author: Mr. Justice Jones

text:
    Henry W. Ohlendorf, Receiver of Illinois State Bank of Crete, Appellee, v. James E. Bennett et al., Appellants.
    Gen. No. 7,378.
    1. Parties — defaulting cashier of bank as party to suit by receiver thereof against brokers to whom he paid bank’s money in course of grain speculations. A defaulting bank cashier was neither a necessary nor a proper party to a suit in equity by the receiver of the bank to recover from brokers moneys of the bank which such cashier had paid to them as losses and for margins in his grain speculations, where in a prior suit a decree had been entered against such cashier for the full amount of the money taken by him from the bank.
    2. Equity — want of jurisdiction of cause where jurisdiction dependent upon necessity of a discovery and an accounting as to improperly joined defendant. Where a defaulting bank cashier was neither a necessary nor a proper party to a suit in equity by the receiver of such bank to recover from brokers the money of such bank which the cashier had paid to them for losses and as margins in his grain speculations, on the ground that in a prior suit such cashier had made a full discovery and an accounting upon which a decree had been entered against him for the full amount he had taken from such bank, equity was without jurisdiction of the cause so far as jurisdiction depended upon the necessity Of a discovery and an accounting by such cashier.
    3. Discovery — right of equity to compel discovery under bill charging criminal acts on part of defendants. Where a bill to recover from brokers moneys of a bank paid to them by a defaulting bank cashier included charge of a criminal offense on the part of such brokers, equity was without jurisdiction to compel a discovery from such brokers.
    4. Equity — when jurisdiction properly taken of suit by receiver to recover moneys of bank paid to brokers by defaulting cashier for losses and as margins in his grain speculations, notwithstanding remedy at law. Equity held to have jurisdiction of a suit by the receiver of a bank to recover from brokers moneys of the bank paid to them by the defaulting cashier of such bank as losses and for margins in his grain speculations, upon the ground that complainant had no adequate remedy at law since the accounts involved were mutual, intricate and complex.
    5. Equity — when bill will be deemed to have been so amended as to include prayer for an accounting, notwithstanding absence of

      actual interlineation pursuant to order of chancellor. Where a suit in equity was tried by both parties upon the theory that an accounting was proper, although none was prayed in the bill, and the chancellor granted leave to complainant to so amend his bill before decree as to ask such accounting, the motion on that behalf having been made at the suggestion of the chancellor and granted over defendants’ objection, the court, on review of a decree for complainant, will treat such amendment as having been made, notwithstanding there was no actual interlineation of the bill.
    6. Gambling — when grain speculations deemed gambling transactions in violation of Cahill’s St. ch. 88, If If 308-810. Evidence in a suit by the receiver of a bank to recover from brokers moneys of the bank paid to them by the defaulting cashier of such bank for losses and as margins in his grain speculations held to show that such transactions were gambling deals and inhibited by Cahill’s St. ch. 38, If ff 308-310.
    7. Limitation of actions — applicability of statute where there is existing but inadequate remedy at law thereon. In a suit by the receiver of a bank to recover moneys of the bank paid by a defaulting cashier of such bank to brokers for losses and as margins in his grain speculations, of which equity retained jurisdiction because of the inadequacy of the complainant’s remedy at law in the circumstances, no recovery could be had as to claims based upon transactions antedating the suit by more than five years, except Upon a showing of circumstances tolling the statute.
    8. Limitation of actions — when statute begins to run against cause of action of receiver of bank to recover moneys taken from bank pursuant to criminal conspiracy. Where in a suit by the receiver of a bank to recover moneys of the bank paid to brokers by a defaulting cashier of such bank for losses and as margins in his grain speculations, the evidence showed that the transactions were gambling deals inhibited by Cahill’s St. ch. 38, ff ff 308-310, and likewise showed beyond a reasonable doubt that such brokers and such cashier were guilty, as charged in the bill, of a criminal conspiracy to rob the bank of such moneys, the statute of limitations did not begin to run against the right of the receiver to recover such moneys until the discovery of the conspiracy, or until such time as by reasonable diligence discovery thereof should have been made.
    9. Accounting suits — propriety of including interest in decree for receiver in suit to recover moneys of bank paid to participants in criminal conspiracy to rob bank. In view of Cahill’s St. ch. 74, ff 2, interest was properly allowed upon moneys of a bank paid to brokers by a defaulting cashier of such bank for losses and as margins in his grain speculations in the course of a conspiracy to rob such hank of such moneys, as a part of the decree against such brokers in favor of the receiver of such bank for the moneys so received by them.
    10. Equity — when evidence insufficient to show release inuring to benefit of brokers sued by bank receiver for moneys of bank paid to them by defaulting cashier in course of grain speculations. Evidence in a suit by the receiver of a bank to recover from brokers moneys of the bank paid to them by a defaulting cashier of such bank for losses and as margins in such cashier’s grain speculations, held not to show that a depositor of such bank who became indebted to it through overdrafts permitted by such cashier was not a joint tort feasor with such cashier in respect of the moneys paid to such brokers so that a compromise settlement with such depositor for his liability to the bank operated to release such brokers.
    11. Equity — sufficiency of evidence in receiver’s action to recover from brokers moneys of bank paid to them by defaulting cashier in course of grain speculations, to show right of defendants to credit for moneys refunded by third person. Evidence in a suit by the receiver of a bank to recover moneys of the bank paid to brokers by a defaulting cashier of such bank for losses and as margins in such cashier’s grain speculations held not to show that certain checks turned over to the bank by a third party went to replenish funds stolen from the bank by such cashier for payment to such brokers, so as to entitle defendants to credit therefor in determining their liability to complainant.
    12. Harmless ahd prejudicial error — statement of account by chancellor personally which should have been referred to master. Where a chancellor has seen fit to state an account in a suit pending before him, and has done so with substantial accuracy, the decree based upon such accounting will not be reversed solely upon the ground that in so doing the chancellor has departed from the approved procedure of referring such matters to a master.
    Appeal by defendants from the Circuit Court of Will county; the Hon. Frederick A. Hill, Judge, presiding. Heard in this court at the April term, 1924.
    Affirmed in part, reversed in part and cause remanded to restate account.
    Opinion filed September 2, 1926.
    Moses, Rosenthal & Kennedy and Donovan, Bray & Gray, for appellants; Walter Bachrach and Walter H. Moses, of counsel.

      Charles S. Deneen, Roy Massena and W. D. Heise, for appellee.
   Mr. Justice Jones

delivered the opinion of the court. This is an appeal from a decree of the circuit court of Will county directing appellants to pay appellee, receiver of the Illinois State Bank of Crete, $76,030.55. The receiver filed a bill in chancery against James E. Bennett, Frank A. Miller and Frank J. Saibert, as individuals and as copartners, doing business under the firm name of James E. Bennett & Company, and Gustav H. Kracke. In Ohlendorf v. Rathje, 230 Ill. App. 427, we set out at length a sorry story of a bank failure in a small town, which was brought about through speculations of the bank’s cashier on the Chicago Board of Trade. In that suit an effort was made to recover the bank’s losses from its directors, who were charged with negligent performance of their duties. In this suit it is sought to recover money which Kracke wrongfully withdrew from the bank and turned over to Bennett & Company as margins and losses in his speculations.

The original bill was filed September 6, 1921, and charged that the defendants constituting the firm of Bennett & Company and the cashier, Kracke, entered into a conspiracy to rob the bank of its money, and pursuant to such conspiracy Kracke robbed it of large sums aggregating $130,000 and gave them to Bennett & Company without the knowledge or consent of the banking corporation; that Bennett & Company are members of the Chicago Board of Trade; that the money so turned over to them by Kracke was lost by him in gambling deals on the differences in the price of grain and other commodities; that Kracke was the custodian of the funds of the bank and as such occupied a fiduciary relationship; that a discovery and an accounting is necessary because the defendants are in possession of documentary evidences which are necessary to prove the charges of the bill; that the account is intricate, complex and difficult, involving the use of documentary evidence, not in the possession of the complainant, and which cannot be obtained by him, and that it is of such complexity and intricacy it cannot be taken properly by a court of law. The prayer of the bill was consistent with the allegations. Appellants, as individuals and as copartners, demurred to the bill on the ground that it charged certain criminal offenses against them, and, therefore, no discovery from them could be compelled. Judge Dibell, who heard the arguments, sustained the demurrer. The bill was then amended so as to charge the necessity of a discovery and accounting as against Kracke alone. Kracke answered, admitting most of its allegations, but denied the existence of the conspiracy and alleged that he was entitled to certain credits. Appellants again demurred. Judge DeSelm passed upon and overruled the demurrer. Answers were thereupon filed by appellants denying the various charges made against them; denying the jurisdiction of the court because, as they allege, an adequate remedy at law exists, and interposing a number of other defenses, which we will mention later in this opinion.

Equity jurisdiction has been challenged both by demurrer and answer, because, it is claimed, that an adequate remedy at law exists and the bill contains no specific allegations of fact sufficient to clothe a court of equity with jurisdiction. A bill of complaint should allege the specific facts showing the complication of the account which makes the remedy at law inadequate, and where conclusions of fact alone are pleaded, the bill is the subject of demurrer. If the demurrer is overruled the defendant may either stand by his demurrer or plead over. He cannot do both. If he pleads over he abandons his objections to the sufficiency of the bill and makes Ms objection a matter of defense, wMch will be decided on the proof showing the necessity for a resort to equity. If the proof shows the necessity, the court will retain jurisdiction to grant relief notwithstanding the bill contains allegations which are conclusions of facts, rather than allegations of specific facts upon which the conclusions are based.

It is necessary for us to determine at the outset whether or not chancery has jurisdiction of this cause. Testimony was heard before the chancellor in open court and he held that Kracke was neither a necessary nor a proper party to the suit because a decree had been rendered in Ohlendorf v. Rathje, supra, against him for the entire amount of money stolen by him from the bank, and that he had made full discovery to the receiver and that no other or further discovery or accounting could be required of him. In this holding of the chancellor we fully agree. Therefore the proceeding may be considered as though it had been brought against the members of the firm of Bennett & Company alone. We also concur in Judge Dibell’s ruling that the bill charges criminal offenses against the appellants and that they cannot be compelled under the constitution to make a discovery concerning matters involving such charges. Chancery has no jurisdiction in this cause either to compel an accounting from Kracke or a discovery from appellants.

In support of chancery jurisdiction, appellee urges that (a) the transactions, in which the money was lost, were violations against the Criminal Code and under the provisions of section 132 of that Code [Ca-hill’s St. ch. 38, 310], recovery may be had in a court of chancery; (b) the cashier and the brokers were co-conspirators and a court of equity has extensive powers in matters involving fraud; (c) a trust or fiduciary relationship is involved for the alleged reason that Kracke as the cashier under the circumstances surrounding the conduct of the bank was a trustee of its funds, and that equity will follow the funds into the hands of others who did not acquire title to them in good faith and impress them with the trust; and (d) the accounts are mutual, intricate and complex so that adequate relief at law is not obtainable.

This proceeding is for the recovery of a money decree. Such being the case, resort must be had to a suit at law, unless there are considerations involved which make the remedy at law inadequate. While controversies involving a violation of the Criminal Code against gaming, and transactions involving fraud and fiduciary relationships are often the subject of equity jurisdiction, still, if the proceeding is for money only and the law affords an adequate remedy, the suit must be brought at law, notwithstanding it may involve gambling transactions, fiduciary relationships, conspiracies and fraud. Some special and substantial ground of equitable jurisdiction must exist in order to deprive a court of law of its jurisdiction. (Toledo, St. L. & N. O. R. Co. v. St. Louis & O. R. Co., 208 Ill. 623.) Where a court of law is competent to afford an adequate and ample remedy, courts of equity will remit the parties to the courts of law, where the right of trial by jury is secured to them. In such cases either party has a right to demand that the matter of the defendant’s liability be submitted to a jury according to the course of the common law, and unless some special and substantial ground of equity jurisdiction be alleged, and, if necessary, proved, such as that a lien exists for a money demand which cannot be adequately enforced at law, or that discovery is necessary to a recovery by complainant, or other like equitable considerations affecting the adequacy of the remedy at law, courts of equity will decline to interfere. (Cook County v. Davis, 143 Ill. 151.) Even if Kracke stole the money from the bank and gambled it off with Bennett & Company, or even if he entered into a conspiracy with them to rob the bank and did rob it, or even if he was acting in a fiduciary relationship with respect to the funds at the time he stole them, or even if all of these situations existed in combination, a suit for the recovery of the money must be brought at law, unless there also exists some special and substantial ground of equitable jurisdiction. A defendant has a constitutional right to a trial by jury, unless to give it to him would deprive his adversary of a substantial right because of the inadequacy of the remedy offered by the law. And in this case we have reached the conclusion that there is nothing in the pleadings and nothing in the proof concerning conspiracy, fraud, gaming or fiduciary relationship sufficient to entitle the complainant to relief in equity. If equity has jurisdiction, it is upon another ground. The chancellor reached the same conclusion, and held that because of the complex and intricate accounts involved, a special ground for equitable relief presented itself and he retained jurisdiction of the cause for the purpose of entering the decree.

Appellants deny the necessity of resort to equity on that ground and say that section 68 of the Practice Act [Cahill’s St. ch. 110, ¶ 68] affords the means for complete relief in this case, at law. It provides that all actions in which matters of account are in controversy may, by order of the court, be referred to some competent person as a referee to state and report an account between the parties and the amount that may be due from either party to the other, which report, when confirmed by the court, shall be final and conclusive between the parties and judgment may be entered thereon; but either party may, within ten days after notice of the filing of the report, file exceptions thereto and demand a trial by jury and upon such trial the report of the referee shall be prima facie evidence of all the facts so found and reported. This statute has been declared constitutional in Continental Beer Pump & Plumbing Co. v. Geo. J. Coolce Co., 299 Ill. 104. It was enacted in aid of the jurisdiction of courts in the action of assumpsit and other common-law actions which involve questions of account. While such remedial statutes have been enacted for the better examination of complicated accounts at law, and such fact should be considered in determining whether a court of equity should decree an accounting solely on the ground that the accounts are complicated, still they do not take away the jurisdiction of equity in cases of complicated accounts. (1 C. J. 619.)

No one can doubt the jurisdiction of a court at law in the instant case. The only right equity has to assume jurisdiction over it is on the ground that a full and complete remedy is not afforded by an action at law. Appellants undertake to give the case an appearance of simplicity by saying that the payments to them were made by four drafts drawn by the Illinois State Bank of Crete upon the National City Bank of Chicago, fifteen drafts drawn by the Illinois State Bank of Crete upon the Chicago City Bank & Trust Co., one other draft of the Illinois State Bank of Crete drawn on the Chicago City Bank & Trust Co., twenty-nine checks and ten deposit slips. In our judgment such an enumeration of items furnishes no fair estimate of the complexities and intricacies to be encountered in determining the account between appellants and appellee. In order to fix appellants’ liability under the bill, it was necessary to first show that the money represented by the items mentioned was stolen from the bank and turned over to appellants. Kracke was not only speculating on the Board of Trade through Bennett & Company but also through a number of other brokerage concerns. The means employed by him in filching money from the bank were many and devious. His falsifications and alteration of records and documents ran through almost all of the books and records of the bank. It required a complete audit of such books and records, accompanied by explanations only obtainable through testimony of Kracke to arrive at a determination of appellants’ liability.

How the question of complexity and intricacy of the account impressed the chancellor is best evidenced by what he said upon that subject in his written opinion, filed in the case. His language upon that subject is as follows: “In order to establish the amount of money which Kracke extracted from the assets of the Crete Bank and paid to Bennett & Company in the various transactions in which they were engaged, it was necessary to introduce a large number of checks and drafts, and to show that these payments were made upon the Seggebruch & Company account, as distinguished from the Seggebruch account; and for other reasons it became necessary also to offer in evidence a large part of the books and records of the Crete Bank; and to ascertain finally what portions of these payments should be chargeable to Bennett & Company requires a careful analysis and examination of the various entries in the books and records, by comparison with checks and drafts evidencing the payments. In order that the court might get an intelligent understanding of these matters, it has been necessary to examine the checks and drafts and the indorsements thereon, to make exhaustive notes and memoranda, checking each check and draft with the entries in the books and records of the bank, and with the explanations of Kracke with reference thereto. And it would seem that it would be wholly impracticable for a jury to carry all these matters in their minds and arrive at any intelligent conclusion as to the total amount properly chargeable to Bennett & Company. For these reasons it would seem clear that although the checks and drafts in themselves might be just as readily proven and offered in evidence in an action at law before a jury, still when we consider the extent to which the other books and documents and records of the bank are involved in an intelligent understanding of the transactions, it may well be said that the evidence is of such an intricate, complex and difficult character as to require the employment of those methods of investigation peculiar to courts of equity, and to justify a court of equity in taking jurisdiction of the case. ’ ’

This court can readily appreciate the accuracy of the chancellor’s finding upon this question. When we considered the case of Ohlendorf v. Rathje, supra, we had before us many of the same exhibits which were before the chancellor in the instant case. They were voluminous and in addition to that they contained secret marks and symbols employed by Kracke as an aid to him in remembering the device he used in manipulating and juggling the accounts of the bank. They were of such a character that they baffled and deceived the bank examiners and the audit committee. There was no key to their solution. There was no means available for their interpretation except that furnished by Kracke. They presented a condition which would mystify any jury. The record in this case shows that the difficulties of proof concerning these books and records were the same as in the former case. It is clear to us that only the methods of investigation peculiar to courts of equity could solve the problem of determining an exact account. We are of the view that the jurisdiction of equity in this case is obvious. But if there be any doubt about it, the chancellor, under the circumstances before him, was vested with a sound discretion in determining the question of jurisdiction. (Hartford Fire Ins. Co. v. Ledford, 151 Ill. App. 413; Billboard Pub. Co. v. McCarahan, 151 Ill. App. 227; Crown Coal & Tow Co. v. Thomas, 177 Ill. 534; Des Moines Life Ins. Co. v. Seifert, 112 Ill. App. 277; Forster, Waterbury & Co. v. Webster Mfg. Co., 108 Ill. App. 41.) We are convinced there was no abuse of discretion on the part of the chancellor in deciding the question of jurisdiction raised by the answer in favor of appellee. Because of our holding that no adequate remedy at law exists, it is unnecessary for us to discuss other grounds which appellee insists are sufficient to give a court of equity jurisdiction of this cause. But in order that the parties may understand our attitude we expressly state that, as applied to this case,, inadequacy of remedy at law is the only ground urged by appellee sufficient to clothe a court of equity with jurisdiction.

It is said that there can be no accounting against anyone because the amended bill asks for a discovery and accounting against Kracke only and not against appellants and that the chancellor found that Kracke was neither a necessary nor a proper party because a decree had already been entered against him in the Rathje case. There is no doubt that relief must be granted upon the theory of the bill or not at all. (Chicago, P. & St. L. R. Co. v. Jacksonville Railway & Light Co., 245 Ill. 155. It is evident that if no accounting was asked for as against appellants none could be had against anyone. This anomaly presented itself to the chancellor at the time he decided the case and he expressed the view that although an account might be taken under the general prayer for relief contained in the bill, yet, good pleading required a specific prayer for it and remarked that: “In view, therefore, of the fact that the case has been tried by both parties on the theory that the accounting was proper, I will permit complainant, if he shall be so advised, to amend his bill before decree is entered by inserting after the word ‘thereof’ on the 17th line of the 14th page of the .amended bill, the words ‘that an account may be taken by or under the direction of this Honorable Court as to all of said transactions. ’ ” This amendment was not in fact made either by interlineation or by the filing of a separate paper. However, the parties treated the amendment as having been actually made and proceeded to a decree with that understanding. The decree contains a recital showing the motion to amend after such suggestion had been made by the court, and the granting of leave to amend over the objection of defendants. An agreement was then entered into of record that the several answers to the bill as so amended shall stand, to wit, in its present form. It is a general rule that obtaining leave to amend is not tantamount to an actual amendment, but in Hinchcliffe v. Wenig Teaming Co., 274 Ill. 417, it is said: “Where there is an order granting leave to amend and the subsequent proceedings in the cause are based upon the assumption that the amendment has been made, the course is to consider the order as standing for the amendment itself. Where a motion to amend has been granted but no amended pleading appears in the judgment roll, it may be treated, on appeal, as if actually made.” Hnder the circumstances here set forth we are constrained to treat the proposed amendment as though it had been actually made according to the rules of pleading, and to hold that relief is obtainable under the bill as amended if the allegations are sufficiently supported by the proof.

Having decided that equity has jurisdiction of this cause, we must determine the other questions presented. Counsel for appellants argue that the proof does not show the transactions between Bennett & Company and Kracke were in violation of the Criminal Code. It needs but a brief recital of the facts to disclose that the transactions were gambling deals. According to the evidence, appellants have been engaged in the brokerage business upon the Chicago Board of Trade for a number of years and have transacted a tremendous volume of business in Chicago, and numerous other cities and towns throughout the states of this union. Their knowledge and acquaintance with people and with the methods employed in doing business on the Board of Trade were extensive and intimate. Kracke was a young man of limited business experience. He was made the cashier of a bank located in a small village with a capital stock of $25,000. About the only tangible property he possessed was a one-half interest in the premises in which he lived. The value of all of his property at the time he began trading was not in excess of $10,000. He never received a salary of over $125 a month. He had a wife and child to support. "When his business relations with Bennett & Company began, he was in mental distress, because he had permitted William Seggebruch, also a resident of the village of Crete, to largely overdraw his account at the bank for money used in Board of Trade operations. Kracke testified that in order to restore funds to the bank which he had permitted William Seggebruch to withdraw, he began to buy and sell grain on the Chicago Board of Trade through Bennett & Company and other brokers under the name of William Seggebruch & Company. His dealings were mainly carried on with appellants through their branch office at Chicago Heights, conducted by S. E. Fisher, local manager for appellants. Kracke’s trading was extensive. During the World’s War, the government put a limit upon the number of bushels of certain grains which could be traded in. Kracke frequently had deals which involved the limit. He never delivered a bushel of grain that he sold, or received a bushel of grain that he bought. He testified that he had no warehouse or elevator in which he could receive any commodity purchased by him and that he never owned any grain "Which he could have delivered on any of his contracts, He knew that there was a rule which provided that in the event a deal was not closed within a specified time he could be called upon to deliver the grain sold by him or to receive the grain bought by him. He testified, however, that he never expected to deliver or to receive any grain upon his contracts. Fisher, the agent for Bennett & Company, testified that he never expected him either to deliver or to receive the grain. He was continually buying and selling in quantities which represented a value far in excess of his financial worth. All of these things were as well known to one party as to the other. The circumstances are not disputed or contradicted by any testimony in the case.

The parties stipulated that Fisher, as manager of the branch office at Chicago Heights, was authorized to act in the conduct of all lawful transactions in said city. Appellants now contend that this stipulation estops appellee from imputing the knowledge which Fisher obtained in the transaction of his unlawful business with Kracke to his principals, Bennett & Company. The stipulation does not amount to an agreement that the transactions were not gambling deals and if appellants’ contention is sound, then every bucket-shop keeper can escape liability under the Criminal Code by proving he had instructed his agent not to gamble or engage in any unlawful enterprise. Fisher’s knowledge was imputable to appellants. But, even if it were not, appellants had actual knowledge of these circumstances. Under a long line of decisions the transactions in question must be held to have been gambling deals and inhibited by sections 130-132 of the Criminal Code [Cahill’s St. ch. 38, ¶¶ 308-310]. (First Nat. Bank of El Paso v. Miller, 235 Ill. 135; Pratt & Co. v. Ashmore, 224 Ill. 587; Pope v. Hanke, 155 Ill. 617; Pardridge v. Cutler, 168 Ill. 504; Weare Commission Co. v. People, 209 Ill. 528; Pelouze v. Slaughter, 241 Ill. 215; Kempton Farmers’ Elevator Co. v. James E. Bennett & Co., 233 Ill. App. 655, abst.)

The answer of appellants sets up the statute of limitations as to all claims against them which were incurred more than five years prior to the filing of the bill of complaint. The chancellor held that the statute applied,- and the decree rendered herein is for the liability of appellants incurred subsequently to September 6, 1916. Appellee has assigned cross error upon such ruling and urges that it is inequitable under the circumstances of this case to interpose it as a defense and that it was tolled through the fraud, criminal conduct and concealment of appellants. While courts of equity in some cases ignore the statute of limitations because it is purely legal as distinguished from an equitable defense (Evans v. Moore, 247 Ill. 60), we doubt if such action is ever taken in any case except one in which equity has exclusive jurisdiction. (Harding v. Durand, 138 Ill. 515.) The rule is, that when courts of equity have concurrent jurisdiction with courts of law and the party proceeds in equity, if barred at law, he will also be barred in equity. (Hawley v. Simons, 157 Ill. 218, p. 224; Lancaster v. Springer, 239 Ill. 472; Gordon v. Johnson, 186 Ill. 18.) We have already said that the jurisdiction of a court at law .in this case is unquestioned and that a court of equity also has jurisdiction because of the inadequacy of the legal remedy. It follows then that unless the statute was tolled no recovery can be had for any liability which was incurred prior to September 6, 1916.

Recovery can be had in this case for moneys received by appellants in their gambling transactions with Kracke without regard to whether a criminal conspiracy to rob the bank existed or not. But appellants claim that in order to toll the statute of limitations, the conspiracy to rob must be proved as alleged, and it must also be shown that their wrongdoing was intentionally and actively concealed by them from the bank. The chancellor found that no such criminal conspiracy existed and that the statute was not tolled. Appellee has assigned cross error as to this holding. We fail to see what difference it makes as to the application of the statute whether the alleged conspiracy was proven or not. Appellants were guilty of gambling with the bank’s employee and of thereby obtaining its funds. If the proof shows that they had sufficient knowledge to apprize them that he was stealing and concealing the fact from the bank, can it be said that the statute of limitations will protect them because they were not also in a conspiracy to rob? It seems to us that it makes no difference what crime or crimes were availed of by appellants to get the money. If they got it by gaming or theft or both, knowing that it belonged to the bank, and actively concealed the fact from the bank, certainly the statute was tolled until a discovery of the loss.

The proof of the alleged conspiracy consists to a considerable degree of the same facts and circumstances which both the trial court and this court hold clearly establish the guilt of appellants of the criminal offense of gambling. But there are additional facts and circumstances in evidence which are material and pertinent to the issue. To establish the charge against appellants of criminal conspiracy to rob, it must be shown that the accused were guilty of the crime charged not merely by a preponderance of the evidence, but beyond a reasonable doubt, just as in a criminal proceeding. (McInturff v. Insurance Co. of North America, 248 Ill. 92; People v. Sullivan, 218 Ill. 419; Germania Fire Ins. Co. v. Klewer, 129 Ill. 599.)

A summing up of the proofs pertaining to the charge of conspiracy shows that when Kracke became the cashier of the Illinois State Bank of Crete, William Seggebruch was an active speculator on the Chicago Board of Trade, and was trading under three different names, to wit, William Seggebruch, William Seggebruch & Company and The Crete G-rain Company. He possessed a stronger personality than Kracke and induced the latter to permit him to overdraw his accounts in the bank. So large were these overdrafts that Kracke became frightened, and in order to conceal the condition of the bank and of Seggebruch’s accounts he began tampering with the books and records of the bank. It will serve no useful purpose to again recite the methods employed by Kracke in extracting money from the bank as well as from other sources to carry on grain speculations. He claims that he began speculating for the sole purpose of replenishing the funds of the bank which had been stolen by him in aid of Seggebruch’s accounts. His deals were intentionally concealed from the bank and the public. He operated under the name of Seggebruch & Company in an account known upon the books of Bennett & Company as Ho. 3105. Seggebruch carried on his speculations with Bennett & Company through the account of William Seggebruch, known on the books of said brokers as Ho. 3100. The record shows that Seggebruch was well acquainted with appellants and that Kracke was acquainted with none of them, until after he began dealing in the grain market. Seggebruch informed Bennett & Company that Kracke was cashier of the Illinois State Bank of Crete and that he was not worth to exceed $10,000. The evidence discloses beyond any doubt that in the early stages of Kracke’s speculations appellants were fully informed as to who he was, his occupation and his financial condition. This information furnished them with actual and positive proof of the credit to which he was entitled. With this knowledge they permitted him to embark upon an extensive course of speculation far beyond any limit which they might reasonably permit bim to go. They had no branch office in Crete, but conducted one nearby in Chicago Heights, managed by Fisher as heretofore mentioned. Kracke usually placed his orders for purchases and sales with Fisher by telephone. The bank’s telephone was on a party line and conversation over it could be listened in on by all other subscribers on that line. This matter was talked over between Kracke and Fisher and the bank’s telephone was taken off of the party line and established on an individual line. The monthly charges to subscribers on individual lines were greater than on party lines. Kracke did not want the bank directors to know of the change and Fisher agreed to take care of the additional monthly charges. Thereafter Fisher paid such additional charges and itemized the same in his monthly statements of expense to Bennett & Company, sent to Chicago to the principal office of appellants. Kracke’s speculations were generally not successful and to recoup his losses he plunged more heavily. It was not an infrequent thing for him to buy through Bennett & Company 200,000 bushels of grain. He was compelled to margin these purchases to the extent sometimes of 5c a bushel. It will thus be seen that to margin a single deal of that size it would require $10,000 in cash, a sum equivalent to what appellants knew to be Kracke’s entire worth without excepting his legal exemptions. Sometimes he had as much as 250,000 bushels of grain. As a rule when he won anything the winnings were credited to the account of Seggebruch & Company upon balances due from him. He was the largest trader at the Chicago Heights office. Fisher testified that his business was equivalent to that of all other business of the office. His trading was so active and his losing so consistent that Bennett & Company was continually calling upon him to cover losses or to put up more margins. His losses during the years he traded with Bennett & Company were known to appellants to be more than ten times the value of his entire estate. The No. 3100 account was a purely criminal enterprise as was also the No. 3105 account. The undisputed evidence shows that Bennett & Company received from Kracke between $130,000 and $150,000. Not all of this was allowed by the chancellor for the reason that he held that a portion of it could not be recovered because of the statute of limitations interposed by appellants. Appellee claims that the losses to Bennett & Company were $87,000 more or a total of over $200,000 and his claim is supported by the testimony of Kracke and not contradicted by anyone. The chancellor refused to allow the claim of $87,000 because the testimony of Kracke was uncorroborated as to it, and, being an accomplice, his testimony was tainted. The court was justified, for that reason, in rejecting the claim for the additional sum; but the fact remains, that in considering the question of appellants’ knowledge of Kracke’s guilt, the payment of $130,000 to them has as much probative force as the payment of $200,000.

The conclusion from the evidence that Bennett & Company knew Kracke was a thief is inescapable. They had full, complete and actual knowledge all the time that he had only $10,000 worth of property; that he had only a little position in a country bank; that when they called upon him for margins he had to produce the money without delay; and that they often called upon him daily for money aggregating $1,000 or more. Fisher admitted he knew Kracke was stealing money from the bank. The proof shows that appellants had actual knowledge of the payment of margins and losses. They cashed the major portion of the drafts and checks. They were in touch with every essential detail of the gambling transactions. Indeed, the facts and the circumstances surrounding the situation were sufficient to have made it obvious to anyone acquainted with them that the money was being stolen. No amount of credulity would have prevented such belief. Nor could there be any doubt that it was being stolen from the State Bank of Crete. We need cite but a few instances of the proof to firmly establish these propositions. For example: payments by Kracke on the William Seggebruch & Company account, No. 3105, were generally made by drafts payable to William Seggebruch and indorsed by him, or by checks upon the State Bank of Crete, signed by William Seggebruch and payable to appellants. On July 13, 1916, Kracke as cashier issued five separate drafts for $1,000 drawn on the National City Bank of Chicago, the correspondent bank of the Illinois State Bank of Crete, payable to William Seggebruch and. indorsed by him. These drafts were turned over to Fisher by Kracke who requested Fisher to hold some of them a few days before presenting them, as the market might go up, and if it did it would not be necessary to cash them. Frequent requests of this kind with reference to other drafts were made. What difference did it make to the Crete Bank whether the drafts were cashed or not, if the money represented by them had not been stolen? What occasion can there be for holding up a draft if the bank is good and has sufficient funds on deposit with its correspondent bank? Manifestly, there is none. These requests to hold up drafts impugned the solvency of the bank and furnished proof that it was in a failing condition. Bennett & Company and their branch manager Fisher knew what was the cause of such condition. Evidently the market did not go up because the drafts being held until July 17 and 18 were cashed by appellants and bear their indorsement. The draft of July 8,1916, for $2,000 was cashed on July 14. The draft of July 22, 1916, for $1,000, No. 26766, and draft No. 26756 of the same date for $1,000, did not go through the clearing house until August 2,1916. Draft No. 26512 for $2,000 dated July 1, 1916, did not clear until July 7. These are only a few of many similar circumstances. Further proof of appellants’ knowledge where the money was coming from and of the bank’s consequent tottering condition is found in the conduct of appellants themselves with reference to Kracke’s request that the drafts be not presented for several days after their delivery. The five drafts issued July 13, 1916, and the three drafts issued July 17, 1916, were taken by appellants, after they received them, to the bank upon which they were drawn to be certified. Why this precaution? It may not be unusual to have an individual check certified by the bank upon which it was drawn. In some cases it is an ordinary precaution taken to obviate the hazard incident to the possible withdrawal of the maker’s deposit or his insolvency. But is such a practice usual with bank drafts? Did appellants fear the insolvency of the Crete Bank and the withdrawal of their deposit accounts? Their conduct shows they had such a fear and it also shows what that fear was predicated upon. We have not undertaken to go through the long list of drafts to show the number of them that were certified. We have taken only a few and the ones we have mentioned are among those which were issued more than five years prior to the bringing of the suit and which are barred, if the statute of Emitations has application. Our purpose in making such a selection is that they show conclusively the guilty knowledge of appellants at an early day in the period of Kracke’s transactions with appellants. The total losses of Kracke in 1916 subsequently to September 6, as found by the chancellor, approximate $12,000 but the evidence shows, though not included in the chancellor’s finding, that the losses of that year approximate $30,000. In 1917, they were more than $27,000 and in 1918, up to the time the bank was closed, and Kracke became a fugitive from justice, they were at least $15,000.

The chancellor found that in addition to the amount covered by drafts and checks, Kracke paid to James E. Bennett & Company, through the local manager Fisher, $10,500 in cash. The finding was based upon the testimony of Kraeke and Fisher as to such payments and upon the documentary evidence furnished by the records of the Commercial Bank of Chicago Heights showing the deposits of various cash payments to the credit of Bennett & Company. Fisher testified that the payments were generally made in amounts of $1,000 or $1,500 each; that while he occasionally received cash from other customers, they were in smaller amounts and he remembered no payment as large as $1,000 having been made by any other customer. The records of the Chicago Heights Bank show that seven deposits of $1,000, two deposits of $1,500 and one deposit of $500 were made on or after October 13, 1916. Fisher testified that when these cash payments were made to him they consisted of paper money done up in packages in $500 and $1,000 amounts in the manner in which paper money is often kept in banks. Fisher admitted that he was “leery” about where Kraeke was obtaining money. This proof furnished him with sufficient evidence to warrant more than a suspicion.

Fisher severed his connection temporarily with Bennett & Company a short time before the bank was closed. A man by the name of Decker took his place at the Chicago Heights office. Kraeke was indebted to Bennett & Company on his Seggebrueh & Company account. Decker went to see him about it and Kraeke gave him a deposit slip for $5,000 indicating that James E. Bennett & Company had on that day deposited with the Crete Bank and had to appellants’ credit in that bank the sum of $5,000. The slip was delivered to Bennett & Company and was retained by that firm until some time later when Kraeke took it up by payment upon his account with Bennett & Company. Appellants knew when they received the deposit slip that they had made no deposit in the Crete Bank. They knew that Kracke had no money of his own to deposit to their credit. They never made any effort to withdraw the deposit by check or otherwise. They held the slip until it was convenient for Kracke to take it up. When he had paid them the amount shown on it, they surrendered it to him. The whole transaction shows that the slip was a device by which Kracke was using the bank to supply him with funds for the operation of his gambling deals with appellants. The issuance of the deposit slip necessarily required a falsification of the bank’s books. This must have been as evident to appellants as it is to everyone else.

The proof demonstrates that appellants were gambling with Kracke and knew that he was losing large sums of money; that they had actual knowledge that he was stealing money with which to pay his losses; and that he was stealing it from the Illinois State Bank of Crete, by which he was employed.

It is claimed by appellants that the charge of conspiracy to rob is lacking in essential proof of an agreement and common design. It is not contended by appellee that a conspiracy existed between Kracke and appellants when the former began trading in the Seggebruch & Company account. Although he was then dishonest and was looting the bank, it is not claimed that appellants knew of it when their relations with him began. The knowledge of his dishonest conduct was not acquired by appellants until a later date. It is difficult to ascertain just when appellants learned with definiteness about Kracke’s thefts and began participating in the fruits thereof. We are of the opinion that it was before January 1, 1915, but there can be no doubt that they knew it from July 9,1915, at which time the telephone was changed. The question therefore is: Does the subsequent knowledge and participation of appellants in the dishonest conduct of Kracke make them guilty of a conspiracy to rob?

Bishop’s New Criminal Law, vol. 2, sec. 171, defines a conspiracy as “the corrupt agreeing together of two or more persons to do by concerted action something unlawful either as a means or an end.” ,The means to be employed to accomplish the unlawful purpose may never have been disclosed or may never have been agreed upon, so that they could not be stated, and yet the offense would be complete and might be proved by overt acts or other circumstances. (People v. Blumenberg, 271 Ill. 180, p. 184.) There never was a meeting between Kracke and appellants at which it was agreed or tacitly understood between them that they should enter into a joint enterprise for the robbery of the bank nor do we think that such a meeting was necessary to formulate an agreement. The gravamen of the offense is the combination, and the agreement or combination need not be evidenced by a writing. It may be a verbal agreement or it may be an undertaking or a scheme evidenced by the action of the parties. (Harding v. American Glucose Co., 182 Ill. 551; Franklin Union, No. 4 v. People, 220 Ill. 355, p. 377.)

In United States v. Cassidy, 67 Fed. 698, it is said that:. “It is not necessary to constitute a conspiracy that two or more persons should meet together, and enter into an explicit or formal agreement for an unlawful scheme, or that they should directly, by words or in writing, state what the unlawful scheme was to be, and the details of the plan or means by which the unlawful combination was to be made effective. It is sufficient if two or more persons, in any manner, or through any contrivance, positively or tacitly come to a mutual understanding to accomplish a common and unlawful design. In other words, where an unlawful end is sought to be effected, and two or more persons, actuated by the common purpose of accomplishing that end, work together, in any way, in furtherance of the unlawful scheme, every one of said persons becomes a member of the conspiracy, although the part he was to take * * * was to be executed at a remote distance from the other conspirators. ’ ’ A mere tacit understanding between conspirators to work to a common purpose is all that is essential to a guilty, actionable combination. (Patnode v. Westenhaver, 114 Wis. 460, p. 474.) It has been held in Richards v. United States, 175 Fed. 911, that where a conspiracy contemplates false or fraudulent entries, a party to it is chargeable with all the acts consummating it although not personally cognizant of all the details. An actual agreement in terms is unnecessary, it being sufficient if the alleged conspirators co-operated and pursued common designs. (Spies v. People, 122 Ill. 1.)

Mere knowledge or even approval of the unlawful acts of the conspirators without co-operation or agreement to co-operate with them is not enough to constitute one a party to the conspiracy. There must be an intentional participation in the transaction and in furtherance of the common design. (People v. Strauch, 240 Ill. 60.) But knowledge with participation makes the crime complete. We have not endeavored to discuss or even detail the guilty participation of Seggebruch and Fisher in the criminal conduct of Kracke. It is sufficient to say that counsel for both parties not only concede but charge such participation. No one can read the evidence in this case without reaching the conclusion that there was a common design among Kracke, Seggebruch and Fisher to maintain their gambling operations with the bank’s money which was to be stolen by Kracke. This is an important landmark. We not only have the conspiracy among those three men to rob, but we have it virtually admitted by the parties to the suit in their briefs. It is shown by the evidence that subsequent to the formation of the conspiracy and the performance of overt acts done in pursuance of it, appellants acquired actual knowledge of the thefts of the conspirator Kracke and of the purpose of the conspiracy. With this actual knowledge they participated in the means employed to effectuate the conspiracy. It must be remembered that all of these men were engaged in criminal acts of gambling and that the gambling was not done in order to rob the bank, but the bank was robbed in order that they might gamble. These facts bring this case within the rule laid down in People v. Strauch, supra. The Supreme Court in speaking of a given instruction on page 75 said: “That instruction tells the jury, as a matter of law, that all who take part in a conspiracy after it is formed and while it is in execution, and all who, with knowledge of the facts, concur in the plans originally formed and aid in executing them, are fellow-conspirators; that their concurrence, without proof of an agreement to concur, is conclusive against them; that they commit the offense when they become partners to the transaction or further the original plan. * * *, the principal of the instruction has often been approved. In Spies v. People, supra, it was held that if one concur in a conspiracy no proof of agreement to concur is necessary. Such we understand to be the settled rule of law.”

Squaring the undisputed proofs in the instant case with the test laid down in the above-mentioned rule, we discern that appellants, with full knowledge of Kracke’s thievery, and of the unlawful combination in which he was associated, as well as the dishonest purposes of the combination, became partners in the transaction and aided in executing the common design of robbing the bank by receiving its money with the knowledge that it was stolen. The Supreme Court said that such knowledge and such conduct is conclusive against them even without proof of an agreement to concur. We are not impressed by the argument that Kracke, Seggebruch and Fisher were conspirators, and that appellants were only innocent participants in the loot of the bank. In Cooke v. People, 134 Ill. App. 41 (aff’d 231 Ill. 9), it is held that where a new participant enters into a conspiratous combination he will be liable for all of the acts done in furtherance of the common design. It is immaterial to the existence of a common design to rob, what the several conspirators may have had in their minds with reference to a distribution of the stolen funds. If A, B, C and D enter into an agreement to blow a safe in order to obtain money with which to gamble among themselves, the conspiracy is not affected by the fact that it is the- idea of each conspirator to win the other’s share of the loot. The common design remained the same. It was to rob the safe.

The rule as to the quantum of proof necessary to sustain the charge of conspiracy to rob against appellants is no different from that necessary to sustain the charge of gambling. Both charges must be proven beyond a reasonable doubt. We apprehend that all courts would reach the conclusion that appellants were guilty of gambling as charged in the bill of complaint and we see no reason for a different conclusion in reference to the charge of conspiracy. That charge is supported by almost every fact which sustains the charge of gambling and by many other facts, a number of which we have mentioned in this opinion. There is no better basis for the argument that Bennett & Company did not have actual knowledge of the thefts than there is that they did not have actual knowledge that Kracke was gambling on the rise and fall of the grain market. If the crime of gambling is established, so is the crime of conspiracy.

By reason of the law and facts we must hold that the appellants were guilty of the conspiracy charged in the bill of complaint. That the thefts and defalcations of Kracke were concealed from the officers of the bank needs no discussion by us at this time. We have fully expressed our views in the Rathje case and we see no occasion at this time and under the facts in this case to change them. The bank’s financial troubles burst upon the village of Crete like a thunderstorm. Kracke’s concealment of his criminal acts had been as nearly perfect as crimes of such magnitude ever attain. Our findings that appellants had knowledge that the money they received from Kracke in gambling belonged to the bank, and that they participated in the conspiracy and in the concealment of the loss of the funds from the bank, make the statute of limitations without application and removes the bar. Where a cause arises from a fraud, the statute of limitations will not begin to run nor laches apply until the discovery of the fraud or from the time the fraud could have been discovered by the exercise of reasonable diligence. (Farwell v. Great Western Tel. Co., 161 Ill. 592, p. 596, and cases cited.)

The chancellor allowed interest which appellants object to on the alleged ground that appellee’s claim is unliquidated. Section 2, chap. 74 of the Revised Statutes [Cahill’s St. ch. 74, ¶ 2] provides for the payment of interest at the rate of 5 per cent for money received for the use of another and retained without the owner’s knowledge. We do not consider the account to be unliquidated. Outside of the single item of $5,000 which was paid Kracke on the account of Seggebruch & Company and which went to replenish the funds of the bank, the record does not disclose any other sum to which appellants are entitled to credit. The items which appellants received, so far as the findings of the chancellor are concerned, were in definite specified amounts with absolute proof as to dates of payment. It would indeed be inequitable not to require interest to be paid on these several amounts. Counsel for appellee cite Harvey v. Hamilton, 54 Ill. App. 507; Central Stock & Grain Exchange of Chicago v. Bendinger, 109 Fed. 926; Joslyn v. Downing, Hopkins & Co., 150 Fed. 317, in support of the chancellor’s allowance of interest and we think they sustain it.

When the bank failed, William Seggebruch was indebted to it on the William Seggebruch and The Crete Garage accounts in excess of $100,000 by reason of overdrafts and other withdrawals. He effected a compromise of all his liabilities with the receiver and it is urged by appellants that the proof shows that he was jointly interested in the Seggebruch & Company account, and being a joint tort-feasor with Kracke, a settlement releasing him also released all other joint tort-feasors of their civil liability. We are convinced from the evidence that when Kracke began speculating he employed the William Seggebruch & Company account for his individual deals and that Seggebruch had no interest in them.

Appellants claim they are entitled to a credit of $34,231.36 on account of fourteen checks of Bennett & Company payable to William Seggebruch and which were turned over to the Crete Bank. They insist that these checks went to replenish the funds of the bank which had been stolen by Kracke. There is no dispute about the checks being used to replenish stolen funds, but the trouble with appellants’ contention is, there is no proof that they went to replenish the funds stolen and used in the account of Seggebruch & Company with Bennett & Company. The only explanation offered was given by Kracke. He testified that they did not replenish funds stolen for the use of the Seggebruch & Company account, but were used for the purpose of replenishing other funds which he had hypot'hecated for the benefit of William Seggebruch in the latter’s individual deals. Under the circumstances, appellants are not entitled to such a credit.

Because of our holding that the directors were not guilty of negligence, the case of Bartlett v. First Nat. Bank of Chicago, 247 Ill. 490, has no application. And in view of our holding that appellants had actual knowledge of Kracke’s crimes and participated in them, the case of Murray v. Standard Pecan Co., 309 Ill. 226, has no application.

Appellants claim that it was error for the chancellor to state the account and cite Barnes v. Barnes, 282 Ill. 593, and Carstens v. Reinecke, 212 Ill. App. 555, in support of their position. There can be no doubt that both the Supreme and the Appellate Courts of this State have expressed themselves against the policy of the chancellor’s stating an account. Such courts will no doubt continue to adhere to their view. But where a chancellor has seen fit to state the account himself and has done so with substantial accuracy, it would be folly to reverse a case upon that ground and direct the chancellor to cause the master to do something which has already been done by the chancellor.

We have reached the conclusion that appellants’ liability, as stated by the chancellor and as found in the decree, is correct in so far as it covers the period after September 6, 1916. But the chancellor was in error in holding that appellants had not actively participated with Kracke in concealing from the bank the fact that they had received its funds from Kracke in gambling deals; that appellants were not co-conspirators with Kracke, and that the statute of limitations barred a recovery against appellants for claims arising on and prior to September 6, 1916. The decree is affirmed with respect to its findings and order against appellants in the sum of $76,030.50, but because of the errors above indicated, the cause is remanded to the circuit court of Will county with directions to restate the account so as to include such items, if any, as appellants are liable for from July 9, 1915, to September 6, 1916.

Affirmed in part, reversed in part omd cause remanded to restate account.


source: Caselaw Access Project

author: Mr. Presiding Justice Gridley

license: Public Domain

text:
    Lewis E. Bower, Plaintiff and Appellant, v. John Popp et al., Defendants. George Wuhs, Appellee.
    Gen. No. 30,959.
    1. Chattel mortgages — failure to take possession of mortgaged property or to file statutory affidavit of extension, after maturity of mortgage, as affecting priority over labor lien claimant. Wliere no affidavit of extension, as provided by Cahill’s St. ch. 95, If 4, was filed within 90 days after the maturity of a chattel mortgage upon an automobile, and the mortgagor neither took possession of the automobile nor made diligent attempts to do so after the maturity of the mortgage debt, such mortgage created no lien as against one having a lien upon such automobile under Cahill’s St. ch. 82, If 45, by reason of labor thereon and storage thereof, the automobile having been delivered to such claimant for the purpose of making repairs after the maturity of the mortgage but before the expiration of the 90-day period aforesaid, and having been retained in his possession until taken therefrom by replevin proceedings instituted after the expiration of such 90-day period.
    2. Replevin — propriety of judgment conditioning right of holder of chattel mortgage on property to retain sarme upon payment of amount of valid superior lien for labor and storage. Where at the time the holder of a chattel mortgage upon an automobile brought an action of replevin to secure possession of the automobile from one who held it under a valid lien for labor and storage' pursuant to Cahill’s St. ch. 82, If 45, such mortgage has ceased to be a valid lien upon the property because of noncompliance with Cahill’s St. ch. 95, If 4, judgment was properly entered conditioning the right of the plaintiff to retain possession of the automobile upon payment of the amount of the defendant’s lien within three days, in view of Cahill’s St. ch. 119, ff 22.

      Appeal by plaintiff from the Superior Court of Cook county; the Hon. Joseph B. David, Judge, presiding. Heard in the second division of this court for the first district at the March term, 1926.
    Affirmed.
    Opinion filed October 5, 1926.
    Brown, Brown & Brown, for appellant.
    Underwood, Stevens & Timm, for appellee.
   Mr. Presiding Justice Gridley

delivered the opinion of the court.

On August 13, 1924, plaintiff commenced an action in replevin for possession of a certain automobile. The sheriff found it in the possession of the defendant, George Wuhs, and took it under the writ, and on the same day delivered it to plaintiff. Wuhs was the only defendant who appeared. There was a trial before the court without a jury, on the issues formed, resulting in the court finding that, although the right to the ownership of the automobile is in plaintiff, Wuhs had a valid lien on it for $379.90. On November 25, 1925, the court entered an alternative judgment on the finding to the effect that plaintiff either pay Wuhs the amount of his claim, $379.90, with proper costs and charges, or within three days return to him the automobile. From this judgment plaintiff appeals.

To plaintiff’s declaration, consisting of two counts charging the unlawful taking and retention of the automobile, Wuhs filed pleas, among them a special plea, alleging in substance that at and before the time of the beginning of the action he was engaged in the business in Chicago of towing and repairing automobiles ; that.on April 15,1924, John Popp, owner of the automobile, employed him to tow it to his place of business and make certain repairs on it; that he did these things, expending for labor and materials for the same $286.90, and completing the repairs on May 10, 1924; that between that date and the day the automobile was replevied, his charges for storage on it amounted to $93, and that under the statute he has a lien on it for his total unpaid claim, $379.90, which is superior to plaintiff’s claim of lien on or right of property in the automobile. Evidently the statute referred to in the plea is the Act of 1921 in reference to liens for labor on or storage of chattels. Cahill’s St. 1925, ch. 82, ¶ 45.

To this special plea plaintiff filed a replication, alleging in substance that he was the owner and holder of a chattel mortgage upon the automobile, which mortgage was duly signed and acknowledged by Popp on March 17,1922, and duly recorded in the recorder’s office of Cook county on March 21,1922; that the mortgage did not mature until two years after its date (March 17, 1924); that some of Popp’s notes, for which the mortgage was given as security, were unpaid; that after the automobile was replevied and after notice of foreclosure sale given to Popp, plaintiff sold the automobile, as he had a right to do under the terms of the mortgage; and that plaintiff’s mortgage lien on the automobile was superior to Wuhs’ claimed lien.

On the trial plaintiff’s attorney admitted that Wuhs had a lien on the automobile under said statute and for the amount claimed, but contended that the mortgage, at the time of the replevy of the automobile, was a valid and subsisting one as against third parties and the superior lien. Wuhs’ attorney claimed in substance that as against Wuhs the mortgage was not good, because plaintiff, upon failure of the mortgagor (Popp) to make the stipulated payments, had not, upon the expiration of the mortgage and within apt time thereafter, taken possession of the automobile, but had allowed it to remain in Popp’s possession. Wuhs’ attorney admitted, however, that if the mortgage on the automobile was a valid and subsisting one as against third persons at the date the automobile was replevied (August 13, 1924), Wuhs’ lien for repairs, etc., was inferior to that of the mortgage. See Ehrlich v. Chapple, 311 Ill. 467.

Plaintiff introduced the mortgage in evidence. It is dated, signed, acknowledged and recorded as alleged in plaintiff’s replication. By it Popp, in consideration of $972.71 received by him, conveys the automobile to plaintiff as security for said sum, as evidenced by his 19 promissory notes, — the first being for $91.71, due on April 21, 1922, the last being for $1, due “2 years after date” (March 17, 1924), and the remaining notes being each for $50, payable monthly, — the first on May 21, 1922, and the others on the 21st day of succeeding months. It is further provided in the mortgage that the mortgagor may retain possession of the automobile until default in payment of any of the notes; that if he should attempt to secrete, convert, sell or incumber it, or if the mortgagee should at any time deem himself insecure, etc., all unpaid sums might, at the mortgagee’s option, immediately become due and payable, etc., and the latter would have the right to pursue and take possession of the automobile, and sell it at public or private sale, etc.; that the mortgagor has “no authority to place any repairs on said automobile without the mortgagee’s consent in writing, and that no lien for labor, repairs, equipment or storage, superior to the lien of this mortgage, shall attach to the automobile until all indebtedness secured hereby is paid”; and that the “mortgagor consents that replevin of the automobile may be instituted by the mortgagee without notice or demand.”

And plaintiff called as a witness Frank E. Shapera, who testified in substance that defendant paid the first six notes, but had not paid any of those maturing after September 21, 1922; that something over $600 remained unpaid when the automobile was replevied; that subsequent to the replevy plaintiff bought it in at the foreclosure sale held September 10, 1924, for less than the amount of Popp’s remaining indebtedness; that one of the reasons why Popp did not make further payments after September 21, 1922, was that he became ill and was taken to a hospital, where he remained for over six months; that while there his wife called on the witness and explained the situation, and he, as plaintiff’s agent, verbally agreed with her to extend payment for ninety days on each of the remaining notes except the last one; that after Popp got out of the hospital, but still was unable to work, the witness called on him frequently and several times requested that he turn over the automobile to plaintiff, or at least inform the witness where the automobile was, but that Popp refused to tell him, saying, in substance, on one occasion, that he expected soon to be able to take care of his mortgage indebtedness; that he had considerable money in the automobile, and that if he told the witness where the automobile was plaintiff would foreclose on it and he would have nothing to show for his previous payments and that the witness first learned that the automobile was in Wuhs’ shop the day before it was replevied. Wuhs did not introduce any evidence, apparently because of the admissions of plaintiff’s attorney above mentioned; nor was Popp called as a witness.

We are of the opinion that, if at the time the automobile was replevied the mortgage was no longer a valid and subsisting one as to third parties, the trial court was justified in entering the alternative ■ judgment appealed from. In section 22 of the Replevin Act (Cahill’s St. 1925, ch. 119, ¶ 22) it is provided that “if the property was held for the payment of any money, the judgment may be in the alternative that the plaintiff pay the amount for which the same was rightfully held, with proper damages, within a given time, or make return of the property.” In construing this provision it is said in Lamping Bros. v. Payne, 83 Ill. 463, 466, that it applies to cases where the general property is in the plaintiff, and the defendant shows a special property, consisting of a right to hold the property, as against the plaintiff, only for a certain sum of money, “as, where the defendant showed special property by a levy of a fi. fa. against the plaintiff, or where the defendant holds the property as the property of the plaintiff, but by virtue of some lien, as carrier, warehouseman or otherwise.” And in Janes v. Gilbert, 168 Ill. 627, 630, in further construing the provision, it is said: ‘ ‘ The statute does not say that the money must be money owed by the plaintiff, but only that it must be money for the payment of which the property was rightfully held. ’ ’

In view of the admission of plaintiff’s attorney, that when the automobile was replevied Wuhs had a lien thereon to the amount of $379.90, the main question to be decided is whether the lien of plaintiff’s alleged mortgage was superior to, and entitled to preference over, Wuhs’ lien. And that question involves another question, viz: Whether, at the date of the replevy and under the facts disclosed, the mortgage could be held to be a valid and subsisting one as against the lien and rights of Wuhs, a third party.

In section 4 of the Chattel Mortgage Act (Cahill’s St. 1925, ch. 95, ¶ 4) it is provided that a chattel mortgage, if acknowledged and recorded as mentioned in preceding sections of said act, “shall thereupon if bona fide, be good and valid from the time it is filed for record until ninety days after the maturity of the entire debt or obligation or until ninety days after an extension of time of payment thereof made as hereinafter provided: Provided, that such maturity shall not exceed three years from the filing of such instrument for record unless within ninety days after the expiration of said three years, or if the debt or obligation matures within such three years” (as did the alleged mortgage in question) “then within ninety days after* the maturity of said debt or obligation, the mortgagor and mortgagee, his, her, its or their agent or agents, attorney or attorneys shall file for record in the office of the recorder of deeds of the county where the original mortgage is recorded, cm affidavit setting forth particularly the interest which the mortgagee has by virtue of such mortgage in the property therein mentioned, and if such mortgage is for the payment of money, the amount remaining unpaid thereon, and the time when the same will become due by extension or otherwise; which affidavit shall be recorded by such recorder, and thereupon the mortgage lien originally acquired shall be continued and extended until ninety days after the expiration of such period of extension of the time of payment: Provided, such extension of the time of payment shall not exceed one year from the filing of such affidavit. ’ ’

The entire indebtedness ■ secured by the mortgage matured on March 17, 1924. Ninety days thereafter would be June 15, 1924, which was the limit of time that the mortgage would be “good and valid” unless extended, as against the rights of third persons. It does not appear that within the ninety days after March 17,1924, any such affidavit of extension as mentioned in the statute was filed with the recorder. Wuhs was given possession of the automobile by Popp, for the purpose of making repairs on it, after the maturity of the last unpaid note but before. June 15, 1924, the expiration of said ninety-day period. He furnished materials and performed labor on the automobile, and he had it in his possession until plaintiff replevied it on August 13, 1924, which was nearly two months after the expiration of the mortgage by its terms and the provision of the statute. Under the facts disclosed and the law applicable thereto, we think that at the time plaintiff replevied the automobile bis mortgage, he not having in apt time before taken possession of the automobile, was no longer “good and valid” as against the lien and rights of Wuhs. In Lyons v. People’s Bank, 317 Ill. 44, 46, it is said: “Our statute relating to chattel mortgages is in derogation of the common law, and it must be strictly construed.” In Thompson v. Yeck, 21 Ill. 73, 74, it is said: “Possession of personal property being one of the strongest indications of ownership, thé policy of that law is, that so Soon as the credit expires, the mortgagee shall take possession, so that others may not be deceived and defrauded by the appearance of ownership in one, while the title is really in another.” In Shannon v. Wolf, 173 Ill. 253, 258, it is said (italics ours): “The law of Illinois has always been that, if the mortgagee in a chattel mortgage neglects to reduce the property to possession upon the default of the mortgagor, or within a reasonable time thereafter to be determined, by the circumstances of the parties, he loses his lien as against the rights of third persons, and that, as affecting the interests and liens of the latter, the mortgage becomes a void instrument. (Burnham v. Muller, 61 Ill. 453.) In Reed v. Eames, 19 Ill. 594, where the parties lived in the same town or county, it was held that if the mortgagee permitted the property to remain in the possession of the mortgagor one day after default, the delay would be unreasonable, and would constitute a fraud per se which could not be explained.” See also Cass v. Perkins, 23 Ill. 382, 384; Jones v. Noel, 139 Ill. 377, 380; Albert Pick & Co. v. Spoor, 212 Ill. App. 612, 614; Williams v. Head, 219 Ill. App. 5, 9. In the testimony of plaintiff’s witness, Shapera, there was an attempt made to explain why plaintiff had not taken possession of the automobile before August 13, 1924, but under the decisions above mentioned such explanations are not allowed as> against the intervening liens and rights of third persons. Furthermore, it does not appear from Shapera’s testimony that, at any time after Popp’s default in the payment of his monthly notes maturing after September 21, 1922, and before June 15, 1924, plaintiff made diligent search to ascertain the whereabouts of the automobile. Apparently, upon Popp’s several refusals to give information of the whereabouts of the automobile, no further attempts were made by plaintiff to ascertain its location. And Shapera’s testimony does not disclose that about the time the mortgage expired on June 15, 1924, or within a reasonable time thereafter, plaintiff made any attempts to find the automobile and obtain possession of it, until about August 13, 1924, when it was replevied from the possession of Wuhs.

Our conclusion is that the alternative judgment appealed from should be affirmed, and it is so ordered.

Affirmed.

Fitch and Barnes, JJ., concur.


author: Mr. Presiding Justice G-ridley

text:
    Katz Finance Company, Appellee, v. Joseph Levy, Appellant.
    Gen. No. 30,968.
    1. Negotiable instruments — when signature in blank on back of note renders signer liable as indorser. Signature in blank on the back of a chattel mortgage note payable in instalments held to render the signer liable as an indorser thereof, no limitation of his liability appearing upon the instrument.
    2. Negotiable instruments — admissibility or parol evidence to vary liability of indorser in blank before delivery. Parol evidence is not admissible to vary the liability of one who indorses a negotiable -promissory note in blank before delivery thereof to the payee.

      3. Negotiable instruments — when indorsement in blank not deemed one made after delivery within Cahill’s 8t. ch. 98, f 1[ 88, 84-Where a vendor accepted in payment for the property the note of the vendee payable to a third party, and by pre-arrangement then indorsed the instrument in blank without restriction and delivered it to the named payee in exchange for the cash discount value thereof, such indorsement was not one made after delivery of the instrument within Cahill’s St. ch. 98, flfl 83, 84.
    4. Negotiable instruments — express waiver as precluding defense by indorser based upon want of notice of nonpayment by maker. An indorser in blank before delivery cannot escape liability upon the note because of want of notice of nonpayment by the maker where at the time of his indorsement there appeared upon the face of the instrument an express waiver of such notice by all parties thereto, including indorsers and guarantors.
    Appeal by defendant from the Municipal Court of Chicago; the Hon. Robert E. Gentzel, Judge, presiding. Heard in the second division of this court for the first district at the March term, 1926.
    Affirmed.
    Opinion filed October 5, 1926.
    Edward H. Kubitz, for appellant.
    Jones, Addington, Ames & Seibold, for appellee; Albert F. Mecklenburger and Thorley Von Holst, of counsel.
   Mr. Presiding Justice G-ridley

delivered the opinion of the court.

In a fourth-class action in contract, tried before the court without a jury, there was a finding and judgment on October 9, 1925, for $289.13 against defendant as an irregular indorser on each of two promissory notes, dated respectively March 24 and March 26, 1923, signed by a third party as maker, and made payable to the order of plaintiff. Defendant by this appeal seeks to reverse the judgment.

One of the notes was for $186, payable in 10 monthly instalments of $18.60, the first instalment being due on April 24, 1923, and upon which note no payments had been made. The other was for $106 (upon which $40 had been paid), payable in four monthly instalments of $26.50, the first instalment being due on April 26, 1923. All instalments after maturity bore interest at the rate of 7 per cent per annum. It was not disputed on, the trial that there was due plaintiff on both notes, including interest, the said sum of $289.13. On the back of each note was defendant’s signature in blank, “Joseph Levy,” and embodied in the face and printed in small type above the signature of the maker was the following:

“This note is secured by a chattel mortgage, of even date herewith. If any installments of this note be not paid when due, then all installments hereof shall immediately become due at the option of the legal holder hereof, without notice or demand. All the parties to this note, including sureties, endorsers and guarantors, hereby severally waive presentment for payment, notice of non-payment, protest, notice of protest, and diligence in bringing suit against any party hereto, and all endorsers and guarantors hereon hereby consent that time of payment may be extended from time to time after maturity without notice to them. ’ ’

Defendant’s main contention is that defendant is not liable to plaintiff (the payee and holder of the note) as indorser or guarantor thereof, because defendant’s testimony, and that of another witness for him, disclosed that, when he indorsed the notes and delivered them to plaintiff and the latter “discounted” them and paid the defendant the total of their face value less discount charges, it was verbally agreed between plaintiff and defendant in substance that defendant’s liability as indorser or guarantor, in the event the notes were not paid by the respective makers, was contingent upon plaintiff’s returning to defendant two automobiles, upon which said makers respectively had given chattel mortgages as security and of which plaintiff would in the meantime have gained possession by foreclosure of the mortgages, and because said testimony further disclosed that plaintiff had not tendered or returned to defendant said two automobiles and in other respects had not complied with said verbal agreement.

Defendant was in the business of selling automobiles in Chicago and plaintiff’s business partly was that of discounting for a consideration notes of purchasers of automobiles secured by chattel mortgages thereon. A purchaser of an automobile from defendant usually paid part of the purchase price to him in cash, and he would take said purchaser’s note, payable in monthly instalments, for .the balance and secured by a chattel mortgage on the car. Many of such notes, perhaps as many as 200, defendant had delivered to plaintiff, and it would discount them, and defendant would receive in cash or by check the face value of the notes less the discount charges. Substantially the same procedure was followed as to the two notes in question, only that in the instant case plaintiff was named as payee of the notes, and, before delivery of them by defendant to plaintiff, defendant, at the request of plaintiff’s president, Katz, indorsed them in blank in the manner stated. This transaction occurred in plaintiff’s Chicago office shortly after the dates of the notes, in the latter part of March, 1923. Katz testified in substance that, after the notes had come into plaintiff’s possession, it had only been able to collect from one of the makers the sum of $40, which collection had been made through defendant; that nothing further had been collected on either of the notes, although plaintiff had endeavored to collect the various instalments as they came due; that plaintiff had never been able to find or obtain possession of the automobiles for which the notes had originally been given by the purchasers thereof, although it had searched for them; and that the witness repeatedly had advised defendant by telephone of the nonpayment by the makers of the several instalments of the notes and of the fact that plaintiff had not been able to locate the automobiles. The witness denied that plaintiff had made any such verbal contract with defendant, at the time of the delivery of the notes to plaintiff, as claimed. Defendant’s testimony was to the effect that at the time of the delivery of the indorsed notes to- plaintiff, a verbal agreement substantially as above stated was made as regards his indorsement being a qualified one and his liability as such indorser being dependent upon plaintiff doing the things stated, which it did not do, and that defendant never was notified by telephone or otherwise of the fact of the nonpayment by the makers of said notes or any of the indebtedness thereof.

It is evident from the court’s finding and judgment, and its refusal to hold certain propositions of law requested by defendant, that it regarded defendant as an indorser, as distinguished from that of a guarantor, of the notes, and liable as such; and that, although the court had admitted defendant’s evidence concerning the alleged verbal contract mentioned, the court had disregarded the same on the theory that defendant’s written contract of indorsement could not be varied or explained by parol evidence.

In view of the evidence and the provisions of the present Negotiable Instruments Law of Illinois, we are of the opinion that defendant’s status was that of an indorser on the notes and that he is liable as such (Tucker v. Mueller, 287 Ill. 551, 558), and that the judgment against him was right and should be affirmed. There is no qualification or limitation as to his liability as such indorser appearing on the instruments themselves. It is provided in sections 63 and 64 of said Law (Cahill’s St. 1923, ch. 98, ¶¶ 83, 84): “A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicated by appropriate words his intention to be bound in some other capacity.” And “where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser in accordance with the following rules: (1) If the instrument is a note or bill, payable to the order of a third person, * * * he is liable to the payee and to all subsequent parties. * * *” And we think that defendant’s liability as an irregular indorser in blank on the notes in question could not be varied or explained by parol evidence. In an annotation in 37 A. L. R., p. 1223, concerning the question, it is said: 1 ‘ The greater number of jurisdictions hold that under the Negotiable Instruments Act the status of indorser fixed by the act upon one, not otherwise a party, who places his signature upon the instrument in blank before delivery, cannot be varied by parol evidence.” That this is also the law of Illinois is disclosed from decisions in cases arising after the passage of our Negotiable Instruments Law in 1907. Kopf v. Yordy, 200 Ill. App. 409, 415; Muntz v. Schmidt, 213 Ill. App. 641, 643; Kroll v. Hoyt, 214 Ill. App. 428, 429. And that the contract of indorsement could not be varied by parol evidence was the law of this State before said Negotiable Instruments Law was passed is disclosed from the following cases: Johnson v. Glover, 121 Ill. 283, 286; Hately v. Pike, 162 Ill. 241, 247; Bradley v. Brown, 146 Ill. App. 297, 299.

And we do not think there is any force in counsel’s contention that defendant indorsed the notes after delivery to plaintiff. The argument in this connection is, as we understand it, that, although plaintiff did not receive the notes and discount them until after defendant had indorsed them as shown, nevertheless, when the makers of the notes delivered them to defendant, there was then a presumptive delivery to plaintiff, on the theory that defendant was plaintiff’s agent, and delivery to the agent was delivery to the principal. In support of the argument counsel cites the case of Gordon v. Adams, 127 Ill. 223, 226, where it is said: “It is not, however, indispensable to the delivery of a promissory note that it should pass into the personal possession of the payee. If delivery is made to another, for the payee, without condition, his acceptance of it may be presumed, and the delivery of it will be complete.” The cited case is inapplicable to the facts in evidence, which did not disclose that defendant was plaintiff’s agent to receive for plaintiff the notes in question, or similar ones. Furthermore, it appears that plaintiff consented to discount the notes only upon the condition that defendant indorse the same, and when plaintiff received the notes and parted with its money the notes bore defendant’s indorsements.

Nor do we think that there is any merit in counsel’s further contention that defendant is not liable because no notice of nonpayment by the makers of the notes was given to defendant as indorser thereof. It is true that in section 88 of said Negotiable Instruments Law [Cahill’s St. ch. 98, ¶ 110] it is provided: “Except as herein otherwise provided, when a negotiable instrument has been dishonored by non-acceptance or non-payment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged.” But embodied on the face of the two notes in question there is the express waiver of such notice by all parties to the notes, including the indorsers and guarantors. And in section 108 of said. Negotiable Instruments Law [Cahill’s St. ch. 98, ¶ 130] it is provided: “Notice of dishonor may be waived, either before the time of giving notice has arrived, or after the omission to give due notice, and the waiver may be express or implied.” And in section 109 [Cahill’s St. ch. 98; ¶ 131]: “Where the waiver is embodied in the instrument itself, it is binding upon all parties, * *

For the reasons indicated the judgment of the municipal court is affirmed.

Affirmed.

Fitch and Barnes, JJ., concur.