author: Mr. Justice John J. Sullivan

text:
    William Columbus Flanagan et al., Appellees, v. City of Chicago et al., Appellants.
    Gen. No. 41,113.

      Heard In the second division of this court for the first district at the February term, 1940.
    Opinion filed July 1, 1941.
    Barnett Hodes, Corporation Counsel, for appellants; Walter V. Schaefer and Edward J. Kelly, Assistant Corporation Counsel, of counsel.
    Mason & Mason and Rathje, Hinckley, Barnard & Kulp, both, of Chicago, for appellees; Joseph J. Sullivan, Jr., of Chicago, and George A. Mason and Francis E. Hinckley, of counsel.
   Mr. Justice John J. Sullivan

delivered the opinion of the court.

A decree was entered in this cause which after finding that the equities were with plaintiffs, that this proceeding was properly instituted and maintained as a representative suit and that $515,839.29 remained in the special assessment fund involved herein available for rebate to the owners of private property assessed to pay the cost of the construction of the Wacker Drive Improvement, ordered that $60,000 be deducted from the aforesaid sum and paid to the attorneys for plaintiffs for legal services performed and to be performed by them and that the balance of said sum should be rebated pro rata to the parties entitled thereto. The defendants appeal from the decree.

On September 14,1937, William Columbus Flanagan, on behalf of himself and others similarly situated, filed his sworn complaint in equity to compel defendants, City of Chicago and certain of its officials (hereinafter for convenience sometimes referred to collectively as the city), to account for all moneys collected and expended by the city by reason of a special assessment levied and confirmed in the county court of Cook county, Case No. 46221, for the construction of a double deck highway on East River street and East and West South Water street, on North Michigan avenue to West Lake street and on Market street to the first alley south of Randolph street (Wacker Drive Improvement) and to refund to all assessees and persons who paid the assessment any sums collected which were unexpended and subject to rebate.

The complaint alleged substantially that the Wacker Drive Improvement had been constructed in 1926, which was eleven years before the filing of this suit; that, although the statutes of the State of Illinois provide that a final certificate of cost and completion shall be filed within 30 days after a local improvement is completed, none had been filed as to this improvement; that the fund collected by the assessment for the Wacker Drive Improvement was a trust fund to be held by the City of Chicago for the benefit of plaintiff, William Columbus Flanagan, and others similarly situated, to be used for the sole and exclusive purpose of the construction of the improvement and that it was the duty and obligation of the trustee to rebate or refund to the owners of all properties assessed any money which was left over after the improvement had been completed; that all bonds and vouchers issued on account of this improvement, as well as interest on such bonds and vouchers and expenses incurred in connection with said improvement had been paid and that there was in the special assessment warrant a surplus of approximately $1,000,000, which should have been rebated or refunded to the parties entitled thereto; that the city had diverted this trust fund for corporate purposes other than those allowed under the trust, used it in its aggregate of funds and threatened the use of it for other purposes; that, although repeated demands had been made upon it for rebate or refund, the city failed and still fails and refuses to rebate this surplus trust money; that the plaintiff “has instituted and is maintaining this suit on behalf of himself, and on behalf of all other property owners who have been assessed for or paid said special assessments” for the Wacker Drive Improvement; that “the plaintiff and all of the other said property owners have a common interest in the subject matter of this suit”; that “there exists a common right sought to be enforced in this cause, and plaintiff undertakes to represent the right of all of such property owners and to maintain and conduct this suit as a representative class suit for the benefit of all said property owners ’ ’; that the expenses, court costs and attorneys’ fees should be paid out of the fund recovered; and that a multiplicity of suits were threatened against the city.

The complaint concluded with a prayer for an accounting of the moneys collected, spent and diverted, that the court determine the manner of the distribution of the surplus fund, that the city be ordered to rebate to the parties entitled thereto the amounts found to be due and owing to them, that an injunction issue to restrain the city from diverting the trust fund for other corporate purposes, that an injunction also issue to restrain others from instituting actions against the city for the relief sought herein and that the fees, expenses and costs incident to this proceeding be determined and ordered paid.

In their sworn answer defendants denied that there was any money in the special assessment warrant involved herein which constituted a surplus the assessees were entitled to receive or which should have been or should now be rebated to them or any of them.

On May 6, 1938, plaintiff filed an amended and supplemental complaint, which contained practically the same allegations and prayer for relief as did the original complaint. It did, however, contain an additional prayer that the city be ordered to file its final certificate of cost and completion in the county court and it made approximately one hundred and thirty additional parties plaintiff. Subsequently, by a further amendment, one hundred and sixty-one more additional parties plaintiff were named.

On May 28, 1938, defendants filed their sworn answer to the amended and supplemental complaint in which they admitted that there was $1,099,528.22 subject to rebate in their possession in the special assessment fund in question.

On January 9, 1939, plaintiffs filed another amendment to their amended and supplemental complaint wherein they alleged that in compliance with the order of the circuit court theretofore entered on plaintiffs’ motion the city had filed its certificate of final cost and completion, “In the Matter of Special Assessment of the City of Chicago for improving East and West South Water Street,” etc. (Wacker Drive Improvement), Docket No. 46221, Warrant 50075 in the county court of Cook county; that there had been a hearing on said certificate in said court; that the county court had entered an order confirming and approving the certificate, which order was final and unappealable; and that there was now in the fund $1,120,598.12 subject to distribution to the owners of the private property included in the assessment and to the City of Chicago.

Defendants’ answer to the amended and supplemental complaint was allowed to stand as its answer to the foregoing amendment.

Except for the testimony of three attorneys who testified in behalf of plaintiffs as to the reasonable value of the services rendered by the attorneys for plaintiffs, this case was submitted for determination in the trial court upon a “Statement of Agreed Facts,” the pertinent portions of which are as follows:

“That on June 29, 1922, an ordinance was passed by the City Council of the City of Chicago providing for the erection and construction by special assessment of a double decked highway on East River street and East and West South Water street, on North Michigan avenue to West Lake street, and on Market street to the first alley south of Randolph street; that following the passage of said ordinance the City of Chicago filed, on August 16, 1922, its petition in the County Court of Cook County, Illinois, in Case No. 46221, seeking confirmation of the improvement provided for in the said ordinance; that on October 16, 1922, the Commissioners’ Report and Assessment Roll was filed in said cause, in which roll an assessment of $8,727,000 was assessed against private property and no sum was assessed against the public as a public benefit; that on a hearing before the court on August 15, 1924, a public benefit of 35% was charged against the city amounting to $3,054,450; that subsequently the said Commissioners’ Report and Assessment Roll was further modified by charging against the city as an additional public benefit amounts which raised the public benefit to $4,242,849.79, an additional increase of $1,188,399.79, and that said roll as modified was confirmed in the said court; that the assessment roll as confirmed amounted to $8,702,810.81 and, as changed in red ink after judgment to conform to the judgment of confirmation showed that $4,242,849.79 was assessed against the city as a public benefit and $4,459,961.02 was assessed against private property for benefits received; that the assessed district extends north and south from Twelfth street to North avenue, a distance of approximately three miles, and east and west approximately from Halsted street to Lake Michigan, a distance of approximately one mile, and included 12,533 separate parcels of property assessed, and 5,078 owners as assessees.
“That all of the requisite proceedings and steps provided by law for the levying, confirmation and certification of special assessments for the benefits inuring to all properties on account of the improvement hereinabove described have been taken; that all of the said properties were assessed pursuant to the said ordinance, which assessments were modified and, as modified, finally confirmed by final judgment order entered in the above cause No. 46221 on August 27, 1924; that after judgment all necessary steps were taken to put the said special assessment into collection; that the said special assessment was described in the records of the City of Chicago as Special Warrant No. 50075.
“That after the order of confirmation was entered the City of Chicago, through its Board of Local Improvements, advertised and received bids for the construction of the improvement above described; that the total amount of bids received for the cost of construction of the above improvement amounted to $6,994,194.22, and that 23 contracts were entered into pursuant to said bid prices; that the said contracts were executed in the year 1925, in which year construction work started; that the said improvement was constructed in substantial compliance with the ordinance in the year 1927 so as to fully comply with Section 84 of the Local Improvement Act.
"That Section 84 of the Local Improvement Act required that the city should file its final certificate of cost and completion within thirty days after the completion of the above described improvement; that the certificate was filed on May 27, 1938, after order of this court in this cause.
“That from April to September in 1937, on behalf of the plaintiffs and other assessees, Joseph J. Sullivan and William C. Hartray made numerous investigations in the City Hall and of the cause itself relative to the question of the filing of the final certificate and of the rebate to be paid out of Warrant No. 50075, the warrant in the South Water Street case; that they found the assessment entered against the property amounted to $8,702,810.81, the bid price on the contracts and construction work amounted to $6,994,-194.22; that prior to the institution of this suit there was credited to the said Warrant Account a substantial amount of money after all bonds had been retired and all contracts paid in full; that Joseph-J. Sullivan and William C. Hartray made oral demands on the president and secretary of the Board of Local Improvements of the City of Chicago on behalf of their clients requesting the filing of the final certificate of cost and completion, and demanding that a proper rebate be made to all parties in interest, but that said request was not complied with and it was stated by the city officials, Arthur A. Sullivan, attorney for the Board of Local Improvements, and Paul Lemke, paving assessor, charged with the duty of making up the certificate of costs and final completion, that the amount of money shown in Warrant No. 50075 was credited there through error of a clerk in charging the public benefits against the City of Chicago and in modifying the roll and that instead of any rebate coming to the assessees that there was really a deficit of $28,000; that this examination of files, records, contracts and reports took practically all of the spring and summer of 1937.
“That Joseph J. Sullivan and William C. Hartray then prepared and filed in this Court on September 14, 1937, as a class suit, a complaint for an accounting in this cause in a representative capacity on behalf of the plaintiffs and other assessees in the South Water Street Improvement case; that paragraph ten of the said bill of complaint charged:
“ ‘That there is nowin Special Assessment Warrant No. 50075, which is the Warrant or Account having to do with the improvement above described, after all bonds and vouchers and interest thereon and expenses have been paid, approximately over One Million Dollars ($1,000,000.00), which sum of money has been in the Warrant for a long period of time and which sum should be distributed pro rata to those who have paid the assessment for the construction of the improvement above described.’
“That the defendants filed their sworn answer to the said complaint on December 15, 1937, and in paragraph seven of said answer they deny that there is any money in the said Warrant subject to distribution; that said paragraph seven is in words and figures, as follows, to-wit:
“ ‘They admit the allegations of paragraph ten of said complaint referring to the provisions of the laws of the State of Illinois as to the rebate of any surplus, but deny that there ever was, or now is a surplus in Special Assessment Warrant No. 50075 as defined or contemplated by the said statutes of the State of Illinois, and deny that any money at present in said Special Assessment Warrant constitutes a surplus as defined or contemplated by the statutes of the State of Illinois, and deny that the plaintiff, or those in whose behalf this suit is alleged to be brought, is or are entitled to any moneys in said fund, and deny that any moneys in said fund should be distributed.’
“That prior to the filing of the said bill of complaint on September 14, 1937, Joseph J. Sullivan had been in contact with the Law Department of the Board of Local Improvements relative to the filing of the final certificate of cost and completion as required by Section 84 of the Local Improvement Act; that he was advised by said law department that those in the Board of Local Improvements in charge of the filing of said certificate had prepared a certificate showing a deficit of $28,000.00 to be charged against, instead of a surplus to be paid from, the Warrant No. 50075, and that they were of the opinion that the assessment roll had been improperly modified to charge a large public benefit against the City of Chicago without any authority.
“That Joseph J. Sullivan examined and had examined the files, records and orders of the County Court for the purpose of sustaining the roll as modified; that there are approximately two hundred lawyers who had filed objections for assessees in the original South Water Street case; that there were 12,533 pieces of property assessed and 5,078 owners of said properties listed as assessees; that reduction orders had been entered reducing the assessments for practically every piece of property in the assessed district; that the orders ran into many hundreds; that all the orders referring to the question of public benefits had been taken from the files and were lost; that it then became necessary to search through the volumes containing orders for the South Water Street Improvement and that, after a great deal of search and time spent in endeavoring to discover the orders entered by the County Court justifying the modification of the roll as it had been made, the said Joseph J.. Sullivan was able to present to the Law Department of the City of Chicago orders of the County Court to sustain the roll as modified on its face; that from the filing of the complaint in the above matter on September 14, 1937, up to and after the filing of the interrogatories on February 14, 1938, and before the same were answered on May 27, 1938, the said Joseph J. Sullivan was in almost constant contact with the Board of Local Improvements, the attorney for the Board of Local Improvements, the • records of the County Court, and had made investigations' to determine the cost of the said improvement for the purpose of' presenting proper evidence to the City as to why a' final certificate of cost and completion should be filed in the County Court showing a substantial surplus instead of a deficit; that after many conferences had been had with the Law Department of- the City of Chicago and after the evidence gathered by the said Joseph J. Sullivan had been presented to the said City Law Department, the said -City agreed that when the interrogatories were answered and the final certificate of cost and completion was filed, they would show that an amount in Warrant No. 50075 amounting to over One Million Dollars ($1,000,000.00) would be subject to distribution to the assessees, including the City of Chicago.
“That after the filing of the said interrogatories on February 14, 1938, until May 28, 1938, Joseph J. Sullivan was in continuous communication with and spent a great deal of time with James Todd, an adviser to the Finance Committee of the City of Chicago, who was charged with the preparation of the answers to the interrogatories, assisting him with information which the said Joseph J. Sullivan had discovered, so that the interrogatories could be truthfully answered; that in the answers to said interrogatories the defendants admitted the following:
“That when this cause came on before this Court on May 6, 1938, this Court, on motion of Joseph J. Sullivan and William C. Hartray, ordered and directed the defendant herein, City of Chicago, to file, within ten days after the entry of the order, its final certificate of cost and completion in the County Court, which final certificate was filed on May 27, 1938.
“That after the said final certificate of cost and completion had been filed in the County Court, Joseph J. Sullivan and William C. Hartray served notice on the City of Chicago to set the same down for hearing; that Judge Jarecki set the said cause for hearing on July 5, 1938; that said cause was continued from time to time and came on for trial on September 2, 1938; that from the 2nd day of September up until November 23,1938, the said cause was continuously on trial; that only three attorneys filed objection to the final certificate ; that Joseph J. Sullivan and William C. Hartray filed objections to the cost of the improvement but admitted that the improvement had been built in substantial compliance with the ordinance; Howard Bishop filed objections both to the cost and to the completion of the improvement; George A. Mason filed general objections to both but did not appear in the trial of the case; that when the said cause came on for trial, Joseph J. Sullivan was the only counsel, together with C. Helmer Johnson (partner of William C. Hartray, who died during the trial), in behalf of the assessees presenting any evidence endeavoring to reduce the cost of the improvement; that Joseph J. Sullivan had had accountants examine the records of the Board of Local Improvements as to the amount of moneys which had come into Warrant No. 50075; that the said Joseph J. Sullivan had spent many days and evenings with Arthur Evans, who was the engineer in charge of the South Water Street Improvement and who had been out of the employ of the City of Chicago for a long period of time, for the purpose of determining the proper cost of the improvement; that from the examinations that had been made by Joseph J. Sullivan and his associate they discovered that the bid price for the work amounted to a total of $6,994,194.22; that the cost of the work as set out by the City in the final certificate was the sum of $8,003,742.44, which made a difference of $1,009,548.22; that Joseph J. Sullivan, after a long search and investigation and working with Mr. Evans, who kept a complete file of the South Water Street Improvement, together with the charge for extras, and after studying the engineer’s estimate, the ordinance, the bid sheets, the certificates and accounts for extras, Joseph J. Sullivan and Mr. Evans concluded that overcharges amounting to $283,-053.60 could be successfully advanced against the cost of the improvement; that these extras were as follows:
“That in attempting to deduct the charge of $151,-900.58 from the total cost item, Joseph J. Sullivan investigated files of the City of Chicago vs. Rapid Transit Company, Circuit Court No. 13944, wherein the City brought a law suit against the Rapid Transit Company and in a sworn declaration signed by J. J. Sloan, the President of the Board of Local Improvements, alleged that $250,000.00 was spent for the Rapid Transit Company in the construction of the South Water Street improvement and taken out of Warrant No. 50075, and, substantiating said claim against the said Rapid Transit Company, Joseph J. Sullivan likewise investigated the files and records in the case of Westinghouse Electric Manufacturing Company vs. Chicago Rapid Transit Company, in equity, No. 12,035 in the District Court of the United States, for the Northern District, Eastern Division, a proceeding in bankruptcy against the Chicago Rapid Transit Company, wherein the City of Chicago under oath stated that $116,565.73 was paid out of Warrant No. 50075 for work in connection with the Rapid Transit Company lines, which work should be paid for by the Rapid Transit Company; that Joseph J. Sullivan produced all copies of the ordinances granting franchises to the Rapid Transit Company and its predecessors, numbering some fourteen ordinances, and subpoenaed in the vouchers and engineer’s certificates that were issued out of the money assessed for the work, and produced the engineer who made up the estimates; that all of the other items referred to as extras were established by the engineer in charge, Mr. Evans, who kept memoranda of all charges and who made the certificates for the payment thereof.
“That none of the above items were itemized in the engineer’s estimate, nor provided for in the ordinance, and after trial on September 2, 1938 to November 23, 1938, that the Court reduced the cost of the improvement $21,049.83.
“That in the trial of the South Water Street case on the final certificate of cost and completion, Howard Bishop, representing a certain objector, the Pure Oil Building, attempted to defeat the certificate on the ground that the improvement had not been completed for the following reasons, to-wit:
“That Holden Court had not been completed and that the sum of $640,000.00 should be held back from distribution for that purpose;
“That the ventilating system had not been completed and the sum of $120,000.00 should be held back from distribution for that purpose ;
“That other parts of the improvement provided for in the ordinance, such as- — railing in front of the proposed Holden Court, the building of the approach on Wells Street to South Water Street, and removal of certain obstructions, such as pillars, on South Water Street, — for which purpose the sum of $30,000.00 should be held back from distribution; making a total of $790,000.00 which would not be available for distribution if the Court should find for Mr. Bishop; that Joseph J. Sullivan and C. Helm'er Johnson, representing the assessees, very vigorously opposed Mr. Bishop’s contention in this matter, and that the Court in its opinion rendered on the 23rd day of November, 1938, held that the improvement was completed in substantial compliance with the ordinance, and directed that the final certificate of cost and completion be amended to reduce the cost by the sum of $21,049.83.
“That from the time the final certificate of cost and completion was filed, on May 27, 1938, up until December 31, 1938, when the final certificate was approved, approximately seven months, Joseph J. Sullivan devoted fully four months in court work to sustaining said final certificate as to work being completed and attempting to reduce the cost; that from the time, in the summer of 1937, when Joseph J. Sullivan and William C. Hartray started to prepare their complaint in equity for the above Flanagan case, up until the 31st day of December, 1938, Joseph J. Sullivan, assisted by William C. Hartray, and after the death of William C. Hartray by C. Helmer Johnson, has spent more than one year of actual work in the above Flanagan case and in the South Water Street improvement case hearing on the final certificate.
“That since the order of the County Court on December 31, 1937, confirming the final certificate of cost and completion the respondent Wacker-Wabash Corporation, formerly the Pure Oil Building, has taken an appeal from said order returnable to the June Term of the Supreme Court of Illinois, and has filed in said cause a record of proceedings of over 1300 pages, with hundreds of pages of exhibits, an abstract of 224 pages and a brief of 64 pages; that it has been necessary for Joseph J. Sullivan and C. Helmer Johnson to examine said record, abstract and brief, and they have filed, on June 6, 1939, in the Supreme Court of the State of Illinois a reply brief of 30 pages seeking to sustain the order of the County Court approving the final certificate.
“That since the first investigations made by Joseph J. Sullivan and William C. Hartray in the spring of 1937 of the accounts and records of the City of Chicago, the examination of contracts and specifications of the South Water Street improvement, which were very voluminous, the records of the South Water Street improvement case, the preparation for trial of both the instant and the South Water Street cases, the trial of the South Water Street case, and the resisting of the appeal of the Wacker-Wabash Corporation to the Supreme Court, Joseph J. Sullivan and his associates have spent fully two years in these causes.”

Defendants’ theory is “that under the Local Improvement Act the only court which has jurisdiction to determine the existence of a surplus or deficit resulting from the levy of a special assessment and the construction of a local improvement under the provisions of the Act is the court in which the special assessment proceeding is pending; that mandamus is a complete and adequate remedy to compel the filing of a final certificate of cost and completion in accordance with Section 84 of the Local Improvement Act when a city fails to file such a certificate; that by the filing and prosecution of- a purported representative suit no right to attorneys’ fees from amounts to be rebated to owners of private property assessed to pay the cost of the improvement can be established; and that in the case' at bar the suit was prematurely filed because the existence or nonexistence of any surplus available for rebate had not been determined by the court which had exclusive jurisdiction to determine that question.”

The theory of plaintiffs as stated in their brief is “that the funds collected in a special assessment proceeding constitute a trust fund to be held in trust for the sole purpose of paying the cost of the improvement and rebating or refunding the surplus to the owners of the properties assessed; that when an improvement has been completed and the municipality fails for ten years to file its certificate of cost and completion when the statute requires such certificate to be filed within thirty days after the completion of the improvement, and fails and refuses to refund to property owners assessed the surplus which has accumulated in the special assessment warrant but converts or is about to convert to its own use such trust surplus, a complaint in chancery will lie; (a) for the purpose of requiring the municipality to account for this fund and to distribute it properly to owners assessed pro rata as their interests appear, (b) to enjoin the wrong use, dissipation or conversion of this fund, (c) to require the municipality to comply with the law and file in the Court where the assessment was confirmed its certificate of cost and completion; that the Circuit court of Cook county has power under the State Constitution to administer trusts, which right cannot be taken away by an act of the General Assembly; that a suit to compel such an accounting may be instituted as a representative suit by a single person or a number of persons where the owners are numerous and constitute many thousands of property owners assessed, where the plaintiff or plaintiffs have a common, like pro rata interest in the subject matter and the fund, where the plaintiffs or plaintiffs’ rights are not antagonistic or adverse to the other property owners, and where the plaintiff or plaintiffs are beneficiaries of the said trust fund and under the decree will be entitled to share therein as their respective interests may appear, and that in such suit, being representative in character, fees for the plaintiffs or plaintiffs’ attorneys may be allowed from any fund determined by the Court of Equity to be available for rebate.”

Defendants conclude their reply brief with the following statement:

“The city holds a very substantial sum of money which is to be rebated to those who paid the assessments levied for the improvement of Wacker Drive. If the rebate is made in accordance with the Local Improvement Act and with the order of the County Court all of the available money will be rebated to those who paid the assessments. If the rebate is made in accordance with the decree in the case at bar the amount to be rebated to those who paid the assessments will be reduced by the sum of $60,000, which will be paid to the attorneys for the plaintiffs.”

The history of the special assessment involved in this proceeding makes it quite obvious that the city’s solicitude for the welfare of the private property owner assessees is rather belated. It would seem from the foregoing statement that the city’s primary purpose in prosecuting this appeal is to deprive plaintiffs’ attorneys of their right to the fee allowed for the legal services rendered by them over a period of more than two years, which fee it is conceded is not excessive in „view of the character and extent of the services rendered by them in behalf of the assessees. Under the decree the city is not required to pay one cent of such attorneys ’ fee and not one of the property owners out of whose collective rebates said fee is payable has seen fit to attack either the allowance or the amount of the fee. It must be borne in mind in this connection that it was the utter failure of the city for more than 10 years to comply with the provisions of the Local Improvements Act (ch. 24, par. 698 et seq., Ill. Rev. Stats. 1939 [Jones Ill. Stats. Ann. 76.003 et seq.]) that necessitated the rendition of the services by plaintiffs’ attorneys, for which the decree ordered that they be compensated.

The city contends that “the Circuit Court was without jurisdiction of the subject matter of this case” because “by the Local Improvement Act the court in which the special assessment is confirmed is given exclusive jurisdiction to determine the cost of a local improvement constructed by special assessment and to determine whether or not a surplus exists ’ ’ and because “the remedy of the plaintiffs at law is plain, adequate and complete.” There is no merit in this contention.

While it is true that the Local Improvements Act confers upon the county court which confirms an assessment exclusive jurisdiction to determine the cost of a local improvement constructed by special assess ment and to determine whether or not a surplus, exists upon the filing of a certificate of cost and completion, and while it is also true that upon the failure of the city to file such certificate it could he compelled to file same by a proceeding in mandamus, it does not follow that such remedy would be adequate or complete. Whether the city files a certificate of cost and completion in the county court voluntarily or under compulsion, the only authority that court has under section 84 of the Local Improvements Act is to determine whether or not a surplus exists and if the cost of the improvement is less than the amount of the assessment to rebate unpaid assessments pro rata to the extent of such surplus. In this case the assessments were practically all collected and it clearly appears that under the foregoing section all that the county court could do was determine that a surplus did exist and the amount thereof, thereby affording each of the assessees the basis for an action in assumpsit against the city for his share of the surplus in the event the city still persisted in its refusal to pay same.

This proceeding in equity was not instituted until after plaintiffs’ attorneys had importuned the city over a period of several months to file its certificate of cost and completion, which it should have filed under the statute within 30 days after the completion of the improvement or more than 10 years previously. The officials of the city repeatedly denied that there was any surplus in the assessment fund in question, and, even after the original plaintiff was forced to bring this action to secure relief for himself and the other assessees, the city persisted in its denial in its answer to the original complaint that there was any surplus in such fund for rebate.

As heretofore shown, under section 84 of the Local Improvements Act the county court has no power after it determines that there is a surplus in a special assessment fund to order or compel the proper distribution of such fund by the city where the assessments have been paid. The filing of a certificate of cost and completion in the county court by the city and the determination by that court that a surplus exists is merely incidental to the relief sought by plaintiffs in this cause.

There can be no question but that the surplus in the hands of the city of the assessments collected over and above the cost of completion of the project constituted a trust fund of which the assessees are the beneficiaries and the city the trustee. It has been repeatedly held that the proceeds of special assessments are trust funds for the payment of bonds issued for the cost of improvements. (Conway v. City of Chicago, 237 Ill. 128; Rothschild v. Village of Calumet Park, 350 Ill. 330.) It necessarily follows that special assessment collections over and above the cost of the completion of the improvement must be trust funds held by the city as trustee for the benefit of the assessees.

Section 93 of the Local Improvements Act provides in part as follows:

“If, upon final settlement with the contractor for any improvement and full payment of all vouchers or bonds, issued on account of such contract, there shall be any surplus remaining in such special assessment or special tax above the payments aforesaid and above the amount necessary for the payment of interest on such vouchers or bonds as above provided, it shall be the duty of the proper authorities of such city, incorporated town or village to at once cause a rebate to be declared upon each lot, block, tract or parcel of land, assessed of its pro rata proportion of such surplus.”

Under this section it was mandatory for the city as trustee to distribute the surplus trust funds in its hands at once. Instead of doing so, it kept and concealed said funds for more than 10 years. The city must have known how much it had collected and how much it had paid out. Therefore it must also have known the amount of the surplus in its hands belonging to the assessees. It knew that the work was completed in compliance with the city ordinance authorizing the improvement, yet it not only made no attempt to distribute said surplus but it refused to do so, notwithstanding plaintiffs’ insistent demands.

Where, as here, the existence of the trust fund belonging to the private property owner assessees was denied, the beneficiaries of said fund had the right to invoke the broad powers of a court of equity to discover the fund and compel its distribution, and since the city by its denial of the existence of the trust fund and its concealment of same for more than 10 years forced plaintiffs to resort to equity for relief, it will not be heard to say that the court of chancery lacked jurisdiction of plaintiffs’ complaint.

Since it was necessary under section 84 of the Local Improvements Act that the amount paid by the city for the construction of the improvement, the amount collected in assessments and the amount of the surplus be determined by the county court, the chancellor referred those matters to that court by directing the city to file its certificate of cost and completion therein. When the county court found that the improvement had been completed as provided by the city ordinance and further found the amount of the cost of such improvement, the amount of the assessments collected and the amount of the surplus held by the city, the chancellor properly resumed jurisdiction to enter the decree herein, all necessary procedural steps having been taken to make the surplus or trust fund available for refund.

Notwithstanding that the county court has exclusive jurisdiction under section 84 of the Local Improvements Act to determine the cost of the improvement and to pass upon the final certificate of cost and completion, nevertheless the circuit court had jurisdiction in this case to require the city to file such certificate of cost and completion in the county court so that an adjudication of same might be had and to thereafter make such disposition of the surplus as it should direct in declaring refunds to the assessees. Where it is essential for a complete determination by a court of chancery of a controversy of an equitable nature that an issue of law outside of the jurisdiction of a court of equity be referred to a court of law for decision, it has been the recognized and long established practice that such reference be made, the chancellor retaining jurisdiction of the cause for ultimate decision. (Lake Lenore, Inc. v. Delaware, L. & W. R. Co., 113 N. J. Eq. 533, 168 Atl. 178; Delaware, L. & W. R. Co. v. Breckenridge, 56 N. J. 595, 40 Atl. 23; Nashua Savings Bank v. Burlington Electric Light Co., 99 Fed. 14; Green & C. St. Pass. Ry. Co. v. Moore, 64 Pa. 79; Fisher v. Carroll, 46 N. C. 27; Brown v. Cranberry Iron & Coal Co., 72 Fed. 96; Decker v. Caskey, 1 N. J. Eq. 427; Watt v. Starke, 101 U. S. 247, 25 L. Ed. 826.)

The mere fact that plaintiffs under section 84 of the Local Improvements Act might have compelled the city through a proceeding in mandamus to file its certificate of cost and completion did not and could not deprive equity of jurisdiction of this cause, inasmuch as this section does not empower the county court to order a refund of trust funds but merely to direct an abatement of unpaid special assessments if there is an overassessment. Neither does this section contemplate the concealment or conversion of a trust fund surplus and a situation such as is presented here could not have arisen if the city had obeyed the provisions of the statute.

Since there was involved herein a trust fund, its concealment and the failure of the city as trustee to perform its duty to administer and distribute such fund to its rightful beneficiaries, the circuit court functioning as a court of equity had jurisdiction of this cause and became the proper forum for the protection of the owners of the common trust fund.

A situation somewhat similar to that in the instant case was presented in Rothschild v. Village of Calumet Park, 350 Ill. 330, where it was found that the municipality had violated its trust by using special assessment collections to pay favorite bondholders instead of paying all bondholders pro rata. There the court said at p. 338:

“It is contended that the complainant’s remedy at law is adequate and equity has no jurisdiction. There are two sufficient grounds upon which the jurisdiction of equity rests. The complainant’s claim is for money had and received to the complainant’s use and could be the basis of an action of assumpsit, but the amount of it could be ascertained only by an investigation of the accounts of the defendant, the books and papers in the possession of its officers, the books of the city collector, those of the county collector, the tax judgment, sales, redemption and forfeiture records of the county court for several years, all constituting a great volume of intricate accounts which could not be presented to a jury in such a manner as to enable them to arrive at a satisfactory conclusion as to the amount due. In such cases it is well settled that a court of equity has jurisdiction to entertain a bill for an accounting. An entire absence of a remedy at law is not necessary but the inadequacy and impracticability of the remedy is equally effective to furnish a ground for equity jurisdiction. (Ely v. King-Richardson Co., 265 Ill. 148; People v. Small, 319 id. 437.) The jurisdiction of equity for the enforcement of trusts is another ground of its jurisdiction in this case. The enforcement of trusts is peculiarly within the province of a court of equity, and a case which has for its object the enforcement of a trust is a case in equity. Equitable jurisdiction is not taken away by the fact that the complainant has a remedy at law. (Howell v. Moores, 127 Ill. 67; People v. Bordeaux, 242 id. 327.) We have held that the proceeds of special assessments are trust funds for the payment of the bonds issued for the cost of the improvement. (Conway v. City of Chicago, 237 Ill. 128.)”

The Rothschild case is directly in point and furnishes ample authority for the commencement and maintenance of this proceeding in equity since its object was the enforcement of a trust.

In defendants’ brief it is stated that “the only theory which can justify the allowance of $60,000 to the attorneys for plaintiffs from the amount available for rebate to the persons who paid special assessments levied for the construction of the Wacker Drive improvement is that the suit was properly instituted and maintained as a representative or class action. Only a cursory analysis of the origin and purpose of the device of the class action and its application is necessary to show that the present suit cannot properly be maintained as a class action.”

It is sufficient answer to the city’s position in this regard that all the necessary elements of a representative or class action are present in this case. In defining a representative suit in Hale v. Hale, 146 Ill. 227, the court said at p. 257:

“A familiar illustration may be found in cases where the parties are so numerous that it is inconvenient or impossible to bring them all before the court, and it appears that they all stand in the same situation, and have one common right or one common interest, the operation and protection of which will be for the common benefit of all, and cannot be to the injury- of any.”

Discussing the requisites for the institution of a representative suit in Lee v. Hansberry, 372 Ill. 369, the court said at p. 373:

“It thus appears that Burke v. Kleinman, supra, was a class or representative suit. It cannot be seriously contended that it was not properly a representative suit. There was a class of individuals who had common rights and who needed protection. They were so numerous it would have imposed an unreasonable hardship and burden on them to require all members to be made parties to the suit. Under such circumstances we have repeatedly held that a court of equity has jurisdiction of representative suits, and where the remedy is pursued by a plaintiff who has the right to represent the class to which he belongs, other members of the class are bound by the result in the case, unless it is reversed or set aside in a direct proceeding. Groves v. Farmers State Bank, 368 Ill. 35; Leonard v. Bye, 361 id. 185; Greenberg v. City of Chicago, 256 id. 213.”

Plaintiffs clearly had the right to institute and maintain this proceeding as a class suit. They represented the class they belonged to. It not only would have been a great burden but it would have been impossible to have brought the 5,078 assessees into court. All having a like interest in the same fund, its discovery and its distribution, the instant action was brought for their common benefit and could not injure any of them. They all profit not only as a result of the decree entered herein, but also through plaintiffs’ efforts in the county court whereby the surplus trust funds were not only protected but augmented. Therefore, all the requirements necessary for the commencement and maintenance of a representative suit are present here.

Defendants’ final contention is that the complaint in this case was prematurely filed. It is unnecessary to discuss this contention since it has been completely answered by what has already been said.

For the reasons stated herein the decree of the circuit court is affirmed.

Decree affirmed.

Friend, P. J., and Scanlan, J., concur.


source: Caselaw Access Project

license: Public Domain

text:
    N. J. Kreizelman, Appellant, v. George M. Stevens, Appellee.
    Gen. No. 41,297.
    Heard in the second division of this court for the first district at the June term, 1940.
    Opinion filed July 1, 1941.
    Goodman & Golosinec, of Chicago, for appellant; Irving Goodman and John W. Golosinec, of counsel.
    Stevens & Carrier, of Chicago, for appellee; Geo. M. Stevens and Geo. M. Stevens, Jr., of counsel.
   Mr. Justice John J. Sullivan

delivered the opinion of the court.

This action was brought by plaintiff, N. J. Kreizelman, to recover from defendant, George M. Stevens, on certain written guaranties alleged to have been made by said defendant. Plaintiff filed an amended complaint. Defendant filed an answer thereto and plaintiff filed a reply to said answer. This appeal is from the following judgment order entered by the trial court:

“This cause coming on to be heard on the motion of the attorneys for the defendant for a judgment on the pleadings and upon the motion of the attorneys for the plaintiff to set the above entitled cause down for hearing, and the court having read the Amended Complaint, the Answer of the Defendant, and the Reply thereto of the plaintiff, and having examined the guaranty sued upon therein, and upon the arguments of counsel, orders that the reply of the plaintiff be and is hereby stricken, and that judgment be and is hereby entered in favor of the defendant and against the plaintiff and that the costs be taxed against the plaintiff.”

Plaintiff’s amended complaint alleged that he “is the owner and holder of two certain Special Assessment Vouchers issued by the Village of La Grange Park, Illinois, and dated September 3, 1929; that Voucher No. 2 was issued for the sum of $2,203.15 and that there has been paid on account of principal the sum of $1,200.00, leaving a balance of $1,103.15 due and unpaid on the principal thereof; that Voucher No. 3 was issued for the sum of $980.44 and there has been paid on account the sum of $300, leaving a balance of $680.44 due and unpaid on the principal thereof”; that he “acquired the said special assessment vouchers and the guaranties of the defendant sued upon herein on, to wit, October 17, 1938, by purchasing the same from Armstrong, Valiquet and Company, Inc., an investment security house on LaSalle Street, and the said vouchers and the guaranties on the backs thereof were duly delivered to the plaintiff herein; that the plaintiff is the actual bona fide owner thereof and acquired title to the said vouchers and the guaranties on the backs thereof by the purchase and delivery of the same and an oral assignment and bill of sale to the same”; that “the defendant, George M. Stevens, guaranteed the payment in full of the principal and inter-' est of each of said vouchers Numbers 2 and 3 respectively, said guaranty appearing on the back of each of said vouchers and signed by said defendant and being in words and figures as follows, to wit:

“For value received the undersigned hereby guarantee the payment of the within note at maturity with interest, agreeing to pay all costs and expenses in collecting the same and waiving demand of payment protest, notice of protest and notice of nonpayment.”

The complaint further alleged that “plaintiff herein, as the owner and holder of the vouchers and the guaranties herein sued upon, has demanded from this defendant the payment of the principal and interest, but that the said defendant has refused and still refuses to pay said sum or any other sum whatsoever, and that neither the principal nor anyone else on behalf of the defendant, has paid the amount due on the guaranties, as aforesaid; that the plaintiff purchased the guaranties and the vouchers in reliance upon the guaranty and the signature of the said defendant and the financial responsibility of the said defendant; that the said guaranties are past due and payable to the plaintiff herein, but that the said defendant refuses to pay the amount plainly due on the said guaranties, in accordance with the express terms thereof.”

The complaint then alleged that “there is due and owing to the plaintiff herein from the said defendant on the guaranty on the back of voucher No. 2 the sum of $1,003.15 as principal and interest thereon amounting to $348.28 and on the guaranty on the back of voucher No. 3 the sum of $680.44, as principal, and $228.60 as interest, making a total of $2,260.47 due to the plaintiff from the said defendant herein on the guaranties signed by the said defendant; that upon the payment to him of the said sum the plaintiff offers to assign all his right, title and interest in and to the said vouchers and the guaranties thereon to the said defendant.”

The two special assessment vouchers, which were identical except as to the amounts shown to have been paid and the amounts still due thereon, were attached to and made a part of plaintiff’s complaint. Voucher No. 2 is as follows:

To the treasurer of the Village of LaGrange Park, Illinois:

From the funds realized by the Village of LaGrange Park, from the collection of the first installment of the special assessment levied and confirmed by the County Court of Cook County, Illinois, in Special Assessment No. 72, for the improvement of Paving Newberry Avenue and Other Streets as provided by Ordinance of said Village, a copy of which is on file in said special assessment proceedings, but out of no other tax or funds, pay to Geo. M. Stevens the sum of Twenty-two hundred three & 15/100 Dollars, and interest thereon at the rate of five per centum per annum, from the date hereof.

This voucher is issued on account of work done and services rendered in pursuance of and in carrying out the provisions of said ordinance.

The holder hereof expressly agrees in all things to be governed by an act of the General Assembly of the State of Illinois entitled: ‘An Act concerning Local Improvements, ’ approved June 15, 1897, in force July 1, 1897, and all amendments thereto.

Both principal and interest of this voucher are payable when collected at the office of the Treasurer of the Village of LaGrange Park, Illinois, solely out of the portion of taxes collected pursuant to levy of the said Village for the purpose of discharging the first installment of said special assessment, on or before December 31, 1930.

Dated this the Third day of September, A. D. 1929.

Village of LaGrange Park, Illinois,

By Stanley Bracken,

President of the Board of Trustees

Registered:

W. J. Gardner

Village Treasurer.

Attest:

Albert A. Allen,

Village Clerk.”

Defendant’s answer, after denying that plaintiff acquired title to said vouchers and the guaranties on the backs thereof by purchase and delivery of same and by an oral assignment and bill of sale and that he was in any manner liable on such guaranties, averred that there was no consideration for the guaranties and that said guaranties were placed on the vouchers after he had signed same.

Plaintiff’s reply joined issue on the denials contained in defendant’s answer and denied the allegations in said answer that plaintiff was not the bona fide owner and holder of the vouchers and guaranties sued upon, that there was no consideration for defendant’s guaranties and that the guaranties were placed upon the vouchers subsequent to the time defendant signed said vouchers.

Plaintiff contends in his brief ‘ that the Court erred in entering judgment on the pleadings without hearing any evidence where there were controverted issues of fact to be determined; that the pleadings raised issues of fact which the Court was without jurisdiction to ignore; that the amended complaint, answer and reply presented issues of fact; that the guaranty sued upon was a valid, binding, enforceable guaranty; that a guarantor is liable according to the terms of the guaranty and he can if he so desires assume a greater obligation than his principal; that the answer of the defendant is frivolous and sets up no valid defense; . . . that the Court erred in deciding controverted issues of fact on the pleadings.”

Defendant advances several propositions to sustain the judgment of the trial court, of which only the following need be considered:

“Plaintiff did not state a cause of action against the defendant upon the alleged guaranties, there being no allegations nor statements of fact in said amended complaint of any default by the principal, Village of La Grange Park, Illinois, in the performance of the principal contracts according to the terms, conditions and provisions thereof.”

The real question presented for determination is whether plaintiff’s amended complaint stated a cause of action. While it is true that issues of fact were raised by the pleadings as to plaintiff’s ownership of the special assessment vouchers and the guaranties thereon, the consideration, if any, for such guaranties and as to whether the guaranties were placed upon the vouchers after defendant had signed same, plaintiff would not be entitled to recover even though he were to prevail as to the foregoing issues upon a trial of this cause, unless he also alleged and proved the default of the principal debtor.

It is conceded that the principal obligor, the village of La Grange Park, was not in default in the payment of the vouchers since it fully complied with its obligations to pay same “From the funds realized by the Village of LaGrange Park, from the collection of the first installment of the special assessment levied and confirmed by the County Court of Cook County, Illinois . . . but out of no other tax or funds . . . Both principal and interest of this voucher are payable when collected at the office of the Treasurer of the Village of LaGrange Park, Illinois, solely out of the portion of taxes collected pursuant to levy of the said Village for the purpose of discharging the 1st installment of said special assessment, on or before December 31, 1930.”

Plaintiff’s complaint did not and could not, under the circumstances, allege that the principal debtor was in default in its payments on the vouchers. However, plaintiff insists that since defendant guaranteed “the payment of the within note at maturity with interest” and that since the special assessment vouchers by their terms were due and payable on or before December 31, 1930, said vouchers matured as of that date in so far as the guaranty was concerned and therefore the guarantor is absolutely liable on his guaranty, even though the principal obligor was only liable to pay the vouchers if, as and when the special assessments were collected. Plaintiff states in his brief that he is in accord with the general rule that the liability of a guarantor is limited by and is no greater than that of the principal debtor and that if no recovery could be had against the principal debtor the guarantor would also be absolved from liability, but he argues that where the guarantor by his contract of guaranty assumes a . greater obligation than that of his principal, he will be held to the terms thereof irrespective of whether the principal is liable. In every case cited by plaintiff in support of this contention the principal debtor had defaulted before the guarantor had been called upon to comply with his guaranty and it is therefore unnecessary to discuss such cases since it is conceded that upon the default of the principal obligor the guarantor may be held liable irrespective of the liability of the principal debtor.

The difficulty with plaintiff’s position is that there was no default in the instant case on the part of the principal debtor and the rule in this State, as well as in every other jurisdiction, is that “a guaranty of the payment of an obligation of another is an absolute undertaking imposing liability upon the guarantor immediately upon the default of the principal debtor.” 28 C. J., section 125, p. 972. Thus no liability may be imposed upon the guarantor unless and until the principal debtor has defaulted and this is true whether the guaranty is coextensive with or broader or narrower than the principal contract. Where under the conditions of the contract no liability has arisen on the part of the principal there is no liability on the guarantor. (28 C. J., section 94, p. 946.) “A guaranty is an undertaking to be responsible for the performance of an obligation of a third person upon his failure to perform it." Illinois Surety Co. v. Munro, 289 Ill. 570. Plaintiff has not called our attention to a single case nor have we been able to find one where the guarantor has been held liable on his guaranty unless the principal debtor was in default.

It should be stated that the “note” referred to in the respective guaranties is not a promissory note but a special assessment voucher, which is not a negotiable instrument, and it is apparent that when the contracts of guaranty are considered in connection with the special assessment vouchers, as they must be (28 C. J. Section 78, p. 933; Bogardus v. Phoenix Mfg. Co., 120 Ill. App. 46; Ewen v. Wilbor, 99 Ill. App. 132), no liability thereon has been shown.

Regardless of the issues of fact heretofore referred to, which were raised by the pleadings, plaintiff’s complaint did not state a cause of action since there was no allegation therein that the defendant ever became bound as a guarantor to pay the special assessment vouchers because it failed to state that the principal debtor defaulted in the payment of said vouchers.

While it would have been better practice if defendant had moved to strike plaintiff’s complaint instead of answering same, it would serve no useful purpose to remand this cause to permit plaintiff to amend its complaint since it is admitted that the principal debtor was not in default on its contract.

For the reasons stated herein the judgment of the circuit court is affirmed.

Judgment affirmed.

Friend, P. J., and Scanlan, J., concur.


author: Mr. Justice O’Connor

text:
    Simon Hirshman, Trustee in Bankruptcy of Carl Ray Corporation, Appellee, v. National Mineral Company, Appellant.
    Gen. No. 41,611.

      Heard in the first division of this court for the first district at the April term, 1941.
    Opinion filed July 3, 1941.
    Rehearing denied July 21, 1941.
    Adolph A. Rubinson, of Chicago, for appellant.
    Culver & Mendelson, of Chicago, for appellee.
   Mr. Justice O’Connor

delivered the opinion of the court.

August 15,1936, plaintiff filed his suit in the municipal court of Chicago against defendant, and in his statement of claim alleged he was elected trustee October 16,1935, in the bankruptcy proceeding instituted in the District of Columbia. He sought to recover on the ground that defendant within four months of the institution of the bankruptcy proceeding had obtained a preference over other creditors, which plaintiff sought to recover. Plaintiff’s claim is made up of three items: (1) that defendant had sold and delivered to the Carl Ray Corporation merchandise for $1,381, (2) other merchandise for $1,414.51, and (3) the Carl Ray Corporation had given defendant a note which it obtained from one of its customers, of $5,869.40; that the merchandise had been returned by Carl Ray Co. to defendant and such return and the giving of the note to defendant occurred within four months prior to the institution of the bankruptcy proceeding when defendant knew or had reasonable cause to believe that the Carl Ray Co. was insolvent. There was a jury trial and a witness testified that August 6, 1935, merchandise of the value of $1,521.68 and August 23 other merchandise of the value of $1,210.51 (making a total of $2,732.19), was returned by Carl Ray Co. to defendant. The jury returned a verdict in plaintiff’s favor for the amount of these two items, judgment was entered on the verdict and defendant appeals.

No suggestion or complaint is made that the verdict made no allowance for the note of $5,869.40. Plaintiff’s action is based on the provisions of § 60b of the Bankruptcy Act (U. S. Code, Title 11, § 96 (b)), which provides that “If a bankrupt shall have . . . made a transfer of any of his property, and if, at the time of the transfer, . . . and being within four months before the filing of the petition in bankruptcy . . . the bankrupt be insolvent and the . . . transfer then operate as a preference, and the person receiving it or to be benefited thereby, . . . shall then have reasonable canse to believe that the . . . transfer would effect a preference, it shall be voidable by the trustee and he may recover the property or its value from such person.”

The evidence shows, and there is no contention to the contrary, that the two items of merchandise aggregating the amount of the verdict and judgment was returned by the Carl Kay Co. within four months of the filing of the petition in bankruptcy.

The questions for decision on the merits are (1) whether the goods were sold by defendant to the Carl Ray Co. or consigned to it by defendant, and (2) whether the Carl Ray Co. at the time the goods were returned was insolvent and defendant knew or had reason to- believe that the Carl Ray Co. was insolvent.

The first question is not discussed by counsel for either side but Godfrey L. Hunter, a witness called by plaintiff, testified by deposition he was a member of the bar of the District of Columbia and had been attorney for the Carl Ray Co. in 1935; that defendant was a creditor of the corporation July 1935, ‘‘judging from some letters I find here, I was consulted by Carl Ray with reference to the demands of National for payment of indebtedness.” That he had about twenty conferences on the subject. “Their position was, as I recollect, that they wanted money and some of the goods back which had been shipped on consignment”; that during those conferences all the parties were trying to see if the Carl Ray Co. could be saved.

There is considerable evidence in the record as to the financial condition of the Carl Ray Co. during June, July, August and September of 1935, and counsel for defendant contends it fails to show that during those months the Carl Ray Co. was insolvent and therefore the court should have sustained defendant’s motion at the close of plaintiff’s case for a directed verdict. After such motion was overruled, defendant put in its evidence and that motion was then out of the case for all time. Popadowski v. Bergaman, 304 Ill. App. 422; Kahler v. Marchi, 307 Ill. App. 23. Counsel for defendant argues on this question which is the only question discussed in the brief and is wholly inapt. While a second motion was made by defendant for a directed verdict at the close of all the evidence, the only question on this phase of the case is, Did the court err in overruling this motion? If there is any evidence taken in connection with all legitimate inference to be drawn therefrom, considered most favorably to plaintiff, the motion was properly overruled.

In view of the argument of counsel for defendant the questions for decision are (1) whether the court should have directed a verdict for defendant at the close of all the evidence or (2) whether the verdict of the jury in favor of plaintiff (to the effect that the Carl Bay Co. at the time the merchandise was returned was insolvent) is against the manifest weight of the evidence. We think the evidence was clearly sufficient to warrant the jury in finding that defendant knew the financial situation of the Carl Bay Co. at the time the goods were returned. But while the question of the insolvency at that time is not entirely clear, yet upon a consideration of all the evidence in the record we are of opinion we would not be warranted in holding the court should have sustained defendant’s motion at the close of all the evidence and directed a verdict in its favor. We are further of opinion that the verdict in plaintiff’s favor on the question of the insolvency of the Carl Bay Co. at the time the goods were returned to defendant is against the manifest weight of. the evidence.

In a letter sent by the Carl Bay Co. July 18, 1935, to defendant’s representative an itemized statement of the assets and liabilities of that company was included. It showed a net value of $14,116.94. July 31, 1935, another itemized statement of the assets and liabilities of the Carl Bay Co. showed a net- value of $11,556.25.

Defendant also offered in evidence a report of Dun & Bradstreet as of September 27, 1934, concerning the financial standing of the Carl Bay Co. We think this report only tended to confuse the issues and should not be in evidence in case of a retrial. It would in no way tend to show the solvency or insolvency of the Carl Bay Co. at the time the goods were returned the following August 1935.

The verdict was returned and the judgment entered April 21, 1939, and May 3 following, an order was entered giving defendant leave to file a motion to vacate the judgment. The motion was supported by a verified petition which tended to show the court in Washington, D. C. did not have jurisdiction of the bankruptcy proceeding. An answer was filed to this' petition and a hearing had, all of which we think was improper. The jurisdiction of the court in Washington, D. C. could not be thus collaterally attacked. That court adjudicated that Carl Bay Co. was a bankrupt. Defendant was notified of the proceedings but did not raise any question of the jurisdiction of that court and the question could not be raised in the instant case. Chicot County Drainage Dist. v. Baxter State Bank, 308 U. S. 371.

Defendant also complains the court erred in refusing to give instruction No. 4 tendered by it. The instruction is not set out in defendant’s brief, which we have heretofore held was the proper practice. General Platers Supply Co. v. L’Hommedieu & Sons Co., 228 Ill. App. 201; In re Estate of Wood v. Tyler, 256 Ill. App. 401. But in any event we think the' instruction was properly refused. By it defendant sought to have the jury told, among other things, that plaintiff was required to prove by a preponderance of the evidence “That the taking back of the goods and note had the effect of cutting down the property and assets of Carl Ray Corporation,” etc.; "That National Mineral caused Colbe to be placed in management of the Carl Ray Corporation as a condition of refraining from legal action; That Colbe paid nothing for his stock . . . That National Mineral Company willingly received said property for the purpose of defrauding the other creditors of Carl Ray.” None of these propositions had anything to do with the solution of the questions properly involved. The fact that plaintiff had alleged all or some of these matters in his statement of claim was immaterial and mere surplusage. He was not required to prove all of these allegations.

The judgment of the municipal court of Chicago is reversed and the cause remanded.

Reversed and remanded.

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


author: Mr. Presiding Justice Wolfe

text:
    Judd Clikeman, Appellant, v. Calvin Korf, Appellee.
    Gen. No. 9,665.

      Heard in this court at the May term, 1941.
    Opinion filed July 9, 1941.
    B. Jay Knight and Frederick H. Haye, both of Rockford, for appellant.
    Thomas F. Ryan, of Rockford, and Donald M. Keenan, of Chicago, for appellee; Donald M. Keenan, of counsel.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

This suit was originally instituted by Judd Clikeman to recover for damages sustained to his automobile in an accident which occurred on July 23, 1939. The suit was before a J. Flynn, a justice of peace. A counterclaim was filed by Calvin Korf for damages which he alleged he sustained to his automobile in the same accident'. The justice entered judgment in favor of Clikeman in the sum of $106. Costs of the suit were entered by the justice of peace against the defendant, Korf. From this judgment, an appeal was taken by Korf to the circuit court of Winnebago county. In the circuit court, Judd Clikeman entered a motion to dismiss the appeal. This motion was denied, and upon a hearing before the court without a jury, judgment was entered in favor of Korf on his counterclaim in the sum of $137.75. Costs of the suit were assessed against the plaintiff, Clikeman. It is from this judgment that the appeal is prosecuted.

The transcript filed by the Justice of Peace in the circuit court is as follows:

“Schedule of Fees
“Sumonds issued on July 27, 1939 agaists defendant and in favor of plaintiff returnable August 1, 1939 same seved.
“August 1, 1939, defendant by his Attorney Thomas F. Eyan appeared and moved the Court for a continuance of said cause for one week or until August 11, 1939, at one oclock P.M. Continuance agreed to by Counsel for Plaintiff, B. J. Knight.
“11 August 1939
“Case called for trial plaintiff appeared in pearson and his council B. J. Knight defendant appeared in pearson and his Council Thomas F. Eyan. Case proceeded plaintiff introduced evidence upon on his orignal claim by way of several witness — and proved damage to his Automobile in sum of ($106.00) defendant offered evidence as to Counteclaim in the sum of $137.75 at conclusion of all the evidence. Arguments wer — made by council foath plaintiff and defendant. Case continued till August 19 — 1939 for decision of Court.
“ Judgement in favor of plaintiff and against defendants in the sum of $106.00 and cost of Trial. Counter claim of defendant rejected and dismissed.
“I, A. J. Flynn, a Justice of the Peace in and for said County, Do Hereby Certify, that the foregoing is a true and correct Transcript of the Judgment given by me in the above entitled suit, and that said Transcript, and the papers herewith accompanying, contain a full and perfect statement of all the proceedings before me, in the above entitled cause.
“In Witness Whereof, I have hereunto set my hand and seal this 20 day of November, 1939.
“A. J. Flynn (Seal)”

The appellant, Judd Clikeman, made a motion to dismiss the appeal because the transcript filed by the justice shows that judgment was entered in favor of the plaintiff on August 19, 1939, and the appeal bond was not filed by Korf until September 12, 1939, more than twenty days after the judgment was entered by the justice for the plaintiff. It will also be observed that the appeal bond was approved by the justice on the 12th day of September, A.D. 1939. The bond was not filed by the justice in the circuit court until December 4, 1939.

It is insisted in this court by the appellant that the attempted appeal was nullity, and the circuit court had no jurisdiction to pass upon the merits of the case. It is also claimed by the appellant that the finding of the court against the plaintiff and in favor of the defendant was against the manifest weight of the evidence.

Section 116 of chapter 79 of Smith-Hurd’s Ill. Ann. Stats. [Jones Ill. Stats. Ann. 71.112] provides that: “Appeals from judgments of justices of the peace, and police magistrates to the circuit or county court . . . shall be granted in all cases except on judgments confessed. . . . The party praying for an appeal shall, within twenty days from the rendition of the judgment, pay the fee provided by law for the filing of such appeals and enter into bond with security to be approved and conditioned as hereinafter provided. ’ ’ Then follows the form of the bond.

In the case of Bennett v. Karasik, 164 Ill. App. 362, at page 364, this court was considering a case where the appeal bond had not been filed in apt time, and in the opinion we use this language: “As already stated, the judgment before the justice was entered on February 8, 1909. The appeal bond of Levy was dated and filed in the circuit court and approved, on March 3, 1909, more than twenty days after the date of the judgment. The statute requires the party desiring to take an appeal from the judgment of a justice of the peace to file a bond either in the office of the justice of the peace rendering the judgment or with’ the clerk of the court to which the appeal is taken and secure its approval within twenty days from the rendition of the judgment. Statutes limiting the time for taking the appeal are mandatory and jurisdictional, and if the appeal is not taken within the statutory period, neither the regularity of the proceedings nor the jurisdiction of the lower court can be inquired into, and the appeal cannot be considered, but must be dismissed. 4 Ency. P. & P. 115, title, ‘Appeal;’ Sholty V: McIntyre, 136 Ill. 33; Vickers v. Tyndall, 168 Ill. 616.” The filing of the appeal bond with the justice of the peace within twenty days is jurisdictional, unless it was so filed the circuit court had no jurisdiction to hear the case.

The transcript filed by the justice, which serves as a declaration in the circuit court, shows that the justice heard the case on August 11, 1939, and continued by him to August 19, 1939, for his decision when and according to the transcript filed by the justice, he entered judgment in favor of the plaintiff, Judd Clikeman, for $106 and assessed the costs of the suit against the defendant, Korf, and rejected and dismissed his counterclaim. After the justice heard the evidence, he had the authority to adjourn the case for some fixed and reasonable time to enable him to consider the evidence, or examine the law relative to the case. This adjournment must be to a definite time, and should be announced in open court so that the parties may be present at the time of his decision in order to take such step for the protection of their interests, as they may deem proper. Hall v. Reber, 36 Ill. 483; Colwell v. Swich, 190 Ill. App. 369. We think that the justice’s record clearly indicates that he followed the legal procedure in adjourning the case for his decision to August 19, and rendered his judgment on that date.

The bond filed by the appellee in the circuit court recites that the appeal is taken from a judgment entered by the justice on August 30, 1939. The appellee insists that this' shows the date on which the judgment was actually rendered, therefore the appeal bond was filed in apt time. As stated before, the transcript of the justice stands as the declaration in the circuit court, and is the basis for the suit. After the transcript is once filed, the justice of the peace has lost jurisdiction of the case, and cannot amend or change the transcript in any manner. (Merritt v. Yates, 71 Ill. 636.) The bond filed by the appellee is no part of the transcript, and cannot aid it in any way in determining the jurisdiction of the circuit court. It is our conclusion that the court erred in not dismissing the appeal. The view we have taken in regard to the jurisdictional question raised in this case, makes it unnecessary for us to pass upon the facts as presented to the trial court.

The judgment of the trial court is hereby reversed, and the cause remanded with directions to the trial court to dismiss the appeal, and to issue a writ of procedendo.

Reversed and cause remanded.


text:
    Frank Frederick Kalschinski, Also Known as Frank Chinsky, Jr., Appellee, v. Illinois Bankers Life Assurance Company and Margaret Demere, Defendants. (Margaret Demere, Appellant.)
    Gen. No. 9,667.
    Heard in this court at the May term, 1941.
    Opinion filed July 9, 1941.
    Eva L. Minor, of Kankakee, for appellant.
    Harry S. Streeter, of Kankakee, for appellee.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

Frank Frederick Kalsehinski, the plaintiff (now appellee), started a suit in the circuit court of Kankakee County, against the defendants, Illinois Bankers Life Assurance Company, a corporation, and Margaret Demere, to recover $2,000 on an insurance policy that the defendant, Illinois Bankers Life Assurance Company had issued to Frank Kalsehinski during his lifetime. Frank Kalsehinski died on February 1, 1940. The appellee, Frank Frederick Kalsehinski, gave notice to the insurance company of the death of his father, and made claim for the $2,000. Margaret Demere also claimed the $2,000 under a benefit certificate which she held, in which she was named as the beneficiary.

The Illinois Bankers Life Assurance Company filed its answer and counterclaim in which it alleged that the original benefit certificate issued to the deceased on November 19, 1919, named Barbara Kalsehinski, the wife of Frank Kalsehinski, as beneficiary; that on or about November 27, 1926, the said Frank Kalschinski requested that the beneficiary be changed to Margaret Demere, his daughter; that on June 22, 1929, the said Frank Kalsehinski made a written waiver of lost policy, and application for a duplicate; that said Frank Kalsehinski also represented that said certificate was being withheld by Margaret Demere, and requested that a duplicate policy be issued naming Frank Frederick Kalsehinski, his son, as beneficiary; that pursuant to said application, the same was done; that notice of death of Frank Kalsehinski was received by the company, and proof duly made by the son on February 8, 1940; that before any action was taken by the company on the plaintiff’s claim, that the defendant, Margaret Demere, made inquiry to the company with respect to the original certificate under which she .was made beneficiary. The company further stated that there was $2,000 due on said certificate, and that the company was ready and willing to pay said amount to whomsoever the court determined it was due.

The appellant, Margaret Demere, filed her answer denying that Frank Frederick Kalsehinski was entitled to the proceeds of said benefit certificate, and alleged that on November 27, 1926, Frank Kalsehinski changed the beneficiary in said policy to her; that thereafter on May 8, 1929, she, at the request of said Frank Kalsehinski, loaned him the sum of $1,000 and thereupon her father delivered to her, said certificate as security for said loan; that she took said policy, and kept the same in her possession, and still has it; that at no time did her father or anyone else ask her to return it; that immediately after the death of her father, she notified said company, and for the first time learned that her brother was making claim to the proceeds of said certificate. She further alleged that said insurance company was liable to her in the sum of $2,000.

Before the hearing in court, the insurance company paid to the clerk of the court the sum of $2,000. A hearing was had before the court without a jury, and judgment given for plaintiff for the amount of the insurance. It is from this judgment that Margaret Demere has perfected an appeal to this court.

There is very little dispute in regard to the facts in this case. The evidence shows that Frank Kalschinski Sr., was the father of the appellee, Frank Frederick Kalsehinski, and the appellant, Margaret Demere. He died on February 1, 1940. During his lifetime, he became a member of the “Court of Honor,” and on November 19, 1919, the said Court of Honor issued to him its benefit certificate in which it agreed to pay to his wife, Barbara Kalsehinski, as beneficiary, the sum of $2,000 upon the proof of his death; that Barbara Kalsehinski died on November 26, 1926, and on the application of Frank Kalsehinski Sr., the beneficiary, in said certificate was changed to the defendant, Margaret Demere; that the certificate naming her as beneficiary, was delivered to her by her father some time in the year 1928, and that she has kept it continually in her possession since that time; that on May 8,1929, at the request of her father, she loaned him the sum of $1,000 at which time he told her it might be a long time before he would be in a position to repay her, but that she was to hold the policy as security for the loan; that no one at any time ever asked Margaret Demere to return or surrender the said benefit certificate; that after her father’s death, she notified the defendants, Illinois Bankers Life Assurance Company (which had in the meantime succeeded the Court of Honor and assumed the liability under said policy), and that then for the first time she learned that another benefit certificate had been issued to her father naming her brother, Frank Kalsehinski, the appellee, as the beneficiary therein; that on or about June 22, 1929, Frank Kalsehinski Sr., made a written waiver of lost policy, and applied for a duplicate in which he represented that the original certificate was being withheld by Margaret Demere, and that she refused to surrender it; that the company without communicating with Mrs. Demere or making any effort to do so, issued the duplicate policy naming the plaintiff, Frank Kalsehinski Jr., as beneficiary; that during the month of July 1927, Frank Kalsehinski sent his daughter, Mrs. Demere, a bank draft for $1,000 which she testified was a gift from her father to her; that the $1,000 loaned to her father on May 8, 1929, had never been repaid to her by him.

It is insisted by the appellant that the insured had no right to change the beneficiary from Margaret Demere to the appellee, Frank Kalsehinski, because she had loaned her father $1,000 and at the time of making the loan, the father had stated to her, that she was to continue to hold the insurance policy heretofore delivered to her, as security for her making the loan to him; that by reason of such loan, she had a vested interest in the policy, and without her consent the beneficiary in the policy could not be changed. In the case of Royal Arcanum, v. Tracy, 169 Ill. 123, at page 127, we find the following: “Under the charter and laws of the society it may be conceded that a member, where no intervening rights have attached, may surrender a- benefit certificate and designate a new beneficiary. It may also be conceded that in the absence of a contract existing between the member and the beneficiary named in the certificate, as a general rule the beneficiary, before the death of the member, has no vested interest in the certificate. But the case made by appellee, as we understand the record, stands upon different grounds. While a certificate like the one in question is not assignable at law, all beneficial interest therein may be transferred in equity. Equitable rights may be acquired in a beneficial certificate which may be enforced in a court of equity. (Bispham’s Principles of Equity, chap. 8, 162-167.) Before Tracy obtained the certificate it was agreed between him and his wife that she should advance him $1,500, and that she should be the beneficiary, and the certificate should be turned over to her when he obtained it from the organization. In pursuance of this agreement she paid her husband $1,500 in cash and he turned over the certificate to her, and ever after that it remained in her sole possession and custody. After this agreement was made, the money paid and the certificate turned over, as between Tracy and his wife he had no right whatever to surrender the certificate and have the organization make out a new one payable to another party, and his attempt to do so, based upon a false affidavit, was a fraud on the organization and upon his wife; and his daughters, who are mere volunteers, having advanced nothing, cannot profit by the fraud of Tracy attempted to be practiced on his wife. The new certificate was obtained through perjury and fraud, and as the daughters can have no standing as innocent purchasers, they are not entitled to be protected as against appellee, who advanced her money on the faith of a contract with her husband.” This case clearly defines the right of changing a beneficiary in benefit certificates, and has been followed by numerous cases both in the Supreme and Appellate Courts.

It is conceded by the parties to this litigation that a member of a fraternal benefit society where no intervening rights have attached may at his pleasure surrender his benefit certificate, and have a new certificate issued and designate therein a new beneficiary, and that a beneficiary has no vested rights in the certificate during the life of a member by reason of the fact that he has been named as a beneficiary in such certificate. The appellant insists that the evidence clearly shows that she did have a vested interest in this policy, because she had in the year 1929, loaned her father $1,000 and at the time of mating the loan, the father had told her to hold the certificate as security for the loan. That the appellant testified to such facts is undisputed, but the appellee contends that such evidence was incompetent, and was not considered by the court in rendering his decision. At the time Margaret Demere gave her testimony, this evidence was objected to by the attorney for appellee, but the objections were all overruled by the court, and the evidence admitted, and it now stands in the record and abstract as part of the evidence in the case. The appellee has not seen fit to assign any cross error in their brief relative to the court’s admitting this evidence. The appellant insists that it was competent evidence, as being a part of the res gestae. In the case of Lambe v. Manning, 171 Ill. 612, the court was considering whether oral evidence could be admitted to explain a deed. The grantor was Julins M. Warren, and at the time of the institution of the suit, had been dead for two years or more, and the land had been sold by a proceeding in court. At the hearing of the case, the scrivener who drew the deed was called as a witness to state what the grantor had said in regard to the grantees under the deed, having the right to remove gravel from the premises, and in discussing the matter, used this language: “As we said before, it was important to know when, how, by whom and for what purpose the writing was attached to the deed. It was, of course, proper to show who was present and what was done at the time the paper was attached, to the deed, but it is urged it was improper to admit the statement of the grantor, Warren, as to the reason why he directed the paper to be fastened to the deed. The declarations were made at the time of the transaction. They accompanied an act of Warren, were explanatory of his motives and intentions in doing the act, and are to be regarded as a. ‘verbal act,’ or as a part of what he did, and were properly received in evidence.” In Lambe v. Manning, supra, the court cites with approval Rowley v. Hughes, 40 Ill. 316, at page 319. The court there states: “The fact that Moore was permitted to testify that Brown, the claimant, had made a contract with him to break eighty acres on each quarter of this land was not improper. The question was one of possession merely, and the intention with which Brown took possession was a proper subject of inquiry, to be established by his own declarations and acts. These acts and declarations made at the time of taking possession are a part of the res gestae, and were admissible.”

The appellee insists that this evidence was incompetent, as under the statute Margaret Demere was an incompetent witness, and cites numerous cases as supporting this contention. An examination of these cases discloses that some of them were an attempt to show by the widow of the deceased, conversations which she had had with her husband during their marital relations. No doubt under the statute, as existed at the time these cases were decided, the widow would be an incompetent witness. The other cases are where the heir is suing or defending as an heir of the ancestor, and the cases held that where such a suit is brought by an heir, that the other heirs are not competent to testify.

In the present case the plaintiff is suing the insurance company for money due under an insurance policy, and the defendant, Margaret Demere, is also claiming the proceeds of the insurance policy. It is not a suit involving the estate of Frank Kalschinski, deceased, and the cases cited by the appellant are not applicable. The general rule is, that for declarations to be admissible in evidence as part of the res gestae, they must be made in connection with an act proven. Whether the circumstances under which a declaration was made are such as to make it reasonably probable presents a question for the determination of the trial court. The question of admissibility is one of administration, each case being properly decided upon its own facts. And in this regard the trial court should be clothed with a reasonable degree of latitude, since the application of the principle depends on the circumstances of the particular case. (Johnson v. Swords Co., 286 Ill. App. 377.)

It is insisted by the appellee that even if Margaret Demere’s testimony had been competent, that it was not worthy of belief, and therefore the court properly found that she was not entitled to the proceeds of this insurance policy. He cites numerous cases in which it is stated that evidence of admissions made by a person since dead should be carefully scrutinized, and the circumstances under which they are alleged to be made should be carefully considered with all the evidence in the case, and that such evidence is liable to abuse. There are many cases both in the Supreme and Appellate Courts that adhere to this rule, however, the court cannot wholly refuse to consider such evidence when it is uncontradicted, but should consider it with other facts and circumstances in evidence. In the present case it is undisputed that in May 1929, Margaret Demere gave her father a check for $1,000. The father had given the daughter $1,000 in July 1927. The evidence is positive that this $1,000 was a gift, and there is no evidence that the $1,000 received by the father from Margaret Demere in May 1929, was not as she says, a loan from her to her father. It is also uncontradicted that the father had delivered the policy to the daughter, and that she had kept it from the date of delivery until after her father’s death; that she had no knowledge of the change of the beneficiary in the policy, and that the father had never made demand upon her for the return of the policy which had been delivered to her. The plaintiff in rebuttal testified to conversations which he had had with his father in regard to the $1,000 which he sent to his daughter in 1927. It seems to us this testimony corroborates Mrs. Demere’s testimony that the $1,000 payment was a gift, as it would be a natural thing for the father to help the daughter if she were in financial distress. "We think the evidence in this case clearly establishes that Mrs. Demere loaned her father $1,000 in May 1929; that at that time the father told his daughter that she should hold the insurance policy as security for this loan. The father having delivered to his daughter the insurance policy as security for the loan, the daughter then had a vested interest in the policy, and the father had no right to change the beneficiary in his insurance policy without the consent of the daughter, so long as the loan of $1,000 had not been repaid to her.

The judgment of the trial court is hereby reversed, and the cause remanded to said court with directions to enter judgment in favor of the appellant, Margaret Demere, for the amount of the policy of insurance.

Reversed and remanded.

Dove, J., dissents.