, plaintiff made a formal tender in writing to defendant of the indebtedness, notes, documents and papers described in the contract, advised him of the sale of the collateral, credited him with the proceeds of the sale, and demanded payment of the balance on the contract. Defendant refused to accept or examine the papers tendered, and refused to pay the amount claimed to be due. Thereafter, January 17, 1938, plaintiff instituted suit and after personal service on Herbst and his default, judgment was entered in favor of plaintiff on February 28,1938, for $18,203.77 and costs. March 29, 1938, defendant moved to vacate the judgment, admitting the contract and his refusal to pay the remainder of the purchase price alleged to be due, and setting forth as the reason for his refusal, the verbal cancelation of the contract by mutual agreement, thus claiming to have been released from any obligution to pay the balance of the purchase price for the notes and securities mentioned in the agreement. Upon the filing of defendant’s answer setting forth this defense, the court entered an order opening the judgment, but allowing it to stand as security. No question is raised by defendant as to the amount of the judgment, and he concedes that he never made any payments on account of his undertaking. Neither does he question plaintiff’s figures as to the amounts credited to him on the various notes purchased. Trial of the issues was had by jury. On the day of the hearing defendant filed a counterclaim, on the theory that plaintiff and its officers were liable to him for selling, for less than their alleged value, the bonds which he had pledged as collateral. This counterclaim was traversed by a counter-answer, filed by plaintiff instanter. No evidence was offered on the counterclaim and the court accordingly dismissed it. At the close of plaintiff’s case defendant’s motion for a directed verdict was overruled, but at the close of all the evidence a similar motion made by defendant was allowed, for the sole reason, as stated by the court, that plaintiff failed to prove tender to defendant of the entire subject matter of his purchase contract.

The principal question argued by the parties in their briefs is whether an adequate tender was made by plaintiff and proved upon the hearing. Before discussing the evidence bearing upon this question, it seems pertinent to observe that this issue was not raised as a defense in the answer filed by defendant; he relied solely on the alleged oral cancelation of the agreement; but upon the hearing he abandoned this defense and embraced the theory of inadequate tender. It is undisputed that when plaintiff made a formal tender in writing in January, 1938, of the indebtedness, notes, documents and papers described in the contract, and advised defendant of the sale of the collateral, defendant refused to accept the tender, giving as his reason the alleged cancelation of his contract, and when suit was instituted against him he interposed the alleged cancelation of the contract as his sole defense. Under the circumstances, we feel that we would be justified in disposing of this appeal on the ground that defendant thereby waived all other defenses, including the sufficiency of the tender. (National Importing & Trading Co. v. Bear & Co., 236 Ill. App. 426, 441.) It has been generally held that when a tender would be useless or unavailing, it is unnecessary to make it even if it were a condition precedent. (Ladd v. Cochran & McCluer Co., 274 Ill. App. 427; Osgood v. Skinner, 211 Ill. 229.) Under this well-established legal principle, the question of an adequate tender becomes one of secondary importance, especially in view of the position taken by defendant and the reason assigned by him for refusing to carry out his agreement, namely, that it had been canceled by mutual oral agreement of the parties.

However, in view of the fact that the cause was tried on the sole issue whether an adequate tender was made we have carefully examined the record and have reached the conclusion that plaintiff did make an adequate tender, both before the suit and at the trial, of all the notes listed in the contract as the subject matter of the sale, and that the supposed deficiency in the tender relates only to some of the lot instalment contracts which were collateral security for those notes. The evidence discloses that the cemetery company considered some of the instalment contracts worthless and procured their return, stating its purpose to cancel them and resell the lots. The court was evidently of opinion, however, that the tender was not adequate without the inclusion of all the collateral in its original form, and that redelivery to the cemetery company, of some of the contracts, placed plaintiff in the position of not being able to deliver what plaintiff had contracted to sell and deliver to defendant. In this connection, the undisputed evidence discloses that defendant requested plaintiff to surrender those defaulted instalment contracts to the cemetery company and authorized its secretary to obtain them from plaintiff. J. F. Van Devanter, plaintiff’s secretary, testified to this effect, and there is no denial thereof. The court was also of the opinion that it was the plaintiff who had decided upon the redelivery, assuming to act for Herbst’s, benefit. This is indicated in the oral opinion of the court in the following* language:

“Now your idea of what was the best thing* for Mr. Herbst might not be Mr. Herbst’s idea of what the best thing would be for him. If he bought white horses he is entitled to white horses, whether you think black horses would be better for him or not; and I think he was entitled to get what he bought here under this contract, which were these specific notes, together with all of the security that secured them, whatever they were: deeds, contracts or anything* else that went along* with it.” In this conclusion the court evidently overlooked the undisputed fact that it was Herbst, himself, who had decided upon that course and who directed plaintiff to redeliver the contracts.

When the whole transaction is carefully analyzed nothing* appears therein to warrant the conclusion that the lot contracts mentioned by the court were sold to Herbst; it was the indebtedness of the cemetery company to plaintiff which Herbst agreed to purchase and nothing else; the lot contracts were merely incidental as collateral security to that indebtedness. Plaintiff’s counsel aptly points out that the real value in these notes lay in the prospects of collecting the instalments from willing purchasers, not in foreclosing on the doubtful value of cemetery lots. The notes themselves made provisions for cancelation of defaulted instalment contracts and for resale, and therefore it was to Herbst’s interest, as well as that of the cemetery company, to return the lot contracts which were in default. Herbst undoubtedly had the right to request plaintiff to return the lot contracts which were in default and in so doing he waived his right to this particular collateral (Evans v. Howell, 211 Ill. 85) and rendered it unnecessary for plaintiff to tender the return thereof.

As applicable to the question of inadequate tender, the record discloses that all of the original notes which defendant had agreed to purchase were produced at the trial, introduced in evidence, and tendered in open court to the defendant. That they were also tendered to him before suit is not denied. Along with these notes, plaintiff also tendered on both occasions all the collateral documents except those whose absence was explained as due to defendant’s own act, namely, his¡ direction for redelivery of certain contracts to the cemetery company, of which he was president. This, it seems to us, fulfilled every legal obligation that plaintiff owed defendant, and since the execution of the contract, default, and all other facts underlying plaintiff’s right to a judgment are undisputed, we see no reason why the original judgment entered against defendant should not be enforced. It was not set aside under the court’s order, but was merely allowed to stand as security. Since defendant admits the terms of the contract which fixed the purchase price, admits that he made no payments other than those credited to him by plaintiff, and in all respects approves plaintiff’s computation of the amount due, there was nothing left for the jury to decide. Therefore, the judgment or order of the circuit court of July 15, 1938, is reversed without remanding* the cause for a new trial and judgment is entered here confirming the judgment of said court of February 28, 1938.

Judgment of July 15, 1938, reversed and judgment here confirming judgment of February 28, 1938.

Soanlan, P. J., and John J. Sullivan, J., concur.


source: Caselaw Access Project

author: Mr. Justice John J. Sullivan

license: Public Domain

text:
    Chicago Title & Trust Company, Appellee, v. Mercantile Trust & Savings Bank et al., Appellants.
    Gen. No. 40,221.

      Opinion filed May 2, 1939.
    Julian C. Ryer, of Chicago, for appellants.
    Stearns & Jones, of Chicago, for appellee; Lloyd McBride and Norbert B. Tyrrell, both of Chicago, of counsel.
   Mr. Justice John J. Sullivan

delivered the opinion of the court.

The Northern Trust Company, trustee under Trust Agreement No. 7313 (hereinafter for convenience referred to as the Lauth Trust), having recovered a judgment for $5,501 against Harold S. Shrader, pursuant to which an execution was issued and returned wholly unsatisfied, filed its complaint in the nature of a creditor’s bill in the circuit court to reach principally the land held in Trust No. 24797 (hereinafter referred to as the Land Trust), of which Chicago Title & Trust Company was trustee and Shrader was the sole beneficiary. Shortly thereafter Chicago Title & Trust Company, trustee under Trust Agreement No. 22146 (hereinafter referred to as the Morton Trust), the owner of a first mortgage note for $16,000 and the trust deed securing same, filed its complaint in the superior court to foreclose said trust deed against the property which was the subject of the aforesaid land trust, being the same property which the Lauth Trust sought to reach by its complaint against Shrader. In such complaint in the nature of a creditor’s bill the Lauth Trust claimed a prior lien on the mortgaged land by reason of its judgment against Shrader. The proceeding instituted by the Lauth Trust in the circuit court was transferred to the superior court and there consolidated with the foreclosure suit brought by the Morton Trust. A decree was entered finding that the Lauth Trust, the judgment creditor of Shrader, had no lien on the land which was the subject of the land trust and that the mortgage of the Morton Trust was a first lien thereon, and ordering the sale of the property for the satisfaction of the mortgage indebtedness. The Lauth Trust appeals from that portion of the decree which denied its claim of lien and the priority thereof.

The facts briefly stated are that the Lauth Trust obtained a judgment for $5,501 against Harold S. Shrader October 22, 1930; that Shrader was then living in the premises, which prior to the entry of said judgment had been conveyed by deed in trust from Nels Shoan and Hilma Shoan to the Chicago Title & Trust Company, as trustee under Trust Agreement No. 24797; that Shrader was the only person beneficially interested in that agreement and that he had various rights and powers thereunder, including the right to direct the trustee to mortgage the land described therein, as will hereinafter be fully set forth; that shortly after the Lauth Trust judgment against Shrader was rendered, the latter directed his trustee to make the mortgage, the foreclosure of which was ordered by the decree entered in this cause; and that the mortgage note and trust deed securing same is owned -by the Morton Trust, of which Chicago Title & Trust Company is also trustee under its Trust Agreement No. 22146.

As heretofore stated the real estate in question was conveyed by deed in trust by Nels Shoan and Hilma Shoan to Chicago Title & Trust Company, on April 2, 1930, under Trust Agreement No. 24797. This land trust agreement recited that the trustee “is about to take title” to the real estate and “will hold it for the uses and purposes herein set forth. ’ ’ The other pertinent provisions of said trust agreement are:

“The following named persons shall be entitled to the earnings, avails and proceeds of said real estate according to the respective interests herein set forth, to-wit:

“Harold S. Shrader

“It Is Understood and Agreed between the parties hereto, and by any person or persons who may become entitled to any interest under this trust, that the interest of any beneficiary hereunder shall consist solely of a power of direction to deal with the title to said property, and to manage and control said property, as hereinafter provided, and the right to receive the proceeds from rentals and from mortgages, sales or other disposition of said premises, and that such right in the avails of said property shall be deemed to be personal property, and may be assigned and transferred as such; that in case of the death of any beneficiary hereunder during the existence of this trust, his or her right and interest hereunder shall, except as herein otherwise specifically provided, pass to his or her executor or administrator, and not to his or her heirs at law; and that no beneficiary now has, and that no beneficiary hereunder at any time shall have any right, title or interest in or to any portion of said real estate as such, either legal or equitable, but only an interest in the earnings, avails and proceeds as aforesaid ....

“It is understood and agreed by the parties hereto and by any person who may hereafter become a party hereto, that said Chicago Title and Trust Company will deal with said real estate only when authorized to do so in writing and that (notwithstanding any change in the beneficiary or beneficiaries hereunder), it mil on the written direction of

“Harold S. Shrader

or such other person or persons as shall be from time to time named in writing by the beneficiary or beneficiaries, or on the written direction of such person or persons as may be beneficiary or beneficiaries at the time, make deeds for, or otherwise deal with the title to said real estate. . . .

“The beneficiary or beneficiaries hereunder, in his, her or their own right shall have the management of said property and control of the selling, renting and handling thereof, and shall collect and handle the rents, earnings, avails and proceeds thereof, and said trustee shall have no duty in respect to such management or control, or the collection, handling or application of such rents, earnings, avails or proceeds, or in respect to the payment of taxes or assessments or in respect to insurance, litigation or otherwise, except on written direction as hereinabove provided, and after the payment to it of all money necessary to carry out said instructions. ... If any property remains in this trust twenty years from this date it shall be sold at public sale by the trustee on reasonable notice, and the proceeds of the sale shall be divided among* those who are entitled thereto under this trust agreement.”

The position of the Lauth Trust, the judgment creditor of Shrader, as stated in its brief is as follows: “The only question to be determined in this proceeding is entirely one of law. The lien of the appellant’s judgment is or is not superior to that of the trust deed. If this court determines that the Statute of Uses did not vest title in Harold S. Shrader to the premises in question then the decree should he affirmed, but should the court adjudge that appellant’s position is legally sound then this court should and, of course, will reverse the decree in that particular and remand the cause to the Superior Court of Cook County so that a decree may be entered therein finding and fixing the lien of the judgment as a first and superior lien and directing the sale of the premises to satisfy the lien of the judgment in the first instance and the balance over to be applied on account of the mortgage indebtedness.”

In support of its position appellant insists that no duties or obligations are imposed upon. the trustee under Trust Agreement No. 24797, heretofore set forth, and that, therefore, said agreement constitutes a mere nominal, naked, dry or passive trust, which was executed by the statute of uses (sec. 3, ch. 30, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 29.03]), immediately vesting* the legal title to the property in Shrader, the beneficiary of the trust and the judgment debtor; and that the legal title to the property being in Shrader when appellant’s judgment was entered against him and the rendition of said judgment having preceded the execution of the trust deed securing* the mortgage indebtedness, appellant’s lien on the property involved was prior and superior to the lien of the trust deed. Many authorities are cited to sustain the proposition that although words of express trust are used in the grant or devise of an estate in land to a trustee, where such trust is a passive one, imposing* no active duties upon the trustee, the statute of uses operates to vest the legal title in the cestui que trust at once. It is unnecessary to discuss these authorities since they all passed upon factual situations disclosing naked or passive trusts and it is conceded that such trusts are executed by the statute of uses.

Appellee in its brief relies upon the following propositions

“1. The judgment debtor, Shrader, had no interest in the mortgaged real estate as such. His interest was only in income, proceeds and avails of the trust, and was personal property. Consequently, the defendant’s judgment against Shrader was not a lien on the mortgaged real estate, and any notice arising from Shrader’s possession is immaterial.

“2. The Statute of Uses did not operate to vest Shrader with any title to the mortgaged real estate, because (a) that statute does not affect personal property interests at all and (b) the trustee has under the terms of the land trust agreement No. 24797 the active duty to make conveyances during the term of the trust and the active duty at the end of twenty years to sell and convey all real estate remaining in the trust. ’ ’

Perhaps a clearer statement of appellant’s theory is that Shrader, immediately upon the delivery of the deed in trust on April 2, 1930, by the Shoans to Chicago Title & Trust Company, as trustee, by the operation of the statute of uses, became the legal owner of the real estate conveyed by said deed in trust, and consequently that appellant’s judgment against Shrader entered October 27,1930, attached as a lien on such real estate at the time of the rendition of said judgment and was therefore superior to the lien of appellee’s mortgage made on November 1, 1930. The appellee concedes that, if Shrader had title to the property as claimed, then appellant’s judgment became a superior lien on the land, but insists that Shrader had no title to the real estate by virtue of the statute of uses or otherwise and that appellant’s judgment never became a lien on the land.

Was the beneficial interest of Shrader in the land trust personal property or was it an interest in the real estate as such? If the former, the statute of uses can have no application. It is expressly declared in the trust agreement, heretofore set forth, that the interest of the beneficiary in the trust ‘ shall be deemed to be personal property” and not “any right, title or interest in or to any portion of said real estate as such, either legal or equitable, but only an interest in the earnings, avails and proceeds” thereof.

The rule has been long and well established in this State that the form of deed of trust and trust agreement before us creates a valid and subsisting* trust under which the interest of the beneficiary is personal property only and not real estate. It has been repeatedly held that an agreement creating an interest in the profits or proceeds of the sale of real estate creates no interest in or lien upon the land itself. (Morrill v. Colehour, 82 Ill. 618; Roby v. Colehour, 135 Ill. 300; MacDonald v. Dexter, 234 Ill. 517.) It is true that under the terms of the land trust agreement Shrader, the beneficiary, had the power to direct the trustee to convey the real estate to him and thus reconvert his interest in said land trust into real estate, but until he exercised such power his interest remained personalty so long as the trust continues in effect and before such reconversion is actually accomplished. The law gives to persons entitled to the proceeds of land the right to elect to take the land instead, but until they do so elect there is no reconversion of their interests. Provisions in trust instruments giving-beneficiaries the option to take the land instead of the proceeds are but expressions of the right of election, which the law gives them in any event, and such provisions in no way alter the character of their rights. (Baker v. Copenbarger, 15 Ill. 103.)

In Duncanson v. Lill, 322 Ill. 528, where it was urged that the interests of beneficiaries under the same form of trust agreement under consideration here should be regarded as real estate because they might direct the conveyance of the land to themselves, the court said at pp. 533 and 534:

“By the deed of trust the entire legal and equitable title to the property was expressly vested in the trustee, and the interest of each and every beneficiary, and of all persons claiming under them, was declared to be personal property and to be in the earnings, avails and proceeds arising from the disposition of the property. The trust agreement likewise provided that the interest of any beneficiary should consist solely of the right to receive the proceeds from rentals or from sales of the property; that such right should be deemed to be personal property and might be assigned and transferred as such, and that in case of the death of any beneficiary during the existence of the trust, his right or interest should pass to his executor or administrator and not to his heirs-at-law. The rights of Duncanson and his wife as beneficiaries were declared to be personal property, and by the assignment George and William W. Lili succeeded to those rights. The assignees merely took the place of the assignors as beneficiaries under the trust agreement and the trust continued to exist. The acquisition of those rights by the assignees effected no change or transfer of the title to the real estate. No conveyance was made by the Chicago Title and Trust Company, as trustee, pursuant to the assignment. The title remained in the trustee and it was not made a party to' the suit. Nor does the fact that the beneficiaries might terminate the trust by requiring the trustee to convey the property avail the appellants. The right might or might not be exercised. Such a conveyance would depend upon subsequent acts which might not be required or performed. ’ ’

In Duncanson v. Lill, supra, and Sweesy v. Hoy, 324 Ill. 319, our Supreme Court transferred to this court appeals involving beneficial interests under forms of trust agreements similar to that in the case at bar, holding that such beneficial interests were personal property and not real estate and that therefore no freehold could be involved.

In Kerr v. Kotz, 218 Ill. App. 654 (Abst.), in passing upon an identical form of trust agreement the court held that the interest of the beneficiary being personalty, a judgment against such beneficiary was not a lien upon the land which was the subject of the trust. It has frequently been held that where a trust accomplished an equitable conversion of land a judgment against a beneficiary of the proceeds of such conversion was not a lien on the land. (Lash v. Lash, 209 Ill. 595; Moll v. Gardner, 214 Ill. 248.) It follows that the interest of Shrader, the beneficiary of the land trust, being personal property, the statute of uses did not operate to reconvert or change the character of the estate of such beneficiary from personal property to real estate. That required an election or exercise of power, by the beneficiary himself. The statute of uses does not operate upon personal property interests but only upon interests in real estate. (Smith v. Smith, 254 Ill. 488; Lord v. Comstock, 240 Ill. 492.)

Even though we assume that Shrader, the beneficiary, had the equitable title to the land, would the statute of uses execute the trust? The statute would not operate because the trustee has active duties to perform under the trust agreement sufficient to remove the trust from the class which the statute of uses executes. Although it is repeatedly asserted in appellant’s brief that the trust under consideration is one that is dry and passive because the trustee has no duties to perform, it is expressly covenanted in the trust agreement that the trustee will at the written direction of Shrader “make deeds for, or otherwise deal with the title to said real estate” and that “if any property remains in this trust twenty years from this date it shall be sold at public sale by the trustee on reasonable notice, and the proceeds of the sale shall be divided among those who are entitled thereto under this trust agreement.”

In Crow v. Crow, 348 Ill. 241, a husband and wife conveyed real estate to a trustee upon trust “to re-convey to us as joint tenants and not as tenants in common. ’ ’ The trustee made the reconveyance in joint tenancy in execution of his trust. After the death of the husband, his heirs disputed the wife’s title as survivor, claiming that the statute of uses had operated instantaneously upon the delivery of the conveyance to the trustee to vest the husband and wife with the title as tenants in common, and that the subsequent conveyance by the trustee in accordance with the terms of the trust was ineffective. It was claimed further that the property was never surrendered to the trustee, that he did not take possession of it or have any control over it, that it was at all times under the full and exclusive control of the grantors and occupied by them and that the trust was, therefore, inactive. In denying these claims in that case the court said at p. 245:

“If the trust is created for some special purpose, as to convey the estate, it is a trust which the Statute of Uses will not execute. (Silverman v. Kristufek, 162 Ill. 222; Masters v. Mayes, 246 id. 506) . . . If active duties are imposed it does not matter that they are merely formal or ministerial. (Gardner v. Baxter, 293 Ill 547.) By the terms of the Crow deed Chamberlin (the trustee) was under the duty of executing a conveyance of a prescribed technical nature. The trust was manifestly created for that special purpose, and it cannot be said that no active obligation was imposed.”

In Masters v. Mayes, 246 Ill. 506, real estate was conveyed to one Brengle, in trust for Ollie M. Coons, with power to Brengle, as such trustee, to convey the premises when so requested by the cestui que trust. In passing upon the conveyance to Brengle, the court said at p. 509:

“By the deed from Alvord ... an express trust was created, and as, under the conditions of the trust, the fee could only be conveyed by Daniel D. Brengle, it was an active trust. ’ ’

In addition to its duty to “make deeds for, or otherwise deal with the title to said real estate” when so directed by the trustee, the trust agreement imposed the positive, active duty upon the trustee to sell any property remaining in the trust at the end of its prescribed term without the necessity of the beneficiary’s direction to make such sale. Inasmuch as the trustee was expressly empowered and obligated under the terms of the trust instruments to perform the' active duties shown and since Shrader’s interest in the trust was personal property only, we are impelled to hold that the statute of uses did not operate to vest Shrader with the title to the real estate involved in the land trust and that no lien attached thereto by reason of appellant’s judgment.

Other points have been urged and considered, but in the view we take of this cause further discussion is unnecessary.

For the reasons stated herein the judgment of the superior court is affirmed.

Judgment affirmed.

Scanlan, P. J., and Friend, J., concur.


text:
    Walter Waishwell, Appellee, v. Helen Doberstein et al., Defendants. Matilda Yoelin, Administratrix of Estate of Michael Gorski, Deceased, and James G. Barsaloux, Appellants.
    Gen. No. 40,647.
    Opinion filed May 2, 1939.
    Rehearing denied May 20, 1939.
    Estelle M. Wells, of Chicago, for appellants.
    Alex Janoski, Harold L. Reeve and Edmund J. Reynolds, all of Chicago, for appellee; Norbert B. Tyrrell, of Chicago, of counsel.
   Mr. Justice John J. Sullivan

delivered the opinion of the court.

This is a foreclosure suit in which the defendants appealed directly to the Supreme Court from a decree of the circuit court in favor of plaintiff. That court transferred the appeal to this court, holding that no freehold is involved where the only question on appeal is the priority of the lien of a trust deed, the validity of which has been finally determined, over the lien of a judgment arising out of an award under the Workmen’s Compensation Act.

Plaintiff, Walter Waishwell, filed a complaint to foreclose a trust deed as a first lien on the premises involved. The answer and counterclaim of Matilda Yoelin, as administratrix of the estate of Michael Gorski, deceased, and the answer of James G. Barsaloux, as the receiver appointed in another proceeding* instituted by Gorski in his lifetime, by the filing of a complaint in the nature of a creditor’s bill, seek to establish an award by the industrial commission to said Gorski as a paramount lien on the same premises. No question arises on the pleadings.

For a clearer understanding of the issues it is necessary to state the facts somewhat fully. Michael Gorski sustained injuries while working as an employee of John Kudla on a building at 2459 South Whipple street, Chicago, which is not the property involved in this suit. May 16, 1924, the industrial commission made an award in favor of Gorski against John Kudla, of which a certified copy was recorded August 14,1924.

September 1, 1924, plaintiff, Walter Waishwell, leased the premises involved in this foredlosure proceeding to Rozalia Kudla, wife of John Kudla, for a period of five years for a rental of $5,040, payable in monthly instalments. This lease contained an option entitling Eozalia Kudla to purchase the premises on or before September 1, 1925, for $14,000, of which $5,000 was to be paid in cash and a first mortgage given for the balance of $9,000, payable in five years with interest at 6 per cent. The option to purchase expired, but on September 28, 1925., Rozalia Kudla entered into a real estate contract to purchase the leased premises from Waishwell on the terms stated in the lease. Thereafter the parties met and Waishwell delivered his warranty deed conveying the leased premises to Rozalia Kudla and simultaneously received in consideration thereof $5,000 in cash and a first mortgage on said premises for $9,000, in accordance with the terms of the real estate sales contract. The warranty deed executed by Waishwell and the trust deed in the nature of a mortgage executed by the Kudlas were both acknowledged December 1, 1925, before the same notary and were both recorded simultaneously on February 2, 1926. The trust deed contains below the description of the premises the recital: “The notes mentioned in the within Trust Deed have been given in part purchase of the aforesaid property.”

On April 13, 1927, Waishwell sold the mortgage to Frank Lapinski and agreed to guarantee the payment of said mortgage, as well as to repurchase same if the principal and interest provided for therein were not paid at maturity. On December 4, 1930, and again in 1933, the maturity date of the mortgage was extended by the then holder of same and the Kudlas by written agreement, to which Waishwell was not a party. The principal and interest on the mortgage not having been paid at maturity, Waishwell repurchased same from Lapinski May 12, 1937, and commenced this proceeding to foreclose the lien of the trust deed on May 21, 1937.

Theretofore, on December 16, 1930, Grorski filed a complaint in the nature of a creditor’s bill (Gorski v. Kudla, circuit court case No. B-211606) to enforce payment of his compensation award against John Kudla out of the mortgaged property involved here and other property, all of which he asserted belonged to John Kudla, although the legal title thereto was in Rozalia Kudla. Giorski made Helen Doberstein, the trustee named in the trust deed given to secure the purchase money indebtedness to Waishwell a party defendant, and attempted to establish in the creditor’s suit that the mortgage to Waishwell was not a valid lien and to have it canceled and removed as a cloud upon the title to the property. While the creditor’s suit was pending Grorski died and Matilda Toelin, his administratrix with the will annexed, was substituted as plaintiff therein. John Kudla died March 13, 1934. July 9, 1935, a decree was entered in the creditor’s suit which ordered the Waishwell mortgage canceled and removed as a cloud on the title to the premises here involved and which further ordered a sale of this property, as well as other real estate, to satisfy the award.

An appeal was taken to this court from the decree entered in the creditor’s suit, which decree was affirmed in so far as it ordered the sale of the properties but reversed as to that portion thereof which ordered the cancelation of the Waishwell mortgage. [Yoelin v. Kudla, 287 Ill. App. 618 (Abst.).] Relative to the trust deed before us here, we held in that case as follows:

“As to the finding of the decree that the trust deed from John Kudla and his wife, Rozalia Kudla, to Helen Doberstein, as trustee, was executed without consideration and as part of the scheme of the Kudlas ‘to avoid paying compensation to Michael Groski,’ we think that the chancellor was clearly in error. When the property at 3856-58 Kedzie was purchased from Waishwell in the name of Rozalia Kudla on November 23, 1925 for $14,000, $5,000 was paid in cash and the balance of $9,000 by the execution of a purchase money mortgage in that amount secured by the trust deed to Helen Doberstein. There is not a scintilla of evidence in the record that Helen Doberstein ever had any interest in this $9,000 mortgage indebtedness except as trustee, but the record does show that Waishwell, from whom this property was purchased, took back this mortgage as part payment of the purchase price and later sold it to one Rybinski [Lapinski] for $9,000. The trust deed to Helen Doberstein securing the $9,000 indebtedness against the property is a valid lien upon same and John Kudla and Rozalia Kudla never at any time had any right, title or interest in or to the said trust deed or the principal note secured thereby. That portion of the decree setting aside and canceling this trust deed and removing it ‘as a cloud from the title ’ to the property in question must, therefore, be reversed.”

Our judgment in the foregoing appeal holding that the trust deed under foreclosure in the instant case is a valid purchase money mortgage lien has not been reversed, and remains in full force and effect. The mandate of the Appellate Court issued pursuant to said judgment.

In the case at bar the master reported and the chancellor found and decreed that the mortgage in question is a first and paramount lien upon the premises for $6,382.59 and interest and costs, and ordered the premises sold to satisfy said indebtedness. Both Matilda Toelin, administratrix with the will annexed of the estate of Michael Gorski, deceased, and James G. Barsaloux, receiver in circuit court case No. B-211606, prosecute this appeal to reverse the decree of foreclosure and sale.

This court in the appeal in the creditor’s proceeding-having held that the Waishwell mortgage was a purchase money mortgage and a valid lien upon the property sold by Waishwell to Rozalia Kudla, and the Supreme Court in Waishwell v. Doberstein, 370 Ill. 111, the instant appeal, which, as heretofore said was transferred from that court to the Appellate Court, having held “the judgment of the Appellate Court [Yoelin v. Kudla, supra] being final as to the validity of the trust deed, the only triable issue is the question of priority between the liens,” defendants" are precluded from questioning the existence and validity of the lien of the Doberstein trust deed or its character as a purchase money mortgage. Furthermore the validity of said lien and the character of said mortgage are clearly and conclusively established by the evidence in the record. Both the execution of the mortgage note and the trust deed securing the indebtedness, as well as the consideration therefore were fully proved or admitted.

As heretofore shown the industrial commission made its award to Gforsld on May 16,1924, a certified copy of same being recorded August 14, 1924; and the warranty deed, executed by Waishwell and his wife, conveying the property to Rozalia Kudla, and the trust deed in the nature of a mortgage executed by the Kudlas, were both acknowledged December 1, 1925, and recorded on February 2, 1926. The undisputed evidence discloses that although the warranty deed from the Waishwells to Rozalia Kudla was executed on November 23, 1925, and the Doberstein trust deed was executed December 1, 1925, both conveyances were acknowledged at the same time on December 1, 1925, and recorded at the same time on February 2, 1926. The undisputed evidence also shows that the $9,000 mortgage note and the Doberstein trust deed securing same were delivered to Waishwell at the same time he delivered his warranty deed to Rozalia Kudla.

The major question presented is whether Gorski’s prior compensation award against the purchaser of the property involved is superior or subordinate to the mortgage given by the purchaser, Rozalia Kudla, to Waishwell, the seller, as part of the purchase price of the land.

We have carefully read and considered the cases cited on this question and without exception they hold that the lien of a purchase money mortgage is superior to that of a judgment against the mortgagor, even though the judgment against such mortgagor is rendered before the purchase of the property and the execution of the mortgage in part payment of the purchase price thereof. Defendants insist that the Gorsld award attached as a lien upon the equitable interest or title of John Kudla in the premises at the moment they were conveyed to his wife, Rozalia Kudla. But they overlook the fact that after the execution of the Doberstein trust deed the interest of Kudla was never more than an equity in the property sold by Waishwell to Rozalia Kudla, and in the event of the foreclosure of the purchase money mortgage was never more than the right to the proceeds of the foreclosure sale, subject, however, to the satisfaction of plaintiff’s superior lien out of said proceeds and the further right to redeem from said foreclosure sale.

In Curtis v. Root, 20 Ill. 53, it was said at p. 57:

“It is a principle of law too familiar to justify a reference to the authorities, that a mortgage given for the purchase money of land and executed at the same time the deed is executed to the mortgagor, takes precedence of a judgment against the mortgagor. The execution of the deed and of the mortgage being* simultaneous acts, the title to the land does not for a single moment rest in the purchaser, but merely passes through his hands and vests in the mortgagee without stopping at all in the purchaser, and during* such instantaneous passage the judgment lien cannot attach to the title. This is the reason assigned by the books, why the mortgage takes precedence of the judgment rather than any supposed equity which the vendor might be supposed to have for the purchase money; though that consideration may have originated the rule at the first. Indeed, nearly all the cases to be met with are cases where the mortgage has been given to the vendor and for the purchase money.” (To the same effect are Roane v. Baker, 120 Ill. 308; Christie v. Hale, 46 Ill. 117; Elder v. Derby, 98 Ill. 228; Gorham v. Farson, 119 Ill. 425.)

In Roane v. Baker, 120 Ill. 308, the court said at p. 314:

“It is true, that the judgment, which was affirmed in Curtis v. Root, 20 Ill. 53, was afterwards reversed in the same case, as reported in 28 Ill. 367 and 38 id. 192, upon other grounds, but the case in 20 Ill. still stands, as authority for the doctrine announced in the above quotation [referring to' the foregoing quotation from the Curtis case], where the deed and purchase money mortgage are executed at the same time. Freeman on Judgments, sec. 360, says: ‘A mortgage, trust deed or other instrument, given to secure the purchase money, takes precedence over a prior judgment lien against the vendee. ’ Dusenbury v. Hulbert, 59 N. Y. 541.”

This is a proceeding in a court of equity. The judgment creditor, without being any worse off than before the purchase of this property by Rozalia Kudla from Waishwell, seeks enforcement of a purely legal and technical lien through a cross complaint for affirmative relief against property which has not been paid for by its apparent owner, the judgment debtor. (Roane v. Baker et al., supra.) “The vendor did not intend to release the land from a lien for the purchase money, and supposed by taking the mortgage he had effectively secured the lien, and in equity we think he did, and that it should be protected.” (Elder v. Derby et al., supra.)

We are impelled to hold that under all the circumstances of this case Waishwell’s purchase money mortgage should have precedence over the lien of Gorski’s award.

The judgment of the circuit court is therefore affirmed.

Judgment affirmed.

Scanlan, P. J., and Friend, J., concur.


author: Mr. Justice Huffman

text:
    Bayle Harper, Administrator of the Estate of John Harper, Deceased, Appellant, v. State Bank of Paw Paw et al., Appellees.
    Gen. No. 9,340.
    Opinion filed April 20, 1939.
    Rehearing denied May 22, 1939.

      Dixon, Devine, Bracken & Dixon, of Dixon, for appellant ; Robert L. Bracken and J. C. Ryan, of Dixon, of counsel.
    Clyde Smith, of Dixon, for appellees.
   Mr. Justice Huffman

delivered the opinion of the court.

Mr. John Harper was a director of the State Bank of Paw Paw. The capital assets of this bank became impaired in 1931. In compliance with the requirements of the auditor’s office, to render the bank solvent, two things were done. First, Mr. Harper and other directors placed their individual notes in the assets of the bank in lieu of certain notes therein to which the auditor objected. These objectionable assets were then removed and held for the benefit of the persons whose notes had been substituted therefor. The second step taken was a reduction of the capital stock from $100,000 to $50,000.

Mr. Harper died in 1933. Following his death, the bank filed his note as a claim against his estate, whereupon appellant administrator brought this suit in equity against the bank and certain of its officers to restrain the prosecution of its claim against the estate of the deceased, and for an accounting against the bank and other relief. It is urged by appellant that the deceased is entitled to credit on his note, for his proportionate part of the money that has been collected on the objectionable paper. It is further claimed by appellant that the deceased’s note is entitled to be credited with his proportionate share of the assets of the bank which were charged out upon the reduction of its capital stock, pursuant to an alleged agreement claimed to have been had between the deceased and the officers of the bank, whereby all the assets, credits, money and property such bank should receive by the reduction of its capital stock would be so credited.

The trial court found that the action of the deceased and the other directors in placing their notes in the bank as aforesaid was in order to remove objectionable paper of a like amount, and done at the instance of the auditor’s office; that no evidence appeared to show or prove that the officers of the bank at the time, entered into any agreement with the deceased to reimburse him from the assets of the bank for any losses he might sustain by reason of the giving of his note. It appears that the deceased secured his advice from the bank examiner, who was no agent or officer of the bank, and could not act either for the stockholders or the board of directors. The court denied the prayer for an accounting and set-off with reference to appellant’s claim to an interest in the assets of the bank arising from the reduction of its capital stock. The court found that appellant was entitled to have the bank account to him for a proportionate amount of the money that had been collected on the bad paper. The plaintiff appellant was given leave to make additional parties to his complaint by amendment, consisting of the other note signers, so that upon a proper hearing and accounting, it could be determined what had been collected on the bad paper and the manner in which the same should be distributed. The bank was enjoined from prosecuting its claim against the deceased’s estate until after such hearing and accounting.

Appellant has prosecuted this appeal from the decree of the trial court, urging that the court erred in denying relief against the assets of the bank, which arose from the act of reducing the capital stock, and in confining appellant’s relief to a proportionate share of the money collected from the bad paper.

Appellant now urges on this appeal, that irrespective of any promise by the bank officers to permit Mr. Harper to share in the assets arising from the reduction of the capital stock, that the law is, where the capital stock of a banking corporation has been reduced, the assets charged out of the corporation and created by such reduction of capital stock, are the property of the stockholders to which they are then entitled. In support of this contention, appellant cites such authorities as are found in Michie on Banks and Banking, Vol. 2, p. 8, par. 8; and Vol. 7, p. 33, par. 30. These cases are all national bank cases. Under the U. S. Code, Title 12, sec. 59 (on banks), empowering a national bank to reduce its capital stock, it has been held that the capital thus set free by such reduction, must be returned to the stockholders in the proportion to their respective holdings, and cannot be retained by the banking corporation. However, in this respect it is well settled' that such right of the stockholder to share in any such reduction, exists only in cases where the capital stock is reduced without constraint, and that where the reduction of the capital stock is made to meet an impairment thereof, the stockholders have no right to a distribution of any part of such funds. Michie on Banks and Banking, Vol. 2, p. 11; Vol. 7, pp. 33, 34; and cases cited.

Where the capital stock of a bank is impaired, and a .reduction is made to meet such impairment, the effect thereof is to escape an impending and threatened assessment on stock, and for all practical purposes is the equivalent of an assessment against the stockholders, to be used to charge off worthless and doubtful assets. Under such circumstances, the stockholders will not be permitted to withdraw the depreciated assets which were the cause of such impairment to the capital, and bring about a distribution thereof among themselves. 7 Am. Jur. p. 50, par. 43.

Appellant in support of his contention, relies strongly upon the case of Jerome v. Cogswell, 204 U. S. 1, 51 L. Ed. 343, 27 Sup. Ct. 241, taken from Michie, Vol. 7, p. 34. In that case, however, the charter of the bank had expired and the question raised was between the stockholders of record at the time of the reduction of the capital stock in 1900, and the stockholders of record at the time of the expiration of the bank’s charter, as to which group was entitled to the money that had been realized on that portion of the capital assets involved in the above reduction of the capital stock. The court in that case states: “As a general rule, it may be admitted that where capital stock is impaired and a reduction is made merely to meet that impairment, there can be no distribution.” (51 L. Ed. 345.)

The assets of a bank are held by it, first, for the payment of its indebtedness, and second, for the distribution among its stockholders of remaining surplus. It may be conceded that if a bank reduced its capital stock without constraint, for the purpose of withdrawing a portion of the investment represented by the excess capital above the amount to which it was reduced, it may thereupon be entitled to a distribution of such assets among the stockholders. And for the most part, the courts concede that if a reduction of capital stock is duly made while the corporation is solvent and a going concern, the shareholders may compel a distribution among them as compensation for diminishing the amount of their share holdings. A reduction of capital stock operates equally on all stockholders, or, at least on all stockholders of the same class, and in this respect it has been held that an unequal and unfair distribution may be enjoined. Niagara Shoe Co. v. Tobey, 71 Ill. App. 250. But when such reduction of capital stock is involuntary, in the sense that it is necessary to meet a condition of impaired capital, it cannot then be considered an act done for the purpose of withdrawing a portion of the investment. It is obviously an act to meet an impairment of the capital structure, and a method employed in preference to a stock assessment. It is quite the opposite to withdrawing a portion of the investment by such method when the capital is intact and unimpaired.

The right of' shareholders to compel a distribution of excess capital above the amount to which the stock was reduced, is fixed by the condition of the corporation as it existed at the time of such reduction, and it is not to be determined in the light of subsequent events.

Here, this bank was in a failing condition. The reduction of its capital stock was insufficient to. place it in a liquid state, and in order to so shape the affairs of the bank that it might continue in business, Mr. Harper and his associates had to place their notes therein to the amount of $25,658.44, in order to remove from the assets a like amount of bad paper. Hnder such circumstances, its reduction of capital stock cannot be considered an act done for the purpose of bringing about any distribution of surplus assets created by such reduction.

We are of the opinion that the decree of the trial court in this case is correct and the same is hereby affirmed.

Decree affirmed.


author: Per Curiam;.

text:
    Ellen Louise Kelley, By E. C. Kelley, Her Father and Next Friend, Appellee, v. Public Service Company of Northern Illinois, Appellant.
    Gen. No. 9,387.

      Opinion filed April 20, 1939.
    Rehearing denied May 22, 1939.
    Hamilton, Black & Klatt, of Peoria, for appellant; Kent J. Owens, of Chicago, of counsel.
    F. B. Brian, of Toulon, and Harry C. Heyl, of Peoria, for appellee; J. E. Richards, of counsel.
   Per Curiam;.

Appellee brings this suit against appellant in the circuit court of Peoria county, by her father as next friend, to recover damages for personal injuries sustained in and about the operation of a switch in connection with an electric motor, used to pump water from a well located on the premises upon which appellee resided with her parents.

The farm in question was located in Stark county. It was owned by Mr. Gleason of El Paso, Illinois. Appellee’s father, Mr. Kelley, had been the tenant on this farm since 1928. There was a water well on the premises for the purpose of furnishing water to the livestock and for domestic use by the family of Mr. Kelley. This well was operated by a windmill and by an ordinary hand pump. The windmill had become unsatisfactory through use, and Mr. Kelley was anxious to determine what the comparative cost would be between a new windmill and an electric motor, to pump the well. He met Webber and Owen, two of appellant’s representatives, on the street in the city of Wyoming, at which time he acquainted them with the above situation and discussed with them what would be the cheapest method to obtain the results desired. These men told him they would figure the matter up as to the probable cost of electric equipment and would let him know. Subsequently, they visited the premises in order to obtain the necessary information as to the size of the motor and pump needed. Mr. Kelley there advised them that he could make no arrangements for the purchase of same, as he was only the tenant, and they would have to see Mr. Gleason, the owner. About a week later, Mr. Kelley and Webber went over to El Paso and saw Mr. Gleason, who agreed to purchase and install the equipment necessary to pump the well by electricity. This was in November, 1932.

A small wooden pump house was constructed about the well, which housed the pump and electric equipment. The installation of the pump, motor, switch and electric equipment was made by the Bacon Electric Supply Company of Chillicothe, Illinois. After the equipment was installed, appellant company through some of its service men, set a meter in the pump house immediately above the switch box. The switch box was attached to the inside wall of the pump house, about five feet from the ground, and was a closed metal box with an iron lever or arm extending outside the box, for the purpose of engaging and disengaging the motor with the electric current. This operation was performed by pushing the iron lever or arm up or down, as the case might be. The installation of the equipment was completed and the electric current connected about December 1, 1932, at which time the pump was put in operation and has so continued from that time hitherto.

Appellee returned home from school on the afternoon of April 18,1935, at about the hour of 4:30. She was then 12 years of age. She and her brother were helping with the evening chores about the farm. During this time, the electric current had been applied to the motor, and the pump was in operation pumping water to a tank used for watering the stock. After they finished with this work, and at about 6:30, appellee went to the pump house to shut off the motor. She states that she had operated the switch many times. On this occasion when she pulled down the lever or arm to shut off the current, she says that the switch seemed to explode and that fire shot all over the pump house, whereupon she ran out into the open. Mr. Kelley saw appellee as she ran from the pump house. He states that the bottom of her skirt was afire; that he ran to the barnyard where she was and attempted to extinguish the fire from her skirt, hut that her underclothing was afire; that he called to the house for help, and they brought him a blanket, which he used to smother the fire the best he could. Appellee’s hands, face and legs were severely burned.

It is claimed on behalf of appellee, that natural gas escaped from the ground through the well in such quantities as to make the use of the electric switch dangerous, and that appellant with full knowledge of this condition, connected its electric current to the equipment in December, 1932, and continued to furnish such electric power from that time to April 18, 1935, the date of the accident. It is urged by appellee that appellant was negligent in this respect; that the type of switch to which it connected its electric service in this instance should have been placed upon the outside of the pump house; and that the only type of switch to which appellant should have connected its service inside the pump house was a type designated as a nonexplosive switch, the same being inclosed in a heavy metal or cast-iron box that is air-tight so that gas cannot become ignited by the throwing of the switch.

The switch and the electric equipment connected with the pump were installed by Sam Potter, who was an employee of the Bacon Electric Company. He denies that Mr. Kelley said anything to him about gas escaping from the well, and denies that he had any knowledge of such fact. The negotiations regarding the installation of the pump were had by Mr. Kelley and the owner of the land, with Fred Webber, a representative of appellant company. Mr. Dale Owen, another representative of appellant company, was present with Mr. Webber on some of the occasions. When Webber and Owen went to the premises to look the situation over in order to determine what size motor and equipment would be necessary to pump the well by electricity, they talked with Mr. Kelley. They deny that he said anything about gas coming from the well. They pumped the well by hand at that time and say they detected no odor of gas nor anything unusual about the water. Mr. Kelley advised them he could make no arrangements for the purchase of the equipment, and that they would have to see Mr. Gleason, the owner of the land. About a week later, Kelley and Webber went over to El Paso to see Mr. Gleason about purchasing electric equipment to pump the well, and do away with the windmill and the hand pump. Webber advised Mr. Gleason the approximate cost of the equipment. Mr. Gleason agreed to purchase same and it was later installed by the Bacon Electric Company, by its employee, Potter. Potter, Owen and Webber all deny they knew anything about gas escaping from this water well and deny that Kelley said anything to them about it. Kelley, however, claims that he told each of them about the gas both before the equipment was purchased and installed, and after such installation.

Mr. Gleason, the owner of the land, was agent for the Illinois Central Railroad Company at El Paso. He had been with this company for 30 years. He testifies about the visit that Mr. Kelley and Webber made with respect to presenting to him the proposition of installing electrical equipment for pumping the well. He says no one was present except the three of them; that they talked the matter over; and that he agreed to replace the windmill with the electric equipment. He says he does not remember Mr. Kelley saying anything about gas being in the well.

The evidence shows that the equipment was installed and put in operation about the first of December, 1932, and was continued in daily use thereafter. It was on April 18, 1935, that appellee in throwing the switch, sustained the burns resulting in her injuries. She was a child of some 12 years of age and did not know what caused her dress to catch afire, except she says that fire flew when she pulled the switch. Mr. Kelley continued to operate the switch as usual for several days after the accident, when he had an electrician put an auxiliary switch on the outside of the pump house. The switch inside the pump house was then left turned on and the switch on the outside of the pump house was used to control the current.

It is the position of appellee that gas had escaped from the water well and collected in the pump house to such an extent that when she threw the switch on the evening in question, the electric spark resulting from such act, ignited the gas, causing an explosion, which resulted in setting fire to her clothing, from which she sustained her injuries. There is no definite evidence of an explosion, from the condition of the building. It was a very common wooden structure, having one window and a door. The window remained intact, and the electric equipment continued to operate as before. There was no eyewitness to the occurrence and it is impossible to determine what caused appellee ’s clothing to become ignited, other than what inferences might be reasonably drawn from the facts and circumstances appearing in evidence. Appellant urges that even though gas had accumulated in the pump house from the well, and caused the injuries, yet that it had no notice or knowledge of the existence of such gas and had no reason to believe the same existed. The only property of appellant located in the pump house was the electric meter. The question of knowledge on the part of appellant is the primary question to be determined before the other points in the case become material.

The representatives of appellant and of the electric company who installed the equipment, all readily agree that had they known of the existence of gas coming from the well as claimed, the switch box would have either been located on the outside of the building, or a nonexplosive type of switch box would have been figured in the cost of the equipment, in the event the switch was desired to be located inside the pump house.

The evidence fails to show knowledge on the part of appellant that gas was escaping in the manner claimed, and the use of the equipment therefore dangerous. The fact that it had been in daily use from December 1, 1932 to April 18,1935, is a strong factor going to show that neither appellant nor Mr. Kelley had any knowledge that the use of the equipment was dangerous as claimed. The evidence shows that Mr. Kelley and his family used the switch daily over the above period of time in starting and stopping the motor for the purpose of pumping this well. The electric wiring and equipment in the pump house belonged to Mr. Kelley’s landlord. Appellant was in no way charged with the supervision or inspection thereof. We do not consider the evidence sufficient to show knowledge or cause for knowledge on the part of appellant, that the installation and use of the switch box in this case was dangerous as claimed. It is not claimed the switch box was in any way improper or defective, but merely that it was not the proper type to have been used where gas was present. The evidence, however, is that had the switch box been a nonexplosive type, or located outside the pump house, that when the switch was turned on to apply electric power to the motor, sparks would then ensue from the motor, regardless of what type of switch box might have been installed.

Appellant urges that it is the nature and tendency of escaping gas to rise in the atmosphere and spread itself over a room in approximately equal density; that before it would have come from this well and risen five feet from the ground, in sufficient quantity to have penetrated a closed switch box, surrounded an electric switch, and produced such an explosion as claimed, it would have spread itself over the entire room and the explosion would have manifested itself in a definite and destructive manner. Neither the pump house nor the equipment sustained any damage. Although appellee’s injuries are not in dispute, yet the exciting cause thereof is a matter of conjecture and presumption. Proof of a mere possibility is not sufficient. A theory cannot be said to be established by circumstantial evidence unless the facts are of such a nature and so related as to make it the only conclusion that could reasonably be drawn. It cannot be said one fact can be inferred, when the existence of another inconsistent fact can be drawn with equal certainty. The pumping equipment had been in daily use for nearly three years before the accident. Each time the pump was started or stopped, the electric switch was thrown. Subsequent to the accident, Mr. Kelley continued to use the switch, as had been his custom, until he later had an auxiliary switch placed on the outside of the pump house, when he closed the switch inside the pump house,, and thereafter used the outside switch.

On the question of knowledge and liability, this case is governed by similar rules of law as in suits against gas companies. Generally speaking, a gas company which does not own the pipes and appliances .in a customer’s building, and which exercises no control over them, but merely furnishes gas to be used therein, is not responsible for the condition in which such pipes and appliances are maintained, and consequently is not liable for injuries caused by a leak or defect therein, of which such company has'no knowledge. Middleton v. DeKalb, 168 Ill. App. 353. It is generally considered that unless the company has actual notice or knowledge of escaping gas, or is in possession of facts sufficient to put it upon notice thereof, the company cannot be deemed liable, though it may continue to furnish gas to such defective pipes or appliances. The owner or occupant of the premises is obliged to keep the pipe lines and equipment in repair or notify the company of their defective condition, otherwise the company is not liable for negligence. Reid v. Westchester Lighting Co., 236 N. Y. 322, 140 N. E. 712, 29 A. L. R. 1247.

In this case the fixtures and equipment were the property of the owner of the premises, and there was no contractual duty resting on appellant to exercise control over such fixtures and equipment. Under such circumstances, the consumer assumes the burden of inspecting and maintaining such fixtures and equipment on his property in a manner reasonably suited to meet the services to which they are to be put, and the company has the right to assume that these duties have been performed by such owner. Smith v. Pawtucket Gas Co., 24 R. I. 292, 52 Atl. 1078, 96 Am. St. Rep. 713.

The appellant’s business upon the premises at the time it installed the electric meter was solely for that purpose and for the purpose of making a connection between its power lines and the meter, so that power could be applied to the equipment installed by the owner of the premises. It does not appear that appellant’s employee who installed the meter had authority to do more than to make such connection and to see that the same permitted the proper flow of electric current to the owner’s premises. There is no claim here that the connections were not properly made and successfully used over a period of nearly two and a half years before the accident, or that they were not successfully used thereafter.

Appellee predicates her case upon appellant’s knowledge of the existence of this gas, which it is claimed rendered the use of the electric switch dangerous. It will be found in cases holding a defendant liable for similar injuries, that the defendant had notice and knowledge of the existence of the gas and did not use reasonable diligence to cut off such supply, with the result that injuries were sustained because of such neglect. The rule, regarding notice to the defendant being first necessary before a legal responsibility can arise in cases of this character, is recognized and adliered to in the case of Clare v. Bond County Gas Co., 356 Ill. 241. In that case the tenant of the building had reported to the defendant that he thought he could detect escaping gas. A representative of the defendant company made an examination of the premises, but could find no leak. Thereafter an explosion occurred.

There is insufficient evidence in this case tending to prove knowledge on the part of appellant as claimed. The judgment is therefore reversed and the cause remanded.

Reversed and remanded.


author: Mr. Justice Wolfe

text:
    James B. Sheean, Appellee, v. Frank R. Beil, Administrator of Estate of Charles A. Powell, Deceased, Appellee. Einar Carlson, Executor of Estate of William O. Powell, Deceased, Appellant.
    Gen. No. 9,378.
    Opinion filed April 20, 1939.
    Rehearing denied May 22, 1939.

      Harry C. Tear, of Galena, and George T. Simpson, of Minneapolis, Minn., for appellant.
    Donald M. Eaton, of Galena, for appellee.
   Mr. Justice Wolfe

delivered the opinion of the court.

Mr. James B. Sheean, an attorney of Galena, Illinois, filed a petition in the circuit court of Jo Daviess county, Illinois, asking that the court declare that he have a lien on certain funds in the estate of William Powell, deceased. The petition alleges that Mr. Sheean was a legally qualified practicing attorney in Jo Daviess county, Illinois; that he had entered into a contract with William Powell, now deceased, to contest his brother’s will, and that he was to receive in payment, for his services, one-half of the amount realized from said contest, and all costs advanced by him, in the prosecution of the suit; that he did file said suit, and prosecuted it to a successful conclusion, and the will was set aside on the ground of undue influence; that a part of the cost of prosecuting said suit amounted to $1,215.97 and that a reasonable fee for the services rendered in prosecuting said suit was $4,062.17; that no part of which had been paid; that all of the assets of the Powell estate amounting to $9,340.37 was paid to Frank Beil, who is administrator of the Charles A. Powell estate; that Frank R. Beil now is in possession of $5,278.14, and that on November 24, 1934, the petitioner served notice of his attorney’s lien on Joseph Williams, the executor of Charles Powell estate, and January 5, 1938, a like notice was served on Frank R. Beil, administrator of the estate of Charles A. Powell, deceased, and claimed a lien for 50 per cent of the amount received in said will contest, and the cost and expenses advanced by him in the total amount of $5,278.14.

The defendants filed an answer to this petition, in which they admitted that Mr. Sheean was an attorney at law, at the time of the death of Mr. Powell, but denied the other material allegations in the petition. The case was heard before the court without a jury, who found the issues in favor of the petitioner, and declared a lien against the trustees of the estate of Charles Powell, deceased, as prayed for in the petition. It is from this order that this appeal is prosecuted.

The appellee, who is plaintiff below, has filed herein motions to dismiss the appeal. The first motion is, that the appellant does not have such an interest as would give him the right to intervene herein and prosecute this appeal; and that he is not an adverse party, as disclosed by the record in this case. In view of the second motion, which we will consider, we do not deem it necessary to pass upon the first motion, as the second motion disposes of the case.

The second motion is to strike from the record, that part thereof, “purporting to be a copy of the testimony and proceedings of the trial court.” Appellee assigns the following reason therefor, viz. ‘ ‘ That the trial court did not certify that said purported copy of the testimony contained all of the evidence, or testimony received in the trial.” The judge’s certificate recites as follows: “This is to certify that the above and foregoing testimony was taken down in shorthand by the official court reporter at the hearing in the above entitled cause, on April 4, and 5, and May 18, 1938, in the Circuit Court of Jo Daviess County, Illinois, and that the same was by him correctly transcribed. ’ ’ A casual examination of this certificate disclosed that all that the judge certifies to, is that the testimony was taken down in shorthand on certain days, and was correctly transcribed by the reporter. Whether this was all of the evidence taken, no one knows. The record does not show that the hearing of the evidence was concluded, or that either side rested their case. There is no court reporter’s certificate that the testimony taken is all of the testimony, and that the same is a true and correct copy, as transcribed by him. Our courts have frequently held, that such a certificate of the judge is fatally defective on appeal. There was a dispute of fact in this case, and the appellants now contend there is not sufficient evidence in the record to sustain the judgment. In the case of Sutton v. Board of Education, 259 Ill. App. 193, the court there states the law to be, that where the bill of exception does not purport to contain all of the evidence, the verdict of the jury will not be questioned, and a certificate of the court reporter, that the bill of exceptions contains all the evidence, is not sufficient for that purpose. People v. Clark, 298 Ill. 170. To the same effect is Siegle v. Mitchell, 249 Ill. App. 116; Cogshall v. Beesley, 76 Ill. 445. The court held where a bill of exceptions fails to show that it contains all of the evidence, this court will not decide whether the evidence it does contain, supports the verdict. The reporter’s certificate at the foot of the testimony, that it contained all the evidence, will not answer. The judge who tries the case must so certify.

In the case of Henry v. Halloway, 78 Ill. 356, we find the following: “Where the bill of exception fails to show that it contains all the evidence introduced upon the trial in the court below, it will be presumed on appeal to the Supreme Court, that other testimony was heard, and that the evidence before the court was sufficient to authorize the judgment rendered.” To the same effect is the case of the Board of Trustees v. Misenheimer, 89 Ill. 151. Also People v. Nelson, 320 Ill. 273. The appellant was served with notice of appellee’s motion, but has not seen fit to cite any authority that is opposed to the ones cited by the appellee. If there is any such case, we have not had the opportunity of examining it.

The motion to strike the purported copy of the testimony of the proceedings in the trial court is hereby sustained. The same is stricken, and the judgment of the trial court is hereby affirmed.

Affirmed.


text:
    Richard H. Saunders and Walter S. Saunders, Appellants, v. Frederick R. Saunders et al., Defendants. D. E. Branstetter et al., Appellees.
    Gen. No. 9,413.
    Opinion filed April 20, 1939.
    Rehearing denied May 22, 1939.
    Frank E. Maynard, of Rockford, for appellants.
    Smith & Menzimer, of Rockford, for appellees.
   Mr. Justice Wolfe

delivered the opinion of the court.

Lillian F. Saunders was the owner of a farm in Winnebago county, Illinois, which she and her husband, Frederick B. Saunders, for $1.00 and other valuable considerations, conveyed and quitclaimed to Bichard H. Saunders and Walter S. Saunders. After the description of the land conveyed and the clause waiving homestead and dower in said premises, the following words appear, “The aforesaid Grantors hereby expressly reserve unto themselves the use of the above conveyed premises for and during the time of their natural lives.” This deed was executed on January 24, 1927. On February 1, 1927, Lillian F. Saunders died leaving her husband, Frederick B. Saunders and her two sons, Bichard IT. and Walter S. Saunders, as her only heirs at law. Since the death of his wife, Frederick B. Saunders lived with Walter S. Saunders on the said farm until 1936, when he went to California. Winifred Hills and others in the year of 1933, foreclosed a mortgage on certain property owned by Frederick B. Saunders and obtained a deficiency decree in said proceedings in the sum of $535.07. Execution was issued upon this decree, levy was made upon the premises, formerly owned by Mrs. Saunders, on the theory that Frederick B. Saunders had a life estate in the lands conveyed to his two sons. The sheriff sold all of Frederick B. Saunder’s right, title and interest in and to said lands, to D. E. Branstetter, agent for the parties who had held the deficiency judgment.

Bichard H. Saunders and his brother, Walter S. Saunders, filed a suit in equity in the nature of a bill to quiet title to the farm in question. The complaint alleged the foregoing* facts and claimed that the plaintiffs were the owners in fee simple of the lands in question, and that after the death of Lillian F. Saunders, Frederick B. Saunders had no right, title or interest of any kind, to the premises in question. The defendants, who were the interested parties in the deficiency decree, filed their answers alleging that Frederick B. Saunders had a life estate in said premises created by the deed of Lillian F. Saunders to the plaintiffs. The case was tried upon a stipulation of fact, before the court, without a jury. The court found the issues in favor of the defendants, and that Frederick R. Saunders, as the surviving husband of Lillian F. Saunders, deceased, has a life estate in the premises in question. A decree was entered in conformity with the court’s findings, and from this decree, the appeal is prosecuted to this court.

The question arises, what interest, if any, did Frederick R. Saunders have in the premises in question, after the death of his wife, Lillian F. Saunders? The legal effect given to the words used in the deed as attempting to create a life estate in the premises for Lillian F. Saunders and her husband, Frederick R. Saunders, decides the issues in this case. It is seriously contended by the appellees that these words are sufficient to create a life estate in the husband on which life estate they could make a valid levy and sale after the death of the wife, and that they are entitled to the possession of the premises as long as Frederick R. Saunders lives.

The appellees cite one case on which they base this contention, namely; DuBois v. Judy, 291 Ill. 340, 344, in which it is said, “Strictly, a reservation in a deed is some right in favor of the grantor created out of or retained in the granted premises. A purported reservation in favor of a third person can only take effect as a grant to him by way of exception to the other grant and in such case, there must be words of conveyance to the third person, except that a grantor may reserve to himself and his wife an estate during their natural lives, which will continue during* the life of the survivor.” In support of this statement, the Supreme Court cites the case of White v. Willard, 232 Ill. 464. From our examination of these two cases, we are led to the conclusion that the statement by the court does not decide the point in issue in the case that is now before us, but is by way of dictum. The language used by the learned court in these decisions would tend to establish the rule that a life estate could be created. In the same volume of reports as the DuBois case, is Bullard v. Suedmeier, 291 Ill. 400. Our Supreme Court had occasion to consider a similar question to that we have before us. The deed in that case contained this clause, “This conveyance shall not take effect during the lifetime of the grantor, Christian Suedmeier and Anna Margaret Suedmeier.” In the Bullard case, as in the present case, the owner of the land, the grantor, died before his spouse who claimed a life estate in the conveyed premises. The trial court found that the widow did not have a life estate in, or the use of the premises.

A similar case arose in the State of Missouri, namely; Lemon v. Lemon, 273 Mo. 484, 201 S. W. 103. Joseph R. Lemon was the owner of property and he and his wife, Nannie A. Lemon, conveyed certain premises to Alphonso V. Lemon. It is stated in the deed that Nannie A. Lemon does not intend in any way to relinquish her right to her dower and homestead in said premises, should she survive her husband, Joseph R. Lemon. Later, in the deed after the parties agreed to warrant and defend the title, etc., we find the following : “Reserving* however, a life estate in the above described property. In other words, the estate and remainder is the estate intended to be conveyed to second party and the first parties Joseph R. Lemon and Nannie A. Lemon, and to have the use and profit of said place as long as both or either of them is living.” Joseph R. Lemon died leaving his widow, Nannie A. Lemon, who claimed a life estate in the conveyed property. The court held that the widow did not have a life estate in the conveyed premises and in doing so used this language: “She was in the last analysis a useless party to this deed, having, as we have seen expressly disavowed in the deed itself, the only reasons for which she was or could have been a necessary party grantor. If she had not executed this deed at all, the situation would have been in no wise different. But while she conveyed nothing by this deed (having disavowed her intent to convey any part of either of the two inchoate or contingent interests which she actually possessed) she took nothing by it. For by the terms of the deed she was not a grantee, but a grantor, and, moreover, the words of the deed are words of reservation, or of exception, and not words of grant. In order for defendant to take anything by this deed, she must either (a) have had the estate herself beforehand and reserved it or had it reserved for her in this grant, or (b) her husband (who actually had it) must have conveyed it to her by this deed. Since the first condition did not exist and the second never happened, defendant took nothing, and there was reserved for her nothing beyond what she had already. (Shelby v. Railroad, 143 Ill. 385, 32 N. E. 438; Illinois, etc., Railroad v. Indiana, etc., Railroad, 85 Ill. 211.) Her husband, who owned the land, reserved for himself therein the rents and profits and excepted therefrom a life estate, and attempted to reserve and except for defendant a similar estate and interest for her life. But unfortunately he reserved it in himself, and did not convey, nor has he ever conveyed, it to defendant. This estate pur autre vie remained in Joseph B. Lemon till his death, and defendant never owned it, nor did she take it by grant; hence she has never had it, and cannot now claim it.”

In the case of Legout v. Price, 318 Ill. 425, the sufficiency of language used in attempting to create a life estate was involved. Julian Legout conveyed land to the heirs of . his son Adolphus Legout and attempted to create a life estate for Adolphus Legout in the conveyed land. The provision of the deed is as follows: “Provided always that Adolphus Legout may retain the possession of, and have the use of the lands above conveyed during his lifetime. It is also understood and agreed that the said Julian Legout do hereby reserve during his lifetime the rent off all the land herein conveyed that is now cleared and in cultivation except the sand hills. ” The court in discussing the sufficiency of this language to convey a life estate to the son, Adolphus, have this to say: “The deed contains no words purporting to convey an estate to Adolphus. It purports, first, to grant the land to the heirs of Adolphus in fee simple, and this grant is followed by the proviso, ‘that Adolphus Legout may retain the possession of and have the use of the lands above conveyed during his lifetime. ’ These words do not convey an estate or purport to do so.". . . The words ‘give, grant, bargain and sell’ are frequently employed and are sufficient in any class of conveyances. Other words frequently used are enfeoff, release, alien, assure and convey. Though none of these formal technical words may be necessary, it is necessary that the conveyance contain words purporting to transfer the grantor’s interest. The words ‘ shall have and be entitled to at and after the death of the party of the first part’ are not sufficient; . . . nor the words, ‘sign over’; . . . nor the words ‘warrant and defend.’ . . . The declaration of the grantor in a deed that he makes a quitclaim deed to the grantee, accompanied by a description of the land, is not enough. . . .

“The object of a proviso is to except something out of . the general terms of the grant, statute or other instrument to which it may be attached, and this was the effect of the proviso in Julian Logout’s deed, — to except the use of the lands during the lifetime of Adolphus Legout from the conveyance to his heirs, but it did not purport to convey that use to him. If the proviso is regarded as a reservation it is of no effect to pass the title to Adolphus. A purported reservation in favor of a third person can only take effect as a grant to him by way of exception to the other grant, and in such case there must be words of conveyance to the third person. . . . The words ‘retain and have the use of’ do not purport to convey anything, and the instrument cannot be regarded as conveying a life estate to Adolphus.”

In the case before us, the only interest that Frederick R. Saunders had in the premises at the time of the execution of the deed was a homestead or inchoate right of dower. By his deed, he conveyed that right away. Lillian F. Saunders did reserve unto herself a life estate in the premises, and during the life of the wife, Frederick R. Saunders had a life estate, but at the death of" Lillian F. Saunders, all right, title and interest that Frederick R. Saunders had in the premises were extinguished.

It is our conclusion that the court erred in finding that Frederick R. Saunders had a life estate in the premises in question. The other questions raised by the appellant are immaterial, because they have no basis if Frederick R. Saunders did not have a life estate in the premises.

The decree of the circuit court of Winnebago county is hereby reversed and the cause remanded.

Reversed and cause remanded.