text:
    Clarence A. Martin, Appellant, v. Rockford Trust Company, Appellee.
    Gen. No. 8,956.

      Opinion filed August 14, 1935.
    Rehearing denied September 30, 1935.

      Hyer & Gill, of Rockford, for appellant.
    Welsh & Welsh, of Rockford, for appellee; C. K. Welsh, of counsel.
   Mr. Justice Huffman

delivered the opinion of the court.

This was a complaint in chancery filed by appellant to cause appellee, as trustee, to account to appellant for his pro rata share of certain funds that had come into the hands of said trustee. On May 1, 1927, the Rockford Silver Plate Company, an Illinois corporation, with its principal place of business located in the city of Rockford, Illinois, executed its promissory notes in the aggregate amount of $55,000. These notes were made payable to bearer, at the office of appellee. To secure the payment thereof, a trust deed was executed by said corporation upon certain real estate located in the city of Rockford, to appellee, as trustee. Appellant became the holder of $10,000 face value of said notes. The city of Rockford, desiring to widen the street adjacent to the mortgaged premises, brought a condemnation proceeding therefor, which resulted in a judgment against the city for $21,839.79. On August 5,1931, the said city paid the sum of $22,134 to appellee, as trustee, in satisfaction of the above judgment and accrued interest thereon. Appellee, as trustee, without any notice to appellant or any of the other noteholders, paid the first special assessment instalment against the balance of the real estate secured, to the amount of $5,209.90. The trustee also paid to the county treasurer the sum of $1,850.14 for general taxes due upon the mortgaged premises, for the taxable year of 1930, payable in 1931. The trustee also expended $600 in wrecking a part of a building located upon the mortgaged premises. Following these expenditures, the trustee invested the sum of $4,103.33 of the above judgment money in school warrants of the city of Rockford.

The cause came on for hearing before the chancellor, who by his decree found the facts to be as above stated, and found that such disbursements were made without the knowledge or consent of appellant. The chancellor held that the trustee did not violate its duty as trustee toward appellant in its application of the judgment money, and that such trustee was not accountable to appellant for any of such disbursements, and only accountable for the balance of the judgment money remaining on hand. Appellant prosecutes this appeal from the decree of the court.

In a general way, a trust may be said to exist where the legal estate is in one person, and the equitable estate is in another, or where there are rights, titles, and interest in the property distinct from the legal ownership. The trust in this case is what may be termed a direct or express trust, since it arises out of a direct and positive declaration of trust. Express trusts are usually divided into two groups, commonly designated as passive or dry trusts, and active trusts. By an active trust, duties usually devolve upon the trustee, the performance with which he is charged, such as the active operation and control of the corpus of the trust. The powers of a trustee depend upon the terms of the instrument by which the trust is created. A trustee holds the trust estate for the benefit of the cestui que trust, and it is incumbent upon the trustee to administer the trust in compliance with the terms thereof. Failing to do this, he is liable for any injury sustained by any person beneficially interested in the trust.

Property conveyed to a trustee by a trust deed, providing for the discharge of an obligation of the grantor to the cestui que trust, will be given effect as a mortgage. Consistency has been achieved in matters of this kind only by the complete adoption, by judicial decision or statute, of the equitable conception that a mortgage is in fact a security, nothing more and nothing less. A trustee in a deed of trust in the nature of a mortgage must look to the terms of the instrument itself for the determination of his duties, and is entitled to act only within the scope of the powers granted. He has no right to perform any acts extraneous to his trust or beyond his authority as granted therein.

A very recent case was before the Supreme Court of this State, entitled Chicago Title & Trust Co. v. Robin, 361 Ill. 261, filed in said court on June 18, 1935, wherein it was stated that “the powers granted to a trustee in a deed of trust, are not liberally construed, and their exercise must be consonant with the terms of that instrument. Those powers, furthermore, exist only in the terms creating the trust, and no others.” The court in that opinion, in making further comment with reference to the powers of a trustee under a trust deed, makes the following statement: ‘ ‘ This court does not have the power to import into a contract other or additional provisions. To do so would be making a new contract for the parties. We cannot construe a contract along the lines of what we might believe would be a better contract for the parties to make, as equity vests no wide discretion in the chancellor such as would permit him to disturb contract rights of property. ’ ’ It was the holding of the court in the above case that since the rights, duties, and obligations of a trustee were contained and defined solely in the trust deed, it was his duty to look to the same in determining his right and power to act thereunder, and that he was limited to the powers therein set out.

The trust deed in this case did not empower the trustee to do any of the things that it did with reference to the above judgment money. On the contrary, by the terms of the trust deed, the Boekford Silver Plate Company covenanted and agreed with the trustee and the noteholders “to pay all taxes and assessments accruing or levied upon the real estate. ’ ’ There is no charge or showing that the grantor corporation was unable to pay its taxes and assessments. We discover nothing in the terms of the trust deed which would authorize the trustee to exercise any control of the property, pay any taxes, make any repairs, or to in any way assume an active charge and control of the mortgaged premises, such as going- upon the same and wrecking any part of the buildings thereon.

Where property under mortgage is condemned for public use, the mortgagee or holder of the mortgage debt is entitled to be first paid out of the fund. South Park Com’r v. Todd, 112 Ill. 379; Calumet River Ry. Co. v. Brown, 136 Ill. 322; Union Mut. Life Ins. Co. v. Chicago & W. I. R. Co., 146 Ill. 320. The condemnation money takes the place of the land taken, and thus lost by the mortgagee as security for the debt. The holder of the debt is entitled to have such money applied upon the discharge of his debt.

Appellee urges that there is no charge of bad faith on its part, and therefore the presumption that it acted for the best interests of the noteholders, and appellant in particular, should prevail, and that the decree should be affirmed. This court has not taken into consideration in any manner whatever the question of bad faith on the part of appellee, in the determination of this case. Tt is purely a question of whether appellee as trustee had the power, under the trust deed, to make application of the judgment money in the manner in.which it was done. We are of the opinion that no such powers were granted and the court is unable to inject new and additional provisions into the instrument in question. We are compelled to accept the contract as written and look to the terms thereof for the determination of the trustee’s rights thereunder, as effectually as the trustee itself is bound to do.

The decree of the trial court is reversed and this cause remanded.

Reversed and remanded.


source: Caselaw Access Project

author: Mr. Justice Dove

license: Public Domain

text:
    Ottawa Public Finance Corporation and The First National Bank, Appellees, v. Blackley-Gould Corporation et al. John Gaudi, Appellant.
    Gen. No. 8,927.

      Opinion filed September 18, 1935.
    Wilhelm & Wilhelm, of Ottawa, for appellant.
    Hibbs & Pool, of Ottawa, for appellees.
   Mr. Justice Dove

delivered the opinion of the court.

On February 17, 1932, the Ottawa Public Finance Corporation loaned to the Blacldey-Grould Corporation $3,872. The note evidencing this indebtedness was executed by the Blackley-Qould Corporation and' made payable to the order of The First National Bank of Ottawa, Illinois, trustee. To secure the payment of this note, which was payable in monthly instalments, the makers executed a chattel mortgage naming The First National Bank of Ottawa, Illinois, trustee, as mortgagee. The property covered by the chattel mortgage was machinery, appliances and equipment used by it in the business of dyeing and cleaning and described therein as follows, viz.: 1 Hoffman Pressing Machine, Model B-C 05-39511; 1 “Pantex” Pants Pressing Machine, No. 3011; 2 F. W. Matcer & Co., Iron Pressing Boards; 1 F. W. Matcer & Co., Spotting Board; 1 Quincy Compressor Company Spray Gun and compressing unit for spotting board; 2 Patrick Steam Electric Hand Irons; 1 Monarch Return to Boiler System; 1 Rotary Machine Company Rug Scrubbing Machine, No. 20214; 1 Atwood Vacuum Cleaner; 1 Jas. Heffel & Co., Marine Boiler, No. EB6159; 1 Troy Dry Cleaning Machine, size 36 x 54, No. 37528; 1 Troy Dry Cleaning Machine, size 30x36, No. 36658; 1 F. M. Bowers & Sons Spotting Tub; 1 Galvanized Iron Dry Room; 1 Troy Premier Tumbler, size 42 x 42, No. 4800; 1 Voroclone Tumbler, size 32x40, No. D-945; 1 General Electric 10 H. P. Electric Motor, with automatic switch, Motor No. 97259; 1 Complete Glover Purifying System, consisting of 3 tanks above ground, with capacities as follows: 1000 gal., 300 gal., 2000 gal. respectively, and 3 tanks below ground with capacities as follows: 1400 gal., 700 gal., 300 gal., respectively, and 2 Rotary Pumps; 1 Master Strainer; 1, 3 Gang Valve Header; 1, 5 Gang Valve Header; 1 Nelson & Knieter Co., extractor equipped with electric motor. All line shafts, belts, pulleys and attachments used, operated and attached to the articles and equipment as above listed.

On January 30, 1934, the Blackley-Gould Corporation being indebted to John Gaudi in the sum of $3,200, executed and delivered to him a chattel mortgage covering the identical property above described. After the description of the property, this chattel mortgage contains the following statement, viz.: “some of the articles hereinabove described are fixtures real and consequently are not proper items to be included in the chattel mortgage.”

On April 30, 1934, the Ottawa Public Finance Corporation instituted this suit in the circuit court of La Salle county. Subsequently and on June 15, 1934, an amended complaint was filed, the Ottawa Public Finance Corporation and The First National Bank of Ottawa, Illinois, trustee, being named therein as plaintiffs and the Blackley-Gould Corporation, a corporation, J. A. Blackley, Grace Blackley and John Gaudi being named as parties defendant. This amended complaint alleged that the Blackley-Gould Corporation was engaged in the cleaning and dyeing-business in Ottawa and that its place of business was located in a building- owned by the defendant, John Gaudi, from whom it leased said building- under a written lease which was made a part of the amended bill, and that the Blackley-Gould Corporation placed in said building all of the machinery, tools, appliances and equipment necessary for its use in its business of dyeing and cleaning. It is then alleged that on February 17, 1932, the Blackley-Gould Corporation was indebted to numerous creditors in the amount of $3,872 and that it owned no property other than the machinery and equipment which it had installed in its place of business; that John Gaudi knew the financial condition of the Blackley-Gould Corporation and knew that it was negotiating for a loan from the plaintiff, Ottawa Public Finance Corporation, and knew that if said loan was granted, it was to be secured by a chattel mortgage upon the machinery, tools and equipment of the Blackley-Gould Corporation. The amended bill then alleges that the Public Finance Corporation loaned to the Blackley-Gould Corporation-on February 17, 1932 the sum of $3,872 and that the maker executed its note for that sum and the chattel mortgage as hereinbefore set forth. It is then alleged that the proceeds of said loan were paid to the creditors of the mortgagor, whereby the mortgagor was able to and did continue in business until January 30, 1934, when the defendant Gaudi took possession of the machinery, tools, appliances and equipment of his tenant and evicted it from its place of business It is then charged that Gaudi knew that the plaintiff finance corporation had loaned the money to the Blaekley-Gould Corporation at the time the loan was made and knew that it had executed and delivered a chattel mortgage as in said complaint set forth and knew that the proceeds of said loan were used by the BlacldeyGould Corporation to pay its creditors. It was then alleged that the plaintiff, The First National Bank of Ottawa, trustee, had, prior to the execution and delivery of said note and mortgage, entered into an agreement with the finance corporation to act as trustee in its behalf; that after the execution and delivery of said note and chattel mortgage, á copy of said chattel mortgage was delivered to The First National Bank of Ottawa and that it caused said trust to be set up and noted on its books and trust department and that it received for its services as such trustee the sum of $9; that the said bank has no interest in said note or chattel mortgage except as trustee for the use of the finance corporation, and that the finance corporation is the owner and holder thereof. The amended bill then alleges the execution and delivery of the note for $3,200 and a chattel mortgage to secure the 'payment of the same on January 30, 1934, by the Blaekley-Gould Corporation to Gaudi and avers that Gaudi took possession of said chattels and evicted the mortgagor. The amended bill then alleges that the Blaekley-Gould Corporation has defaulted in observing the covenants of said chattel mortgage on its part to be performed and the plaintiff finance corporation has declared the entire indebtedness represented by the note secured by its mortgage due and payable, that it is entitled to the possession of the property in said mortgage described and that Gaudi is unlawfully withholding the possession of said chattels from the plaintiff Ottawa Public Finance Corporation. The prayer of the complaint is that the rights of John Gaudi in the chattels be found and decreed by the court to be subsequent and junior to the rights of the finance corporation, that an account may be taken and the amount due the finance corporation ascertained, and that in default of the payment of said amount that the chattel property be sold under the direction of the court to satisfy the amount so found to be due the finance corporation.

John Gaudi answered, denying practically every allegation of the amended complaint and averring that the instrument referred to in the complaint was not a chattel mortgage, and alleging that the premises which he leased to the Blackley-Gould Corporation had been, for more than 25 years, used for a dyeing and cleaning establishment; that in February, 1930, Gaudi, at the request of the Blackley-Gould Corporation, erected a two-story brick addition to his building for the benefit of said corporation, which addition houses all of the items described in the chattel mortgage; that each item therein described is attached to and made a part of a steam system therein installed; that the several appliances are each connected by shafts, belts, pulleys and steam pipe fittings, and that each appliance is permanently attached to the real estate and cannot be removed without great damage to the building and its concrete walls and partitions; that the cost of removal of said appliances is in excess of their value; that to remove them will require the removal of a fire wall and an outside wall; that three tanks of the Glover Purifying system are below ground and underneath the north wall of the premises and in order to remove the same, the north wall will necessarily be destroyed. The answer further alleges that at the time the addition was built in the spring of 1930, it was agreed between Gaudi and the Blackley-Gould Corporation that a 10-year lease would be executed for the premises and on May 1, 1930, such a lease was executed with an option to the lessee for an additional 10-year period; that the Blaekley-Gould Corporation was in possession of the premises prior to the execution of the lease on May 1, 1930, and continued in possession thereafter until it surrendered possession of all property described in the chattel mortgage to Gaudi. In his answer, Gaudi further alleged that for many years he had been a creditor of the Blaekley-Gould Corporation and, becoming fearful of its solvency, consulted his attorneys and in December, 1932, ascertained for the first time that the said Blaekley-Gould Corporation had executed the instrument set forth in the original and amended bills; that his attorneys advised him that the chattel mortgage of the plaintiff was invalid and that the property therein described belonged to Gaudi as a part of his real estate; that he could protect himself by taking a similar chattel mortgage, which he did on January 30, 1934, at which time the relationship of landlord and tenant between the Blaekley-Gould Corporation and Gaudi terminated, and the BlaekleyGould Corporation surrendered possession of all property described in the chattel mortgage to Gaudi at that time.

The defendants, other than Gaudi, defaulted. There was a hearing had in open court, which resulted in a finding that the various articles described in the finance corporation mortgage and the Gaudi mortgage were all articles adapted to and used solely for the purpose of dyeing and cleaning and useful only in the particular kind of business in which the BlaekleyGould Corporation had been engaged; that said property had, through a course of years, been treated by the Blaekley-Gould Corporation and by Gaudi as chattel property, and not as a part of the building in which said property was located; that it was the intention of the parties that said property should continue to be chattel property and not a part of the realty and that such property was a proper subject of a chattel mortgage; that the chattel mortgage executed to The First National Bank of Ottawa as trustee for the use of the finance corporation created a lien upon the property senior and superior to the one executed by the Blaekley-Gould Corporation to Gaudi; that the finance corporation is entitled to possession of the chattels by the terms of its mortgage and that Gaudi should be directed to permit the finance corporation to enter upon the premises and into the building in which the property is located for the purpose of taking possession thereof, provided the finance corporation execute a bond in the sum of $5,000 payable to Gaudi and conditioned that the finance corporation should repair or replace any part or portion of the building in which the property is located which may be injured in the operation of removing said chattel property. The bond having been filed and approved as required, a decree was thereupon entered in accordance with these findings. The decree directed the sale of the chattel property to satisfy the amount found due the plaintiff, finance corporation, which was $2,794.94, and it is from this decree that John Gaudi brings the record to this court for review by appeal.

Rule 9 of this court provides that the brief of appellant shall contain, among other things, the errors relied upon for reversal. Counsel for appellant has made no attempt to comply with this very essential portion of Rule 9, and we would be justified in affirming the decree for that reason.

At the beginning of their argument, however, counsel for appellant state that there are two questions which arise upon this record. First, Has the Finance Corporation or the First National Bank of Ottawa any rights by virtue of the chattel mortgage sought to be foreclosed 1 Second, Was the property conveyed by this chattel mortgage personal property at the time of the execution of the mortgage which belonged to the mortgagor or was it real property belonging to appellant?

First

The evidence discloses that the Blackley-G-ould Corporation borrowed from the finance corporation $3,872 and thereupon the Blackley-Gould Corporation, by its proper officers, executed the note and chattel mortgage in question and delivered the same to the Ottawa Public Finance Corporation. The evidence further discloses that four or five days prior to the execution of the mortgage, an officer of the finance corporation and an official of the First National Bank of Ottawa had a conversation regarding this note and mortgage and the bank agreed to act as trustee and fixed its fee at $3 for each instrument which named the bank as trustee where the bank was not expected to make collections but only to hold the documents and execute releases. A few days after the execution of the mortgage, the finance corporation delivered to the bank a copy thereof and out of the money loaned by the finance corporation to the Blackley-Gould Corporation, the finance corporation paid to the bank $9 for its services and the bank thereupon made records of the trust. As we understand counsel’s argument, it is that this chattel mortgage being at all times the property of the Ottawa Public Finance Corporation was fraudulent, inasmuch as it named as mortgagee the First National Bank of Ottawa, trustee. Appellant argues that the word “trustee” following the word “Ottawa” in the mortgage is merely descriptive and that a chattel mortgage cannot secure any other debt than the one described therein; that the instant chattel mortgage describes a debt to the First National Bank of Ottawa, while it is conceded that the mortgagor was not indebted to that bank but the indebtedness secured by said mortgage was due the finance corporation and it, the finance corporation was nowhere mentioned in any of the provisions of said chattel mortgage. In support of this contention the cases of Martin v. Sexton, 112 Ill. App. 199, and John Deere Plow Co. v. Hershbarger, 260 Ill. App. 227, are cited. We have examined those cases and both of them are referred to in the opinion of this court in Citizens State Bank v. Senesac, 267 Ill. App. 288, where we said: “In our opinion the consideration of a chattel mortgage may move from a person other than the mortgagee, a proposition which would appear to be indisputable under elementary principles of contract law. There is no principle of law nor any reason in fact which makes it illegal for a debtor to transfer his property to a third person to be held for the security of his creditor.” In the Senesac case it appeared that the mortgagor executed three notes to Fred H. La Rocque and named him as mortgagee. La Rocque had no personal interest in any of them and the same contention was there made as in the instant case, but this court sustained the mortgage saying: “In view of the authorities it would seem to be immaterial to whom the obligation ran, whether to Fred H. La Rocque or to those whom he represented, so long as there was an obligation of which no attempt is made to deny. It has been said that the essence of a chattel mortgage is the intention to transfer title to secure the performance of an obligation of the mortgagor. The transaction here in question was therefore a chattel mortgage. ... It was undertaken in good faith, admittedly complying with all statutory formalities of acknowledgment and recording*.”

In the instant case the mortgage was duly signed and acknowledged by the mortgagor and thereafter recorded. Delivery to the finance corporation, the cestui que trust, was a sufficient delivery to make it effective. Crocker v. Lowenthal, 83 Ill. 579. The mortgagee accepted the trust, and in our opinion it was not illegal or fraudulent for the mortgagor to convey his property to the bank as trustee for the benefit of the party which actually and in good faith loaned the mortgagor the money evidenced by the note which was correctly and accurately described in the mortgage.

Second

Appellant insists that as owner of the freehold he owns the property described in appellee’s chattel mortgage; that while his tenant purchased those trade fixtures, it installed them in appellant’s property in such a way that they cannot be removed without material injury to appellant’s building and that they are and were real and not personal property at the time the chattel mortgage was executed. Counsel for both parties concede that whether the several articles covered by appellee’s chattel mortgage became permanent fixtures depends upon the intention of appellant, the owner of the building and the intention of his tenant the Blackley-Gould Corporation at the time appellant leased the premises to the Blackley-Gould Corporation. The lease itself, made in 1930, is silent upon this subject, and it is therefore necessary to ascertain the intention of the parties thereto from their conduct in the light of all the surrounding facts and circumstances. Thuma v. Granada Hotel Corp., 269 Ill. App. 484.

The evidence discloses that the articles covered by the chattel mortgage constituted all of the machinery, appliances and equipment used by the Blackley-Gould Corporation in its business of dyeing and cleaning. These articles are usable only for that purpose and come within a class commonly known and designated as trade fixtures. Some of the articles of equipment were used by the Blackley-Gould Corporation in its business in 1923, when the real estate was purchased by Gaudi. The others were purchased and installed by the Blackley-Gould Corporation in the period of 1923-1930. In 1930, the Blackley-Gould Corporation removed the boiler in the plant and replaced it with a new one. Appellant never made any claim to it and no claim of any kind was ever made by Mm to any of the machinery and equipment until some 10 days after he had accepted a chattel mortgage upon the very articles which he now claims belong to him as a part of his freehold.

The evidence further discloses that appellant knew that the Blackley-Gould Corporation had mortgaged its equipment and appliances to appellee in 1932, and in October or November of 1933 he called at the office of appellee finance corporation to ascertain whether the Blackley-Gould Corporation was keeping up its payments on the mortgage. The fact that appellee had a chattel mortgage was discussed by him and his attorney in 1934 prior to or about the time appellant acquired his chattel mortgage. The fact that appellant remained silent during all of this period of time and asserted no claim to the articles of equipment in question tends to prove that it was not his intention to claim such articles as a part of his real estate. Furthermore, with full knowledge of the character of the machinery and equipment of the Blackley-Gould Corporation and the manner of its attachment, and that appellee had a chattel mortgage thereon, appellant procured from his tenant a chattel mortgage on January 30, 1934. This mortgage contained an identical description of the machinery and equipment as contained in the chattel mortgage theretofore given by the Blackley-Gould Corporation to appellees. This act tends at least to prove that as between the landlord Gaudi, appellant here and the tenant, the mortgagor, the intention was that the articles of machinery and ■equipment were personal property and not real estate. The fact that there was inserted in the mortgage the statement that some of the articles were “fixtures real” does not alter the effect of it. Which ones were “fixtures real” is not stated. If any of them were, they should not have been included in the mortgage. In their reply brief counsel for appellant state that the Hoffman Pressing Machine, the Pants Pressing Machine, the two Iron Pressing boards, the Spotting board, the Spray Gun for spotting board and compress unit, the two Patrick Steam Electric hand irons, the Rotary Rug Scrubbing Machine, the Atwood Vacuum cleaner, the Spotting Tub-Blower, the Electric Motor including automatic switch and the Extractor with electric motor can all be removed from the property without injury thereto. The lien of appellee’s mortgage, therefore, as to these articles, is valid. The evidence further discloses that all of this equipment is contained in a one- and two-story brick building. The one-story portion was built in 1924 or 1925. In 1930 the two-story addition was built expressly for the use of the Blackley-Gould Company. Both are brick and tile, the one-story structure being 34 by. 60 feet and the two-story structure is 25 by 60 feet and adjoins the one-story section. The two-story building was used for pressing and spotting and all the equipment can be removed through the doorways. Some of the articles are attached to the wooden floor of the upper story by screws and bolts. There are three rooms in the one-story part, the boiler room, dry cleaning room and rug cleaning room. The partitions are of hollow tile and were put in before the boiler was put in, but after the tanks had been placed. The boiler room was formerly used as a four-car garage, with large doors in the outside wall. Above the doors was a steel beam, 16 or 18 feet long, which supported the walls and roof above the door opening. The old boiler was removed through this door and the new boiler moved in and thereafter the opening was closed with a brick wall, the steel beam remaining.

Furthermore, in many cases it has been held that the giving and talcing of a chattel mortgage expresses an agreement and an intention of the parties that the property covered therein shall retain its character as personal property. In the case of Sword v. Low, 122 Ill. 487, the court says that it has been held: “that the execution and record of a chattel mortgage will, of itself, without any special agreement that the chattel shall retain its personal character, be sufficient to prevent the article from attaching as a permanent fixture.” In the case of Thuma v. Granada Hotel Corp., supra, it is stated that the trend of modern decisions is in favor of increased liberality in holding fixtures to be personalty. The case of Sword v. Low, supra, and many others were reviewed, and in the course of its opinion the court said: “Many authorities might be cited to the effect that the giving of a chattel mortgage expresses the agreement and intention of the parties thereto that the property covered therein shall retain its character as personalty. ’ ’

In the instant case the chattel mortgage executed by the Blackley-G-ould Corporation on January 30, 1934, and which was accepted by appellant was on a standard chattel mortgage form, referred to the property therein described as goods and chattels in numerous places, provided that it should be lawful for the mortgagor to redeem possession of the goods and chattels therein described, until it made default in paying the indebtedness which the mortgage was given to secure and gave appellant, as mortgagee, the right to enter the premises where the chattels were located and to remove said property therefrom. Certainly appellant, prior to accepting this chattel mortgage, never considered that his tenant had made a permanent accession to his property or he would not have accepted this chattel mortgage. If appellant, as his counsel insists, became the owner of these fixtures in 1930, why did he on January 30, 1934, accept, as mortgagee, a chattel mortgage upon property which he now insists that he himself then owned? In our opinion the acceptance of this chattel mortgage in 1934, containing the provisions it did, certainly manifested an intention that the property in controversy here should retain its character of personalty even though annexed to and used as a part of the realty.

In Baker v. McClurg, 198 Ill. 28, it appeared that the complainants leased to the defendants certain premises to be used as a bakery. Upon taking possession of the premises under their lease, the lessees erected three ovens, and also placed therein an engine, boiler, shafting, pulleys and wheels. Prior to the expiration of the lease, the defendants commenced to remove the ovens and fixtures, whereupon the owners of the building instituted proceedings to restrain them from so doing. In affirming the decree of the circuit court, which dissolved a temporary injunction and dismissed the bill, the Supreme Court adopted the opinion of the Appellate Court which stated that the rule in Illinois is liberal in favor of the tenant and that as between him and the landlord, removable trade fixtures may include all erections made for the purposes of trade during tenancy. The court cited Ewell on Fixtures at page 96, where it is said that if when a trade fixture was erected, the tenant, by his conduct, manifested the intention to retain ownership and remove it at the end of the lease, such intention should control even if such removal necessitates a reconstruction of the fixture. In answer to the contention that the building would be injured by their removal, the court said that the removal of one of the ovens would leave the original openings in the two floors and also in the cement floor of the basement “but these,” said the court, “were left when the building was erected, and if they should be filled in by the tenants to correspond with the rest of the building, as may be the latter’s duty in equitable compliance with their covenants, it is difficult to see wherein the freehold would be injured. It is also true, doubtless, that the brick structure of the ovens, when removed, would have to be taken down brick by brick; but this need not be injurious to the building or premises if the work should be properly done. ’ ’

In Moore v. Smith, 24 Ill. 513, it was held that distillery pipes and machinery are trade fixtures which may be removed by the tenant and in its opinion the court said the majority of cases hold that all erections made for the purposes of trade, during the tenancy, such as soap vats, fire engines to work a colliery, pans used in manufacturing salt, brewhouses, furnaces and coppers, greenhouses, hothouses erected by nurserymen and gardeners may all be removed by the tenant.

In the instant case all of these trade fixtures were purchased by the Blackley-Gould Corporation and placed in and affixed to appellant’s building, and from the evidence in this record we are satisfied that the tenant never intended to make a permanent accession to his landlord’s property. That the tenant considered that it was the owner of these trade fixtures is evidenced by the fact that it made two chattel mortgages thereon.

Counsel for appellant particularly call our attention to the case of Cross v. Weare Commission Co., 153 Ill. 499, and insist that the holding in that case supports their contention. That case was a contest between an execution creditor and a mortgage creditor and involved a steam grain elevator. The plant consisted of an elevator, cribs and office located upon leased ground, together with an engine, boiler, machinery and scales, all firmly affixed to the realty. The court held that the interest of the mortgagors in the elevator plant as a whole was a chattel real, and therefore a proper subject matter of a real estate mortgage; that notwithstanding the fact that a blank form of a chattel mortgage was used, the instrument which they executed was a valid real estate mortgage and the mortgage creditor was not estopped in that proceeding from asserting that the property mortgaged was not personal property. In its opinion the court said that it would construe the conveyance so as to give effect to the intention of the parties rather than defeat such an intention by. a strict technical construction of the form of conveyance adopted. We fail to find anything in that case not in harmony with the conclusion we have reached.

Counsel for appellant concede that the majority of these trade fixtures can be removed from appellant’s building without injury to the building and without injury to the articles themselves, but insist that the boiler and tanks cannot be removed without destroying a portion of the building. Upon this question the evidence does disclose that the old boiler was taken from the building through the opening which formerly constituted the doorway to the four-car garage. The present boiler was moved in the building through this same opening and the opening was then closed by brick but the supporting steel beam above the opening to support the walls above and the roof remained. The evidence is further that it may be necessary, in order to remove the boiler in its entirety, to take down the brick which were used to close the opening through which the boiler was taken into the building, but it clearly appears that this may be done without injury to the building or to any portion thereof, and appellant’s freehold will not be materially injured by so doing.

The decree herein amply protects appellant’s rights and freehold, it deprives him of nothing of which he is the owner, is equitable to all parties and should be affirmed.

Decree affirmed.


text:
    The Grundy County National Bank et al., Appellees, v. Frank Sanford et al., Appellants.
    Gen. No. 8,940.
    Opinion filed September 18, 1935.
    H. B. Smith, of Morris, for appellants.
    Frank W. Young and David F. Boot, both of Morris, for appellees.
   Mr. Justice Dove

delivered the opinion of the court.

On August 5, 1931, Frank Sanford and Emma P. Sanford, being indebted to the Grundy County National Bank of Morris, Illinois, in the sum of $20,000, executed and delivered to said bank their several notes aggregating that amount, and to secure the payment thereof executed and delivered to said bank their three trust deeds on lands located in Grundy, Cook and Iroquois counties. The makers having defaulted in making the payments as provided in said trust deeds, the bank, at the June term, 1932, of the circuit court of Grundy county, filed its bill to foreclose the three trust deeds. Service was had upon the defendants, who answered, and in due course a decree of foreclosure and sale was entered in said court on the 2nd day of July, 1932. The decree found the amount due complainant to be $20,503.34, together with a solicitor fee in the sum of $600 and decreed the payment thereof within 20 days, and upon failure so to do that the lands described in the several trust deeds be sold at public sale at the north door of the courthouse in Morris, Illinois, to satisfy the decree. The decree further provided that it should be executed by the master in chancery of Grundy county and directed “that he give public notice of the time and place of sale by previously publishing the same once a week for the space of three weeks in three newspapers of general circulation, printed and published in the English language. One of which newspapers is published in the County of Grundy, one of which newspapers is published in the County of Cook, and one of which newspapers is published in the County of Iroquois.”

In pursuance of this decree, the master advertised this sale in the National Corporation Reporter of Chicago, in Cook county and in the Morris Daily Herald published in Morris, Grundy county, Illinois. These notices described all the lands described in the decree and stated that the sale would be held at 10 o’clock a. m. on Thursday, the 1st day of September, 1932, at the north door of the courthouse at Morris. The master also advertised a sale in the Watseka Republican published in Iroquois county. This notice stated that the sale would be held at the hour of 10 o’clock a. m. on Saturday the third day of September, A. D. 1932. On September 1, 1932, at 10 o ’clock a. m. at the north door of the courthouse in Morris, the master sold the premises to the complainant bank for $19,400, leaving a deficiency of $2,287.63, and thereafter on September 2, 1932, filed his report of sale reciting these facts. On September 7, 1932, an order was entered by the circuit court of Grundy county ruling all parties to file' objections, if any, to the master’s report of sale by Saturday, September 10, 1932, at 10 o’clock a. m. On September 12,1932, no objections being filed, the court entered an order approving and confirming the sale, and the report of thé master, and rendered a deficiency judgment against the mortgagors for $2,287.63. On October 4,1932, the master’s report of distribution was filed and a rule entered at that time requiring the filing of objections thereto by October 8, 1932, and no objections being filed, the report of distribution was approved that day. The usual certificate was issued and delivered to the purchaser and a copy duly filed for record as provided by law. Nothing further was done or occurred ifi the case until August 31, 1933, the last day on which the property could be redeemed by the mortgagors, and on that date they filed their petition in the circuit court of Grundy county, setting forth the facts as above stated, with reference to the provisions of the decree, the time, place and publication of notices of sale, pointing ouf in their petition that the advertisement of the sale in The Watseka Republican in Iroquois county gave the date for the sale as September 3, 1932, and praying that the order confirming the master’s report of distribution and confirming the sale and report thereof be vacated and set aside and the purported sale be declared null and void. Subsequently an amendment to the petition was filed, alleging that the sale price was wholly inadequate.

Following the filing of this petition, a motion was entered by the Grundy County National Bank to strike the petition from the files, and upon the hearing of this motion it was stipulated that the mortgagors were personally present at the time and place-of sale on September 1, 1932, and that at the time of the sale and subsequent thereto, and until the date of the filing of the original petition they had no knowledge of the fact that the sale had been advertised in the Iroquois county paper for the third day of September, 1932.

Oh February 19, 1935, an order was entered finding that the court was without jurisdiction to modify its former order confirming said sale and granted the motion of the bank to strike the petition as amended from the files, denied the prayer of said petition as amended and again approved the sale. From this order the record is brought to this court for review by appeal.

It is the contention of appellants that the sale, not having been advertised as provided by the decree ordering the sale, was, as to them, fraudulent and void. Appellees insist that the sale was not void, but voidable only, and as the order approving the master’s report of sale was a final order and the term at which it was entered having elapsed and no appeal having-been taken therefrom, appellants are concluded thereby.

It appeared in Hall v. Towne, 45 Ill. 493, and in Thornton v. Boyden, 31 Ill. 200, that a sale was had under a power of sale given in a mortgage which provided for a sale upon 30 days’ notice. Less than 30 days’ notice was given and the court held each sale a nullity. Counsel for appellee seek to distinguish these cases from the instant case by calling- our attention to the fact that the right to sell in the Hall and Thornton cases, supra, was founded upon a contract of the parties and that the ¡mortgagors had never had their days in court and were therefore entitled to a strict performance of the contract while in the instant case the mortgagors have had their day in court, and the sale here sought to be invalidated was a judicial sale, which was subsequently confirmed at a term of court which had expired before the noncompliance with the provisions of the decree by the master was brought to the attention of the chancellor. It is true that in the instant case the sale was a judicial sale and the power of the master to sell the mortgaged property was governed by the provisions of the decree of foreclosure and sale. This decree ordered the master to give three weeks ’ notice of the sale and to publish this notice in three newspapers, one of which was to be published in Iroquois county. This decree was the charter of the master’s power and before he could make the sale it was necessary for him to advertise the premises as provided by the decree as appellants were entitled to have their property sold according to the terms and conditions of that decree. This was not done and the sale, in our opinion, was therefore void.

A master in chancery can only perform such duties as are provided by statute or directed by the court in its orders and decrees. In the instant case the decree specifically provided that before the sale the master should give public notice of the time and place thereof in a newspaper of general circulation published in Iroquois county. The advertisement in the Iroquois county paper was not in compliance with the provisions of the decree. It is true that the master advertised a sale in a newspaper published in Iroquois county, but the sale he advertised never took place and the sale that did take place was never advertised in a newspaper published in Iroquois county.

In Hall v. American Bankers Ins. Co., 315 Ill. 252, section 28 of the statute on judgments and decrees, as amended in 1917, requiring redemption to be before the sale in foreclosure proceedings, was held to be valid and in the course of its opinion the court said: “While section 28 does not describe the time, manner or method of making the sale, the authority of the Master to sell is derived from the decree, alone, and not from statute, and it has long been the settled law of this State that sales under decrees for foreclosure can only be made at public vendue after the giving of such public notice as is fixed by the court in its decree.” In Sowards v. Pritchett, 37 Ill. 517, it was stated that the object of giving such notice is that persons desiring to purchase may learn the time and place of sale. The master did not give the notice required by this decree. In Quick v. Collins, 197 Ill. 391, the court said: “In ordering the sale, the court exercised its judicial discretion as to the time and manner in which notice of the sale should be given and the master had no discretion but was bound to execute the decree as made. It was essential to the validity of the sale that the notice should be given as directed and the court is not authorized to approve a sale where the master has not given the notice required by the decree.”

The master incorrectly reported to the court that he had duly advertised the property according to the decree. The court, relying upon such incorrect report, thereafter approved the sale, and the term of court at which this was done adjourned. Notwithstanding that fact, the sale being void for failure of the master to comply with the directions of the court decreeing the sale, the order approving it was a nullity.

The order and decree appealed from is reversed and this cause is remanded to the circuit court of Grundy county with directions to enter an order vacating the order approving and confirming the sale held on September 1, 1932, and directing the master to proceed to execute the original decree of foreclosure and sale as therein provided.

Reversed and remanded with directions.


text:
    Oscar E. Landstrom, Appellee, v. Armer E. Johnson et al., Appellants.
    Gen. No. 8,977.

      Opinion filed September 18, 1935.
    George B. McKibbiu and Walter E. Beebe, both of Chicago,' and Karl C. Williams, of Rockford, for appellants.
    Welsh & Welsh, of Rockford, for appellee.
   Mr. Justice Dove

delivered the opinion of the court.

On January 5, 1935, the plaintiff below, appellee in this court, filed his complaint, making Armer E. Johnson, Benjamin F. Frick, Jr., R. R. Claybaugh, Luther E. Todd, Earl M. Johnston, E. L. Roy, Consolidated Industries Corporation, Free Sewing Machine Company and Landstrom Furniture Corporation defendants. The relief sought was to have the individual defendants, other than Armer E. Johnson, declared to have been wrongfully and unlawfully elected as directors of the Consolidated Industries Corporation and removed as such directors, that they be also removed as voting trustees of the first preferred stock of the Consolidated Industries Corporation and that successors to them as such voting trustees be designated by the court, and that all the individual defendants be temporarily restrained from removing, discharging or voting against the continuance in office of the plaintiff as a director of the said Industries Corporation and as a director and president of the Landstrom Furniture Corporation, and that they, the said individual defendants^ as directors of said Industries Corporation, be restrained from calling a meeting of the stockholders of the Landstrom Furniture Corporation and from interfering with plaintiff’s conduct of said offices of such director and such president of said Furniture Corporation. A preliminary injunction as prayed was issued on the day the bill was filed. Thereafter a motion to dissolve the preliminary injunction was heard and denied and thereupon the several individual and corporate defendants answered the complaint and again moved for a dissolution of the temporary injunction. This motion was referred to the master in chancery, who took the proofs and on May 23, 1935, submitted to the court his amended report recommending that the motion to dissolve the temporary injunction be denied. On June 5, 1935, the chancellor entered an interlocutory decree approving the master’s report, overruling defendant’s motion to dissolve said temporary injunction and continuing the said injunction pending the final hearing of the cause. From this interlocutory decree this appeal has been prosecuted.

The pleadings and proof disclose that in 1927, Consolidated Industries, Inc., an Illinois corporation, was organized and took over all of the assets of the then existing Haddorff Piano Company, the Free Sewing Machine Company, the Eockford Cabinet Company and the Landstrom Furniture Company. In order to finance this merger and consolidation, Consolidated Industries, Inc. executed a trust deed upon the properties acquired by such consolidation, to secure the payment of a bond issue of $1,500,000 executed to the Mississippi Valley Trust Company, as trustee. Thereafter the business of the Consolidated Industries, Inc. was conducted in three divisions, the piano business in the name of Haddorff Piano Company, the sewing machine business in the name of the Free Sewing Machine Company and the furniture business in the name of Landstrom Furniture Company. The plaintiff Landstrom and the defendant Armer E. Johnson are residents of Eockford and had been friends, business associates and stockholders in these several companies for years and each was instrumental in effecting the consolidation and merger of these concerns and it was mutually agreed at the time of the consolidation that Johnson should have the management of the sewing machine and piano divisions and the plaintiff Landstrom should continue in the management of the furniture division of Consolidated Industries, Inc. At this time Landstrom, the plaintiff, became president of Consolidated Industries, Inc. and Armer E. Johnson became vice president and treasurer, and L. I. Johnson, a brother of Armer E. Johnson, was made secretary thereof. Thereafter financial difficulties arose and on December 15, 1931, Consolidated Industries, Inc. defaulted in making the payments then due upon its outstanding bonds and continued in default through the year 1932. In the spring of 1933 foreclosure proceedings were instituted in the United States District Court of the Northern District of Illinois. Appellee, together with appellant, Armer E. Johnson and others interested, including a bondholders’ protective committee formulated a plan for reorganization, and as one of the steps in this reorganization plan, a new corporation known as Consolidated Industries Corporation was incorporated under the laws of the State of Delaware in August, 1933, with authority to conduct any line of manufacturing business and to act as á holding company. It was licensed to do business in Illinois and its principal, place of business is Rockford. The Landstrom Furniture Corporation and the Free Sewing Machine Company were also organized and each incorporated about the same time under the laws of Illinois and all the stock of both of these last corporations was subscribed for by the Delaware Corporation and it is now the holder and owner of all the capital stock of these subsidiaries. Thereafter a decree of foreclosure and sale was rendered by the United States District Court and in order to carry out the reorganization plan, Consolidated Industries Corporation acquired the title to the real estate and plants formerly owned by Consolidated Industries, Inc. and it, the said Consolidated Industries Corporation, thereafter executed a trust deed covering such real estate and plants to secure the payment of bonds in the sum of $663,250, and it was these bonds and the first preferred stock of said Consolidated Industries Corporation which were used to satisfy and discharge the said decree of foreclosure. Pursuant to its charter, Consolidated Industries Corporation issued 104,910 shares of first preferred stock, 389,354 shares of second preferred and 13,955 shares of common stock. Appellee is the owner of 103,145 shares of the second preferred stock and 5,732 shares of the common stock. The entire voting power of this corporation until payment of the bond issue amounting to $663,250 and until the retirement- of the first preferred stock is vested in the holders of the first preferred stock, and all of this stock was held under a voting trust agreement, which was entered into on October 24, 1933. By the provisions of this voting stock agreement, appellee and the said individual appellants herein became vested with the exclusive power and authority to vote all the preferred stock of Consolidated Industries Corporation. This agreement, to which appellee was a party, authorized a majority of these seven gentlemen to vote all of this stock and at the initial meeting held in 1933, these seven gentlemen, by virtue of this trust agreement, elected themselves directors of Consolidated Industries Corporation, who in turn elected appellant Frick president of this corporation. On the same day they elected the first board of directors of the Landstrom Furniture Corporation, consisting of appellee and four other gentlemen. Appellee was chosen president of the board and he and two other gentlemen were designated to constitute the executive committee. 'At a meeting on January 16, 1934, one of the members of the executive committee resigned and Wm. R. Blacldock was elected to fill the vacancy. Blacklock was not a director, but at the time of his election appellee was present and participated and the record of the meeting does not show that he in any way protested. Dissensions among the parties arose- and in the fall of 1934, appellant Frick, the president of Consolidated Industries Corporation, wrote appellee that in order to save him, appellee, from future embarrassment, he, Frick, was giving appellee one more opportunity to tender his resignation effective immediately. Appellee did not comply with this request, but instituted this suit.

The proof further disclosed that on June 23,1933, an agreement was entered into, referred to in the record herein, as the “standstill agreement.” This instrument was executed by Consolidated. Industries, Inc., by appellee, its then president, The Bondholders’ Protective Committee and the Mississippi Valley Trust Company, as trustee. It recited the fact that the foreclosure suit was pending and that the parties thereto desired to work out a plan of reorganization. This agreement then provided for the creation of the corporate appellants herein, Consolidated Industries Corporation and its subsidiaries and it outlined the plan of reorganization. It provided for the transfer of the property to the new corporation, designated the several classes of stock the new corporation would have and specified that the first preferred stock was to have the entire voting power and was to be placed in a voting trust. It further provided that the stock of the Furniture Company and the Sewing Machine Company would be wholly owned by the parent company, Consolidated Industries Corporation and the officers of the subsidiaries would be elected by the new corporation and that appellee would, at the outset, be made president of the new Furniture Company and he would hold office during the pleasure of the new corporation. So far as the record discloses, every step taken by the voting trustees and directors of Consolidated Industries Corporation was in pursuance of the terms and provisions of this agreement.

Upon the presentation of the complaint to the chancellor, a temporary injunction issued. This complaint alleged that there were only five voting trustees and did not aver that appellee was one of the five. The complaint also failed to make any reference to the so-called “standstill” agreement. Appellants in their answer denied that there were only five voting trustees, alleged that there were seven, naming them, and averring that appellee was one of the seven. The answer also set forth the “standstill” agreement to which appellee was a party. The question, therefore, which is now presented for our determination is not the same as was presented to the chancellor when the preliminary injunction was granted.

By this proceeding, appellee seeks to recover a decree finding that his associate directors and his associate voting trustees were wrongfully and unlawfully elected and for an order removing them as such directors and such trustees. From the facts as they appear in this record, this relief cannot be granted inasmuch as the individual defendants whom appellee seeks to remove were designated as voting trustees by the same instrument which named appellee and to which he and they each assented. And those whom he now seeks to remove as directors were elected directors at the same time appellee was elected, and he, appellee, participated in such election and voted for them as well as himself. The only other relief appellee seeks is an injunction restraining his associates from calling a stockholders’ meeting of the Furniture Corporation and restraining his associates from removing him as a director and president of that company. Appellee concedes that the stock of the Furniture Corporation is rightfully held by Consolidated Industries Corporation, and he claims no contract which gives him any vested title either to the office of director or president of the Furniture Corporation. His contention, however, is that his associates, as voting trustees, elected themselves to the office of directors and as directors they are fiduciaries and hence bound to act in the strictest good faith in caring for and managing the property of the corporations of which they are directors. He then insists that his associates violated such fiduciary obligations by interfering with him as president of the Furniture Corporation, and by unlawfully substituting a wholly inefficient management for an efficient one.

In support of this contention, counsel state that the furniture division of Consolidated Industries Corporation was developed and built up by appellee, that prior to the depression he had been very successful and his company occupied an enviable position in the furniture world, that his name was connected with it and naturally he was very much interested and deeply concerned in the problem of saving and rehabilitating it, that although all the capital stock of the furniture company is owned by Consolidated Industries Corporation, he, appellee, as a minority owner of second preferred and common stock, does have an indirect interest therein and unless his interest is such as appeals to a court of equity, he is powerless to prevent the business being wrecked by an inexperienced and by an inefficient management. As evidence of what his associates propose to do, appellee insists that Blackloclc, after his election by the directors as comptroller of Consolidated Industries Corporation, was sent by them to Rockford to check the subsidiary companies and to keep the directors informed concerning the financial situation of the Landstrom Furniture Corporation and the Free Sewing Machine Company; that he, Blacklock, thereafter began to assume and take over the management of the Furniture Corporation, and that to do so was a part of the scheme and method of the defendants to take the management of this corporation ont of the hands of appellee and place it in the hands of someone else.

In this connection, however, it should be borne in mind that the entire voting power and all powers of direction and management of the Consolidated Industries Corporation, which included the power to elect directors of the Landstrom Furniture Corporation, were vested in the majority of the directors of the Consolidated Industries Corporation. All the stock held by appellee is nonvoting stock and while he may now be in a position where he is utterly helpless so far as any voting power is concerned, still he was a party to the voting trust agreement as well as a party to the so-called ‘ ‘ standstill ’ ’ agreement and went along with his associates in the reorganization plan and participated in every act of the voting trustees. From the facts as they now appear in this record, he must be held to be estopped to complain of anything for which he voted as such trustee and is likewise bound by the terms and provisions of the standstill agreement and is estopped to question any of its legal provisions. His counsel concede this to be true.

We do not find in the record any evidence to substantiate counsel’s statement that'appellee’s associates have in any way violated their fiduciary obligations as directors or that they have illegally interfered with. the business or management of the Furniture Corporation. The board of directors of the Furniture Corporation elected its officers and were given the power by its by-laws to designate an executive committee and the appointment of Blaeklock as a member thereof was approved by appellee. If the officers of this corporation did not efficiently perform their respective duties, the directors, of which appellee was one, were chargeable therewith,

Counsel for appellee cite Moroney v. Allman, 271 Ill. App. 336, and call our attention to that portion of the opinion which quotes from 22 Cyc. 751, where it is said: “It is not sufficient ground for refusing a preliminary injunction that it is not absolutely certain that complainant has the right that he claims or that the injury feared will occur; and even though complainant’s right to permanent relief is doubtful, it may be proper to maintain the status quo pending the determination of his right, the issuance of a temporary injunction in such cases depending chiefly upon the relative inconvenience to be caused the parties.” There are many instances where the status quo should be maintained pending a final determination of the issues involved in a given proceeding, but in the instant case the record discloses that appellee participated in all the reorganization proceedings, participated in all corporate matters of the Furniture Corporation and Consolidated Industries, voted for all officers of both corporations and has shown no right now to prevent or postpone the election of directors of the Furniture Company by the directors of Consolidated Industries Corporation.

The responsibility for the management of all the corporations involved herein is in their several boards of directors and it is fundamental that courts of equity in the absence of fraud will not seek to control the internal affairs of any corporation at the instance of a minority stockholder, and whether appellee can or cannot operate the Furniture Corporation profitably, cannot, under the facts as disclosed by this record, be a concern of a court of equity.

The order of the circuit court denying appellants’ motion to dissolve the temporary injunction is reversed and this cause is remanded to the circuit court of Winnebago county with directions to dissolve the temporary injunction.

Reversed and remanded with directions.


author: Mr. Presiding Justice Wolfe

text:
    Kaethe Willgeroth, Administratrix of the Estate of Alfred O. Willgeroth, Deceased, Appellee, v. Susie W. Maddox, Administratrix of the Estate of William A. Maddox, Deceased, Appellant.
    Gen. No. 8,958.
    Opinion filed July 30, 1935.
    Rehearing denied September 30, 1935.
    William D. Knight, of Rockford, and Hogan & Simon, of Chicago, for appellant.
    Hall & Lusher, of Rockford, for appellee.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

This case arises out of an action brought in the circuit court of Winnebago county by Kaethe Willgeroth, administratrix of the estate of her deceased husband Alfred 0. Willgeroth, against Susie W. Maddox, as administratrix of the estate of her deceased husband, William A. Maddox. The complaint alleged that on August 10, 1933, William A. Maddox was driving his automobile and Alfred 0. Willgeroth was riding with him as a passenger; that Maddox was driving said automobile on State Route No. 70, known as the Meridian Highway; that said highway runs north and south, and about one mile east of Davis Junction crosses the railroad track of the Chicago, Milwaukee, St. Paul & Pacific Railroad Company; that the automobile was being driven in a southerly direction; that as the car was approaching the crossing, Maddox then and there wilfully, wantonly and recklessly ran, managed, operated, and drove said automobile, and that on account of said wilful, wanton and reckless conduct of defendant’s intestate, said automobile was caused to and did collide with a railroad train on said railroad track at said crossing and the plaintiff’s intestate, Alfred 0. Willgeroth, then and there received injuries from which he thereafter died. The complaint also sets forth the heirship of Alfred 0. Willgeroth.

To this bill of complaint the defendant filed an answer admitting part of the allegations of the petition, but denying that William A. Maddox was guilty of wilful and wanton conduct in the management and operation of the automobile just prior to and at the time of the collision which caused the death of the plaintiff’s intestate. The case was tried before a jury which rendered a verdict in favor of the plaintiff and against the defendant in the sum of $5,000. The defendant entered a motion for a judgment notwithstanding the verdict, which was overruled. After a motion for a new trial was entered and overruled, the defendant was then granted leave to file an amendment to her answer which charges, “That the plaintiff’s intestate, Willgeroth, then and there, was guilty of wilful and wanton conduct, and that said wilful and wanton conduct contributed as the proximate cause to his own injury and death, without which the accident would not have occurred"; and (b) also charged “that plaintiff’s intestate, Willgeroth, before and at the time of the accident in question, had the same opportunity to observe the oncoming train which defendant’s intestate, Maddox, had, and that plaintiff’s intestate, Willgeroth, was guilty of the same degree of wilful and wanton conduct of which defendant’s intestate, Maddox, was guilty, if any, which wilful and wanton conduct on the part of plaintiff’s intestate, Willgeroth, contributed as the proximate cause of-his own injury and death, and without which it would not have occurred"; and (c) also charged “that plaintiff’s intestate, Willgeroth, had equal opportunity to observe the approach of the railroad train with the opportunity which defendant’s intestate, Maddox, had,, and that nevertheless in wilful, wanton and reckless disregard of his duty in that behalf, and with utter disregard of consequences, the plaintiff’s intestate, Willgeroth, wilfully, wantonly and with wilful, wanton and reckless disregard of his duty in that behalf, and with a willingness to accept the chance of injury to himself, wilfully, wantonly and with reckless disregard either failed to observe the coming of said train, or having observed the coming of said train, and knowing of its approach, and with a conscious willingness to incur injury to himself failed to do anything to protect himself and failed to do anything to warn the said Maddox of the approach of said train, and the said Willgeroth wilfully and wantonly, and with reckless disregard of his own safety, left a place of safety, and rode in front of said approaching train, and was struck by said train, which wilful, wanton and reckless conduct of the said Willgeroth, contributed as the proximate cause of his own injury and death, and without which it would not have occurred. ’ ’

To this amended answer the plaintiff filed a replication denying that the plaintiff’s intestate was guilty of any wilful, wanton and reckless conduct which was the proximate cause of his injuries.

The first point urged by the appellant for a reversal of the judgment is that the plaintiff failed to prove that she was the widow and next of kin of the plaintiff’s intestate. There may be, and probably is, some merit in this contention but as the case will have to be reversed and remanded for other reasons, we do not decide this point in this appeal.

There is very little, if any, dispute in regard to the evidence in this case. The main witness for the plaintiff, Mr. Boss C. Wheat of Bensenville, Illinois, a locomotive engineer employed by the C. M. St. P. & Pac. Bailway Company, testified that he was in charge of the engine on August 10, 1933, at the time of the accident in question; that he was driving the engine at approximately 50 miles per hour; that the bell was ringing and that he blew the whistle as he approached the crossing where the accident occurred; that he first observed the automobile coming in a southerly direction about 700 feet north of the intersection of the highway with the railroad track; that in his opinion the automobile was traveling approximately at a rate of 60 miles per hour; that the driver of the automobile was looking straight ahead until he approached within two or three hundred feet of the crossing when he turned his head to the west; also, that the man who was riding with him did the same thing; that within a few seconds they faced ahead again and kept coming on at the same rate of speed until they got within 75 or 100 feet of the track, when the automobile slowed down and the driver just as he got in front of the engine looked at the engine and that was the last that he, the engineer, saw of the automobile until the engine struck it; that when the driver and the passenger in the automobile first looked at the engine they were perhaps 15 feet from the crossing and the engine was about the same distance away.

Other witnesses testified relative to the speed at which the automobile was being driven and that neither of the deceased parties in the automobile appeared to have any knowledge of the approach of the freight train. The fireman on the engine testified that because the automobile was struck on the front of the engine another engine was procured from the station a short distance west of the scene of the accident and that they had that engine come up and pull the automobile loose from the engine which struck the automobile. This witness also testified that the engine that came to pull the automobile from the other engine was being used for switching purposes near the station at the time of the accident.

The jury by their verdict evidently thought that Maddox at the time he was driving the automobile in question was guilty of wilful and wanton conduct which caused the injuries to the plaintiff’s intestate. The appellant seriously contends that the evidence does not justify such a finding, and if it does, that the plaintiff’s intestate is guilty of the same wanton and wilful conduct as Maddox, and therefore, the plaintiff is barred from a recovery.

It is hard to distinguish between negligence and wanton and wilful conduct. In the case of Lake Shore & M. S. Ry. Co. v. Bodemer, 139 Ill. 596, the Supreme Court in discussing this matter use the following language : “What degree of negligence the law considers equivalent to a wilful or wanton act is as hard to define as negligence itself, and in the nature of things, is so dependent upon the particular circumstances of each case as not to be susceptible of general statement. ’ ’ In Illinois Cent. R. Co. v. Godfrey, 71 Ill. 500, we said that where a trespasser is injured, the railroad company is liable for “such gross negligence as evidences wilfulness. ’ ’ We said the same thing in Blanchard v. Lake Shore & M. S. Ry. Co., 126 Ill. 416. What is meant by “such gross negligence as evidences wilfulness?” It is “such a gross want of care and regard for the rights of others as to justify the presumption of wilfulness or wantonness.” “It is such gross negligence as to imply a disregard of consequences, or a willingness to inflict injury.” In Harlem v. St. Louis, Kansas City & N. Ry. Co., 65 Mo. 22, it was said: “When it is said, in cases where plaintiff has been guilty of contributory negligence, that the company is liable, if by the exercise of ordinary care it could have prevented the accident, it is to be understood that it will be so liable if, by the exercise of reasonable care, after a discovery by defendant of the danger in which the injured party stood, the accident could have been prevented, or if the company failed to discover the danger through the recklessness or carelessness of its employees, when the exercise of ordinary care would have discovered the danger and averted the calamity. ’ ’

The evidence in this case shows that William A. Maddox and Alfred 0. WiUgeroth had been friends, and for several years were employed at the same place; that they had been together frequently, that as they were riding they evidently were attracted by the freight train which was switching west of the road on which they were traveling, that they were both looking in the same direction toward this engine; that neither of them gave any indication whatsoever that they were aware of the approach of the freight train which caused their deaths. That each of these parties was guilty of the grossest negligence in not discovering the approaching freight train is beyond question. From the evidence in this case we are of the opinion that Maddox and WiUgeroth were guilty of negligence or wilful and wanton conduct to the same degree, as they both had equal opportunity to observe the approaching train. It is further our opinion that the plaintiff has failed to prove that defendant’s intestate was guilty of wilful and wanton misconduct that was the proximate cause of plaintiff’s intestate’s injury that caused his death.

Assuming that both Maddox and Willgeroth were guilty of wilful and wanton conduct in not discovering the approach of the freight train, the question then arises whether that is a defense to the action of the plaintiff in this suit. It is conceded that contributory negligence is not a defense to an action for the personal injuries, when it is charged that the acts were done wilfully and wantonly. The Supreme Court of Michigan in the case of Redson v. Michigan Cent. R. Co., 120 Mich. 671, 79 N. W. 939, had occasion to pass on this question, and in their opinion say: “Plaintiff saw this train coming. He was just in the act of hitching onto a log. Instead of immediately removing his horses, which, it is evident, he had then ample time to do, and taking them out of danger, he ordered the log-rolled up onto the car, and, before he could then get his horses removed, both the horses and his partner, Wentworth, in charge of them, were killed. Had injury resulted to the train, or to the trainmen, it might just as well have been charged that he (the plaintiff) was guilty of intentional wrong, as to charge that the engineer was guilty of it. It would then be gross negligence against gross negligence, wilful misconduct against wilful misconduct, and intent against intent; and in such case the law leaves both parties where they have placed themselves, and gives recovery to neither. ’ ’

In the case of Hinkle v. Minneapolis, A. & C. R. Co., 162 Minn. 112, 202 N. W. 340, the Supreme Court of the State of Minnesota defines what is wilful and wanton conduct, and defenses to such actions and in their opinion say this: “Wilful and wanton negligence is reckless disregard of the safety of the person or property of another by failing, after discovering the peril, to exercise ordinary care to prevent the impending injury. One is liable for negligence only when such negligence is the proximate cause of the injury. When a defendant is charged with ordinary negligence, contributory negligence is a good defense. Why? The answer is founded in proximate cause. In the absence of the doctrine of comparative negligence they are equally to blame. When two persons are equally at fault in producing the injury, the law leaves them where it finds them. Contributory negligence is not a defense to wanton and wilful negligence, for the very simple reason that the parties are not equally delinquent in the violation of duty. In such case the negligence of the defendant is the proximate cause of plaintiff’s injury while his negligence is no more than a remote cause.

“The theory of these variations of negligence leads to but one logical conclusion, and that is that the same basic reason which causes contributory negligence to prevent a recovery in an action sounding in ordinary negligence also prevents a recovery by one who is guilty of wilful and wanton negligence. Such negligence is just as efficient to offset the defendant’s negligence of the same character as contributory negligence offsets ordinary negligence. There can be no more comparative wantonness than there can be comparative negligence. When both parties are guilty of such negligence neither can be selected as that which is the proximate cause, and hence the law must leave both where it finds them. The conclusion is inevitable, even though its application be fraught with difficulties. ’ ’

The case of Osteen v. Atlantic Coast Line R. Co., 119 S. C. 438, 112 S. E. 352, holds that “contributory negligence on the part of the plaintiff is a defense to negligence on the part of a defendant, and contributory wilfulness, wantonness, or recklessness on the part of the plaintiff is a defense to wilfulness, wantonness or recklessness on the part of the defendant. ’ ’

In the case of Spillers v. Griffin, 109 S. C. 78, 95 S. E. 133, the Supreme Court of South Carolina uses this language: “Again, contributory negligence is not a defense tb wilfulness, because the parties are not equally to blame. Apply that same rule here, and we find that when a plaintiff wilfully contributes, as the proximate cause to his own injury, he cannot recover, even though the defendant was wilful. If the parties were equally, in the same class, to blame in producing the injury, neither can recover.”

It is our opinion that where the plaintiff charges the defendant with wilful and wanton misconduct as being the proximate cause of injury to him, and the defense charges that the plaintiff was also guilty of wilful and wanton misconduct which was the proximate cause of the injury, then the same is a good defense, and bars the action if proven.

The judgment of the circuit court of Winnebago county is hereby reversed and the cause remanded.

Judgment reversed and remanded.


author: Mr. Presiding Justice Edwards

text:
    Elizabeth T. Smith, Administratrix of the Estate of John Smith, Deceased, Appellee, v. The Fidelity Trust Company (Now Realty Agency Corporation), Appellant.

      Opinion filed September 16, 1935.
    Farmer, IClingel & Baltz, of Belleville, for appellant.
    L. P. Zerweck, of Belleville, and W. J. Chapman, of Alton, for appellee; Maynard H. Motz, of Edwards-ville, and I. W. Gtberson, of counsel.
   Mr. Presiding Justice Edwards

delivered the opinion of the court.

On July 30,1930, appellee filed her bill against appellant, The Fidelity Trust Company, and one Berthold Heymann, for an accounting of funds claimed to have been intrusted to them by appellee for the purpose of investment.

On October 9, 1930, the defendants filed their joint answer, in which they averred: “These defendants admit that the complainant came to the Fidelity Trust Company and to Berthold Heymann, who was and is an officer of said Trust Company, and has immediate charge of the trust affairs of thé Fidelity Trust Company, and further admit that the complainant did request the said Trust Company, through its officer and manager, the defendant Heymann, to make investments for her in the way of purchasing stock, bonds and other like securities, and to be prepared to advance her from time to time small sums of money which she might need.”

The answer further set forth that the appellant, The Fidelity Trust Company, undertook to and did invest the funds of appellee as she desired, and later had a full and complete accounting and settlement with her. Replication being1 filed, the cause was referred to the master on October 17,1930.

Thereafter, at divers times, testimony was offered by both parties before the master, who, on June 19, 1933, rendered Ms report in favor of appellee. On the same day the appellant, now represented by different counsel, entered its motion to withdraw the answer above referred to and for leave to file a further answer in the cause, alleging that said first answer inadvertently contained the clause before set out, and that it did not know said clause was contained therein and never consented thereto; also, that it never had possession or custody of any funds of appellee and never handled same; furthermore, that it was not organized, nor in existence, at the time she placed certain funds for investment purposes in the hands of said Heymann. The motion was overruled, whereupon appellant asked leave to reopen the case to take further testimony; which motion was allowed and additional evidence was offered by said trust company.

On June 11, 1934, the master filed his supplemental report, adopting the findings and conclusions of his original account, the principal feature of wMch was that appellant trust company, by the said admission in its answer, was precluded from disputing its liability to account to appellee. After overruling exceptions to such report, the court entered its decree against both The Fidelity Trust Company and Heymann, from which the former has appealed.

The chief contentions are that the proof shows that appellant was not connected with the transactions between appellee and Heymann, and that the court erred in overruling'appellant’s motion to withdraw the answer and for leave to file another.

Appellant asserts that by the Civil Practice Act, Item 3, section 46, Ill. State Bar Stats. 1935, ch. 110, ¶ 174, the right to amend pleadings is absolute, subject to the discretion of the court as to costs and a continuance, and that the court’s refusal to sustain its said motion was an arbitrary denial of its statutory right.

The proceeding was instituted in 1930, and the motion filed and denied on June 19,1933. This was before the Civil Practice Act became effective. Bule One adopted by the Supreme Court, in aid of and to supplement such act, provides that all proceedings instituted prior to January 1, 1934, except certain enumerated exceptions, which do not include the pending cause, shall not be governed by the Civil Practice Act. The settlement of the pleadings was obviously governed by the course of practice in force prior to said last mentioned date, and the Civil Practice Act had no relation to or control thereof.

Under such former system the grant or refusal of leave to withdraw an answer and file another in its stead, was a matter resting in the sound discretion of the chancellor, to be exercised in furtherance of justice. Drew v. Drew, 271 Ill. 239; Jones v. J enkinson, 316 Ill. 264. Whether or not the court rightly exercised its discretion in denying the motion is the controlling question in the case, and must be tested by rules of law which govern in such situations.

It is elementary that appellant, in order to avail itself of the grounds stated in its motion, must have pressed same upon the court as soon as it became aware of their existence, or within a reasonable time thereafter, or it will be held to have waived the right.

As previously observed, the answer was filed on October 9, 1930, and it is not disputed that same was drafted by a regularly employed and authorized solicitor. It remained on file, without objection or protest of appellant, until June 19, 1933, a period of nearly three years, during which time appellant, by its officers, appeared at the several hearings and gave testimony relative to the issue made by the pleadings. The solicitor who filed the answer had authority so to do, but appellant claims that its officers informed him that it had no connection with the business affairs of appellee, and that the admission which he made in the answer, as to such matter, was wrongfully and inadvertently inserted therein, without its knowledge or consent.

The law charges parties to a suit with notice of the contents of pleadings filed in their behalf, and presumes that they knew and understood same. Linn v. Clark, 295 Ill. 22; Ranken v. Probey, 120 N. Y. S. 413; Coward v. Clanton, 79 Cal. 23, 21 Pac. 359. They have a right, however, to show that, as a matter of fact, the particular pleading was not authorized by them.

In Ring v. Vogel Paint & Glass Co., 46 Mo. App. 374, it was held that there is a strong legal presumption that all acts of an attorney in the progress of a suit are done by the direction of the party whom he assumes to represent.

It is thus manifest that appellant was charged with knowledge of the contents of its answer, and in the absence of a satisfactory showing to the contrary, the court was warranted in finding that it had such knowledge.

Attached to the motion was an affidavit as follows: ‘ ‘ Arthur W. Bischoff, being duly sworn, on oath states that he has read the foregoing motion, and that the facts therein stated are true, and that he is secretary of said defendant corporation”; which same was subscribed and sworn to by the affiant on June 19,1933.

It will be noted that the affidavit, while reciting that the affiant was secretary of appellant, does not state over what period of time he held such position. For aught that appears he may have been such secretary for only a few weeks or days, and never, prior thereto, had any connection or acquaintance with the Fidelity Trust Company, nor any knowledge of its affairs. He further states that the matters averred are true, but does not set out circumstances or facts from which such inference may arise. The most that can be said is that it is the conclusion of the affiant, and based upon nothing from which the court might see that he knew whereof he spoke. There is nothing to indicate that the president or other officials of appellant were not fully cognizant of all which the answer contained. The presumption of law, as we have seen, is that they knew the contents of the answer, and in our opinion the conclusion of the secretary to the contrary, based upon no stated facts from which such inference might fairly arise, does not overcome such presumption.

If appellant was aware that its answer contained an admission of business connection with appellee, and suffered same to remain, without protest, a part of the record in the cause, for almost three years, and during the interim defended upon the grounds set out in the answer, making no objection thereto until the master had rendered an adverse finding to its defense as therein stated, it is in no position to ask leave to withdraw the answer and file another which states a different defense.

Such a motion must be accompanied by an affidavit, deposition or other evidence, proving the truth of the matters of the proposed amendment. Fielding v. Fitzgerald., 130 Ill. 437, 441; Higgins v. Curtiss, 82 Ill. 28.

So far as the record discloses, the affidavit of Bischoff, before quoted, was the only evidence before the court upon the hearing of the motion, and we are constrained to hold that it was insufficient to overcome the legal presumption that appellant knew the contents of the answer, and that its attorney filed same with its sanction. For which reason we are of the opinion that the chancellor rightly denied the motion.

It is also contended that the proof shows that Heymann, alone, was the party with whom appellee dealt, and that appellant was not in anywise connected with the transaction. Where a fact is alleged in a bill of complaint, and the answer admits its existence, the admission is conclusive, and the fact may not be disputed. Home Ins. & Banking Co. of Texas v. Myer, 93 Ill. 271; Depue v. Cordell, 327 Ill. 254, 258. The admission of the answer must be regarded as true, and evidence to the contrary, if admitted, should not he considered so long as the answer so remains; Weider v. Clark, 27 Ill. 251; Home Ins. & Banking Co. of Texas v. Myer, supra; and it is wholly immaterial whether such answer is sworn to or not. Loughridge v. Northwestern Mut. Life Ins. Co., 180 Ill. 267.

The admission of the answer being final and conclusive of appellee’s contention that her business relations were with both the Fidelity Trust Company and Heymann, the decree holding the former liable was warranted, and should be affirmed. ■

Decree affirmed.