text:
    Citizens State Bank of Manteno, Illinois et al., Appellees, v. Zephire Senesac, Administrator De Bonis Non with the Will Annexed of the Estate of Alexander Senesac, Deceased, Appellant.
    Gen. No. 8,448.

      Opinion filed July 29, 1932.
    Chas. D. Henry, Jr., for appellant.
    Claude M. Granger, for appellees.
   Mr. Justice Jett

delivered the opinion of the court.

This was a trial of right of property in the county court of Kankakee county, in which 2,500 bushels of corn were levied upon by the sheriff by virtue of an execution in his hands in favor of Zephire Senesac, administrator de bonis non with the will annexed, of the estate of Alexander Senesac, deceased, appellant. As disclosed by the record the pleadings consisted of the statutory notice to Ed Hoennicke, sheriff, notifying him that the undersigned claimed the share of Emilian Senesac in all corn in crib and field levied upon by the sheriff, under writ of execution out of the circuit court of Kankakee county on a certain judgment in favor of Zephire Senesac, administrator, against Emilian Senesac, and that it was the intention of the undersigned to prosecute their said claim. Said notice was signed by Citizens State Bank of Manteno, Illinois, First National Bank of Momence, Illinois, and John B. Senesac, and later Fred H. La Rocque was added as party claimant by leave of the court and signed same.

It appears that on March 27, 1930, Emilian Senesac was indebted to his brother John F. Senesac for $1,774.97, due the latter in the settlement of their father’s estate, and for money borrowed to the appellee, Citizens State Bank of Manteno, Illinois, in the sum of $1,757.85, to the appellee, First National Bank of Momence in the sum of $500. It further appears that appellee Fred H. La Rocque, cashier of the Citizens State Bank of Manteno, had been endeavoring for some time in behalf of the other appellees to collect the three debts mentioned. On March 27, 1930, he procured from Emilian Senesac, by way of security for these debts, three notes for the sums mentioned as above and a chattel mortgage on certain live stock, implements and grain. The notes were drawn to the order of Fred H. La Rocque who was also named as mortgagee in the chattel mortgage. Upon receipt of the notes La Rocque indorsed each in blank without recourse and delivered to the Citizens State Bank and to the First National Bank their respective notes; John B. Senesac’s note was left with the Citizens State Bank.

It further appears that on June 30,1930, La Rocque, in behalf of the same three creditors, procured from Emilian Senesac as further collateral security for these debts, another chattel mortgage upon his growing crops of barley, oats and corn. This chattel mortgage was also drawn to Fred H. La Rocque and secured a note for $5,000 to his order which he indorsed in blank without recourse and held with the mortgage.

Thereafter La Rocque continued to act for the three creditors. He collected two per cent of the principal and accrued interest on the first three notes. Still later, on January 26, 1931, the first chattel mortgage was foreclosed by sale, the net proceeds of which were $2,937.03 cash, and notes which at the time of the hearing below had not yet been distributed among the three creditors. Allowing credit, however, on the aggregate indebtedness of the proceeds of the sale, there remained a balance owing to the three creditors of about $1,000 and some interest.

The said trial of the right of property arose out of a levy by the sheriff under execution on the judgment in favor of appellant against Emilian Senesae, upon corn covered by the chattel mortgage of June 30, 1930. On the hearing before the court, without the intervention of a jury, appellees claimed under the crop mortgage and introduced evidence of their claim as above indicated herein. The appellant introduced no evidence but moved to strike the evidence heard on the part of appellees and for a finding in his favor, which was by the court denied. The appellant then submitted propositions of law and facts embodying his contentions that because the note and chattel mortgage of June 30, 1930, were taken in the name of Fred H. La Rocque, to whom individually Emilian Senesae was not indebted, the mortgage was void; that the debts of the other appellees were not in law a consideration of the mortgage. The court found the mortgage to be a valid one and rendered judgment for appellees, and the appellant prosecuted this appeal.

The whole contention of appellant is that the mortgage was void because the note and chattel mortgage of the date of June 30,1930, were taken in the name of La Rocque to whom Emilian Senesae was not indebted. If this chattel mortgage was legal then the contention of the appellant must fail. If it was not legal then his contention must prevail. In answering the suggestions of appellant it is conceded that appellees had the burden of proving their claim. It is quite apparent that no question of construction either of a chattel mortgage or of the Mortgage Act, Cahill’s St. ch. 95, is presented by the record in this canse. It is the contention of appellees that the appellant is not in a position to raise the question as is sought to be raised in his 5th, 6th, 7th, 8th and 11th propositions of law for the reason that no objection was made in the court below which would permit appellant to insist that the note and chattel mortgage of June 30, 1930, were void. We are of the opinion that the contention of appellees is well founded. Whether this be true or not is there any merit in appellant’s contention as raised by the last above mentioned propositions of law? There is nothing in the statute which confines the trial of the right of property to purely legal claims. It is apparent that La Eocque, having taken in his own name the crop mortgage and note and not having transferred them, was the legal owner thereof, but as trustee for the other three appellees, the beneficial owners. The entire technical and beneficial ownership of this note and mortgage was in the four appellees at all times and no authority is cited that they could not join in claiming it. In support of his contention appellant relies upon Lips v. Cermak, 205 Ill. App. 246, which was a case where one claimant owned the entire legal and equitable title and the other had only a contractual claim to a commission for selling it. Moreover in that case the question of misjoinder was raised below. Furthermore no injury was worked to the rights and interests of appellant because of appellees joining as claimants.

In this connection it will further be observed that in support of his contention appellant insists that the chattel mortgage was invalid, first, on the ground that the consideration for a chattel mortgage may not move from any one other than the mortgagee named, and second, that a chattel mortgage may not be given to one person for the benefit of another person, a creditor. In support of these contentions appellant relies principally upon the case of Martin v. Sexton, 112 Ill. App. 199. In that case the contest was between a chattel mortgagee in possession and a mortgage creditor whos > chattel mortgage running to “A,” trustee, was given subsequent to possession acquired by the first mortgagee, and the transaction was found to be tainted with actual fraud. The court said that the second chattel mortgage was invalid because of its form, not disclosing for whom “A” was trustee, and because “A” was an entire stranger to the transaction, had no interest in it and did not even know that a mortgage had been given. In the instant case the chattel mortgage was not given to Fred H. La Bocque, trustee, and he was no stranger, disinterested and unaware of the transaction, but on the contrary he actually did the business, knew all the details and had ar^nterest as representative of the creditors in procuring the security. The case of Martin v. Sexton, supra, is distinguishable as far as the facts are concerned from the instant case.

Appellant also, in support of his contention, relies upon Christoffel v. Lee, 153 Ill. App. 395. In view of the state of facts before us, as arise out of the present record, the case of Christoffel v. Lee, supra, is not decisive of the point in question.

In our opinion the consideration of a chattel mortgage may move from a person other than the mortgagee, a proposition which would appear to be indisputable under elementary principles of contract law. There is no principle of law nor any reason in fact which makes it illegal for a debtor to transfer his property to a third person to be held for the security of his creditor. In Vol. 5, R. C. L. at page 419, it is stated that a chattel mortgage may be given to one person for the benefit of another, for instance, to the cashier of a bank to secure a debt to the bank.

Our attention has been called to the opinion of the District Court of the United States for the Eastern District of Illinois, In re Babb, 41 F. (2d) 253. In this case Pfeifer, mortgagee, in a chattel mortgage from the bankrupt Babb, complained of an order of the referee in bankruptcy holding the mortgage invalid as against the trustee in bankruptcy because given along with certain notes therein mentioned, as collateral security for other notes owed by the bankrupt to a bank for which Pfeifer was trustee and of which he was vice president. A trustee in bankruptcy occupies the position of a creditor armed with an execution, so the trustee claiming the mortgaged property was in effect in the same position as appellant in the instant case. In its decision the federal court pointed out that the Illinois Statutes are silent and the Supreme Court had not passed upon the questions so far as they relate to those involved in the case at bar and held, first, that the consideration wr a chattel mortgage need not move from mortgagee to mortgagor; second, a chattel mortgage may be given to one person for the benefit of another; third, a chattel mortgage is not necessarily void because the indebtedness is not fully or accurately described in the instrument; fourth, an indebtedness upon several notes may be stated in a mortgage as the gross amount, equal to the principal and interest of the notés without reference to the notes. The conclusion of the court was reached after an examination of authorities bearing upon the point in question from a number of States. We are of the opinion that the conclusion reached by the United States District Court is sound. The case of In re Babb answers the contention of the appellant that the mortgage is void because of a misdescription of the debt.

The case relied upon by the appellant, John Deere Plow Co. v. Hershbarger, 260 Ill. App. 227, is clearly distinguishable from the case under consideration. In the John Deere Plow Co. case the chattel mortgage described all of the notes listed as payable to “A” and assigned to “X,” whereas it appeared that the last note listed was payable to “B” and had always been held by “B.” In the instant cause the $5,000 note was correctly described in the chattel mortgage. It certainly cannot be successfully urged that the mortgage before us is invalid because the amount it purported to secure was collateral security against a contingent liability not disclosed by the mortgage; that is, the possible deficiency after foreclosure of appellee’s other mortgage.

In Goodheart v. Johnson, 88 Ill. 58, cited with approval in Southern Surety Co. v. Peoples State Bank of Astoria, 332 Ill. 362, 365, 366, the chattel mortgage was held valid although reciting a $6,200 debt upon a showing made that it was given to secure the mortgagee who had signed the notes for the mortgagor.

In Bodley v. Anderson, 2 Ill. App. 450, a chattel mortgage purporting to secure a $1,100 note was sustained on appeal, although the evidence showed it was given to secure the mortgagee, signer for the mortgagor on another note of lesser amount.

In Melody v. Arcola State Bank, 249 Ill. App. 85, 89, on trial of right of property, a chattel mortgage purporting to secure $1,000 was upheld though the evidence showed that in part it was to secure the mortgagee who had signed a $394 note for the mortgagor.

It should be kept in mind that the evidence on the part of appellees successfully rebuts any imputation of fraud. Appellant does not charge actual fraud but contends that the transaction in question operated as a “constructive fraud” on his right. In view of the authorities it would seem to be immaterial to whom the obligation ran, whether to Fred H. La Rocque or to those whom he represented, so long as there was an obligation of which no attempt is made to deny.

It has been said that the essence of a chattel mortgage is the intention to transfer title to secure the performance of an obligation of the mortgagor. Southern Surety Co. v. Peoples State Bank of Astoria, 332 Ill. 362. The transaction here in question was therefore a chattel mortgage. It was undertaken in good faith, admittedly complying with all statutory formalities of acknowledgment and recording.

We have examined all the objections raised by the appellant and after an examination of the record, and of the various reasons assigned by the appellant, we are of the opinion that the judgment of the county court of Kankakee county should be affirmed, which is accordingly done.

Judgment affirmed.


source: Caselaw Access Project

author: Mr. Justice Jett

license: Public Domain

text:
    Laurence H. Henschen, Appellant, v. Board of School Inspectors of School District No. 86, Will County, Illinois et al., Appellees.
    Gen. No. 8,451.

      Opinion filed July 29, 1932.
    Samuel W. King, for appellant.
    John O. Cowing, for certain appellee.
    Frank J. Wise, for certain other appellee.
   Mr. Justice Jett

delivered the opinion of the court.

This is an appeal from a decree entered by the circuit court of Will county dismissing the bill of Laurence H. Henschen, appellant, in his case against board of school inspectors of School District No. 86, Will county, Illinois, and the members of said board, namely, James L. Longley, Harley J. Hart, C. H. Olin, L. A. Touzalin, Wm. D. Hickey, J. F. Mowat, John G-. Brennan and Margaret W. Skinner, as acting treasurer of said board, and also against Adam Groth & Company, a corporation, Ernest H. Swenson and Dallas C. Bippus, appellees, and entering an order against the said Laurence H. Henschen, appellant, for costs of suit.

In his said bill of complaint the said Laurence H. Henschen, appellant, among other things alleges that he is a resident of Will county, Illinois, within the territorial limits of School District No. 86 in said county and was and is the owner of property within said School District No. 86 on which taxes were levied and collected by the board of school inspectors for the year 1927 and since said time, and which said taxes were paid by the complainant; that the schools in said School District No. 86, at the time of the happening of the matters and things in the bill of complaint alleged,were under the control of the board of school inspectors of School District No. 86, being seven in number; that Margaret W. Skinner, one of the defendants, was acting as treasurer of said board of school inspectors; that said James L. Longley is and was, at the time of the matters and things charged to have taken place in said bill of complaint, a member of said board of school inspectors of said School District No. 86, and was at said time chairman of its building committee, which said committee had charge of school buildings and the erection of new buildings in said district; that at said time the said James L. Longley was a stockholder and an officer of Adam G-roth & Company, a corporation, one of the defendants, and was holding the position of president and was acting as its general manager, which said company was carrying on the business of furnishing, cutting and selling cut stone and other building materials; that in June, 1928, said board of school inspectors advertised for bids for the improving, repairing and building of additions to the Farragut, A. O. Marshall and Woodland school buildings, and thereafter the said board of school inspectors let the contracts for the improving, repairing and building of an addition to the Farr'agut school building to Dallas C. Bippus, as general contractor and one of the defendants, and to Ernest H. Swenson, general contractor, for the improving, repairing and building of additions to A. O. Marshall and Woodland school buildings ; that said Bippus thereafter entered upon the performance of the contract for his work on the Farragut school building and Swenson entered upon the performance of the contracts for his work on the Marshall and Woodland school buildings; that the said Swenson, in accordance with the prices and estimates furnished by said Adam Groth & Company, a corporation, let and awarded the contract amounting to, to wit, $2,400 for the furnishing and supplying of cut stone and building material on the Woodland school building to Adam Groth & Company, a corporation; that said Swenson, in accordance with the prices and estimates so furnished by Adam Groth & Company, let and awarded the contract amounting toj to wit, $3,100 for the furnishing and supplying of cut stone and building materials on the Marshall school building to said Adam Groth & Company, a corporation; that the said Bippus, in accordance with the prices and estimates furnished by said Adam Groth & Company, a corporation, let and awarded the contract amounting to, to wit, $7,000 for the furnishing and supplying of cut stone and other building material to the said Adam Groth & Company; that said Adam Groth & Company, in accordance with contracts and orders placed by the said Swenson and Bippus respectively, entered into the fulfilment of the same and delivered said cut stone and building materials to the said school buildings for the sums of money as above set forth.

It is further alleged that Longley was a member of said board of school inspectors of said District No. 86, and was chairman of its building committee and as such chairman had active charge and management of matters and things pertaining to the handling and operation of the various school buildings of said district and pertaining to the erection of said additions to the said Farragut, Woodland and Marshall school buildings, and in his capacity as such member of the board of school inspectors did, at a meeting of said board on, to wit, the 23rd day of July, 1928, move that the bids for the erection of the addition to said Woodland school building be opened, which motion was carried; that Longley did thereupon vote for the motion to award the general contract for the erection of said addition to the Woodland school building to Swenson, which said motion was carried; that Longley seconded a motion that the attorney for the board draw up a contract for the said addition with said Swenson and that the president and secretary of the board be authorized to execute the same on behalf of the board, which motion was carried; that Longley, on July 30, 1928, at a meeting of said board, made a motion that the general contract for the addition to the Farragut school building be awarded to Dallas C. Bippus and voted for said motion which was carried; that said Longley, in his capacity as a. member of said board on frequent occasions did thereafter at various meetings of said board make motions, for and vote for various payments to be made on all the aforesaid contracts to the said Swenson and Bippus; that the said Longley, at the time aforesaid, was a stockholder and officer in, the said Adam Broth & Company, a corporation, and was and still is actively engaged in the management of the affairs of said Adam Broth & Company as its president.

The bill then charges that it is contrary to the statutes, the common law and public policy of the State for any member of any board of school inspectors to be interested directly or indirectly in any contracts or orders with said board of school inspectors or school district of which he is an officer, and that the action of the said Swenson and Bippus in placing said orders as aforesaid with the said Adam Broth & Company, a corporation, for the furnishing and delivery of stone and building materials to the said school buildings was void and illegal, etc.

The appellant in his said bill prayed that upon a final hearing the appellees, their officers and agents may be restrained by injunction from paying any further amounts of money to said Adam Broth & Company, a corporation, upon any of the alleged orders or contracts which said appellees or any or either of them may have had for the furnishing of any cut stone or building materials to said Woodland, A. O. Marshall and Farragut school buildings; and further prayed that the said Adam G-roth & Company, Swenson and Bippus may be required to account to said board of school inspectors for any and all amounts of money which may have been paid, or may be paid during the pendency of the suit, to said Adam Groth & Company, on any of the alleged orders or contracts for furnishing cut stone or building materials to any and all of the aforesaid school buildings, and may be required by a decree of the court to refund and pay back to said board any and all payments which have been paid or which may be paid during the pendency of the suit to said Adam Groth & Company, on any of the alleged orders and contracts for the furnishing of cut stone or building materials to any and all of the aforesaid school buildings.

To the bill of complaint all of appellees interposed demurrers except Swenson and Bippus. The demurrers were argued and taken under advisement by the court and appellant presented to the court his motion for a default of Swenson and Bippus for a failure to appear and plead to said bill of complaint, and for a decree pro confesso against Swenson and Bippus. The court entered a decree sustaining the demurrers to the bill and denied appellant’s motion for default and decree pro confesso against Swenson and Bippus for want of equity in said bill, and appellant then elected to stand by his bill of complaint and the court dismissed the bill for want of equity as to all of appellees in the cause and further ordered that appellant pay the costs and that execution issue therefor, and this appeal followed.

The demurrers admit the truth of all the things that are well pleaded. It appears that appellee, Adam Groth & Company, is and for a long time past has been engaged in the business of furnishing cut stone and building materials; that James L.' Longley, president of Adam Groth & Company, at the time of the commencement of this shit and for many years prior thereto, was a member of appellee board of school inspectors of District No. 86. On or about June 23,1928, the said .board of school inspectors let contracts for the improving, repairing and building of additions to the Farragut, Marshall and Woodland school buildings belonging to said district to Ernest H. Swenson and Dallas C. Bippus, general contractors. No question is raised by the bill of the appellant as to the validity and legality of all of the proceedings incident to such letting and to the execution of said contracts. Swenson and Bippus proceeded to carry out their respective contracts and in progress thereof purchased cut stone and building materials to be used in said buildings from Adam Groth & Company. In the purchase of said cut stone and building materials it is conceded that there was no fraudulent practice and that the prices paid for said materials to Adam Groth & Company were not excessive and in no manner worked to the detriment or hardship of the board of school inspectors of School District No. 86.

Appellant seeks by reason of the allegations of his bill and argument based thereon to draw the inferences that the actions of Longley in voting payments to Bippus and Swenson made him and his employer, Adam Groth & Company, financially interested in the original contracts. There is nothing in the record to dispute the fact that at the time of the letting of the original contracts to Bippus and Swenson there was no agreement or understanding on the part of said contractors with Adam Groth & Company concerning the furnishing of cut -stone and building materials. The furnishing of prices and estimates and the letting of contracts for the furnishing of cut stone and materials were all done subsequent to the letting of the original contracts and there is nothing in the record in any manner tending to intimate that a subletting was in anywise predicated upon a prior understanding or agreement on the part of the general contractors and Adam G-roth & Company. There is nothing in this record which can be construed as showing that at the time of the letting of the original contracts to Swenson and Bippus that Adam Groth & Company had any interest directly or indirectly in the contracts. With the element of fraud entirely eliminated the sole point at issue as we understand it from appellant’s bill and his argument, is whether the contractors, Swenson and Bippus, by reason by having contracted with the said board of school inspectors were bound to refrain from purchasing materials necessary to the execution thereof from anyone connected with said board of school inspectors.

In view of the allegations of the bill, the question now is, What is the law that arises out of such facts?

As to the contention of the appellant that a contract made in violation of an expressed statutory■ provision is inoperative and void, we quite agree, but the question arises, Do the facts as alleged in the bill of complaint call for an application of this rule?

Fredericks v. Borough of Wanaque, 95 N. J. L. 112, 112 Atl. 309, involved a contract for the furnishing of speed signs and snow plows for the city. The contract was let by the city officials to Fredericks, and Fredericks bought lumber for the use of his contract from a member of the council committee who had let the contract. A dispute arose as to the bill which was objected to by the mayor and suit was brought by Fredericks to collect. In the District Court Fredericks was nonsuited, and the Supreme Court of New Jersey reversed the decision. Upon an appeal to the court of errors and appeals, in sustaining the Supreme Court, the court said:

“There is no evidence in the case that the employment of the plaintiff was undertaken as the result of any understanding or agreement between Biker (the alderman) and plaintiff, or that the materials cost the plaintiff more at Biker’s yard than they could be procured for elsewhere, or that the borough is in any manner dissatisfied with the work, but, on the contrary, the borough has accepted the signs and plows and has them in use. The argument therefore is reduced to the inquiry whether one who obtains a contract from a municipality for public work is impliedly bound as a condition to legal performance, to refrain from purchasing materials for the execution of the work from one who happens to be a member of the governing body of the municipality. ... We are referred to no case which intimates that in the absence of a corrupt understanding or agreement of the contractor with a member of the council voting for the contract, for the purpose of evading the provisions of the Crimes Act, a resolution of the municipality, otherwise legal, is rendered illegal by the subsequent action of the contractor in purchasing his material from a recognized source of supply, the proprietor of which happens to be a member of the governing body which awarded the contract, and that the contract itself thereby becomes nugatory. The contention of the defendant quite obviously is resolvable upon the fallacious argument of conduct post hoc and not propter hoc; for manifestly the test of the legality of the contract must be determined as of the time when the resolution was passed, and not by the free act of the plaintiff in purchasing materials. If it was free of criminal taint at its inception, the subsequent action of the contractor in executing the contract cannot relate back so as to invalidate it, unless such ex post facto action can be connected with a prior corrupt agreement or understanding with a member of the governing body, in pursuance of which the resolution was passed. ’ ’

Applying this well considered case to the facts at issue, it is apparent that there was no fraud or collusion proven or even alleged which would carry the taint of illegality back to the original contract. In fact, counsel concedes that there was no fraud on the part of either Adam Grroth & Company or James L. Longley in the subsequent purchase of the contractors of the materials for use on the building contracts. Counsel for appellant further admits that the prices paid by the contractors to appellees were not excessive.

In vol. 44 Corpus Juris, page 94, it is said: “If an officer at the time a city contract is entered into has a subcontract for the furnishing of materials to the contractor, his interest in the principal contract operates to invalidate it. But if his contract is entered into after the making of the principal contract, the latter is not invalidated, in the absence of any understanding or agreement at the time the principal contract was made that the officer should have the subcontract for the furnishing of the materials.”

The rule last above announced is followed in Security Nat. Bank of Mason City v. Bagley, 202 Iowa 701, 49 A. L. R. 705, and 210 N. W. 947. The case arose over the action of the school board of Mason City, Iowa, authorizing Thrift, Inc., to install their system of banking in the public schools of Mason City, provided that a local bank or banks could be secured by Thrift, Inc., to carry the accounts and furnish the necessary supplies and services. After the letting of the contract to Thrift, Inc., the company entered into a contract with the First National Bank of Mason City, Iowa, to act as a depository for the funds saved by the pupils in the schools. Bagley, the president of the school board, was vice president of the First National Bank and voted for the adoption of the resolution awarding the contract to Thrift, Inc. It was contended that the contract was void by reason of this fact. The court in its opinion says:

“The resolution authorized the installation of the system ‘providing a local bank or banks can be secured by Thrift, Incorporated, to carry the accounts.’ At this time Thrift, Incorporated, had no contract with the First National Bank, and there was nothing in the situation that disqualified Bagley, although vice president of said First National Bank, from voting upon such resolution authorizing the inauguration of the system. The fact that Thrift, Incorporated, made a contract with the First National Bank after such authorization had been granted by the board did not operate retroactively and render invalid and illegal the action of Bagley, as a member of the board of directors, in voting for the resolution. There is no claim or proof of fraud, conspiracy, or connivance at this point. It is the general and well established rule that it is improper and illegal for a member of a municipal council or other similar body to vote upon any question properly before such body in which he is personally interested and where his personal rights will be affected by the vote. (Citing cases.) These, and other similar cases, where the action has been rendered illegal because of the vote of one personally interested, are cases where such personal interest existed at the time of the action and the party was pecuniarily affected by the action in which he participated. The facts of the instant case do not bring it within the above rule. There was no contract at any time between the school board and the bank of which Bagley was an officer. The resolution merely provided that Thrift, Incorporated, was to secure a local bank or banks as the depository. There was nothing in the action that in any way bound Thrift, Incorporated, to make a contract with the First National Bank, or with any other particular bank. . . . We do not think the fact, under all of the circumstances as shown by the record in this particular case, that subsequent to the adoption of this resolution by the school board, a contract was made between Thrift, Incorporated, and the First National Bank, renders the action of the board of directors in adopting the resolution void because Bagley was at the time an officer of the First National Bank. ’ ’

In the instant case at the time the contracts were awarded to Swenson and Bippus for the remodeling of the school buildings, there was no understanding of any kind between the contractors and Adam G-roth & Company, and the contractors were free and at liberty to purchase their materials and cut stone from any dealer they chose, and the fact that subsequently Swenson and Bippus did purchase materials and cut stone from Adam G-roth & Company cannot act retroactively so as to invalidate the original contract of the school board, which at the time it was executed was legal and free from fraud.

O’Neill v. Town of Auburn, 50 L. R. A. (N. S.) 1140, is a case in which the contract for a street improvement was sought to be held void for the reason that the contractors purchased material necessary to said contract in the open market from a corporation in which municipal officers held stock and the Supreme Court of Washington in deciding the cause held that material for street improvements made necessary by a change in the specifications, purchased in the open market by the contractor from a corporation in which municipal officers have stock, does not nullify the improvement contract under a statute providing that no officer shall be interested, directly or indirectly, in any contract with the town.

In Escondido Lumber, Hay & Grain Co. v. Baldwin, 2 Cal. App. 606, 84 Pac. 284, it was held that the mere fact that a solvent contractor for the construction of a schoolhouse, without any previous agreement or arrangement therefor, purchased lumber necessary to the fulfilment of his contract from a corporation in which one of the trustees of the school district was a stockholder, and of which he was a director and joint manager, did not bring the contract within the inhibition of a statute declaring that no school trustee must be interested in any contract made by the board of which he is a member, and that any contract made in violation of such provision is void, so as to prevent such corporation from recovering on orders drawn for the amount due under the contract, and assigned through an agent to the corporation, in payment for the lumber. In its decision the court said: “The mere fact that the contractor, without previous arrangement or agreement, saw fit to buy of a corporation for which one of the trustees was an agent, certain materials used in the construction of the house would not render the contract void, voidable, or ordinarily subject it to merited criticism. The only possible conflicting interest which could in any sense be said to exist, whereby the trustees’ act could be influenced, would be in connection with the acceptance of the building when completed. But it is not pretended or claimed that the building was not properly constructed, from which the formal acceptance would be imperative. ’ ’

In Finn v. State ex rel. McDaniel, 66 Ind. App. 432, 114 N. E. 9, the court construed a statute that is very similar to the statute of the State of Illinois, which reads as follows: “No member of the common council ... of any city or incorporated town of this State, shall, either directly or indirectly, be a party to or in any manner interested in any contract or agreement, either with such city or incorporated town, or with any officer, board, clerk, deputy or employee of such city or incorporated town, for any matter, cause or thing, by which any liability or indebtedness is in any way or manner created or passed upon, authorized or approved by such council . . . or by any member thereof. . . . Any contract in contravention of the foregoing provisions shall be absolutely void. ’ ’

In construing the above statute the court said: “Did the legislature, in enacting such statute, intend it to include contracts between the general contractor and materialmen? . . . By the. language used the legislature has eliminated city officials not parties to, connected with, or interested in the original contract made with the city by other parties, but who simply furnished materials in the regular way to such general contractor, and no rule of construction would permit its being read into the statute.”

It is also argued by the appellant that the court committed error in denying his motion for a default and decree pro confesso against' appellees Swenson and Bippus, contractors. It will be remembered that the decision of the court in sustaining the demurrers was a final decree effective against all of the defendants and there was nothing further to be decided by the court. As to the said Swenson and Bippus it does not appear from the record that they had any special or different defense or rights personal to them and they have no relation other than those argued on behalf of the other appellees.

In Griffiths v. Griffiths, 198 Ill. 632, it appears that but two of the defendants appeared in the court below and demurred to the bill filed. The demurrer was general and upon a hearing was sustained. It was urged upon the court that it was error to dismiss the bill as to all of the defendants, and the court, speaking at page 637, among other things said: ‘ ‘ The demurrer by the two defendants made an issue upon the bill, which, being sustained, left nothing to be decided by the court. It does not appear that complainant asked that it be retained as to the defendants not appearing, for the purpose of determining any rights personal to them, and it is perfectly clear that the complainant could have no equities against them distinct from her rights against those who did not appear. The court having determined that upon the face of the bill the complainant was not entitled to the relief prayed, might of its own motion have dismissed it.”

In vol. 21 of Corpus Juris, page 452, the following rule is announced: “Where a demurrer, putting in issue the entire equity of the bill, is filed by a part of the defendants, if it is sustained the bill should be dismissed as to all.”

We are of the opinion that the court was within the' rule in denying the motion of appellant for default and for a decree pro confesso against Swenson and Bippus, contractors. In reaching a conclusion in this case we are not unmindful of the statutory provisions in our State touching upon the duties and responsibilities of public officers as found in our Schools Act, Cities and Villages Act and Officers Act, which are clear in prohibiting public officers or any character from being interested, either directly or indirectly, in public contracts, but the instant case does not turn upon that situation. It is quite plain from the pleadings and argument of appellant that neither Adam Groth & Company nor James L. Longley, had any interest, directly or indirectly, of any kind whatsoever in the contracts let to Swenson and Bippus, either at the time of their letting or subsequently. The mere fact that in due course of business, after the contracts had been let, Swenson and Bippus saw fit to become customers of Adam Groth & Company, raises no basis for fraud and in fact no fraud is claimed and this incident alone, as is clear from the cases above cited, would not be sufficient to act retroactively on the validity of the original contract. If the contract at its inception was bona fide and legal and no understanding was had or entered into between the contractors and appellees, whereby the contractors were bound to purchase their material and cut stone from appellees, then no act of the contractors could render the contract entered into with the appellees either void or voidable, and no provision of the statutes above referred to or any other statute that we have been able to find can be construed as prohibiting or in any manner limiting the rights of a contractor, who has in good faith obtained a public contract, from thereafter purchasing his material or supplies or doing business with a person, firm or corporation, any member of which may be a public officer and connected with the public body through which he originally obtained his contract and in the absence of fraud and connivance, such as in the present case, there is no légal basis upon which the acts of the appellee corporation in selling to the contractors, Swenson and Bippus, can be criticized in the slightest degree.

Appellant has cited a number of cases of the Appellate and Supreme Courts of our State in support of his contention. We have examined them and we fail to find that in any of them a state of facts is presentéd as is found in this cause presented to us for our consideration. After diligent search we have been unable to find any case reported in our State based upon a similar state of facts as presented by the record before us. We have, after due consideration, in view of the rule as announced by the courts of our sister States, reached the conclusion that the circuit court did not commit error in sustaining the demurrers to the bill of complaint of appellant and dismissing the bill and entering an order against him for costs. The order and decree of the circuit court of Will county will therefore be affirmed.

Order and decree affirmed.


author: Mr. Presiding Justice Niehaus

text:
    Joseph D. Runyan, Appellant, v. F. S. Moon, Appellee.
    Gen. No. 8,577.

      Opinion filed May 11, 1932.
    Scofield, Bell & Berry, for appellant.
    Curran & Curran, for appellee.
   Mr. Presiding Justice Niehaus

delivered the opinion of the court.

In this case a suit in assumpsit was commenced in the circuit court of McDonough county by Joseph D. Runyan, the appellant, against the appellee F. S. Moon and Sadie Moon, as defendants. The suit was brought to recover as assignee of a promissory note made for the sum of $2,018.85 by the appellee F. S. Moon and Sadie Moon, and the appellant, Joseph D. Runyan and others as comakers. The declaration filed in the cause consists of the common counts, and the appellant filed with the declaration an affidavit of his claim which he states to be as follows:

“That the demand of the plaintiff in the above entitled cause is for money due to the plaintiff upon a certain promissory note payable to the order of George A. Tucker, and by the said George A. Tucker assigned in writing to the plaintiff; and that there is due from the defendants, F. S. Moon and Sadie Moon, after allowing them all just credits, deductions and set-offs, the sum of $1,920.00. ’ ’

The defendants filed an affidavit of merits in which they state their defense to be:

First, that the note or instrument sued on in the above entitled cause is fully and wholly paid.

Second, that the plaintiff, Joseph D. Bunyan, did •not, at the time he brought suit herein, have the legal title to the note or instrument on which this suit is based.

Third, that if the defendants, or either of them, did make promises as alleged in the declaration herein, the statute of limitations has run against said promises.

Fourth, that the note sued on has, by payment of one of the comakers .thereof, become extinguished.

In connection with the affidavit of merits, the appellee filed to the general issue and three special pleas. The court sustained a demurrer to the special pleas and the case proceeded to trial upon the general issue. The plaintiff thereafter dismissed the case as to the defendant, Sadie Moon. A jury was waived and the trial was by the court. The court found the issues for the defendant, and entered a judgment in bar of the plaintiff’s right to recover. This appeal is prosecuted from the judgment.

Various errors are assigned and argued by the appellant for reversal of the judgment. It is contended that the affidavit of merits in the case is legally insufficient; and that therefore the evidence for the appellee should have been disregarded; that the statements in the affidavits are mere conclusions. It may be said in reference to this contention, that a defendant in an affidavit of merits is not required to state the evidence upon which he relies as a defense, but only ultimate facts which give notice of the nature of his defense. Firestone Tire & Rubber Co. v. Ginsburg, 285 Ill. 132; Parent Mfg. Co. v. Oil Products Appliance Co., 246 Ill. App. 222. The affidavit in question stales ultimate facts relied on by the appellee as a defense which under the authorities cited is sufficient.

It is also contended by the appellant that the court erred in admitting in evidence special matters relied on as a defense without notice of such special matters of defense having been first filed in connection with the plea of the general issue. However:

“In an action of assumpsit, the general rule is, that a defendant may give in evidence, under the general issue, any matter which shows he was not indebted to the plaintiff when the action was brought. And this is true, whether the defense be that defendant was never indebted to plaintiff, or that the liability has been extinguished after it was incurred.” Wilson v. King, 83 Ill. 232; Harrison v. Thackaberry, 248 Ill. 512; American Central Ins. Co. v. Birds Building & Loan Ass’n, 81 Ill. App. 258; Price v. Burns, 101 Ill. App. 418.

As to the. right of recovery, it is argued by the appellant that the appellee, F. S. Moon, was the principal debtor on the note sued on in this case; and that appellant signed the same as surety; and that as surety, he has the legal right to acquire the title to the note by the assignment of the payee and recover from the principal maker the amount of the note. Whether the appellant signed the note as surety for the appellee or not is a controverted matter of fact in the case. The evidence tends to show that the original note, of which the note in question was a renewal, was given as part consideration for the purchase of a stock of goods and merchandise, and which the appellee Moon acquired by purchase from George A. Tucker, the payee in the note, on the 3rd day of December, 1913; and that in this transaction the appellant acted as agent for the appellee. It also tends to show that thereafter on the following 1st day of January, 1914, the appellant became a partner of the appellee in the business referred to which the appellee had acquired from George A. Tucker. The evidence is clearly to the effect that the appellant signed the note given at the time Moon purchased the mercantile business of George A. Tucker, as surety; and the fact that the appellant afterwards acquired an interest in the business as partner of the appellee would not change the nature of his obligation as surety on the note to that of principal maker; nor would the fact that afterwards the note was renewed while he was a partner of the appellee. This feature of the case, however, is not of controlling importance.

It is contended by the appellant that having executed the note as surety, he had a legal right to acquire the title of the payee by assignment, and enforce the same by suit against the principal maker of the note. What actually occurred in reference to the assignment of the note which the appellant claims to have been made to him is shown by the evidence to be that the appellant paid the note; that he paid a part of the original note which was for the sum of $2,267.37 to reduce it to $2,018.85; and that thereafter, by partial payments on the note in question, made at the bank which held the note for the payee for collection, finally paid up the entire amount due and interest without manifesting or signifying any intention of acquiring the title of the payee for subrogation purposes or for any other purposes; and he did not ask for any assignment of the note to him until three or four years had elapsed after the note had been apparently paid; then he procured an assignment by the payee to him.

The reasonable inference to be drawn from the evidence and the appellant’s own testimony is that he had no other thought concerning the note than to pay it off and extinguish the indebtedness for which it had been given; and the indebtedness was thereby extinguished as a matter of fact. The law is well settled that the payment in full of a note made by one joint maker extinguishes the debt represented by a note and is a discharge of liability on the part of all the comakers. Gillett v. Sweat, 6 Ill. (1 Gil.) 475; Snell v. Davis, 149 Ill. App. 391; Curley v. Ford, 168 Ill. App. 525, 529.

If the indebtedness represented by the note was discharged and extinguished at the time the appellant paid the note, it could not thereafter be revived legally by an assignment three or four years thereafter. It is true that the appellant, being a surety on the note, by paying the same, could have acquired a cause of action for reimbursement against the principal maker of the note, but this action would be one of implied assumpsit and would have been barred by limitation in five years after the action had accrued. Junker v. Rush, 136 Ill. 179; Walker v. Chicago, M. & N. R. Co., 277 Ill. 451.

Under the facts shown by the evidence, and the law as set forth in the authorities cited, we conclude that the appellant had no right to recovery on the note in question; and the trial court therefore properly entered a judgment in bar; and the judgment is affirmed.

Affirmed.


author: Mr. Presiding Justice Eldredge

text:
    Oscar Nelson, Auditor of Public Accounts of Illinois, v. John B. Colegrove & Company State Bank. Anna McManus, Legal Custodian of Ida McManus and John McManus, Appellee, John E. Jackson, Appellee, v. Robert G. Earley, Receiver of John B. Colegrove & Company State Bank, Appellant.
    Gen. No. 8,616.

      Opinion filed August 18, 1932.
    Oscar J. Putting, for appellant.
    Frank K. Lemon, U. S. List. Attorney, H. R. Pool, Leal W. Reese and David W. Johnston, for appellee.
   Mr. Presiding Justice Eldredge

delivered the opinion of the court.

The John B. Oolegrove- & Co. State Bank of Taylor-ville, Illinois, became insolvent in November, 1929, and Robert G. Earley was appointed receiver thereof. On February 13, 1931, leave was granted to F. A. Barry, acting regional attorney of the United States Veterans ’ Bureau, and duly authorized attorney of George E. I jams, director of the United States Veterans’ Bureau, as an interested party, to file intervening petitions in the liquidation suit for the purpose of having two certain claims filed therein declared to be preferred and to take precedence over those of general creditors of the insolvent bank. The receiver resisted the intervening petitions by filing answers respectively thereto denying that the claims were entitled to preferences. Upon a hearing the court decreed that each of said claims should be classed as preferred. An appeal from this decree is prosecuted by the receiver. By stipulation of parties, both of the claims were heard at the same time and the same evidence so far as applicable was applied to each claim and the certificate of evidence filed herein embraces both claims.

The facts set out in the intervening petition in regard to the first claim are substantially as follows: that James L. McManus is a permanently and totally disabled veteran of the World War; that at the time said veteran became thus disabled he had two minor children, Ida May and John McManus, who are still minors; that Mrs. Anna McManus, mother of said minors, was formally recognized and confirmed as their legal guardian by said veterans’ bureau on or about February 2, 1929, by appropriate proceedings under the regulations of said bureau; that said custodian has received from the United States Veterans’ Bureau in accordance with the terms of the World War Veterans’ Act of 1924, as amended, various sums of money for the use and benefit of her said wards as compensation accruing* to them as the minor children of the above named disabled veteran; that said Anna McManus, as legal custodian of said minors, deposited said funds as they accrued in the John B. Colegrove & Co. State Bank of Taylorville, Illinois; that from the last balance shown on the books of said bank it appears that said Anna McManus, as legal custodian of said minors, had on deposit in said institution, at the time of its becoming insolvent, $870, in an interest-bearing certificate, and an open checking account of $64.42, aggregating a total of $934.42 for- which she has duly filed a claim with the receiver of said bank; that said funds were received by said custodian of said minors as the agent of the United States government and never have reached the beneficiaries, the said minors, and while in custody of said custodian have never ceased to be funds of the United States government, and that they are, therefore, entitled to priority of payment according to section 3466 of the Revised Statutes of the United States, etc.

The material facts set out in the intervening* petition in regard to the second claim are as follows: that Noah B. Jackson was a soldier in the United States army during the World War; that while in the service he was granted a policy of war risk insurance by the United States government in the sum of $6,000, in which he made his brother, Charles Jackson, minor, beneficiary as to one-half of said amount; said Noah B. Jackson died while serving in the United States army on May 21, 1921, and John E. Jackson was, on February 9,1927, appointed guardian of the estate of said Charles Jackson, minor, by the county court and has never been discharged from said guardianship; that said guardian has received from the United States Veterans’ Bureau in accordance with the terms of the World War Veterans’ Act of 1924, as amended, various sums of money for the use and benefit of his said ward, as insurance accruing to him as beneficiary under said insurance policy of Noah B. Jackson, deceased; that said guardian deposited said funds, as they accrued, in the John B. Colegrove & Co. State Bank of Taylorville, Illinois and had on deposit in said institution at the time of its becoming insolvent $1,060.90 in an interest-bearing certificate, on which $13.08 interest had accrued, and also an open checking account of $65.15, aggregating a total of $1,139.13 for which he has duly filed a claim with the receiver of said bank; that said funds were received by the said John E. Jackson in his dual capacity of guardian under the laws of the State of Illinois, and as the agent of the United States government under federal legislation, and that said funds never have reached the beneficiary, the said minor, and while in custody of said guardian have never ceased to be funds of the United States government and that said funds are therefore entitled to priority of payment within the purview of section 3466 of the Revised Statutes of the United States.

Two material legal questions are presented by this appeal and they apply equally to each claim and are controlled as to each claim by the same principles of law: (1) Are said claims in fact preferred and entitled to preferences over the claims of the general creditors of the bank? (2) Is the defense that the bank had no notice of the character of the respective deposits sustained by the evidence and the law?

In June, 1924, there was enacted by the congress of the United States what is known as the “World War Veterans’ Act, 1924,” and all references hereinafter made to this act are to the same as codified in the United States Code Annotated, 1928. The general purpose of the act is declared by sec. 422, part 1, eh. 10, title 38, which is as follows: “This chapter is intended to provide a system for the relief of persons who were disabled, and for the dependents of those who died as a result of disability suffered in the military service of the United States between April 6, 1917, and July 2, 1921.” Sec. 425 provides for the establishment of an independent bureau under the president to be known as the United States Veterans’ Bureau, the director of which shall be appointed by the president. This section further provides as follows: There shall be included on the technical and administrative staff of the director such staff officers, experts, inspectors, and assistants as the director shall prescribe; and there shall be in the United States Veterans’ Bureau such sections and subdivisions thereof as the director shall prescribe.” Under sec. 426, the director, subject to the general direction of the president, shall administer, execute, and enforce the provisions of the law, and for that purpose shall have full power and authority to make rules and regulations, not inconsistent with the provisions thereof, which are necessary or appropriate to carry out its purposes, and shall decide all questions arising under the act, and all decisions of questions of fact affecting any claimant to the benefits of Parts II, III or IV shall be conclusive except as otherwise provided therein. All officers and employees of the bureau shall perform such duties as may be assigned them .by the director and all official acts performed by such officers or employees specially designated therefor by the director shall have the same force and effect as though performed by the director in person. All regulations directed or authorized to be made, unless the context otherwise requires, shall be made by the director and he shall adopt reasonable and proper rules to govern the procedure of the divisions. Under the above noted provisions of the act the entire administration thereof is delegated to the director of the veterans’ bureau and all rules and regulations promulgated by him have the same force as law. Tomlinson v. United States, 18 F. (2d) 795; Sawyer v. United States, 10 F. (2d) 416.

Sec. 430 provides that the director shall establish a central office in the District of Columbia, and such regional offices and suboffices, not exceeding 100 in number, within the territory of the United States and its outlying possessions as may be deemed necessary by him and such regional offices and suboffices may, subject to final action of the director in case of an appeal, and under such rules and regulations as may be prescribed by the director, exercise such powers for hearing complaints, etc., and all other matters delegated to them, or some of them, by the director, as could be performed lawfully by the central office. It is apparent that the war veterans’ bureau as provided for by the act is an agency of the government established for the purpose of carrying out the provisions of the act and all acts done by it are those of the federal government and all moneys paid out by it for pensions, insurance or otherwise as provided by the act are moneys of the federal government.

It is further provided in the act: “Sec. 450. Payments to minors, mental incompetents, or persons under legal disability. Where any payment under this chapter is to be made to a minor, other than a person in the military or naval forces of the United States, or to a person mentally incompetent, or under other legal disability adjudged by a court of competent jurisdiction, such payment may be made to the person who is constituted guardian, curator, or conservator by the laws of the State or residence of claimant, or is otherwise legally vested with responsibility or care of the claimant or his estate: Provided, That prior to receipt of notice by the bureau that any such person is under such other legal disability adjudged by some court of competent jurisdiction, payment may be made to such person direct: Provided, further, That for the purpose of payments of benefits under Part II of this chapter, where no guardian, curator, or conservator of the person under a legal disability has been appointed under the laws of the State or residence of the claimant, the director shall determine the person who is otherwise legally vested with responsibility or care of the claimant or his estate; And provided further, That the director, in his discretion, may suspend such payments to any such guardian, curator, conservator, or other person who shall neglect or refuse, after reasonable notice, to render an account to the director from time to time showing the application of such payments for the benéfit of such minor or incompetent beneficiary. ’ ’

It will be noted that under the above section payment “may” be made to the person who is- constituted guardian, etc., by the laws of the State or residence of the claimant, under certain conditions named in the proviso. It will also be noted that the director in his discretion may suspend such payments to any guardian, conservator or other person who shall neglect or refuse to render an account to the director from time to time showing the application of such payments for the benefit of such minor or incompetent beneficiary. The director is not required to make such payments to the lawfully appointed guardian, curator, or conservator but may do so at his discretion and if he does so and such guardian, curator, or conservator, “or other person” shall neglect or refuse to render an account to the director as provided he may suspend such payments. In other words, the veterans’ bureau through the director has complete control over all payments of the moneys of the United States within the purview of the act. That such moneys are at all times considered as moneys of the United States until actually expended for the benefit of those entitled thereto is further emphasized by the proviso in sec. 451 which is as follows: “That in cases where the estate of the decedent would escheat under the laws' of the place of his residence, such instalments shall not be paid to the estate of the decedent but shall escheat to the United States and shall be credited to the appropriation from which the original award was made. ’ ’

Payment of moneys to a guardian or conservator under this act is not made to the guardian or conservator in his representative capacity as such but as a representative of the federal government to whom he is required to account for his acts. The fundamental reasons for this rule are stated in the case of the United States v. Hall, 98 U. S. 343: “For the defendant, it is insisted that when the payment is made to the guardian, the money paid ceases to be within the constitutional control of the United States, and that the Act of Congress, which enacts that the guardian who embezzles the money or fraudulently converts the same to his own use is guilty of a misdemeanor, is unconstitutional and void. But the court is unhesitatingly of a different opinion, for several reasons: (1) Because the United States, as the donors of the pensions, may, through the legislative department of the government, annex such conditions to the donation as they see fit, to insure its transmission unimpaired to the beneficiary. (2) Because the guardian, no more than the agent or attorney of the pensioner, is obliged by the laws of Congress to receive the fund; but if he does, he must accept it subject to the annexed conditions. (3) Because the word ‘guardian’ as used in the Acts of Congress, is merely the designation of the person to whom the money granted may be paid for the use and benefit of the pensioners. (4) Because the fund proceeds from the United States, and inasmuch as the donation is a voluntary gift, the Congress may pass laws for its protection, certainly until it passes into the hands of the beneficiary, which is all that is necessary to decide in this case. . . . Power to protect the fund from misappropriation, fraud and unauthorized conversion to the use of another, and to secure its safe and unimpaired transmission to the beneficiary, has been claimed and exercised through the whole period since Congress, under the Constitution, commenced to grant such bounties.” The Supreme Court of Iowa in Manning v. Spry, 121 Iowa 191, very tersely expresses this principle as follows: “Indeed, as we understand it, the government may, and frequently does, withhold pensions from one under guardianship. If a guardian does receive it, he is amenable to the department for its care and disposition. This being true, it has not reached the beneficiary until actually paid to him or expended for his benefit. While in the guardian’s hands, he is a mere trustee or depositary for the general government.”

Sec. 454 is as follows: “The compensation, insurance, and maintenance and support allowance payable under Parts II, III, and IY, respectively, shall not be assignable; shall not be subject to the claims of creditors of any person to whom an award is made under Parts II, III, or IY; and shall be exempt from all taxation. Such compensation, insurance, and maintenance and support allowance shall be subject to any claims which the United States may have, under Parts II, III, IY, and Y, against the person on whose account the compensation, insurance, or maintenance and support allowance is payable.” At the time the bank closed its doors on account of its insolvency the moneys deposited therein by the respective claimants had not been expended for the benefit of the beneficiaries. They were still moneys of the United States. They were not assignable nor were they subject to the claims of any of the creditors of the beneficiaries and were exempt from all taxation, nor could any of these funds be appropriated by the receiver of the bank for the payment of any indebtedness of the bank to its creditors. It was held in the case of State of Nebraska v. First State Bank of Pawnee City, 121 Neb. 515, 237 N. W. 623, that where war risk insurance is paid by the United States to the guardian of an incompetent, the money belongs. to the United States, and is subject to its control until it reaches the beneficiary designated according to law. In such a case the guardian is the agent for the government and his authority over the fund is limited and controlled by federal statutes alone. In the above case the court also held: “The United States, for convenience, paid the money impressed with a trust provision to the guardian. Such guardian could not be required to accept the money, but, if he accepted it, he took it subject to all the provisions imposed by statute.” In the case of Tama County v. Kepler, 187 Iowa 34, it is said: “It is the settled law of the United States and of this State that the guardian in such case ‘is nothing more than an agent for the government, and that pension money in his hands is still under its control and management. ’ ’ ’ The rule is stated in 21 R. C. L. 247, sec. 13: “Throughout the whole period since the constitution was adopted it has been the policy of Congress to enact such regulations as will secure to the beneficiaries of the pensions granted the exclusive use and benefit of the money appropriated and paid for that purpose. With that view, sales, pledges, mortgages, assignments and every other kind of conveyance have been prohibited. . . . This power of Congress to enact such protective measures cannot well be questioned, for if it may grant pensions it is difficult to see why it may not pass laws to protect the fund appropriated for such a beneficiary of the government, certainly until it reaches his hands. And power to protect the fund from misappropriation, fraud and unauthorized conversion to the use of another, and to secure its safe and unimpaired transmission to the beneficiary, has been claimed and exercised through the whole period since Congress, under the constitution, commenced to grant pensions.” To the same effect are State v. Security Bank of Creighton, 121 Neb. 521, 237 N. W. 620; In re Fisher’s Estate, 302 Pa. 516, 153 Atl. 736; Butler v. Cantley (Mo. App.), 47 S. W. (2d) 258.

In 1924, congress also passed an act entitled “World War Veterans’ Adjusted Compensation Act” which provides for the making of loans on adjusted service certificates of veterans. By this act an application for such certificate is filed with the secretary of war or with the secretary of navy, as the case may be, and is transmitted by him to the United States Veterans’ Bureau which is granted authority to carry out the provisions of the act. Sec. 618 thereof provides: “No sum payable- under this chapter to a veteran or his dependents, or to his estate, or to any beneficiary named under Part V of this chapter, no adjusted service certificate, and no proceeds of any loan made on such certificate, shall be subject to attachment, levy, or seizure under any legal or equitable process, or to National or State taxation.” In construing the effect of this section of that act the Court of Appeals of Ohio in the case of Ramisch v. Fulton (Ohio App.), 180 N. E. 735, held that the taking possession of the proceeds of the loan advanced to Ramisch on his adjusted service certificate by the receiver of an insolvent bank in which such proceeds had been deposited was a seizure under a legal or equitable process and void, and that Ramisch was entitled to preferential payment. In the course of this opinion the court said: “The creation of preferences, generally speaking, should therefore be discouraged except in cases where the right thereto is clearly established, ’ ’ and held in effect that the right to a preference in that particular case had been established. In the case at bar the moneys in question when the bank ceased to do business were the moneys of the United States, and the director of the United States Veterans’ Bureau, as the agent of the government, had the right and it was his duty to retake said moneys and apply them for the purposes for which they were appropriated.

It is claimed by appellant that the bank had no notice of the character of the funds deposited by the claimants! The evidence fully discloses that they had such notice. The payments were made to the claimants respectively by checks issued by the treasurer of the United States. These checks were deposited by the respective claimants in the bank for which credit was given by the bank and show upon their face for what purpose they were drawn. The form of these checks, as an illustration, is as follows:

B-l

United States Denver, Colo. 216,354

Veterans 1

Bureau Treasurer of the United States

15-51

July 31, 1929

(Thesaur.) Pay in Dollars Fourteen 25-100*** $14.25

(Amer. )

(Septant.) To the Order of Mrs. Anna McManus

(Sigil. ) LGrL CUSt

DC-1201429

Object for which Ida May McManus (No-Pro)

(70-376)

drawn 302 E. Franklin St.

Compensation Taylorville, Ill.

C. E. Evans

Special Disbursing Agent

By C. E. Evans

11-463

On the back of which appears the following:

B-l

Form Approved by Comptroller of the Treasury, January 27, 1931.

This check must be indorsed in ink or indelible pencil on the line below by the person in whose favor it is drawn, and the name must be spelled exactly the same as it is on the face of the check.

If endorsement is made by mark (X) it must be witnessed by two persons who can write, giving their place of residence in full.

Mrs. Anna McManus

(Sign on this line)

Oust of Ida May McManus

Pay To The Order Of

Any Bank Or Trust Co.

All Previous Endorsements Guaranteed

Aug 5 1929

John B. Colegrove & Co.

** “State Bank****

Taylorville, Illinois

Received Payment From

The Treasurer of the United States

Aug - 6 1929

Federal Reserve Bank

2-30 of Chicago 2-30

The form of receipt issued by the Bank is as follows:

Capital $200,000.00

Surplus $ 50,000.00

John B. Colegrove & Co. State Bank No. 15830 J B C & Co. Taylorville, Ill. Mar 11 1929 $870.00

This Certifies That Anna McManus Oust of Ida & John McManus Has Deposited In This Bank The Sum of $870 and 00 cts Dollars Payable To The Order of Same x---In Current Funds -12- Months After Date With Interest At The Rate of -3- Per Cent Per Annum. No Interest After Maturity.

Not Subject to Check.

Leon Traylor

A Cashier

These checks and receipts show conclusively that the bank had full knowledge of the character of the deposits. In the case of Ramisch v. Fulton, supra, the court also held: “In the instant case the bank must be held to have known that the check deposited by Ramisch represented the proceeds of a loan made to him by the government, and that when collected the amount thereof was in fact the proceeds of the loan. The bank and every one connected or dealing therewith was also bound to know the law and to know that the proceeds of any such loan were exempt from seizure under legal or equitable process.” In the case of Clarke v. Public National Bank & Trust Co., 259 N. Y. 285, 181 N. E. 574, the court, in commenting upon similar checks, said: “We may assume that the checks on their face gave notice to the bank that they were received by Louis Rosenhaus in a fiduciary capacity for an incompetent veteran.” So in this case the checks and the receipts given for the various deposits made by the claimants in their respective capacities charged the bank with the notice of the character of such deposits and the law in regard thereto.

The priority of the claims in question involved on this appeal has been clearly shown and the respective decrees of the circuit court are affirmed.

Affirmed.


text:
    George H. Jeffries et al., Plaintiffs in Error, v. John M. White et al., Defendants in Error.
    Gen. No. 8,624.

      Opinion filed August 20, 1932.
    A. C. & Ben F. Anderson, for plaintiffs in error; Herbert S. Anderson, of counsel.
    Bryan H. Tivnen, for defendants in error; Thomas R. Figenbaum and Carus 8. Ioenogle, of counsel.
   Mr. Presiding Justice Eldredge

delivered the opinion of the court.

Plaintiffs in error filed a bill in equity in the circuit court of Coles county against defendants in error to which, after the same was amended, the chancellor in the court below sustained a demurrer thereto, and the plaintiffs in error refusing to further amend their bill, the same was dismissed.

No error is assigned to the action of the court in sustaining the demurrer to the amended bill. , The assignments.of error are as follows: 1st. The court committed reversible error in holding that the assignees could not sue in their own names. 2nd. The court committed revérsible error in holding that the beneficiaries of the trust were necessary parties to the bill of complaint. 3rd. The court committed reversible error in dismissing the bill of complaint. The order of the court is as follows: “This day come the parties to this cause by their attorneys respectively, and after due deliberation thereof by the court, the demurrer to said bill of complaint heretofore filed, is sustained and complainants refused to amend the said bill of complaint and said bill of complaint is dismissed at complainants’ costs, whereupon said complainants except and pray an appeal to the Appellate Court, etc.”

The demurrer to the amended bill was general and special. There are 32 reasons assigned in the special demurrer why it is insufficient but it will be necessary to consider but two of them. The only authority alleged in the bill of the right of plaintiffs in error to maintain the same is the allegation, “That.they are the equitable assignees, holding in trust certain assets of the First National Bank of Charleston, Illinois, an Incorporation, and are the equitable owners of the judgment hereinbefore set forth.” The judgment referred to is alleged in the bill to have been entered in an action at law against defendants in error, John M. White and Leila White, in favor of the First National Bank of Charleston, Illinois, on July 21, 1930, in the sum of $16,062.36 and costs.

In order to maintain a creditor’s bill the complainants therein must show a clear right to the relief sought. The allegation in this bill that the plaintiffs in error are the equitable assignees holding in trust certain assets of the First National Bank of Charleston and are the equitable owners of the judgment involved are pure conclusions of law. The allegation that they hold in trust certain assets of said bank would give them no right to file this bill, and the further allegation that they are the equitable owners of the judgment is a general allegation of their own conclusions of law. No facts are averred of any kind by which the court can determine what interests they may have in the judgment, if any, which would entitle them "to file their creditor’s bill, nor on which any issues of fact can be joined.

The bill alleges among other things that John M. White had a policy of insurance on his life in the New York Life Insurance Company in the sum of $10,000, payable to his executors, administrators and assigns, and that said White delivered said policy to the First National Bank of Charleston, Illinois, and pledged the same for the payment of the debt sued on but failed to make any written assignment of said policy to the bank, that said policy constitutes a valuable asset of said White and that the New York Life Insurance Company should be required to pay the amount due on said policy to a receiver to be hereafter appointed to collect. Under the allegations in the bill the bank still holds this policy as security for the payment of the debt. The bank is not made a party to the bill and the court would have no power to order this policy turned over to a receiver nor to anyone else.

The amended bill is clearly defective in failing to allege facts showing that plaintiffs in error had a right to maintain the same and also for want of proper parties and the court did not err in sustaining a demurrer thereto. Plaintiffs in error having refused to further amend the bill, the court had the right to dismiss it and the judgment of the circuit court is affirmed.

Affirmed.


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    Wesley Tallent et al., Complainants, Defendants in in Error, v. John Tallent et al., Defendants, Defendants in Error. Farmers & Merchants State Bank of Bushnell, Plaintiff in Error.
    Gen. No. 8,628.

      Opinion filed August 20, 1932.
    Downing & Helfrioh, for plaintiff in error.
    G. E. Chiperfield, B. M. Chiperfield, Robert B. Chiperfield, R. E. Lybarger and Joseph R. Martin, for defendants in error.
   Mr. Presiding Justice Eldredge

delivered the opinion of the court.

By this writ of error it is sought to reverse a decree entered by the chancellor in the court below denying to the Farmers & Merchants State Bank of Bushnell, Illinois, leave to file an intervening petition in a suit brought by the defendants in error for the partition of certain premises situated in Fulton county, Illinois.

On September 15,1888, the following instrument was executed:

“This indenture made this 15th day of September, A. D. 1888, by and between Wesley Osborn and Boxy Osborn, his wife, of the first part, and Harriet E. Tallent and J. T. Tallent, her husband, of the second part, all of said parties being of Fulton County, Illinois, witnesseth; that the parties of the first part in consideration of the agreements and covenants of the parties of the second part, hereinafter set forth, has remised, released, sold, conveyed and quit-claimed, and by these presents does remise, release, sell, convey and quitclaim unto the said parties of the second part, their heirs and assigns forever, all the right, title, interest, claim and demand, which the said parties of the first part have in and to the following described lots, pieces, or parcels of land, subject however to the conditions hereinafter set forth, to-wit: The south half of the southeast quarter and the northeast quarter of the southeast quarter of section four (4), township six (6) North, range one (1) east of the fourth principal meridian, in Fulton County, Illinois.

“The said J. T. Tallent hereby agrees to pay to said parties of the first part, eighty dollars as rent for said land per year as long as both Wesley and Boxy Osborn shall live and 'at the death of either of the parties of the first part to pay to the survivor forty dollars during the life of such survivor. The said J. T. Tallent further agreed that he will pay all taxes assessed against said land and keep said land and the buildings and fences thereon in good repair.

“It is hereby agreed between the parties hereto that the land hereby conveyed shall be held by said J. T. and Harriet E. Tallent during their natural lives and at the death of both of them the said land shall descend to the children born to the said Harriet E. Tallent and su.ch children shall hold said lands in fee simple in equal parts.

“And should there be no children living at the death of both J. T. and Harriet E, Tallent, then the said lands shall revert back and become part of the estate of the said Wesley Osborn.

“And further that should the said Harriet E. Tallent die before her husband, J. T. Tallent, then the said J. T. Tallent is to hold the said land during his life and at his death the children born to him and Harriet are to have and hold said lands in fee simple, and should said J. T. Tallent in the event of the death of the said Harriet E. Tallent — marry again and have children born to him by the second wife then and in that case, the children of such second marriage shall not be entitled to any right or title whatsoever in the lands hereby conveyed.

“And should said J. T. Tallent die before the said Harriet E. Tallent and said Harriet E. Tallent marry a second time, then in the event of the death of the said Harriet E. Tallent, the said lands shall descend to the children of said Harriet E. Tallent whether of the first or second marriage and such children shall become vested in fee simple in equal parts of said land.

“It is further agreed that should the parties of the second part fail or refuse to perform the covenants on their part hereby agreed, then the said party of the first part may declare this indenture void or of no effect and recover possession of the lands hereby conditionally conveyed to have and to hold the same together with all and singular the appurtenances and privileges thereunto belonging or in anywise appertaining and all the estate, right, title, interest and claim whatever of the said party of the first part, either in law or in equity, to the only proper use, benefit and behoof of the said party of the second part, their heirs forever as hereinbefore set forth.

“And the said parties of the first part hereby expressly waive, release and relinquish unto the said parties of the second part, their heirs, executors and administrators,' all right, title, claim, interest and benefit whatever in and to the above described premises and each and every part thereof which is given by or results from all laws of this State pertaining to the exemption of homesteads as above set forth.

“The condition of this indenture shall extend to and be binding upon our heirs, executors and administrators.

Wesley Osborn (Seal)

Boxey Osborn (Seal)

Thomas Tallent (Seal)

Harriet Tallent (Seal)”

J. T. Tallent died on March 7, 1929 and Harriet E. Tallent, his wife, died on the 9th day of October, 1929. There were born to J. T. Tallent and Harriet E. Tallent six children, four of whom were living and of legal age at the time the bill for partition was filed, viz.: Wesley, Glenn, Daniel and John Tallent. One of the children, Naomi Tallent, died intestate in 1912, leaving her surviving, her husband, Boyd Wilson, and two children, a daughter, now Grace Hutchens, and a son, Curtis Wilson, a minor, and no descendants of any deceased child or children and no other heirs at law. Another brother, Tommie Tallent, died intestate in 1910 and was never married.

On October 18, 1929,-Wesley Tallent, Glenn Tallent and Daniel Tallent filed a bill for partition of the premises mentioned in the deed hereinabove set forth in which, after setting out the above facts, it is averred that by a decree entered June 30, 1925, in a divorce case of Mary Tallent v. John Tallent, it was decreed that Mary Tallent have as her sole and absolute property an undivided one-third interest in and to the above described real estate, and that since said decree she has married one Jesse Stephenson and is now Mary Stephenson. The cause was referred to the master in chancery who correctly found the interests of the parties to the partition suit as to which no question is involved in this case. The court approved the master’s report and ordered the sale of the premises which was accordingly done and the master sold the property April 14, 1930 for the sum of $3,950, of which 25 per cent of the purchase price or $987.50 was paid by the purchaser on the day of sale. On the same day the court approved the master’s report of sale, directed him to collect the balance due of the purchase price and ordered a distribution of the proceeds. On April 19,1930, plaintiff in error made a motion in this cause to be made a party defendant and for leave to file its intervening petition therein praying that the proceeds of the sale of the real estate involved, now in the hands of the master in chancery, be subjected to the payment of the claim of the bank and that the decree directing distribution be modified, and that the master be directed to stay distribution of the proceeds of the sale until further order of the court, and, as reasons for the allowance of said motion attached thereto, it is alleged that during the lifetime of Wesley Osborn and Boxy Osborn, the said J. T. Tallent, pursuant to the terms of said written instrument, paid to them as rent for said land, the sum of $80 per year as long as both Wesley Osborn and Boxy Osborn lived, and that he paid the survivor $40 per year thereafter until the death of such survivor; that he paid all taxes assessed against said land from the date of said instrument until his death and during that time kept said land and the buildings and fences thereon in good repair; that at the death of said J. T. Tallent his interest acquired by biru under said instrument descended to his heirs, who at that time were also the children of Harriet E .Tallent and her only heirs, and that at the death of Harriet E. Tallent the interest in said real estate acquired by her under and by virtue of said instrument descended to the children born to said Harriet E. Tallent who were the only heirs at law of Harriet E. Tallent and J. T. Tallent.

It is further alleged that J. T. Tallent died intestate and letters of administration in his estate issued out of the county court of Fulton county and that Harriet E. Tallent died intestate and letters of administration were issued in her estate out of said court; that there is not sufficient personal property in the estate of either J. T. Tallent, deceased, or Harriet E. Tallent, deceased, to pay the debts and costs of administration of either of said estates, and that the interest of said J. T. Tallent and Harriet E. Tallent in said real estate above described are the only assets of either or both estates out of which the debts and costs of administration thereof can be satisfied; that at the time of the death of J. T. Tallent and Harriet E. Tallent they were indebted to plaintiff in error in the principal sum of $800 together with the interest thereon from December 22, 1928, at the rate of six per cent per aiinum for money borrowed by them in their lifetime from plaintiff in error, which indebtedness is evidenced by their promissory note for said amount, which is still due and unpaid and the claim of the bank based upon said promissory note has been filed in the county court of Fulton county and allowed by said court in its favor as a claim against the estate of J. T. Tallent, deceased; that neither the administrator of the estate of J. T. Tallent, deceased, nor the administratrix of the estate of Harriet E. Tallent, deceased, has been made a party defendant to this suit and that if plaintiff in error is not permitted to intervene at this time its interest will be jeopardized and it will be compelled to bring a multiplicity of suits in seeking to enforce its claim aforesaid, etc.

On April 23,1930, the court allowed the motion “for the purpose of allowing movent to be made a party defendant herein for the purpose of filing an intervening petition herein only. Whereupon comes the said petitioner and files herein its said- petition to intervene. Whereupon now here in open court a hearing is had before the court on the said petition, and the court now here in open court being fully advised in the premises doth deny said petition of the said petitioner for leave to intervene herein.”

It is the theory of plaintiff in error that all the conditions of the deed having been performed by J. T. Tallent during the lifetimes of Wesley Osborn and his wife Boxy Osborn before the latter’s decease, J. T. Tallent and Harriet E. Tallent under the terms of the deed became seized in fee simple as tenants in common of the premises mentioned therein, and that said lands became subject to the debts of J. T. Tallent and Harriet E. Tallent. It is contended by defendants in error that John T. Tallent and Harriet E. Tallent took but life estates under the deed and therefore the premises are not subject to the debts of the grantees. In the case of Anderson v. Stewart, 285 Ill. 605, the court cites with approval as the proper rule for the construction of deeds the doctrine announced in 8 R. C. L. 1046: ‘ The modern tendency is to ignore the technical distinctions between the various parts of a deed and to seek the grantor’s intention from them all, without undue preference to any, giving due effect to all, including both habendum and granting clauses, where such can reasonably be done, in order to arrive at the true intention, even to the extent of allowing the habendum to qualify or control the granting clause where it was manifestly intended that it should do so.” In construing a deed each clause, and the intention of the grantor as indicated thereby, must be given effect unless by so doing some positive rule of law is violated. (Farmer v. Reed, 335 Ill. 156.) It will be noticed that the deed provides: ‘ That all parties of the first part in consideration of the agreements and covenants of the parties of the second part, hereinafter set forth, has remised, released, sold, conveyed and quit-claimed, and by these presents does remise, reléase, sell, convey and quit-claim unto the said parties of the second part, their heirs and assigns forever, all the right, title, interest, claim and demand, which the said parties of the first part have in and to the following described lots, pieces, or parcels of land, subject however to the conditions hereinafter set forth, to-wit:” Keeping in mind the above provision and considering in connection therewith all the other agreements and conditions set out in the deed, but one logical conclusion can be arrived at and that is that the real intention of the grantors was to convey but life estates to John T. and Harriet E. Tallent upon conditions. ‘ ‘ Conditions may be annexed to every species of estate or interest in real property, and are therefore more properly qualifications of other estates than a distinct species of themselves.” (21 C. J. 928, sec. 31.) A life estate may be made to depend upon a contingency, upon the happening of which the estate may be defeated before the death of the grantee. However indefinite or uncertain the duration of the estate may be, yet if there is a possibility that it may extend to life, it becomes a life estate. (21 C. J. 938, sec. 59.) It was held in the case of Michie v. Wood, 26 Va. 571, where the grant was so long as the tenants might pay a stipulated rent that the grantees were seized of a life estate. In our opinion J. T. Tallent and Harriet E. Tallent under the terms of this deed took conditional life estates subject to be terminated by the failure of J. T. Tallent to pay the rentals required.

A motion has been made by defendants in error to dismiss the writ of error or transfer the cause to the Supreme Court on the ground that a question of title to real estate is involved and therefore this court has no jurisdiction. No title to the real estate is involved because the defendants in error are conceded to have the legal title to the real estate whether they took as remaindermen under the deed or by direct inheritance as the children and heirs of John T. and Harriet E. Tallent. In either event they are tenants in common holding the title in fee simple, the only question involved being a construction of the deed to determine whether they acquired their title as remaindermen under the deed or by direct inheritance. The motion is denied.

John T. and Harriet E. Tallent having had only life estates in said premises, the same were not subject to their debts after their decease. It follows therefore that the court did not err in denying leave to intervene and the judgment of the circuit court is affirmed.

Affirmed.


text:
    M. J. Hallihan et al., Trading as Hallihan Brothers, Appellees, v. The Home Insurance Company of New York, Appellant.
    Gen. No. 8,653.

      Opinion filed August 20, 1932.
    Herrick & Herrick, for appellant.
    George J. Smith, for appellees.
   Mr. Presiding Justice Eldredge

delivered the opinion of the court.

Appellees recovered a judgment in the sum of $300 against appellant in an action of assumpsit based upon an insurance policy covering loss by damage by fire and lightning to the horses of appellees.

Appellant filed a plea of nonassumpsit and one special plea. It is averred in the special plea that the policy contains the following provision: “No suit or action against this company for any loss under this policy shall be sustained in any court of law or equity, unless commenced within one year next after the fire, ’ ’ and that said suit was not commenced within one year “next .after the alleged injuries to said horses.” It is averred in the declaration that the horses were injured by being struck by lightning and as a direct result thereof became totally blind. The plea does not answer the declaration because the horses were not injured by fire and the limitation provision in the policy only applies to injuries received by fire. A demurrer to this plea was properly sustained by the court.

The evidence for appellees tended to show that on November 16,1928, the three horses which it is alleged were injured by lightning were in a pasture on a farm owned and operated by appellees; that at that time they were sound and not afflicted with blindness nor any other disease. On the night of that day there was a very severe rain and electrical storm and on the following morning- when appellees went to the pasture the three horses were very excited, running around in circles and it was discovered that each of them was blind. A part of the pasture fence was knocked down and there were scratches- on the bodies of the horses showing that apparently they had run into the barbed wire on the fence. The veterinary produced as a witness by appellees testified that upon an examination of the horses in his opinion the blindness was caused by an electrical shock. The expert evidence introduced by appellant tended to show that the blindness was caused by a disease known as periodic ophthalmia commonly called “moon blindness”; that this disease comes by spells or periods anywhere from one to four or five months apart and takes five to seven or eight attacks to cause complete blindness. There is no conflict in the evidence that the horses were completely blind on the morning after the storm and there is no evidence tending to show that they had had a previous attack. The evidence introduced by appellees, consisting of the testimony of themselves and of several neighbors who had known the horses, tended to show that shortly before the time in question they were not afflicted with blindness. There is no evidence that moon blindness is contagious. The jury had a right to consider all these facts and the unreasonable probability that three sound horses should overnight become blind by a disease of which they had no symptoms before. The evidence further disclosed that the facts that on the following morning the horses were nervous, excited and trembling were symptoms that they had received a very severe nervous shock. Under the above circumstances we would not be justified in holding that the verdict is contrary to the manifest weight of the evidence.

It is claimed by counsel for appellant that the court erred in giving some of the instructions offered by appellees and in refusing to give one offered by appellant. We have examined these instructions in the light of the criticisms made of them and find there are no reversible errors therein.

The judgment of the circuit court is affirmed.

Affirmed.