text:
    E. Ferdie Trichelle, Defendant in Error, v. Sherman & Ellis, Inc., Plaintiff in Error.
    Gen. No. 34,346.

      Heard in the second division of this court for the first district at the June term, 1930.
    Opinion filed December 16, 1930.
    Knapp, Beye, Allen, Cochran & Cushing, for plaintiff in error; John R. Cochran, Leonard F. Martin and R. Corwins Stevenson, of counsel.
    Fisher, Boyden, Bell, Boyd & Marshall, for defendant in error; Rudolph M. Muleinger, of counsel.
   Mr. Justice Barnes

delivered the opinion of the court.

This was a suit to recover insurance predicated upon a so-called preliminary or temporary contract therefor generally referred to as an insurance binder. Defendant filed the general issue and several special pleas. Plea number two denied liability on the ground that the binder was unauthorized, number three, on the ground that it was not executed by defendant or anyone authorized by defendant, and the other special pleas set up noncompliance with some term or provision contained in the policy referred to in the binder.

The judgment under review was entered on the verdict of the jury against the defendant for $11,958.33, including interest.

The so-called binder (omitting the printing at the top of the letter) and dated at Houston, Texas, April 8, 1924, reads:

“Miss E. Ferdie Triehelle,
820 Live Oak,
City.
Dear Madam:
We are this day binding coverage on your three story, iron clad metal roof warehouse to the amount of ten thousand ($10,000.00) dollars concurrent insurance.
The policy will be here from our Chicago office within the next few days and at that time I will deliver same.
Very truly yours,
Indemnity Exchange Sherman & Ellis, Inc.
(Signed) By John A. Montgomery.”

Said “Indemnity' Exchange” was a reciprocal fire insurance exchange having its home office in Chicago, and licensed to transact .business in Texas. Under the method of reciprocal insurance, so-called subscribers thereto insure each other by private contracts through a common attorney in fact authorized by each to exchange contracts of insurance on his behalf with the other subscribers and under such authority the attorney executes a policy of insurance to the subscriber. The place where the business is conducted and policies exchanged by said attorney is called the “Exchange.”

Sherman & Ellis, Inc., defendant, was the attorney in fact for the subscribers to the Indemnity Exchange, and employed one Gray at the Chicago office as its managing fire underwriter, and one Montgomery at Houston, Texas, as its solicitor and claim adjuster. Gray only was authorized to issue binders. Montgomery had spoken to plaintiff while she was assistant manager to the Kent H. Easter Warehouse and Forwarding Company at Houston, regarding fire insurance on its building in the Indemnity Exchange. She told him she was not the owner but might have to take over the building on a mortgage, and if so, would give him some insurance, and that the building was then carrying $15,000 insurance. He told her he had no authority to pass on the risk and that Sherman & Ellis, Inc., was sending a Mr. Botkin into the territory and he would inspect the building.

A few weeks later Montgomery and Botkin called on plaintiff and inspected the building. It had a Grinuell sprinkler system but not connected with the city water service. Botkin got the impression it would be, and said he would approve the risk, but plaintiff made no statement to that effect. His approval, however, was subject to Gray’s. No arrangement for insurance, however, was made at that time.

Later, shortly before April 2, 1924, after plaintiff acquired title to the property, she called on Montgomery and told him she was ready for $10,000 insurance, for him to get the description of the property and the amount of concurrent insurance from the policy form of another concern carrying insurance on the same, and that she expected the sprinkler system to be connected about April 4th. It was never connected up.

On the same day Montgomery wrote to the Indemnity Exchange at Chicago asking it to place $10,000 fire insurance on the “Kent H. Easter Warehouse and Forwarding Company Warehouse,” to become “effective April 4 by wire, ’ ’ and stating therein the character of its construction, that Botkin had passed upon it as a good risk, that the Grinnell sprinkler system was installed, and what would be the probable rate. The admitted purpose of the letter was to get the issue of a binder. Gray received it April 5. Without receiving a reply Montgomery on April 7, having that day obtained a description of the property and the amount of concurrent insurance (then ^15,000) in the manner plaintiff indicated, addressed a letter to the Easter Warehouse Company advising it that the Exchange was that day binding coverage on the warehouse to the amount of $10,000 concurrent insurance, and that the policy would be received from Chicago in a few days, and on the same day sent the Exchange a telegram advising that he was issuing the binder for the Easter Company, and also a letter advising it that the binder was for $10,000, that there was $15,000 concurrent insurance, and requesting a policy for $10,000. The letter was received at 2 o ’clock, April 10, the day of the fire.

On April 8, plaintiff having returned to Montgomery the binder or letter of April 7, addressed to the Easter Company instead of to her, he delivered to her the binder in question, and wrote to the Exchange advising of the change of ownership and that the policy was to be issued to plaintiff. That letter was received at 11 a. m. April 10, 1924. Defendant did not reply to Montgomery’s telegram of April 7 advising it that he had issued a binder for the property nor repudiate his exercise of such authority.

Defendant contends that such preliminary contract is subject to all the terms and conditions of the usual form of policy to be subsequently issued even though such policy may never issue, and cites the following authorities as sustaining that theory: Eames v. Home Ins. Co. of New York, 94 U. S. 621, 629; Eureka Ins. Co. v. Robinson, Rea & Co., 56 Pa. St. 256, 94 Am. Dec. 65; Barre v. Council Bluffs Ins. Co., 76 Iowa 609, 41 N. W. 373; Cottingham v. National Mut. Church Ins. Co., 290 Ill. 26; Lipman v. Niagara Ins. Co., 121 N. Y. 454, 458, 24 N. E. 699, 700; Sherri v. National Surety Co., 243 N. Y. 266; Concordia Fire Ins. Co. v. Heffron, 84 Ill. App. 610, 612.

Plaintiff does not seem to question this general doctrine except where the policy is not issued, a fact which we fail to see could affect the doctrine, and as appears from several of the cited cases, it has been applied where the policy was never issued. Plaintiff’s main contention is that having repudiated the binder and denied liability under it defendant is in no position to urge noncompliance with the terms and conditions of the unissued policy, and the following cases are referred to: Welch v. Northern Assur. Co., 223 Ill. App. 77; Chenier v. Insurance Co. of North America, 72 Wash. 27, 129 Pac. 905; Western Assurance Co. v. McAlpin, 23 Ind. App. 220, 55 N. E. 119; Tayloe v. Merchants’ Fire Ins. Co., 50 U. S. (9 How.) 390; Knickerbocker Life Insurance Co. v. Pendleton, 112 U. S. 696, 709; Gold v. Sun Ins. Co., 73 Cal. 216, 14 Pac. 786; Baile v. St. Joseph Fire & Marine Ins. Co., 73 Mo. 371; Hardwick v. State Ins. Co., 20 Ore. 547, 557, 26 Pac. 840, and Sprout v. Western Assurance Co., 33 Ore. 98, 99, 54 Pac. 180.

If upon the instant state of facts, however, plaintiff’s contention is untenable both as to construction of the contract and waiver of the provisions of the contemplated policy, and defendant’s theory of the legal import and effect of the binder is correct and applicable to the facts, it follows that the insured cannot recover if she has failed to comply with such provisions.

This leads us to consider, first, the legal import of the so-called binder, assuming authority to issue it, which we think defendant is in no position to question, it having failed to repudiate at once Montgomery’s exercise of such authority conveyed to it both by wire and by letter.

It will first be noted that the binder does not purport to express any terms of the “coverage” and expressly refers to a policy to be delivered. That it is a preliminary contract for present insurance as of its date, and an executed contract in that respect, is not questioned, and the suit is brought upon it as such, but it is distinguishable from a suit brought upon or' to enforce a contract “to insure.” Most of the cases cited by plaintiff are of the latter nature. Some note that distinction, particularly the Welch case, and in some the terms of the preliminary contract were either deemed complete or affected by something said or omitted to be said. There is no contention here that anything was said or done that created any different understanding than is expressed in the preliminary contract, so it becomes a mere question of law, in such a case, whether there may be read into such contract the terms and conditions of the contemplate!! policy to which said contract refers.

One of the leading cases on the subject, frequently referred to, is the case of Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454. There the insurance company issued a “binding slip” or agreement which recited that “this receipt binding until policy is delivered” and, as there said, did.not contain any of the conditions “usually found in insurance policies.” The insurance company relied upon a provision contained in its ordinary policies authorizing it to terminate the insurance on notice, and upon its having given such a notice prior to the fire. The insured contended that the company could not cancel the risk so long as the binding slip was in force, and that the only remedy of the company to get rid of the risk was to issue the policy and then immediately cancel it. This is much the same contention made here that defendant’s theory that the binder is subject to the terms and conditions of the contemplated policy is untenable where the policy is never issued. The court said:

“The binding-slip was a short method of issuing a temporary policy for the convenience of all parties, to continue until the execution of the formal one. It would be unreasonable to suppose either that the brokers expected an insurance except upon the usual terms imposed by the company, or that the secretary of the company intended to insure upon any other terms. . . . The binding-slip was a mere memorandum to identify the parties to the contract, the subject matter, and the principal terms. It refers to the policy to be issued. The construction is, we think, the same as though it had expressed that the present insurance was under the terms of the usual policy of the company, to be thereafter delivered.”

This construction was reaffirmed in Sherri v. Nat. Surety Co., 243 N. Y. ‘266,153 N. E. 70, and is adopted in the other cases cited by defendant and above referred to. In Gottingham v. National Mut. Church Ins. Co., 290 Ill. 26, 33, a suit that was brought on a preliminary contract of insurance, our Supreme Court, referring to the Eames case (U. S. Sup. Ct.) and using much the same language, said: “It is not necessary in such a preliminary contract that all the details of the contract as finally expressed in the written policy should be specified. In a preliminary contract it will be presumed that the parties contemplate such form of policy containing such conditions and limitations as are usual in such cases or have been used before between the parties.”

In short, this theory recognizes a practical situation and the manifest mutual intent and understanding of the parties with regard thereto, that the applicant desiring protection from the date of his application, before the policy can be executed in the ordinary course of business, is given and accepts a binder as evidence of ‘ ‘ coverage ’ ’ or temporary insurance from that date until a policy to take effect as of said date can be delivered, but, in the absence of any express terms in the binder or other understandings, on the basis of the terms and conditions of the policy contemplated. By the very nature of the transaction both parties contemplate that the protection given is in accordance with the terms and conditions of the policy to be issued.

Plaintiff, however, contends that the insurance company waived such terms and conditions when it repudiated the contract and refused to issue the policy. As already stated, most of the cases cited by plaintiff were suits brought upon a verbal or written preliminary contract “to insure” and not upon a contract for present insurance, and most of what was said in those cases should be considered with reference to that distinction. In several of them the insurance company claimed that the failure to produce proofs of loss required by the contemplated policy relieved it of liability, and it was held that the refusal of the company to issue a policy was a waiver of such proofs. The ruling was on the theory, however, that the refusal to issue the policy superseded the necessity for producing the proofs and it would be a useless and idle ceremony. That doctrine is not questioned. Some of plaintiff’s cases so deciding nevertheless assume or expressly recognize the doctrine contended for by defendant. In the Sproul case, supra, it was said that where nothing is stipulated in the preliminary agreement with respect to the kind and nature of the policy to be issued, the law presumes the parties contemplate the usual ordinary policy employed by the company to cover property of like kind and nature as that designated in the agreement, but held that where no inquiry was made touching incumbrances that would have voided the policy, and no intimation given that they would in any way affect the insurance stipulated for, and the insurance company denies the contract and withholds the policy, it operates as a waiver of the condition of the policy voiding it because of such incumbrances. ■ “But,” the court added, “the assured, under the authorities, is held accountable under all conditions of the contemplated policy which are calculated to protect the company against subsequent increase' of hazard without its consent, in the prescribed manner, if it is possible, without the physical existence of the instrument itself, to comply therewith,” citing the Eureka Ins. case, supra. If, however, in the absence of any understanding otherwise than expressed in a binder that merely identifies the assured, the property and its amount and refers to a policy to be issued, waiver may be asserted to exclude the operation of any one condition of liability contained in the contemplated policy because not referred to in the preliminary contract or discussed at the time of its execution, it is somewhat difficult to draw the line as to what condi-tions and limitations of the policy may be enforced. We cannot reconcile such a ground of waiver with the general rule of construction — which the opinion itself concedes — that where a binder does not attempt to prescribe or restrict the terms of insurance but merely undertakes to give coverage and refers to the policy to be delivered thereafter the obligations of the parties are, as stated in the Lipman and Sherri cases, supra, “according to the terms of the policy in ordinary use by the company.”

But it is urged by defendant that plaintiff can in no event avail herself of the doctrine of waiver having-pleaded performance on her part of the conditions of the policy and not having pleaded waiver, citing Feder v. Midland Casualty Co., 316 Ill. 552, where it was held that a waiver of the requirement of proofs of loss could not be claimed where plaintiff had not by the pleadings claimed the benefit of such waiver, but instead had in her declaration alleged performance of the conditions. To meet this contention her counsel argues that the allegation in the declaration of performance on her part of the conditions of the policy is mere surplusage in view of plaintiff’s theory that the preliminary contract measures the obligation upon which her right to recover depends. While this is but a mere repetition of the argument that the preliminary contract is not subject to the terms and conditions of the policy to be issued, nevertheless, her declaration was based upon a different theory. Each count npt only alleges that plaintiff has “kept and performed all things in said policy contained on her part to be kept and performed” — clearly referring to the policy contemplated to be issued — but explicitly sets forth in detail compliance with certain conditions of the contemplated policy, namely, that she had an interest in the property in the amount for which it was insured, that the loss did not happen by any means “not covered by said policy of insurance, ’ ’ that she gave notice to defendant of the loss as soon as possible, that there was not any other insurance on said property except the amount of $15,000 (afterwards amended to read $20,000), that the building was not appropriated, applied or used for or to the purpose of carrying on or exercising therein any trade, business or vocation denominated hazardous or extrahazardous, or specified as not being covered by said policy of insurance.

Construing the pleading most strongly against the pleader, as we must, under a familiar rule, plaintiff must be held to have recognized that the contract sued upon embraced the terms and conditions of the policy to be issued, and having alleged performance of all things in said policy on her part to be kept and performed, and not having pleaded waiver, either in the declaration or by replication to the special pleas, she is in no position under the well established rule stated in the Feder case, to rely upon her claim of waiver.

If, therefore, the binder be construed as subject to the terms and conditions of defendant’s usual form of policy, and there is no ground for waiver, then it remains to be seen whether the policy was voided by plaintiff’s failure to comply with its terms and conditions or any of them.

One of the provisions of defendant’s form of policy, set up in its eighth plea, is that any suit or action thereon for the recovery of any claim shall not be sustainable unless commenced within twelve months next after the fire. It is undisputed that the warehouse was destroyed by fire on April 10,1924, and that this suit was commenced by plaintiff on April 21,1926. The suit was, therefore, barred by this limitation of the contract. (Hartzell v. Maryland Casualty Co., 163 Ill. App. 221, and cases there cited.)

The seventh plea set up a provision of the policy that it shall be void if the insured has made or thereafter makes or procures any other contract of insurance on the property covered by the policy. When plaintiff asked for temporary insurance there was, as she represented, concurrent insurance on the property for only $15,000. The day she asked for a new binder in her name she had increased the amount to $20,000, without Montgomery’s knowledge or conveying the fact to him, on which she collected $18,000. The fact is not disputed and it cannot be questioned that violation of this provision invalidated the policy. (Continental Ins. Co. v. Hulman & Cox, 92 Ill. 145.)

Defendant’s fifth plea set up a provision of the policy that it shall be void “if there was kept, used or allowed on the premises any explosives.” That there was ammonia kept in the warehouse until the fire and that it caused explosions is practically admitted and not questioned. That the language of the policy includes ammonia as an explosive there is little or no room for doubt. (Penman v. St. Paul Fire & Marine Ins. Co., 216 U. S. 311.) A violation of this provision also precludes plaintiff’s right to recover.

In view of these conclusions it is unnecessary to discuss the grounds relied upon in other special pleas as to which the evidence may be more or less uncertain. The facts on which the special pleas above considered rest being uncontroverted it follows upon the construction we give to the contract sued on and the denial of plaintiff’s right to assert waiver of any of the conditions of the contemplated policy, the court erred in not directing a verdict for defendant as requested and that, therefore, the judgment must be reversed as a matter of law.

Reversed.

Scanlan, P. J., and Gridley, J., concur.


source: Caselaw Access Project

author: Mr. Justice Barnes

license: Public Domain

text:
    Benjamin Heller, Appellee, v. Franklin-Butler Motors, Inc., Appellant.
    Gen. No. 34,392.
    Heard in the second division of this court for the first district at the June term, 1930.
    Opinion filed December 16, 1930.

      William McKinley and Paul E. Price, for appellant.
    Altheimer & Mayer, for appellee; A. B. Manion, Sylvan S. Rosenbaum and Alan J. Altheimer, of counsel.
   Mr. Justice Barnes

delivered the opinion of the court.

This is an appeal from a judgment entered on the verdict of the jury for $1,500, in plaintiff’s favor, in an action of trespass on the case on promises. When the case went to the jury two counts remained in the declaration, one charging the breach of an express warranty, the other, the breach of an implied warranty, in the sale of an automobile by defendant to plaintiff.

The former charged that defendant promised that said automobile would be sound, mechanically perfect and otherwise free from defects. But there was no proof to support it. The latter is based upon a written contract describing the automobile and containing the following provision:

“There are no understandings, agreements, warranties or representations, verbal or written, not specified herein respecting the goods hereby purchased.”

The implied warranty relied upon is that provided under section 15 clause (2) of the Uniform Sales Act, Cahill’s St. ch. 121a, 18, clause (2), that the goods shall be of a merchantable quality where bought by description from a seller dealing in goods of that description. No question arises but that the sale was of that character. Defendant, however, relies upon Section 71 of said Act, Cahill’s St. ch. 121a, jf 74, which provides that:

“Where any right, duty or liability would arise under a contract to sell or a sale by implication of law, it may be negatived or varied by express agreement, ’ ’ and contends that the provision in question constitutes such an express agreement, citing in support of the contention, Sterling-Midland Coal Co. v. Great Lakes Coal & Coke Co., 334 Ill. 281. There the provision construed as negativing and excluding all implied warranties (p. 291) reads as follows:

“There are no understandings or agreements relative to this contract or its subject matter' that are not fully expressed herein.”

Comparing its language with that of the provision in question there would seem to be little room for argument for a different construction of the latter. The principal distinction contended for by plaintiff is placed upon the effect of the words “verbal or written.” He contends that as they can be properly applied only to an express agreement they manifest an intention to limit the provision to an express agreement only. Instead of their so restricting the negations, we think they were reasonably intended to make them as comprehensive as possible, and fail to see any good ground for construing the provision in the case at bar differently from that construed as aforesaid by the Supreme Court.

It follows, then, that as there was no proof of a breach of an express warranty, and as a proper construction of the other count precludes the theory of an implied warranty, there was no question for submission to the jury and the court erred in not directing a verdict for defendant as asked for.

This conclusion renders it unnecessary to consider defendant’s other assigned errors as, for the reasons stated, the judgment must be reversed as a matter of law.

Reversed.

Soanlan, P. J., and Cridley, J., concur.


author: Mr. Justice Gridley

text:
    Jesse Binga, Complainant and Plaintiff in Error, v. Thomas E. Bell et al., Defendants. Bertha K. Chittenden, Defendant in Error.
    Gen. No. 34,032.
    Heard in the second division of this court for the first district at the February term, 1930.
    Opinion filed December 16, 1930.
    A. M. Burroughs, for plaintiff in error; J. W. Hallam, of counsel.
    John C. Garriott, Jr., for defendant in error; James J. Dana'her, of counsel.
   Mr. Justice Gridley

delivered the opinion of the court.

In a foreclosure proceeding a decree of sale was entered by the superior court of Cook county on April 1, 1929. At the sale, held on April 23, 1929, the -.premises were sold to complainant, Jesse Binga, for $10,000. In the master’s report of sale he .-•.stated that the proceeds were not sufficient to pay the amount due to complainant, that there was a deficiency of $5,236.49, and that complainant was entitled to a deficiency decree for said sum and interest against James Hill and Mae Allen Hill, his wife, and Bertha K. Chittenden. In the court’s decree confirming the sale, entered June 17, 1929, it was ordered that complainant have judgment against James Hill and Mae Allen Hill for the amount of the deficiency and interest, but the court stated that complainant’s motion, then made, for a deficiency judgment against Bertha K. Chittenden be overruled “for reasons given in the decree of sale entered on April 1, 1929.” In that decree there are the following findings, among others:

“And the court finds from the facts shown that complainant is not entitled to a judgment or deficiency decree against Bertha K. Chittenden for any deficiency after the sale of the premises herein, for the reason that complainant purchased the trust deed and notes of Bertha K. Chittenden from the Northern Trust Company and agreed to loan James Hill and Mae Allen Hill the sum of $15,000, out of which amount the trust deed and notes of said Bertha K. Chittenden were to be paid and cancelled; that the Binga State Bank sold the bonds comprising the fifteen thousand dollar loan after they were issued and delivered, and retained the proceeds for over two years, which issue and sale constihoted an extension of the trust deed and notes without her consent, thereby releasing said Bertha K. Chittenden from any liability, by reason of the failure of James Hill and Mae Allen Hill, or the owners of the premises described in said trust deed, to pay the lien of complainant.”

The sole question involved in the present writ of error is whether, under the facts in evidence and the ■ law, the superior court erred in refusing, on complainant’s motion, to enter a deficiency decree against Bertha K. Chittenden for the sum of $5,236.49.

The facts as disclosed from the evidence are substantially as follows: The premises involved are improved with a three-story brick building, known as 515-19 East 36th Place, Chicago. On or about June 1, 1924, Bertha K. Chittenden, a widow, purchased them from the then owner. About the same time she executed and delivered her principal promissory note for $10,400, dated June 1, 1924, due on or before two years after date, with interest at 6 per cent per annum, payable semiannually, as evidenced by four interest coupon notes of $312 each. All the notes were payable to her own order and by her indorsed. To secure them she executed and delivered a trust deed (which was a first mortgage and contained the usual covenants) conveying the premises to the Northern Trust Company, as trustee. The deed was recorded on October 2, 1924. Thereafter the first three coupon notes were paid and canceled, but neither the last coupon note, due June 1, 1926, for $312, nor the principal note for $10,400, due on the same date, were paid by Mrs. Chittenden or any of the grantees of the premises. After the recording of the trust deed and before the maturity of the principal note the' premises were sold and conveyed to James Hill and Mae Allen Hill subject to the mortgage, which they assumed and agreed to pay. While the Hills were the owners of the premises they, in July, 1925, placed a second mortgage thereon to secure certain notes executed by them. During April, 1926, before the maturity of said principal note of $10,400, and said coupon note, James Hill had a conversation with complainant, Jesse Binga, who was the president of the Binga State Bank. He informed Binga of the incumbrances on the premises, that the principal note of $10,400 and said coupon note, secured by said first mortgage, were held by the Northern Trust Company, and that, upon request to renew the mortgage, it had refused to do so and had demanded payment of the entire indebtedness at maturity, June 1, 1926. Hill further stated to Binga that he desired the Binga Bank to loan him sufficient money to pay off the first mortgage and certain additional sums, taking a new first mortgage as security for the loan. , Binga said that he would “take care” of the matter. During May, 1926, Hill informed Binga that he had a prospective purchaser of the premises and asked Binga what arrangements had been made for the refinancing, and Binga thereupon directed an employee of the Binga Bank, Miss Cantey, “to take care of the mortgage.” Many other conferences were thereafter had between Hill and Binga or representatives of the Binga Bank. At some of these conferences the prospective purchaser, William L. Dawson, was present. On July 16, 1926, acting upon Binga’s advice and in pursuance of his plan of refinancing, the two Hills by quitclaim deed conveyed the premises to one Booker T. McGraw. On the same day McGraw made written application to the Binga Bank for a loan of $15,000, to be due in 3 years from that date with semi-annual interest at 7 per cent per annum, to be secured by a first trust deed on the premises. In the application McGraw stated he would furnish a guaranty policy showing a fee simple title in him to the premises, would pay as a commission $750 for negotiating the loan, and that the two mortgages at present on the premises, viz., a first for $10,400 and a second for $3,000, were “to be paid.” On the same day McGraw executed and delivered to the Binga Bank his 15 notes or bonds, each dated July 16, 1926, and each for $1,000 ($15,000 in all), payable to bearer 3 years after date, with interest at 7 per cent per annum payable semi-annually, as evidenced by six coupons for $35 each attached to each bond. To secure the bonds McGraw executed and delivered to the Binga Bank a trust deed, signed by him on the same day, conveying the premises to the Chicago Title «fe Trust Co., as trustee. This trust deed was recorded on July 22,1926. The day after McGraw. had executed and delivered the bonds and trust deed, to wit, on July 17, 1926, either the Binga Bank or Jesse Binga purchased of the Northern Trust Co. the principal note of $10,400 and the last coupon note, signed by Mrs. Chittenden and secured by the original first mortgage on the premises. It appears that A. M. Burroughs, attorney for the Binga Bank, on that day called at the offices of the Northern Trust Co. and delivered to it a cashier’s check of the Binga Bank for $10,807.61 (being the amount due on said notes with interest, etc.). In turn Burroughs was given the two notes, the original trust deed and two insurance policies on the building on the premises. He signed a receipt for the papers in the name of “Binga State Bank,” and delivered them to Jesse Binga. Thereafter, about August 18,1926, in pursuance of an agreement of the Hills with William L. Dawson, the premises were conveyed to Dawson (and subsequently by Dawson to Thomas E. Bell), subject to the $15,000 mortgage given by McGraw and securing said bonds, which were in the hands of the Binga Bank for the purpose of sale by it. But the Binga Bank did not in fact, as had been arranged and agreed, pay the principal note of $10,400 or said last coupon noté, which Mrs. Chittenden had executed together with said' original first mortgage, and which notes and mortgage the Hills when they purchased the premises had assumed and agreed to pay. The Bank, however, did cause to be paid the notes secured by the second mortgage given by the Hills. Thereafter the Binga Bank, during the year 1927, sold to customers, at par and accrued interest, all of the $15,000 worth of bonds, executed by McGraw, and used the proceeds. At the time the present bill to foreclose was filed, May 22, 1928, all of these bonds were still outstanding in said customers’ hands. Indeed, on one of the hearings before the master as late as November 9,1928, the cashier of the Binga Bank, C. N. Langston, testified that said bonds were still outstanding. However, prior to the next hearing before the master on November 14, 1928, the Binga Bank saw fit to call in all of said bonds and to redeem them, and at the time of said hearing the same were again in its possession, as testified by Langston. It further appeared from the evidence that the Hills never received any notice from the Binga Bank or Jesse Binga, until the filing of the present bill, that the notes signed by Mrs. Chittenden had not been paid and canceled, as it had been agreed they would be. And we find no evidence whatever that Mrs. Chittenden, defendant in error, was in any way a party to the refinancing negotiations between the Hills and the Binga Bank or Jesse Binga, or had any knowledge thereof, or consented to ,any of the acts done as above outlined in pursuance of such -negotiations. Nor does it appear that any demand was ever made upon her to pay said principal note of $10,400, or said last coupon note, by the Binga Bank or Jesse Binga; nor does it appear that any notice, prior to the filing of complainant’s bill, was given to her that said notes had not been paid or that the trust deed securing them had not been canceled.

In view of the facts in evidence, as above outlined, we think that the court was fully warranted in denying complainant’s motion for the entry of a deficiency decree against Mrs. Chittenden in the sum of $5,236.49, and in finding in substance that the arrangement for the issuance of said bonds in the sum of $15,000, the sale of said bonds by the Binga Bank and its retention of the proceeds thereof for a period of over two years (all with the knowledge and approval of Jesse Binga) constituted or amounted to an extension of the notes, signed by Mrs. Chittenden, without her consent, and thereby released her from any further liability thereon. Although the decisions of the courts of review in this State, and in other States, have not been harmonious, we think that the clear weight of authority supports the proposition that if a mortgagee, wth knowledge of the conveyance of the property and the assumption by the grantee of the mortgage debt, extends the time of payment by a valid agreement between him and the grantee, such extension operates to discharge the original mortgagor, unless such extension is assented to by said mortgagor. (See note in 41 A. L. B. p. 282-5.) In the recent case of Albee v. Gross, 250 Ill. App. 98, it was decided by the Appellate Court for the second district in substance that where a mortgagor sells the premises to one who agrees to assume the mortgage debt, and such purchaser sells to another who likewise assumes said debt, an agreement of the mortgagee with the last purchaser, extending the time of payment for a consideration and without the knowledge or consent of the mortgagor or his grantee, releases said mortgagor and his grantee from liability under a deficiency decree upon foreclosure and sale. On an application to the Supreme Court for certiorari to review said decision the writ was denied. (250 Ill. App. xxix.) In the opinion in the Albee case numerous decisions of the Supreme and Appellate Courts of this State are referred to or discussed, as are also cases in other jurisdictions, including In re Both, 272 Fed. 516, 520, and Union Mutual Life Ins. Co. v. Hanford, 143 U. S. 187, 191, to the holdings in which last named cases we also here refer. In the still later case of Douglass v. Ullsperger, 251 Ill. App. 145, it was decided by the first division of the Appellate Court for the first district, in substance, that a mortgagor of realty is released from further liability, after he has conveyed the property to a grantee who assumed and agreed to pay the mortgage debt, and said grantee and the mortgagee enter into an agreement, without the knowledge or consent of the mortgagor, whereby the time of paying the said mortgage debt is extended.

We conclude that the order or decree.of the superior court, entered on June 17, 1929, wherein the court refused on complainant’s motion to enter a deficiency decree against Bertha K. Chittenden for the sum of $5,236.49, was right and should be affirmed, and it is so ordered.

Affirmed.

Scanlan, P. J., and Barnes, J., concur.


author: Mr. Justice G-ridley

text:
    Sarah Edith Fisk, as Administratrix and Executrix of the Estate of Henry S. Fisk, Deceased, and in her Own Right, Appellant, v. Toys & Novelties Publishing Company and Porter-Spofford-Langtry Corporation, Appellees.
    Gen. No. 34,183.

      Heard in the second division of this court for the first district at the April term, 1930.
    Opinion filed December 16, 1930.
    Rehearing denied December 30, 1930.
    W. Morton Carden and Dickinson, Smith, Farrell & Wham, for appellant; W. Morton Carden and Benjamin Wham, of counsel.
    Musgrave, Oppenheim & Price, for appellees.
   Mr. Justice G-ridley

delivered the opinion of the court.

On April 6, 1929, plaintiff filed her petition based upon the provisions of section 73, as amended in 1921, of the Illinois Corporation Act of 1919, against the two defendant corporations. Each filed a general demurrer to the petition after it had slightly been amended. The court sustained the demurrers and, plaintiff electing to stand by her petition, the same was dismissed for “want of equity,” and she appealed.

In section 6 of the Corporation Act, as amended, Cahill’s St. ch. 32,6, it is provided in part:

“Each corporation organized under this Act shall, subject to the conditions and limitations prescribed by this Act, have the following powers, rights and privileges : . . .
(9) To lease, exchange or sell all of the corporate assets with the consent of two-thirds of all of the outstanding capital stock of the corporation at any annual meeting or at any special meeting called for that purpose ; . . .”

In section 73 of the Act it is provided in part (Cahill’s St. 1929, ch. 32, fl73, p. 678):

“Any stockholder objecting to any action of the corporation in leasing, exchanging or selling all of its corporate assets, or ' objecting to a merger or eonsolidation with another corporation (the corporation acquiring such assets by lease, exchange, sale, merger or consolidation being hereinafter referred to as the ‘acquiring corporation’), shall be obligated to sell and transfer to the acquiring corporation and the acquiring corporation shall become and be obligated to purchase such share or shares, together with all rights and interests thereby represented, including all cash or securities or other benefits accruing to such share or shares, from or by reason of the sale, lease, merger or consolidation at a price equal to the fair value of such share or shares with interest on such fair value at the rate of five per cent per annum from the date such sale, lease, merger, or consolidation was consummated. If such fair value and interest is not paid to such objecting stockholder by such acquiring corporation within thirty days after a mailing of notice thereof to the stockholder at his last known address as shown by the records of the corporation of such sale, lease, merger or consolidation, then such objecting stockholder may, within sixty days thereafter, file a petition in the circuit court of the county in which the principal office of the acquiring corporation is located, asldng for a finding and determination of the fair value of such shares of stock. Upon the filing of such petition, the practice and procedure thereon shall be the same, so far as practicable, as that under the eminent domain laws of this State, but the court shall have full power and authority to do all things and enter all such orders as it may deem equitable and just for the purpose of preserving and protecting the rights of the parties of the proceeding during the pendency thereof. Such fair values shall be ascertained and determined as of the date of the consummation of such sale, lease, merger or consolidation, and without regard to any depreciation or appreciation because of or on account of such sale, lease, merger or consolidation.

“The court shall enter judgment against such acquiring corporation for the amount of such fair value, and interest thereon, which judgment may be collected as other judgments at law. Upon the payment of such judgment such stockholder shall cease to have any interest in such stock or in the property of the corporation. . . .

“Unless such objecting stockholder shall file such petition within the time herein limited, such stockholder and those claiming under him shall be conclusively presumed to have authorized, approved and ratified such sale, lease, merger or consolidation. If at the expiration of thirty days from the time of the consummation of such sale, etc., the person in whose name such share or shares shall stand shall not be living, . . . his executor or administrator . . . shall be entitled to file such petition within ninety days after the mailing of a notice thereof to the stockholder ... of the consummation of such sale, lease, merger or consolidation. ’ ’

On March 8, 1929, the defendants entered into a written agreement — the Toys & Novelties Publishing Company being referred to therein as the “Vendor” and the Porter-Spofford-Langtry Corporation as the “Vendee.” In section 1 of the agreement the Vendor agrees to sell to the Vendee and the latter agrees to purchase, for a consideration of $85,000,

“The publications known as ‘Toys & Novelties,’ American ‘Toy Manufacturer’ and ‘Buyers’ Directory of American Toys’; the names and the good will in connection with said publications; and all such other assets as are a part of and essential to the future business of publishing said publications and any of them, such as copy-rights, trade-marks, advertising contracts, both active and expired, subscription contracts both active and expired, lists of advertisers and possible advertisers, lists of subscribers and possible subscribers, manuscripts in hand or in process, all data, reports or records pertaining to the field of said publications, all cuts, electrotypes, photographs, library, files of correspondence, stencils, stationery, and any and all such other records as are essential to said publications and each and every of them and their future issuance as a going business; also all office furniture and equipment and other articles of tangible personal property belonging to said Vendor, except paper stock on hand.”

And in section 1 it is stated that “no accounts or bills receivable of the Vendor shall be conveyed or assigned, and that the Vendor shall be given access at all times to any records and contracts essential to the collection of such accounts and bills receivable.”

In section 2 the Vendor agrees to execute a bill of sale and assignment to the Vendee, and “The Vendee agrees, upon delivery to it of said bill of sale and assignment to pay to the Vendor the sum of $6,000 in cash to apply upon said purchase price, and to pay the remainder of said consideration, towit, $79,000, in ten annual installments of $7,900 each, payable respectively on the 20th day of March in each year from 1930 to 1939, both inclusive, and to pay interest at the rate of 6 per cent per annum on the whole amount remaining from time to time unpaid, said interest being payable semi-annually on September 20th and March 20th in each year ...”

In section 3 provision is made for the execution and delivery by the Vendee to the Vendor, to secure the payment of the deferred • payments, of certain described 6 per cent bonds, “to be secured by a trust indenture from the Vendee to Charles W. Spofford, as trustee.” In section 4 it is provided: “The vendor shall pay all expenses pertaining to the February issue of ‘Toys & Novelties’ (now in the press) and shall be entitled to all income or proceeds therefrom. All expenses accruing after March 1, 1929, including rent of the Vendor, pertaining to the publication of the said papers and publications above mentioned, except those specifically pertaining to said February issue of ‘Toys & Novelties’ and the collections relating to said issue, are assumed by the Vendee.”

In section 5 the Vendor agrees, in addition to making the assignments mentioned in section 2, that it will, upon demand of the Vendee, from time to time make any assignment of any specific contracts, rights and choses in action, deemed'necessary or advisable by the Vendee, in order to convey to it “the full right and title to matters above intended to be conveyed.” In section 6 the Vendee “assumes and agrees to carry out all pending, unexpired and unfulfilled advertising and subscription contracts for the purchase of paper, and to save the Vendor from any damage arising from any future breach thereof.” The contract is signed in the name of the Vendor “by Charles W. Spofford, president,” and in the name of the Vendee “by Fred D. Porter, president.”

In plaintiff’s verified petition she sets forth a copy of said agreement as an exhibit and the same is made a part of the petition. She also sets forth the facts of the death of Henry S. Fisk (her husband) in New York City on January 4, 1928, her appointment as administratrix of his estate by a surrogate court there and her subsequent appointment as executrix of his will in which she was devised and bequeathed all of his property. She alleges in substance that the defendant, Toys & Novelties Publishing Company (hereinafter called the Toys Co.), is an Illinois corporation with principal place of business at 620 South Michigan Avenue, Chicago, and has a total capital stock of 1,000 shares of no par value, issued and outstanding; that heretofore it has been engaged in the business of publishing trade papers relating to the business of manufactoring and selling toys and novelties; that after the death of plaintiff’s husband, upon the demand of the Toys Co., plaintiff, as administratrix and executrix, surrendered to it certain stock certificates which had been standing in the name of her husband, and received back in lieu thereof two other certificates of the company, viz., certificate No. 17 for 140 shares and certificate No. 18 for 100 shares, making a total of 240 shares of said stock of no par value; and that she is now the owner of said certificates and stock and “holds the same subject to the further order of this court.”

And plaintiff further alleged that the defendant, Porter-Spofford-Langtry Corporation (hereinafter called the Porter-Spofford Co.) is also an Illinois corporation, with principal place of business in Chicago; that it was organized for the purpose of purchasing the assets and good will of the Toys Co., including the right to publish each and all of its said publications, and of retaining all profits derived from them; that Charles W. Spofford is now and at all times has been the owner and holder of 51 per cent of the outstanding capital stock of the Toys Co., and is its president and general manager; that he is one of the organizers and one of the stockholders, owning 50 shares, of the Porter-Spofford Co.; that on or about March 8, 1929, the two companies entered into a written agreement (referring to the agreement above mentioned); that plaintiff was first notified of the terms of the sale, as therein provided for, on March 15, 1929, when she received a copy of the agreement; and that prior thereto. she “did not know the terms and conditions whereby said sale was effected. ’ ’ And plaintiff further alleged:

“15. That she is informed and verily believes that defendant Toys Co., has during the past seven years earned a total of $108,931.46; that because thereof its average earnings during said period have been $15,501.64; that during the past four years its average annual earnings have been at the rate of $15,588.83; that a fair price for trade papers is in excess of twelve times their average annual earnings; that because thereof the good will and all of the remaining assets belonging to said defendant, except only cash on hand and cash due to it, is now and was on March 8, 1929, and for a considerable period prior thereto, worth at a fair price in excess of $150,000, the exact value of which plaintiff is not now aware.
“16. That immediately after she received notice that the defendant, Toys Co., had sold its assets and good will to defendant, Porter-Spofford Co., for the consideration and under the terms and conditions above stated, she notified both defendants that she objected to said sale and demanded of both of them that the purchase price to be paid and received by said defendants be increased to an amount which would be fair and reasonable, and that she be paid her pro-rata share thereof in cash, but that both defendants refused and failed to heed any of her demands and informed her that unless this action was instituted and they were ordered by this court to pay plaintiff a larger sum in cash, plaintiff would not be paid any larger sum, but would be paid her pro-rata share only as provided in said contract, and that same would not be paid to her until same was received under said contract by said Toys Co.
“17. That subsequent to March 8, 1929, and prior hereto, the defendant, Toys Co., declared and paid to plaintiff two dividends, one for $1,200 and another for $1,600, making a total of $2,800; that plaintiff is informed and verily believes that both of these dividends have been declared out of prior earnings of said defendant, and that no part of the same has been paid out of the funds received from said Porter-Spofford Co., as' a part of the purchase price of said sale; and that plaintiff now holds, and will during the pendency of this action continue to hold, said amounts subject to the further orders of the court. ’ ’

The prayer of the petition is (a) that the court fix the fair value of the good will and all the other assets formerly belonging to the Toys Co., excepting cash on hand and cash due to it on and as of March 8,1929, and also fix the fair value of all of plaintiff’s stock in said company as of that date; (b) that plaintiff have judgment against the defendant, Porter-Spofford Co., in the amount of the fair value of her stock as so fixed; and (c) that plaintiff have judgment against both defendants for her costs, etc., and that she have “such other and further relief as this court may deem legal and equitable.”

Counsel for plaintiff contend in substance that, under the provisions of subsection 9 of section 6 and of section 73-of said Corporation Act, Cahill’s St. ch. 32, 1Í 6 (subsection 9) and If 73, and the allegations of said petition, plaintiff should be given an opportunity upon a trial to show the fair value of her stock, and that, if it should appear that such value is greater, proportionately, than said sale for $85,000 by the Toys Co. to the Porter-Spofford Co. would indicate, she should have the relief prayed for.

And counsel further contend in substance (a) that by the passage of subsection 9 of section 6 of said act a sale by a corporation, such as here appears, was made legal, which before and by common law was illegal and ultra vires (citing Harding v. American Glucose Co., 182 Ill. 551, 631; Abbot v. American Hard Rubber Co., 33 Barb. [N. Y.] 578; People v. Ballard, 134 N. Y. 269); (b) that, however, section 73 of the act was passed to protect the interests of minority stockholders when such a sale is made; (c) that the sections should be considered and construed together because they are in pari materia; and (d) that, although section 73 refers to a stockholder “objecting to any action of the corporation in . . . selling all of its assets,” etc., and although it appears from the allegations of plaintiff’s petition that the Toys Co. reserved from the sale certain paper stock, cash on hand and accounts receivable, still it should be held that it was the legislative intent in passing said section 73 that it should be applicable to such a sale as the present one, because by that sale the Toys Co. sold substantially all of its assets and such as were so integral a part thereof as to be essential to the transaction of its ordinary business.

The main contention of counsel for defendants is that the court properly sustained the demurrers because it appears on the face of plaintiff’s petition that the Toys Co. did not sell to the Porter-Spofford Co. all of its assets and, hence, said section 73 is not applicable. Counsel argue that the word “all” in the section “means just what it says and is not open to construction. ’ ’

We are not advised that the question, which is one not wholly free from difficulty, has been passed upon by our Supreme Court or by any of the Appellate Courts of this State. However, in the State of New York, there are somewhat similar statutes which have been considered by reviewing courts of that state. In Matter of Timmis, 200 N. Y. 177, it is decided in substance that the sale of “business, assets and property,” including the good will, of an important “calendar” department or branch of the business of a New York corporation, organized to carry on the business of lithographing and printing, is not a transaction within the ordinary course of its business, and is valid only when made under and in compliance with the provisions of section 16 of the Stock Corporation Law of the State, authorizing the voluntary sale of the franchise and property of a corporation with the consent of two-thirds of its stockholders; and that, where such sale is made, a stockholder, voting against the resolution authorizing the directors to make the sale, is entitled under section 17 of said Corporation Law to an order for the appointment of three persons to appraise the value of his stock and directing the corporation to pay to him the value thereof as fixed by the appraisers. In the opinion of the court, after quoting parts of said sections 16 and 17, and referring to prior legislation and mentioning the cases of Abbot v. American Hard Rubber Co., supra, and People v. Ballard, supra, it is said (pp. 181-3):

“These cases and those which intervened established the law that a corporation cannot sell all its property, or- even a part thereof so integral as to be essential for the transaction of its ordinary business, because such a sale is wholly or partly an act of self-destruction and a practical dissolution without compliance with law.
“The discussion of the subject in the various opinions suggested two evils: (1) The injustice to the bulk of the stockholders from want of power in a corporation to sell its business or an essential part thereof to another corporation organized for the purpose, frequently from its own membership, on terms deemed advantageous by the holders of a large majority of the stock. (2) The injustice to minority stockholders of requiring them to abandon, change or limit their business if the majority should have the power to direct such a sale. An incidental evil was the power of a dissenting stockholder to compel the majority to buy him out on his own terms in order to secure unanimous consent with no one left to question the transaction.
“These evils could be remedied only by legislation, . . . The act of 1893 is reproduced and amplified by sections 16 and 17 of the statute now in force. This legislation was designed to meet the evils pointed out by the courts by enabling a majority of two-thirds to sell if they deemed it was the best policy, and at the same time to protect the minority, if they regarded the sale as opposed to their interests. . . .
“The sale before ns was not made in the ordinary course of the business of the corporation, for it was not organized to sell calendar departments, or any department that would involve going out of business pro tanto, . . . By the sale of the good will the corporation would be prevented from ever engaging in that kind of business again, and while not in form a sale of its franchise to that extent, it would be in effect, because it could no longer exercise its franchise to make and sell calendars. ... Its own action would result in complete paralysis of every power required to conduct a calendar department and to this extent it would go out of business. Such a sale would, therefore, be corporate suicide to a certain exteüt, and to that extent a sale or abandonment of the charter. . . . The sale in question would not be valid without resorting to section 16, and by resorting to that section the appellant opened the door for the respondent to enter and demand his rights under section 17. . . .
“As the appellant availed itself of the privilege conferred by the statute, it must comply with the condition prescribed for the exercise thereof. ’ ’

In the case of In re Drosnes, 175 N. Y. S. 628, decided by an appellate division of the Supreme Court of New York, Mary Drosnes, a stockholder holding one-third of the stock in the- Film Amusement Co., Inc., made application for the appointment of three persons to appraise the value of her stock. The trial court denied her petition, but on appeal the order was reversed and the petition granted. It appears that said Film Co. was a New York corporation, which owned and operated a theater in New York City. In 1914, it altered the premises so as to comprise a theater and three stores, where only a theater had been before. Subsequently the stockholders, owning two-thirds of the stock, voted at a special meeting of the company, against petitioner’s objection, to sell its interest in the theater to another amusement company. The sale, afterwards consummated, did not include the ground lease covering the land upon which the theater was built, which was reserved to the Film Co. The defendants claimed on the hearing that the Film Co., after the sale, owned the same property as before, and that all that had been done was “to change the method of deriving its income from the property.” The reviewing court in its opinion, for reasons given, held otherwise, and stated that the case “falls directly within the principles enunciated in Matter of Timmis, 200 N. Y. 177,” and further said (p. 631):

“It is an obvious injustice to one who has invested in a third of the capital stock of a corporation, organized for the express" purpose of operating a theater or place of amusement, to have the majority stockholders dispose of the only property it has which enables it to conduct a theater and transform its business into that of a mere landlord or lessor of stores and theaters. In the one case, there is the prospect and opportunity of large profits, growing out of the chance of acquiring plays that develop into great popular successes, while in the other the profits are absolutely limited to rents. So far as concerns the business for which this corporation'was organized to perform, after thus stripping itself of its assets, it might as well have dissolved. But it is not proposed to dissolve it, but to hold the minority stockholders to their interest in the corporation and to such dividends as may be distributable from rentals. While the corppration law permits a corporation upon the consent of two-thirds of its stockholders to dispose of a substantial part of its assets, or even of all its assets,“when it does so against the protest of the minority, it must comply with the conditions prescribed by the statute and buy the minority stock at its appraised value.”

Reference is also made to the case in Cole v. Wells, 224 Mass. 504, from the opinion" of which it appears that the Massachusetts statute is very similar to said section 73 of the Illinois Corporation Act.

In view of the principles enunciated in the above cases we think that it should be held that it was the intent of the Illinois legislature, when it enacted the present Corporation Act and particularly subsection 9 of section 6 and section 73, that said section 73 should be applicable to such a sale as is alleged in plaintiff’s petition, even though it appears that by the sale all of the assets of the Toys Co. were not conveyed to the Porter-Spofford Co. In Louisville & Nashville R. Co. v. Industrial Board, 282 Ill. 136, 139, it is said: “The intention of law-makers is to be gathered from the necessity or reason of the enactment and the meaning of the words, enlarged or restricted according to their real intent. In construing a statute the courts are not confined to the literal meaning of the words. A thing within the intention is regarded within the statute though not within the letter. A thing within the letter is not within the statute if not also within the intention. When the intention can be collected from the statute, words may be modified or altered so as to obviate all inconsistency with such intention. . . . The courts are bound to presume that absurd consequences leading to great injustice were not contemplated by the legislature, and a construction should be adopted that it may be reasonable to presume was contemplated.” (See, also, Anderson v. Chicago, B. & Q. R. Co., 117 Ill. 26, 28, 29; Uphoff v. Industrial Board, 271 Ill. 312, 315; Ketcham v. Board of Education, 324 Ill. 314, 317.) If the word “all” in said section 73 is to be given its literal meaning there would be little or no protection afforded to the rights of minority stockholders, objecting to sales under subsection 9 of section 6, which rights the legislature» evidently intended to protect, for it would in such sales be an easy matter to reserve some small portion of the assets in the selling corporation and thereby completely destroy the rights of the objecting minority stockholders. And we think that the allegations of the petition in this case were sufficient to have warranted the trial court to have ruled defendants to answer the petition and to have a trial upon the merits. In the present case the demurrers were sustained and the petition dismissed “for want of equity.” In Seymour v. Woodstock & Sycamore Traction Co., 281 Ill. 84, 98, it is said: “A demurrer for want of equity cannot be sustained unless the court is, satisfied that no discovery or proof properly called for by or founded upon the allegations in the bill can make the subject matter of the suit a proper case for equitable cognizance.” (See, also, Coryell v. Klehm, 157 Ill. 462, 473; Wescott v. Wicks, 72 Ill. 524, 526; Smith v. Adcock, 209 Ill. App. 277, 283.) It appears from the allegations of the petition that the contract between the two defendants provided for the sale of all the assets, including the good will, less those specifically reserved, of the Toys Co. to the Porter-Spofford Co., for $85,000, and plaintiff alleges in substance (petition par. 15) that on March 8, 1929, said assets, including the good will, were “worth at a fair price in excess of $150,000.” And it further sufficiently appears from the petition that the agreement of sale was consummated.

Other points are made by defendants’ counsel as grounds for sustaining the demurrers to the petition. We have examined them and believe them to be lacldng in substantial merit.

Our conclusion is that the circuit court erred in sustaining the demurrers to plaintiff’s petition, and that the judgment against her should be reversed, and that the cause be remanded with directions to the circuit court to overrule said demurrers and to have a trial upon the merits. Such will be the order.

Reversed and remanded with directions.

Soanlan, P. J., 'and Barnes, J., concur.


text:
    William Schmidt and Joseph Stein, Original Complainants. Charles Follansbee (Otherwise Known as Edward C. Follansbee), Complainant by Supplemental Bill and Defendant in Error, v. Karoline Seidel et al., Defendants. Margaret Holcomb and Lee Holcomb, Plaintiffs in Error.
    Gen. No. 34,351.

      Heard in' the second division of this court for the first district at the June term, 1930.
    Opinion filed December 16, 1930.
    John A. Blake, for plaintiffs in error Margaret Holcomb and Lee Holcomb.
    Samuel Schmetterer, for defendant in error Charles Follansbee.
   Mr. Justice Gridley

delivered the opinion of the court.

By this writ of error Margaret Holcomb and Lee Holcomb, her husband, after severance ordered, seek to reverse a decree of foreclosure, entered by the circuit court of Cook county on October 11, 1929, of a second trust deed on certain improved premises in Chicago.

The litigation was commenced on August 5, 1926, by the filing of a bill to foreclose the trust deed by William Schmidt (then the owner and holder- of certain notes secured thereby) and Joseph Stein, as trustee. The defendants to the bill were Karoline Seidel (hereinafter called Mrs. Seidel); Margaret Holcomb and Lee Holcomb (owners of the premises, subject to said trust deed and two other trust deeds, and hereinafter called the Holcombs); Harold A. Fein, as trustee; Charles E. Roland; and the unknown owners of certain notes. On October 28, 1927, after issues joined, Charles Follansbee (a son-in-law of Mrs. Seidel and otherwise known as Edward Charles Follansbee) filed as sole complainant by leave of court a supplemental bill, or an original bill in the nature of a supplemental bill (subsequently amended), making as defendants the same parties as in the original bill, and also as additional defendants Alice Weiss, L. H. Grange and said Joseph Stein, as trustee. Thereafter Joseph E. Winterbotham was made a defendant. Mrs. Seidel, Alice Weiss, and Fein, as trustee, filed an answer (subsequently amended) to the supplemental bill, as did the Holcombs, and also Winterbotham. The other defendants were defaulted. The Holcombs filed a cross-bill, and on January 27,1928, an amended cross-bill, making Follansbee and Mrs. Seidel, Weiss and Fein, as trustee, among others, cross-defendants. On March 26, 1928, their several demurrers were sustained and the Holcombs ’ amended cross-bill was dismissed for want of equity.

The second trust deed, containing the usual covenants and dated December 26, 1923, was executed by Mrs. Seidel (then the owner of the premises subject to a first trust deed) to secure her 75 principal notes, aggregating $22,500, each for $300 and payable on the 26th day of each and every month thereafter, with interest from date. When the original bill was filed notes 1 to 28, inclusive, had been paid and Schmidt was the owner of note No. 29, due May 26, 1926, and of notes 42 to 75, inclusive, but he was not the owner of the notes of the intervening numbers, 30 to 41, inclusive. Note 29 had not been paid or the interest thereon, nor had accrued interest been paid on notes 42 to 75, inclusive. The breaches of the covenants of the trust deed, as alleged in the original bill, were nonpayment of note 29, principal and interest, and, of interest due on other notes, and failure to pay certain principal and interest due on the first mortgage, etc. The effect of Follansbee’s supplemental bill, filed October 28, 1927, was the substitution of him as sole complainant, and on November 4, 1927, on Schmidt’s motion, the court ordered that Schmidt’s name be stricken from the docket as complainant.

When Follansbee’s supplemental bill was filed he had acquired by purchase or otherwise, and was the owner of, all of the then outstanding notes secured by the second trust deed. In his bill, as amended, he alleged inter alia that by written assignment, dated October 25, 1927, Schmidt had transferred to him notes 29 and 42 to 75, inclusive, and had granted to him full authority to prosecute the present action; that notes 30 to 36, inclusive, and 39, had been paid; that he had acquired all the other outstanding notes; that Mrs. Seidel, owner of the third mortgage given by the Holcombs for $18,200, had foreclosed it; that she had purchased the premises at the foreclosure sale and had assigned the certificates to Alice Weiss; that the Holcombs were the owners of the equity of redemption, they having acquired the premises from Mrs. Seidel, by warranty deed to Margaret Holcomb, dated May 11, 1925, subject to an existing first trust deed of $22,000, to Jen C. Hansen, as trustee, dated February 27, 1920, and renewed, and also subject to the second trust deed sought to be foreclosed; that in the warranty deed Margaret Holcomb had agreed to assume and pay the indebtedness secured by said second trust deed; that after the execution of the warranty deed the Holcombs had taken possession of the premises; that note 29 was overdue and unpaid; that accrued interest on other notes and certain taxes on the premises had not been paid ; that certain principal and'interest due on the first trust deed had not been paid, which Follansbee had been compelled to pay; and that he had elected to declare, and had declared, the entire indebtedness secured by the second trust deed to be due and payable.

In the Holcombs’ answer, as amended, they alleged in substance that note 29, due May 26, 1926, was not presented by Schmidt for payment at the place designated, viz., the State Commercial Savings Bank, Chicago, nor had any other place of payment been designated by him; that shortly prior to the maturity of said note, Fein, as agent and solicitor for Mrs. Seidel, owner of the notes signed by the Holcombs and secured by said third mortgage, procured the appointment of the Chicago Title & Trust Co. as receiver, and “falsely and fraudulently” represented to the receiver that said note had been paid; that by reason thereof the receiver did not pay the note out of rents received from the premises; that because of these facts Schmidt “prematurely and without lawful right” filed his original bill on August 5,1926, “to the great detriment and damage” of the Holcombs. They admitted the assignment by Schmidt to Follansbee, but denied that the latter was a bona fide holder of said notes, 29 and 42 to 75, inclusive; alleged that the money for their purchase was furnished by Mrs. Seidel, that she “was the actual purchaser of her own notes from Schmidt,” and that the written assignments of Schmidt to Follansbee were “fictitious” and “fraudulent” and executed for the purpose of having Follansbee, son-in-law of Mrs. Seidel, “act as a dummy to prosecute the present foreclosure suit” and protect Mrs. Seidel’s third mortgage; denied that Follansbee was the owner of notes 37 and 38 and 40 and'41 “for value and before maturity”; admitted that Mrs. Seidel had foreclosed the third mortgage, that a foreclosure sale had been had and that she was the purchaser at the sale, but alleged that the transfer of the certificate of sale to Alice Weiss (daughter of Mrs. Seidel) was fictitious and without consideration; admitted that the Holcombs were the owners of the equity of redemption of the premises; and denied that, when they accepted said warranty deed of the premises from Mrs. Seidel, there was “any consideration for their promises, express or implied, to pay the indebtedness secured by said second mortgage,” here sought to be foreclosed. A replication to the answer was filed by Follansbee.

There was a full hearing before the master, at which much oral and documentary evidence was introduced by the parties. The master’s report was filed on June 21, 1929. After outlining the pleadings substantially as above stated, and setting forth the provisions of the second trust deed, the master made the following findings of fact in substance, which we think are fully sustained by the evidence:

That up to October 25, 1927, Schmidt (original complainant) was the owner and holder of notes 29 and 42 to 75, inclusive; that on that date, for a consideration of $11,292.25 to him paid, the receipt of which was acknowledged by him before a notary public, Schmidt .executed a written assignment (introduced in evidence) of all his right, title and interest in and to said notes to Follansbee, and also all his right and interest in the subject matter of the present action; that notes 1 to 28, inclusive, 30 to 36, inclusive, and 39, had been paid as they became due; that note 29 was not paid at "maturity, nor had it been since, by defendants or by anyone for them; that other notes of the series — viz., 37, 38 and 40 to 75, inclusive, had not been paid and were outstanding; that Follansbee is the legal holder and owner of all unpaid or outstanding notes; that by reason of the nonpayment of said note 29, and other matured notes, and interest due on other outstanding notes, and other defaults mentioned, he did elect to declare and did declare -the entire indebtedness to be immediately due and payable; that there is now due to him in principal and interest on said notes the sum of $14,022.52, and also the additional sum of $1,000 as a reasonable and earned solicitor’s fee; that during January and February, 1928, the defendant, Winterbotham, recovered two judgments by confession against the Holcombs upon notes given to Winterbotham for legal services rendered by him; that the amount due on said judgments with interest is $6,142.58, but "Winterbotham’s lien therefor is subordinate to Follansbee’s lien under the trust deed sought to be foreclosed; that the Holcombs are the owners of the equity of redemption of the premises; and that in addition to the default in the payment of the notes mentioned, the Holcombs and the other defendants have failed to pay certain principal and interest due on the indebtedness secured by the first trust deed.

The master stated that on the hearing before him the Holcombs made three contentions: (1) That Follansbee’s supplemental bill cannot be maintained because the original bill was faulty; (2) that Follansbee is not a bona fide owner of the notes but is a fictitious complainant, acting for Mrs. Seidel; and (3) that note 29, the failure to pay which is the basis of the foreclosure suit, was not properly presented for payment. The master further stated that, because it was conceded that when the original bill was filed Schmidt was not the owner of all of the notes secured by the trust deed sought to be foreclosed and Schmidt in said bill had prayed for a foreclosure as to all, the Holcombs argued that the original bill could not have been maintained and, hence, the supplemental bill cannot be. The master, however, disagreed with the contention and argument, stating in substance that Follansbee’s right to maintain the supplemental bill must be viewed in the light of the facts and conditions existing at the date of its filing, that the very purpose of a supplemental bill is to present happenings occurring subsequent to the filing of an original bill, and that when the supplemental bill was filed it was therein alleged, and the evidence showed, that Follansbee was the owner and holder of all of the unpaid notes, having acquired the major portion of them by purchase from Schmidt.

The master further stated that, as regards their second contention, the Holcombs argued in substance that the evidence disclosed that Mrs. Seidel, having purchased most of the notes from Schmidt which she had originally executed, was the real owner of them, that Follansbee was a mere dummy for her, and that, hence, her purchase “amounted to payment of the notes and an extinguishment of the debt. ’ ’ The master disagreed with the conclusion, stating in substance that, even assuming Mrs. Seidel had purchased the notes from Schmidt, that fact did not constitute a payment of them and an extinguishment of the indebtedness represented thereby, that whether the purchase of them constituted an extinguishment of the indebtedness depended upon the intention of the parties, and that no such intention appeared from the evidence, but rather that Schmidt’s purchaser was to become his assignee and to succeed to all of his rights as owner and holder of the notes, including the right to continue in the prosecution of the foreclosure proceedings previously instituted by him. And the master further stated:

“It is a matter of no concern to the Holcombs what Mrs. Seidel did wdth the notes after she became the owmer thereof. She would have a right to make a gift of them to Follansbee, if she desired to do so, and Follansbee would, in such event, have a right to foreclose on the notes in case of default. All of the notes were executed in the first instance by Mrs. Seidel for a valuable consideration, and the legal holder of them, whoever he might be, had a right to institute foreclosure proceedings in case of default under the trust deed given to secure them. And the master finds that Follansbee was the legal owner and holder of the notes, and had a right to foreclose on them by said supplemental bill.”

As to the third contention of the Holcombs (that note 29 was not properly presented for payment), the master stated that, although each note of the series provided on its face that it should be paid at a certain named Chicago bank or other place appointed by the holder, and although the evidence shows that when note 29 matured it was not in the possession of said bank but in Schmidt’s possession in Michigan where he then resided, yet the evidence further shows that Schmidt had not appointed any place of payment of said note other than at said bank, that the Holcombs did not call at said bank at said time for the purpose of paying said note, that it is not required in either the notes or trust deed that the notes should be presented for payment at the particular bank; that the Holcombs made no effort to pay note 29, that after its due date they defaulted in the payment of a large number of the subsequently maturing notes of the series, and that they did not at any time make any tender of payment of the amount of note.29 or of the amounts of the subsequently maturing notes, prior to the time of the filing of Follansbee’s supplemental bill.

And the master in his report concluded that all the material allegations of the supplemental bill had been proven and that the equities of the cause were with Follansbee, and recommended that a decree of foreclosure be entered. Objections to the report were ordered to stand as exceptions. After a hearing the court entered the decree complained of, confirming the master’s report, making findings in substantial accord with the findings therein, and ordering a sale in the usual manner if the total indebtedness of $16,652.52 (including certain payments made by Follansbee on the first mortgage indebtedness which had matured and was unpaid), costs, etc., be not paid within a certain stated time. And the present transcript further discloses that the premises were sold at the master’s sale on November 8, 1929, to Follansbee for $14,000; that from the master’s report of sale it appears that there was a deficiency due to Follansbee of $4,369.79; and that the master recommended that a deficiency decree for said sum be entered in his favor and against Mrs. Seidel and the two Holcombs.

Counsel for the Holcombs, as grounds for a reversal of the foreclosure decree in favor of Follansbee, here make substantially the same contentions as made before the master. As to Follansbee’s right, under the facts and circumstances disclosed, to file at the time he did a supplemental bill, or an original bill in the nature of a supplemental bill, we think that he had that right. In Puterbaugh’s Chancery, 6th Ed., p. 269, the author states, generally, that “a supplemental bill is used for the purpose of supplying some irregularity or defect discovered in the frame of the original bill, or in some proceedings upon it; or some defects in the suit arising from events happening- after an issue had been reached in the proceedings and by which persons, not parties to the suit, have acquired an interest in it. ” In 16 Cyc. p. 358, in the article on “Equity” it is said: “Where the interest of a party is transferred pending the suit and the proceedings become for that reason defective a supplemental bill is the proper method for bringing in the new party. . . . Where one has acquired the interest of a party pending the suit he may himself file a supplemental bill, whether the interest acquired be that of plaintiff, or one acquired from a defendant. By strict practice a supplemental bill is proper only where the same parties or the same interests remain before the court; but where new parties with new interests, arising from events happening since the institution of the suit, are brought before the court, it should not be by supplemental bill but by original bill in the nature of a supplemental bill. The distinction between supplemental bills and original bills in the nature of supplemental bills is purely 'technical and is frequently disregarded.” (See Story’s Eq. Pl. sec. 345; Walker v. Chicago, M. & N. R. Co., 199 Ill. App. 610, 621.) Counsel for the Holcombs contends that Follansbee’s supplemental bill was not proper because such a bill “is applicable only to cases where the same parties in interest remain before the court,” and cites in support of the contention the case of Smith v. Johnson, 321 Ill. 134, where language to that effect was used, though in connection with other language disclosing a situation different from that here presented. There a wife had ohtaified a decree of divorce from her husband and the custody of their minor children, and a property settlement by trust agreement, mentioned in a supplemental decree, had been made. Subsequently the husband filed what he characterized “as a supplemental petition and cross-bill,” naming as defendants, in addition to the former wife, the three children, and his three brothers and himself as trustees under said trust agreement, charging fraud and connivance in inducing him to consent to the settlement and trust agreement, and praying for the setting aside of the supplemental decree, etc. The Supreme Court held for reasons stated that said petition could not be considered as a cross-bill and further said (p. 142): “Nor can appellant’s petition be considered a supplemental bill. A supplemental bill is applicable only to cases where the same parties in interest remain before the court. The appellant has made parties defendant his three brothers and his children, none of whom were parties to the divorce proceeding. Such a bill is not a proper pleading to review or alter a decree already entered by the court.” In the present case the parties defendant to Follansbee’s bill were practically the same as those to Schmidt’s bill. Schmidt was dismissed as complainant and his coplaintiff, Joseph Stein, trustee of the trust deed sought to be foreclosed, was made a defendant to Follansbee’s bill. While it is true that three additional persons, Weiss, Grange and Winterbotham, were made defendants to Follansbee’s bill, we think that, treating said bill as an original one in the nature of a supplemental bill, it was properly filed. But counsel for the Holcombs further argues in substance, inasmuch as Schmidt was not the owner of all of the notes secured by the trust deed sought to be foreclosed, he was not entitled to the entire relief asked and could not accelerate the maturity of the whole indebtedness because of the nonpayment of note 29, and Follansbee by his bill could not. Counsel cites the case of Seidel v. Holcomb, 249 Ill. App. 10, decided by the. first division of this court, wherein Mrs. Seidel had obtained a foreclosure decree on the third trust deed on the premises in question. The court, in reversing that decree and remanding the cause for. further proceedings, after stating certain of the provisions of said trust deed (p. 14) said: “This court is of the opinion that the power here granted is to the holder of the whole of the indebtedness to the exclusion of the owner of any part thereof, and since the undisputed evidence shows that Karoline Seidel is not the owner of the whole but, on the contrary, the owner of only a part of the indebtedness, the finding of the master’s report and the decree that she rightfully declared the whole amount due is not sustained by the evidence.” Conceding that when Schmidt filed his original bill in the present cause he (not being the owner of all of the notes secured by said second trust deed) could not accelerate the maturity of- the whole indebtedness, it does not follow that Follansbee, at the time.he filed his bill, could not.legally do so. At that time he was the owner and holder of all of the unpaid notes, including said note 29, and it further appears that there were such breaches of the provisions of said second trust deed as warranted such acceleration and the filing of his bill. In Miller v. Cook, 135 Ill. 190, 205, it is said: “The rule, as we understand it, is well stated by Chancellor Walworth in Candler v. Pettit, 1 Paige Ch. 168, and is, in substance, that if an original bill is wholly defective, and there is no ground for proceeding upon it, it cannot be sustained by filing a supplemental bill, founded upon matters which have subsequently taken place; but that if the original bill is sufficient for one kind of relief, and facts afterwards occur which entitle the complainant to other and more extensive relief, he may have such relief by setting out the new matter in a supplemental bill.”

As to the further contention of counsel for the Holcombs that Follansbee was merely a fictitious complainant and not a bona fide holder for value of all of the unpaid notes secured by said second trust deed, we think that the contrary is shown by a preponderance of the evidence.

As to counsel’s further contention that note 29 was not properly presented for payment we think that it is lacking in merit for reasons as stated by the master in his report as above outlined. Furthermore, it has been decided by our Supreme Court, in substance, that Avhere a promissory note is made payable at a specified time and place, it is not necessary for the payee to make a demand of payment at the time and place specified in order to maintain an action upon the note, or a bill to foreclose a mortgage executed to secure the payment of the note; and that, if in such case the maker is at the designated place of payment, and offers to pay the money due but cannot do so because the note is not there ready tp be surrendered, such offer will only discharge the maker from liability to pay interest accruing after the maturity of the note. (Yeaton v. Berney, 62 Ill. 61, 62, .63; Wood & Co. v. Merchants’ Saving, Loan & Trust Co., 41 Ill. 267, 269.)

As to counsel’s further contention that the trial court erred in sustaining the demurrer to the Holcombs’ amended cross-bill and in dismissing said cross-bill for want of equity, the point is not before us for consideration because not included in the errors assigned by the Holcombs.

Finding no reversible error in the present transcript, the decree of foreclosure, entered by the circuit court on October 11, 1929, is affirmed.

Affirmed.

Scahlah, P. J., and Baretes, J., concur.


author: . Mr. Justice Gridley

text:
    O’Cedar Corporation, Appellee, v. S. S. Kresge Company, Appellant.
    Gen. No. 34,395.

      Heard in the second division of this court for the first district at the June term, 1930.
    Opinion filed December 16, 1930.
    Rehearing denied December 30, 1930.
    Kirkland, Fleming, Green & Martin, for appellant; Weymouth Kirkland, Carl S. Lloyd, J. B. Martineau, Jr., and Arthur H. Stuart, of counsel.
    Lawler, Berry & McKerchar, for appellee; Joseph B. Lawler and G. Donald Whitehouse, of counsel.
   . Mr. Justice Gridley

delivered the opinion of the court.

On February 7,1929, complainant filed its bill in the circuit court praying that defendant, its agents, etc., be temporarily and perpetually enjoined “from ordering, buying, selling, manufacturing or producing any oils, mops or polishes in which the word ‘Cedar’ appears, or forms a component part,” and “for such other and further relief as equity may require.” Prior to October 5,1923, complainant’s corporate name was “Channell Chemical Co.,” but on that date its name was changed under the Illinois statute to “0’Cedar Corporation.” The basis of the bill is a written contract, dated April 1, 1919, between defendant as first party and complainant (as Channell .Chemical Co.) as second party. After the cause was put at issue by defendant’s answer to the bill and complainant’s replication, there was a hearing before the chancellor, resulting in the entry of a decree on April 11, 1930, in which the court found (1) that the parties had entered into the contract on April 1, 1919-; (2) that defendant at and prior to the time of the filing of the bill, in violation of the terms of the contract, “was ordering, buying and selling oils and polishes, in which the word ‘Cedar’ appears, other than those manufactured, produced and sold by complainant”; (3) that the oils and polishes that defendant was selling were not a part of the stock that defendant had on hand on April 1, 1919; and (4) that complainant has no adequate remedy at law and that the equities of the cause are with it. And the court decreed that defendant, its officers, agents, etc., are “hereby perpetually enjoined and restrained from manufacturing, buying, ordering, selling or offering for sale any oils or polishes bearing labels or printed matter upon which the words, ‘ Cedar, ’ ‘Cedar Oil’ or ‘Oil of Cedar,’ appear as the title, caption, trade-mark, trade-name, or name for such oils or polishes, unless the same shall have been manufactured, produced or sold by complainant, except when used in the body of the reading matter of any label indicating that cedar oil is one of the ingredients of the product”; and that the costs herein be taxed against defendant, etc. From the decree defendant has appealed.

In the contract it is recited that first party (defendant) “is selling and offering for sale certain oils and polishes, bearing the words ‘Cedar Oil’ and ‘Cedar,’ manufactured for it by various concerns,” (naming them); that second party (complainant) “is the owner of trade-marks ‘Cedarine’ and ‘O-Cedar,’ which trademarks and trade-names have acquired a secondary name of ‘Cedar,’ ‘Cedar Oil’ and ‘Oil of Cedar’ in the market among the retail and wholesale customers and jobbers”; and that second party- “is exclusively entitled to the use of the word ‘Cedar’ in the manufacture, production and sale of oils and polishes.” It is then stated that “in consideration of $1.00, in hand paid, the receipt whereof is hereby respectively acknowledged, and other good and valuable considerations, and particularly the covenants hereinafter set forth, the parties agree,” in substance as follows:

(1) First Party (defendant) “will no longer order, buy or sell any oils, mops or polishes in which the words ‘Cedar,’ ‘O-Cedar’ or ‘Cedarine’ appear or form a component part, nor will they manufacture, produce or sell for themselves, or anyone else, any oils, mops or polishes in which the word ‘ Cedar, ’ ‘ O-Cedar ’ or ‘Cedarine’ appear or form a component part, except those manufactured, produced and sold by said second party” (complainant).

(2) First party (defendant) shall have the right to sell any mops or polishes, ‘ ‘bearing the word ‘ Cedar, ’ ’ ’ which it may at the present time have on hand until the same are completely exhausted, but, upon the exhaustion of the stock on hand, it ‘ ‘ will no longer order, buy, manufacture, produce or sell for itself, its assigns or anyone else, any mops or polishes bearing the words ‘Cedar,’ ‘Cedarine’ or ‘Oil of Cedar,’ or where any of the above described words form a component part.”

(3) Second party (complainant), for itself and its assigns, does “release” said first party “from any and all manner of actions, or rights of actions in law or in equity, for the manufacture, production and sale of cedar oils, mops or polishes, bearing the words ‘ Cedar,’ from the beginning of the world to the date hereof,” and said second party “will prosecute no action, either at law or in equity, against said first party for the above described.”

In the bill it is alleged that complainant is an Illinois corporation and the owner of the duly registered trademarks “O-Cedar” and “Cedarine,” that it is a manufacturer and vendor of oils, mops and polishes, and that it has been such since its incorporation in 1908; that defendant is a Michigan corporation and duly licensed to do business in Illinois; that on April 1, 1919, the parties entered into a certain, contract (here is set out in full the contract above mentioned); that, in violation of the covenants thereof, defendant “has ordered, bought and sold oils, mops and polishes, in which the word ‘ Cedar ’ appears or forms a component part, other than those manufactured, produced and sold by complainant”-; that the oils and polishes now being sold by defendant, bearing the word “Cedar,” are not of the stock which it had on hand on April 1, 1919, and which was long since exhausted; that defendant for about eight years observed and performed the terms of the contract, but is now buying and selling for itself, and is continuing so to do, in violation of said terms, oils and polishes bearing the word “Cedar” or 1 Oil of Cedar ’ ’; and that complainant has no adequate remedy at law, etc. The prayer of the bill is as first above mentioned.

After defendant’s demurrer to the bill had been overruled it filed an answer in which it denied that complainant is the owner of registered trade-marks “O-Cedar” and “Cedarine”; admitted that it entered into the contract of April 1,1919, but denied its validity because '“indefinite,” “lacking in consideration,” “lacking in mutuality” and being “against public policy”; alleged that its execution was brought about by false representations of complainant’s officers, that the word “Cedar” is in general use throughout the United States in connection with oils, mops and polishes, and that said word is “purely descriptive.” Defendant, however, admitted that it had bought and sold “a small quantity” of polishes, “in the name of which the word ‘Cedar’ forms a component part, other than those polishes manufactured and sold by complainant and which were not a part of the stock which defendant had on hand on April 1, 1919.”

On the hearing before the chancellor, complainant introduced evidence showing that when the bill was filed (February 7, 1929), complainant was, and had been for many years, the owner of the trade-marks “O-Cedar” and “Cedarine,” used in connection with its business of manufacturing and selling oils, mops and polishes, and which trade-marks had been registered in the United States Patent Office; that said trade-marks and also the word “Cedar” had acquired a secondary meaning as indicating to the trade and customers that oils and polishes bearing said marks or words on labels, etc., were complainant’s goods; that complainant had spent much money in advertising and had built up for itself a large and lucrative business in the manufacture and sale of oils and polishes; that shortly prior to the filing of the bill defendant had violated the terms of its said contract with complainant," and especially the provisions of paragraph 1 thereof, and that, when its customers asked for “O-Cedar” or “Cedar” polishes, it sold to them at a less price polishes, labeled “Cedar Oil Polish,” manufactured by a concern other than complainant; that thereby, defendant had not only violated its said contract but was guilty of unfair trade competition as -to complainant and was “palming off” said polishes manufactured by said other concern as the goods of complainant and thereby greatly injuring complainant.

One of defendant’s counsel’s contentions, urged as a ground for the reversal of the injunctional decree appealed from, is that the contract upon which it is based “is void for want of consideration.” And counsel argue in substance that complainant’s release (as stated in paragraph 3 of the contract) of all rights of action against defendant, because of the latter’s previous use of the descriptive word “Cedar” on oils and polishes, is no consideration for the contract, or particularly for paragraph 1 thereof wherein defendant agreed that after April 1, 1919, it would not “order, buy or sell any oils,-mops or polishes (except complainant’s) in which the words ‘ Cedar, ’ ‘O-Cedar’ or ‘Cedarine’ appear or form a component part,” etc. We cannot agree with the contention or the argument. We do not regard any one of these three words as descriptive of the character or quality of complainant’s oils or polishes. (Allen v. Walker & Gibson, 235 Fed. 230, 237; Keasbey v. Brooklyn Chemical Works, 142 N. Y. 467, 474.) Moreover, even if the words could properly be considered as so descriptive, that fact would not justify the deceptive use by others of the words, or similar ones, in unfair trade competition where confusion in the minds of purchasers would result. In DeLong Hook & Eye Co. v. Hump Hairpin Mfg. Co., 297 Ill. 359, 365, it is said: “Where a manufacturer or merchant has used a mark, word or phrase in such a way that it has become identified with his business and the articles of his manufacture, another will not be permitted to use the same mark, word or phrase so as to lead purchasers to believe they are buying the goods of the former. This rule applies even though the word, name or phrase under which the reputation of the merchant or manufacturer has been acquired is . . . merely descriptive of the character or quality of the articles. . . . The question is one of common honesty, and the courts require the observance of such a standard as will protect the business,, the market- and the-reputation of a dealer against all acts which tend to deceive the public into Relieving that the goods of another are his goods and to pass them off as such. A merely descriptive term . . . may have become associated with a particular kind of goods or the product of a particular manufacturer in such a way that merely attaching the word to an article of the same kind would amount to a misrepresentation as to the origin of the article.” (See, also, Standard Paint Co. v. Rubberoid Roofing Co., 224 Fed. 695, 696-7; Mossier v. Jacobs, 66 Ill. App. 571, 574-5; Job Printers Union v. Kinsley, 107 Ill. App. 654, 658; Nestor Johnson Mfg. Co. v. Alfred Johnson Skate Co., 313 Ill. 106, 112; LeBlume Import Co. v. Coty, 293 Fed. 344, 351.)

We have considered counsel’s further contentions, (a) that paragraph 1 of the contract constitutes an unreasonable restraint of trade, (b) that the contract in its entirety is not enforceable in equity because it lacks mutuality and complainant has an adequate remedy at law, and (c) that the contract is too vague and indefinite to support the bill or the injunction granted, and are of the opinion that each and all of these contentions are without merit. And we think that under the provisions of the contract, the pleadings and the evidence, the in junctional decree appealed from was rightfully entered. Accordingly it will be and is affirmed.

Affirmed.

Scant.am, P. J., and Barmes, J., concur.