text:
    L. R. Alexander for the use of Tobey Furniture Company, Appellant, v. The Live Stock National Bank of Chicago, Appellee.
    Gen. No. 38,196.

      Matchett, J., dissenting.
    Opinion filed November 12, 1935.
    Rehearing denied November 26, 1935.
    Meyer Shapiro, of Chicago, for appellant.
    Winston, Strawn & Shaw, of Chicago, for appellee; James H. Cartwright, Gerard E. Grashorn and William C. Mulligan, all of Chicago, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

By this appeal plaintiff seeks to reverse a judgment of the municipal court of Chicago which discharged The Live Stock National Bank of Chicago as garnishee.

The record discloses that on January 18, 1932, The Tobey Furniture Company caused judgment by confession to be entered against L. B. Alexander for $337.82. Afterward an execution was issued and returned by the bailiff no part satisfied. More than two years afterward, November 15, 1934, plaintiff filed an affidavit for a garnishee summons which was issued and served on The Live Stock National Bank; it filed its answer in which it set np that it had no property in its possession belonging to Alexander. The answer was contested. The matter came on for hearing January 4, 1935; evidence was heard and thereupon a motion to discharge the garnishee was denied. The cause was then continued to January 25th. January 10th the garnishee by leave of court filed an amended answer. The hearing was then completed, the court found from the evidence and from the admissions of the garnishee that at the time- of the service of the summons on the garnishee it had in its possession a certificate for 40 shares of stock of the Ever Ready Transit Company, an Illinois corporation, the certificate being in the name of the judgment debtor, Alexander, and indorsed by him in blank. The court further found that subsequent to. the service of the summons on the garnishee it delivered the certificate for the 40 shares of stock back to Alexander. The court then found the issues against the garnishee and entered judgment against it for $404.19, being the amount of the judgment against Alexander with interest thereon. .February 13th the garnishee’s motion for a new trial was allowed, and it was stipulated that neither side had any other evidence to offer, and that the court might decide the case on the evidence theretofore adduced. Thereupon, the court found the issues in favor of the garnishee, it was discharged, and plaintiff appeals.

The substance of the facts as shown by the evidence, and which is not in dispute, is that at the time the garnishee bank was served with summons, for a considerable time prior thereto and for some time thereafter, the bank held certificates for 120' shares of the capital stock of the Ever Ready Transit Company, an Illinois corporation, which were indorsed in blank and held by the bank under an escrow agreement dated December 29, 1932, from which agreement it appears that in addition to the stock certificates the bank held in escrow a promissory note for $2,000 signed by Alexander, due November 21, 1933, on which, there “was $500 still due. The agreement recited that upon production of satisfactory evidence of the payment of a note for $816, dated December 27, 1932, which was signed by Alexander and Charles L. Bingham, the bank was authorized to deliver the certificates of the 120 shares of stock, together with the $2,000 note to “Alexander and Charles L. Bingham”; that in the event of the failure of Alexander and Bingham to pay the note for $816, in accordance with the terms of a certain other agreement (which is not in the record) the bank was authorized to deliver the stock certificates and the $2,000 note to Bernhard H. Stephenson and Herman F. Frank, and the escrow agreement would be thereupon terminated. The escrow agreement was signed by Stephenson, Frank, Alexander and Bingham, and accepted by the garnishee bank.

The amended answer of the garnishee set up that the bank under the escrow agreement had in its possession “120 shares of stock of the Ever Beady Transit Company, an Illinois corporation, 40 shares of which was endorsed in blank by LeRoy D. Alexander” and deposited with the bank; that after the service of the garnishee summons on the bank the escrow agreement Avas terminated by the acts of the parties and the stock certificates for the 120 shares were delivered by the Bank to Alexander and Bingham, that the stock at the time of the service of the garnishee summons was of no value, was still of no value, and that the bank had no property in its possession belonging to Alexander.

A witness called by plaintiff testified that about November 20, 1934 (which was three days after the bank was served by the garnishee summons) he talked with a trust officer of the garnishee - bank and was told by the officer that the bank still had the certificate of stock which Alexander had deposited with it. Another witness called by plaintiff testified that he was one of the original incorporators and stockholders of the Ever Eeady Transit Company; that the par value of the shares was $50, and that at the time of the service of the garnishee summons he was of opinion the stock was worth $25 a share, or a total of $1,000 for the 40 shares. This evidence was objected to on the specific ground that there was no showing that the witness was qualified to place a value on the stock. The objection was overruled and the evidence admitted.

Plaintiff contends that shares of stock of an Illinois corporation owned by a judgment debtor and for which a certificate has been issued and is in the possession or custody of a third party, are subject to garnishee process. His counsel says that neither the Appellate nor the Supreme Court of this State “have ever decided this precise question squarely,” and counsel for the garnishee agree with this statement but say that the question has been decided by the courts of many States, as well as by the Federal courts, and that in no case has such a method of attaching stock been held valid.

At common law a shareholder’s interest in a corporation could not be taken under an execution; the proceeding is statutory. Goss & Phillips Mfg. Co. v. People, 4 Ill. App. 510. Section 1 of our Garnishment Act provides that upon the return of an execution “No property found,” garnishment proceedings may be instituted where it is made to appear by affidavit that any person has “any effects or estate” of the judgment debtor in his possession, custody or charge. (Ill. State Bar Stats. 1935, p. 1729.) The word “effects ’ ’ as used in sec. 8 of the Attachment Act has been defined by our Supreme Court to include shares of stock in a corporation; (Union Nat. Bank of Chicago v. Byram, 131 Ill. 92) and we hold that the word “ef fects” in section 1 of our Garnishment Act is used in the same sense.

In the Byram case the sheriff levied a writ of attachment on certain shares of stock of an Illinois corporation. The court said (p. 97): “The only question which the record presents for our consideration is this: are shares of stock in an incorporated company subject to attachment under the laws of .this State?

“Section 52 of chapter 77 of the Rev. Stat., being ‘An Act in regard to judgments and decrees,’ . . . provides that ‘the shares or interest of a stockholder in any corporation may be taken on execution and sold as hereinafter provided.’ ”

The court then analyzes and discusses other sections of that act and continuing says (p. 98): “The language of sections 53, 54 and 57 plainly indicates that the Legislature intended to subject to attachment the same shares of stock which were liable to be taken on execution.” And continuing (p. 99) says: “It is claimed that the Attachment act, and the act in regard to judgments and executions, contain no provision that stock shall be subject to attachment, and that, if they do contain such provision, they provide no mode of levying an attachment upon stock. We think that an examination of the two Acts will show this claim to be unfounded. ’ ’

The court then quotes from section 8 of the Attachment Act, which provides that the officer shall execute the writ upon the “effects” of the debtor and that “This provision, as well as the other provisions hereafter referred to, should receive a liberal construction. (First National Bank of Chicago v. Hanchett, 126 Ill. 499; . . .) Its words are ’comprehensive enough to include the interest of a stockholder in a corporation.

“It will not be questioned that an attachment may be levied upon personal property. Section 7 of the general Incorporation act of this State provides that ‘the shares of stock . . . shall be deemed personal property. ’ Morawetz on Private Corporations says: ‘In most of the States it is provided by general law that shares in a corporation shall be treated as personal property. . . . They have been held to be “personal property” subject to tax laws, and to pass as personal property under a will.’ (Secs. 224, 225.) "While shares, independently of the certificates of shares, cannot be considered as either goods, wares or merchandise within the meaning of the statute of frauds, yet certificates of shares may be considered goods and merchandise within the meaning of that statute.”

From the quotation just made certificates of shares, as distinguished from shares, are considered goods and merchandise; so in the instant case the certificates of shares in the possession of a garnishee at the time process was served upon it may not only be considered “effects” of the judgment debtor, but also “goods and merchandise. ’ ’

In Illinois Anglo-American Storage Battery Co. v. Long, 41 Ill. App. 333, it was held that shares of stock owned by the defendant in attachment, for which certificates had not been issued, might be reached by garnishment in the hands of the corporation, and their issuance and the disposition of them be controlled by the court. The court there said (p. 334): “The contention of appellant is that the court acquired no control over the stock by the process of garnishment, and was without jurisdiction to render the judgment,” and that sec. 8 of the Attachment Act “authorized attachment of any equitable interest of goods, chattels, rights, credits, moneys and effects ’ ’ of the debtor; that sec. 21 of the same chapter “provides for reaching by garnishment in the hands of any person, the property, effects ... of the debtor in the possession or power of such person”; that sec. 5 of the Garnishment Act, chapter 62, “is equally comprehensive in the description of property interests belonging to the defendant that may be reached in the hands of the garnishee.” The court then discusses the case of Union Nat. Bank of Chicago v. Byram, 131 Ill. 92; and referring to that case the Appellate Court said (p. 335): “It is there said, ‘effects’ are defined to be ‘property or worldly substance,’ and as denoting ‘property in a more extensive sense than goods ... a share of stock cannot be regarded as otherwise than property, ’ nor can it be said that it is not ‘worldly substance. ’

“If, therefore, the certificates of stock when issued are subject to attachment, it is difficult to see why shares of stock owned by a defendant in attachment, for which certificates have not been issued, may not be reached by garnishment in the hands of the corporation, and their issuance and the disposition of them controlled by the court.

“The certificate of stock is not the stock itself, but evidence of its ownership. The assignment of such certificates is the ordinary means of transferring stock, and dealing with the shareholders’ interest in the corporation.”

The court then said that sec. 24 of the Garnishment Act authorized the exercise of “equitable powers in taking possession and disposing of the property in the hands of the garnishee.”

If, as held in that case, shares of stock of a judgment debtor for which certificates have not been issued could be reached by garnishment, we see no reason why garnishment would not lie against one holding the certificates after they had been issued to the judgment debtor. In further support of this holding we refer to section 1 of the Uniform Stock Transfer Act, ch. 32, par. 229, which provides that the “title to a certificate and to the shares represented thereby can be transferred only (a) By delivery of the certificate endorsed, or (b) By delivery of the certificate and a separate document containing a written assignment” of it. And that section further provides that the method of transferring certificates and the shares of stock in a corporation “shall be applicable although the charter or articles of incorporation or code of regulations or bylaws of the corporation issuing the certificate and the certificate itself, provide that the shares represented thereby shall be transferable only on the books of the corporation. ’ ’ Prior to the passage of that act it was held that under sec. 52, ch. 77, the delivery of a certificate of stock of a corporation in good faith, to one who advanced money on the security of it was sufficient to protect the holder against executions or attachments against the pledgor, to the extent of the debt the stock was delivered to secure, although the stock was not transferred on the books of the corporation. Rice v. Gilbert, 72 Ill. App. 649, same case affirmed, 173 Ill. 348.

In that case both the Supreme and Appellate Courts referred to section 52, chapter 77, of our statutes which provides, “The share or interest of a stockholder in any corporation may be taken on execution, and sold as hereinafter provided; but in all cases where such share or interest has been sold or pledged in good faith for a valuable consideration, and the certificate thereof has been delivered upon such sale or pledge, such share or interest shall not be liable to be taken on execution against the vendor or pledgor, except for the - excess of the value thereof over and above the sum for which the same may have been pledged and the certificate thereof delivered.” And it was held that where stock certificates were pledged as collateral security for an indebtedness, the interest of the shareholder in the corporation could not be sold under a judgment obtained against the owner of the shares until the indebtedness for which the certificates were pledged had been paid, although there was no notation on the books of the corporation that the certificates had been pledged. In the instant case the certificates of stock were in the possession of the garnishee at the time of the service of summons on it, and the undisputed evidence is that after the garnishee was served the certificate for the 40 shares was returned to Alexander and the other certificate to Alexander and Bingham. The garnishee had no right to deliver up the certificates after it was served with process, and whatever interest Alexander had in the stock was subject to garnishment.

In Pease v. Chicago Crayon Co., 235 Ill. 391, it was held that shares of stock in a corporation are personal property subject to levy under writ of attachment, and where certificates for the shares had been issued the interest of the stockholder could not be reached by garnishment against the corporation.

Counsel for the garnishee say that the method of' subjecting a shareholder’s interest in a corporation to judicial process was enacted by the legislature, as appears from sections 53, 54, 55, 56 and 57 of chapter 77 of our statutes; and that by section 54 it is provided that if the share or interest of a stockholder has not been previously attached the officer shall leave an attested copy of the execution with the clerk, treasurer or cashier of the corporation; and the argument seems to be that this is the only method by which the interest of a shareholder can be subjected to the payment of a judgment. But we think this provision is immaterial here because no levy has been attempted on the interest of the shareholder, Alexander. By the garnishment proceeding* plaintiff was seeking* to get possession of the stock certificates; and if it did so, whether it would then be required to make the levy, as pointed out in section 54, is not material because the gar.nishee surrendered the certificates after it was served with process and is therefore liable for the value of the stock it surrendered.

Cases are cited from other jurisdictions by counsel which in effect hold that stock certificates cannot be reached by garnishment; they need not be discussed because we think they are contrary to the holding of our Supreme Court.

Plaintiff further contends that the surrender of the certificates of stock in the hands of the garnishee after the service of the garnishee summons, subjects the garnishee to a judgment for the amount of plaintiff’s judgment. In support of this section 25 of the Garnishment Act, Binkley v. Clay, 112 Ill. App. 332, and other cases are cited.

Section 25 provides that if the garnishee refuses or neglects to deliver any goods, chattels or effects in his hands when required to do so by the court or officer having an execution, it may be attached and punished as for contempt, or the court may enter judgment for the amount of plaintiff’s judgment and award execution thereon against the garnishee.

In Binkley v. Clay, 112 Ill. App. 332, it was held that it was the duty of the garnishee who has money or other property subject to garnishment in his hands at the time of the service of the writ upon him, to exercise reasonable diligence to prevent the payment of the money or the delivery of the property to the debtor; but whether the garnishee who had paid out money after he was served with garnishee summons was liable for the amount of plaintiff’s claim or the amount of money that the garnishee had in his possession, was not discussed or considered.

Stevens v. Dillman, 86 Ill. 233, cited by counsel for both parties, was a garnishment proceeding where a plaintiff had a judgment against the principal defendants for $5,154 and then brought garnishment; the garnishee held two $1,000 promissory notes of a third person indorsed in blank and belonging to one of the principal defendants, and after service of garnishee summons surrendered one of the notes. The court gave judgment against the garnishee for $1,151.90, being the face and interest of the note surrendered, and ordered the other note surrendered within 30 days. On appeal to the Supreme Court the judgment was affirmed. The court there said (p. 235): “Stevens held these notes when garnishee process was served on him; and he must have known that it was to reach these notes that he was served. And he should have also known that it was his duty to hold them until the title thereto was determined. The very fact that he was served with process put him on his guard, and he afterwards acted at his peril in surrendering the note to Ward, or in delivering it to Scutt under his directions. When he did so he undertook to prove that the note belonged to Ward. This he attempted, but in it he failed; and, failing in that, he must be held liable for the value of the note. ’ ’

In the instant case plaintiff, on the trial, took this same view of the law because a witness was called and over objection testified that the stock was worth $25 a share. This testimony was objected to because the witness had shown no qualification, nor had any facts been adduced to show the value of the stock. The evidence was clearly inadmissible and should have been excluded. People v. Turpin, 233 Ill. 452. The fact that the witness had been one of the original incorporators did not tend to show the value of the stock. This might be shown by actual bona fide sales of the stock or by other methods well known to the profession. There was no competent evidence to show the value of the stock.

But the garnishee contends that where, as here, it was under duty to return the property to the joint obligees, Alexander and Bingham, the property was not subject to garnishee proceedings based upon a judgment against one of the obligees, that is, the judgment against Alexander. And in support of this the case of Commercial Nat. Bank v. Kirkwood, 184 Ill. 139, and other cases are cited. In that case, following the rule laid down in Siegel, Cooper é Co. v. Schueck, 167 Ill. 522, it was held that a debt owing to one partner is not subject to garnishment by creditors of the partners. But after those cases were decided the Legislature amended section 1 of the Garnishment Act in 1923. (Boska v. Buchaniec, 245 Ill. App. 602.)

Plaintiff had a right to garnishee whatever interest Alexander had in the stock pledged.- Obergfell v. Booth, 218 Ill. App. 492.

Moreover, as above stated, the court found.from the evidence and the admissions of the garnishee, that after it was served with summons it return the certificate for the 40 shares of stock to Alexander. In these circumstances we think the garnishee was liable for the reasons stated.

For the errors mentioned the judgment of the municipal court of Chicago is reversed and the cause is remanded.

Reversed and remanded.

McSurely, P. J., concurs.

Matchett, J., dissents.


source: Caselaw Access Project

author: Mr. Justice O’Connor

license: Public Domain

text:
    The People of the State of Illinois Defendant in Error, v. Joe LaScola, Plaintiff in Error.
    Gen. No. 38,213.
    Opinion filed November 12, 1935.
    Rehearing denied November 29, 1935.
    E. A. Biggs, Jr., of Chicago, for plaintiff in error.
    Thomas J. Courtney, State’s Attorney, for defendant in error; Edward E. Wilson, John T. Gallagher and Bichard H. Devine, Assistant State’s Attorneys, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

Joe LaSeola was found to be in contempt of court for committing perjury and for inducing another person to commit perjury in a criminal ease that was on hearing in the criminal court of Cook county. He was sentenced to the county jail for a term of six months and he prosecutes this writ of error.

The court having found LaScola guilty of a direct contempt, criminal in its nature, the case must be considered by this court on the order alone. People ex rel. Bain v. Feinberg, 266 Ill. App. 306; People v. Bain, 268 Ill. App. 192. This procedure was followed by the trial court.

From the order entered it appears that on February 28,1935, the case of People of the State of Illinois v. Nick Rogulich was on trial before Judge Feinberg, sitting in the criminal court of Cook county. Bogulich was charged with robbery while armed with a gun, and the evidence was that the robbery took place about 4:45 o’clock in the afternoon of January 8, 1935, at a business located at 3039 South Halsted street, Chicago; that LaScola, called by the defendant in that case, testified that at the time Rogulich was charged with having committed the robbery he was employed by LaScola and was working for LaScola in his confectionery store at 227 West 31st street, Chicago.

It further appears from the order that on the afternoon of the same day, February 28,1935, after LaScola had testified as above stated “upon process issued out of this court against . . . Joe LaScola, for contempt of this Court . . . upon inquiry to answer questions upon process heretofore issued by this Court,” that LaScola was then sworn and testified that he was the same person who testified in the Rogulich case on that date, and that he did not employ Rogulich at his place of business as he had theretofore testified, and that Rogulich was not at LaScola’s place of business at the time of the commission of the robbery; and the court found that “the said Joe LaScola knowingly, wilfully, corruptly and falsely testified to said matters ... in order to mislead the court and the jury and to aid the said Nick Rogulich in getting a verdict of not guilty.”

The order further finds that it was within the personal knowledge of the court, and occurred in his presence during the trial of Rogulich, that Martin Gusich, called and testified on behalf of Rogulich, his testimony being that Rogulich was employed by and worked for LaScola at LaScola’s place of business, 227 West 31st street, Chicago. This testimony was also given on the afternoon of February 28th. Gusich, who was represented by counsel, was called by the court “upon inquiry to answer questions upon the process heretofore issued by this Court, and being first duly sworn, stated under oath” that he was the same person who had testified on that date in the Rogulich trial; that he then repudiated his testimony given on that trial and swore that he did not see Rogulich in LaScola’s store and that he was suborned to so testify for the defendant, Nick Rogulich, by the said contemnor, Joe LaSeola.

The order further finds that all of the foregoing matters occurred in open court while the court was in session and within the personal knowledge of the judge; that LaScola was present in open court in person and was “by reason of said conduct guilty of a direct and deliberate contempt of this Court in open court,” and it was ordered that he be confined in the county jail of Cook county for a period of six months.

From the foregoing it appears that on the afternoon of the same day that LaScola and Gusich testified for defendant Rogulich the court instituted a separate and independent inquiry as to the falsity of the testimony of these witnesses given in the Rogulich case. They were called to the witness stand and sworn, and upon examination LaScola testified that the testimony he had given on that day in the trial of the cause was false and that he had so testified to help out Rogulich. The witness, Gusich, was then called, sworn and examined, and he testified that the testimony he had theretofore given on the hearing of the case on trial was false and that he had been induced by LaScola to give such testimony. So far as the order discloses no opportunity was given to LaScola to admit or deny the testimony given by Gusich on the inquiry.

We think it obvious that it was not within the personal knowledge of the court, as the order recites, that LaScola had testified falsely and that Gusich had been induced to give false testimony on the trial of the case against Rogulich at the solicitation of LaScola. The court was apprised of these matters by the testimony of LaScola and Gusich. This demonstrates that the contempt was not of such a character — a direct contempt — as would warrant the court in summarily punishing LaScola.

Moreover, we are further of opinion that while the court might have been satisfied that the testimony given by LaScola on the trial of the criminal case against Rogulich was false, yet the order discloses that the court had at least some doubt on the matter because LaScola was called, was sworn and testified on the inquiry instituted by the court as above stated. As said in People v. Stone, 181 Ill. App. 475 (477): “But there is nothing in the record to disclose that the court knew that the testimoriy was false. In a case of direct contempt, it may act upon that of which it may take judicial notice, but it cannot judicially know that evidence is false unless at the trial it is so made to appear by the witness’ own admission or perhaps by unquestioned or incontrovertible evidence. Otherwise the court would act merely upon its belief or conclusions derived from evidence heard, and not upon matters of fact of which it had judicial cognizance, which is essential to the summary proceeding* for direct contempt. . . .

“ . . .If false swearing in the presence of the court constitutes direct contempt, then judicial knowledge of its falsity is, in our opinion, indispensable to the right of the court to exercise authority to commit therefor. ’ ’ If LaSeola had admitted on cross-examination that his testimony was false when testifying in the trial of Bogulich, a different question would be presented.

A person who gives false testimony in a material matter in a cause on hearing, or who shall suborn another person to swear falsely, is deemed guilty of perjury, or subornation of perjury, and subject to be imprisoned in the penitentiary for not less than one nor more than fourteen years. (Par. 482, chap. 38, Ill. State Bar Stats. 1935.) He may be proceeded against according to law. And it is also the law that because perjury, which tends to obstruct the administration of justice, is punishable as a criminal offense is no reason why it may not also afford basis for punishment as a contempt; but that punishment for a contempt is only warranted when exceptional conditions so justify. Ex parte Hudgings, 249 U. S. 378; People v. Anderson, 272 Ill. App. 93.

In the Hudgings case the court said (p. 382): “Because perjury is a crime defined by law and one committing it may be tried and punished does not necessarily establish that when committed in the presence of the court it may not, when exceptional conditions so justify, be the subject-matter of a punishment for contempt. ’ ’

In the Anderson case, 272 Ill. App. 93, the court quoted with approval the statement of this rule from 11 A. L. R., p. 343 (p. 100) : “The rule is well settled that perjury or false swearing* may, at least under some circumstances, be punished as a contempt of court.” But there is some doubt whether this rule is the law of this State. People v. Hogan, 256 Ill. 496. In that case one was committed to jail for an alleged contempt committed in open court without plea, issue or trial; the court, after holding that the commitment was unwarranted, said (p. 501): “It is not to be inferred because the question is not discussed, that we think a court can in any case, upon its own knowledge of the facts, punish summarily as for a contempt against the dignity of the court, a witness who has testified falsely in a cause. ’ ’

In the instant case we think it apparent that the court did not know of its own knowledge that LaSeola and Gusich had given false testimony in the criminal case because the court instituted a separate inquiry, called these two persons, had them sworn and examined, and from their testimony found LaSeola guilty of contempt. And while the order finds — and the finding must be taken as true — that LaSeola admitted he had given false testimony in the trial of the criminal case, yet it is clear that the court did not know, if such were the fact, that LaSeola had suborned Gusich to testify falsely until Gusich was sworn and testified on the inquiry. When a court is said to know of its own knowledge that certain matters and things have taken place in open court before him, no testimony is required or permitted in a proceeding for a direct contempt.

For the reasons stated, the order finding Joe LaScola guilty of contempt is reversed.

Order reversed.

McSurely, P. J., and Hatchett, J., concur.


text:
    Great Northern Laundry Company, Appellant, v. Commercial Credit Company et al., Appellees.
    Gen. No. 38,267.
    Opinion filed November 12, 1935.
    Heile, Cavender, Milchrist & Kaiser, of Chicago, for appellant.
    Herbert J. Ferguson, of Chicago, for appellee.
   Mr. Justice O’Connor

delivered the opinion of the court.

The Great Northern Laundry Company filed its complaint in chancery against the Commercial Credit Company and Kellman Laundry Machinery' Company, a corporation, alleging that it had purchased machinery from the Kellman Company at a price of $10,000, and as a part of the purchase price had executed its notes for $9,494 and executed a conditional sales contract with the Kellman Company; that afterward it purchased a sprinkling system from the Kellman Company for $5,000, and as part of the purchase price executed its notes for $4,782, and a conditional sales contract to the Kellman Company; that shortly after the execution of these notes and contracts the Kellman Company pledged them to the defendant Commercial Credit Company as security for a loan; that plaintiff had paid the amount due on the notes executed for the machinery except $789.93, and the notes executed for the sprinkling system except $220.89.

It was further alleged in the complaint that the Kellman Company was hopelessly insolvent and that it was indebted to plaintiff for more than $4,400. The prayer was for an accounting and that plaintiff be allowed a set off of the $4,400 due it from the Kellman Company on the amount found due on the notes. And the further prayer was that the credit company be enjoined from endeavoring to collect the balance due on the notes above mentioned and from attempting to seize the machinery which plaintiff had purchased from the Kellman Company.

The Kellman Company answered admitting insolvency; the credit company answered claiming there was a balance due it on the two series of notes and prayed for judgment in its favor against plaintiff for the amount found to be due. The case was tried on a stipulation of facts. The court found that there was $1,076.51 due from plaintiff on the notes and decreed that this be paid to defendant Commercial Credit Company within 30 days or the machinery and equipment and sprinkling system plaintiff had purchased be returned to the Commercial Credit Company, and a special execution was awarded. Plaintiff appeals from this decree.

Plaintiff’s contention is that since the two conditional sales contracts and the two series of notes were pledged by the Kellman Company to the credit company, the latter company was entitled to recover on the notes only the amounts it had lent the Kellman Company' and for which the contracts and notes were pledged, and that the amounts so lent had been paid. But it appears from the stipulation of facts that the Kellman Company from time to time pledged other notes and conditional sales contracts similar to the ones in the case at bar with the credit company, and that it was agreed between the Kellman Company and the credit company that all the notes and conditional sales contracts were to be held by the credit company until all indebtedness had been paid by the Kellman Company to the credit company; and that under such agreement there was still due and owing from the Kellman Company to the credit company $6,623.77. Obviously plaintiff could not have its notes, which are involved in this case and which were pledged to the credit company, delivered up to plaintiff, nor could it apply the $4,400 due it from the Kellman Company to such indebtedness because under the agreement between the Kellman Company and the credit company the latter company had a right to hold all notes and contracts until all indebtedness due from the Kellman Company to the credit company had been paid. Continental Credit Co. v. Ely, 91 Conn. 553.

Plaintiff’s contention is that it had a good defense to the balance remaining due on the two series of notes as against the Kellman Company and that this defense is available to it as against the pledgee of the notes, the defendant Commercial Credit Company.

We think this contention is clearly without merit for the reasons stated.

We know of no reason why the Kellman Company could not pledge the notes it received not only for the amount it received on these notes from the credit company, but for any other debts or loans by the credit company to it.

The decree of the superior court of Cook county is affirmed.

Decree affirmed.

McSubely, P. J., and Matchett, J., concur.


text:
    City of Chicago, Appellant, v. The Great Atlantic and Pacific Tea Company, Appellee.
    Gen. No. 38,361.
    Opinion filed November 12, 1935.
    Rehearing denied November 26, 1935.

      William H. Sexton, Corporation Counsel, for appellant; Martin H. Foss and Boy D. .Keehn, Jr., of counsel.
    John L. MoInbrnby, of Chicago, for appellee.
   Mr. Justice O’Connor

delivered the opinion of the court.

The City of Chicago filed a quasi criminal complaint against the defendant, charging that it carried on a wholesale food business at 445 West Pershing Boad, Chicago, without having obtained a license to do so, in violation of sec. 3144 of the Bevised Chicago Code of 1931. The case was tried before the court without a jury on an agreed statement of facts. The court found in favor of the defendant, judgment was entered on the finding, and plaintiff appeals.

The record discloses that defendant is a corporation doing business in Chicago where it operates approximately 600 chain stores in which it sells food at retail, These retail stores have complied with the city’s retail food establishment ordinance. Defendant also maintains two large establishments in Chicago, one of which is involved in this suit. This consists of a five-story building which covers approximately one-fourth of a city block. There are switch track facilities by means of which merchandise is received and shipped. The defendant uses the premises for the preparation of articles of food and provisions; the handling of stock; the warehousing of it as a central point of distribution to its chain stores in Chicago and Illinois, Wisconsin and Iowa. On October 9, 1934, an inspector of the License Bureau of the city visited the premises and found the building almost completely filled with groceries; there were approximately 210 employees; 12 gas coffee roasters were being operated in the roasting of coffee; after the roasting process the coffee was put into cans, then into large cartons and stored in rooms awaiting outgoing orders; there was also in operation a bacon-slicing department where 25 or 30 girls were employed slicing bacon and packing it into cartons to be stored and shipped; a refrigerator was kept on the premises in which perishable foods were contained, including bacon, butter, lard and other perishable commodities ; there was an egg-candling process in which 20 girls were engaged in candling and packing eggs; about 200 cases of eggs were handled daily; about 50 employees were engaged in packing and shipping food in the packing and shipping rooms on the first floor. The balance of the building was used for the storing and handling of articles of food in cans, cases, tubs, cartons, etc. The method used in distributing the food was that one of the stores would make a requisition on the main plant which filled and' sent the goods to the chain store, and the method of keeping accounts between the chain stores and the central plant is noted. It is admitted that the establishment in question was not licensed by the City of Chicago.

The defendant’s position is that the ordinance in question does not apply to it so far as the operation of the food establishment in question is concerned, but that if it be held to apply, certain provisions of the ordinance' are arbitrary, unreasonable, and therefore invalid.

An appeal was taken direct to the Supreme Court, the trial judge certifying that the validity of a municipal ordinance was involved and that public interest required the appeal to be taken direct to the Supreme Court. The Supreme Court, however, transferred the case to this court.

Counsel for both parties say that the validity of this ordinance was upheld by the Supreme Court in City of Chicago v. Arbuckle Bros., 344 Ill. 597. But counsel for defendant says that the matters considered in that case are not the same as the contentions now made by the defendant in the instant case.

The pertinent provisions of the ordinance in question are as follows: “3144. Wholesale food establishments defined — license required.) The term ‘wholesale food establishment’ as used in this article, shall be construed to mean any building, room, stand, enclosure, premises, place or establishment used for the preparation, manufacture, canning, bottling, packing, distribution, selling or offering or keeping for sale at wholesale, any article of food, confection, condiment or drink used or intended for human consumption,

“The term ‘wholesale’ as used in this article shall be construed to mean the making of sales to the wholesale and retail trade, including such sales by brokers, jobbers, manufacturers’ agents and itinerant vendors, and shall also include . . . the supplying of branch or chain establishments from a central depot or store.

“No person, firm or corporation shall establish, maintain or operate any wholesale food establishment without first having obtained a license. ’ ’

By sec. 3149 of the ordinance it is provided that every person, firm or corporation conducting, operating or maintaining a wholesale food establishment shall keep the premises and the food in the process of production, preparation, sale and distribution in a clean and sanitary condition.

Sec. 3150 provides for a penalty for the violation of the ordinance.

The authority for a municipal corporation to pass ordinances must be found in a statute giving it such power by express provision or by clear implication. City of Chicago v. Arbuckle Bros., 344 Ill. 597.

The sources of power upon which the ordinance in question rests are found in secs. 50, 53, 66 and 78 of Article V. of the Cities and Villages Act.

By sec. 1 of Article V of the Cities and Villages Act, city councils in cities, and the president and board of trustees of villages are given powers therein enumerated.

By sec. 50 of the article, power is given to city councils to regulate the sale of meats, poultry, fish, butter, cheese, lard, vegetables, and other provisions and to provide for place and manner of selling them and to control the location thereof.

Sec. 53 provides that councils may regulate the inspection of meats, etc.; and by sec. 66 authority is given to enforce all necessary police ordinances. Sec. 78 provides that city councils may do any act, “make all regulations, which may be necessary or expedient for the promotion of health or the suppression of disease.”

Counsel for defendant says that these sections “relate solely to the regulation of the sale of food stuffs and the manner and place of selling the same.” We think this contention cannot be sustained.

In the Arbuchle Bros, case, where this same ordinance was under consideration, and where the court considered the sections of Article Y which we are now considering, it was said that these sections authorized the city councils to regulate the sale of food and to regulate the inspection of .the food to compel the person or corporation to conduct his business in a sanitary condition so as not to injure the health of its employees or of the public. The court there said (p. 604): “The foundation of the right to regulate is found in the unclean and insanitary conditions mentioned in section 2009 [now sec. 3149] of the code which may result from negligence in the processes of production, preparation, packing, sale and distribution of the articles of food and in the failure to adequately protect them from contamination.”

Sec. 3144 of the ordinance which we have above quoted, defines the term “wholesale food establishment” to mean any building, place or establishment used for the “preparation, manufacture, canning, bottling, packing, distribution, selling or offering or keeping for sale at wholesale ’ ’ any article of food intended for human consumption. It will be noticed that the ordinance is not limited to the selling of foods for human consumption but it also provides for the preparation, packing and distribution of such foods for human consumption. This part of the ordinance would be sufficient to render it applicable to the instant case because the facts disclose that the defendant had a number of people engaged at this plant in question in roasting coffee, in slicing bacon, in maintaining a refrigerator in which perishable food products were contained, and in candling eggs — all of which obviously was intended for human consumption. But the ordinance goes farther and specifically provides that it shall be applicable to the “supplying of branch or chain establishments from a central depot or store.” This provision is expressly applicable to the facts in the instant case and we think the city council was authorized to pass this ordinance by virtue of sec. 78 of Article V above quoted. That section provides that city councils may make all regulations deemed expedient “for the promotion of health or the suppression of disease.”

We think it cannot be said that the ordinance is invalid because the retail chain stores operated by defendant are required to take out licenses, for it might Avell be that inspection would also be required of the foods in their preparation at the central plant. In fact this was the holding of our Supreme Court in the Arbuckle Bros. case. The only distinction between that case and the case at bar is that in that case Ar-buckle Bros, were selling at wholesale, while in the instant case defendant is distributing food products from its central plant to its chain stores. In City of Chicago v. Clark, 359 Ill. 374, the court said (p. 376): “Where the legislature has committed to municipalities the power to legislate upon a certain subject matter, the councils of such municipalities have full authority to pass ordinances pertinent to such subject matter, restrained only by the condition that such ordinance must be reasonable.” In the instant case we think it cannot be said that the ordinance in question was unreasonable.

The judgment of the municipal court of Chicago is reversed and the cause is remanded for further proceedings in accordance with the views herein expressed.

Reversed and remanded.

McSurely, P. J., and Hatchett, J., concur.


author: Mr. Justice Stone

text:
    The People of the State of Illinois ex rel. Edward J. Barrett, Auditor of Public Accounts of the State of Illinois, Complainant, v. Cairo-Alexander County Bank, Defendant. Cairo Bridge Company, Appellant, v. William L. O’Connell, Receiver of Cairo-Alexander County Bank, Appellee.

      Opinion filed September 16, 1935.
    Rehearing denied October 21, 1935.
    William S. Dewey, of Cairo, and Winston, Strawn & Shaw, of Chicago, for appellant.
    M. J. O’Shea and Alexander Wilson, both of Cairo, and Joe Crain, of Mound City, for appellee.
   Mr. Justice Stone

delivered the opinion of the court.

The Cairo Bridge and Terminal Company was, on April 6, 1932, a depositor in the Cairo-Alexander County Bank, having a ‘‘ General Account” of $21,024.10 and a “Petty Cash” account of $1,500. On that date Wesley E. Cummins and Walter H. Wood were appointed receivers of the bridge and terminal company by order of the United States District Court. On the suggestion of the court to which they were accountable the receivers had a conversation with David S. Lansden, president of the bank, in November or December, 1932, in which the receivers stated to the bank president that they must have security for the general account or they would have to withdraw it. The president stated that it would be impossible to give a depository bond, but that the receivers could be protected by the creation of a trust account in the trust department of the bank. The bridge receivers then verbally agreed to the transfer. On January 14, 1933, the president of the bank delivered a letter to the cashier that the receivers’ account should long since have been transferred to the trust department, and ordered it done without delay.

On January 31,1933, the Cairo bank, to carry out the agreement, transferred the sum of $33,083.13, then standing as the receivers ’ general account, to the trust department of the bank, and placed it there as “Trust Number 71, Name: W. E. Cummins and W. H. Wood as Receivers for the Cairo Bridge and Terminal Co.” Thereafter the above amount was carried only as a trust account. It remained intact. All checks drawn and deposits made by the receivers were handled through a distinct general account carried at the bank.

In June, 1933, the property in the hands of the receivers was assigned to a new company, the Cairo Bridge Company, petitioner.

On March 3, 1933, the Cairo bank was closed by the bank moratorium of the State of Illinois, and never again opened for general business. W. S. Corbley, appointed by .the State auditor of public accounts, acted as conservator until August 2, 1933, when the State auditor of public accounts took possession of the bank. On August 15, 1933, the auditor appointed William L. O’Connell as receiver of the Cairo bank, and since that time he has been acting as such.

The lowest cash balance in the Cairo bank between January 14, 1933, and March 3, 1933, was $74,119.54 which consisted of actual cash, $38,315.42; clearing checks, $1,610.88; cash items, $17.33; cash in transit, $7,946.39; due from banks, $24,729.52; and due from Reconstruction Finance Corporation, $1,500. This was on January 27, 1933. On January 31, 1933, the day of the transfer of the bridge receivers’ account from the commercial department to the trust department, the cash balance was $85,580.12 consisting of: actual cash, $38,116.53; clearing checks, etc., $1,207.76; cashier’s cash items, $33.58; cash items in transit, $7,069.36; due from banks, $41,180.69; due from Reconstruction Finance Corporation, $1,500.

The lowest cash balance in the Cairo bank between March 3, 1933, when the bank closed, and August 15, 1933, when the bank receiver took possession, was $20,186.32 consisting of: actual cash, $15,577.92; and due from banks, $4,608.40.

The accounts of the trust department of the bank stood at $29,256.48 on January 30, 1933. The increase from that figure to $72,095.82 on January 31, 1933, is due almost entirely to two large deposits, one for $33,083.13 being the bridge receivers’ transfer to the trust department, and another one for $9,744.21.

Mr. Roos, who was vice president of the Cairo bank at the time of the transactions involved in this suit testified that the cash of the bank and the trust department were identical: “The Trust Department deposited its cash in the bank just the same as if any other depositor would deposit his account, but it was kept separate in the books.” Question: “Then, if I understand you correctly, you had one set of books which you kept for the bank and one set which you kept for the Trust Department?” Mr. Boos: “That is correct.” Question: “But the funds of the Trust Department were deposited in the funds of the bank?” Mr. Boos: “That is correct.” Question: “Was it, or not, the practice of the Cairo-Alexander County Bank to mingle the funds of the bank, rather of the Trust Department, with the funds of the bank?” Mr. Boos: “Yes as is always done by a bank acting in that capacity.” David Lansden, who was president of the Cairo bank, at the time of the transfer involved here, testified that the trust department money and the general funds of the bank went into a common till. “It went into separate accounts but all went in as assets of the bank. ’ ’

In the transfer of the bridge receivers’ account from the commercial department to the trust department no cash was actually withdrawn and redeposited. A debit slip was made out for the commercial account and a credit slip for the trust account, and appropriate book entries were made.

Apparently, the Cairo bank had been attempting to enforce a five per cent limit on withdrawals from general accounts prior to the conversation between the bridge receivers and the Cairo bank president concerning the creation of the trust account. The president testified that the limit was, in his opinion, binding on no one but that it was enforced where possible. He does not recall that the bank attempted to enforce this limit with respect to the bridge receivers’ account.

The Cairo bank was qualified to act as a trust company and had on deposit with the auditor of public accounts, securities in the amount of $65,000.

On September 18, 1933, the Cairo Bridge Company, petitioner, filed with the bank receiver its claim in writing for the trust account and the general account. The trust claim was included in the list of claims of the trust department of the Cairo bank as filed in this cause by the bank receiver, appellee, on August 25, 1934. Among the list of claims proved in the trial court is Trust Department Account #5487 — Claim #5487-17 for $33,083.13. This is listed in the name of the bridge receivers but is the same account that was assigned by the bridge receivers to the Cairo Bridge Company.

On May 5,1934, the bank receiver had filed a petition with the court asking authority to procure a loan of $619,000 from the Reconstruction Finance Corporation secured by a pledge of the Cairo bank’s assets. On May 21, 1934, the petitioner, Cairo Bridge Company, had filed an intervening petition setting forth the alleged trust, objecting to the petition for a loan unless the court would first declare the claim of the bridge company a preferred claim, and asking that the bank receiver be prohibited from creating a first lien on the assets without first making provision for payment in full of the bridge company’s claim. Alternative requests to the same effect were made in the intervening petition. The trial court had on May 21, 1934, allowed the petition for authority to borrow from the Reconstruction Finance Corporation and to create a first lien on the assets subject to the claim of the Cairo Bridge Company for preference if proved by competent evidence and allowed by the court on final hearing.

Subsequent to the filing of the list of trust claims, including, as hereinbefore stated, the claim of the Cairo Bridge Company, the court entered an order on September 22,1934, containing the following reference to the trusts listed:

“It further appears to the Court that the said Cairo-Alexander County Bank, besides being organized and having a charter from the State Auditor of Public Accounts of Illinois, lawfully to do a banking business, also, in addition thereto, is lawfully authorized before and at the closing of said bank and had been granted a certificate of authority under the provisions of the laws of the State of Illinois to conduct and maintain a trust department in said bank, and that the same was granted authority by the State Auditor of Public Accounts of Illinois to operate and have and do a trust business, and that said bank and trust department had many and different trusts and that there had been filed with said petition the names and amounts that appear on the trust records of said bank filed herein and that the same should be deemed correct and true as claims of the trust department against said bank.

“It is therefore ordered, adjudged and decreed that the Court approve the lists thereof, and that the same be deemed true and correct lists as shown therein, and that the prayer of the petition be granted. ’ ’

On September 27, 1934, the bank receiver, appellee, filed his answer to the intervening petition of the Cairo Bridge Company, denying the Cairo Bridge Company’s claim to preference. The answer admits the deposits in the Cairo bank, admits that the ledger of the trust department and records of the Cairo bank show the transfer of credit, neither admits nor denies the agreement of the bridge receivers and the bank president concerning creation of a trust account, and asks a determination whether it was legal, neither admits nor denies the placing of the sum of $33,083.13 in the trust department, neither admits nor denies the proceedings resulting in assignment of the bridge receivers’ interest to the Cairo Bridge Company, and alleges no notice of the assignment. The answer alleges that the sum was a general deposit, that the trust department deposited $50,000 with the auditor of public accounts as security for its trusts and that if the trust is valid the only recourse is against the said deposit with the auditor. The answer admits the petition for leave to pledge the assets and denies that the Cairo Bridge Company is entitled to a preferred claim. After a hearing, the court, on October 5, 1934, found that the funds of the bridge receivers claimed by petitioner, appellant, constituted a general deposit.

Appellant contends that the order of September 22, 1934, hereinbefore set forth, was an adjudication that a trust had been established by the action of the president of the bank and the receivers of the bridge company. This is a proper construction of the court order. The record, which shows first a claim by the intervening petitioner, the bridge company, that it is entitled to assert a trust claim, second that the bank receiver applied to the court to have the trust claim deemed correct, third that the court adjudged the claim a proper trust claim, fourth that the bank receiver then answered the intervening petition with the assertion that the claim was not a trust claim, and fifth that the court then decreed that the claim amounted only to a claim for a general deposit, is a record which requires further explanation than is given in the briefs of either party. However, this court is of the opinion that the facts are sufficient to establish a trust in favor of the bridge company.

No particular form of words is necessary to establish a trust if the intention of the parties is clear. Osborn v. Rearick, 325 Ill. 529, 533.

A trust of personal property may be created by parol. Maher v. Aldrich, 205 Ill. 242, 254. The conversations between the bank president and the receivers of the bridge and terminal company clearly show an intention to create a trust.

The adjustment of the records of the bank and the trust company by 'debit and credit slips, and book entries, and the separation of bookkeeping with respect to this account and the checking account of the bridge receivers clearly show an attempt to carry out the agreement to create a trust. The purpose of keeping the fund safe pursuant to the suggestion of the court to which the receivers were accountable is a sufficient purpose for the establishment and maintenance of a trust.

The next question is whether there was a fund from which the trust could be established and if so was sufficient action taken to segregate this trust fund.

On January 31, 1933, the day of the transfer, the cash assets of the bank were sufficient to make possible the creation of the trust if both actual cash and “due from banks” are taken into account. This is so even though over $38,000 of the money be considered already appropriated to the trust department before the transfer in question took place. That “due from banks” should be considered the equivalent of actual cash for this purpose seems clear on principle and authority. In People v. Iuka State Bank, 229 Ill. App. 4, 14, People v. Auburn State Bank, 215 Ill. App. 133, 139, and People v. Citizens State Bank of Melrose Park, 274 Ill. App. 444, it was so decided.

There being sufficient cash assets to create the trust it remains whether it is necessary in such a case to go through the formality of withdrawing the money deposited in the general account and redepositing it in the trust department. The law does not require useless things to be done. The right to withdraw the general deposit being granted it would seem useless to require it, 'where it is the intention of the parties to permit the money to remain with the same institution. This principle is clearly set forth in In re National Bank of Ottawa, 273 Ill. App. 545, 554, 555.

The court is therefore of the opinion that a trust in favor of the bridge receivers was created on January 31, 1933.

This is not conclusive of the question of the right to a preference which depends upon the existence of a trust fund which the cestui que trust can trace.

The evidence hereinbefore recited shows that the funds of the trust department of the bank and the commercial department of the bank were mingled in a common till. The older cases such as School Trustees v. Kerwin, 25 Ill. 73; Wetherell v. O’Brien, 140 Ill. 146, and Bayor v. American Trust & Savings Bank, 157 Ill. 62, 68, to the effect that where trust funds are mixed with other funds of the trustee so that the whole becomes an indistinguishable mass, the trust fund cannot be traced, have been modified by the later decisions of the Supreme Court. In People v. Peoples State Bank of Maywood, 354 Ill. 519, 534, 535, the court stated that the former rule with respect to tracing of trust funds had been changed. It held that in such case the cestui-que trust was entitled to a lien on the cash assets in the hands of the bank receiver. The law indulges a presumption that the trustee would spend his own funds before dissipating trust funds. However, if at any time the cash balance in the hands of the trustee becomes less than the amount of money held in trust it becomes clear that the trustee has dissipated trust money. Therefore, the fund to which the trust may be traced is confined to the lowest cash balance in the hands of the trustee between the time when the funds are mingled (which in this case is the same as the date of the establishment of the trust) and the time when the receiver takes possession of the bank.

It has been previously noted that the cash balance in the hands of the trustee was considerably greater at the time when the auditor of the State of Illinois appointed a conservator for the bank than it was at the time when the receiver appointed by the auditor took possession of the bank. The statute authorizes the auditor to appoint a receiver and to take possession of the bank for the purpose of reorganization or liquidation. No authority is given to appoint a conservator. It is impossible to ascertain from this record the nature of the proceeding by which the auditor appointed a conservator. If the conservator was in effect a receiver, and if upon this appointment the real control of the bank was that of the auditor, and if the receiver was simply a successor to the conservator acting in the same capacity as appointee of the auditor, the receiver should not be permitted to say that he is responsible only for the cash assets which came into his hands on August 15,1933. If on the other hand the management of the institution under the conservator-ship was essentially a continuation of the banking business under the bank management, and the conservator was simply a watchman for the auditor, the right to trace the funds of the trust should be confined to the lowest cash balance between January 31, 1933 and August 15,1933.

If the bank receiver is accountable for cash received by the conservator a further question arises with respect to the cash assets as of that time. We have said that the item “due from banks” is to be treated as a cash asset. Is ‘‘ due from Reconstruction Finance Corporation” to be treated in the same manner! If it was money already loaned which simply awaited the call of the Cairo bank it might be so treated. If it was something less than that it could not be considered a cash asset.

Appellee contends that the transaction was ultra vires of the bank in that it was an attempt to prefer one depositor over another by giving security for the deposit. The cases of City of Marion v. Sneeden, 291 U. S. 262; Texas & Pac. By. Co. v. Pottorff, 291 IT. S. 245; People ex rel. Nelson v. Citizens State Bank, 275 Ill. App. 159; People ex rel. Nelson v. Wiersema State Bank, 276 Ill. App. 21; Knass v. Madison & Kedzie State Bank, 354 Ill. 554; and Hoffman v. Sears Community State Bank, 356 Ill. 598, are cited. The first four cases cited are cases in which a bank while retaining a general deposit account in favor of a depositor created a trust to secure that general deposit. The result of such a transaction is to segregate assets of the bank to secure credits to the depositor irrespective of the manner in which the credits arise, and to give a wholly deceptive appearance to the books of the bank. The result would be to permit the bank to have secret trusts which would not appear on the bank’s books. This is not true of trust accounts fairly kept in the books of the trust department. The action of the bank in this case was not an attempt to give security for a general deposit. The general deposit account was closed and a trust account was established. The other two cases cited by appellee on this point are cases in which the court held agreements to repurchase bonds sold by the bank to be ultra vires of the bank.

Appellee’s contention that the transaction violated the Chattel Mortgage Act is also based upon the theory that the bank was giving security for a debt, that is for the general deposit. As we have seen the debt was paid and a trust obligation incurred.

A more serious question is presented by appellee’s assertion that the transaction is void because the president of the bank was, at the time he authorized the transfer, interested in the Cairo Bridge and Terminal Company. Such transactions are scrutinized very closely by the courts and are usually declared void whether or not there is any suggestion of bad faith in the action of the interested officer. Higgins v. Lansingh, 154 Ill. 301, 364. The situation here is unusual and we think the general rule should not apply. If the bridge receivers acting on the suggestion of the court to which they were accountable had demanded of the cashier the full amount of their deposit, could the cashier have refused to pay? It is clear that he could not. So also if the bridge receivers had demanded of the bank that it furnish a depository bond or pay the account, on being unable to furnish the bond the bank could not have refused to pay the account. The evidence shows that the president was faced with this alternative. He thereupon suggested that the institution be permitted to retain the money, even though it could not be retained in the commercial department. This transaction cannot be considered similar to those in which an officer of a bank purchases property of the bank to secure a debt the bank owes him, or to those cases where negotiations for a contract are made between parties free to deal or not as they choose and in which one or the other of two institutions in which the officer is interested must get the worst of the bargain.

There is no evidence to show that either at the time of the first demand of the bridge receivers in November or December, 1932, or at the time of the actual transfer of the account that the president or the bridge receivers knew that the bank would have to close its doors. There is no evidence that the bank was in such condition that payments to depositors could constitute unlawful preferences.

The rights of the bridge receivers in the trust account appear to have been regularly assigned to the Cairo Bridge Company, the appellant.

The trust created was an obligation of the trust department of the bank. The trust department had deposited certain securities with the auditor of the State of Illinois. Appellants, along with other trust creditors, are entitled to payment from these securities and from the cash assets to which the trust funds may be traced in accordance with the principles set forth in this opinion. This court is not in a position to make a final determination of the matter for the reason that it is not advised of the rights- of other trust claimants, it is not advised of the nature of the conservatorship established after the bank moratorium, and it is not advised of the nature of the credits due the bank from the Reconstruction Finance Corporation at the date of the establishment of the conservatorship.

The decree of the circuit court of Alexander county, Illinois, is reversed and the cause is remanded with directions to proceed in accordance with this opinion.

Reversed and remanded with directions.


text:
    Leon Ogent, Plaintiff in Error, v. Louis Beasley and Edward C. Zulley, Defendants in Error.
    Opinion filed September 16, 1935.
    Harold J. Bandy, of Granite City, for plaintiff in error.
    Louis Beasley and Edward C. Zulley, of East St. Louis, pro se.

   Mr. Justice Stone

delivered the opinion of the court.

On the 8th of February, 1935, plaintiff in error filed his transcript of record in this court and on that day sued out a writ of error to reverse a decree of the city court of East St. Louis. The decree sought to be reversed was rendered in the city court on December 13, 1933.

On December 31, 1934, plaintiff in error filed in the city court a written motion entitled “Complainant’s Motion to set aside Court Order,” in which he requested said city court to set aside and vacate the decree of December 13, 1933, on the ground that said decree is null and void and upon other grounds stated in said motion. Defendants moved the court to strike this motion and on January 16, 1935, said motion to strike was allowed.

Defendants in error now move this court to dismiss said writ of error and as grounds therefor allege the following:

“1. The final order and decree was entered on January 16,1935, at which time the City Court refused to vacate the former decree of December 13, 1933, and thereupon ordered: ‘Therefore, it is ordered by the Court, that the decree of this Court filed herein on December 13, 1933, stand as entered.’

“2. That no notice of appeal was filed in this cause with the Clerk of the City Court of the City of East St. Louis at any time within ninety (90) days from date of said decree; and that no copy of such notice was ever served on these defendants.

“3. That as a next step, following the entry of said order or decree of January 16, 1935, plaintiff in error procured a purported transcript of the record from the Clerk of the City Court of East St. Louis and filed the same, together with an abstract and brief, with the Clerk of this Court on May 13, 1935.

“4. That such transcript was not filed in pursuance to the command of any writ from this Honorable Court, for the reason that no such writ ever was issued from this Court.”

Plaintiff in error takes the position that this writ is prosecuted to reverse the final decree of December 13, 1933, and that it in no way seeks to review the order of January 16, 1935.

We are familiar with the authorities cited by defendants in error in support of their motion and are in perfect harmony with the principles held by said authorities but those authorities deal entirely with appeals from judgments entered after January 1,1934. Whether those cases apply here depends upon whether we regard this writ as a proceeding to review the order of January 16, 1935, or the decree of December 13, 1933.

Within two years from December 13, 1933, plaintiff had a right under the Practice Act of 1907 to adopt the method of review which he did adopt. He had a right, and in our judgment it was proper, before suing out his writ of error to move the trial court to set aside the decree complained of. The fact that the trial court refused to set aside and vacate its decree did not take from plaintiff in error his right to have reviewed the original decree. It merely gave the trial court opportunity to correct its own error if it were convinced that it had committed error. An analogous situation is the filing and denial of a petition for rehearing in this court. When application for leave to appeal to the Supreme Court is made, it does not seek an appeal from the order denying a rehearing but from the judgment of this court on the merits of the case. Similarly in appeals from judgments of the trial courts entered before motions for new trials are heard. If the motion is denied, the appeal is from the judgment and not from the order denying the motion for a new trial. The filing of the motion to vacate the decree was merely an incident which plaintiff in error might or might not bring about. This writ of error is to review the final decree of December 13, 1933.

We are now to consider whether that decree may be reviewed according to the procedure which is before us. Rule one of our Supreme Court rules adopted December 22, 1933, provides:

“All provisions of the Civil Practice Act with respect to review in civil proceedings by the Supreme or Appellate Courts shall apply to orders, determinations, decisions, judgments or decrees entered by trial courts on or after January 1, 1934. All suits in which a summons has been issued prior to January 1, 1934, but in which no pleadings have been filed by either party prior thereto, shall be governed by the Civil Practice Act. The provisions of the Civil Practice Act with respect to service of process issued on or after January 1, 1934 (sections 6, 10, 13-19), appearance (section 20), and trial practice (sections 48-73), shall apply to proceedings instituted prior to January 1, 1934, and not on trial prior to that day. Except as provided by this rule, or by written stipulation of parties, or by order of the court, upon notice and motion, proceedings instituted prior to January 1, 1934, shall not be governed by the Civil Practice Act.”

The repeal section of the Civil Practice Act expressly provides that it shall not impair or affect any action or proceeding commenced before the act takes effect.

In view of the foregoing and the fact that this writ of error is for the purpose of reviewing the decree of December 13, 1933, we are of the opinion that the sections of the Civil Practice Act insisted upon by defendants in error do not apply and that plaintiff in error was within his rights in adopting the method of review that he did adopt. The motion to dismiss the writ of error is denied and defendants in error are ruled to file their briefs by October 10, 1935.

Motion denied.


text:
    Mississippi Lime and Material Company, Appellant, v. Hugh R. Smith and Charlotte Smith, Trading as Hugh R. Smith Company, Appellees.

      Opinion filed September 16, 1935.
    Rehearing denied October 21, 1935.
    Burroughs, Simpson & Reed, of Edwardsville, for appellant.
    Josiah Whitnel, of East St. Louis, for appellees; Mallory Burroughs, of Edwardsville, and H. L. Browning, of East St. Louis, of counsel.
   Mr. Justice Stone

delivered the opinion of the court.

This appeal is prosecuted from a judgment of the circuit court of Madison county in bar of action and for costs of suit, against appellant. Appellant’s status as plaintiff in this case is fixed by plaintiff’s Exhibit 1, in evidence, which is in words and figures as follows:

‘ Carrie Douglas, widow of Dan Douglas, deceased, and Mississippi Lime & Material Company represent to the Illinois Industrial Commission that Dan Douglas was killed while employed by the Mississippi Lime & Material Company at its quarry at Alton, Illinois, by a steam shovel throwing a large rock over the cliff while Douglas was working at the foot thereof, by reason of which he was crushed and died instantly; that Douglas earned an average of $15.74 per week and died leaving a widow and one dependent child. Terms of settlement: Employer to pay Carrie Douglas $3,623.92 in weekly installments of $11.00 for 329 weeks, and $4.92 for one week. Signed by Carrie Douglas and Mississippi Lime & Material Company. Certification by Industrial Commission of Illinois that the foregoing settlement contract is a true and correct copy of the contract approved by the Industrial Commission on October 24, 1933.”

The declaration charged that defendants contracted to remove dirt, boulders and rocks from the top of the plaintiff’s limestone quarry at Alton, Illinois, and to cast or shove the rocks over the edge of a 75-foot cliff, except when notified not to do so on account of men working below; that the plaintiff, on January 24, 1933, notified defendants to cease dropping rock over the edge of the precipice on account of plaintiff putting men to work below, yet, nevertheless, defendants contrary to their contractual and common law duty, negligently disregarded the notice and through their agents and servants negligently and carelessly pushed a large rock over the cliff, thereby striking and killing plaintiff’s employee, Dan Douglas, who, while in the exercise of due care for his own safety, was loading rock at the foot of the cliff.

It was further averred that the defendants were independent contractors; that defendant, plaintiff and Douglas were all working under and bound by the provisions of the Workmen’s Compensation Act, Ill. State Bar Stats. 1935, ch. 48, ¶ 201 et seq.; that Douglas was killed within the course of his employment, leaving a widow and one minor child; that by reason of his death plaintiff became liable to pay said widow and child $3,623.92 under the Workmen’s Compensation Act; that the death of Douglas was not proximatély caused by negligence of the plaintiff, whereby plaintiff claimed damages in the sum of $3,623.92.

Defendants filed a general issue and specially pleaded that Douglas was guilty of negligence which proximately caused his own death; they also specially pleaded that Douglas was killed by negligence of the plaintiff, which was the proximate cause of the fatality.

Appellant on and prior to January 24, 1933, was engaged in the stone quarry business at Alton, Illinois. This quarry consisted of a solid bed of stone about 70 feet thick; it had a perpendicular surface for the space of about 200 feet parralleling the Mississippi River-. On top of this bed of stone was a deposit of dirt and disintegrated stone, some 15 feet thick. Part of the quarrying was done there by means of tunnels driven into the base of this cliff. That part of the limestone which could not be quarried by this means was obtained by stripping the overburden from the top of the 70-foot stone deposit and quarrying the stone thereby uncovered.

Some time prior to the death of Douglas appellant made a verbal contract with appellee to strip a certain amount of the overburden. The system of stripping was by first cleaning off the top dirt with a steam shovel, then scooping up the loose rock with said shovel and dropping it over the base of the cliff, where it was afterwards taken by appellant’s employees and loaded in barges on the Mississippi River. The shovel started cleaning off the rock right along the edge of the precipice, dumping it over the cliff. After cleaning off this strip the shovel operator would start a new path a little farther back and continue his work, casting over the edge such stone as he could with his machinery and piling the remainder in a long row along the edge of the cliff where another man employed by appellees with a caterpillar tractor with a blade on it about four feet wide and six feet long would push it over the precipice. This implement for want of a better name was called a “bulldozer.”

Part of the contract between the parties was that appellees would stop operation on top at any time that request was made by one Milner, appellant’s superintendent. This was necessary because men frequently worked at the bottom of the precipice loading trucks with stone which appellees had cast over. Milner, the superintendent, had stopped Smith’s work on various occasions and there was no particular way in which the notice or request to stop was conveyed. It was a part of the agreement between the parties that the work which appellees were doing on the morning in question was to be done only when men were not working below.

On the day in question the shovel started working about seven o’clock in the morning, about 50 feet from the edge of the precipice and traveling parallel therewith. It was too far back from the edge to dump all the rock over and consequently some of it was piled near the brink where the “bulldozer” could push it over. About nine o’clock’ in the morning the power went off in the tunnel and men were called out to the floor of the cliff to load trucks with rock which appellees had cast over. While this was going on, Milner, appellant’s superintendent, yelled up to Simpson who was the operator of the “bulldozer,” saying in substance that men were going to work at the foot of the cliff and to tell Smith .not to push any more rock over. There is a conflict in the evidence as to just what word Milner said to Simpson, — whether he said, “Tell Smith,” or whether he said “Don’t push any more rock over” or just the exact language, is not certain. It is certain from the evidence, however, that Simpson delivered some message to appellee Smith that the men were working below and no more rock was to be pushed over, to which Smith replied, “All right,” but that Smith gave no advice or instruction to his men who were operating the steam shovel, nor did he tell Simpson to tell them. After Milner sent the message up, the rock stopped coming over and the loading gang began to load rock at the foot of the precipice. They had worked there some 25 or 30 minutes when a large rock weighing several tons came over the precipice, struck Dan Douglas and killed him. The evidence is in dispute as to whether or not the steam shovel continued its casting during the interim of the stop order and the casting of the stone which killed Douglas.

The case was tried by a jury, which found the issues for appellees. A motion for new trial was overruled and the aforesaid judgment was entered. Appellant claims that the verdict is against the manifest weight of the evidence; second, that the court erred in overruling plaintiff’s motion for a new trial, and in entering judgment; that the court erred in its charge to the jury, and unduly limited the cross-examination of appellee’s witnesses.

Appellant being plaintiff in this suit by right of subrogation as prescribed by the statute, the burden was placed upon him of proving two things by a preponderance of the evidence:

(1) That he was at the time and place in question in the exercise of reasonable care for the safety of his employees;

(2) That the man Douglas met his death by and through the negligence of appellees.

On the first of these questions the evidence shows that when the power shut down so that the men could no longer work in the tunnel, they were ordered to work at disposing of the rock at the foot of the precipice. Before they were ordered there, however, request was made that appellees cease throwing rock over the cliff because the men were to go to work there. The message was conveyed to appellee Smith, the work ceased, appellant’s men went to work. It would seem that appellant had done the necessary specific thing to procure safety for his men against the one thing that he had need to take precaution about; that his request had been complied with by appellees and that there was no reason why a reasonable man would not order his men to work as appellant did. We do not see what more he could have done in the exercise of reasonable care. He had a contract with appellees that no rock would be thrown over the cliff while the men were at work. This contract had been kept on other occasions. Appellant under the evidence had every reason to believe it was being kept on this occasion; such a conclusion was a reasonable one under the circumstances. We see in this record no act of appellant which shows lack of due care on its part. Especially is this true in view of the fact that the circumstances would convince a reasonable man that appellant’s request, which he had a right to make and a right to have complied with, had in fact been complied with.

The second proposition in our judgment was equally well established by the proof. The preponderance of the evidence shows that coincident with the request of Milner to stop pushing rock over, both machines stopped work; the men went to work below with the knowledge of appellees. They worked there for 25 or 30 minutes when without warning the large rock which killed Douglas came over the cliff. There is evidence that almost instantly before the rock came over the cliff the steam shovel was heard to begin work, and the rock fell. One witness saw the rock moved by the steam shovel. The evidence discloses no inquiry from appellees as to whether it was safe to proceed with the shovel. Work on the cliff had been stopped at the request of Milner; appellee owed to appellant the duty of ascertaining whether it was safe to resume operations ; he owed that duty at law; he owed it by virtue of his contract which he had theretofore lived up to.

We cannot divorce ourselves from the idea that appellees failed to use the care in the premises that was required of them — in other words, that through their negligence they brought about the death of plaintiff’s employee.

These facts seem to us to make out a clear case of negligence on the part of appellees. Appellees answer that the question of negligence and contributory negligence was a question of fact for the jury. True it is that in the large majority of cases the verdict of the jury is final as to questions of fact and binding upon the courts. However, there is a noted exception, with which all lawyers are familiar, and that is, if the court can see upon an examination of the whole record that the verdict is against the manifest weight of the evidence, it will set aside the verdict. Heide v. Schubert, 166 Ill. App. 586.

We are of that opinion in this case. No negligence is shown in the conduct of appellant. Negligence is shown in the conduct of appellees. The result which followed was the proximate result of appellee’s negligence. How may we then account for this verdict ? In such cases it is particularly essential that a jury be properly and carefully instructed. There is a theory upon which this jury might have acted, and that theory evolves from the charge of the court. There is a suggestion that an accident brought about Douglas’ death. That suggestion does not come from any evidence or circumstance in the case. It comes for the first time when the court by its charge injected into the ease the theory that the death of Douglas might have come about through an accident, and if it did, there could be no recovery. It is true that this part of the charge is given in most personal injury cases, and in most injury cases the charge is proper, but in this case we can see nothing in this record, — certainly not of fact, and not of circumstance,- — which could have suggested to the jury that the death of Douglas might have come about through an accident. It was wrong in our judgment for the court to make that suggestion for the first time. Instructions which suggest matter not suggested by the evidence have been universally condemned by our Supreme Court. Chicago & A. Ry. Co. v. Adler, 129 Ill. 335; Indianapolis & St. L. Ry. Co. v. Miller, 71 Ill. 463; Streeter v. Humrichouse, 357 Ill. 234.

Complaint is made of undue restriction of the cross-examination of some of appellee’s witnesses. In one case at least this objection is well taken. During the cross-examination of defense witness Homer Simpson, he was asked the following question:

“Q. And the shovel man was the fellow that cast this big rock over that killed Douglas, wasn’t he?
“A. Yes, sir.
“Mr. Burroughs: I object. He didn’t see it.
“The Court: . Objection sustained.”

The court did not know from the record, and neither did counsel, whether this witness saw what he testified about or not. It was a matter for redirect examination ; it was not a matter for the court to assume and rule upon. This in itself was error, though it might not have controlled our decision in this case.

We cannot escape the conclusion that this verdict is against the manifest weight of the evidence and that it was probably brought about by the injection into it of the theory of an accident by the charge of the court. It is easy for the lay mind to confuse negligent acts with accidental ones. As a matter of fact many lawyers use the word “accident” when they mean “injury.” The court told the jury in the face of what seems to us to be a clear case of negligence on the part of appellees that notwithstanding that, if they believed it came about by an accident they would be warranted in finding the defendants not guilty. This part of the charge should not have been given in this case. Streeter v. Humrichouse, supra.

For the errors pointed out the judgment is reversed and the cause remanded to the circuit court for another trial.

Reversed and remanded.