text:
    John D. Ames, Executor of the Last Will and Testament of Knowlton L. Ames, Deceased, et al., Appellants, v. Henry W. Farnum et al., Appellees.
    Gen. No. 38,153.
    Opinion filed April 22, 1936.
    Walter W. Ross, of Chicago, for certain appellant.

      Wilson & McIlvaine, of Chicago, for appellees; J. F. Dammann and W. P. Gilbert, both of Chicago, of counsel.
   Mr. Presiding Justice Hall

delivered the opinion of the court.

This is an appeal from a judgment of the circuit court of Cook county, allowing a claim against the estate of Knowlton L. Ames, deceased, in the sum of $379,561.65. The cause was tried by the court without a jury, on appeal from the probate court of Cook county. The hearing was had on an amended claim filed in the probate court by Farnum, Winter & Company, stockbrokers, a copartnership, consisting of Henry W. Farnum, Wallace C. Winter, Jesse Spalding, Paul E. Gardner, Herbert L. Jones, John Coleman, Jr., John Tucker, Vaughn C. Spalding and James M. Sheldon, doing business as Farnum, Winter & Company. The claim as filed, was for $360,000, and was based on an account stated between Farnum, Winter & Company and Knowlton L. Ames, decedent, 'of date May 31, 1931. By the account stated, Ames acknowledged himself indebted to the plaintiffs in the sum of $420,237.46. After hearing a large amount of testimony, the court allowed the claim for the amount mentioned, which included interest in the sum of $19,503.16, from January 31, 1932. No question is raised as to the amount of the judgment.

Ames’s bookkeeper, who was produced by plaintiffs, testified that on May 31, 1931, the date of the account stated, Ames’s books showed that he was then indebted to the claimants in the sum of $420,237.46.

It is not claimed by the defendants that Ames in his lifetime did not acknowledge in writing, his debt to the claimants in the amount mentioned. The claim of defendants is that the transactions between Ames and the claimants, upon which the claim is based, were gambling transactions, within the meaning of sections 130 and 131, paragraphs 308 and 309, chapter 38, Ca-hill’s Illinois Revised Statutes, 1933, and were, therefore, illegal and void, and that no recovery could be predicated upon them.

The auditor of Farnum, Winter & Company testified that he prepared a statement of the account of Ames with claimants as of May 31, 1931, and mailed it to Mr. Ames, who returned it to the plaintiffs with an acknowledgment of its correctness and signed by Ames. The document, signed by both parties, is as follows:

“Farnum, Winter & Co.

120'West Adams St.

Telephone Randolph 8910

May 31, 1931

“K. L. Ames,

“In connection with the audit of our books and accounts as of this date, please verify the correctness of your account as shown by statement hereto attached, noting any exceptions thereto, and returning signed acknowledgment in enclosed stamped return envelope.

“Very truly yours,

“Farnum, Winter & Co.

Debit Balance $420,237.46 Credit Balance $ LONG 10130 Murray 6600 Booth Fish Pfd. 20000 Booth Fish Comm. SHORT

“Farnum, Winter & Co.,

Chicago.

“The money balance and security position of this account is correct as shown above.

“Sign here K. L. Ames”

The record shows that subsequent to the making and execution of the statement of account, there were no transactions between the parties, other than the sale of certain securities held by claimants as security for moneys due them from Ames. Such sales were made by the claimants in accordance with an authorization given by Ames of date June 10, 1931, as follows:

“I hereby authorize you to sell any of my securities which you are carrying in my account at any price which you may think is the best to he obtained under the conditions at the time. I hereby assume full responsibility for the balance due you after disposition of these securities.”

These sales were subsequently approved in writing by Mr. Ames, and he received credit for the proceeds thereof. Prior to the execution of the account stated, claimants received a letter from Ames, which was sent after Ames received word that the complainants were selling certain stocks held by them as security for monies owed to them by Ames, dated June 15, 1931, as follows:

“I think you have been very decent and generous in carrying the stock as long as you have, and, of course, did it with the idea of helping you work out the balance due you through an advance in the Murray stock. I authorized Mr. Winter of your company in the spring of 1930 to sell all of my Murray at that time as he might think best, and as I recall about 800 to 1,000 shares were sold at twenty-five and the sales were discontinued. . . . I am not writing you for any personal consideration because your firm has given me more consideration than I deserve, but if I were writing you regarding someone else under the same conditions I could not help but suggest to you that perhaps, all things considered, the best way to collect an indebtedness similar to mine would be to continue to carry the stock if you can possibly see your way clear to do it, and this would be my suggestion no matter who it might be in the same position. Tour explanations, however, are just as reasonable as mine and are more important and vital to your own interests than mine are. Of this no one can be a better judge than yourselves. Please remember that I am mailing no complaint and only a suggestion. I, of course, am exceedingly sorry about the condition of my account and about the conditions which make you decide to sell the sto«k, and my appreciation and gratitude of your friendliness is not and cannot be changed by anything you find necessary to do, and I give you the right to do it without any recourse on my part whatever.”

The claim that the transactions between the parties were gambling, and, therefore, contrary to law and in violation of the statute, is based on the charge that none of the transactions between Ames and Farnum, Winter & Company were intended to be, or were, settled by actual delivery of stocks bought or sold, but by the payment of differences in market prices, and that certain agreements with reference to a “Murray Syndicate” were in violation of the statute, and evidenced the intention of Farnum, Winter & Company that there should be no delivery of stocks bought or sold, but merely a payment of difference of market prices.

At the time of the transactions in question, Knowlton L. Ames was a man of mature years, was prominent in a number of large business enterprises, including a newspaper known as the Chicago Journal of Commerce. Ames and Farnum of the claimant firm had been friends for many years, and Ames had engaged in the purchase and sale of securities through this firm and other firms for upwards of 20 years prior to his death, and his dealings in such commodities during all this time are shown to have been very extensive.

Henry W. Farnum, a member of the claimant firm, was produced as a witness by the defendant. His testimony was to the effect that Ames became a customer of the firm some twenty years prior to the date of the trial. It is here to be noted that among the stocks dealt in between Ames and the claimants, were those of the Murray Corporation of America and the Murray Body Company. Farnum testified to the effect that he became a director of the Murray Corporation .of America in the year 1927, and that such corporation was listed on the New York Stock Exchange on January 26,1927; that the business of this company was the building of automobile bodies; that during the year 1927, many shares of stock of the Murray Corporation of America were transferred through his firm.

Farnum testified as to the purchases and sales of stocks of various sorts, made by Ames through claimants; that various purchases, sales and deliveries of these stocks were made through the claimants on orders from Ames, and that in each of such transactions there was immediate delivery of the stock certificates. Other transactions between the parties testified to by Farnum were those of purchases and sales of stock made through the New York Stock Exchange. He testified to the effect that when Ames placed an order with his firm, that the order was noted on their books and by wire transmitted to the New York office of the claimants; that the order was executed on the floor of the New York Stock Exchange, and if there was a purchase of stocks, the purchase was made there, and under the rules of the exchange, that there had to be an actual delivery of the stocks within two days of the date of the sale, and that all such deliveries were made. The evidence indicates that in some cases, stock so purchased by Ames was given into his physical possession, but that in most cases, they were held by the claimants as'security for balances then owed by Ames to them, and that claimants frequently, under the regular course of procedure followed by brokerage houses under such circumstances, pledged these stocks with banks, so that the banks carried the amount of Ames’s indebtedness instead of it being carried by claimants. In many instances on Ames’s own order, stocks held by claimants as security for balances owed by Ames to complainants, were ordered transferred by Ames to certain banks, who became Ames’s creditor, and these banks in turn took up the balances owed by Ames to the claimants. It is also in evidence that by the books of complainants, it is shown that in all instances of purchases or sales made by Ames through brokers, they were made on Ames’s orders, and the stocks involved were actually transferred. One of the accounts carried by claimants on their books of the Ames transactions was known as the “K. L. Ames Option and trading account” and it is insisted by defendants that the very title of this account is evidence of the fact that the deals were made on options, and that, there was no intention of delivering any stocks, but that settlement would be made on balances. The record shows that this account was kept in this way by Ames’s direction, because of the fact that he had instructed the firm of Thomson & McKinnon to buy certain stocks in the name of “K. L. Ames Option and trading account.” Ames told plaintiffs that he desired the account kept in this way because he wanted “to keep this account separate, as I have some stock to deliver on an option which I gave.” There is nothing to show that claimants had anything to do with any such “option,” if such there was.

In further explaining the deals between the parties, Farnum testified that Ames had many accounts with the claimants, and the books of the firm identified by Farnum show many purchases and sales of various stocks. He testified that Ames began trading with the firm in December, 1927; that various purchases, sales and deliveries of stocks were made through claimants on orders from Ames; that in all cases of purchases of stocks made by the claimants for Ames through the New York Stock Exchange, the stocks were delivered to either the New York office of claimants, or to their agent in New York; that Ames did not at all times pay in full for the stock that was purchased by him, and that whenever he did not pay in full for the securities, the claimants, as already stated, borrowed money from banks for his account, and charged him interest on it; that when they borrowed from the bank, they did not borrow in the name of Ames, but in their own name; that Farnum, Winter & Company first became interested in the Murray Body Corporation in 1924; that they purchased 45,000 shares of the Murray Body Corporation in 1924, none of which was sold to Ames; that thereafter Ames and his associates acquired a quantity of shares in the Murray Body Corporation and Ames became a director in the company, and at that time claimants had sold all of the shares of the company with which they had do to. He testified to the effect that his firm were members of the New York Stock Exchange during all the period when they were acting as brokers for Ames; that there was a rule of the exchange in force at that time with reference to making delivery of stocks that were purchased for customers, which was that they be delivered the next day by the seller to the buyer; that that is done through the Clearing House, which is simply a method of making it easier for the houses to deal, to deliver securities and pay for them; that if his firm purchased a number of shares for a customer, and if they sold another number of shares for a customer today, and purchased more than they sold, they would put a slip into the Clearing House showing the net transactions in that security for that day; that if they purchased more than they bought, they would accompany the slip with a check; if they sold more than they bought, they would make a claim on that slip and would receive a check from the Clearing House; that the certificate of stock would be delivered by the Clearing House to the purchaser, that is, if they bought more than they sold; that if they bought 1,000 and sold 800 shares they would have 200 delivered to themselves; that here is what they would do to take care of the other 800 they had bought for clients — his account would be charged with the 1,000 shares just as though they had sold no stock at all, and the customer selling 800 shares would receive credit for 100 as though they had bought no stock at all. To further illustrate the method pursued by claimants in connection with transactions on the New York Stock Exchange, the witness testified as follows: “Suppose we had a number of purchases equal-ling 1,000 shares, and we had a number of sales equal-ling 800 shares, then the Clearing House would have delivered us only 200 shares. As to the other customers that made up the other 800 that were bought, their account would be treated exactly as though there had been no clearing house. They would get the 800 that had been sold. The actual certificates for all the 1,000 shares would be held to the account of those who had purchased. A record of every certificate is kept in our record books. As to Mr. Ames’s account, whether the shares had been bought or sold by our firm or not, the record is clear on the subject of the number of the certificate which is bought for each customer. That would be kept in the record of the clearing house as a sale. I do not know whether the record of the certificate that was caused to be delivered would be kept on the record of the clearing house, but it certainly would be in our record. There is a difference between receiving an order to be filled in a security listed on an exchange if we received an order to be filled it must go to the exchange; it does go to the exchange; it is filled there, but we may receive instructions from a customer to take over from a bank 1,000 shares of this stock for so much money; we may receive instructions from a customer to take over from another house in our business or from whomsoever he pleases securities at a price, .as taken over and accounted for, that .is quoted by the man filling the order. There is one item here of 1,000 shares which evidently was not transacted on the Stock Exchange, but where we took over 1,000 Murray Company for about $45,000 for Mr. Ames’s account on his instructions. From whom that was taken,' I could not say without looking into the record, but the record will show. There was an absolute delivery of 1,000 shares. Our record will show the certificate number of each one of those, but with reference to the others, except that one, all of them were orders filled on the Stock Exchange. Yes, they were all filled. I can tell that they were filled because when any item appears on these statements ‘received’ that means that it was not an order completed on the Stock Exchange. Where we received or delivered the shares and that is marked ‘received’ for so much money, that means it was not shown because no price is put against it. But in those cases, we received the actual certificates. With reference to all of these other transactions that were filled in every case where the orders were filled on the exchange, deliveries were taken by us of the certificates of stock. They were held by us subject to the order of Mr. Ames. The certificates were either in our possession and at the bank, or with an agent, where we had put them.” While testifying, this witness had claimants’ books before him, and he testified to the effect that the books of claimants show an account of every certificate of stock bought or sold on Ames’s account, and that Ames made á profit in the Murray Body transaction of around $80,000. He further testified that claimants had no interest in the Murray Body Syndicate; that prior to that time, they had bought 45,000 shares of this stock from Eastman, Dillon & Company; that the records of the claimants show the purchases of the Murray Body stock for Mr. Ames from the time of the original purchase made for his wife in 1927, and it is in evidence that they, as his brokers, always had the certificates of stock for Mr. Ames’s account, and that it was a fact that they did have such certificates, either in person, or pledged to the bank.

There is nothing in the record to dispute the testimony of Farnum to the effect that the stocks bought and sold were actually delivered, except that of Louis J. Berg, who was bookkeeper for Ames during all the times in question, and who testified that he received month to month statements of Ames’s accounts from the claimants, and that he checked them and put them on the books, and filed them away. He testified as to many purchases and sales of various securities made for and on account of Ames through these claimants from April, 1928, to October 21, 1929, and that as to most of them, Ames’s books showed that no deliveries were made to Ames of any of these stocks.

It may well be that this is true, and that there were few actual physical deliveries of the stock to Ames, for the reason, as the record indicates, that Ames owed these brokers large amounts of money, for which the stocks were pledged and for which they were held as security. There seems not to have been any balancing up, or settlement made between the parties, but when the transactions were closed, Ames admitted that he owed claimants upwards of $420,000.

As stated, it is insisted by defendants that certain persons entered into an illegal syndicate, or pool, in an attempt to corner the market, or elevate the price of the stock of the Murray Body Corporation, and that such agreement was illegal and is evidence of the character of the transactions between Ames and the claimants. While the record shows that Ames was a party to such a pool which was organized for the purpose mentioned, there is no evidence to indicate that the claimant firm had any connection with this pool. While it is shown that one Spalding, a member of the claimant firm, was a party to this agreement, having for its object the boosting of the stock of this corporation, as claimed by defendant, the record indicates that all the transactions in connection therewith were had through New York stockbrokers. Further, the record clearly indicates that no transaction involving this so-called “Murray Syndicate” had any connection with any of the items mentioned in the account stated, upon which this action is brought. While the statement submitted by claimants to Ames mentions “Murray” as one of the items on which Ames was indebted to claimants, there is nothing to show that this purchase was not made for Ames in the regular course of his business with claimants, as testified to by Farnum.

Pars. 308 and 309 of the' Criminal Code, Ill. State Bar Stats. 1935, ch. 38, upon which the defense here is predicated, are as follows:

“Whoever contracts to have or give to himself or another the option to sell or buy, at a future time, any grain, or other commodity, stock of any railroad or other company, or gold, where it is at the time of making such contract intended by both parties thereto that the option, whenever exercised, or the contract resulting therefrom, shall be settled, not by the receipt or delivery of such property, but by the payment only of differences in prices thereof, or whoever forestalls the market by spreading false rumors to influence the price of commodities therein, or corners the market, or attempts to do so in relation to any such commodities, shall be fined not less than $10 or more than $1,000, or confined in the county jail not exceeding one year, or both; and all contracts made in violation of this section shall be considered gambling contracts and shall be void. ’ ’

“All promises, notes, bills, bonds, covenants, contracts, agreements, judgments, mortgages, or other securities or conveyances made, given, granted, drawn or entered into, or executed by any person whatsoever, where the whole or any part of the consideration thereof, shall be for any money, property or other valuable thing, won by any gaming, or playing at cards, dice, or any other game or games, or by betting on the side or hands of any person gaming, or by wager or bet upon any race, fight, pastime, sport, lot, chance, casualty, election or unknown or contingent event whatever, or for the reimbursing or paying any money or property knowingly lent or advanced at the time and place of such play or bet, to any person or persons so gaming- or betting, or that shall, during such play or betting, so play or bet, shall be void and of no effect.”

In Pelouze v. Slaughter, 241 Ill. 215, a woman named Thompson had bought and sold stocks through the brokerage house of Slaughter & Company of Chicago. Subsequent to her death, suit was brought against Slaughter & Company by her executors to recover possession of stocks held by them, and the executors based their right of recovery upon the charge that such stocks were received by Slaughter & Company through gambling transactions between Slaughter & Company and Mrs. Thompson. The defendants, Slaughter & Company, presented a cross-bill, in which it is alleged that Mrs. Thompson was indebted to them on account of purchases of stocks which were only partly paid for, and against which indebtedness to them and as security for the same, defendants held the stock which she sought to recover in her suit. In the cross-bill, it was also alleged that the stocks had been sold, leaving a balance due cross complainants, and that the debt of Mrs. Thompson amounted to the sum of $13,000, which they sought to recover in their cross-bill. From the statement of the case, it appears that the facts in that case were similar to those in the case at bar. Upon a hearing, the court dismissed the original bill and granted the relief prayed for in the cross bill. From the decree an appeal was prayed to the Appellate Court of the First District, where it was affirmed,- and the Supreme Court affirmed the Appellate Court. In its opinion, the Supreme Court said:

“On the question whether the purchases and sales of stocks made by'appellees on specific orders of Mrs. Thompson and the purchases and sales reported to and ratified by her were gambling transactions, the burden of proof was on the appellants. (Clews v. Jamieson, 192 U. S. 461.) . . . Circumstances which would lead to the conclusion that the intention of parties was to settle on differences in market value at the time for delivery would not justify a belief that there was such an intention where stocks were actually sold, delivered and paid for.”

We are of the opinion that defendant has failed to establish the fact that the transactions here were in violation of the statute, and we find nothing in the record which would justify a reversal of the judgment. Therefore, the judgment is affirmed.

Affirmed.

Hebel, J., and Denis E. Sullivan, J., concur.


source: Caselaw Access Project

author: Mr. Presiding Justice Hall

license: Public Domain

text:
    Boyne Platt et al., Appellees, v. Joe Fischer et al., Defendant. Appeal of Joe Fischer, Appellant.
    Gen. No. 38,195.

      Opinion filed April 22, 1936.
    nied May 5, 1936.
    Dana R. Simpson, of Chicago, for appellant; James V. Kenny, of Chicago, of counsel.
    Theodore A. Kolb, of Chicago, for certain appellees.
   Mr. Presiding Justice Hall

delivered the opinion of the court.

This is an appeal from a decree of the circuit court of Cook .county, in and by which defendant, Joe Fischer, is permanently enjoined from the prosecution of an action at law pending in the superior court of Cook county. The action at law in the superior court, the prosecution of which is enjoined by the order of the circuit court, was begun on March 6, 1933. In the declaration filed therein, which was offered and received in evidence in the instant case on behalf of complainant, plaintiff recites inter alia that on the 12th day of May, 1926, defendants in that suit, — the plaintiffs in the instant case, — namely, Boyne H. Platt, Henry B. Pritz, Clifford Older, William G. Mawhinney, Fred Oswald, Margery Jane Consoer, H. B. Stoltze, R. A. Smith, Fred Consoer, Grace A. McLeod and Ruth Kent, created and established a certain land trust, known as Trust No. 1274, with the Union Bank of Chicago, as trustee, holding title to certain real estate for them; that the defendants employed Bert H. Laudermilk Realty Association as their agent for marketing and selling certain lots described in this land trust; that the Bert H. Laudermilk Realty Association entered into a written contract with the plaintiff dated March 31, 1927, which contract is set forth in full in the declaration filed, and is in substance as follows: The Bert H. Laudermilk Realty Association, as agent for the property, of which the Union Bank of Chicago is trustee under an agreement designated as “Trust-No. 1274,” agreed that the realty association would cause to be conveyed to Joe Fischer by the Union Bank of Chicago, as trustee, certain real estate described in the contract, together with a guarantee policy of title to be issued by the Chicago Title & Trust Company, or a certificate of title to be issued by the Registrar of Titles of Cook county, Illinois, upon the payment by Fischer to the Laudermilk Realty Association of certain amounts therein specified. The payments to be made by Fischer under the terms of this contract were to be made in instalments covering a period of time, and during this time, and until he received his deed upon making the payments agreed to, Fischer also agreed to pay any general taxes or special assessments that might be levied against the property. It is further alleged in this declaration that Fischer made all the payments required of him to be made under the terms of the contract, which included the price to be paid for the property, together with certain taxes and special assessments levied, which amounted in all to the sum of $2,373.95; that after making such payments, he demanded a deed, together with a guarantee policy from the Laudermilk Realty Association, which was acting, as agent, for the defendants, but that .the Lauder-milk Association had failed and refused to give such a deed and guaranty policy, and he, therefore, prayed judgment for the amount of these payments.

The record discloses that the contract called trust agreement No. 1274, entered into between plaintiffs here and the Union Bank of Chicago, is dated May 12, 1926, and describes certain real estate, of which the property agreed to be conveyed to Fischer is a part, and provides generally that in view of the fact that the Union Bank of Chicago is about to take title to this real estate, that when it has so taken title, it will hold it for the ultimate use and benefit of the persons named as defendants in the suit at law in the superior court — the plaintiffs here — according to certain designated interests in the land which was subsequently conveyed to the Union Bank of Chicago, as trustee, in accordance with the terms of this agreement. In- this contract with the Union Bank of Chicago, - it was further agreed that the interest of any of the persons mentioned should consist solely of a power of direction to deal with the title and the right to receive the proceeds from rentals or sales of the land described; that in case of the death of any beneficiary, his right and interest should pass to his or her executor, and not to his or her heirs at law; that none of the beneficiaries had any right, title or interest in the real estate, but only an interest in the proceeds to be derived therefrom, and that it was the intention of the instrument to vest the legal and equitable title in the premises in the trustee. It is also provided in this agreement with the Union Bank of Chicago that while the bank is the sole owner of the real estate in so far as the public is concerned, and has full power to deal with it, it is to be understood and agreed that the bank would deal with the property only when authorized to do so in writing, and upon the direction of Haynes Peterson, A. W. Consoer and George Consoer, three of the beneficiaries, and would make conveyances of such land only upon the direction of these three persons; that the trustee should not be required to enter into any personal obligation or liability in dealing with the land, or make itself liable for the payment of any moneys; that the beneficiaries should have the management and control of the property, and of the selling, renting and handling thereof, and that the trustee should not be called upon to do anything in the management or control of the property, payment of taxes, or otherwise, and that the Union Bank of Chicago should receive $100 for accepting the so-called trust and taking title, and $10 per year for holding the title after May 12, 1927, together with fees for making deeds, and reasonable compensation for any special services which might be rendered.

Haynes Peterson died, and thereafter on March 4, 1927, Arthur W. Consoer and G-eorge Consoer, for and on behalf of these beneficiaries, entered into a joint three-party contract -with the Union Bank of Chicago, as trustee, under the agreement designated as Trust No. 1274, and with Bert H. Laudermilk, wherein this “trust” agreement is referred to, and wherein it is recited that the beneficiaries mentioned were desirous of making a selling arrangement of the premises held by the Union Bank of Chicago, as above set forth, and in furtherance of such selling arrangement, had directed the trustee to join in this tri-party agreement. The substance of this agreement is as follows: That the Laudermilk Association was employed by the beneficiaries as their exclusive agent to handle the properties and make sale thereof for a period beginning with the date of the contract; that the beneficiaries under this “trust” agreement with the Union Bank of Chicago authorized and directed the bank, as trustee, to execute the contract and carry out the provisions, and to continue as trustee; that the beneficiaries would install certain improvements in the properties; that the beneficiaries, at their expense, would cause the trustee to furnish guarantee policies of the Chicago Title & Trust Company with each lot which might be sold under the contract; that the instalments of interest and principal accruing on lots sold should be collected by the trustee, and deposited by it as directed by the beneficiaries; that the beneficiaries would pay the taxes and assessments on the properties, except in cases where the contracts made with the purchaser would provide that the purchaser should pay the taxes and assessments. This contract further provided the amount of commissions that should be paid to Lauder-milk out of the purchase price paid for any of these properties and it provides that there should be no liability on the part of the trustee for anything, except such moneys as might come into its hands.

The bill of complaint herein brought to enjoin the action at law, was filed on May 3, 1933, and recites in substance, that it is filed by Boyne Platt and 11 other persons, who constituted the sole beneficiaries under the land-holding “trust” No. 1274, in which the Union Bank of Chicago, as trustee, holds the legal and equitable title to certain lands described in the bill. Lawrence S. Sutton, who had been appointed successor trustee to the Union Bank, also joined as a party complainant. The defendants are the Union Bank of Chicago, James S. Bodie,- its receiver, and Joe Fischer. Prior to this the Union Bank of Chicago had been closed, and the auditor of public accounts had taken possession in June, 1932. The allegations in the bill are to the effect that the Union Bank, as such trustee, through Bert H. Laudermilk, had entered into a contract with the defendant, Joe Fischer, to sell him a lot; that he had made payment of the purchase price, in instalments, the last three instalments having been paid to James S. Bodie, the receiver of the trustee bank, who received such payments under an agreement made with the beneficiaries; that he, Fischer, demanded a deed and guaranty policy from the trustee and its receiver, and failing to obtain it, had brought a suit at law in the superior court against the beneficiaries of the trust, — the complainants in the bill,— based on a rescission of the contract, because of the failure of the trustee and its receiver to fully execute it, by delivering the deed and policy. It is alleged that on February 27,1933, a tender was made of a deed and guaranty policy to Fischer, but that he refused to accept it. The bill alleges that the beneficiaries are not liable, either for damages, or for the return of the money which the lot buyer had paid to the bank; that their defense could not properly be interposed in the suit at law; that the court at law did not have jurisdiction ; that the matters in controversy arose out of a trust, and were not triable at law, but only in equity; that, even though a judgment were recovered against them at law, they would have an action over against the trustee and its receiver, who were made parties defendant to the bill. The prayer of the bill is that the court construe the trust agreement and other documents mentioned in the bill, and declare their meaning and effect; that the court determine the rights and liabilities of all of the parties to the suit, in connection with the matters in controversy; that the court pass on the right of the defendant Fischer to declare a rescission, and, if he is entitled to sue for the money he had paid, or for damages, that the court ascertain and fix the same, and find from whom such recovery should be had, and enter judgment accordingly, and that the court enjoin the prosecution of the suit at law, and for other relief. The Union Bank and Bodie answered, praying for strict proof. Fischer demurred, and after the demurrer was overruled, answered. He pleaded ignorance of many of the allegations of the bill, virtually admitted others, recited his experiences in attempting to have his contract performed, and denied that the complainants were entitled to any relief. Replications were filed. The cause was referred to a master in chancery. After hearing the evidence, the master made a report, in which he held that the deed to Fischer had been tendered within a reasonable time, and recommended that Fischer be enjoined from maintaining his suit in the superior court. Objections to this report were presented to the master, and an order was entered in the circuit court allowing them to stand as exceptions. On the day the master’s report was presented to the chancellor, the defendants moved for leave to file a counterclaim under the new Practice Act. Subsequently, a decree was entered by the court denying leave to Fischer to file a counterclaim, confirming the master’s report, permanently enjoining the further prosecution of the suit at law, and awarding a cost judgment against Joe Fischer, which included the fees of the master. From this decree, Joe Fischer appealed.

By the three-party contract entered into between complainants in the instant case (the defendants in the suit at law sought to be enjoined), the Union Bank of Chicago and the Laudermilk Association, the Laudermilk Association became the authorized agent of the defendants to enter into the contract with Fischer for the sale to Fischer of the lot mentioned.

Among other things prayed for by plaintiffs in the bill filed here is that the court pass upon the question of the right of the defendant Fischer to declare a rescission of the contract, and that if it should be found that Fischer is entitled to sue for and recover the moneys he has paid, that the court ascertain and fix the amount, and enter judgment accordingly. It is admitted that Fischer had fully performed, and that complainants had not, and as to Fischer’s right to recover the moneys paid out by him, there can be no question. Under the terms of his contract, he was entitled to his deed and guaranty policy upon making his last payment on September 19, 1932, and it was not until February 27, 1933, that a tender was made of the deed and policy, which he then had the right to and did refuse to accept. It was not because of any fault of Fischer’s that these beneficiaries or their agents could not and did not perform.

In Walker v. Tucker, 70 Ill. 527, the Supreme Court said:

“It is elementary law that, when the contract is to do a thing which is possible in itself, the promiser will be liable for a breach thereof, notwithstanding it was beyond his power to perform it. ... 1 Chitty on Conts. (11 Am. Ed.) 1074.” See also to the same effect, Serber v. McLaughlin, 97 Ill. App. 104, and Steele v. Buck, 61 Ill. 343, in which last case, the court said:

“The general doctrine is, as laid down in Paradine v. Jaine, Aleyn, 27, cited in 3 Bos. & Pul. 420: ‘Where a party, by his own contract, creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his own contract. ’ And as said by Mr. Justice Chambre, in the latter case: ‘If a party enter into an absolute contract, without any qualifications or exceptions, and receives from the party, with whom he contracts, the consideration for such engagement, he must abide by the contract, and either do the act or pay damages, his liability arising from his own direct and positive undertaking.’ To the same effect are the following cases: Bacon et al. v. Cobb et al., 45 Ill. 47; Mill Dam Foundry v. Hovey, 21 Pick. 441; Demott v. Jones, 2 Wallace 1; School Trustees v. Bennett, 3 Dutch, 518; Bullock v. Dommitt, 6 Term, 650; Brennock v. Pritchard, 6 Term, 750.”

Pending negotiations between the parties, and on January 4,1933, a petition was presented to the circuit court in a proceeding concerning the liquidation of the affairs of the Union Bank of Chicago, in which the establishment of the trust referred to herein was recited, the appointment of James S. Rodie, as receiver for the Union Bank of Chicago suggested, and a statement made of certain arrangements between the beneficiaries and the receiver for the collections to be made by this trust company as trustees under this Union Bank Trust'No. 1274. Particular referencé was made to the claim of Joe Fischer, and in this proceeding, the circuit court entered the following order:

“On motion of Theodore A. Kolb, solicitor for Boyne H. Platt and certain other intervening petitioners, it is ordered that the order entered by this court on December 21,1932, appointing Dana R. Simpson successor trustee, be vacated; that the Union Bank of Chicago and James S. Rodie, its receiver, be ordered to pay to the clerk of this court out of funds in his hands belonging to Trust #1354, when the money comes into his hands in the course of administration, the sum of Two Thousand ($2000) dollars, said sum to be held subject to the further order of this court on notice to Daniel D. Grlasser, Esq. solicitor for Joe Fischer; that said receiver is ordered to pay all remaining moneys on hand in said trust at the time of the closing of the bank as well as all funds by him received thereafter to Lawrence S. Sutton who has been appointed successor trustee by the beneficiaries of said Trust, and to convey to him, in accordance with the documents filed with him on January 4th, 1933, title to all lands and other property held in said trust.” While the court in its order refers to this fund as belonging to “Trust No. 1354,” we are of the opinion that the language of the order sufficiently identifies the fund as belonging to “trust 1274.”

It is not contended by plaintiffs in the bill filed here that Fischer has not complied with his contract, which was entered into with him on behalf of and by the agents of the plaintiffs in this cause, and that plaintiffs have not performed as they agreed. There is and was no question of fact to be determined. The circuit court has jurisdiction of all the parties involved in the suit at law, of the parties involved in this proceeding, and of the entire subject matter, and of all things involved in both proceedings. Upon the undisputed facts before it, and in view of the conflicting interests of the parties, the court should have asserted its jurisdiction and entered a decree in Fischer’s favor, ordering that the amounts paid out by Fischer on account of the purchase of the lot, together with the amounts paid by him for taxes and special assessments on the land, be paid to him. If the moneys in the hands of the clerk of the court are not sufficient for this purpose, and there are not sufficient funds in the hands of the successor trustee, on account of the Fischer purchase, to pay the balance due Fischer, then it is our opinion that the beneficiaries named — the complainants in this proceeding — are liable to reimburse Fischer for any further amounts found to be due him.

On the question of the duty of a court of chancery under similar circumstances, the court said in Warfield-Pratt-Howett Co. v. Williamson, 233 Ill. 487:

“Plaintiffs in error seek to maintain the proposition that since the relation of the parties, as well as the relief sought, is purely legal, equity has no jurisdiction. Defendant in error seeks to uphold the jurisdiction of equity on the ground that the case falls within the exclusive jurisdiction of a court of equity. Neither of these contentions is sound. In our opinion the case belongs to that class where both the primary rights and the relief sought are purely legal and therefore cognizable in a court of law, but of which a court of equity will take jurisdiction on the ground that, owing to the methods of procedure and the means available to carry its decrees into execution, its remedies are more adequate.”

The cause is, therefore, reversed and remanded with the direction that the court enter a decree in conformity with the views herein expressed, and that the order of the court enjoining further prosecution of the suit at laiv, be made permanent. It is further ordered that the costs, including the fees of the master in chancery, be assessed against the plaintiffs in the instant case.

Reversed and remanded with directions.

Hebel, J., and Denis E. Sullivan, J., concur.


text:
    George Benson, Appellee, v. Charles L. Schwerin, Appellant.
    Gen. No. 38,366.
    Opinion filed April 22, 1936.
    Rehearing denied May 5, 1936.
    Clarence A. Toolen and Max C. Liss, both of Chicago, for appellant.
    Schwartz & Cooper, of Chicago, for appellee.
   Mr. Presiding Justice Hall

delivered the opinion of the court.

This is an appeal by defendant from a judgment of the municipal court of Chicago against him for the sum of $20,174.15, and costs of suit. The action is based' on a number of bonds executed by defendant and secured by a mortgage trust deed on real estate. The judgment includes interest to the date of its entry. No question is raised as to the amount of the judgment.

The principal defense urged at the trial, and the principal ground for reversal urged here, is that because of certain provisions contained in the bonds and trust deed given as security therefor, plaintiff is barred from maintaining an action at law to recover on the bonds. Bach of the bonds contains an unconditional promise to pay the bearer $1,000, with interest, and each bond contains the following provision:

“For a more particular description of the covenants of the mortgagors as well as a description of the mortgaged property and the nature and extent of the security, the rights of the holders of the bonds and the terms and conditions upon which the bonds are issued and secured, and the method of payment thereof, reference is made to said trust deed.

“This bond is issued and accepted by the holder hereof, subject to redemption before maturity on any interest payment date by payment of the full amount of the principal hereof and all interest accrued hereon at the said date of redemption, together with a premium of three per cent upon said principal upon sixty (60) days’ notice in the manner and upon the terms set forth in said trust deed.

“This bond shall pass by delivery, unless registered . . . but the coupons hereto attached shall always be transferable by delivery merely.

“Said trust deed and this bond, as well as all of the other bonds aforesaid, and the interest coupons attached thereto are to be taken and considered together as parts of one and the same contract, and this bond and each coupon hereto attached are subject to all the provisions of said trust deed, to the same extent as if said trust deed were herein fully set forth.

“In case of default in the payment of interest or of principal of any of said bonds, or in case of default in the performance of any. of the covenants or conditions in said trust deed, the principal of this bond may become due and payable before its regular maturity, together with the interest accrued thereon, as provided in said trust deed. ’ ’

The trust deed given to secure these bonds contains the following:

“Section 6, Article 10: Every holder of any of the bonds hereby secured (including pledges) accepts the same subject to the express understanding and agreement that every right of action, whether at law or in equity, upon or under this indenture, is vested exclusively in the trustee and under no circumstances shall the holder of any bonds or coupons or any number or combination of such holders have any right to institute any action at law upon any bond or bonds or upon any coupon or coupons or otherwise or any suit or proceeding in equity or otherwise, except in case of refusal on the part of the trustee to perform any duty imposed upon it by this indenture after request in writing by the holder or holders of at least ten percent in amount of said bonds, as aforesaid. No action at law or in equity shall be brought by or on behalf of the holder or holders of any bonds or coupons whether or not the same be past due, except by the trustee or by the requisite number of bondholders acting in concert under the provisions of this section for the benefit of all bondholders.”

The case of Oswianza v. Wengler & Mandell, 358 Ill. 302, is cited as authority for defendant’s contention. In that case, as here, suit was brought on the bonds which were secured by a mortgage trust deed, and the same defense urged as is urged here. The action, as here, was brought in the municipal court of Chicago, where a judgment was entered on the bonds, and an appeal was taken to the Appellate Court, First District, where the judgment was affirmed. The judgment was reviewed by writ of error in 'the Supreme Court, and the judgment of the Appellate Court was affirmed. In that case, the bonds sued on contained the following provision:

“For a description of the mortgaged property and the nature and extent of the security, reference is made to said trust deed, to all of the provisions of which this bond and each coupon hereto attached are subject, to the same effect as if said trust deed were herein fully set forth.”

Also, it contains the following clause:

“Said trust deed and this bond, as well as all the other bonds aforesaid, are to be taken and considered together as parts of one and the same contract.”

Here, one of the provisions in the bond is as follows: “For a more particular description of the covenants of the mortgagors, as well as a description of the mortgaged property and the nature and extent of the security, the rights of the holders of the bonds and the terms and conditions upon which the bonds are issued and secured and the method of payment thereof, reference is made to said trust deed.”

In that case, as here, the provision in the trust deed is as follows:

“Every holder of any of the bonds hereby secured (including pledgees) accepts the same subject to the express understanding and agreement that every right of action, whether at law or in equity, upon or under this indenture, is vested exclusively in the trustee, and under no circumstances shall the holder of any bond or coupon, or any number or combination of such holders, have any right to institute any action at law upon any bond or bonds or any coupon or coupons or otherwise, or any suit or proceeding in equity or otherwise, except in case of refusal on the part of the trustee to perform any duty imposed upon it by this indenture after request in writing by the holder or holders of at least twenty-five per cent (25%), in amount, of said bonds as aforesaid, and such refusal of the trustee shall continue for sixty (60) days after such demand as aforesaid. No action at law or in equity shall be brought by or on behalf of the holder or holders of any bonds or coupons, whether or not the same be past due, except by the trustee or by the requisite number of bondholders acting in concert under the provisions of this section for the benefit of all bondholders.”

The provisions of the bonds and trust deed in that case are to all intents and purposes, the same as the provisions of the bonds and mortgage in the instant case, and in its opinion, the court said:

“Counsel for plaintiff in error argue that it is contrary to public policy to nullify the restrictive language of the trust deed and thereby encourage a multiplicity of suits. The questions arising in this case are primarily questions of contract. The importance of bonds of this character as commercial paper requires that limitation on the right to sue, appearing in another instrument, be so clearly referred to in the bond that the purchaser of the bond will not be deceived but will be notified that he is to look further to know his rights as a bondholder. If a principle of public policy be invoked, it is quite important that in the traffic of bonds the prospective purchaser thereof know from the bond what search of the trust deed or mortgage is necessary in order to learn his rights. . . .

“It will be seen that the language in the notes or bonds in the cases cited was such as to clearly bring within the terms of such instruments the provisions of the trust deed or agreement affecting or limiting the right to sue. The -bonds before us do not contain such extended words of reference, and though it be argued that it is for the benefit of all bondholders that a multiplicity of suits be avoided, yet if the common law rights of the holder are to be limited it must be done by appropriate reference in the bond to the provisions of the trust deed or mortgage, that he may have warning that his right to sue in case of default is limited by something not appearing in the bond itself. Here the reference is limited to the description, nature and extent of security. The language subjecting the bond to ‘all of the provisions’ of the trust deed must be held to relate to the provisions concerning the security and the rights of bondholders thereunder. The description of the property and the security constitute the subject matter of the clause, and to hold that a provision of the trust deed limiting the right to sue at law was thus included by reference is to bind the bondholder by stipulation of the trust deed, of which the bond gave him no warning or notice.

“Regardless of the question whether these bonds are negotiable, the issue is resolved into the simple proposition whether there is in the bond, language which fairly includes by reference the no-action clause of the trust deed. We are of the opinion there is not.”

It is further urged by defendant in their-brief that “the consideration for the bonds of plaintiff was illegal and against the public policy of the State.”

In the affidavit of merits filed in the municipal court of Chicago, defendant alleges that at the time of the execution of the bonds in question, the Buildings Development Company, a corporation, was the actual owner of the real estate described in the trust deed; that this corporation had made an application for a loan for the purpose of constructing a building upon the premises in question, and that at the time of the making of such application for a loan,' the title to the premises described in the trust deed was held by two individuals, who held title for the use and benefit of the Buildings Development Company; that the title to the real estate described was caused to be conveyed to the defendant so that he might hold the title for the use and benefit of the Buildings Development Company, and that in doing so, and in signing the mortgage trust deed and bonds in question, he was acting as agent for the Buildings Development Company, and that the whole transaction was a scheme entered into for the purpose of circumventing the law. The point is made that, because the Buildings Development Company was not organized as a building corporation under the State of Illinois, therefore, the whole transaction was void and against public policy, and defendant cannot be made to respond to his promises to pay these bonds.

Counsel for defendant cites a number of cases in support of his contention, but none of them is in point. From all that appears in the record, the plaintiff is the holder of negotiable bonds, signed by defendant and payable to bearer.

The Negotiable Instruments Act, Cahill’s Illinois Revised Statutes, 1933, ch. 98, 44, provides that:

“Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value. ’ ’

Paragraph 46 of said act provides that:

“Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time. ’ ’

There is no suggestion made here that any fraud was used in connection with the execution or sale of the bonds.

' From anything appearing to the contrary, plaintiff was the holder in due course, and we are of the opinion that both the defenses urged are without merit. The judgment of the municipal court is affirmed.

Affirmed.

Hebel, J., and Denis E. Sullivan, J., concur.


text:
    Louis M. Proesel, Appellant, v. Alice G. Ratner et al., Defendants. Norris-Ward Coal Company, Appellee.
    Gen. No. 38,785.
    Opinion filed April 22, 1936.
    Rehearing denied May 5-, 1936.
    Hayes & Remus, of Chicago, for appellant: William J. Remus, of Chicago, of counsel.
    Cochrane & George, of Chicago, for appellee.
   Mr. Presiding Justice Hall

delivered the opinion of the court.

This is an appeal from an order of the circuit court of Cook county, entered on January 7, 1936, appointing a receiver for the premises known as 340-42 East 56th street, in the city of Chicago. Prior to the appointment of the receiver, the property in question had been sold under a foreclosure decree entered on October 20, 1932, in favor of Louis Proesel, complainant in the foreclosure suit. On October 23, 1932, an order was entered in the circuit court confirming the master’s sale of the premises to Louis Proesel, and continuing the receiver in possession of the premises during the period of redemption, for the purpose of collecting the rents and paying a deficiency judgment. On February 24, 1934, a master’s deed was issued to Proesel, the purchaser at the foreclosure sale, and on March 27, 1934, the receiver filed his final report and was discharged from further duties in the premises. By order of the court, Proesel was directed to assume any unpaid liabilities contracted by the receiver during the receiver’s administration of the property.

On November 13, 1935, the Norris-Ward Coal Company filed a petition in the circuit court of Cook county, in which it alleges, among other things, that while the receiver was in possession of the property, an apartment building, the receiver, under authority of the court, purchased coal from the petitioners, which coal was delivered to and used in heating the premises; that on March 27, 1934, an order was entered, discharging the receiver, and that as a part of the order, as hereinbefore stated, Proesel was directed to assume the unpaid liabilities; that at the date of the entry of the order discharging the receiver, the receiver was indebted to the Norris-Ward Coal Company, petitioners, in the sum of $287.29 for coal purchased, and the petitioner prayed that Proesel be cited for contempt for his failure and refusal to comply with the order. An answer to this petition was filed by Proesel, in which the facts as to the foreclosure and sale of the property, and the issuing of the deed, are set forth. Thereafter, on January 7, 1936, on motion of the attorneys for the Norris-Ward Coal Company, the court appointed a receiver for the property, and in the order the court found that there was a balance due for coal purchased by the receiver amounting to $262.29, and further in the order, the court gave the receiver so appointed the power to manage and collect the rents of the building in question, apparently, for the purpose of securing money with which to pay this coal bill.

In Stoddard v. Walker, 90 Ill. App. 422, a receiver of a farm was appointed after a sale made in the foreclosure proceeding, and after the period of redemption had expired on January 31, 1899. In passing upon the legality of such appointment, the court stated that “no redemption from the sale having taken place, the title and rights of the purchaser at that sale became vested and fixed as of that date,” (January 31, 1899) . . . “The purchaser then became the absolute owner of the farm, and entitled to all his rights as such. The receiver’s rights and duties were at an end with reference to the farm, which had become another's. So, also, with the rights of the parties to the suit in whose interest the receiver was appointed. The foreclosure suit was then at an end, and the jurisdiction of the court whose aid had been invoked for the purposes of that suit, ceased with the perfection of the title in the purchaser.” See also Davis v. Dale, 150 Ill. 239.

The order of the court in the instant case appointing a receiver after the issuance of the deed was a void order. If the claim of the petitioners, the Norris-Ward Coal Company, is valid, it should have an adequate remedy at law. The order appointing the receiver is, therefore, reversed.

Reversed.

Blebel, J., and Denis E. Sullivan, J., concur.


author: Mr. Justice Hebel

text:
    Fidelity Trust and Savings Bank, Defendant in Error, v. Theodore S. Williams et al. Ida Connell and James Connell, Plaintiffs in Error, v. Fidelity Trust and Savings Bank et al., Defendants in Error.
    Gen. No. 38,167.
    Opinion filed April 22, 1936.
    Rehearing denied May 5, 1936.
    Smith & Wallace, of Chicago, for plaintiffs in error; Hubert E. Page, Raymond M. Smith and R. H. Wehmhoff, all of Chicago, of counsel.
    Urion, Bishop, Sladkey & Boutell, George Gillette and Edmund J. Reynolds, all of Chicago, for defendants in error; Elmer M. Leesman and Jerome J. Sladkey, both of Chicago, of counsel.
   Mr. Justice Hebel

delivered the opinion "of the court.

This suit was a bill in equity to foreclose a trust deed. The defendant, Ida Connell, filed a cross complaint in which she set out that the title to the property in question, prior to the execution of the trust deed, was obtained from her by fraud of which the complainant in the proceeding had constructive notice. A decree was entered in the foreclosure proceeding, and by this writ of error Ida Connell and James Connell seek to have the record reviewed.

The defendant and cross complainant, Ida Connell, in 1912 purchased the premises known as 1113 Albion avenue, in Chicago. She erected- thereon a large dwelling house, where she and her husband, James Connell resided until 1920. Her daughter Sadie was married to Michael F. Schiavone, who came to reside with the Connells and they leased the premises about 1923. Michael Schiavone and his wife resided there as tenants of Ida Connell up to the time of his death in 1929, he paying $200 per month rental.

Michael Schiavone in 1926 was a banker and real estate operator in Winnetka. He was a stockholder in the North Shore Trust & Savings Bank and also a stockholder and director in'the Fidelity Trust & Savings Bank. Mrs. Connell had great confidence in Michael Schiavone, her son-in-law, and believed him to be a successful business man. He furnished the home lavishly.

Early in April, 1926, Michael Schiavone represented to Mrs. Connell that he had a purchaser for the Albion avenue property, in which he and his wife then resided as tenants. He explained that in order for him to make the deal and close the sale, it was necessary that she execute a deed in blank, which he then presented and she signed and delivered to Schiavone. Mr. Connell, her husband, signed the deed later, upon the same representations by Schiavone. At the time the deed was signed no grantee was named, or description of the property inserted in the deed. Without the knowledge of Mr. and Mrs. Connell, the name of Sadie Schiavone, her daughter and wife of Schiavone, was inserted as grantee in the deed, and it was acknowledged on April 6, 1926, before a notary public.

From the testimony, it does not appear that Sadie Schiavone at any time knew, or had notice of the deed until 1929, after her husband, Michael Schiavone, had committed suicide. The taxes for 1925, on the property were paid by Mrs. Connell on August 3, 1926, after the trust deed — the subject of this controversy— for the alleged loan was acquired by the North Shore Trust & Savings Bank. She paid the taxes for 1926 on July 26, 1927. Mr. Schiavone paid the 1927, 1928 and 1929 taxes.

On April 15, 1926, Michael Schiavone requested a loan on the premises from the North Shore Trust & Savings Bank, for his own benefit, in the sum of $30,000. Officials and agents of the bank were driven by Michael Schiavone to the premises on the same day. The representation of Schiavone that it was his home seemed to satisfy the bank, at that time, that Michael Schiavone was the real owner of the premises. At the time the officials of the bank inspected the premises no member of Mr. Schiavone’s family was present except himself. The house was elaborately furnished and apparently occupied by his family — who were then absent. During this month of April, Ida Connell was making her home there with the Schiavone family, recovering from a recent serious operation.

After an inspection of the premises, the property was considered by the bank sufficient security for a $30,000 loan to Michael Schiavone, but he was advised by officials of the bank that for reasons not made clear, it would not be discreet for the bank to make a loan direct to him. The bank suggested that the title to these premises be conveyed to some third party, who should make the application and sign the notes and trust deed to secure such loan. Thereafter, Theodore S. Williams was selected either by the bank or by Schiavone or both as such a party, and Williams consented to act, for no benefit of his own, but as an accommodation apparently to Schiavone and the bank or one of them.

Michael Schiavone submitted to Sadie Schiavone on April 16, 1926, a deed in blank for her signature without any explanation. She had been accustomed to signing deeds in blank for his use in connection with his Winnetka real estate subdivision, and his request for her to sign a deed in blank was apparently no surprise to her. She did not have knowledge, and nothing was said to her by Schiavone, that he intended by said deed to convey the Albion avenue property where they then resided as tenants. Sadie Schiavone signed the deed in blank form. It was acknowledged on April 16, 1926, but the deed itself bears date as of April 22,1926. The description of the Albion avenue property was inserted in the deed after Sadie Schiavone had signed in blank, and also the name of Theodore S. Williams, as grantee, without the knowledge or consent of Sadie Schiavone.

Michael Schiavone delivered the deed to the bank and requested the bank to have same filed for record. The bank required Michael Schiavone and Theodore S. Williams each to make a written application for this loan on the Albion avenue property and the applications were made on identical forms under date of April 19, 1926. Each application was for $30,000 loan on the Albion avenue property, and on the same terms, in compliance with the bank’s request.

On April 24, 1926, Theodore S. Williams and his wife signed, executed and acknowledged in due form the trust deed here in evidence to the Chicago Title & Trust Company, covering the premises in question, and now the subject of this foreclosure. In the trust deed, these premises were conveyed to secure the payment of certain principal notes of even date, signed by Theodore S. Williams and his wife, payable to bearer, amounting to the principal sum of $30,000. None of these notes was signed by Michael Schiavone but he was required by the bank to guarantee such notes and did so by a special instrument, in writing. On April 24, 1926, Theodore S. Williams also executed in due form a power of attorney to Michael Schiavone authorizing him to sign the name of Williams to all vouchers, instruments, checks and other paper required or necessary in or about the payment of the loan of $30,000 upon these premises. This power of attorney was acknowledged on May 11, 1926, by Williams before the same notary public that took the acknowledgment of Williams and his wife to the trust deed. The trust deed was filed by the bank for record on May 3, 1926, as Document No. 9261741. Also on that same day the deed of Ida Connell and her husband to Sadie Schiavone and the deed of Sadie Schiavone and her husband to Theodore S. Williams for the same premises, which were received from Mr. Schiavone and filed for record by the bank as Documents Nos. 9261739 and 9261740.

Complainant’s Exhibits 11 and 12, being the two deeds last mentioned, had been handed by Michael F. Schiavone to an officer of the North Shore Trust and Savings Bank some time between April 22, and May 3, 1926. In the meantime, the bank had the title to the premises examined by the Chicago Title & Trust Company, and under date of May 6, 1926, its letter of opinion was delivered to the bank in which it found the title on May 3rd, to be good in Theodore S. Williams, subject to the “rights or claims of parties in possession not shown of record in questions of survey.” The objection was subsequently waived by the Chicago Title & Trust Company, upon Michael F. Schiavone’s written certification that the property was owned by Williams.

On May 11 and 12th, the North Shore Trust & Savings Bank paid out all the money so loaned, without any knowledge, it is claimed by the bank, that Ida Connell and James Connell claimed any right, title or interest in the premises. In fact, the bank claims that it first heard of any such claim or interest in the property after the bill to foreclose was actually filed.

Williams, the trustee, testified he never received any money or any consideration for the notes he and his wife signed, secured by the trust deed in question. When Williams received the cashier’s check of the bank in the sum of $10,000, it was handed to him by Henry Herman Thurow, an assistant cashier of the North Shore Trust & Savings Bank with the request that he indorse it, which Williams did. Thurow then took back the check and did not give Williams anything for it. Williams also received from Thurow a cashier’s check for $20,000. This, Williams also indorsed and handed back to Thurow. The proceeds from the first check for $10,000 were used in part for the benefit of Michael F. Schiavone and in part by him in cleaning up the title by paying a balance due ón and removing a first mortgage lien on the property, for something less than $5,000. The $10,000 check was used to purchase two cashier’s checks for $5,000 each, issued by the Lake Shore Trust & Savings Bank on or about May 13, 1926, made payable to Theodore S. Williams, but indorsed by him in blank and paid to the account of Michael F. Schiavone through the Fidelity Trust & Savings Bank. A check for $20,000 dated May 11,1926, payable to Theodore S. Williams was delivered to the payee indorsed by him and deposited in the North Shore Trust & Savings Bank to the credit of the account of the Lake Towns Improvement Co., Michael F. Schiavone. On May 12, 1926, Michael Schiavone delivered to the bank the note signed by Ida Connell and James Connell, dated January 26, 1914, for the sum of $5,000, duly marked “paid” and “can-celled” May 12,1926, by the Foreman Trust & Savings Bank. This note had been secured by a trust deed on the premises, and was likewise marked “cancelled” bearing date of January 26,1914. This note had been reduced and paid by check of M. F. Schiavone May 12, 1926, for $3,052.50 through the North Shore Trust & Savings Bank. Since April 15, 1926, the North Shore Trust & Savings Bank made no further inquiry of any one in possession of the premises and the bank paid out the money on this loan about May 12, 1926.

Certain of the assets and liabilities of the North Shore Trust & Savings Bank were taken over later by the Fidelity Trust & Savings Bank under an agreement dated October 30, 1926, among which assets was the Theodore S. Williams loan of $30,000, due October 26, 1931. The Fidelity Trust & Savings Bank at that time had employed Mr. Thurow and Mr. Dose, former officers of the North Shore Trust & Savings Bank. Each of these officers had acted for the bank in making the loan to Schiavone. Each one of these persons began acting in like capacities for the Fidelity Trust & Savings Bank before the bank accepted the loan and trust deed.

One of the important questions to be considered in this lawsuit is whether the Lake Shore Trust & Savings Bank had notice or knowledge of any of the facts and circumstances that led up to the execution of the Williams ’ trust deed. The whole theory hinges largely on whether or not the facts are such as to demonstrate that the Connell deed to Sadie Schiavone was without her knowledge, without consideration, and was never delivered or accepted by the parties named in this deed. ............

The facts clearly disclose that Michael F. Schiavone was really instrumental in obtaining the loan on this Albion avenue property, and in order to determine the value of the property, certain officers of the bank and Michael Schiavone visited the premises and inspected the improvements. At that time it was indicated to the officers of the bank that Michael Schiavone was the then owner, and he so indicated in his application filed with the bank for the loan. The deed which was after-wards presented to him by the bank, indicated that it was a deed from the Connells to Sadie Schiavone, the wife of Michael Schiavone. This of itself was notice that Michael Schiavone did not have title to the premises and that Sadie Schiavone, at least appeared to have some interest in the premises, and it was the suggestion of the bank that it might be well to have some third person take title and sign the notes and trust deed securing payment.

It further appears from the facts that a deed was presented by Michael Schiavone from Sadie Schiavone to Theodore S. Williams, and that Williams and his wife thereafter signed the notes and trust deed securing payment. It is admitted by the defendant, North Shore Trust & Savings Bank, that Williams, in the execution of the papers, was but a dummy, and to that extent, of course, the bank knew the conditions under which the title was obtained. When we follow up this transaction we find that the checks issued by this bank were made payable to Williams, and by him indorsed and the fund used to satisfy the balance of a mortgage of $5,000, which was signed by the Connells to secure their note, and more than $20,000 was placed to the credit of Michael F. Schiavone in his account at the bank.

Also from the facts as they appear, it is established that Sadie Schiavone was the legal holder of title to the property in question:. There is no pretense that her interest in the property Was ever investigated by the bank, and it is established that from the opinion of title of the Chicago Title & Trust Company, the title to the property was subject to the parties in possession. Of course, Sadie Schiavone was the wife of Michael Schiavone; still that fact does not excuse the bank from mailing an investigation as to her interest in the property, and as to whether or not she was interested in the fund of $30,000 secured by the trust deed signed by Williams.

We know of no law to the effect that because a woman holds title to a piece of property, her husband may make application for a loan and receive the benefit therefrom, without notice to her of his intention to do so. This also applies to the bank, as it had knowledge that Sadie Schiavone had an interest in this property and that title was conveyed, as it admits, to a dummy —Williams—and it should have made an investigation to "determine what rights Sadie Schiavone had in and to the property. The deeds were signed in blank, but the purported conveyance of the property from the Connells to Sadie Schiavone and by her to Williams was without knowledge of . either Sadie Schiavone or Ida Connell. The facts disclose a rather unusual situation. The circumstances being such as we have indicated, the bank should have made an investigation as to the rights of Sadie Schiavone. Williams to whom the purported title was conveyed asserts no interest in the property.

The significant fact is that Sadie Schiavone, after the execution of the alleged warranty deed conveying the property in question to Williams, remained in possession, and was in possession of the same at the time this case was tried.

The rule of law which seems to control in a like situation is that the retention of possession by the grantor of the property conveyed is notice of his or her interest in the property, and to those claiming under the grantee, and such rule is laid down in the case of Ford v. Marcall, 107 Ill. 136, wherein the court said: ‘ ‘ The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor.” >

This rule was followed and approved in the case of Ronan v. Bluhm, 173 Ill. 277, where the court said:

“It is proper we should remark, in answer to the discussion upon the point, that as it is conceded by all parties that the said Thomas Ronan did not deliver possession of the premises in question to the grantee, Carbine, but remained in the open and exclusive occupancy thereof, appellee, Bluhm, is deemed, as matter of law, to have taken the conveyance from Carbine with full notice of all the rights and equities of said Ronan in the premises. Illinois Central Railroad Co. v. McCullough, 59 Ill. 166; White v. White, 89 id. 460; Ford v. Marcall, 107 id. 136.’’

It is to be noted from what the court said in this opinion that Bluhm was deemed as a matter of law to have taken the conveyance from Carbine, the grantee of Ronan, with full notice as to all the rights and equities of Ronan in the premises.

This rule has been passed upon by the courts of this State, and the law is again discussed and approved in the case of Rock Island & Peoria Ry. Co. v. Dimick, 144 Ill. 628. The court in this opinion said:

“The law is well settled in this State, as generally elsewhere, when not changed by the recording acts, that open and exclusive possession of lands, under an apparent claim of ownership, is notice to those subsequently dealing with the title of whatever interest the possessor has in the premises, whether the interest be legal or equitable in its nature. Wade on Notice, sec. 273; Davis v. Hopkins, 15 Ill. 519; Truesdale v. Ford, 37 id. 210; Smith v. Jackson’s Heirs, 76 id. 254; Part ridge v. Chapman, 81 id. 137. It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor’s rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136.”

In the case of Porter v. Clark, 23 Ill. App. 567, this rule was also approved, and in discussing the subject matter of the litigation, the court there stated what we. regard as pertinent in its application to the instant case. This statement is:

“If Porter, knowing as he did that Clark was in possession, had gone to him and inquired as to his rights, he would undoubtedly have been told that the purchase money had not been paid, and that he, Clark, claimed a vendor’s lien on the land.”

It has occurred to this court from the statement above quoted that if the North Shore Trust & Savings Bank, by its official, had inquired of Sadie Schiavone as to her rights in the premises by reason of her possession, it undoubtedly would have learned of the rights of the Connells in and to the premises, and the fact that the Schiavones were tenants in possession only by virtue of the right given to them by their landlord— the Connells.

As we have indicated in our opinion, Williams, the grantee in the deed from Sadie Schiavone, paid no consideration and claims no interest whatsoever in the property, of which fact the bank had knowledge.

From the record it is apparent that a fraud was perpetrated by Michael Schiavone, but it is sufficient to say that this fraud would have been discovered if an investigation had been made by the North Shore Trust & Savings Bank and they had learned from Sadie Schiavone what rights she claimed in the property in question. Upon such an investigation the bank no doubt would have learned that Sadie Schiavone was the grantee in possession; that her rights were those of a tenant under her mother, who was the owner of the property, and the Fidelity Trust & Savings Bank is chargeable with the same notice, and' if the bank failed to investigate the reason for the retention of possession by Sadie Schiavone, she had the right to assert and did assert the conditions under which she retained possession, and the right of cross complainant to the property.

The suggestion is made here that there was an unusual delay in asserting any rights as against the complainant in the foreclosure proceeding. There is evidence in the record however that the conditions affecting this piece of property were not discovered until the death of Michael Schiavone by suicide, and the fact that Sadie Schiavone was still in possession as a tenant of the Connells at the time the litigation was instituted is evidence that there was no waiver, because her possession was an indication of her rights in the premises.

For the reasons stated in this opinion, we think under the facts as they appear in the record, the court erred in dismissing cross complainant’s cross-bill.

The North Shore Trust & Savings Bank had notice and it is admitted in the brief that Williams was but a dummy; that no consideration was paid by him for the conveyance of the property in question, and from the evidence it is plain that he asserts no right or equity in the property. Then, too, when we learn that the grantor of the real estate to Williams retained possession of the property even until the time suit was begun, this would indicate that she claimed some rights and that she had equities in the premises, and from the record, such rights were by reason of her possession as a tenant of Mrs. Connell, cross complainant. The North Shore Trust & Savings Bank having failed to inquire, is chargeable with the conditions such as we find from this record, and the Fidelity Trust & Savings Bank, by the purchase of the notes secured by the trust deed, acquired no better right to the property than did the North Shore Trust & Savings Bank.

The court in the entry of the decree as prayed for by the cross-bill should allow the Fidelity Trust & Savings Bank, one of the defendants, the amount used to satisfy the trust deed upon the property securing the note for $5,000, signed by the cross complainant.

The decree of foreclosure is reversed and the cause remanded with directions to the court to enter a decree for the cross complainant as prayed for and in conformity with the reasons stated in this opinion.

Decree reversed and cause remanded with directions.

Hall, P. J., and Denis E. Sullivan, J., concur.


author: Mr. Justice Hebel delivered

text:
    In re Estate of James Thomas Kelly, Deceased. Halbert O. Crews and The People of the State of Illinois, Defendants in Error, v. Julius P. Waitches, Plaintiff in Error.
    Gen. No. 38,210.

      Opinion filed April 22, 1936.
    Rehearing denied May 5, 1936.
    Frank A. McDonnell, of Chicago, for plaintiff in error; Elwyn E. Long, of Chicago, of counsel.
    Levinson, Becker, Peebles & Swiren, of Chicago, for certain defendant in error.
   Mr. Justice Hebel delivered

the opinion of the court.

This writ of error directed to the probate court of Cook county was issued upon the request of Julius P. Waitches for the purpose of reviewing the record in a contempt proceeding, wherein this respondent, together with others, was found guilty in the probate court of Cook county and committed to the county jail for a period of one year, unless sooner discharged in due course of law.

This proceeding was instituted upon a petition filed in the probate court by Jack Rubens, an investigator for the public administrator of Cook county. The petition sets forth that a direct contempt had been committed by reason of the fact that the document purporting to be the last will and testament of James Thomas Kelly, deceased, was a forgery, and known to all of the persons connected therewith to be such. The petitioner fúrther named the persons involved in the matter and prayed that the court might require the persons named to show cause why they should not be held in contempt of the probate court of Cook county, Illinois.

Upon the filing of this petition, the court proceeded in a summary manner, and heard the evidence of witnesses, who were interrogated, together with persons whose names appeared on the document as attesting witnesses, and this respondent, who as the attorney, filed with the clerk of the court the purported last will and testament of James Thomas Kelly, deceased, also presented the petition for proof of the will and letters testamentary in the estate of James Thomas Kelly, also known as James T. Kelly and as Thomas Kelly, deceased, on February 25, A. D. 1935, praying that the will be admitted to probate and that letters testamentary be issued after proper hearing and proof, and that the petition be set down for hearing on May 16, A. D. 1935.

At the conclusion of the hearing upon the matter of contempt, the court entered an order from which it appears that James Thomas Kelly departed this life on or about the 26th day of February, 1935; that Julius P. Waitches appeared in the probate court of Cook county, Illinois, on the 6th day of March, 1935, and presented a document purporting by its terms to be the last will and testament of James Thomas Kelly, deceased, which purported last will and testament bore the signature of Paul P. Zalinck and John Dailvde as witnesses thereto, and which said purported last will and testament named Bella Butman and Nicholas Badis as executors thereof; that at the time Julius P. Waitches filed the purported last will and testament of James Thomas Kelly, deceased, he also presented to the court the verified petitions of Bella Butman and Nicholas Badis, the persons named in the will as executors thereof, asking that the will he admitted to probate and record and that letters testamentary issue to them in the premises.

The court thereupon found from the evidence heard in said cause that the document said to be the will of James Thomas Kelly, deceased, and which was presented to this court as such, and which bore the signatures of Paul P. Zalinck and John Dailyde as witnesses to the execution thereof, was not actually witnessed by these persons in the presence of James Thomas Kelly and in the presence of each other, as required by statute, but on the contrary the court found the fact to be that Paul P. Zalinck and John Dailyde affixed their signatures thereto after the death of James Thomas Kelly, the said John Dailyde having signed said document in the undertaking establishment maintained in the City of Chicago by the respondent, John J. Bagdonas, and the said Paul P. Zalinck having signed the document at his home after the death of James Thomas Kelly at the request and instance of the respondent, Nicholas Badis.

And the court entered a further finding from the evidence that all of the persons named above were fully advised of these facts prior to the date when the aforesaid Julius P. Waitches appeared in court and presented the last will and the application for its probate to the court, and that the persons herein named were scheming to perpetrate a fraud upon the court and intended to cause the court to admit to probate and record a document which Julius P. Waitches and the other respondents knew on said date was not the valid last will and testament of James Thomas Kelly, deceased.

Thereupon the court found the said respondent Julius P. Waitches, together with the other respondents in contempt of court, and they and each of them were sentenced to the county jail of Cook county for a period of one year from the date of the order.

The respondent makes the point that the probate court of Cook county erred in not discharging the respondent Julius P. Waitches on his sworn testimony in open court, denying his guilt. Upon an examination of the record filed by the respondent, as far as this respondent is concerned, we are unable to find that at any time during the hearing he objected to the admissibility of evidence of witnesses, on the theory that he had purged himself by his testimony as a witness at the hearing before the court. So, the question resolves itself into whether the hearing before the court was in the nature of a direct contempt which assailed the dignity of the court.

The attorneys who appear as amicus curiae invite our attention to the case of People v. Whitlow, 357 Ill. 34, wherein the court speaks of contempts committed in open court, or a contempt that is not in the presence of the court, and says: “Upon the commission of a contempt in open court, it is competent for the judge to proceed upon his personal knowledge of the facts and to punish the offender summarily without entering any rule against him and without hearing any evidence. . . . Misbehavior constituting a contempt committed in any place set apart for the use of any constituent part óf the court, when it is in session, is deemed to have been committed in the presence of the court. . . . The order adjudging a contemner guilty of contempt committed in open court must set out the facts constituting the offense with sufficient particularity and certainty to show that the court was authorized to make the order. . . . In a ease where the proceeding for contempt is for acts committed, not in the presence of the court and not in furtherance of the remedy sought or in enforcement of the court’s orders or decrees but to maintain its authority and to uphold the administration of justice, if the party should answer denying the alleged wrongful acts, his answer is conclusive, extrinsic evidence may not be received to impeach it, and he is entitled to his discharge.”

In the case of People v. Sheridan, 349 Ill. 202, the court stated what would be considered a constituent part of the court and said that if the alleged conduct of the persons charged took place before such constituent part of the court, it was therefore in the presence of the court and a direct contempt. The court further said:

“The first contention of defendant is that the petition filed by the State’s attorney was insufficient to charge him with conduct constituting contempt of court because it did not contain an allegation that the grand jury was investigating any complaint or charge of crime committed in Cook county or an allegation of the object of the questions asked defendant when he was before the grand jury. It is a sufficient answer to this contention to state that the alleged contemptuous conduct of defendant was before the grand jury, which was a constituent part of the criminal court, and his conduct was therefore in the presence of the court and if contemptuous was a direct contempt, and it was unnecessary to file a petition or make a formal charge by affidavit in order that the court might punish him for the contempt. (People v. Cochrane, 307 Ill. 126; People v. Sherwin, 334 id. 609.) Since it was not necessary or essential that the petition be filed it is unnecessary to consider whether the allegations of the petition that was filed were sufficient to charge conduct constituting contempt of court.”

From the order entered by the court, we find that the respondent in this case, together with the other respondents found guilty by the court, presented a document purporting to be the last will and testament of James Thomas Kelly, deceased, which document was not properly signed by two witnesses, and the witnesses who did sign were not witnesses to the execution thereof in the presence of James Thomas Kelly in his lifetime, and in the presence of each other, as required by law.

From the order the court further found that the appearance in court for the purpose of filing the purported last will and testament of James Thomas Kelly, deceased, was in furtherance of a scheme on the part of the respondents named to perpetrate a fraud, and that the contemptuous conduct of this respondent, together with the other named respondents, when the will was presented in the court for purposes of probate, took place in the presence of the court, and being a direct contempt, the judge of the probate court acted properly in exercising jurisdiction to pass upon the contemptuous acts of the respondents.

It is evident from the "record that the court was imposed upon when this alleged last will and testament of James Thomas Kelly, deceased, was presented.

The only real question involved in this proceeding so far as this particular respondent before us is concerned is whether the order is sufficient in its finding of fact to sustain the court’s position in finding this respondent guilty.

It appears from the order that Julius P. Waitches appeared in the probate court on the day in question and filed with the clerk of the court a document purporting to be by its terms the last will and testament of James Thomas Kelly, deceased, and presented it for probate, together with a verified petition by Bella But-man and Nicholas Radis, who were named in the will as executors, asking that the will be admitted to probate and record, and that letters testamentary issue to the petitioners named.

It is clear from the order that when this respondent, Julius P. Waitches, appeared in court and presented the alleged last will and testament, the same was prepared as a part of and in furtherance of a scheme and design on the part of the respondents named to perpetrate a fraud upon the court. That, in our opinion, would of itself be sufficient, from all the facts and circumstances as they appear in the record, to justify the court’s order.

The question is called to our attention that this prosecution was founded upon a petition of one Jack Rubens, and was not supported by a sufficient oath or affidavit. If we turn to the case of People v. Sheridan, 349 Ill. 202, we will find, upon a like question, this statement by the court: “Since it was not necessary or essential that the petition be filed it is unnecessary to consider whether the allegations of the petition that was filed were sufficient to charge conduct constituting contempt of court.”

In other words, the hearing being before the court, it was competent for the judge to consider the contemptuous conduct of the respondent before the court, as well as in the clerk’s office — a constituent part of the probate court — and punish him for direct contempt without the filing of a petition or the making of a formal charge, supported by an affidavit.

Since the question arises largely upon the order of the court, we have examined the suggestions made by this respondent, and are of the opinion that there is sufficient in the order itself to justify the court in finding him guilty and in fixing his punishment.

From an examination of the record filed in this court, this respondent was not only present in court on the days when evidence was heard, but was also present when the order complained of was entered by the court.

In our opinion the court acted properly, and there is no error in the record such as would justify a reversal of the order.

For the reasons stated in this opinion the order of the probate court is affirmed.

Order affirmed.

Hall, P. J., and Denis E. Sullivan, J., concur.