author: Mr. Justice Dove

text:
    Abingdon Bank and Trust Company, Appellee, v. Shipplett-Moloney Company and Patrick Moloney, Appellants.
    Gen. No. 9,778.

      Heard in this court at the May term, 1942.
    Opinion filed September 17, 1942.
    Leo P. Baird, of Galesburg, for appellants.
    Burrel Barash, of Galesburg, for appellee.
   Mr. Justice Dove

delivered the opinion of the court.

The question in this case is whether two instruments upon which appellee obtained judgment against appellants in the circuit court of Knox county, are ne-' gotiable instruments upon which appellants are liable. The judgment for $2,321 and costs was entered after motions to strike the complaint were overruled and appellants failed to answer. The cause is here on their appeal.

The facts alleged in the complaint and admitted by the motion to strike, are as follows: G. A. Shipplett and Patrick Moloney were partners in a retail hardware store at Abingdon. They did business under the firm name of Shipplett-Moloney Company. The two instruments sued on were payable to the partnership by the name and style above mentioned. One of them reads:

“$700.00 Abingdon, Illinois. May 1, 1926
One yr. four months after date for value received, I (we) promise to pay to Shipplett-Moloney Co., or order Seven Hundred Dollars at the First National Bank, Abingdon, Illinois, with interest at seven per cent per annum from date until paid.
This note (with 1 other) is given for John Deere Tractor and I hereby agree that title thereto, and to all repairs and extra parts furnished therefor, shall remain in the payee, owner or holder of this note until this and all other notes given therefor shall have been paid in money. If at any time he shall deem himself insecure, or if said property or any part thereof is levied upon, or the undersigned attempts to sell or remove the same, then the owner or holder hereof may declare this and every other such note due, and may take possession of said property, and sell the same at public or private sale, with or without notice, pay all expenses incurredx thereby and apply the net proceeds on this and other notes given for the purchase price thereof. In consideration of the use of said property, I agree to pay any balance remaining unpaid on this or any other such note after the net proceeds of such sale ‘ are applied, and if said property, or any part thereof, shall be lost, damaged or destroyed I shall not on that account be entitled to a recission of this contract or abatement in price.
In Consideration Whereof, I hereby authorize irrevocably, any attorney of any Court of Record, in term time or vacation to enter my appearance therein, at any time after date hereof, to waive all process and confess judgment or judgments in favor of the legal holder hereof against me alone, or jointly with any or all other signers hereof, for such amount as may appear to be unpaid thereon, and costs, with twenty-five dollars attorney’s fees, and consent to immediate issue of execution on the judgment as confessed, and waive all errors in the rendition thereof, and ratify and confirm all that my said attorney may do by virtue hereof.
The endorsers, sureties and guarantors severally waive presentment for payment, protest, notice of nonpayment and diligence.
Oscar W. Swanson.”

The other instrument sued on is for $550, dated June 1, 1926, and is signed “J. E. Whitenack.” In all other respects it is idéntical with the one signed by Swanson, except that it refers to a John Deere Model R. tractor. The partnership sold and endorsed the notes to the First National Bank of Ahingdon, which bank made a like transfer of them to the First State and Savings Bank, and appellee acquired them from the latter bank. It is not claimed that appellee is not a bona fide holder thereof for value- before maturity. In February 1930, Shipplett-Moloney Company was incorporated. Moloney subscribed for 200 shares of the capital stock, Shipplett for 49 shares, and one other share was issued to a third party. In payment for the 249 shares, the corporation, at a stockholders’ meeting, took over the assets and assumed the liabilities of the partnership. Gr. A. Shipplett died in August 1930. His estate is insolvent. The original complaint was filed December 6, 1934.

The parties are in agreement that if the instruments sued on are negotiable instruments appellants are liable. Reversal is urged on the ground that they are neither negotiable instruments nor promissory notes. The same ground was included in the motions to strike. Appellants admit that the first paragraph of each instrument, standing alone, answers all the requirements of a negotiable promissory note, but they claim that because of the provisions of the second paragraph, the instruments are rendered mere non-negotiable contracts or choses in action, upon which they are not liable. This is the determinative issue.

The pertinent provisions of the Negotiable Instruments Act of 1907 (Ill. Rev. Stat. 1941, ch. 98, par. 21 et seq. [Jones Ill. Stats. Ann. 89.021 et seq.]) which is the governing statute, are found in its first five sections. In order for an instrument payable in money to be negotiable, it is required by section 1 that it must contain an unconditional promise or order to pay a sum certain in money, and that it must be payable on demand or at a fixed or determinable future time. By section 2 the sum payable is a sum certain within the meaning of the act, although it is to be paid: (1) with interest; or (2) by stated instalments; or (3) by stated instalments, with a provision that upon default in payment of any instalment, or of interest, the whole shall become due; or (4) with exchange, whether at a fixed rate or at the current rate ; or (5) with costs of collection or an attorney’s fee in case payment shall not be made at maturity. Section 3 provides, among other things, that an unqualified order or promise to pay is unconditional, within the meaning of the act, though coupled with a statement of the transaction which gives rise to the instrument. Section 4 provides that an instrument is payable at a determinable future time, within the meaning of the act, which is expressed to be payable: (1) at a fixed period after date or sight; or (2) on or before a fixed or determinable future time specified therein; or (3) on or at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be uncertain; and that an instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect. Section 5 provides, among other things, the negotiable character of an instrument otherwise negotiable is not affected by a provision which authorizes the sale of collateral securities in case the instrument be not paid at maturity or by a provision which authorizes a confession of judgment.

A recent expression of our Supreme Court upon the question of negotiability is found in Sturgis Nat. Bank v. Harris Trust & Savings Bank, 351 Ill. 465, and is relied upon in some measure by each of the parties. That suit was to recover certain stolen bonds secured by a deed of trust. The bonds were in the hands of the Harris Trust & Savings Bank as bailee for an innocent holder. The question was whether the bonds were non-negotiable because of a reference to the deed of trust. It is said in that case (omitting citations): “The negotiability of an instrument must be determined from the writing itself. It cannot depend upon extrinsic evidence. The reference to another writing which will destroy the negotiability of an instrument, otherwise negotiable, must be of a kind which in some respect qualifies or makes uncertain or conditional the promise. Reference in a bond, note or other obligation for the payment of money, otherwise negotiable, to the fact that it is secured by a mortgage or trust deed or by a deposit of collateral securities; or that the consideration for it is a promise to pay money for services to be rendered in the future; or to advance money in the future; or is the purchase of personal property to be paid for by a series of notes maturing on certain fixed dates, all to become due on the failure of the maker to pay any one of the notes, the title of the property to remain in the payee, the vendor, until all the notes are paid, all of the notes being equally and ratably secured on the property; or is a contract whose terms are not mentioned; or that it is issued as one of a series of like obligations, all of which are equally secured by a mortgage or trust deed or other collateral agreement, and that each is equally entitled to the privileges and subject to the provisions of the trust deed; does not affect the negotiability of the instrument containing the reference. In all such cases where the reference is general and no particular provision of the mortgage, trust deed or other agreement for collateral security is mentioned which modifies the unconditional promise to pay, the amount to be paid or the time when it is to be paid, the negotiability of the note is not affected. Such a reference does not make the instrument referred to, a part of the promise to pay or indicate an intention to impose any condition upon that promise. Bach case must be determined on its particular facts, and the question in each case is, Does the language of the particular instrument modify the promise to pay by subjecting it to the possibility of a condition contained in the instrument referred to? The terms of the instrument referred to are immaterial. The question is whether the terms of the reference are such as lead to the inference that the instrument referred to contains a condition qualifying the absolute promise to pay or the amount or time of such payment.” The opinion analyzes and adopts the doctrine announced in several of the cases cited therein, and others, summarizing with the statement that “notes and bonds which comply with the requirements of the Negotiable Instrument Act are on their face negotiable and are governed by the law merchant — the rules of commercial law — while mortgages or deeds of trust of land are governed by the laws applicable to conveyances of real estate, and mortgages of chattels or pledges of collaterals are governed by the laws applicable to such conveyances or pledges. The two instruments do not relate to the same subject matter. The one is a simple promise to pay money: the other relates only to the security given for its payment and the method of its enforcement. So far as the bond or note is concerned, its negotiability must be determined from its face, alone. If the reference, by its relation to the other parts of the instrument, its connection with the context or its express language, indicates an intention to make the note, bond or other obligation dependent for its payment upon the terms of another contract, either as to the unconditional nature of the promise to pay, the amount to be paid or the time when it is to be paid, the negotiability of the instrument is destroyed; otherwise it is not affected.”

In Hunter v. Clarke, 184 Ill. 158, also relied upon by appellee, it appeared that the principal note and two interest notes were secured by a real estate mortgage. The mortgage provided that in case of neglect or refusal to pay any of the notes when due, or in case of waste or nonpayment of taxes or assessments, or neglect to insure or keep insured the buildings on the premises, the principal note, with all accrued interest thereon, should become due and payable at the option of the legal holder thereof, and the mortgage might then be foreclosed. Following the words of promise in the principal note were these words: “according to the tenor of a certain mortgage deed, bearing even date herewith.” The court, assuming the note and mortgage were to be construed as one instrument so far as the stipulations of the mortgage might affect the note, held that the negotiability of the note was not affected by the provisions of the mortgage. In the course of its opinion (omitting citations) the court said: “A note payable by installments is negotiable, although the whole is to become due upon a failure in the payment of an installment or the nonpayment of interest. (Chicago Railway Equipment Co. v. Merchants’ Nat. Bank, 136 U. S. 268.) So a note payable at a date certain or sooner, upon the happening of some specified event, is held to be due at such date and is negotiable; as for example, a note due at a fixed day, or before, if made out of the sale of certain property or upon making a collection, or in case of the death of the maker before such day. There can be no difference, in principle, between the exercise of an option by the maker to pay before a certain day, or a provision that the notes shall be due upon the happening of some event prior to the date fixed and an option of the holder to declare it due upon' the occurrence of some event. . . . The other proposition that the stipulations of the mortgage render the amount promised to be paid by the note uncertain, is not correct. The amount is not increased in any event, but the note is to be satisfied by the sum certain therein named. The provisions of the mortgage for the allowance of costs, taxes, assessments, insurance and attorney’s fees apply only in case of foreclosure and do not add to the amount of the note.” Cited with approval in the recent case of Conerty v. Richtsteig, 379 Ill. 360.

Other cases cited by appellant announce similar principles to those in the two cases above mentioned. All of them are cases where the reference to security was embodied in a separate instrument, except the case of Chicago Railway Equipment Co. v. Merchants’ Nat. Bank, supra, in which, like the case at bar, the reference to security and to companion notes are contained in the particular instrument itself. In that case the notes sued on were part of an issue with a title retaining clause. The court held that negotiability was not affected by a provision that upon failure of the maker to pay any one of the notes the others should become due and payable. It is manifest that the same principles must be applied whether the reference is by way of a recital in the instrument itself or by reference to a separate document. The test is not whether the promise to pay and the reference to security are contained in the same or in different instruments, but in either case it is whether the reference qualifies or renders uncertain or conditional the promise to pay, the amount to be paid, or the time of payment.

The instruments sued on, according to their terms, may mature at any time the owner or holder may deem himself insecure or if the property therein described is levied upon or if the conditional vendee attempts to sell or remove it. Counsel for appellants say they do not object to that provision because it renders uncertain the time of maturity, nor because it renders the promise to pay conditional but do object to it for the reason that it renders uncertain the amount to be paid at maturity. Referring particularly to an exercise of the option under the insecurity clause, they call attention to the fact that the amount of the note referred to in the second paragraph of the instrument sued on is not stated therein and argue that this renders uncertain the amount to be paid, and that to determine such amount would require resort to extrinsic evidence. They invoke the holding in Sturgis Nat. Bank v. Har ris Trust & Savings Bank, supra, to the effect that the negotiability of an instrument must be determined from the writing itself, and that it cannot depend upon extrinsic evidence.

Appellants lose sight of the fact that the amount unpaid on the note referred to in the second paragraph of the note sued on, and extrinsic evidence thereof, could have no effect upon the amount of the promise in or the amount unpaid on the note sued on. The effect of an election to exercise the option under the insecurity provision can be no different than an election under a provision for acceleration on account of nonpayment. In either case the note is put in default by the exercise of the option, which operates only to accelerate maturity, without in any way changing or making uncertain the amount promised to be paid or the- amount due or unpaid under the note sued on and this is true, regardless of the amount of the other note or the amount due or unpaid thereon. This view accords with the holdings in Sturgis Nat. Bank v. Harris Trust & Savings Bank, supra; Hunter v. Clarke, supra; and Chicago Railway Equipment Co. v. Merchants’ Nat. Bank, supra. Especially adaptable are the following expressions in Hunter v. Clarke, supra: “The other proposition, that the stipulations of the mortgage (here the .second paragraph of the note) render the amount to be paid by the note uncertain, is not correct. The amount is not increased in any event, but the note is to be satisfied by the sum certain therein named.”

Smith v. Myers, 207 Ill. 126, relied upon by appellants was a case where a note, following the usual promise to pay a certain sum at a time designated, contained the words: “Value received, with interest at six percent per annum and taxes.” The court held the uncertainty as to the amount of the taxes rendered the instrument non-negotiable. That uncertainty went to the amount promised by the instrument to be paid. That amount was not fixed by the instrument itself nor were there any means found in the instrument by which the amount could be fixed. That in order to determine the amount resort to extrinsic evidence was necessary and therefore, the instrument was not a promissory note. The situation in the case at bar is different. Nothing in the second paragraph of the notes sued on has any such effect. That case is not applicable here.

In our opinion the instruments sued on are negotiable promissory notes. The judgment of the trial court is accordingly affirmed.

Judgment affirmed.


source: Caselaw Access Project

license: Public Domain

text:
    Maude E. Hart v. Jabez Hart et al. Swedish American National Bank of Rockford, Trustee, v. Maude E. Hart Mazur, Appellee. Hazel Carton, Appellant.
    Gen. No. 9,784.

      Heard in this court at the May term, 1942.
    Opinion filed September 17, 1942.
    Scott, Wood & Pace, of Detroit, and Gibboney & Faissler, of Rockford, for appellant; Karl E. Scott, of Detroit, and John J. Faissler, of Rockford, of counsel.
    Stanley H. Guyer, of Rockford, for appellee.
   Mr. Justice Dove

delivered the opinion of the court.

The issue in this case is as to how the net income from a testamentary trust created by the last will of Albert E. Hart, deceased, shall be divided between the two beneficiaries, Hazel Carton, appellant, who is the daughter of the decedent, and Maude E. Hart Mazur, appellee (formerly Maude E. Hart), decedent’s widow and stepmother of appellant.

The controversy involves that portion of the will which reads:

“After all my just debts are paid I want all my property put in trust for the benefit of my heirs as hereafter stated. My wife Maude E. Hart is to have the entire net income, If she lives until my daughter Hazel Carton is not teaching or unable to .teach Then Hazel Carton is to receive one half of the net income from my estate less whatever income she may receive from other sources and the balance of said net income is to be paid to Maude E. Hart my wife. In case that eather dies the other is to receive the entire income and in case both die, after their funeral expenses is paid the^alnet income is then to go to Jabez W- (Jay) Hart my Grandson.”

The cause is here on the daughter’s appeal from a decree of the circuit court of Winnebago county, holding a former decree is res adjudicada, and ordering that the net income from the estate be divided into two equal shares, from one of which shares the income received by appellant from other sources shall be deducted; that whatever remains of that share shall be paid to her, and that appellee be paid all the rest and remainder of the income from the estate.

Appellant has been a school teacher in the city of Detroit, Michigan, since September 1919. At the time the decree appealed from was entered (October 24, 1941) she had been on leave of absence since June 30th of that year, on account of high blood pressure and nervous exhaustion. Her physician advised her she should not teach any more if she did not have to' do so. She owns an incumbered two-family apartment building in the city of Detroit. One of the apartments is occupied by a tenant. She and her husband live in the other apartment. The decree further orders that in computing her income there shall be included the rent actually received, together with the fair rental value of the apartment occupied by her and her husband, less the interest on the mortgage, cost of heating, light, water and taxes, but not including depreciation. It further orders that any money appellant receives in the future as benefits or pension, from the Detroit teachers’ pension fund, less any future assessments, be treated as income, without deduction for any assessments theretofore paid by her.

Appellant claims that under the terms of the will, an amount equal to her income from other sources should be deducted from the entire net income from the estate, the remainder divided into two equal parts, one of which should be paid to her, and all the balance of the net income from the estate should be paid to appellee. She also claims the rental value of the apartment occupied by her and her husband should not be counted as income, and that payments made by her to the teachers ’ pension fund before the decree was entered are deductible. The decree is in accord with the claims of appellee.

The decedent died in February 1937. The circuit court first took jurisdiction of the trust estate under a petition filed by the widow in April 1937, individually and as executor of the will, for the construction thereof and the appointment of a trustee. The petition alleges, among other things, that “An ambiguity and uncertainty appears in the terms of the clause of the will with reference to the amount of the net income to be paid by the trustees to the daughter, Hazel Carton, and in respect to the time when said daughter should receive any portion of the net income from said trust estate.” The daughter answered. The pleadings set out the respective contentions of the parties. The decree appointed Swedish American National Bank of Rockford as trustee, found that it was the intention of the testator that when the daughter “ceases to be a school teacher, either from her own volition or from any other cause, she shall then become entitled to receive one-half of the net income from said estate, less whatever income she receives at that time from other sources”; that it was not the intention of the testator that she should receive such income during the usual three months summer vacation, but only when she has definitely quit teaching or is not teaching when school is ordinarily in session; and in case, after receiving such income, she should resume teaching, no income shall be paid to her while she so continues to teach. The decree has never been appealed from or modified.

In July 1941, the trustee filed a petition for further construction of the will and further directions to the trustee, detailing the disagreements between the widow and the daughter. Each of them filed an answer, and a counterclaim setting out their respective claims. On the hearing, the decree appealed from was entered. It sets out the above quoted portion of the former decree, finds that it is res adjudicaba, and orders distribution of the net income from the estate in the manner above mentioned.

The question as to the method to be employed in dividing the net income from the estate is whether appellant’s income from other sources is to be deducted from such entire net income or from one half of such net income. Assuming that appellant’s income from other sources will be less than the entire net income from the estate, so as to be deductible at all, then, regardless of the specific amounts' of either of such incomes, if the method ordered by the decree is followed, appellee’s income from the estate will always exceed appellant’s total income, including her income from outside sources. If the method which appellant claims to be correct is used, appellee’s income from the estate will exactly equal appellant’s total income, including that from outside sources.

Appellant argues that the will shows an intention of the testator to treat the beneficiaries on an equal basis, as shown by three things: that whoever survives is to receive the entire net income; that when either dies, the funeral expenses are to be paid from the trust fund; and that both beneficiaries are named as executors. The argument leaves out of consideration the fact that the testator first provides that the widow is to have the entire net income. It is only upon the contingency that the daughter ceases to teach during the widow’s lifetime that there is to be any division thereof. There is nothing in the wording of the will which indicates an intention of the testator that the phrase: 1 one half of the net income” shall be split up so as to eliminate the words “one half of” in making such division, and that the phrase be held to mean that the daughter’s income from other sources is to be deducted from the “net income.” On the contrary, interpreting the words as used, in their natural, general, popular sense under the established rule (Welsch v. Belleville Savings Bank, 94 Ill. 191; Taubenhan v. Dunz, 125 Ill. 524), they indicate the testator meant the phrase to be used in its entirety, and that the deduction shall be made from “one half of the net income.” As suggested by appellee the testator negatived equality of benefits when he provided that the daughter should receive less than one half of the net income. Furthermore, the provisions for the widow’s share is for the “balance” of the net income, without any direction or suggestion that the daughter’s share of the net income of the trust estate, or her total income, including that from other sources, shall equal that of the widow. If the -testator had any such intention he made no such provision in his will.

The intention of the testator to be established by construction of a will is that expressed in the instrument and not one which may have existed in the mind of the testator. (Ryan v. Beshk, 339 Ill. 45; Bushman v. Fraser, 322 Ill. 579.) The language will be interpreted in view of the circumstances surrounding the testator, but will not be permitted to import into the will an intention different from that expressed by its language, however clearly such different intention may be made to appear. (Knight v. Knight, 367 Ill. 646; Hollenbeck v. Smith, 231 Ill. 484.) The testator’s intention cannot be determined from any surmise that he used language to express a meaning he had in mind but failed to express, or that he intended what he said to mean something else. (Heitzig v. Goetten, 347 Ill. 619; Foss v. State Bank & Trust Co., 343 Ill. 94.)

Appellant invokes the familiar doctrine that the cardinal rule of testamentary construction is to ascertain the intention of the testator and give it effect unless it is contrary to some rule of law or public policy; and that such intention must be gathered from the words of the will itself and requires a consideration of all the provisions of the will as a whole and not any particular part separated from the rest. (Dahmer v. Wensler, 350 Ill. 23.) That case also holds that the purpose of testamentary construction is to arrive at the intention of the testator as expressed by the language of the will, and not an intention which existed in his mind apart from such language. Appellant also relies upon holdings that in determining the intention of the testator, that construction which conforms most nearly to the general law of inheritance will be favored. (Dell v. Herman, 365 Ill. 261; Dahmer v. Wensler, supra); and that where the language of a will is susceptible of two constructions, the construction which results in or tends to equality of distribution among beneficiaries will be preferred. (Fidelity & Columbia Trust Co. v. Lucas, 66 F. (2d) 116; In re Estate of Wootten, 253 Pa. 136, 97 Atl. 1066; Thompson on Wills (2d Ed.) 283.) Manifestly the holdings in the two latter classes of cases are applicable only when the language of the will is susceptible of two different constructions,- and they do not lessen the effect of the holdings that the intention of the testator must be determined from the language he uses and not from anything different he may have had in mind. "Where, as here, the language used is susceptible of only one construction, the court must be governed by the language used, and all other rules of construction must yield thereto. (Hartwick v. Heberling, 364 Ill. 523; Brittain v. Farrington, 318 Ill. 474.) In our opinion the language of the will clearly shows the testator intended the net income from his estate shall be divided in the manner provided by the decree, and is not susceptible of any other construction. Counsel for appellant stated, upon oral argument, that the result of this construction is to penalize appellant for having an income because the greater her income the less she would receive from the trust created for her benefit. This is true but the answer is that it was the expressed wish of the testator as disclosed by the words he chose to express his meaning.

On the former hearing the issue on the question of the method of dividing the net income of the trust estate between appellant and appellee was the same as in the instant proceeding. We are of the opinion that the holding in the former decree is res adjudicata, but whether it is or not, in the instant proceeding the chancellor arrived at a correct conclusion on that question.

The court correctly held that no deduction in appellant’s income from the teachers’ pension fund shall be allowed on account of assessments theretofore paid by her. She relies upon a statement by appellee’s counsel during the argument in the trial court that he was willing that the word “income” should be interpreted in accordance with the Federal income tax law, as to all matters except upon the question of the deductibility of a reasonable rental of the apartment occupied by appellant, and upon a ruling in C. C. H. 1941 Federal Tax Service, pars. 95.0843, 95.0844, respecting a similar deduction under New York State and New York City Teachers’ Retirement Funds wherein it was held that a recipient of a pension is entitled to deduct from income for tax purposes the amount contributed to the pension fund. It is not shown or claimed that payments to teachers under the New York statute relating to teachers’ retirement funds is on the same or a similar basis, as under the Michigan Act, or that the Michigan Act would be subject to the interpretation cited. Furthermore, the will in this case does not show any intention of the testator to attach to the word “income” any other than its usual and general meaning.

Appellee’s claim that appellant has not shown she has definitely quit teaching so as to bring herself within the terms of the will is without merit. The uncontradicted testimony shows she Avas physically unable to teach when the trustee’s petition was filed herein and at the time of the hearing. The will does not require that she should resign. She was definitely Avithin its terms.

The chancellor erred, however, in ordering that the fair rental value of the apartment occupied by appellant and her husband shall be counted as income. It is not income in the usual and general sense of the word, and there is nothing in the will which tends to indicate the testator had any idea that it was to be counted as income. Inasmuch as appellant derives no income from that apartment which she occupies she is not entitled to credit for interest, cost of heating, light, water and taxes, applicable to that part of the building, but only to credit for such items in the proportion that they bear to that portion of the premises occupied by a tenant from which she receives rent.

That part of the decree ordering the fair rental value of the apartment occupied by appellant- and her husband be charged as income, and allowing credit for the items mentioned, so far as they are applicable to that apartment, is reversed and the cause is remanded with directions to enter a decree in conformity with the views herein expressed. In all other respects the decree is affirmed.

Reversed in part and remanded with directions.


text:
    Joseph Le Doux et al. v. Henry D. Dettmering et al. Niagara Fire Insurance Company, Appellant, v. Joseph Le Doux et al., Appellees.
    Gen. No. 9,787.

      Heard in this court at the May term, 1942.
    Opinion filed September 17, 1942.
    R. C. Schoenstedt, of Joliet, and Peters, Dixon & Heineke, of Chicago, for appellant; Paul H. Heineke and Morton Lane, both of Chicago, of counsel.
    Arch F. Nuttall, of Steger, for appellees.
   Mr. Justice Dove

delivered the opinion of the court.

The controversy in this case is between an insurance company and the makers of notes secured by a trust deed. The only question is whether the payment by the insurance company of a fire loss to the holder of the notes, under a policy insuring him as such holder, entitled the insurance cdmpany to subrogation, or whether such payment operated to discharge the indebtedness secured by the trust deed. The facts were stipulated.

Joseph Le Doux and Thomas Frankiewicz were the owners of certain premises in the village of Steger, improved with a five-room frame house. On April 24, 1930, they and their respective wives executed their promissory note for $1,000, due in five years, payable to the order of themselves and indorsed in blank, with semiannual interest coupon notes. To secure the payment of these notes they also executed a trust deed of even date covering said premises. Henry D. Dettmering was the legal holder of the notes. Upon refusal of the makers thereof to have the building insured, in compliance with their covenant to do so in the trust deed, Dettmering procured a policy of insurance on May 16, 1936 from appellant, Niagara Fire Insurance Company, for $2,000, insuring him as “legal holder of notes.” A fire occurred on August 2, 1936. The insurance company paid Dettmering $1,340.12, being the full amount then due on the notes, whereupon he delivered to it the notes, the trust deed and other papers in connection with said loan.

Le Doux and Frankiewicz, in May 1937 brought an action in the circuit court of Will county against Dettmering and the insurance company to compel them to cancel and surrender the notes and cause the trust deed to be released of record, and for damages, costs and attorney’s fees. Le Doux and his wife Rosa had on January 25, 1932, conveyed their interest in the premises to Thomas Frankiewicz and Katarzyna, his wife, as joint tenants. The insurance company filed a counterclaim at law against all four of them to recover the amount of the note and interest. Thomas Frankiewicz died during the pendency of the suit. At the conclusion of the hearing the court entered a decree ordering that the plaintiffs and counter-defendants take nothing from the insurance company and Dettmering; that the insurance company take nothing on its counterclaim; that the promissory note be canceled and surrendered, and delivered to Katarzyna Frankiewicz as evidence of payment of the indebtedness secured by the trust deed and that all parties pay their own costs. The insurance company has appealed from those portions of the decree which are adverse to it.

The trust deed provided, among other things, that the grantors would keep all buildings insured to their full insurable value against loss by fire and tornado, made payable to the grantee, who was authorized to collect it and apply it on the indebtedness; and that in the event of the breach of such covenant, the grantee or holder of the indebtedness might insure the premises, and all moneys thus expended should be so much additional indebtedness secured thereby. Before Dettmering obtained the insurance policy he made a demand upon appellees that they procure insurance in accordance with the terms of the trust deed and they refused. Thereupon, Dettmering, at his own expense, and without the knowledge or consent of appellees, procured the policy insuring him as “legal holder of notes” against loss by fire, windstorm, cyclone, tornado and hail, explosion, riot, riot attending a strike, aircraft, vehicles and smoke. Dettmering did not bill appellees with the premium on the policy, nor charge it to them or seek to collect it from them, and does not now and never has claimed they were indebted to him on account of the payment by him of the premium. The last interest paid on the principal note was on October 24, 1931. There was no subrogation agreement in the insurance policy. Appellees made no claim on appellant after the fire until the filing of this action. On December 24,1936, the attorney for appellees wrote Dettmering that the insurance company had demanded payment of the notes, and that appellees would look to him for any damages and costs, incurred by them in defending any suit on the note; that they claimed damages by reason of his action in insuring the mortgaged building and collecting insurance on their property without their consent or knowledge, and demanded cancellation and surrender of the note and that he procure a release of the trust deed.

Appellees attach much importance to the insurance provision in the trust deed and to the fact that the insurance policy contained no subrogation clause and rely upon the statement in sec. 418, 1 Jones on Mortgages (7th Ed.), where, in commenting on cases where there is no subrogation clause in the insurance policy, the author says that if there be nothing in the policy inconsistent with the contract between the mortgagee and the mortgagor, such contract may be regarded as an explanation of the policy obtained by the mortgagee, and the policy will be regarded as having been obtained under the provisions of the mortgage and for the benefit of the mortgagor. The author cites and quotes from Waring v. Loder, 53 N. Y. 581 which case is also relied upon by appellees. In the same section the author says: ‘ ‘ Insurance obtained by the mortgagee when the mortgage contains the usual covenant for insurance on the part of the mortgagor, and an agreement that, in case of his failure to do so, the mortgagee or his representatives may take such insurance, and the mortgage shall secure the repayment of the premium, is not necessarily presumed to be under this authority, especially if it be taken ‘on his interest as mortgagee.’ (Foster v. Van Reed 70 N. Y. 19).” That expression fits the case at bar.

In Waring v. Loder, supra the mortgagee insured the property under a provision in the note that the mortgagor should place insurance upon the property and in default of so doing that the mortgagee may take out such insurance and the premium thus paid would be deemed secured by the mortgage. Suit to foreclose was instituted and while pending the premises burned. The insurance company paid the amount of its loss to the mortgagee and took an assignment of the mortgage. In its opinion the court said that the insurance was effected by the mortgagee under the authority contained in the mortgage, that this was established by the record in the foreclosure suit inasmuch as the complaint alleged that the premium paid was a part of the indebtedness secured by the mortgage, was included in the amount reported by the referee to be due and the deficiency judgment was increased by the amount of the cost of the insurance. “The import of the transaction is,” said the court, “that the insurance was additional collateral security for the mortgage debt, furnished by the mortgagor at his expense, and procured by the mortgagee, acting as his agent and by his authority. — The mortgagee had no interest to procure an insurance limited to his own protection merely where the expense was to be paid by the other party and was secured on the land. It has been held in several cases that insurance procured by a mortgagee upon the request or at the expense of the mortgagor is held by the mortgagee for the protection of both interests and the implied obligation arising is that the insurance money when paid to the former shall apply on the mortgage debt (citing cases).” The controlling fact in that case was that the mortgagee’s complaint alleged that the premium paid for the insurance was part of the indebtedness secured by the mortgage and the amount of the premium was included in the amount found to be due, and the deficiency judgment was increased by the amount of the cost of the insurance. Manifestly, in the light of the well-established rule, neither the isolated portion of the text of Jones on Mortgages relied upon by appellees, nor the holding of Waring v. Loder is controlling here. Furthermore, we do not think it can be said that the author of Jones on Mortgages intended to be understood as meaning that in the absence of a subrogation clause the insurance must be regarded as having been effected under the insurance clause in the mortgage if extrinsic facts show it was for the sole benefit of the mortgagee. Such an interpretation would be in contravention of all the authorities on the subject.

In Thorp v. Croto, 79 Vt. 390, 65 Atl. 562,10 L. R. A. (N. S.) 1166 also relied upon by appellees, the insurance policy was procured by the mortgagor. In Pendleton v. Elliott, 67 Mich. 496, also relied upon by them, the holding in favor of the mortgagor was based upon the fact that the endorsement on the application for insurance, in the handwriting of the mortgagee, showed the assessments were to be paid by the mortgagor; and that he paid about half of them. The court found the insurance was effected with the understanding that the mortgagor should pay the assessments. Neither of those cases support the contentions of appellees. However, it is significant that in the Pendleton case the court said: “The law is well settled that if the mortgagee obtain insurance on his own account, and the premium is not paid by or charged to the mortgagor, he cannot claim the benefit of the payment of the insurance.” (Citing cases.)

In Leyden v. Lawrence, 79 N. J. Eq. 113, 81 Atl. 121, aff’d 80 N. J. Eq. 550, 85 Atl. 1134, the mortgage contained an insurance clause like the one in the case at bar. A foreclosure suit was filed by the insurer which had paid a fire loss to the mortgagee under a policy issued to him as such. The mortgagor filed a cross bill praying the mortgage be deemed satisfied by the payment of the insurance to the mortgagee. The court stated that it was the settled law of New Jersey that a mortgagee of real estate has an insurable interest therein and when such mortgagee, at his own expense and solely in his own behalf, procures insurance on the mortgaged property for the better security of his debt, the insurer, if obliged to pay a loss occasioned by injury to such property, may be subrogated pro tanto to the rights of the mortgagee under the mortgage; that if the insurance has been taken out by the mortgagee at the expense and for the benefit of the mortgagor, as well as for his own protection, the mortgagor will have the right, in ease of a loss, to have the avails of the policy applied for his benefit toward the discharge of his indebtedness; that there was no evidence to establish that the insurance was effected by the mortgagee for the benefit of himself and the mortgagor, or at the mortgagor’s expense, except the fact that the insurance was, in amount, in excess of the amount due on the mortgage, and that the mortgage authorized the mortgagee to effect insurance at the expense of the mortgagor in the event of the failure of the mortgagor to keep the premises insured. The court then held that where an insurance clause in a mortgage gave the mortgagee the option to take out insurance at the expense of the mortgagor, but did not compel him to do so, the mortgagee was at liberty to insure at his own expense and solely for his own benefit; that in the absence of proof that the insurance effected was for the joint benefit of the mortgagor and the mortgagee, or at the mortgagor’s expense, the mortgagor was not entitled to have the amount of the. loss credited on the mortgage; that the insurance effected by the mortgagee was, by its terms, solely upon his interest as mortgagee and hence the insurer, having paid such loss, was entitled to be subrogated to the rights of the mortgagee. The same situation obtains here. In the instant case it affirmatively appears that Dettmering procured the insurance at his own expense as “legal holder of notes” without the consent or knowledge of appellees, after they had not only failed, but had refused to procure any insurance and that he never charged the premium to them or sought to collect it from them, or claimed they were indebted to him on account of the premium. The facts in the instant case are more favorable to the insurance company than they were in the Leyden case. There was a subrogation clause in the policy in that case, but the court says the conclusion in favor of the insurance company was reached independently of that fact.

In Gainesville Nat. Bank v. Martin, 187 Ga. 559 it appeared that one J. W. Oglesby executed a trust deed by which he conveyed to trustees certain property to secure the payment of two notes aggregating $18,000 which notes and trust deed were delivered to> the trustees for the benefit of certain creditors of Oglesby. Some of these creditors, in order to protect themselves, took out certain fire insurance policies upon the property covered by the trust deed and paid the premiums thereon. Later the property was destroyed by fire and the insurance companies paid the amount of the moneys to those who had paid the premiums, and in consideration thereof those creditors subrogated the insurance companies to their interests in the indebtedness so secured by said trust deed, equal to the amount so paid by the insurance companies and authorized the companies to take any and all steps necessary to enforce their rights. In reversing the judgment of the lower court which held the insurance companies not entitled to any relief the Supreme Court in its opinion stated the question presented as follows: “Do the plaintiffs in error have a right of recovery under fire-insurance policies taken out by persons who are mortgagee beneficiaries under a trust deed, for the sole protection of said mortgagee beneficiaries, where a fire loss has occurred thereunder, all the insurance premiums having been paid by said mortgagee beneficiaries, and where a pro tanto assignment and subrogation agreement is made between said mortgagee beneficiaries and the insurers, upon payment by the insurers to said mortgagee beneficiaries of the fire loss sustained by them and by virtue of said insurance policies, even though the policies contain no subrogation clause giving the insurers such right of recovery?” This question, said the court, had not theretofore beén presented to the court for determination. It then cited and commented upon Scottish Union & National Ins. Co. v. Colvard, 135 Ga. 188, 68 S. E. 1097, and People’s Bank of Mansfield v. Insurance Co. of North America, 146 Ga. 514, 91 S. E. 684, L. R. A. 1917 D, 868, and continued: “Upon the question as to whether or not, in case of an independent insurance by a mortgagee upon his own account and for his own protection, the insurer, upon payment of the loss, is entitled as a matter of law to be subrogated to the mortgagee’s rights, there is a slight conflict of opinion, though by the great weight of authority such right of subrogation exists. The principal case denying the right is King v. State Mutual Fire Insurance Co., 7 Cushing, 1 (54 Am. Dec. 683), decided by the Supreme Judicial Court of Massachusetts in 1851. That decision stands almost or quite alone. No holding to that effect from any other State is cited on the briefs filed by able and industrious counsel for defendants in error, and our own investigation has disclosed none. The rule contrary to that stated by the Massachusetts court is laid down in 26 C. J. 461; 1 Jones on Mortgages (7th ed.), sec. 420; and in 7 Cooley’s Briefs on Insurance (2d ed.), 6716, where, with the exception of the Massachusetts cases, an unbroken line of cases are cited in support of the statement that ‘It is a general rule that where the interest of a mortgagee is separately insured for his own benefit, and a loss occurs before payment of the mortgage, the underwriters are bound to pay the amount of such debt to the mortgagee, providing it does not exceed the insurance, and are thereupon entitled to an assignment of the debt from the mortgagee, and may recover the same from the mortgagor. The payment of the insurance by the underwriter does not, in such a case, discharge the mortgagor from the debt, but only changes the creditor. ’ See also the cases collected and cited in a note to Baker v. Monumental Savings & Loan Assn, and Scottish Union & National Insurance Co., in 3 L. R. A. (N. S.) 79. For a more recent ruling to the same effect in which a number of later rulings are cited, see Stuyvesant Insurance Co. v. Reid, 171 N. C. 513 (88 S. E. 779). Here the mortgagees gave to the insurance companies written' assignments of their claims. The position of the plaintiffs is therefore much stronger than if they merely relied on the law to give them the right of subrogation in the absence of such assignment. In Honore v. Lamar Fire Ins. Co., 51 Ill. 409, 414, it was said: ‘In Concord A. M. Ins. Co. v. Woodbury, 45 Maine, 452, where the assured had voluntarily assigned his claim to the insurance company upon payment by it, as in the present case, the court held the company entitled to recover. The question of the right to subrogation against the will of the mortgagee was not presented in that case, nor is it in this, because the assignment was made by the mortgagee upon payment of the loss. The only question strictly presented here is, whether the mortgagor has been discharged from his debt by the payment of the mortgagee’s policy, and on this point there is no disagreement among the authorities. The debt is still in existence, and the strong equity of the insurance company has been united to the legal title.’ See also Hackett v. Cash, 196 Ala. 403 (72 So. 52).”

In Fergus v. Wilmarth, 117 Ill. 542, the insurance was effected by the maker of the trust deed in accordance with its provisions. A loss occurred and the proceeds of the insurance was paid to the trustee. Our Supreme Court held that the trustee was agent of both the mortgagor and holder of the note and the money took the place of the buildings, destroyed by fire, and was, in the hands of the trustee, a part of the security for the debt.

In Clark v. Traimor, 237 Ill. App. 269, at page 278, this court quoted with approval Cooley’s Briefs on the Law of Insurance at page 3700 where it is said: “A mortgagor has no interest in the proceeds of a policy insuring the mortgagee, taken out by the mortgagee to protect his own interest, or in which the interest of the mortgagor has been forfeited, leaving that of the mortgagee still in force.” In the course of the opinion it is stated that it was not uncommon in policies of fire insurance to provide that whenever the insurer shall pay the mortgagee any sum on account of a loss, and shall claim that as to the mortgagor no liability exists, the insurer shall be subrogated to the mortgagee’s rights and it was held that the effect of the mortgage clause in that particular case was that, from the time the policy became void as to the mortgagor, the insurance was only in favor of the mortgagee and sustained a decree holding that the insurer was entitled to be subrogated to the rights of the mortgagee’s debt to the extent of its payment to the mortgagee.

A contract of insurance is one of indemnity merely and any person having an interest in property may, through an insurance contract, indemnify himself against loss by fire or other insurable casualty. Mortgagors and mortgagees each have an insurable interest in the mortgaged property and the interests of both may be covered in one policy, or each may take out a separate policy and where the mortgagee does insure at his own cost, without privity with the mortgagor, the insurer which pays the mortgagee a loss is entitled to be subrogated to his claim, and the mortgagor cannot claim any benefit of the insurance. If, however, insurance has been effected at the request or by the authority of the mortgagor, or under circumstances that would make him chargeable with the premium, the mortgagor, in case of a loss, is entitled to have the proceeds of the insurance applied in liquidation of the mortgage debt pro tanto. Honore v. Lamar Fire Ins. Co., 51 Ill. 409; Norwich Fire Ins. Co. v. Boomer, 52 Ill. 442; Carpenter v. Providence Washington Ins. Co., 16 Pet. (U. S.) 495, 10 L. Ed. 1044; Leyden v. Lawrence, supra; 1 Jones on Mortgages (7th Ed.) sec. 418; Waring v. Loder, supra; Pendleton v. Elliott, supra; Thorp v. Croto, supra.

From these and other authorities it is apparent that the question here to be determined resolves itself into one of privity. In cases like the instant one the insurance is considered as a further security of the debt; and on the familiar principle that a surety who pays the debt may resort to the principal debtor for payment, the insurer is permitted to recover from the mortgagor. (Norwich Fire Ins. Co. v. Boomer, supra.)

Appellees here refused to procure insurance in compliance with their covenant in the trust deed and Dettmering having obtained insurance without their knowledge or consent, for his own benefit exclusively and at his own expense, there is no privity between appellees and him, nor between them and appellant. They stand as strangers to the insurance transaction, as much so as if the trust deed had not contained any insurance clause. Under such circumstances, their claim that the cases cited by appellant where there was no insurance clause in the mortgage are not applicable is without merit.

It is common knowledge that the premium for a policy insuring against all the hazards mentioned in Dettmering ’s policy is larger than the premium for a policy covering only fire and tornado. It is obvious that in such a case Dettmering could not recover the premium for such extra hazards from appellees or charge it to them under the terms of the trust deed. Presumably he knew the law in this respect at the time he procured the policy. A subrogation clause therein could not have changed the legal status of the premium paid in connection with the covenant in the trust deed. There is nothing in the record which tends to indicate he had in mind any division of the premium between appellees and himself, or that they contemplated assuming liability for any portion of it when the policy was procured or thereafter. On the contrary, they had immediately prior to the time it was obtained refused to procure any insurance. Appellee’s claim that Dettmering could wait until there was a fire before deciding whether to charge the premium to them, and then waive it for the benefit of appellant has no support from anything appearing in this record.

By their letter to Dettmering written by their attorney they, in effect, denied his right to procure insurance without their knowledge and consent, as well as the right to collect it after the fire. By taking this position they repudiated their covenant in the trust deed, yet they now seek to invoke the benefit of the covenant, without tendering any part of the premium or offering to have any part of it charged as a part of the indebtedness, as provided therein. Even if they were otherwise entitled to relief, this would require denying it. Under the law, however, they are not in privity as to the insurance, and so are not otherwise entitled to relief.

"While the insurance clause in the trust deed authorized Dettmering to insure at the expense of appellees, it was at his option, and he was not thereby denied the privilege of insuring for his own exclusive benefit. (Leyden v. Lawrence, supra; Foster v. Van Reed, supra.) He did so, and appellees cannot bring the provision in the trust deed into force against him by their own default. (1 Jones on Mortgages (8th Ed.) sec. 513.) They are in no different or worse situation than if Dettmering had never insured his interest. If he had not done so the only difference would be that his security would have been impaired to the extent of the loss occasioned by fire, and appellees would still owe the debt. They have not paid it and they carried no insurance. The fire loss is naturally theirs, and as observed above, the only effect is that there has been a change of creditors.

It is immaterial that the result of our holding is that appellant when it issued its policy of insurance in this case and collected the premium therefor from Henry D. Dettmering did not stand to lose anything by its contract of insurance if the property covered by the trust deed, after the fire, was worth the amount it paid Dettmering under its policy or if those liable upon the notes, to which it became subrogated were financially responsible.

The decree of the circuit court is reversed and the cause is remanded with directions to dismiss appellees’ complaint for want of equity and to enter judgment for appellant on its counterclaim.

Reversed and remanded with directions.


author: Presiding Justice Hates.

text:
    Louis Baltisberger, Appellee, v. Frederick Weishaar and Joseph Weishaar, Executors of Estate of Joseph Weishaar, Deceased, Appellants.
    Gen. No. 9,330.
    Heard in this court at February term, 1942;
    opinion filed May 20, 1942;
    rehearing denied October 6, 1942.
    J. P. Streuber, for appellants;
    Paul R. Durr, for appellee;
    Jack McDonald, of counsel.
   Opinion by

Presiding Justice Hates.

“Not to be published in full.”


author: Justice Riess.

text:
    Milford Kellenberger, Appellee, v. Helen Hartman Mitchell, Administratrix of Estate of Everett E. Mitchell, Deceased, Appellant.
    Gen. No. 9,326.

      Heard in this court at February term, 1942;
    opinion filed May 20, 1942;
    rehearing denied October 6, 1942.
    Omer Poos, for appellant;
    Dennis J. Godfrey, for appellee.
   Opinion by

Justice Riess.

“Not to be published in full.”


author: Justice Wolfe.

text:
    L. S. Beattie et al., Appellants, v. Charles T. Lamb et al., Appellees.
    Gen. No. 9,789.
    Heard in this court at May term, 1942;
    opinion filed August 21, 1942;
    rehearing denied October 6, 1942.
    Manus & Manus and Donald M. Eaton; for appellants;
    Robert J. Ellis, for appellees.
   Opinion by

Justice Wolfe.

“Not to be published in full.”


text:
    Mary E. Schultz, Appellee, v. Reuben Schultz, Appellant.
    Gen. No. 9,797.

      -Heard in this court at May term, 1942;
    opinion filed August 21, 1942;
    rehearing denied October 6, 1942.
    George W. Thoma, for appellant; Thomas H. Slusser, of counsel;
    C. Norman Flanders, for appellee.
   Opinion by

Justice Wolfe.

“Not to be published in full.’’


author: Presiding Justice Huffman.

text:
    Clement Reed et al., Appellees, v. Board of Police and Fire Commissioners of the City of Peoria et al., Appellants.
    Gen. No. 9,785.
    Heard in this court at May term, 1942;
    opinion filed September 3, 1942.
    J. Edward Radley and C. E. MeNemar, for appellants; George W. Sprenger, of counsel;
    Londrigan & Londrigan and Leo F. Cavanaugh, for appellees.
   Opinion by

Presiding Justice Huffman.

“Not to be published in full.’’


author: Justice O’Connor.

text:
    Irwin H. Keller, Appellee, v. Christopher L. Anton et al. Ida Russell Mack, Appellant.
    Gen. No. 42,095.

      Heard in first division, first district, this court at December term, 1941;
    opinion filed September 9, 1942;
    rehearing denied September 23, 1942.
    Barnard J. Baumer, for appellant;
    Philip H. Salzman, for appellee; Jacob G. Grossberg, of counsel.
   Opinion by

Justice O’Connor.

“Not to be published in full.”


author: Justice 0 ’Connor.

text:
    People of the State of Illinois ex rel. John S. Rusch, Appellee, v. Ben L. Orloff, Appellant.
    Gen. No. 42,132.
    Heard in first division, first district, this court at February term, 1942;
    opinion filed September 9, 1942.
    Abraham L. Marovitz and Mayer Goldberg, for appellant;
    Thomas J. Courtney, State’s Attorney, for appellee; John F. Cashen, Jr., Special Attorney, of counsel.
   Opinion by

Justice 0 ’Connor.

“Not

to be published in full.”


author: Justice Dove.

text:
    Anna Kaznowski, Minor, by Joseph Kaznowski, Her Next Friend, Appellee, v. City of La Salle, Appellant.
    Gen. No. 9,792.

      Heard in this court at May term, 1942;
    opinion filed September 17, 1942.
    M. J. Faletti, for appellant;
    Hollerich & Hurley, for appellee.
   Opinion by

Justice Dove.

“Not to be published in full."


author: Mr. Justice Riess delivered

text:
    Farmers Grain and Supply Company of Warsaw, Appellee, v. Toledo, Peoria and Western Railroad, Appellant.
    Gen. No. 9,306.

      Heard in this' court at the May term, 1942.
    Opinion filed May 20, 1942.
    Opinion modified and rehearing denied October 6, 1942.

      John M. Elliott, of Peoria, and John W. Williams, of Carthage, for appellant.
    Leon Lamet, of Warsaw, and Robert N. Burchmore, of Chicago, for appellee.
   Mr. Justice Riess delivered

the opinion of the court.

Defendant has appealed from a decree of the circuit court of Hancock county enjoining interference with the construction and maintenance of an overhead conveyor extending from the mill elevator of plaintiff, Farmers Grain and Supply Company of Warsaw, above and across the 100 foot right of way of defendant’s railroad at a point on the banks of the Mississippi River, to be used in loading wheat or other products of plaintiff company on the barges for transshipment on the Mississippi River.

The cause was referred to the master in chancery of said county and heard upon the amended complaint and answer thereto, and objections to the findings and recommendations of said master were heard and overruled and stood as exceptions, which were overruled by the trial court. Relief was granted as prayed in the complaint and recommended by the master, and a decree was entered in favor of the plaintiff, from which defendant has appealed.

Prior to the present suit, defendant herein had procured a decree of said court dated September 14, 1939, in another suit enjoining plaintiff from building a steel overhead bridge supported by a skeleton steel tower with its foundation of concrete piers and supports located within and constructed upon a part of said right of way. The former case was tried by the same chancellor who entered the decree herein. The former proposed structure was to be built to a height of approximately 17 feet, being below the minimum height of 21% feet required by rules of the Illinois Commerce Commission for structures passing over railroad tracks and rights of way.

The modified structure was to extend from the outer wall of the elevator building across the right of way at a minimum height of 25 feet with no supports based on the 100 foot right of way. The supporting structure was based upon a 20 foot strip lying between the railroad right of way and the high water line on the bank of the Mississippi Biver.

The elevator plant owned in fee simple by the plaintiff and the defendant company’s right of way (acquired under an easement granted to its predecessor in 1865) were both located within the Village of Warsaw on a certain addition thereof which had been divided into blocks, lots, streets and alleys shown upon plats in evidence. There was also located on defendant’s right of way a depot shown on plats and photographs in evidence, which was constructed of a converted boxcar and used for freight and passenger service.

Among the findings of fact and conclusions of the master in chancery in the present suit which were approved by the court below are the following: “That the plaintiff has recently constructed a structure over and above the strip of ground which lies West of the west line of the property over which the defendant has an easement of a right-of-way; that said structure is supported on its west side by a steel tower which has its foundations in the bed of the Mississippi Biver and which is not upon the right-of-way of the defendant, and which said structure when completed will be supported at the Eastern end thereof by the same being attached to the plaintiff ’s elevator building and that at different times during the construction of said structure, a rope and a wire have been attached to the plaintiff’s elevator building which extended across the defendant’s right-of-way and were used or intended to be used to aid in the construction of said structure; that said wire or rope when so attached did not encroach upon or over the right-of-way of the defendant in such manner as to create a hazard and danger to the employees of the defendant in the operation of its cars and trains over and upon its railroad tracks located on said right-of-way; that the height of the rope and wire above defendant’s tracks was sufficient to safely permit the operation of trains or cars over and upon defendant’s tracks, and that the height of the same was in accordance with the minimum requirements under the rules and regulations of the Illinois Commerce Commission of the State of Illinois, and that the defendant caused said rope and wire to be cut down and removed. That such part of said structure as has been completed is well and safely constructed of steel and that according to the plans and specifications for the building the remainder thereof will be so constructed, and that at no point will any part of said structure be less than 25 feet above the top of defendant’s rails. That said structure when erected and completed in the manner proposed will give adequate and sufficient clearance for the safe operation of the trains of the defendant and that the employees of the defendant will not be rendered unsafe thereby, and that said structure will not in any way enter upon, obstruct or interfere with the defendant’s right-of-way, the operation of defendant’s trains or the lawful conduct of defendant’s business. That said rope, so cut, was approximately 30 feet, and said wire, so cut, approximately 60 feet above defendant’s tracks and would not have interfered with passage of the trains thereon nor endangered the life and limb of its employees.”

The numerous photographs and plats in evidence clearly portray the framework, construction and location of the steel overpass, elevator, poles, tracks and the entire river front in question.

The railroad company, through its agents and employees, had cut the above rope and cable and the upper edge of the tower which extended over and above the west line of the right of way, claiming right to do so under the prior decree of the circuit court and that their easement extended upward beyond the height of the proposed conveyor which interfered with the use and enjoyment of its right of way for railroad purposes.

Plaintiff contended that the defendant appellant’s right of way extended only to a height that was necessary for the operation of trains and the railway in the ordinary manner and the construction and use of structures necessarily or reasonably incident thereto and did not extend to the height of the proposed conveyor, which latter height was contended to be above and beyond the easement and right of way of the railroad company and that the right beyond such height inhered only in an owner in fee simple and not in the owner of a mere easement for railway purposes and further contended from the evidence- that highway bridges and telephone lines were generally constructed above said railroad right of way along defendant’s line and that the plaintiff herein, in so constructing the conveyor above the proposed height of 25 feet, was in no way trespassing upon defendant’s rights or interfering with its legitimate use and enjoyment of the right of way under its easement for railway purposes.

After cutting the cables, the railroad company immediately placed two telephone poles shown on photographs along the west edge of its right of way and immediately opposite the tower of the proposed conveyor and placed at the top thereof a sign reading: “T P & W R R Warsaw Station,” which faced the elevator and could only be seen diagonally from a street beyond, thereby blocking off and preventing construction of the overpass by the plaintiff company. The evidence showed that during the long previous operation and maintenance of the railroad station, no sign had ever been placed or maintained thereon by the company, and plaintiff contended that the same was placed at its present height and location solely for the purpose of obstructing and preventing the plaintiff’s lawful use of a conveyor above the right of way easement and was not a lawful or legitimate use of the right of way or within the height to be lawfully or reasonably constructed for railway purposes.

The railroad company further contended that the boom of a certain crane kept by the company for use in case of wrecks or similar emergencies extended to a height of approximately 40 feet and that therefore the same could not pass under the proposed conveyor without being loosened at the base and laid down and placed.upon the railroad car, which method was used when passing under bridges, wires or other overhead obstructions. Plaintiff also contended that the railroad right of way ended at the northerly side of its property; that no such boom was needed or could be used at said point in the operation of its railway by defendant company and that such proposed conveyor interfered in no way with such use or any other lawful and legitimate use of the space above the right of way at the point indicated, and the trial court, by its decree, so found.

Without discussing in detail the evidence in relation thereto, the lower court, in its decree, also found and we hold that it appears from the record that the lots upon which the elevator was located were owned in fee simple by the plaintiff; that the title in fee to the 100 foot right of way strip of the defendant was neither owned by the plaintiff nor the defendant, but that the defendant possessed an easement for railway purposes in said right of way; that.neither the plaintiff nor the defendant owned in fee simple the adjoining 20 foot strip of ground along the river bank upon which the supporting tower of plaintiff’s conveyor was located, but that the plaintiff is in possession thereof and has erected a permanent improvement thereon and that the defendant has no easement nor interest in said 20 foot strip, in fee, possession or otherwise and cannot, therefore, lawfully object to the placing of plaintiff’s tower thereon.

An easement for right of way purposes acquired by a railroad company is in some respects different from other easements in its essential purposes, uses and necessities. The use to which an easement is devoted or for which it is granted determines its character and to the extent for which it is necessary to carry out the purpose of the grant, the rights of the owner of the easement are paramount.

The generally accepted rule of law seems to be that applied by and recognized in the able opinion filed by the chancellor below. While such easement is not limited to the bare surface of the land, it does have certain limitations as to height and depth within which the railroad company must remain. The ownership of such an easement extends only to such height and depth as reasonably permits the full and free enjoyment of the surface for railroad purposes. In 51 C. J. 530, par. 193, the rule is aptly stated as follows: ‘ The property rights of a railroad company, under an easement, in its right of way, extend upward for a space necessary for the use of its franchise and downward to a line of support for its tracks and superstructures. But if the company acquires a fee simple title, its absolute ownership will extend indefinitely upward so as to include proprietorship of the air and space above the land. ’ ’

It may be noted here that we find no force in defendant’s contention that it held an interest in the fee by virtue of a certain master’s deed and tax payments. From the record it appears that the master’s deed was given in a. mortgage foreclosure proceeding affecting railroad property located on its easement and right of way and did not constitute a purported conveyance of the fee simple title to the right of way, nor did the occupancy and payment of current taxes by the appellant on its'property located on such right of way under its easement evidence ownership of the fee title or a color of title to the freehold.

The space or distance upward or downward which is necessary for the full free use of its franchise is a question of fact to be determined from the circumstances of each case. Citizens’ Tel. Co. v. Cincinnati, N. O. & T. P. R. Co., 192 Ky. 399, 233 S. W. 901, 18 A. L. R. 615.

An easement for a railroad right of way extends to a height sufficient for the safe and convenient passage of all trains and their burdens of whatever nature. Citizens’ Tel. Co. v. Cincinnati, N. O. & T. P. R. Co., supra.

It has been held in several cases that the railway company not owning the fee may not restrain the stringing of wires above and across its right of way at a proper height and properly supported. Citizens’ Tel. Co. v. Cincinnati, N. O. & T. P. R. Co., supra; Illinois Cent. R. Co. v. Centerville Tel. Co., 135 Tenn. 198, 186 S. W. 90.

In the Kentucky case, supra, the railroad company owned an easement for right of way purposes and sought to prevent the maintenance of private telephone wires (not a main trunk line) across its right of way. The comment of the court in passing upon that question is applicable in principle to the facts herein. “To what height an easement extends where there are no dimensions fixed depends upon the facts of each case. For a railroad the height must be sufficient for the safe and convenient passage of all trains and their burden, of whatever nature. ... So long as the structure above the track does not interfere with the full enjoyment of the right of way, and is of such permanent and substantial nature as not to be a menace to those who have to pass under it, the owner of the easement has no right to require its removal, nor can such owner maintain an action for such purpose, for its domain has not been invaded, nor has it suffered a wrong, although the fee owner may maintain such an action.” To the same effect is Illinois Cent. R. Co. v. Centerville Tel. Co., supra. Fanciful or speculative invasion of easements need not be considered.

In Citizens’ Tel. Co. v. Cincinnati, N. O. & T. P. R. Co., supra, it-is further said: “But if the railroad company owns merely the easement or right of use of the land on which its road is constructed, it cannot complain that another, even a stranger, as is the telephone company in this case, has entered over the easement at an elevation so high as to give no obstruction to the full enjoyment of the easement for the purposes for which it was granted, and there maintains a wire or wires in connection with its telephone business. . . . The ownership of an easement extends only to such height as reasonably to permit the full and free enjoyment thereof for the purpose for which it was granted or acquired, and no further. The easement holder would be as much a trespasser if he ascended and occupied the realm above the right of way for some purpose not contemplated by the grant as would be a stranger. ’ ’

While no case involving similar facts in Illinois courts of review has been cited, the general rule has been recognized that a grant of an easement of a right of way does not, by implication, include the right to have that way kept open to the sky for light and air, and that the grant is not interfered with by building over the way, provided there is no interference with the reasonable usé of the easement as a passageway. Gulick v. Hamilton, 293 Ill. 126, 127 N. E. 383, 9 A. L. R. 1629, 17 Am. Jur. 1009, par. 117.

Aside from the generally recognized rule that the owner of the fee may construct improvements above the right of way that will not interfere with the enjoyment of the easement, a railroad company cannot complain or interfere with the construction of an improvement by a stranger, since the same is above and beyond the use and purpose of the easement granted, and the railroad company therefore holds no legal right or interest therein.

To meet the effect of this recognized rule of law, the defendant company contends that the erection and maintenance of the proposed overhead conveyor will in fact interfere with the reasonable and proper use of its right of way, and in support of this contention refers to the evidence concerning certain pile driver equipment in use by the company. As we have noted, the evidence shows that the right of way ends at or a short distance beyond Main street adjoining* the plaintiff’s property in question, beyond which short distance said equipment could not operate. It further appears that the same, in its usual and ordinary use and operation, passes beneath highways and other bridges and obstructions of a permanent nature referred to in the evidence, by lowering or loosening the boom to the surface of the car in clearing such structures erected or complying with the rules of the Illinois Commerce Commission fixing a minimum clearance of 21% feet above the track. While such rules are not controlling here, they are indicative of what is ordinarily considered a safe clearance for trains operating on railroad rights of way. In view of the usual and ordinary use of this equipment, which, from the facts appearing herein would not interfere with or prevent its use by the defendant company as a result of the construction and maintenance of the overhead conveyor by the plaintiff, we hold with the trial court that the same constitutes no interference with the lawful use and enjoyment of defendant’s right of way for railroad purposes. Aside from such evidence, defendant offers no testimony of possible interference with the operation of its railroad and train service.

Concerning the placing and elevating of poles by defendant with an attached sign at a height far above and beyond the ordinary use of the right of way by the company at a point on the western edge thereof immediately opposite plaintiff’s tower and thereby preventing the possible use of such domain, after first cutting away the cable, rope and upper edge of the tower, the trial court properly concluded that the same was not shown to be for the purpose of facilitating in any way the reasonable, necessary or proper transaction of the ordinary business and operation of the railway or within the area of its easement under the facts and circumstances in evidence, but was a deliberate act through its agents and employees calculated to destroy and prevent the construction and maintenance of the overpass at a point above and beyond the domain of the easement in question; that, therefore, only the owner of the fee could have objected to such structure and that the trial court properly found under the facts and circumstances in evidence that the defendant had no interest therein or legal right to interfere therewith.

The trial court further found that the plaintiff, through such deliberate action of the defendant, had sustained damages in the sum of ope hundred dollars, decreed the equities of the cause to be with the plaintiff and directed that said sign be either lowered or removed so as not to interfere with or prevent the completion of the overhead conveyor of the plaintiff so being constructed above and not within the domain of proper use and enjoyment of defendant’s easement.

We need not here specifically discuss nor pass upon “the earnest contention of appellee that appellant primarily seeks by inequitable and dilatory action to delay and prevent shipment of any grain on river barges to meet the competition of other shippers using such facilities and thus compel appellee to ship all of its products at higher rates by rail, resulting in great private loss and hardship.

Railroad companies may and frequently do erect and maintain suitable and necessary structures and improvements on their rights of way of considerable height under varying circumstances, in order to properly conduct and facilitate the necessary and vitally important service rendered by them as public carriers of persons and property. While such structures are usually located on lands or premises owned by them in fee simple, the same may be located upon rights of way procured by lease, condemnation proceedings or otherwise to be used for railway purposes. Although the surface dimensions of the latter are usually fixed and determined in the lease or grant, the height to which such easement may extend is not usually so fixed nor designated, and the easement extends only to such height as is reasonably necessary to permit its full, free and lawful use and enjoyment for the purpose for which the easement or grant was acquired, and no further, dependent upon and to be determined, in case of controversy, by the particular facts, circumstances and conditions prevailing in each case. Courts of equity will not abridge, impair nor interfere with the use and enjoyment of an easement within the lawful scope, domain and purpose of the grant. If, however, the holder of such easement arbitrarily invades and seeks to occupy the domain above or beyond the scope and purpose of the easement and right of way granted, he becomes as much a trespasser as would be any stranger. Such trespass may be against the rights of the owner of the fee or of a mere possessor, even though the latter be a trespasser as against the interests of the fee owner who is not a party to the proceedings and whose rights and interests are not in controversy. If such invasion occur against the party in actual possession of the specific area thus trespassed upon, the injured party may properly invoke the aid of a court of equity and seek such relief against the continued trespass or invasion of such possession as the particular facts and circumstances of the case may warrant. Under the facts and circumstances disclosed by the evidence herein, we deem the findings and decree of the chancellor who heard and determined the cause to be in accord with both the law and the evidence.

Defendant further contends that aside from the question of whether or not the building of said conveyor at its present and proposed height is at a suEcient height as not to interfere with the exercise of its easement, such question has become res judicata by reason of the former decree of the chancellor hereinabove referred to and further contends that whether or not the same was so adjudicated, it might have been adjudicated as an issue in said cause and that the plaintiff therefore is precluded from raising such question herein under the authority of Skolmik v. Petella, 376 Ill. 500, 34 N. E. (2d) 825. However, it will clearly appear from a reading of the former decree, which was in evidence, and the ruling of the trial court thereon in the instant case that the same properly enjoined the plaintiff from placing the concrete foundations and supports upon the right of way and constructing the same upon and within the area of said right of way and did not purport to decide the height thereof or pass upon the right of the plaintiff to build súch conveyor at a point above and beyond the use of said right of way easement for railroad purposes, which was not in issue nor determined by the court in that case. The facts in the above cited case are not applicable herein.

In Cherry v. Aetna Casualty & Surety Co., 300 Ill. App. 392, 21 N. E. (2d) 4 (aff’d 372 Ill. 534, 25 N. E. (2d) 11), a similar contention was made by appellants based upon the same theory now advanced by the defendant in this case. The court in that case acknowledged the principle relied upon, but held that it did not apply in that case, saying, at page 403: “Before a fact or question in some former suit can be claimed to be res adjudicata in a subsequent suit, as estoppel by verdict, certain requirements must be shown to exist. When the second suit is on a different cause of action, claim or demand, the judgment in the first suit is an estoppel only as to the point or question there actually litigated and determined, and not as to other matters which might have been litigated and determined. The burden of proof is on him who invokes the estoppel. Harding Co. v. Harding, 352 Ill. 417. We are in accord with the holding of the Trial Court that res adjudicata is not a proper defense in this case.’’ We find that the trial court did not err in holding that the decree in the former case was not res adjudicata.

We have further carefully examined and considered all other assignments of error and we hold that the same are without merit. The decree of the circuit court of Hancock county will therefore be affirmed.

Decree affirmed.