text:
    George Maretick, Minor, By Evelyn Maretick, His Mother and Next Friend, Appellant, v. South Chicago Community Hospital, Appellee.
    Gen. No. 40,160.
    Heard in the third division of this court for the first district at the June term, 1938.
    Opinion filed November 30, 1938.
    Rehearing denied December 16, 1938.

      Royal W. Irwin, of Chicago, for appellant.
    Edward W. Rawlins, James F. Wright and Lee W. Carrier, all of Chicago, for appellee.
   Mr. Justice Denis E. Sullivan

delivered the opinion of the court.

A jury returned a verdict in the above entitled cause in favor of plaintiff for $45,000, for personal injuries sustained by plaintiff while a patient in the South Chicago Community Hospital. After the verdict was returned by the jury, the court on motion of defendant entered a judgment non obstante veredicto in favor of defendant, and it is from that judgment that plaintiff brings this appeal.

The facts with relation to the accident are substantially as follows:

The plaintiff was born on October 6, 1926 in the South Chicago Community Hospital and was placed in a crib in the nursery with several other infants. During the night of October 12,1926, a fire occurred in the nursery, which resulted in plaintiff’s injury.

The fire apparently was caused by a defective electric light cord to which a globe was attached and which the hospital authorities had used to improvise an incubator by permitting the globe to hang over the crib and thereby furnish warmth to the baby. One of the witnesses who testified for plaintiff in referring to the electric light stated that “there was an old looking wire and at the end it was frayed, and all in threads. The light in it was burning about two feet above the infant in the crib. The clothing was over the crib. The globe was in the socket on the cord and hanging in this opening in the canopy” which was over the crib.

It appears that during the night, either because of the defective condition of the electric wiring or because of the close proximity of the light globe with the cotton bedding, the crib caught fire and the premature baby who was in that crib was burned to death and the fire communicated from that crib to the crib in which the plaintiff was sleeping*, as a result of which plaintiff was injured.

An interne from the hospital stated, “A sort of canopy was put over one of the cots to make an improvised incubator. It was made of steel and an extension with a globe at the end. Cotton was around the globe and around the foot of the bed. The cotton was used to equalize the heat. The covering of the wire next to the socket was worn out. It had been in that condition for a month or two before the accident. ’ ’

The doctor in charge testified as to the physical condition in which he found plaintiff at the time of the trial.

There is no controversy as to the happening, cause or result of the injury sustained by plaintiff.

The principal and controlling question here involved is whether or not the hospital was a charitable organization. The proof submitted on behalf of plaintiff shows that the hospital was incorporated on December 18, 1895 under the name South Chicago Hospital, and that its object or purpose was “for general Hospital purposes.” Later, in 1908, the charter was amended and the purposes for which it was amended are set forth as follows: “The objects for which it is formed is for General Hospital purposes. Also to establish, conduct and carry on a Nurses Training School, a Nurses Home for Nurses while in training, and to issue diplomas for graduating nurses, including the right to furnish necessary object lessons in practical nursing and the giving of instructions in both theoretical and practical nursing of medical, surgical and obstetrical cases to the individual in training.” From the above it will be seen that the corporation was one which was organized not for pecuniary profit, there being no capital stock issued, no provision for dividencls or the usual powers granted to a profit making corporation.

In the case of People v. Young Men’s Christian Ass’n, 365 Ill. 118, it was said: “A charity, in law, is not confined to the relief of poverty or distress or to mere almsgiving but embraces the improvement and promotion of the happiness of man, and whether it extends to the rich or to the poor, it is a charity if it is a gift to the general public use and relieves to some extent the burden of the State to care for and advance the interests of its citizens. ...

“The charitable nature of an organization depends upon whether its primary object is to carry out a purpose recognized in law as charitable or whether it is maintained for gain, profit or private advantage, and an institution does not lose its charitable character by reason of the fact that recipients of its benefits who are able to pay are required to do so, where no profits are made by the institution except such as are devoted to charitable purposes and where its benefits are refused to none because of inability to pay therefor. ’ ’

We think it is conceded that if the defendant in this case is a charitable organization, as so defined in the law, that it is not liable for an action in tort for the negligence of its servants and employees.

In Johnston v. City of Chicago, 258 Ill. 494, at page 498, the court said:

“A purely charitable corporation is by the weight of authority held not hable for the torts or neglect of its servants in the performance of their duties in carrying on the work of such corporation.”

In the case of Hogan v. Chicago Lying-In Hospital, 335 Ill. 42, plaintiff brought suit to recover damages for personal injuries which, he sustained while a patient in the Chicago Lying-In Hospital shortly after his birth. The injuries complained of were caused by plaintiff having been placed in close proximity to a therapeutic lamp for an unreasonable length of time causing his feet to be seriously burned. It was alleged that said hospital was incorporated under the laws of Illinois as a corporation not for pecuniary profit and that its object was the establishment and maintenance of a hospital for charitable purposes; that it had no capital stock, it paid no dividends, and at the time of the supposed grievance was engaged in the maintenance of a hospital for charitable purposes and not for pecuniary profit, and the court in that case in discussing the case of Parks v. Northwestern University, 218 Ill. 381, said:

“This court held that under its charter and the Statute of Charitable Uses, which is a part of the common law of this State, the university was a charitable institution notwithstanding the fact that it required its students to pay tuition; that the rule exempting a charitable institution from liability for the negligence of its servants does not rest solely upon the ground that it is an agency of the State, but also upon the ground that an admission of liability would result in a diversion of the trust funds of the institution; that a private corporation organized for the sole purpose of disseminating learning, having no power to declare dividends and depending for its maintenance upon the income from its property and the endowments and gifts of benevolent persons, holds its funds, from whatever source derived, in trust for the object of its organization, and such corporation is within the rule exempting a public charity from liability for the negligence of its servants; that the doctrine of respondeat superior does not extend to charitable institutions, for the reason that if liability were admitted and the trust fund would be destroyed and diverted from the purpose for which it was given, thus thwarting the donor’s intent as the result of negligence for which he was in nowise responsible, and that if the trustees cannot by their direct acts divert funds from the purposes for which they were donated, such funds cannot be indirectly diverted by the tortious or negligent acts of the managers of the fund or their agents or employees.”

Complaint is made by defendant that the trial court did not permit it to present all the facts and circumstances which tend to prove that the hospital was used only for charitable purposes. When offer of proof was made by defendant, plaintiff objected and the objection was sustained. We do not think such proof on behalf of defendant was necessary and, of course, plaintiff could not complain when such ruling was made because of his objection.

As was said in Turnverein “Lincoln” v. Board of Appeals, 358 Ill. 135, at page 142:

“The appellant is a corporation and, as a general rule, the character of a corporation and the object for which it was organized must be ascertained from its charter or certificate of incorporation. (People v. Rockford Masonic Ass’n, 348 Ill. 567; People v. Rockford Lodge B. P. O. E., 348 id. 528; People v. Wyanet Electric Light Co., 306 id. 377; Distilling Co. v. People, 161 id. 101).”

The provisions of the charter determine the character of the organization and the purposes for which it is organized, and is controlling. Evidence as to the conditions of the charter would not be competent. As was said in People ex rel. Nelson v. Rockford Lodge, B. P. O. E., 348 Ill. 528, at page 532: “It is a corporation, and its character and the purpose for which it was organized must be ascertained by reference to the terms of its charter.” This being true, we are of the opinion that a corporation organized not for profit and engaged in conducting a hospital is a charitable organization as contemplated by law. As the court said in Congregational S. S. & Pub. Society v. Board of Review, 290 Ill. 108, at page 113:

‘ ‘ Charity, in the legal sense, is not confined to mere almsgiving or the relief of poverty and distress but has a wider signification, which embraces the improvement and promotion of the happiness of man. A charity is a gift to the general public use which extends to the rich as well as to the poor. The test of a charity and the test of a charitable organization are in law the same. The principal and distinctive features of a charitable organization are, that it has no capital stock and no provision for making dividends or profits but derives its funds mainly from public and private charity and holds them in trust for the objects and purposes expressed in its charter. In other words, the test whether an enterprise is charitable is whether it exists to carry out a purpose recognized in law as charitable, or whether it is maintained for gain, profit or private advantage. ’ ’

From the foregoing it will be seen that the law presumes that where a corporation, as shown by the terms of its charter, is operated not for profit and has no provision for the issuance of stock or the payment of dividends thereon to its incorporators or its stockholders, and where it further appears that it is conducted for the purposes of a hospital, it is recognized under the law as a charitable institution. The evidence in the instant case is sufficient to show that the purpose of said hospital is charitable in its nature. Santa Clara Female Academy v. Sullivan, 116 Ill. 375; McDonald v. Massachusetts General Hospital, 120 Mass. 432; New England Sanitarium v. Inhabitants of Stoneham, 205 Mass. 335.

Counsel in their brief call attention to the fact that there are many corporations organized not for profit, such as the Board of Trade, Trade Unions, Cattle Exchange Associations, etc. We have no knowledge as to the language used in the charters of these last named organizations, or the purposes for which they were organized as pertaining to the law, but as before stated, we believe that in this State where a corporation is organized for charitable purposes, such as a hospital and its charter contains the clause “not for profit,” such a charitable organization is not liable for the torts of its servants.

In view of our holding that the hospital is a charitable institution, it will not be necessary for us to discuss the evidence with relation to the cause, nature and extent of the injuries sustained by plaintiff. The injuries were grievous and would enlist sympathy if that were one of the elements to be considered in arriving at a decision in this case, but under the law, we are obliged to hold that no liability attached to the defendant hospital.

For the reasons given in this opinion the judgment of the superior court is affirmed.

Judgment affirmed.

Hall, P. J., and Hebel, J., concur.


source: Caselaw Access Project

author: Mr. Justice O’Connor

license: Public Domain

text:
    E. I. Du Pont De Nemours and Company, Appellee, v. McKay Engineering and Construction Company and United States Fidelity and Guaranty Company. Appeal of the United States Fidelity and Guaranty Company, Appellant.
    Gen. No. 40,227.

      Heard in the first division of this court for the first district at the June term, 1938.
    Opinion filed December 13, 1938.
    Robertson, Crowe & Spence, of Chicago, for appellant; Eugene P. Kealy and Henry L. McIntyre, both of Chicago, of counsel.
    No appearance for appellee.
   Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought an action on a surety bond executed by defendants as principal and surety, conditioned upon the performance of a construction contract made by defendant McKay Engineering & Construction Company with the Sanitary District of Chicago. Plaintiff’s claim was for $1,601.06. The principal defendant, McKay Engineering & Construction Company, filed its affidavit of merits in which it admitted a liability of $705, being the fair, reasonable agreed price for materials furnished by plaintiff in the construction of the work. Afterward, on motion of plaintiff, judgment was entered against the McKay Engineering & Construction Company for the amount it admitted due, $705, and it was ordered that there be a trial for the balance of plaintiff’s claim. Later the Surety Company filed its motion to dismiss the suit as to it on the ground that the court was without jurisdiction because the bond in suit was executed by defendants, pursuant to par. 15, ch. 29, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 126.320], and that by par. 16, of that act, it was provided that actions to recover on such bonds could be only brought in the circuit courts of the State, and therefore the municipal court had no jurisdiction. The court overruled the motion. Defendant elected to stand by its motion and thereupon, judgment was entered in plaintiff’s favor against the Surety Company for the balance of its claim, $896.06, and the Surety Company appeals.

Plaintiff has filed no brief in this court.

The question for decision is, has the municipal court of Chicago jurisdiction of a suit on such bond? Par. 15, ch. 29 [Ill. Rev. Stat. 1937; Jones Ill. Stats. Ann. 126.320] provides that: “All officials, boards, commissions or agents of this State, or of any political subdivision” in making contracts for public work to be performed for the State, or a political subdivision thereof, shall require every contractor for such work to execute a bond, etc., with good and sufficient surety in an amount to be fixed, conditioned “for the payment of material, used in such work and for all labor performed in such work, whether by subcontractor or otherwise.” Par. 16 of the act provides that “Every person furnishing material or performing labor, either as an individual or as a sub-contractor for any contractor with the State, or a political subdivision thereof where bond shall be executed as provided in this Act, shall have the right to sue on such bond . . . for his use and benefit, ’ ’ etc. The paragraph also provides for the filing of notice by the claimant, and other matters not here pertinent, and further provides “Suit shall be brought only in the circuit court of this State in the judicial district in which the contract is to be performed.”

Plaintiff, in its statement of claim alleged that it furnished materials as sub-contractor, pursuant to a contract entered into between it and defendant, McKay Engineering & Construction Company, which materials were used in a certain work job or project for the Sanitary District of Chicago, with whom the McKay Engineering & Construction Company had a contract. We think it clear that the bond, which is the basis of the instant case, was intended to comply with the provisions of the statutes. By par. 16 of the act, the legislature saw fit to lodge jurisdiction alone in the circuit courts of the State where suit was brought on such bonds. Apparently the legislature, in passing the act, intended that every contractor mentioned in the act should give a bond for the faithful performance of the work, and that any one furnishing labor or material in connection with the work might bring suit to recover for his labor or material, and the legislature intended that such suits should not be brought before other courts but only in the circuit courts of the State in the judicial district in which the contract was to be performed.

We hold that the 'municipal court had no jurisdiction and the motion of the Surety Company should have been sustained.

The judgment of the municipal court of Chicago appealed from is reversed and the cause remanded with directions to sustain the Surety Company’s motion.

Judgment reversed and remanded with directions.

McSurely, P. J., and Matchett, J., concur.


author: Mr. Presiding Justice Friend

text:
    George P. Phillip, Appellee, v. The First National Bank of Chicago, Appellant.
    Gen. No. 39,814.

      Heard in the second division of this court for the first district at the October term, 1937.
    Opinion filed December 13, 1938.
    Amberg, Ott, Dahlin & Livingston and Nat M. Kahn, of Chicago, for appellant; Nat M. Kahn and Frank L. Paul, of Chicago, of counsel.
    Campbell, Clithero & Fischer, of Chicago, for appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Greorge P. Phillip, as trustee, plaintiff herein, brought suit against the First National Bank of Chicago, defendant, for breach of contract in charging his accounts with checks that were not signed as required by the agreement, thereby causing plaintiff a loss. The case was tried by the court without a jury, resulting in findings and judgment in favor of plaintiff for $5,170 and costs, from which defendant appeals.

There is substantially no dispute as to the facts, but a summary thereof is necessary for a proper understanding of the questions of law involved. George P. Phillip, formerly an officer of the Phillip State Bank, was a banker of more than 20 years’ experience. In 1932 he was appointed as successor trustee under four trust deeds which secured real estate mortgage bond issues originally negotiated and sold by the Garfield Park State Bank. Phillip, as trustee, was placed in possession of the. real estate secured by these trust deeds, which consisted of apartment buildings, but he had nothing to do with managing the properties and his custodianship was purely nominal since the owners of the equities remained in possession, collected the rents themselves, and remitted the proceeds to the bondholders’ committee of the Garfield Park State Bank, which maintained an office at 8 South Dearborn street, Chicago. One Thomas R. Ferguson, a friend of Mr. Phillip, who was a member of the bondholders’ committee and had previously been associated with Phillip in the bank, and Luke J. Malley, were employed by the bondholders’ committee at regular salaries and had charge of the office. Mr. Phillip would drop in occasionally, but his name was not on the door.

In March, 1932, plaintiff, through his attorney, Herman A. Fischer, opened two separate checking accounts with the First National Bank, under the respective names of “George P. Phillip — Montenegro Properties” and “George P. Phillip — Forte Properties,” and at the same time Mr. Fischer delivered the following letters, addressed to defendant bank: “Kindly pay all checks drawn on the account of George P. Phillip— Montenegro Properties when signed by any one of the following: George P. Phillip — T. R. Ferguson — Luke J. Malley — and countersigned by any one of the following : Louis S. Binkley — Herman A. Fischer — Dated at Chicago, Illinois, March 25, 1932. (Signed) Herman A. Fischer, Counsel for George P. Phillip and above properties.” A similar letter was delivered to the bank and signed by Mr. Fischer in relation to the account under the name of “George P. Phillip — Forte Property.” On the same day signature cards were delivered to the bank for each of these accounts. After the name of the account and on a separate line on the top portion of the card appears the legend ‘ ‘ Two Signatures Necessary,” and underneath and following this phrase are the following five signatures and words: “George P. Phillip — Will Sign; Luke J. Malley — Will Sign; T. R. Ferguson — Will Sign; Herman A. Fischer —Countersign; Louis S. Binkley — Countersign.” The back of each signature card contains plaintiff’s address as Room 805 — 8 South Dearborn street. It appears from the evidence that at least ten accounts, similar in nature, wore opened by plaintiff with defendant bank. The Forte and Montenegro accounts were opened March 25, 1932, as heretofore stated, and were closed June 14, 1935.

The suit at bar is predicated upon 33 checks which did not have the signature or countersignature of either Herman A. Fischer or Louis S. Binkley, aggregating $4,700. Of this amount, checks for a total of $4,130 were payable to the order of Ferguson and $570 to the order of Malley. Of these checks, $1,050 were signed alone by Phillip, the owner of the account, $300 by Phillip and Malley, $200 by Phillip and Ferguson, and $3,150 by Malley and Ferguson.

It appears that Phillip exercised no supervision whatsoever over these checking accounts, other than signing certain checks, at times countersigning other checks and frequently signing or countersigning checks in blank at the request of Ferguson or Malley. Whenever he signed or countersigned checks in blank, Phillip would make no separate record as to the identity of the checks, nor did he take the precaution to make an entry on the stubs covering checks thus signed by him in blank. Even as to those checks upon which no complaint is made, which Phillip signed or countersigned, did he require any showing to be made by either Ferguson or Halley as to the propriety of the checks or the purpose for which they were intended, and in at least three instances Phillip cashed checks made payable to his order which were signed in the same manner as those upon which he brought suit.

It further appears from the evidence that Phillip never saw any of the bills for the upkeep of the properties, nor approved any of them for payment. A ledger or book of account was kept under the supervision of Halley or Ferguson at the office of the bondholders ’ committee, but Phillip never examined this ledger, and upon the trial he testified that he did not even then know who had charge of authorizing the payment of the bills for the upkeep of the property, nor did he have any idea as to whom the checks were made payable. Phillip kept no record whatsoever in connection with the properties; he confined his activities to the signing of checks when he dropped in at the office. His visits to the office of the bondholders’ committee were rather infrequent, and at times when traveling he would be absent for long periods. He was unable to say or even approximate the number of checks that he signed or countersigned in blank, and admitted that he never turned down any request by Halley or Ferguson to sign or countersign checks in blank when requested so to do. At the time of the hearing he was not even certain whether he was still the trustee.

From a stipulation entered into between the parties it appears that during the time the accounts were maintained in the defendant bank the canceled checks and bank statements thereof were mailed each month to Hr. Phillip at the office of the bondholders ’ committee, 8 South Dearborn street, which was later moved to 10 South LaSalle street, Chicago. None of the canceled checks was ever destroyed, but they were filed away in a cabinet together with the statements accompanying them and were found so filed by Mr. Fischer in April or May, 1935. All the statements had the following notice printed thereon: “Please examine at once, if no errors are reported within ten days the account will be considered correct.” Phillip testified that this was a customary notice on bank statements with which he was familiar because of his experience as a banker; that at no time during the entire period of more than 3 years that the accounts were in the defendant bank did he ever examine or even look at the bank statements and canceled checks, nor did he ever delegate anyone to make such an examination. In fact the inspection of these canceled checks and bank accounts was never discussed between Phillip and Fischer until more than 3 years had elapsed after the accounts were opened, when Fischer found the canceled checks still enclosed in their original bank statements at the office of the bondholders’ committee. Phillip had no recollection of ever having seen the canceled checks and bank statements nor did he ever inquire about them, and as he himself testified, “I did not bother at all with them. ’ ’ Phillip said that he had full confidence in Ferguson and Malley, that Malley was covered by a fidelity bond and that the bondholders’ committee was looking after matters.

Plaintiff contends that defendant bank is liable for the 33 checks upon which suit was brought because none of them was countersigned by either Fischer or Binkley. As said heretofore, $4,130 of these checks were made payable to Ferguson and $570 to Malley. Of the 33 checks 2 were signed by Phillip alone and 11 aggregating $1,400 bore Phillip’s signature. The remaining 20 checks aggregating $3,150 were signed by both Malley and Ferguson.

The record discloses that altogether there were 841 checks drawn on these accounts from the time they were opened March 25, 1932, until they were closed. The earliest date of any check upon which suit was brought is January 20, 1934, almost 2 years after the account was opened. Previous to the last date 281 checks had been drawn and paid in the Montenegro account. Of these 281 checks there were 11 drawn and paid which had the same signatures as the checks upon which suit was brought. The first 10 of these checks were all countersigned by Phillip, the eleventh was signed by Phillip alone, payable to his own order and cashed by him. This check was for $150 and represented payment of his trustee’s fees on account. Included in these 11 checks, none of which bore the signatures of either Fischer or Binkley, was one for $326.55, payable to the bondholders’ committee.

In the Forte accourit.293 checks were drawn and paid prior to January 20, "1934. Of these 293 checks 11 were countersigned by Phillip. Among them was a check for $416.91 payable to the bondholders’ committee, and another for $200 payable to Phillip, indorsed by him and cashed in defendant bank. None of these 11 checks had the signatures of either Fischer or Binkley.

Defendant’s counsel summarize the checks drawn on both accounts up to January 20, 1934, and they show that there was a total of 574 checks drawn, of which 22 or an average of one out of every 26 checks did not contain the signatures of either Fischer or Binkley, covering a period of approximately 22 months from March 25,1932, to January 20,1934. After January 20, 1934, 54 checks were drawn on the Forte account, which in addition to the 8 Forte checks upon which suit was brought, aggregate 62 checks. Summarizing all the checks drawn after January 20, 1934, counsel point out that there were a total of 264 checks drawn against both accounts. Of these 33 constitute the basis of this suit, and in addition there were 38 checks, including 27 drawn on the Montenegro account, without the signatures of either Fischer or Binkley, and 11 on the Forte account without either of their signatures, making a total of 71 checks in all drawn on both accounts which did not contain the signatures of either Fischer or Binkley. Of the 38 checks drawn on both accounts which are not included in the 33 upon which suit was brought, none bore the signatures of either Binkley or Fischer, and 20 had the countersignature of Mr. Phillip. Four of these 20 checks were signed by Phillip, including a check for $3,173.92, one of the largest checks drawn on either account, payable to Thomas D. Nash, county collector, and six others which did not include the signature of either Fischer or Binkley, all payable to the bondholders’ committee, aggregated $1,667.89.

When Mr. Fischer learned in May, 1935, that Ferguson and Malley had cashed checks drawn on the accounts, payable to their own order, he visited the office of the bondholders’ committee, and for the first time examined the canceled checks and bank statements. Thereafter this suit was instituted.

It is urged by defendant at the outset that Phillip, as trustee, had complete legal title to the rents which constituted the funds upon which these various checks were drawn, and plaintiff in his brief concedes that as between him and the defendant bank plaintiff was the sole owner of these accounts, notwithstanding he was acting as a trustee and had a legal duty to others who were the beneficiaries of the trust. Being the owner of the funds in these accounts, it is difficult to understand why defendant should not have been given credit at least for those checks upon which suit was brought, bearing the signature of Phillip. There were a total of $1,550 of such checks; $1,050 of this sum was for checks signed by Phillip alone, $300 for checks signed by Phillip and Malley, and $200 for checks signed by Phillip and Ferguson. Some of the checks signed by Phillip alone were payable to his own order for trustee’s fees, were indorsed by him and cashed at the bank the same day they were issued. Phillip did not bring suit on the checks payable to his own order and signed by him, but he did institute suit on the $1,550 worth of checks signed by him which were payable to Malley and Ferguson, and we see no distinction between checks signed by Phillip alone, payable to himself, and those signed by him alone payable to Ferguson or Malley. When he placed his name on the checks on which he brought suit, he did so on his own responsibility, and if he was the owner of the funds upon which the checks were drawn, as plaintiff concedes, it would seem that the bank became relieved of any responsibility in the matter as against Phillip.

Counsel on both sides concede that under the general rule, even if a depositor omits all examination of his statement and canceled checks, the bank is still liable for wrongfully paying the checks drawn on his account, where it appears that the bank was negligent in paying them, but defendant contends that this rule, while general in its application, has its limitations and does not apply to the facts at bar, because plaintiff was grossly negligent in the maintenance of his books and records and exercised no supervision whatsoever over his accounts, and because plaintiff not only had full knowledge that checks were improperly drawn, but by actually participating in the drawing of a series of checks in a manner similar to the checks upon which suit was brought ratified the practice and became estopped from holding the bank liable.

Plaintiff relies principally on the early case of Manufacturers’ Nat. Bank v. Barnes, 65 Ill. 69. In that case plaintiff, expecting to be absent for a short time, gave his clerk and bookkeeper a power of attorney to draw checks on the defendant against deposits for 15 days only, and deposited the power of attorney with the bank. After his return and the expiration of 15 days, the clerk continued to draw checks without the knowledge of plaintiff, part of which he applied to the payment of the firm’s bills and the balance of which he appropriated to his own use. The court held that defendant was liable for the moneys paid out on the checks after the clerk’s agency had ceased. The decision was based on an early New York case, Weisser v. Denison, 10 N. Y. 68, where under similar circumstances the court had held the bank guilty of negligence, notwithstanding the fact that the depositor had failed to examine the returned checks. Examination of the following authorities, however, discloses that this early rule is no longer followed, either in this State or New York.

In Brady on Bank Checks, 2nd Ed., p. 289, the author points out decisions in “a few of the earlier cases,” holding that a depositor is under no obligation to examine the bank statements or paid checks which are returned to him, and cites Manufacturers’ Nat. Bank v. Barnes, supra, as one of the few earlier cases to which reference is made, but says that “now it is quite well established that a depositor is under a duty to examine the bank’s statements and his canceled vouchers with reasonable promptness and to report to the bank any forgeries, alterations or other irregularities.”

The doctrine laid down on Weisser v. Denison, 10 N. Y. 68, which was decided in 1854, has been rejected by the courts of New York in recent years. It was held by the court of appeals of New York, in Morgan v. United States Mortgage & Trust Co., 208 N. Y. 218, that a depositor who sends his pass book to be written up and receives it back with his paid checks as vouchers is bound, under certain circumstances, to examine the pass book and vouchers and to report to the bank, without unreasonable delay, any errors which may be discovered. And again in Potts & Co. v. Lafayette Nat. Bank, 269 N. Y. 181, the court of appeals of that State held that the depositor owed to the bank a positive duty to examine the monthly statements of its accounts, and was not excused by the fact that it intrusted that duty to a dishonest employee.

In this State the Supreme Court has likewise departed from the rule laid down in Manufacturers’ Nat. Bank v. Barnes. In the recent case of Cosmopolitan State Bank v. Lake Shore Trust & Sav. Bank, 343 Ill. 347, decided in 1931, the court held that “A depositor of a bank who receives from it a statement of his account with its paid checks as vouchers is bound to examine the account and vouchers and report to the bank, without unreasonable delay, any errors which may be discovered,” citing Morgan v. United States Mortgage & Trust Co., 208 N. Y. 218; Prudential Ins. Co. of America v. National Bank of Commerce, 227 N. Y. 510; Dana v. National Bank, 132 Mass. 156; Leather Manufacturers’ Nat. Bank v. Morgan, 117 U. S. 96. In the last mentioned case it was held that a depositor in a bank who sends his pass book to be written up and receives it back with entries of credits and debits and his paid checks as vouchers for the latter, is bound personally or by an authorized agent, and with due diligence, to examine the pass book and vouchers and to report to the bank, without unreasonable delay, any errors which may be discovered in them; and if he fails to do so, and if the bank is thereby misled to its prejudice, he cannot afterward dispute the correctness of the balance shown by the pass book.

In Osborn v. Corn Exchange Nat. Bank, 218 Ill. App. 28, this court had occasion to consider a similar question, and in discussing Morgan v. United States Mortgage & Trust Co., 208 N. Y. 218, one of the cases cited, said “this case overruled Weisser v. Denison, 10 N. Y. 68.”

In discussing the duty of a depositor to examine his statements and canceled checks, the writer of an article appearing in 24 Columbia Law Review 467, calls attention to the rule in Weisser v. Denison, holding that a depositor is under no duty to examine his statement and canceled checks, characterizes that decision as dictum which has been quoted occasionally in other States, and concludes by saying, “but the contrary view has been definitely adopted by the New York Court of Appeals, and is now generally accepted,” citing Critten v. Chemical Bank, 171 N. Y. 219.

In Empire Trust Co. v. Cahan, 274 U. S. 473, an adult son exceeded the authority given him by his father under an unlimited power of attorney and drew funds from the bank which he applied to his own use. These transactions went on for over two years. The father had no knowledge that this son was misappropriating money and no notice other than that given by the form of the checks. In reversing the judgment of the district court and circuit court of appeals in favor of plaintiff, the Supreme Court of the United States called attention to the fact that the transactions had gone on for over two years and that the bank might fairly expect plaintiff to “find out in a month or two if anything was wrong. Careful people generally look over their bank accounts rather frequently.” The facts in this case disclose that Phillip was not only careless, but by reason of his experience as a banker was fully cognizant of his duty to check his statements and canceled checks. The record discloses an utter disregard of this duty imposed upon him by law as well as by agreement of the parties, and because of the knowledge that must be imputed to him of the alleged wrongful payments extending over a long period of time, in which he actually participated, it would be unconscionable to permit him to recover. Among the decisions cited by plaintiff we find no case in which recovery was permitted where the depositor had notice or knowledge of the improper payments and failed to voice objection. The circumstances of this case are stronger than any of the reported decisions that have been called to our attention by reason of the fact that Phillip not only had notice and disregarded the plain duty imposed upon him by law as well as by agreement of the parties, but he also actively participated in violating his own instructions.

There is, however, an additional reason among the many urged by defendant’s counsel why plaintiff should not be permitted to prevail in this proceeding. He was the sole owner of these funds and could distribute them as he saw fit insofar as the bank was concerned, and was at liberty with the consent of the bank to change and modify his original instructions as to the mode of payment. The question therefore arises whether by his course of conduct over a long period of time he is not estopped from denying that he authorized the bank to make payments in a different manner than that embodied in his original instructions to the bank. The earliest date of the cheeks upon which suit was brought was January 20, 1934. Prior to that time s.ome 22 checks had been drawn against the accounts which did not bear the countersignature of either Binkley or Fischer and no objection was made to this practice. These 22 checks were signed in the identical manner of those on which suit is brought and counsel refers to them as “ratification,” or “estoppel” checks. This evidently constituted the first departure from Phillip’s original instructions to the bank. After January 20, 1934, this changed or modified method of payment continued with increasing frequency. Thereafter, there were some 71 checks drawn against the accounts which did not bear the signature or countersignature of either Binkley or Fischer, including the checks upon which suit was brought. Many of these checks were-for large amounts, one being for $3,173.92, payable to the county collector. This check bore the signature of Malley and the countersignature of Ferguson, identical with most of the checks upon which suit was brought. Phillip made further departures from the original instructions issued to the bank in signing, alone, numerous checks payable to his own order and using the proceeds in payment of trustees ’ fees on account. All these ratification or estoppel checks, as defendant’s counsel call them, were regularly returned to Phillip each month with a bank statement which imposed upon him the duty of examining them and stating that if no errors were reported within 10 days the account would be considered correct. Neverthless, no complaint was ever made, and in fact Phillip admitted that neither he nor anyone on his behalf had ever as much as looked at the bank statements or canceled checks for a period of approximately three years. It was not until Phillip’s counsel found these canceled checks and bank statements in the files in Phillip’s office, just as they had been returned by the bank, that suit was instituted. It seems to us that this constituted a course of dealing on the part of Phillip, amounting to ratification or consent to the payment of checks in accordance with his own practices, and placed the responsibility on his own shoulders. It was through his own negligence that the checks in suit were paid and he ought to be estopped from holding the bank liable for doing that which he repeatedly sanctioned.

Courts in various jurisdictions have absolved banks from liability under circumstances not nearly so aggravated as the facts in this case. In Newmark Grain Co. v. Merchants Nat. Bank of Los Angeles, 166 Cal. 203, 135 Pac. 958, the officers of a depositor by their conduct permitted a bookkeeper to cash checks over a period of 3 years. finder the original arrangements between the depositor and the bank checks were to be cashed only by some one authorized to sign checks for the firm and the bookkeeper was not included in these instructions. The bank was held not liable because the bookkeeper had been permitted to cash checks over a long period of time, and this conduct was held to estop the depositor from "holding the bank liable for the checks improperly cashed.

In Thorold Mfg. Co. v. Imperial Bank, 13 Ont. 330, the president and treasurer of the depositor were the only persons authorized to cash checks in the original written instructions filed with the bank. However, the secretary of the company was in the habit of cashing checks and his continued conduct in so doing, with the knoivledge of the depositor, was held to estop the latter from questioning this custom because it had failed to object thereto.

In Bank of Ukiah v. Mohr, 130 Cal. 268, 62 Pac. 511, the Supreme Court of California held that the depositor was estopped from questioning the payments of drafts drawn against its account signed by an allegedly unauthorized agent, because the depositor knew of previous, similar drafts, drawn by the same agent and paid by the bank, to which he had failed to object.

In Mitchie on Banks and Banking, 1932, vol. 5, p. 337, sec. 178, the rule is stated as follows: “Where a depositor by negligent silence or silent acquiescence estops himself from denying the authority of an agent to draw checks against his deposit, the estoppel applies as to subsequent deposits in the absence of evidence of a notification to the bank that they should be treated differently from the first in respect to their withdrawal. A course of dealing between the bank and a depositor may establish obligations as to its continuance, and if nothing is provided to the contrary, will govern subsequent transactions of the same nature between them.” (Italics ours.)

A conclusion in conformance with this rule was reached in Reeves v. First Nat. Bank of Oakland, 20 Cal. App. 508, 129 Pac. 800, wherein a departure was made from the original signature instructions given to the bank, and the court held that since all the other checks drawn on the. account were signed the same way as the two checks upon which suit was brought, the conduct of the parties showed “how the parties had interpreted the contract, and this course of conduct may be regarded as having established a general usage between the bank and the plaintiff. . . . ”

In view of the unusual facts of this case and the decisions cited to support our conclusions, we are impelled to find that Phillip should be estopped from holding the bank liable for a departure from instructions which he by his own conduct had led the bank to believe was acceptable to him.

The judgment of the circuit court is reversed.

Judgment reversed.

John J. Sullivan and Burke, JJ., concur.


text:
    Owen Barton Jones and George A. Bates, Appellants, v. Commonwealth Edison Company et al., Appellees.
    Gen. No. 39,821.

      Opinion filed December 13, 1938.
    Pope & Ballard, of Chicago, for appellants; Herbert Pope, Ferris E. Hurd and Ralph E. Bowers, all of Chicago, of counsel.
    Wilson & McIlvaine and Taylor, Miller, Busch & Boyden, both of Chicago, for appellees; Charles Y. Freeman, Clay Judson, J. H. Sheldon Lee, Jr., Francis X. Busch, Preston Boyden, and Cassius M. Doty, all of Chicago, of counsel.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Owen Barton Jones and George A. Bates, plaintiffs herein, as stockholders of Commonwealth Edison Company (hereinafter referred to as Edison) filed a bill of complaint in the superior court in December, 1933, and an amended bill in June, 1935, on behalf of themselves and such other stockholders of Edison as might desire to join in the proceeding and bear their share of the litigation expenses, by which they sought to set aside certain contracts made in 1929 and 1932 between Edison and Public Service Company of Northern Illinois (hereinafter called Public Service) and two other public utility companies, and to recover on behalf of Edison certain payments which had been made under these contracts. That suit has been pending in the superior court for more than 4 years. Afterward on December 29,1936, while the proceeding was still pending and undisposed of in the superior court, Edison sent out a notice of a stockholders’ meeting to vote upon a reorganization plan, including the acquisition of Public Service stock by Edison. Plaintiffs then filed their first supplemental complaint, in which they sought to enjoin the stockholders’ meeting. After a hearing the court denied the prayer of the supplemental complaint and dismissed it for want of equity. The stockholders ’ meeting was then held and the plan for reorganization adopted. Thereafter, plaintiffs filed their second supplemental complaint to enjoin the carrying out of the proposals authorized at the stockholders’ meeting, including the acquisition by Edison of Public Service stock. After a hearing the prayer of the second supplemental bill was denied and the complaint dismissed. Plaintiffs have appealed from the last decree thus entered.

It is conceded that this appeal does not involve any of the issues in the original complaint, but a summary of the entire litigation will be helpful to a better understanding of the contentions made by the respective parties.

Edison is a public utility, furnishing light and power to consumers in Chicago. Public Service performs the same function for the suburban and rural territory immediately adjacent to Chicago, extending largely to the north and west. Western United Gfas & Electric Company and Illinois Northern Utilities Company serve neighboring and adjacent territory in northern Illinois, reaching out to points as far west as the Mississippi. In the summer of 1936 Edison owned, directly or indirectly through a wholly owned subsidiary, valuable investments in these other three companies. The four utilities together form an integrated power system of which Edison is the hub.

Since 1925 there has been in existence a contract known as the interchange energy contract, which provides for the pooling of generating capacity by Edison, Public Service and the other two utilities serving this territory. By an amendment to that contract in 1929 a large amount of capacity was made available to Edison and a large amount of electrical energy was taken by it from the other companies. The original bill of complaint is predicated upon amendments made to the interchange energy contract in 1929 and the payments made thereunder to Public Service. It appears that for some years, as far back as 1925, Edison had been faced with physical conditions which restricted its ability to generate power for distribution within its own territory. By the summer of 1936 these conditions resulted in compelling Edison to acquire approximately 47 per cent of its total power from stations outside its geographical district and it was forced to use the transmission lines of other companies to bring this power into the Chicago territory. The acquisition of the stock of these three companies by Edison was therefore considered necessary, not only from a practical operating standpoint, but also to bring about a simplified financial capital structure.

The original bill was filed by plaintiffs in 1933. They then owned 982 shares of Edison stock of a total outstanding capitalization of 1,633,728 shares, or considerably less than 1 per cent of the entire issue. The original bill, puiporting to be in the nature of a class suit, asked relief in connection with payments made by Edison to Public Service under the interchange energy contract amounting to many millions of dollars. It set forth and complained of the payments made by Edison to Public Service over a long period of years preceding 1933, which are characterized as a wrongful diversion and misappropriation of funds, and asks that the action of Edison be declared fraudulent and void, that an accounting be had as to the payments which are alleged to have been unlawfully and wrongfully made to Public Service and that the latter pay to Edison the amount found by said accounting to be due.

In its annual report to stockholders for 1933 Edison advised its stockholders that the original bill of complaint had been filed attacking operations under the interchange energy contract; that the directors had requested a well known firm of engineers to analyze the contract; that the engineers had made a report to the management finding that operations under the agreement had resulted in a minimum practical cost for power to each company; and that the management was convinced that the contract was fair and equitable. The following year the annual report to stockholders advised them that joint answers to the original bill had been filed by counsel for defendants, and again expressed the opinion that the agreement was fair and equitable. Edison’s annual report for 1935 likewise contained a statement relating to the lawsuit, advising stockholders that an amended bill of complaint had been filed and stating that “the management continues to believe the contract as amended will be sustained. ’ ’ During this period and until 1937 numerous stories appeared in the metropolitan press of Chicago, commenting upon either the litigation involved in the original bill or plaintiffs’ attempts to get an injunction against the stockholders ’ meeting. Substantially three-fourths of the Edison stockholders then resided in Chicago, and some 13 per cent or 14 per cent lived in Illinois, outside of Chicago.

The stockholders’ meeting sought to be enjoined in the first supplemental complaint was set for January 23, 1937. Events that transpired during the preceding summer and which culminated in that meeting may briefly be summarized as follows: August 4, 1936, James Simpson, chairman of the board of directors of both Edison and Public Service, addressed a communication to Owen D. Young of New York, expressing the desire of Edison to acquire complete ownership of the stock of Public Service, and he sought to enlist Mr. Young’s services and advice in arriving at a fair basis of exchange. Edison then owned approximately 35 per cent of Public Service stock. Simpson’s letter outlined the task Mr. Young would be asked to perform, including the study of the engineers’ reports, when completed, and his own recommendation to the Edison directors as to the basis of exchange. At approximately the same time Simpson wrote Ford, Bacon & Davis, Inc., and Stone & Webster Engineering Corporation, two independent engineering firms, requesting them to make independent investigations as to the relative value of the stocks of the two companies and to consider the effect to be given to the pending lawsuit and the questions raised therein involving the interchange energy contract and its various amendments. After some 4 months the engineering firms made their respective reports. Stone & Webster Engineering Corporation, representing Public Service, were of opinion that one share of Public Service stock should be exchanged for 4/5ths of a share of Edison, or a ratio of 80 to 100. Ford, Bacon & Davis, representing Edison, recommended that the exchange should range between 69/100ths and 78/100ths of a share of Edison for 1 share of Public Service. Both groups of engineers had reported the interchange energy contract a fair one from an engineering standpoint and based upon these findings Mr. Young, on December 14, 1936, reported to Mr. Simpson that after studying the engineers’ reports and without giving weight to the lawsuit then pending, he was prepared to recommend the exchange of %ths of a share of Edison stock for each share of Public Service. Before making his recommendation and as part of his study of the interchange basis, Mr. Young had investigated the lawsuit then pending and had held a number of conferences with plaintiffs’ attorneys and representatives wherein the situation was discussed and arrangements made so that technical advisers of plaintiffs might discuss the matter with the two engineering firms. After receiving the final reports of Ford, Bacon & Davis, Inc., and of Stone & Webster Engineering Corporation, both dated early in December, 1936, and the recommendations of Mr. Young which were forwarded under date of December 14, 1936, a stockholders’ meeting was set for January 23, 1937. Notice of this meeting, including a statement as to the various matters that were to be voted on, was mailed to the stockholders December 29, 1936, and with the notice was included a letter written and signed by the directors of Edison.

The principal question involved in this appeal is whether this notice to stockholders, with the accompanying directors’ letter, furnished them with sufficient information regarding matters to be voted on at the meeting, as well as of the relations between Edison and Public Service. Plaintiffs complain of the notice, not because of its failure accurately to describe the propositions to be voted on, but because the notice is alleged not to describe sufficiently the question raised by plaintiff’s main litigation and the matters connected therewith. It therefore becomes important to summarize in detail the information given to the stockholders prior to the meeting of January 23, 1937.

The notice and the letter of the directors constitute a voluminous document consuming approximately 26 printed pages of the abstract of record. The notice set forth that the meeting was being called to consider certain resolutions, including one to adopt the plan of reorganization, pursuant to which Edison was authorized to acquire the stock of Public Service in exchange for its own stock at the ratio recommended by Mr. Young, as well as to acquire the stocks of Western United and of Illinois Northern. Accompanying the notice was a letter from the board of directors, pointing out the reasons which made desirable the acquisition of the stock of these three companies by Edison. With respect to the interchange energy contract, the directors’ letter gave a comprehensive review of the facts and of substantially everything that Edison had done up to that time in connection with the lawsuit and contained excerpts from Mr. Young’s letter of December 14, 1936, as will be noted from the following: “As a part of this review (meaning the review of the values of the stock of Edison and Public Service for purposes of exchange), the respective firms of engineers were particularly requested by your Company and Public Service Company of Northern Illinois to make a careful study of the so-called Interchange Energy Contract, the litigation in connection with this contract having already been brought to the attention of the stockholders of this Company in the Annual Reports of 1933, 1934, and 1935.

“If the complainants in this litigation should be entirely successful in every contention made by them, it is possible that Commonwealth Edison Company might recover a very large sum of money from Public Service Company of Northern Illinois. A statement with respect to.the Interchange Energy Contract and the litigation is added to this letter.

“The engineers who were employed by Commonwealth Edison Company and who, with Mr. Owen D. Young, have recommended the ratio of exchange of Commonwealth Edison Company stock for Public Service Company of Northern Illinois stock, gave careful consideration to the effect of the Interchange Energy Contract and this litigation on the proposed exchange. As a result of the investigation and analysis made by Ford, Bacon &■ Davis, Inc., and Stone & Webster Engineering Corporation, independently of the companies and of each other, the conclusion arrived at was that the contract in its present form is fair and equitable between the parties. They found that, so far as the facts were concerned, there was no reason to vary the ratio of exchange by reason of any of the claims made in the litigation. They did not pass on any technical legal questions which might be involved.

“Mr. Owen D. Young, in writing to the Company recommending the basis of exchange now presented to the stockholders, said:

“ ‘I gave attention also to the pending lawsuit involving the Interchange Energy Contract and I had several interviews with the counsel and other representatives of the complainants in that proceeding. Inasmuch as both groups of engineers havp reported that in their judgment, from an engineering standpoint, the contract was a fair one and that in fact it has worked no injustice to the Commonwealth Edison, I am driven to the conclusion that the suit must largely rest on technical legal grounds, which can better be appraised by you under advice of your counsel than by me.

“ ‘On the whole, after studying the engineers’ reports and weighing as best I can the elements in which judgment and evaluation of opinion are a factor, but without giving weight to the law-suit, I am prepared to recommend the exchange of three-fourths (%ths) of a share of Commonwealth Edison Stock for each share of the common stock of the Public Service Company of Northern Illinois.’

“Our counsel advise us that, from a technical legal standpoint, the existence of this law-suit and the claims made therein do not furnish a basis for changing the ratio of exchange recommended by the engineers and Mr. Young.

“As a result of all these opinions that the contract is fair and has worked fairly, your Directors join in the belief that no weight should be given to the lawsuit relative to the contract in recommending to the stockholders the approved ratio of exchange.” In addition to this review of the situation the directors appended to their letter a separate document covering over 2% pages, headed, “Interchange Energy Contract and Litigation,” which described the agreement itself and stated that a bill of complaint had been filed questioning the validity of certain payments made thereunder by Edison, principally to Public Service. The directors’ statement also set forth-Edison’s position with respect to its experience with the interchange energy contract, and explained the reasons for the payments made under the contract and advised the stockholders that copies of the amended bill and answers were available to any stockholder on request to the secretary of the company. It thus appears that prior to the meeting of January 23, 1937, the stockholders were apprised of the entire history of the procedure by which the ratio of exchange was fixed, what the findings of the engineers had been with respect to the interchange energy contract, and full details of the status of the litigation up to that time. The stockholders’ attention was also called to the fact that in previous annual reports they had been advised of the pendency of the original suit and finally they were told that copies of the pleadings were available on request to the secretary of the company.

Plaintiffs concede that the stockholders were apprised of the matters hereinbefore indicated, but they take the position that the meeting was called to obtain ratification of the wrongful acts about which complaint had been made in the original proceeding, namely, payments of very large sums of money totaling millions of dollars by Edison to Public Service under the interchange energy contract and amendments thereto. They say that these payments constituted an unlawful diversion of the funds of Edison and were wholly gratuitous and without consideration; that the pertinent facts regarding these payments were not disclosed to the stockholders, and even if they had been disclosed the stockholders were without power to ratify the payments so as to bind dissenting stockholders because they were donations or gifts of Edison’s corporate funds. In other words, it is argued that because the story had not been told to stockholders of Edison’s prior relations with Public Service and the legal consequences thereof, they did not have the information necessary to enable them to form a just judgment upon the matters to be taken up at the meeting. The principal matters as to which plaintiffs claim that there had not been a full disclosure are set forth under 8 separate paragraphs in the second supplemental complaint.

It is first urged that the nature of the controversy presented by the original proceeding was withheld from the stockholders. We find, however, that a part of the letter from the board of directors contained a statement devoted solely to this litigation, including the following: “Its [the amended bill] chief contention is based on the amount of payments which were made by Commonwealth Edison Company to Public Service Company as the result of certain amendments to the contract which were made in 1929 to secure necessary additional capacity for Commonwealth Edison Company in the most efficient location, which was then in the Public Service Company territory and seeks to have these amendments declared void as to Commonwealth Edison Company and set aside and asks for an accounting for all sums paid by the Company to Public Service Company under the provisions of the amendments complained of.” This statement fairly summarizes the nature of the controversy presented by the amended bill of complaint and any stockholder who wished to avail himself of additional detailed information was at liberty to obtain copies of all the pleadings in that proceeding.

It is next urged that the extent of the payments which plaintiffs claim have wrongfully been made to Public Service by Edison were not disclosed to the stockholders. The directors’ letter contains the following paragraph dealing with this subject matter: “If the complainants in this litigation should be entirely successful in every contention made by them, it is possible that Commonwealth Edison Company might recover a very large sum of money from Public Service Company of Northern Illinois. A statement with respect to the Interchange Energy Contract and the litigation is added to this letter.” Of course, no specific sum was mentioned in the letter for the obvious reason that plaintiffs sought an accounting and it could not then be definitely ascertained what sum would be payable in the event that plaintiffs should obtain a decree in their favor.

Complaint is also made that the stockholders were not advised of the relation of the officers and directors of Edison to Public Service. This contention is predicated upon the fact that Simpson was president and a director of both companies and that one of the vice presidents was an officer of both Edison and Public Service. These facts, however, were well known, as indicated by some 50 news stories introduced in evidence covering the period from June, 1932, to February, 1937, most of which commented upon and made clear the fact that Simpson was chairman of both companies, and presumably the stockholders were fámiliar with these facts. In any event the determination of the ratio of exchange of stocks was not made or influenced by any officer or director, but was made by independent engineers and Mr. Young who were retained for that purpose.

It is further urged that there was no disclosure of stock ownership in Public Service by the officers and directors of Edison. This question was raised at the hearing before the chancellor and defendants forthwith presented to the court a statement covering the stock holdings of the Edison board of directors, which discloses that no director of Edison owns as much Public Service stock as he does Edison; that six of them own either one share of Public Service or no shares at all; and that Simpson, who is chairman of the board, owns one share; that the United States Trust Company of New York, as trustee, owns a large block of stock in both Edison and Public Service in an irrevocable trust for Simpson’s sons in which the settlor has no interest whatsoever.

Complaint is further made that there was no disclosure that counsel who advised Edison that it had no claim against Public Service also represented Public Service in defending the litigation. These facts must have been clear to all stockholders, for in dismissing the first supplemental complaint the trial court pointed out that “the annual report to Edison stockholders in 1934 fully advised the stockholders that the defendants had united in this suit, and the pleadings filed will show that.” As a matter of fact all of the pleadings show on their face that the same counsel have always represented all defendants in the case for the obvious reason that all defendants, as well as their officers, have consistently supported the fairness and validity of the interchange energy contract, and the pleadings which were available on request would have disclosed this fact.

It is further urged that there was no disclosure of the reports of the engineers who recommended the ratio of exchange and the elements upon which they relied. This contention is untenable because the findings. of the engineers were fully and accurately reported to the stockholders by means of the directors’ letter attached to the notice.

Plaintiffs also complain that there was no disclosure of the alleged recommendation of Mr. Young that the ratio of exchange be reduced from 3 to 4 to 7 to 10 because of the claim against Public Service and in favor of Edison set up in plaintiffs’ amended bill of complaint. This reduction is alleged to have equalled substantially $3,000,000 in the equity of Public Service. Mr. Young stated his position in affidavits presented at the trial of the second supplemental complaint, which disclose that his earliest impressions favored a 7 to 10 ratio, but after examining the engineers’ reports and counselling with his own assistants he became convinced that 7% to 10 was a fairer ratio, and he admitted in his affidavit that he was inclined to consider a reduction of the ratio if the lawsuit were disposed of because he felt that it would be in the interest of stockholders of both companies that the exchange should be made promptly and should be free from litigation. Young’s position was clearly stated in his letter of December 14 to Edison and excerpts from that letter, indicating the conclusions reached by Young and his reasons therefor, were quoted in the letter attached to the notice to stockholders.

The remaining objection is that defendants failed to disclose that the acquisition by Edison of the capital stock of Public Service will prevent recovery from Public Service for payments alleged to have been wrongfully made by Edison. We find that the directors said in their letter to stockholders that if plaintiffs were entirely successful in every contention made by them that Edison might recover a very large sum of money from Public Service; that Edison already had a very substantial interest in the stock of Public Service; and they were told that they would be asked to vote upon the acquisition of the remaining shares. The stockholders were thus advised that to whatever extent Edison became the owner of shares of Public Service, a recovery by Edison against Public Service would to that extent be affected.

The sum and substance of plaintiffs’ complaint is that the payments made by Edison to Public Service were wrongful and unlawful and were so concealed by means of amendments made to the interchange energy contract that stockholders were never fully apprised of the real nature of the transaction, and that until it can be determined through a hearing of the main litigation, which is still pending, whether or not these transactions between the two companies were fair, even a stockholders ’ meeting could not ratify them. It is argued that no information was given stockholders on this phase of the case; that the vast sums of money paid by Edison to Public Service from 1929 to 1936 under the interchange energy contract and amendments thereto created a value for Public Service stock which Young used to fix a ratio, and that if these sums had not been paid, illegally as plaintiffs claim, no such ratio would have been considered.

There are several answers to these contentions. It is conceded, of course, that the subject matter of the original proceeding, which had been pending in the superior court for more than 4 years, is not directly involved in this appeal. The only issue before this court is the sufficiency of the notice with the accompanying directors’ letter sent out for the meeting of Edison stockholders January 23*1937. That notice sufficiently apprised stockholders of the issues involved in the main litigation and informed them, if they did not already know, that plaintiffs sought to recover on behalf of Edison large sums of money theretofore paid under thé interchange energy contract and amendments thereto. The nature of this contract was explained to them and they were advised that two independent engineering firms and Mr. Young considered the contract fair from an engineering standpoint. Through this information the stockholders were sufficiently informed as to the purpose which plaintiffs sought to accomplish by means of that proceeding, and if any stockholder had desired further details with reference to the alleged wrongful payments made by Edison to Public Service, and the consequences thereof as affecting his holdings of Edison stock, the means of information was easily available. Notwithstanding these facts, none of the stockholders ever joined plaintiffs in the contentions made in the original proceeding or objected to the ratification of actions taken by the directors of Edison.

The courts of various States have dealt with situations where the form and sufficiency of notice to stockholders called to ratify mergers and reorganizations of various kinds were considered. In Continental Ins. Co. v. New York & H. R. Co., 187 N. Y. 225, 79 N. E. 1026, the Harlem Railway leased part of its road to the New York Central and a dispute arose as to which party should get the benefit of the lower rate of interest in the refinancing of certain bonds on the property. A committee consisting of three directors who were not common to both companies compromised the matter and a majority of the stockholders in both companies approved the compromise. Afterward stockholders of the Harlem Railway Company sued to have the compromise adjudged void, and among the various contentions made w&s the inadequacy of the notice for the stockholders ’ meeting. With reference to this contention the court said (p. 240): “It is contended that the circular issued to the stockholders calling the meeting to act on the proposed compromise was misleading and insufficient. Of course, any circular that might have been issued would be subject to some criticism. Minds differ, and one person would suggest one change, one another. Not a single stockholder that voted for the ratification of the compromise has complained that he was in any way misled or has sought to repudiate his action, The controversy was of long duration and of some public discussion. As early as December, 1896, or nearly two years before the stockholders’ meeting, the eminent counsel for the plaintiff, Mr. Trull, in an elaborate opinion, which is found in the case, had advised that company that the claim of the Central Railroad was without foundation and that the Harlem Company and its stockholders were entitled to the reduction in the interest charges on the road. The plaintiff at all times knew the exact situation of the controversy, and, if it had any fears as to its co-stockholders being misled, it could have apprised them of the true state of the case, if they deemed the circular insufficient in any respect.” (Italics ours.)

A similar contention was made in Cooper v. Central Alloy Steel Corp., 43 Ohio App. 455, 183 N. E. 439 (1931), wherein a minority stockholder sought to set aside certain merger agreements on the ground that the ratio of exchange of shares had been arbitrarily and fraudulently arrived at, and the claim was there also made that notice of the stockholders’ meeting called to ratify the plan was inadequate. However, the court held (p. 469): “It is also strongly asserted that defendant Jones misled his directorate and stockholders in the form and insufficiency of his notice of the stockholders’ meeting called to ratify the merger plan. We are not impressed with this assertion. The notice is regular and sets forth the basis of exchange. It would have been next to impossible to have stated in the notice all that was proper matter for discussion in the stockholders’ meeting called to approve the resolution proposed, which was subsequently adopted by the vote of 419,740 Alloy shares.”

In Citrus Growers’ Dev. Ass’n v. Salt River Water Users’ Ass’n, 34 Ariz. 105, 268 Pac. 773 (1928), it was contended that a special election held under the articles of association to authorize a bond issue was void because the notice did not sufficiently advise the shareholders of the questions to be voted upon, but the court said (p. 114): “In this case the notice states clearly the general nature of each proposition to be voted and that a copy of the proposition could be seen at the office of the secretary. We think this was sufficient notice that each question submitted covered all matters appearing in the proposition so on file, as well as all things appearing in any of the official minutes and records of the association which were referred to in such proposition.”

The notice sent to the stockholders in this proceeding was unusually voluminous, and dealt not only with the resolutions and matters to be voted on at the meeting, but contained a statement as to the original litigation, what plaintiffs sought to accomplish thereby, the position of the defendants with reference to the charges made, including the alleged illegal and wrongful payment of large sums of money by Edison to Public Service and the possible legal consequences thereof in the event that plaintiffs should obtain a decree. Where a notice to stockholders sufficiently apprises them of the matters to be considered at the meeting, gives them information upon which they may exercise an intelligent judgment with reference to the proposed questions, and opens up the avenue for such additional information as stockholders may desire to obtain, that is sufficient. We think this notice went beyond the ordinary requirements imposed by law under similar circumstances.

It was urged by defendants that after the first supplemental complaint was dismissed, whereby plaintiffs sought to enjoin the holding of the stockholders’ meeting January 23, and no appeal having been taken from that order, that plaintiffs are estopped to raise the same question under the second supplemental bill, and during the pendency of this appeal defendants moved to dismiss the same on the ground that the events sought to be enjoined by the second supplemental complaint have already occurred, and that the issues raised therein have become in substance and effect moot, since the Illinois Commerce Commission and the Securities Exchange Commission have both approved the exchange of stocks and all the resolutions approved at the meeting have been carried out, so that nothing remains to be done. In view of our conclusion as to the principal question involved, we see no useful purpose in extending this already lengthy opinion by a discussion of these issues. The motion to dismiss is denied.

We are of the opinion that the chancellor properly dismissed the second supplemental complaint for want of equity. The decree of the superior court is affirmed.

Decree affirmed.

John J. Sullivan and Burke, JJ., concur.


text:
    Samuel K. Markman, Appellee, v. The City of Calumet City, Appellant.
    Gen. No. 39,962.

      Opinion filed December 13, 1938.
    Miller, Gorham, Wescott & Adams and John E. Pavlik, both of Chicago, for appellant; Herbert C. De Young, of Chicago, of counsel.
    Markman, Donovan & Sullivan and Henry O. Nickel, both of Chicago, for appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Samuel K. Markman, Martin H. Finneran and Consoer, Townsend & Quinlan, a corporation, filed separate suits against city of Calumet City to recover for services claimed to have been performed by them as attorney, commissioner and engineers, respectively, in connection with a special assessment proceeding for the construction of sewers in Calumet City. The three suits were consolidated and tried together before the court without a jury, resulting in judgment in favor of Markman for $3,500, Finneran for $1,500 and Consoer, Townsend & Quinlan for $2,000, respectively. Defendant appealed from the three judgments thus rendered, and during the pendency of these appeals, this suit by Markman, No. 39,962 and cases numbered 39,963 and 39,964 were consolidated by orders entered in each case.

The facts essential to a consideration of the issues involved disclose that June 23, 1927, defendant, a municipal corporation, passed an ordinance providing for the construction of a connected system of combined sanitary and storm water sewers, pursuant to the provisions of the Local Improvements Act (Ill. Rev. Stat. 1937, ch. 24 [Jones Ill. Stats. Ann. 76.003 et seq.]), the total estimated cost of which, including the making, levying and collecting of the assessments and all lawful expenses attending them aggregated $261,200. In compliance with the ordinance a petition was filed in the county court July 21, 1927, and was docketed as Calumet City special assessment No. 183. Thereafter, Martin H. Finneran, who had been appointed by the president of' the board of local improvements of Calumet City, was ordered by the county court to prepare a true and impartial assessment of the cost of the proposed improvement and return it to the court. A report and assessment roll in the aggregate amount of $261,200 was accordingly filed and thereafter confirmed by the county court September 26, 1927.

The journal proceedings of the board of local improvements of Calumet City disclose that defendant had some difficulty in obtaining bids for the proposed improvement. October 13, 1927, the secretary was authorized to advertise for bids, to be opened October 21, 1927. No bids were received, and thereafter other notice's were published from time to time, without producing any results. The question of obtaining bids was frequently considered and deferred until 1929. The record shows that the following bids were finally received, pursuant to a notice published in a local newspaper January 12,1929: Kruse Construction Company —$189,925; DeAndreas Bros.- — $201,175.95; Public Construction Company — $188,659; Krenn & Dato— $196,783. On January 29, 1929, the contract was awarded to Public Construction Company as the lowest responsible bidder, the secretary of the board was directed to publish notice of the awarding of the contract, and on January 31, 1929, the local newspaper published notice that it had been awarded to Public Construction Company for $188,659.

Thereafter, March 1, 1929, the city issued special assessment voucher No. 634, payable to bearer, in the sum of $4,716.48, with interest thereon at 6 per cent per annum, which was delivered to Samuel K. Mark-man, plaintiff herein, for services performed by him as attorney on this special assessment proceeding. Another voucher, No. 635, in like amount, was evidently issued to Finneran, plaintiff in one of the consolidated cases, but it was never signed by the mayor or attested by the clerk, and was thereafter marked “cancelled” as of October 13, 1931, but never delivered to Finneran. A third voucher, No. 632, in the sum of $8,125 was issued to Consoer, Older & Quinlan, plaintiff in the third consolidated suit. This voucher likewise was never signed by the mayor or attested by the clerk, and was canceled October 12,1931, and never delivered to the Consoer corporation.

It appears from the evidence that Markman had been city attorney for Calumet City for a great many years. He had never had a written contract with the municipality. In the early years of his employment he had been paid 4 per cent or 5 per cent of the cost of special assessment improvements, and later, when the village embarked upon a large amount of special assessment work, his compensation was reduced to 2% per cent of the contract price. He testified that as city attorney he performed all legal services for the city, and was to receive additional compensation for services rendered in connection with special assessments. He understood that he was to be paid by voucher in special assessment cases, and vouchers were issued to him in all cases where a contract was let as soon as the clerk had filed in the office of the county court in which the assessment was confirmed a certificate of the issuance of first voucher for work done. In this proceeding such a certificate was issued February 21, 1929, in the nominal sum of $50, certified to by the engineers, Consoer, Older & Quinlan, and was filed with the clerk of the county court on that date. Simultaneously with the issuance of the first voucher issued to the contractor a voucher was issued to Markman. It is conceded that Markman did all the legal work in connection with the special assessment proceeding up to confirmation thereof and the awarding of the contract, and he testified that the usual, customary and reasonable charge of an attorney doing special assessment work in Cook county at that time was 4 or 5 per cent of the cost of the improvement; that after completion of his work in this proceeding he had submitted a bill to the board of local improvements of Calumet City which had theretofore been allowed in the sum of $6,750, but had afterward, without his consent, been reduced to $4,716.48, this sum having evidently been calculated on the basis of 2% per cent of the contract price. Markman made no objection to this reduction and accepted the voucher.

Martin II. Finneran testified that he had spread the assessment in the instant proceeding, prepared the reports, conferred with the attorneys during the preparation of the assessment, as well as with the engineers regarding the area of the sewer district; that he had submitted a bill to the board of local improvements for $6,750, which was later reduced by the board so as to equal 2% per cent of the contract price. Finneran said that he was unaware that a voucher had been issued to him until he received a letter from the city clerk in October, 1931, requesting him to return the voucher for cancellation. The witness further testified that the fair and reasonable fee for commissioners for spreading assessments in Cook county is 2% per cent of the cost. He detailed the character of his services and said that he had some outlays in connection with spreading the assessment. His overhead expense on the job was estimated by him at $2,500 to $3,000.

On behalf of Consoer, Townsend & Quinlan, George O. Consoer testified that he was a member of that firm; that he had helped prepare plans and specifications for special assessment No. 183, and that the service consisted of drawing plans and specifications, assisting the attorneys and the commissioners, furnishing maps to the assessment commissioner, outlining the sewer district and appearing in court when the case came up for confirmation; that the usual, customary and fair price for making plans and specifications in special assessment proceedings up to the time of letting the contract is 2% per cent of the cost, and that an additional charge of 1 per cent is usually made for supervision, Consoer likewise said that his firm had never received a voucher from Calumet City and that it was apprised for the first time in October, 1931, that a voucher had been issued.

The construction of this improvement was never carried out. The only reason assigned for the failure of the city to complete the improvement is contained in a letter dated October 7,1931, written to the three plaintiffs, saying: “We have learned from our last Audit. Report that no work was actually performed in Special Assessment 183 due to the fact that there was no market for the bonds at that time. Regardless of the fact that no work was actually performed, vouchers were issued against this assessment. Of the total amount issued, you are holding voucher in the amount of [here the amount of the respective vouchers was set forth]. I am at this time, asking you to return the voucher which you have in your possession, for cancellation. ’ ’

Public Construction Company, to whom the contract was awarded, had made a deposit of 10 per cent of its bid, amounting to some $19,000, and furnished bond for the completion of its undertaking. Markman téstified that long after awarding the contract to Public Construction Company the board met “surreptitiously,” returned the certified check to the contractor, and permitted it to withdraw its bond. It is conceded that the proceeding was never dismissed in the county court.

Since the improvement was never carried out and no funds became available from which the Markman special assessment voucher could be paid, he, as well as the other plaintiffs, claim that they have a right to recover on a quantum meruit. They concede that under the decisions cited by defendant, where the proceeding ripens into a completion and levying of an assessment, persons holding special assessment vouchers payable for expenses incurred in the proceeding, must look to the specific fund for payment for the services rendered. (City of Chicago v. Brede, 218 Ill. 528; Northern Trust Co. v. Village of Wilmette, 220 Ill. 417.) It is urged, however, that where the municipality completes the proceeding by procuring confirmation of the assessment and actually awards the contract for construction, and then without any legal justification abandons the work, even though the proceeding is not dismissed in the county court, there can be no valid reason why the city should not be held generally liable on a quantum meruit basis, and it is argued that the conduct of Calumet City in this proceeding amounted to an abandonment of the improvement and that in that situation the same rule applies as where a special assessment proceeding is not carried out to completion, either because of the invalidity of the ordinance or because it is dismissed before confirmation. This raises the principal question involved in these consolidated appeals, namely, whether there was an abandonment of the improvement on the part of the defendant.

It is conceivable, of course, that no work was actually performed at the time because as the clerk said' in his letter to plaintiffs on October 7, 1931, “there was no market for the bonds at that time,” and Calumet City may well have considered it advisable to defer the actual construction work until better market conditions prevailed. It is difficult to understand, however, why the contractor’s check was returned, why it was permitted to withdraw its bond, and why the city clerk, after notifying each of the plaintiffs that no work had been done and impliedly indicating that none would be done, requested them to return their special assessment vouchers for cancellation. It is significant that no effort was made to carry out the improvement between October, 1931, and August 11, 1936, when these suits were instituted, and it may fairly be inferred from these circumstances that the city had no intention thereafter to proceed with the work. Substantially 7 years had elapsed from the time the contract was awarded to Public Construction Company in 1929 until the suits were filed, and the record contains no suggestion of any effort whatsoever on the part of the city to proceed with the work nor that it has any intention of carrying out the improvement. This it seems to us, constitutes a clear abandonment.

Defendant has devoted the major portion of its argument to the premise that under secs. 73, 88 and 90 of the Local Improvements Act (Ill. Rev. Stat. 1937, ch. 24 [Jones Ill. Stats. Ann. 76.090, 76.109, 76.113]) the city cannot be held generally liable, and in support of this contention it relies principally on City of Chicago v. Brede, 218 Ill. 528; First Nat. Bank v. Dolton, 288 Ill. App. 85; Berman v. Board of Education, 360 Ill. 535. It was held, however, in Gray v. City of Joliet, 287 Ill. 280, 285, that “where the city abandons the proceeding, as it has a right to do, before it reaches the final stage of levying the assessment, a person like the commissioner having a claim for the preliminary work of preparing the assessment roll has no claim against any special fund, for no such fund is raised, and he has no remedy by mandcumus to compel the city to levy the assessment, for the municipality has the lawful right to abandon the proceeding and not make the improvement. ... It cannot relieve itself from liability to pay the reasonable expenses incurred where the city itself voluntarily abandons and dismisses the proceeding before judgment of confirmation. ’ ’

On oral argument considerable stress was laid by counsel for defendant on the fact that the proceeding had never been dismissed, and it was argued that the Gray case applies only to proceedings where dismissal was had, definitely indicating an abandonment of the project. We see no difference in principle, however, between a situation where the proceeding is dismissed and where from all the facts and circumstances it clearly appears that there has been a definite abandonment of the project. And since no funds became available out of the special assessment by reason of the city’s abandonment of the proceeding, plaintiffs ought to be allowed to recover on a quantum meruit basis for the services rendered.

In Gray v. City of Joliet, supra, Gray had been appointed to spread the assessment, and agreed, as here, to take his pay from the fund derived from the special assessment, but, as the court pointed out in its opinion, the city counsel by their own act destroyed the fund from which he should be paid, and having acted in good faith in his transactions with the city, and the city having received and accepted the benefit of his services, the court held that he should be paid therefor. It was conceded by counsel for defendant that if the proceeding in the case at bar had been dismissed, plaintiffs would be entitled to recover for their services. We think Calumet City by its conduct in abandoning the improvement destroyed the fund from which plaintiffs could be paid, just as effectively as if the proceedings had been dismissed, and that plaintiffs having in good faith rendered valuable services, the benefits of which the city accepted, they should be paid therefor.

The question arose on oral argument as to whether mandamus was available as a remedy to compel Calumet City to complete the improvement, and counsel for defendant filed additional authorities citing Church v. People ex rel. Kochersperger, 174 Ill. 366, and several other decisions under which it is contended that plaintiffs could compel the reletting of the contract by mandamus. In the Church case the municipality had not completed the special assessment improvement according to the specifications of the ordinance, and on application of the treasurer for judgment for the delinquent assessments the court held that where it was admitted that the location of the sewer had been changed the burden was upon the applicant to prove that the completed improvement was substantially in compliance with the ordinance. By way of dictum the court said that during the course of construction the property owner who had been assessed would have a right to proceed by mandamus to compel the city to complete the improvement. That case involves a' right of a property owner but it did not, nor did any of the other cases cited by defendant, deal with the rights of attorneys, commissioners or engineers to compel construction of improvements for the sole purpose of collecting their fees. Likewise, in Webster v. City of Chicago, 83 Ill. 458, cited by defendant, the court, by way of dictum, pointed out that the property owner is the one who has the right to have the improvement installed, and where he had paid for it, can compel the city by mandamus to make it. We do not think these decisions are applicable to the circumstances of this case, or that plaintiffs herein could maintain mandamus proceedings to compel the city to act, because as pointed out in Gray v. City of Joliet, supra, the city has a right to abandon the proceeding before it reaches the final state of levying the assessment, and “a person like the commissioner having a claim for the preliminary work of preparing the assessment roll has no claim against any special fund, for no such fund is raised, and he has no remedy by mandamus to compel the city to levy the assessment, for the municipality has the legal right to abandon the proceeding and not malee the improvement(Italics ours.)

It is further urged on behalf of defendant that the provisions of sec. 4, article VII of the' Cities & Villages Act (Ill. Rev. Stat. 1937, ch. 24, p. 365 [Jones Ill. Stats. Ann. 21.196]) require a prior appropriation before officials of a municipality are authorized to enter into a contract. In the case at bar the work performed by Markman was under a contract providing that he was to be paid out of the special assessment fund, and defendant contends that that is the only manner in which Markman and the other two plaintiffs could be paid. The contention thus made is inconsistent with the argument that a prior appropriation is necessary. The ordinance authorizing the improvements specifically required that the cost of mailing and levying and collecting should be assessed against the property under the provisions of sec. 94 of the Local Improvements Act (Ill. Rev. Stat. 1937, ch. 24 [Jones Ill. Stats. Ann. 76.117]), and it has been generally recognized that attorney, commissioner and engineering fees are legally payable out of what is generally termed the 6 per cent item. In Langworthy v. Village of Oak Lawn, 286 Ill. App. 236, 240, the court held that vouchers issued to evidence the cost of engineering and inspection were on a parity with vouchers issued to attorneys for the cost of the legal services rendered. In the case at bar defendant was evidently under the misapprehension that it had issued vouchers to the commissioner and engineers, as well as to the attorney, and it should not now be allowed to take any other position.

As a third contention it is urged that the claim of the three plaintiffs is barred by the statute of limitations, which provides that actions on unwritten contracts ‘ ‘ shall be commenced within five years next after the cause of action accrued.” It is urged that the claim for services performed accrued during the year 1927, and that suits were not commenced within five years from that date and until August 11, 1936. In Davis v. Munie, 235 Ill. 620, the court pointed out that the statute itself fixes the time when the cause of action accrues, and said that “it means when facts exist which authorize one party to maintain an action against another.” The question thus presented is when the cause of action accrued in the instant case. Although the judgment of confirmation was entered in 1927, almost two years elapsed before the contract was awarded in January, 1929, and plaintiffs were justified in believing that after the contract was awarded the improvement would be constructed. If the city had proceeded with the work the plaintiffs would have had to await the collection of the assessment before payment could be made to them for their services. However, the city returned the certified check to the contractor and canceled his bond, and it was not until October 7, 1931, that plaintiffs were apprised by the city clerk why no work had been done, and the lapse of time from October, 1931, until August, 1936, when suit was instituted, Avithout any indication on the part of the city that it intended to carry out the improvement, confirms the abandonment. We think it was not until plaintiffs received the letter from the city clerk apprising them of the fact that no work had been done, and requesting the return of their vouchers for cancellation, that facts came into existence which would authorize the maintenance of an action against the city, and this was within the statutory period.

The remaining contention is that plaintiffs failed to prove the reasonable value of the services rendered. We have examined the record and have outlined a summary of the testimony given by the respective plaintiffs on this phase of the cases and are of opinion that the evidence sufficiently supports their claims.

For the reasons given, herein the judgment of the city court of Calumet City in favor of Samuel K. Mark-man and against the city of Calumet City, is affirmed.

Judgment against the city of Calumet City affirmed.

John J. Sullivan and Burke, JJ., concur.