text:
    The People of the State of Illinois ex rel. Henry J. Schelling, Appellee, v. Roy L. Watson et al., Appellants.
    Gen. No. 8,806.
    Opinion filed August 1, 1934.

      Faulkner & Faulkner and Dale G. Nicholson, for appellants.
    Hill & Miller, for appellee.
   Mr. Justice Dove

delivered the opinion of the court.

An amended petition, praying for a writ of mandamus commanding the respondents therein, who constituted the Board of Trustees of the Police Pension Fund of Joliet, to vacate and expunge their order of October 10, 1932, which denied a disability pension to relator, was filed, pursuant to leave granted, in the circuit court of Will county. To this petition a general demurrer was overruled and respondents electing to abide by their demurrer, a writ of mandamus was awarded as prayed for. To review this action of the trial court, an appeal has been perfected and the record is before us for review.

The amended petition alleged that on the 7th day of June, 1932, and for many years prior thereto and since that date, the City of Joliet was operating under the provisions of “An Act to provide for the setting apart, formation and disbursement of a police pension fund in cities, villages and incorporated towns in the State of Illinois, having a population of not less than 5,000 and not more than 200,000 inhabitants, in force July 1, 1909,” Cahill’s St. ch. 24, U 915 et seq.; that on said date, and ever since appellants were the duly elected or appointed members of the Board of Trustees of the Police Pension Fund of said city; that on June 2, 1927, relator was appointed a patrolman on the police force of the City of Joliet; that he was born in Mokena, and lives with his wife and two minor children, and since his appointment has resided and still does reside in Joliet; that on June 11, 1930, while in the discharge of his duties as police officer in the City of- Joliet, he was shot with a bullet which entered the left side of Ms neck, passing through the apex of his left lung and came out through his back; that he entered a hospital, spending some time therein, and later resumed his duties as patrolman; that on November 2,1930, while discharging his duties as such police officer, he was thrown from a motorcycle, sustaining injuries to his left hand, wrist, arm and shoulder; that the nature, extent and severity of his injuries physically disabled him so as to necessitate his suspension of the performance of his duties as a member of the police force; that said physical disability still exists and is of a permanent and incurable nature and renders it impossible for relator to perform duties as hard, severe and strenuous as required of a police officer working as a patrolman on the police force of Joliet, or of doing any kind of manual work, requiring the use of both hands; that his left lung was injured and that he sustained injuries to his arm, wrist and hand, as a result of which, motion and extension thereof became nil, the muscles of the forearm atrophied and he lost the use of 75 per cent of his left hand.

The amended petition then avers that on June 7; 1932, relator filed with appellants his verified written petition for a.pension on account of his physical disability arising while in and in consequence of the performance of his duties as patrolman, showing that his disability was of such an extent as to necessitate the suspending of performance of his duty on such police force, and that said injuries resulted from and in consequence of the performance of his duties as such policeman, and that relator also filed with his application certificates of his disability, one of which was subscribed and sworn to by him, another by Dr. Frank J. Chmelik, a practicing physician and surgeon of Joliet, who signed said certificate as police surgeon and who occupied that position, and one each by Dr. T. S. F. Johnson and Dr. John Mitchell, practicing physicians in Joliet, and another by Dr. A. N. Kitenplon, a practicing physician of the City of Aurora, Illinois, who had treated relator’s injuries mentioned in reíator’s amended petition, and all of said certificates were subscribed and sworn to by said respective parties, and all recited facts from which it clearly appeared that relator became physically disabled while in the performance of his duty as policeman to such an extent as to necessitate the suspending of performance of his duty on the police force. The amended petition then alleged that at the time the relator filed said petition, his salary was $140 a month, and had been for at least one year immediately prior to the time of his having suspended performance of his duties as such police officer, and that from the date of his appointment up to and including the date of the filing of his petition there was deducted from his salary one per cent thereof per month, in accordance with the provisions of said Pension Act; that relator appeared before said Board of Trustees of the Police Pension Fund of the City of Joliet at a meeting of said board, held in the police station, and submitted to both oral and physical examinations conducted by the board; that said board did not ask or require other evidence of disability, but wholly ignored and disregarded the evidence submitted, both oral and in the form of said certificates, and also disregarded the results shown by his physical examination, and wrongfully and arbitrarily denied his petition, thereby grossly abusing the discretion vested in the board, which action was prompted by improper motives and: was not based upon the facts submitted; that on June 7,1932, and at all times since, there were sufficient moneys belonging to the pension fund to pay all allowances of such board to its beneficiaries, including the amount to which relator was entitled.

The amended petition prayed that a writ of mandamus issue, directed to the members of said Board of Trustees of the Police Pension Fund, commanding them to vacate and set aside their order denying a disability pension to relator and directing that relator be paid from said fund a pension of $70 per month, being one-half of the salary attached to the rank held by relator, that said pension begin June 7, 1932, and continue until terminated in accordance with the provisions of said Pension Act.

The pertinent part of the Police Pension Fund Act of 1909 provides: “Whenever any policeman, while serving as such, in any such city . . . , shall become physically disabled while in and in consequence of the performance of his duty as such policeman, to such an extent as to necessitate the suspending of performance of his duty on such police force, or retirement from the police force, said board shall order and direct that he be paid from said fund a pension of one-half of the salary attached to the rank he may have held on said police force for one year immediately prior to the time of his so suspending performance of his duty or retirement: Provided, that whenever such disability shall cease and said policeman shall resume the performance of his duty on said police force such pension shall cease.” “No person shall receive any benefits from said fund, unless there shall be filed with said board, certificates of his disability, which certificates shall be subscribed and sworn to by said person and by the police surgeon (if there be one), and two practicing physicians of such city, village or town, and such board may require other evidence of disability before ordering such payment as aforesaid.” Cahill’s Illinois Revised Statutes, 1933, ch. 24, Tfíf 918, 919.

Appellants, by their demurrer to the petition, admitted all facts well pleaded, and inasmuch as the board elected to stand by the overruled demurrer to the petition, we are bound, for the purpose of this decision, to assume that the statements of the petition are true. Illinois State Board of Dental Examiners v. People ex rel. Cooper, 123 Ill. 227.

This statute made it the mandatory duty of appellants to order that relator be paid from the pension fund $70 per month, provided relator, while serving as a policeman, became physically disabled while in the performance of his duty to such an extent as to necessítate the suspending of performance of his duty or retirement from the police force. The statute further provided that before relator should be entitled to be paid this pension, he must file with the board a sworn certificate of disability, executed by himself, a sworn certificate of disability by the police surgeon, if there be one, or by two practicing physicians of Joliet.

Examining the allegations of the amended petition, we find that all these statutory provisions were complied with by relator. The allegations of the amended petition are that while serving Joliet as a policeman on June 11, 1930, he was shot and the petition tells where the bullet entered his body, and the range it took and the organs affected. It is then stated that as a result of this, he entered a hospital, being physically disabled and that later he resumed his duties as policeman. The amended petition then alleges that on November 2nd of the same year, while discharging his duties as a policeman, he was thrown from a motorcycle and it described the injuries he received thereby and avers that they are permanent and incurable, and necessitated the suspension of the performance of his duties as a member of the police force. The amended petition then recites that he filed with the board the requisite statutory certificates and specifically sets forth facts which show that the statute in every particular was complied with.

In support of their contention that the allegations of the amended petition are insufficient, counsel for appellants cite the following cases: People ex rel. Sheppard v. Illinois State Board of Dental Examiners, 110 Ill. 180; People ex rel. Jones v. Webb, 256 Ill. 364; Calder v. City of Chicago, 176 Ill. App. 313; Benner v. City of Chicago, 176 Ill. App. 317; Wilke v. Wilson, 176 Ill. App. 319; McGann v. Harris, 114 Ill. App. 308; Eddy v. People ex rel. Welter, 218 Ill. 611; United States v. Arredondo, 6 Pet. (U. S.) 691. In People ex rel. Sheppard v. Illinois State Board of Dental Examiners, 110 Ill. 180, it was sought to compel respondents to issue a license to relator, he having been granted a diploma from a certain dental college, but the court held that the statute did not specifically define what was a reputable college and left it to the discretion and judgment of the board to determine what was a reputable college and the court therefore refused to grant the writ on the ground that the writ will not lie to compel the performance of acts or duties which necessarily call for the exercise of judgment and discretion on the part of the body at whose hands their performance is required. In Illinois State Board of Dental Examiners v. People ex rel. Cooper, 123 Ill. 227, the court, after commenting upon its holding in People ex rel. Sheppard v. Illinois State Board of Dental Examiners, supra, said: “If a discretionary power is exercised with manifest injustice, the courts are not precluded from commanding its due exercise. They will interfere where it is clearly shown that the discretion is abused. Such abuse of discretion will be controlled by mandamus. A public officer or inferior tribunal may be guilty of so gross an abuse of discretion or such an evasion of positive duty as to amount to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law; in such a case mandamus will afford a remedy.”

People ex rel. Jones v. Webb, supra, was a proceeding brought to compel the board of review to list for taxation certain omitted property. A demurrer to the petition was sustained by the trial court, but the Supreme Court held the allegations of the petition sufficient and reversed the judgment of the lower court. There is nothing said in the opinion in that case sustaining appellant’s contention in the instant case.

The petitioners in the three cases in 176 Ill. App. 313, 317 and 319, cited by appellants, sought to compel the Board of Trustees of the Fireman’s Pension Fund to enroll relators as a beneficiary of that fund. The Appellate Court stated that the allegations of the petition were insufficient, holding that the petitions did not show that the board either exceeded or abused is powers and without such showing, the court had no right to entertain it.

We have examined all the other cases cited by counsel for appellants, but no good purpose can be served by reviewing them.

In Stiles v. Board of Trustees, 281 Ill. 636, a mandamus proceeding, petitioner sought to compel the Board of Trustees of the Police Pension Fund of the West Chicago Park Commissioners to grant him a pension. In the course of its opinion the Supreme Court said: “The right of appellant to a pension depends entirely and altogether upon the terms of the act providing for such pension. Not all pension laws are alike, and the sole question in any case is whether the person applying for a pension thereunder comes within its provisions. . . . It is the duty of the courts to enforce the law as enacted according to its plain and unmistakable provisions. The courts have no power to change the statute and under the guise of judicial construction either bestow or take away a pension, much less is there such a power in a civil service commission or in the respondent board, which are creatures- of the statute and cannot rise above the source of their power.”

The act which created the appellant board and prescribed the conditions nnder which one might participate in the fund created does not make it discretionary with appellants whether they will or will not grant a pension but makes it mandatory where certain facts exist. Accepting as true the allegations of the amended petition, the action of appellants was arbitrary, and unjust to relator, as all the facts are therein alleged which are necessary to entitle him to a pension.

Appellee filed herein a motion to disregard a portion of appellant’s reply brief. This motion was taken with the case. In appellant’s original brief and argument, counsel stated that the question to be decided was whether or not a petition for mandamus will lie to compel appellants, a quasi-judicial body, to decide a question of fact in a particular way. In their reply brief and argument counsel insist for the first time that the allegations of the amended petition were insufficient, a matter which they ignored in their original brief and argument. It will be noted that every case cited by counsel for appellant in their reply brief was cited and relied upon by counsel for appellee in their brief, and some of these cases have been referred to by us in this opinion. Our rules do provide that no point not contained in the original brief shall be after-wards raised in the reply brief. The purpose of the rule is apparent. We have considered the suggestions of counsel for appellee in support of their motion, and in view of the fact that we believe the allegations of the amended petition sufficient to entitle relator to the relief sought, the motion to disregard will be denied.

There was no error in overruling the demurrer and rendering the judgment appealed from.

Judgment affirmed.


source: Caselaw Access Project

author: Mr. Presiding Justice Wolfe

license: Public Domain

text:
    In re Estate of Ella P. Sargent, Deceased.
    Gen. No. 8,606.
    Opinion filed August 1, 1934.
    Barhes & Magoou, for appellants.

      Hamilton, Black, Holtgbeve & Klatt, for appellee.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

On November 25, 1918, the appellee, Frank E. Wilson, was appointed conservator of the estate of one Ella P. Sargent who died July 17, 1928. By reason of his appointment as such conservator Wilson became ex officio administrator of the Sargent estate. The appellee qualified as administrator of said estate and filed his final report in the county court of Marshall county in March, 1931. The heirs of Ella P. Sargent, deceased, filed numerous objections to the report. The report and objections came on for a hearing in said court and the county court sustained the objections to one item of $4,000, commonly referred to as the “Thompson notes.” An appeal was taken to the circuit court of said county, and upon a hearing before this court the objections were again sustained as to the $4,000 Thompson note. The objections were also sustained as to the administrator’s fee of $800, and attorney’s fee of $400. Otherwise the objections to said report were overruled. Both the administrator and the heirs prayed an appeal to this court. The heirs of Ella P. Sargent, deceased, are the only ones that have perfected the appeal, but the administrator has assigned as cross errors that the court erred in sustaining objections to the administrator’s fee of $800 and to the attorney’s fee of $400.

It is admitted by the parties to the litigation that the court properly sustained the objection to the $4,000 item, commonly referred to as the “Thompson notes.” The appellant seriously insists that the court erred in not sustaining their objections as to the $1,500 Wilkinson note, and the Anderson $2,000 note. Appellants also contend that the court erred in allowing the conservator any fees for himself or his attorney for handling the estate, because they claim the records show gross mismanagement of the estate by the conservator, Frank E. Wilson. The conservator, Frank E. Wilson, purchased the Wilkinson note of $1,500 on March 1,1922, the same being due five years after that date. He purchased this note from the Thompson Farm Loan Company, and at the time he purchased such notes he was manager of the said Thompson Farm Loan Company. This note was a part of a series of notes for the sum of $12,000 secured by a mortgage on a farm in the State of Iowa. The Anderson note was dated March 1,1924, and due March 1, 1934 in the principal sum of $2,000. This note was a part of an $18,000 mortgage loan on 160 acres of land situated in Wright county, Iowa, and was also purchased from the Thompson Farm Loan Company.

Cahill’s St. ch. 86,1f 18 (section 18, chapter 86, SmithHurd Revised Statutes) describes the duties of a conservator in taking care of his ward’s estate and is as follows: “It shall be the duty of the conservator to place and keep his ward’s money at interest, upon security to be approved by the court, by investing, on approval of the court, the same in United States bonds or in the bonds of any state, county, city or municipality, which are not issued in aid of railroads and where the laws do not permit said counties, cities or municipalities to become indebted in excess of five per cent of the assessed valuation of property for taxation therein, and where the total indebtedness of such county, city or municipality does not exceed five per cent of the assessed valuation of property for taxation at the time of such investment. Personal security may be taken for loans not exceeding $100. Loans upon real estate shall be secured by first mortgage, or trust deed thereon and not to exceed one-half the value thereof. All loans shall be subject to the approval of the court. The conservator shall be chargeable with interest upon any money which he shall wrongfully or negligently allow to remain in his hands uninvested, after the same might have been invested.”

From the reading of this section of the statute it is clear that if the conservator invests his ward’s funds in real estate loans they must be secured by first mortgages. Our courts have held that the provision of this statute is mandatory and the statute in question only permits the investment of such funds in notes secured by a mortgage on real estate which give these notes and these notes only a first lien on the real estate. An investment of the same in notes secured by a mortgage which gives other notes an equal lien is not an investment in a good first mortgage as contemplated by our statute. People v. Mitchell, 223 Ill. App. 8.

The conservator had no right to invest the funds of his ward in these notes as they were not secured by a first mortgage on real estate. There is a more serious objection to the legality of the purchase of these notes by the conservator. The record in this case shows that the conservator was also an officer of the Thompson Loan Company; that he, as conservator, bought the loans from the company in which he was the manager. This is contrary to public policy. In the case of Miles v. Wheeler, 43 Ill. 123, the court in discussing the same question used this language: “There is really no room for controversy as to the main question. It is perfectly manifest, from the facts stated above, that the name Alexander was used merely as a means of passing the title of the land to Miles; that the sale to Alexander was simply colorable; and that the transaction was really a purchase by an administrator at his own sale. This the law forbids. Thorp v. McCullom et al., 1 Gilm. 614; Dennis v. McCagg, 32 Ill. 444; Michaud v. Girard, 4 How. 553. In this last case the Supreme Court of the United States gave this question a very searching examination, reviewing the authorities both in the common and civil law. In that case an executor, as in this an administrator, became the purchaser, through the interposition of a third person, of real estate belonging to the deceased, and sold at public sale. The court laid down the salutary rule that this is fraudulent per se, and that it matters not that the sale was at a public auction, for a fair price, and made through the medium of a third person as the bidder, and to whom the executor or administrator conveys. It avails nothing to show that the intentions of the trustee were honest, and that here was no fraud in fact. It is one of those cases in which the law will not permit a trustee to palter with his own conscience. It shields him from all temptation by the inflexible rule that he cannot buy. The plain and sufficient reason is that the interests of the buyer and seller of the same property are necessarily antagonistic, and the only safe rule is one which absolutely forbids a trustee to occupy two positions inconsistent with each other.” The same doctrine was announced by this court in the case of Field, Leiter & Co. v. Colton, 7 Ill. App. 379; St. Paul Trust Co. v. Strong, 85 Minn. 1, 88 N. W. 256; McGruder v. Drury, 235 U. S. 106; In re Riordan, 216 Iowa 1138, 248 N. W. 21; In re Security Bank & Trust Co. (Minn.), 224 N. W. 235.

It is our opinion that the conservator in purchasing these notes imposed a fraud upon the estate of Ella P. Sargent, and the trial court erred in not sustaining the objections to this part of the report. The conservator should be compelled to pay to the estate of Ella P. Sargent, deceased, the amount of the Anderson note of $2,000 and the Wilkinson note of $1,500, with interest from the date of their purchase, but he should be given credit for any interest that he has collected on said loans and paid to the estate of Ella P. Sargent.

The appellants contend that the court erred in allowing the conservator any fees or any attorney fees, because the record shows gross mismanagement of the estate from the time the conservator was appointed down to and including the time of his final report as administrator. The record shows that during the time that Mr. Wilson was acting as conservator he was allowed $797 fees for himself and $140 attorney’s fees; that the estate at the time he was appointed conservator consisted of approximately $8,500 net assets; that under his management the estate increased in value. The record also shows that Mr. Wilson made numerous investments of his ward’s funds that were not authorized by law, but we are not prepared to say that the county court and the circuit court erred in allowing his fees and attorney’s fees for managing the estate of Ella P. Sargent, deceased, while he whs such conservator.

The record discloses that Frank P. Wilson after he was appointed administrator of the estate of Ella P. Sargent, deceased, deposited in the Thompson Farm Loan Company the sum of $3,466.63. We know of no rule of law that would permit, or justify, such a transaction, and in our opinion it should not have been done. Mr. Wilson, being an interested party of the Thompson Farm Loan Company, benefited by having deposited this money in said company, and should be held liable to pay to said estate the amount of the deposit, together with the legal rate of interest on the same from the date the deposit was made.

The record shows that after Mr. Wilson was appointed administrator he did things which he should not have done and did not do' things that he should have done. The trial court sustained objections to the allowance of $800 fees to such administrator and a $400 fee for his attorney’s fee. In this we think the court was justified. The order of the circuit court is hereby reversed and the case remanded to said court with directions to enter an order in compliance with the facts as set forth in this opinion. On account of the mismanagement of said estate the costs of this appeal are hereby charged against Frank E. Wilson individually.

Reversed and remanded with directions.


text:
    Thomas H. Connors, Appellee, v. The Swords Company, Appellant.
    Gen. No. 8,773.
    Opinion filed August 1, 1934.
    Large & Reno and Fisher, Boyden, Bell, Boyd & Marshall, for appellant; Guy B. Reno, Glenn A. .Lloyd and Joseph E. Nolan, of counsel.
    David D. Madden and Loretta Laden, for appellee.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

Thomas H. Connors, the appellee, started suit against the Swords Company, a corporation, the appellants, for a balance alleged to be due him as salary and for services performed by him, for the said company. Connors had been president or vice president of the Swords Company, during all the time that compensation is alleged to have accrued to him. The declaration consists of the common counts in assumpsit. To this declaration the defendant filed a plea of general issue. A bill of particulars was asked for and filed. The bill of particulars shows that the appellee claims a salary is due him from January 1, 1930, to February 15, 1933, at $12,000 a year, making a total of $37,500. To this amount a credit of $29,958.29 was applied, leaving a balance claimed to be due him of $7,541.71.

The plaintiff testified to the character and duration of the services that he had performed. The by-laws of the corporation showing the duties of the president and vice president, and the power of the board of directors .to fix the salaries of the various officers and employees were offered and admitted in evidence. Over the objection of the defendant the resolution of the board of directors of February 17, 1930, electing the appellee president of said corporation and fixing his salary at $10,000 for the year 1930, was offered and admitted in evidence. The court refused to admit a subsequent resolution of May 10, 1930 of said board of directors increasing appellee’s salary to $12,000 and making the same retroactive to January 1, 1930. The defendant moved for a directed verdict, which was denied. The defendant then offered its evidence attempting to show that after the resolution was adopted fixing the salaries of the different officers, by agreement, of all of the officers of the company the salary of each was reduced for the year 1932 and 1933, and that the Swords Company was not indebted to appellee, Connors, in any sum. The court sustained an objection to this offer. The appellant then offered to show the following: “We offer to show that on or about the first of March, 1932, a meeting was held-between Thomas H. Connors, the plaintiff, Stanley Smith, H. K. Hutton, Mr. Babcock, the witness, and Mr. Glenn Lloyd, who was at that time attorney for the corporation; that the financial affairs of the corporation were discussed and that at that time Thomas H. Connors, Stanley Smith and H. K. Hutton each agreed to take a cut from the salary which they had been drawing, of $10,000 per year to $7,500 per year; that Thomas Connors and each one of the directors of said corporation agreed to accept said cut and that Thomas Connors notified the officers of the corporation who kept the payroll thereof, that his salary thereafter would be $7,500 per year instead of $10,000; that the records of the corporation showing- the account of Thomas Connors reflected a credit to him each month for salary at the rate of $7,500 per year from and after March 1, 1932, and that at the end of each month financial statements showing the amount of accrued salary for Thomas Connors, Stanley Smith and H. K. Hutton, were furnished to Thomas Connors and that he made no objection thereto; that he never at any time, until about the end of the year, 1933, claimed that the corporation owed him any back salary, over and above what he had received each month; that he received, from March 15, 1932, until July 31, 1932, a salary at the rate of $7,500 per year, which was paid to him bi-monthly, each check being for $312.50; that on or about August 1, 1932, Thomas Connors entered into an agreement with other directors and officers of the defendant that thereafter his salary and their salaries should be $500 per month, instead of $625 per month, which they had just prior,thereto, been drawing and that from and after August 1, 1932, to January 15, 1933, Thomas Connors drew salary at the rate of $500 a month and that the officers of the Swords Company set up to his credit in the books each month’s salary at the rate of $500 a month; that financial statements showing such set-up were furnished to Thomas Connors each month and that he made no objection thereto; that at the time said conversations occurred, Thomas H. Connors, H. K. Hutton, and S. E. Smith were all directors of the Swords Company and that on said dates, when said purported cuts went into effect, the salaries of the other officers and employees of the Swords Company were likewise cut; that during the latter part of the year 1932 Thomas Connors was president of the defendant corporation, and as such president, at the end of each month received balance sheets and operating statements of the corporation showing its financial condition and showing the amount of money which was credited to him and the other officers for salaries each month and that said credits were $625 per month from March 1, 1932 to August 1, 1932, and $500 per month from and after August 1,1932. .

“Mr. Madden: I object to the offer of the testimony, for the reason that, admitting the truth bf everything offered, it is irrelevant, incompetent and immaterial and does not tend to bind the plaintiff in this case.

“The Court: Objection sustained.”

The defendant then renewed its motion for a directed verdict at the close of all of the evidence and the court instructed the jury to find the issues for the plaintiff for the sum of $1,291.71. The jury found for the plaintiff as directed by the court and judgment was entered in favor of the plaintiff for this amount. The case is brought to this court on appeal by the Swords Company.

The first assignment of error of the appellant is that the court erroneously admitted in evidence the resolution of the board of directors of the Swords Company fixing the salaries of the various officers. Appellant claims that the same is illegal and void for the reason that the record shows that appellee, Connors, voted for the resolution in fixing his own salary. Our courts have had occasion to pass upon this question a great many times and have uniformly held that where a director’s vote is necessary to carry a motion to fix his own salary that the same is illegal and void and such director cannot maintain a suit to recover for services rendered by reason of such resolution. In the case of Voorhees v. Mason, 245 Ill. 256, at page 263, the same question was before our Supreme Court and in passing upon the question they say: ‘ ‘ The bylaws of the corporation provided that ‘the secretary shall be secretary of the board of directors and of the standing committees. He shall be general sales agent of stock and income certificates. ’ Each director, other than Kimball, held an office in the corporation, and at the first meeting of the board of directors was passed a resolution ‘that commissions on sales of income certificates be limited to ten per cent. of such sales,’ and that of the commissions paid upon the sale of stock and income certificates, $5 be paid to the secretary, and $25 ‘to general agent or'director making sale,’ and the total amount of commissions on sales of stock and income certificates retained or paid from the proceeds of sales was $24,700. It was doubtless contemplated at the time said resolution was passed that the stock and income certificates of the corporation would be sold by the directors, and by their own votes they fixed the value of their commissions for making such sales. We think, therefore, the resolution fixing the amount of commissions which the corporation should pay to its secretary and directors for placing its stock and income certificates was not conclusive upon the corporation. (Fritze v. Equitable Building & Loan Society, 186 Ill. 183; Adams v. Burke, 201 Ill. 395.) The law is well settled in this State that compensation voted to an officer of a corporation is illegal if the resolution fixing the compensation is carried by his vote. (McNulta v. Corn Belt Bank, 164 Ill. 427; . . .) If, therefore, the resolution fixing the amount of commissions which should be paid for selling stock and income certificates by the board of directors was void, the directors could not rightfully retain commissions for such sales by virtue of said resolution. The services of the secretary and other officers of the corporation in making sales of stock and income certificates were of value to the corporation, and upon proof of the value of such sales, regardless of the resolution, they may rightfully be allowed compensation for making such sales, — that is, allowed such sum for such services as the same are reasonably worth, not to exceed the amount fixed by the resolution, — it being our view that the resolution having been passed for the express purpose to authorize the directors to sell stock and income certificates and to receive commissions for such service, and that resolution having been adopted by the votes of the directors who were to benefit from its adoption, it was void, and that such directors could only recover what their services were reasonably worth, but that they having made said sales while the resolution which had been passed by their own votes was unrescinded, they should be estopped to claim that they were entitled to receive more in the way of commissions for making said sales than the amount fixed by their own votes; that while the resolution was not binding upon the corporation, it was binding, by way of estoppel, upon the directors.” A similar case is Luthy v. Ream, 270 Ill. 170, 177, in which it is said, “Compensation voted to an officer of a corporation is illegal if the resolution fixing such compensation is carried by his vote. The salaries voted to the three officers by their own votes were therefore illegal, and the decree of the circuit court properly required the amounts which had been paid on account of such salaries to be refunded.”

. The appellee was attempting to prove a contract between himself and the Swords Company, and to establish this it was necessary for him to show a valid resolution by the board of directors of the Swords Company fixing his compensation. The burden of establishing the legality of this resolution was upon the plaintiff, and it is our opinion it was error for the trial court to admit this resolution in evidence without proof that it was not necessary for Connors’ vote to be counted for passing this resolution. The record itself does not disclose who voted for or against the resolution. Some proof should have been offered as to who voted for or against it.

The appellant strenuously insists that the appellee, Connors, has been paid all that is due him and that the court erred in refusing to admit proper proof to show that Connors and the other officers had mutually agreed to accept a reduced, salary and had accepted the same in full settlement of the company’s indebtedness to each of them. On the other hand the appellee insists that parol evidence was not admissible to show that the officers had agreed and did receive reduced salaries, and even if the same could have been shown by parol evidence this would not have any binding effect upon the Swords Company as it was not a party to, nor consented to a reduction of any of the salaries. The appellee places great reliance upon the case of Richard Thompson Co. v. Brook, reported in 14 N. Y. S. 370. An examination of this case discloses that the identical point which is involved in the case that we are now considering was discussed by the court in the New York case. In that case the court held that the corporation had not been a party to the reduction of the directors ’ salaries, and therefore, it could not maintain suit against a director for the amount that had been advanced for service. The court in passing upon this question reviewed the case of Vrooman v. Turner, 69 N. Y. 280, and quote it at length from the opinion in that case. It is very doubtful if the law as stated in the Thompson case is now the law in the State of New York. In the case of Seaver v. Ransom, 224 N. Y. 233, 120 N. E. 639, the court announced departure from the strict construction as announced in the earlier cases. The courts of Illinois have never adopted the doctrine as laid down in the Thompson Co. v. Brook case, and Vrooman v. Turner. In the case of Dean v. Walker, 107 Ill. 540, our Supreme Court was passing upon the same facts as presented in the Vrooman v. Turner case, supra, and our court had occasion to review the Vrooman case as it was cited by, and relied upon by the appellant in the case. The court in passing upon the case uses this language: “It is a familiar rule, and one well sustained by authority, that where one person, for a valuable consideration, makes a promise to another for the benefit of a third person, such third person may maintain an action upon it. It is not necessary in such a case that there should be any consideration moving from the third person, for whose benefit the promise is made, or that there should be any privity between them. The conveyance of the land is the consideration for the promise, and the fact that the consideration moves from the mortgagor is a matter of no moment. This is well illustrated in Brown v. Dyer, 7 Cush. 337, where it is said: ‘Upon the principle of law long recognized and clearly established, that where one person, for a valuable consideration, engages with another to do some act for the benefit of a third, the latter, who would enjoy the benefit of the act, may maintain an action for the breach of such engagement, — that it does not rest upon the ground of any actual or supposed relationship between the parties, as some of the earlier cases seem to indicate, but upon the broad and more satisfactory basis that the law, operating upon the acts of the parties, creates the duty, establishes a privity, and implies the promise and obligation on which the action is founded, ’ ’ ’ This case has been followed in the case of Daub v. Englebach, 109 Ill. 267; Gage v. Cameron, 212 Ill. 146; and Scholten v. Barber, 217 Ill. 148.

In the case of Lawrence v. Oglesby, 178 Ill. 122, 129, the court says: “Where a contract is entered into by one with another for the benefit of a third person, such third person may maintain an action in his own name for a breach thereof. Such is the well recognized rule and one not an open question in this State. In the enforcement of such right on such a promise resort may be had to a court of law. It is not necessary to resort to chancery. The common count for money had and received for the use of another is an equitable form of common law pleading, and of itself is sufficient on which to authorize the admission of this evidence and sustain a recovery.” This same doctrine was announced in the case of Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, 262. It is our opinion that the trial court erred in refusing to permit the appellant to make its offered proof, to shoiv that by mutual agreement, the salaries of the various officers including the appellee, had been voluntarily reduced, and accepted by them in payment for their salaries due them from the defendant company. The reduction of the salaries of the various officers was made for the benefit of the defendant company and said company had a right to maintain or defend its suit as against the claim of the appellee. A promise to accept a reduced salary and the acceptance of the same was an executed parol agreement and could be shown to defeat a recovery upon a written resolution passed by the board of directors fixing the appellee’s salary at $10,000 per year. Yockey v. Marion, 269 Ill. 342.

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

Reversed and remanded.


text:
    James Anderson Company, Inc., Appellant, v. City of Highland Park, Appellee.
    Gen. No. 8,781.
    Opinion filed August 1, 1934.

      Paul MaoQ-uffin and David H. Jackson, for appellant.
    Ernest S. Gail, Corporation Counsel, for appellee; Paul C. Behanna, of counsel.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

The plaintiff, a corporation, brought an action of assumpsit against the defendant, the City of Highland Park, and filed the consolidated common counts. A bill of particulars was filed and the defendant filed the general issue. The parties entered into a stipulation that the cause should be heard by the judge of the court, and' that evidence might be admitted without objection other than objections to be made at the hearing. Forty propositions of law were submitted by the plaintiff and the defendant. The court found the issues for the defendant.

It appears from the bill of particulars that the plaintiff claims compensation from the defendant for the reasonable and customary charges made for work performed by the plaintiff. The bill of particulars charges as follows: “That the work, labor and services sued for is engineering, surveying and draughtsmanship, work, labor and services rendered by various employees and officers of plaintiff making surveys, preparing plans and specifications, culminating in estimates of cost and blue prints, and ordinances used by the City of Highland Park and the Board of Local Improvements of said city, filed by said city in the county court of Lake County, and known as Highland Park Special Assessment Number 332. The work and labor done in connection with the said foregoing and in attending meetings of said Board of Local Improvements and various members thereof, which meetings were both formal and informal, was done beginning with the second week of September, 1926, down to and including the middle of July, 1928. The first substantially completed but tentative plans and specifications and estimate of costs and resolution were delivered to said Board of Local Improvements in the month of December, 1927, and the same are in the possession of said Board. The completed plans, specifications, resolution for said Board and estimate of costs were delivered to said board about the latter part of May, 1928, and used by or incorporated in and used in preparing the originating resolution and estimate of costs for said special assessment proceeding on or about May 1, 1928, and in the proceeding of said Board of Local Improvements on or about the 18th day of June, 1928, and in the council proceedings of said city of Highland Park on or about the 9th day of July, 1928, at which an ordinance providing for said local improvement and special assessment was adopted. The members of said Board of Local Improvements at all times had knowledge that the plaintiff was performing said services for said city, accepted the results of said services and through the members and agents of said board directed that said work and services be so performed by the plaintiff, etc.”

Ordinances of the City of Highland Park for the years 1926, 1927, and 1928 appropriated $20,000 for “engineering services” for the board of local improvements. There were during those years no appropriations for city engineer other than as indicated. The city did not appoint a city engineer for those years so far as is shown by any record of the city. The petition filed in the county court of Lake county for the improvement designated as Highland Park Special Assessment No. 332 was dismissed. The city has not collected any special assessments for the once proposed improvement, out of which the engineering services for the improvement were to be paid. The city has not taken possession of money which in equity and good conscience belongs to the .plaintiff. The question if an executory contract irregularly entered into by the city is invalid, is not presented by the record.

The general theory is indicated in the bill of particulars that the city is liable to pay for the work performed by the plaintiff because such labor was directed to be done by its board of local improvements, and that the council of the city adopted the plans and specifications of the proposed local improvement which were the result of the plaintiff’s labor. There was no record made by the board of local improvements showing the employment of the plaintiff to perform the work and labor in question. The city did not enter into an express contract with the plaintiff to do the work. The city council did not by formal action ratify the alleged employment of the plaintiff by the board of local improvements. The City of Highland Park by ordinance had prescribed conditions precedent which were to be complied with by its city council before the city should become liable under a contract. There are also statutory provisions which the city relies on as prescribing conditions precedent which were not observed in this case and that therefore, the defendant argues, the plaintiff is barred from a recovery. The exact legal issues of the case do not appear from the pleadings. A reference to the bill of exceptions will bring into focus the divergent views of the plaintiff and the defendant on the main issues of law in the case.

At the trial Mr. Anderson, president of the plaintiff company, was asked this question: “Will you state whether your company, had any dealings with the city of Highland Park at any time in 1926, 1927 or 1928 ? ” To this question objections were raised by the defendant on the following grounds: “The defendant is a municipal corporation existing under the commission form of government and it must speak by its records, and parol evidence is not competent. That the city is disqualified to enter into any business transaction or contract except in the manner provided by statute and by the ordinances of the city.” The defendant thereupon introduced in evidence certain sections of the ordinances of the City of Highland Park. These provisions of the ordinances must be herein quoted. However, for the purpose of clarity and to illuminate the issues of law involved, we state further, that after the ordinances were introduced, the defendant objected to Mr. Anderson’s testimony on the further grounds which will now be quoted“I object to the question, unless it is shown that it is in accordance with the law providing that any contract made with the city (A) must be in writing, (B) remain on' file one week complete in form and (C) adopted by a yea and nay vote of the city council.”

Opportunely to the above objections made by the defendant, we quote from the defendant’s brief: “That it is appellee’s contention that a contract made in contravention of, or otherwise than as prescribed by statute and ordinance, is void and illegal and is not binding or obligatory upon the city as a contract nor can there be any implied contract or estoppel in view of the contravention and disregard of mandatory provisions.” Opposed to this view of the defendant, the plaintiff contends that the provisions of the ordinances and statutes indicated in the above objection are directory and not mandatory. Plaintiff quotes from McQuillin on Municipal Corporations, page 250, as follows: “Irregularities in the making of a contract within the corporate powers which are directory merely, will not necessarily invalidate the contract. Recovery on a quantum meruit is frequently permitted in such cases where the public has received the benefits. If the restrictions as to the mode and form constitute limitations on the power to contract, usually liability is denied.” Thus, we apprehend, we have stated the main issues of law presented by the record and under controversy.

Referring to the bill of exceptions, the defendant introduced in evidence ordinances of the City of Highland Park as follows:

“The council of the City of Highland Park shall consist of the Mayor and four commissioners and shall be the governing body of the City.”

(A)

“It (the city council) shall make or authorize the making of all contracts, and no contract shall be binding or be obligatory upon the city unless either made by ordinance or resolution, adopted by the council, or reduced to writing and approved by the council, or expressly authorized by an ordinance or resolution adopted by the council. All contracts and all ordinances and resolutions making contracts or authorizing the making of contracts excepting ordinances, resolutions or contracts pertaining to local improvements, special assessments or condemnation proceedings or both, under and by virtue of an act of the General Assembly of the State of Illinois entitled, shall be drawn by the corporation counsel or approved by him before the same are made or passed.” Section 12, Par. 17, City Code of Highland Park.

(B)

“Every ordinance or resolution appropriating any money, or ordering any street improvement or sewer, or making or authorizing the making of any contract for any purpose shall remain on file with the' city clerk for public inspection, complete in form, in which it is finally passed, at least one week before the final passage or adoption thereof.” Section 12, Par. 15, City Code of Highland Park. The foregoing section is a re-statement of Cahill’s St. ch. 24, ff 356 (section 33, Art. 13, ch. 24, Smith-Hurd’s Rev. St.).

(C)

“Upon every vote, the Yeas and Nays shall be called and recorded, and every motion, resolution or ordinance shall be reduced to writing and read before a vote is taken thereon, and all the commissioners, including’ the mayor, present at any meeting, shall vote thereon.” Section 12, Chap. 2, City Code of Highland Park. This section of the code is a copy of Cahill’s St. ch. 24, ff 344 (section 22, article 13, chapter 24, Smith-Hurd’s Rev. St.).

The defendant also calls attention to and relies on Cahill’s St. ch. 24, If 44 (sec. 13, Art. 2, Chap. 24, Par. 44, Smith-Hurd’s Rev. St., which is as follows: “The Yeas and Nays shall be taken upon the passage of all ordinances, and on all propositions to create any liability against the city, or for the expenditure or appropriation of its money, and in all other cases at the request of any member, which shall be entered on the journal of its proceedings; and the concurrence of a majority of all the members elected in the city council shall be necessary to the passage of any such ordinance or proposition: Provided,” etc.

The plaintiff asks this court to hold that a contract by the City of Highland Park employing the plaintiff to prepare plans, specifications and estimate for a proposed public local improvement by the city would not be ultra vires of the city; that such a contract is not in express terms prohibited by law nor contrary to public policy (De Kam v. City of Streator, 316 Ill. 123); that there are no mandatory conditions precedent prescribed by statute or ordinance as to the manner and mode of entering into such a contract with the city which are a limitation on the power of the city to enter into such a contract. Plaintiff then contends that as a result of such holding, the. city is estopped to set up mere irregularities of the manner and mode of entering into the contract by the plaintiff and the city, the city having received the benefits of its completed work knowing that the plaintiff had done the work for the city; that the city has ratified the contract entered into by the plaintiff and the board of local improvements of the city; that the city is liable under an implied contract under the quantum meruit count.

In answer to the plaintiff’s request and contention the defendant replies as follows: (1) Its insistence that the conditions precedent prescribed by statute and ordinances for entering into a contract by the City of Highland Park are mandatory, and a contract entered into contrary to, or without a compliance with, the conditions is void; that the city cannot ratify a void contract nor is the city estopped to set up the failure of the city to comply with the conditions; that the city cannot be held liable under an implied contract if conditions precedent are not complied with, as otherwise there would be a nullification of the provisions of the ordinances and the statute. (2) Defendant denies that the board of local improvements had the express or implied power to employ the plaintiff to do the work in question and thereby bind the city directly by any contract made by the board. (3) That the city council did not accept the result of the work of the plaintiff with knowledge that the work was done for the city. (4) That the plaintiff did very little work preparing the plans, specifications and estimate, and that the exhibits introduced in evidence show on their face that the plans, specifications and estimate were made by Windes and Marsh who the defendant claims were the engineers for the city of Highland Park. (5) That the plaintiff’s recovery is barred by the statutory limitations of indebtedness of cities. (6) That the creation of the office of city engineer by ordinance expressly or impliedly prohibited the employment of the plaintiff to do the work in question.

We will first devote onr attention to the question if the doctrine of estoppel should be applied in this case against the defendant. The evidence shows that the plaintiff was directed by the board of local improvements of the defendant to prepare the plans and specifications for the proposed local improvements known as Highland Park Assessment No. 332. The board of local improvements of a city is an arm or agency of the city. (Gray v. Black Co., 338 Ill. 488.) The evidence further shows that the plaintiff prepared such plans and specifications and that it did all the field work necessary to prepare the plans and specifications. The plaintiff secured the data for the estimate of the cost of the improvement which was signed by the engineering firm of Windes and Marsh.

It is contended by the defendant that it did not know that the work of the plaintiff was done for the city and that it did not accept the result of said work; that some of the members of the city council were elected after the plaintiff was directed by the board of local improvements to do the work; that the city council at the time of the passage of the ordinance for Special Improvement No. 332 did not know of the action of the board of local improvements employing the plaintiff because the estimate mentioned in the ordinance was signed by the firm of Windes and Marsh and not by the plaintiff; that the defendant had ¡no contract with Windes and Marsh to prepare plans, specifications and estimate for the improvement; that that firm, as directed by the board of local improvements, was to examine and approve the plans and specifications after they were prepared by the plaintiff.

The evidence shows that Mr. Anderson, the president of the plaintiff, attended several meetings of the board of local improvements and that changes were made in the plans and specifications for the improvement under the direction of and with the knowledge of the board; that with the knowledge of the board certain territory was taken out of the plans as the improvement had been first considered; that the mayor of Highland Park and two commissioners of the city who were also members of the board of local improvements, were fully aware of the work being done by the plaintiff; that the city accepted the benefit of the plaintiff’s work with full knowledge that the work had been done by the plaintiff for the city.

It is also contended by the defendant that the plaintiff’s recovery is barred by the statutory limitation of indebtedness of cities. It was stipulated that in April, 1926, the indebtedness of the City of Highland Park amounted to $122,061; that in April, 1927, the total indebtedness was $150,154.40; that in April, 1928, the total indebtedness was $621,503.21; that $597,000 of which was represented by corporate bonds outstanding and that out of this amount of bonds outstanding, $540,000 worth was issued on March 21, 1928; that the total assessed valuation for levying and extending taxes on all taxable property in the city for the year 1926, was $6,823,994, for the year 1927, $16,296,902, for the year 1928, $16,570,744; that the population of the city for the year 1928 was less than 15,000. It appears from the evidence that the plaintiff completed and turned in to the board of local improvements its plans, specifications and data for the estimate sometime in April or May, 1928. The Act of 1928 limiting the indebtedness of cities went into effect on July 1, 1928; that before that time the constitutional limitation of indebtedness of cities within five per cent of their total assessed valuation of taxable property was in force. Cahill’s St. ch. 120, If 362 (2). (Sec. 44, ch. 113, Smith-Hurd Rev. St.; Michaels v. Hill, 328 Ill. 11; Constitution, Art. IX, sec. 12.) The contention of the defendant that the debt limitation against the City of Highland Park prevented the city incurring any liability to pay the plaintiff cannot be sustained.

It is further contended by the defendant that the creation of the office of city engineer by ordinance expressly or impliedly prohibited the plaintiff’s employment and bars its recovery. To sustain this contention, the defendant relies on section 31 of the Commission Form of Government for Municipalities Act, Cahill’s St. ch. 24, If 354 (par. 296, Smith-Hurd Rev. St., ch. 24), which provides substantially, that all officers (excluding mayor, commissioners, and other officers named), assistants or employees of the city, shall receive such salary or compensation as the council shall by ordinance provide. As heretofore stated the City of Highland Park did not during the years in question appoint a city engineer. It made appropriations for those years for its board of local improvements “for engineering services.” During the years the plaintiff was engaged in doing the work, the law provided, as it does now, that the board of local improvements of a city under the commission form of government, and having a population of less than 50,000, shall consist of the mayor and any two or more commissioners regardless of whether or not the office of city engineer is provided for by ordinance. Under section 24 of the Commission Form of Government Act it was not compulsory that the city council appoint a city engineer. The defendant having accepted the services of the plaintiff, we think that the defendant is estopped from setting up its failure, or its determined purpose, not to appoint a city engineer and thereby defeat the claim of the plaintiff. Section 31 of the statute, above mentioned, is not applicable as the plaintiff was not an officer or an employee of the defendant.

It is also insisted by the defendant that parol evidence was inadmissible to prove that the board of local improvements had directed the plaintiff to do the work for which he claims pay, on the ground that the board speaks by and through its records. We do not think that it was incumbent on the plaintiff to see that the clerk of the board performed his duty to keep a complete and accurate record of the proceedings of the board.- Having accepted the result of plaintiff’s work, the city cannot now' interpose the defense that its board of local improvements failed to make a record of its proceedings. County of Vermilion v. Knight, 1 Scam. (Ill.) 97; New Athens v. Thomas, 82 Ill. 259; City of Belton v. Sterling (Tex. Civ. App.), 50 S. W. 1027.

A municipal corporation may be estopped by its own conduct. Melin v. Community Consol. School District, 312 Ill. 376. The rule is that a city may be estopped to set up the defense that its contract was not made in compliance with the form and method prescribed by law if the city has accepted the benefits of the contract as executed by the other party thereto, if the contract is not ultra vires of the city nor prohibited by law. De Kam v. City of Streator, 316 Ill. 123; McGovern v. Chicago, 281 Ill. 264; Great Lakes Dredge & Dock Co. v. Chicago, 353 Ill. 614. A city is liable for the costs and expenses of preparing a local improvement. City of Carlinville v. Anderson, 303 Ill. 247. The design and effect of the ordinances of the' City of Highland Park requiring its contracts to be in writing, that the Aye and Nay shall be taken on any motion or resolution voted on by the city council and that all ordinances and resolutions appropriating money shall remain on file for one week with the city clerk for public inspection, is to define the mode of the execution of express contracts with the city. Village of London Mills v. White, 208 Ill. 289; Chicago v. Pittsburg, C., C. & St. L. Ry. Co., 244 Ill. 220; McGovern v. Chicago, 281 Ill. 264. In the case of Chicago v. Pittsburg, C., C. & St. L. Ry. Co., 244 Ill. 220, it is said: “A city is not entirely exempt from all the rules of honesty and fair dealing that are applicable to individuals and private corporations. If a city may lawfully exercise a power, it may be equitably estopped to question the validity of its exercise on account of the manner in which it is done or the lack of required formalities, as right and justice require.” The provisions of the ordinances are not a limitation on the power of the city contained in its charter. Having accepted the benefits of the work of the plaintiff, it would be inequitable and unjust to permit the defendant to defeat the claim of the plaintiff by relying on the ordinances. Avery v. City of Chicago, 345 Ill. 640; Beers v. Dalles City, 16 Ore. 334, 18 Pac. 835; Bates County v. Wills, 239 Fed. 785; Worthington v. Boston, 152 U. S. 695, 38 L. Ed. 603; Bunge v. Downers Grove Sanitary District, 356 Ill. 531.

The judgment of the circuit court of Lake county is hereby reversed and the cause remanded to said court.

Reversed and remanded.


text:
    Charles H. Cashmore, Appellee, v. Olive H. Hanna et al., Appellant.
    Gen. No. 8,789.

      Opinion filed August 1, 1934.
    Gerald C. Snyder, for appellant; Lewis D. Clarke, of counsel.
    Altheimer, Mayer, Woods & Smith and Wilbur B. Brazell, for appellee; William F. Struckmann, of counsel.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

This is an appeal from an interlocutory order entered by the circuit court of Lake county appointing a receiver in a proceeding to foreclose a trust deed. The complaint was filed on January 30, 1934, and on the same day a receiver was appointed by the court. On February 2, 1934, the order was vacated and appellee made a motion for the appointment of a receiver, basing his motion on the verified complaint. The motion was heard by the judge on February 3rd, and he entered a second order appointing a receiver, which is the order appealed from.

At the hearing on the motion, the appellant introduced evidence as to the market value of the real estate conveyed in the trust deed for the debt thereby secured. This evidence stands undenied, and it appears therefrom that the real estate is worth $34,000, which is double the amount due the appellee under the promissory notes secured by the trust deed, together with interest due thereon, and including the amount of unpaid taxes and special assessments which are liens against the real estate at the time of the hearing. The allegation of the bill that the real estate is “scant and meager ’ ’ security for the amount due the plaintiff is not sustained by the evidence. If the order appointing the receiver is to be affirmed, it must be on some other ground than that the security for the amount due the plaintiff under the trust deed is inadequate.

The trust deed was executed by Theodore H. Durst and Marie Durst, his wife, to secure their eight promissory notes totaling $14,000. The notes were made payable to “myself,” indorsed by the makers, and the appellee is now the owner of all of the notes. No payment has been made on the principals of the notes. After the trust deed was made, one Florence J. Druce, now deceased, became the owner of the real estate. She demised it to the appellant during her lifetime with a devise over, in contingent remainder in fee, with a double aspect, to other persons.

The trust deed conveys the real estate in question, “together with all the rents, issues and profits of said premises.” By their covenant in the trust deed, the grantors thereof agreed “to pay prior to the first day of July in each year all taxes and assessments against said premises.” The trust deed provides that in the event of the breach of the agreements mentioned in the trust deed, the whole of the indebtedness secured shall, at the option of the legal holder of the indebtedness become due and payable. The trust deed also provides as follows: “The grantors waive all right to the possession of the income from said premises pending foreclosure proceedings, and until the period of redemption from sale theréunder expires, and agree that upon the filing of any bill "to foreclose this trust deed, a receiver shall at once be appointed to take possession or charge of said premises, and collect such income and the same less receivership expenses, including taxes and assessments, to pay to the person entitled thereto in reduction of the indebtedness hereby secured, or in reduction of any deficiency decree entered in such foreclosure proceeding, or in reduction of the redemption money if said premises be redeemed, or if not redeemed, to the person entitled to the master’s deed under the certificate of sale.”

The trust deed is dated May 12, 1919, and a judicial sale of the real estate under foreclosure cannot be had until 15 months after a decree of sale is entered. Cahill’s St. ch. 77, ft 18 (sec. 18, ch. 77 as amended by Act of June 11, 1917); Cahill’s St. ch. 77, If 33 (sec. 32, ch. 77, Smith-Hurd Eev. Statutes). Consequently there will be no person entitled to a master’s deed under a certificate of sale. The question of the right of a purchaser at a foreclosure sale, to rents of the property during the redemption period, is not involved. (See Standish v. Musgrove, 223 Ill. 500.) If the order appointing the receiver is affirmed, he will have the power, under the direction of the circuit court of Lake county, to pay any taxes and special assessments now due and those that may become due before the expiration of the 15 months. Verst v. Foreman-State Trust & Savings Bank, 270 Ill. App. 484; Powell v. Voight, 348 Ill. 605. As the rents of the premises are pledged by-the trust deed as security for the debt thereby secured, the appellee was not bound to prove that the makers of the trust deed are insolvent in order to be entitled to have a receiver appointed. Bagley v. Illinois Trust & Savings Bank, 199 Ill. 76.

The trust deed also provides that in the event of the failure of the grantors to pay taxes and special assessments against the premises, then the trustees, or the holder of the indebtedness secured thereby, may pay the taxes and assessments and all money so paid shall be additional indebtedness secured by the trust deed. This provision of the trust deed imposes no obligation on the trustee or the holder of the indebtedness to pay the taxes. Parsons v. East St. Louis Gas Light & Coke Co., 108 Ill. 380.

On the hearing for the appointment of the receiver it was stipulated by the parties substantially as follows: That the property in question consists of a lot with a brick building of two stories and basement located thereon, and is used for stores and offices, situated in the City of Waukegan; that the trust deed is dated May 12, 1919, in the principal stun of $14,000 and matured on May 12, 1924, and has been extended; that the basement consists of a barber shop and furnace room; that the first floor is occupied by doctors and dentists; that the taxes on the real estate to the amount of $791, the general 1932 taxes, have been forfeited and have not been redeemed; that special assessments in the amount of $198 for three instalments, have been forfeited and not redeemed; that the above amounts do not include penalties, interest and costs; that no interest has been paid on the debt since November, 1932. The evidence shows that in 1933 the gross income from the building was $2,736 and that the total expenses of the building, including operating cost and taxes were $1,111, leaving a net income of $1,625.

• It appears from the fourth assignment of error that the appellant takes the position that in a foreclosure proceeding “no receiver should be appointed when the security is adequate.” On the other hand, the appellee maintains that since the trust deed pledges the rents of the real estate conveyed as security for the payment" of the notes and the performance of the covenants therein, and, there being a breach of the covenant of the trust deed that the taxes and the special assessments against the real estate should be paid by the grantors and their successors in title, the appellee is, in equity, entitled to have his security protected against the creation and enforcement of superior liens for unpaid taxes and special assessments. To afford this protection a court of equity will make effective the covenants in the trust deed waiving the right to possession and the right to the rentals and authorizing the appointment of a receiver.

A court of equity in a foreclosure proceeding has inherent power to appoint a receiver pendente lite. The exercise of this power rests within the discretion of the court, and the determination of the question of the appointment of a receiver cannot be predetermined, or controlled, by the agreement of the parties to the trust deed or mortgage which is being foreclosed. Chicago Title & Trust Co. v. Mack, 347 Ill. 480; Firebaugh v. Seegren, 269 Ill. App. 47. A court of equity will not enforce a covenant of a trust deed providing for the appointment of a receiver to collect the rents of the premises conveyed should it be unconscionable or unnecessary to do so, although the trust deed pledges the rents as a primary fund as security for the debt. The appointment of a receiver in a foreclosure proceeding is remedial in character and not a contract right which will in all cases be enforced by a court of equity. The above statement of the law is an epitome of the decisions in the recent cases. Frank v. Siegel, 263 Ill. App. 316; Althausen v. Kohn, 222 Ill. App. 324; Wolkenstein v. Slonim, 270 Ill. App. 473. Even after condition of the trust deed is broken, the grantor, or mortgagor, is entitled to the rents and profits pledged, until the trustee, or mortgagor, takes affirmative steps to enforce his lien upon the rents and profits. Steinberg v. Kloster Steel Corp., 266 Ill. App. 60; Consumers Bond & Mortgage Co. v. Sadin, 266 Ill. App. 141. A motion for the appointment of a receiver being addressed to the discretion of the court, a receiver should not he appointed except upon equitable grounds and for substantial reasons.

The grounds for the appointment of a receiver in this case are that the trust deed pledges the rents as security for the debt and that there has been a breach of the covenant of the trust deed to pay such taxes and assessments prior to the first day of July of each year during the lifetime of the trust deed.

The first ground so advanced for the appointment of a receiver should be given weight by the court. Bagley v. Illinois Trust & Savings Bank, supra. The real estate mortgaged in this case is business property and it is not occupied as a homestead. There is no proof that the owners of the property are able and willing to pay the taxes and special assessments which are now a first and superior lien against the property. The said owners have not offered to pay such taxes and assessments or any part thereof. A deficiency decree, in case the property is sold for less than the amount which is to be found due the appellee in the decree of sale to be entered, cannot be rendered against the present owners of the property. There is no proof that Marie Durst, the sole surviving grantor of the trust, is solvent. The record does not contain any information of any estate of Theodore H. Durst, deceased. The trustee named in the trust deed has no financial interest in the trust deed and he is not bound to pay the taxes and assessments against it. As before stated, a judicial sale of the property cannot be made until 15 months after a decree of sale is entered and there will be no redemption after the sale. The taxes and assessment for 1933 will be a further lien on the property. The eight promissory notes secured by the trust deed are negotiable. It was no doubt the intention of the person who originally made the loan of $14,000, for the notes to be sold to several persons as investments. Further considering that it would be the duty of the receiver to pay the taxes and special assessments against the property so that it would be offered for sale, under order of the court, free from such taxes and assessments (Verst v. Foreman-State Trust & Savings Bank, supra), we have no doubt that the pledging of the rents as security for the debt, and the performance of the covenants of the trust deed, were strong reasons for making the loan.

It is true that there are decisions which hold that as a general rule a receiver will not be appointed in a foreclosure proceeding because the taxes have not been paid. (Detroit Trust Co. v. Lipsitz, 264 Mich. 404, 249 N. W. 892; Union Guardian Trust Co. v. Rau, 255 Mich. 324, 238 N. W. 166; 42 C. J. 124.) Still in this case the property has been forfeited to the State. The property in having been forfeited for general taxes and special taxes levied against the same, the county of Lake and the City of Waukegan could at any time bring actions of debt to collect by judgments, the amounts due these corporations respectively for forfeited general taxes and special assessments. If such a proceeding was instituted the sale value of the property at public sale would be greatly lessened.

The order appointing a receiver, under the facts and circumstances disclosed by the record should be, and is, hereby affirmed.

Affirmed.


text:
    Oscar Sundquist et al., Appellants, v. Rose V. Rubin et al., Appellees.
    Gen. No. 8,796.

      Opinion filed August 1, 1934.
    T. O. Prather, Lawrence A. Smith and Karl O. Williams, for appellants.
    Frank E. Maynard, James A. Penny, Karl J. Mohr, Welsh & Welsh, Smith & Menzimer and Hyer & Gill, for appellees.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

The appellants filed their hill in equity to foreclose a trust deed. The trial court sustained general demurrers of appellees to the hill as amended. Appellants have elected to stand by their bill and have appealed to this court for the reversal of the decree dismissing the bill as to the appellees. The bill as amended sets forth that on July 24, 1922, Rose V. Rubin and George A. Rubin, being indebted in the sum of $2,500, executed their three promissory notes for said amount, bearing interest at six per cent per annum and payable two years after date thereof, which three notes are severally owned by appellants herein. To secure said indebtedness and interest said Rubins, on the same day, executed and delivered their trust deed, conveying thereby to Ernest C. Stokburger, trustee, 23 lots in third central park subdivision in Rockford, Illinois. The said trust deed was duly recorded in the recorder’s office in Winnebago county, Illinois, on August 8, 1922.

The bill further sets forth that when said notes became due on July 24,1924, the date of maturity thereof was, by written instrument, extended to July 24, 1927, at which time the date of maturity was further extended, by written instrument, to July 24, 1929. Neither of said extensions appears on record. The date of maturity of said notes was further extended from time to time, by verbal agreements and indorsements on said notes, to July 24, 1934.

By reason of default the appellants elected to declare the entire indebtedness immediately due and payable, as alleged in the bill.

The bill further sets forth that said Ernest C. Stokburger, as trustee, without any grant of authority or power contained in said trust deed so to do, and without the knowledge, consent or authority of appellants or their respective assignors, and without any consideration passing to them, executed and delivered nine partial releases, thereby releasing eleven of said lots, the first being executed and delivered on July 12, 1926, the last on June 24, 1931, and that said releases were fraudulent, void and of no effect as to the rights of appellants in the premises herein sought to be foreclosed.

The hill further charges that appellees, Mary Corn-stock and Marie Gaffney, are the holders and owners of certain notes secured by a trust deed on Lot 10. Block 5, one of the lots under the trust deed herein sought to be foreclosed, executed and delivered by Fred C. Sally, Jr., and Irene L. Sally to said Ernest C. Stokburger, trustee, on April 7, 1928, and recorded on July 30, 1928; that the rights of said Mary Com-stock and Marie Gaffney in the premises, under and by virtue of said trust deed and notes are subject to the rights- of appellants.

The bill further alleges that appellee, Rockford Trust Company, was the trustee named in a trust deed executed and delivered by Andrew J. Davis, and Myrtle G. Davis, on January 2, 1930, and recorded on June 17, 1930, thereby conveying Lot 3 in Block 4, one of the lots under the trust deed herein sought to be foreclosed; that appellees, Anna Thomas, Mrs. W. H. Knowlton and Mrs. D. Comstock are the holders and owners of the notes secured by said trust deed so executed and delivered by said Davis and wife; that in said bill so amended the holders and owners of said notes are described as “Unknown Owners,” and the rights of said “Unknown Owners” are alleged to be subject to the rights of appellants.

The bill further alleges that appellees, Mary Had-dad, James M. Haddad," Elizabeth F. Murphy and Home Lumber & Supply Company have or claim some interest in the premises herein sought to be foreclosed, or some part thereof, but that whatever interest they may have, the same is subject to the rights of appellants.

Each and all of the lots in which appellees claim an interest are lots so released by said partial releases.

The bill prays for an accounting, a foreclosure of the trust deed executed by said Rubins, and that said nine releases be declared null and void and ineffectual as to the rights of appellants.

The only points raised under said general demurrer are the questions of the validity of said partial releases and the priority of rights with respect thereto.

The appellants contend that said releases are invalid and of no effect as to their rights under said trust deed, because said trust deed provided no manner, means, method of, or grant of, authority to the trustee to execute and deliver a release or releases of a part of the premises thereby conveyed, and the holders of the notes secured by said trust deed have never given any authority, direction or instructions to said trustee to execute and deliver any of the releases aforesaid; that said releases were executed and delivered without the knowledge and consent of said noteholders and without any consideration passing to them. Appellants further contend that appellees do not stand in the position of innocent purchasers without notice, for said trust deed appeared of record when each and all of said releases were so executed and delivered and the same still appears of record unreleased, thereby constituting notice to the world of the trustee’s limitedt power and authority to release the premises so conveyed. Appellants contend that in determining the validity of said releases it is immaterial whether they were executed and delivered before or after maturity of the notes. They also contend that whether or not appellees are innocent purchasers without notice is a question of fact to be established by affirmative proof and not a question to be heard on a general demurrer.

The appellees contend that they should be protected as subsequent purchasers without notice of any existing indebtedness at the time of their purchase, because said releases were executed and delivered by the trustee after maturity of the mortgage indebtedness; that they had no notice of any extension agreements; that said extension agreements do not appear of record.

The question presented to this court is, the validity of the releases executed by Stokburger, the trustee, at times subsequent to the maturity of the notes secured by the original deed of trust. The same question was before our Supreme Court in the case of Mann v. Jummel, 183 Ill. 523. The court in discussing* the case quotes from Williams v. Jackson, 107 U. S. 478, as follows: “The first deed of trust from Sweet and wife did not give the trustees merely a power to release the land on payment of the notes secured thereby and to sell on default of payment, but it vested the legal title in them. A release of the land before payment of the notes would be a breach of their trust, and would be unavailing in equity to any one who had knowledge of that breach. But it would pass the legal title. The legal title in the land being in the trustees under the first deed of trust, passed by their deed of release to Mrs. Sweet, and from her by the second deed of trust to the trustees for Williams. The first deed of trust having been made to the trustees therein named, for the benefit of Augustus Davis, and to secure the payment of the notes from the grantors to him, and the plaintiffs, upon the transfer and endorsement to them of those notes, having taken no precaution to obtain and put on record an assignment of his rights in such form as would be notice to all the world, the recorded deed of release executed by him as well as by the trustees, reciting that the notes had been paid and conveying the legal title, bound the plaintiffs, as well as himself, in favor of any one acting upon the faith of the record and ignorant of the real state of facts.

“Not only did the record fail to show that any third party claimed any lien upon the property when the second mortgage was purchased by Jummel, but from the recitals in the deed the indebtedness was past due more than five years when the release was executed and recorded. A trustee in deeds of trust of this kind has the power to release the lien so as to re-vest the legal title in the grantor, even though he does so without the consent of the cestui que trust and in violation of the obligations of his trust. (Walton v. Follansbee, 131 Ill. 147, and cases cited.) In equity, however, a release unauthorized by the terms of the trust or by the cestui que trust will have no effect upon the deed of trust, as between the original parties or as to subsequent purchasers with notice. (Barbour v. Scottish-American Mortgage Co., 102 Ill. 121; Stiger v. Bent, 111 id. 328; Insurance Co. v. Eldridge. 102 U. S. 545; Williams v. Jackson, supra.) And we think the law is, that when the record shows that the release was executed after the indebtedness was past due, in the absence of all evidence of notice to the subsequent purchaser, he will be protected.”

This case was cited with approval in Kennell v. Herbert, 342 Ill. 464, 469, in which it is said: “Where the release is executed by the trustee after the indebtedness is past due, in the absence of evidence of notice to subsequent purchasers such subsequent purchasers will be protected.”

The appellants contend that there is a material distinction between a partial and a total release of property covered by a trust deed and that in this case the trustee had no authority to release a part of the lots covered by the trust deed. Bach of the lots in question is a separate and distinct parcel of land, bearing an individual and separate legal description; the description of no one lot will fit that of another, and the conveyance thereto must be by a proper description of the several lots involved; that there should be no confusion resulting from the release of one or more of the lots from the original trust deed. Counsel have not cited any cases that sustain their contention that a different rule should apply in releasing all, or only a part of the mortgage premises. It was within the power of the holders of the notes to have recorded the assignment to them which would give notice to the world that they were the legal holders of the notes and thus protect their rights. In the case of Culhane v. Layman, 273 Ill. App. 557, we held that where one of two innocent parties must suffer loss, he, who by his negligent conduct made it possible for the loss to occur must bear the loss.

The appellants insist that the points raised by the bill are not proper on demurrer in a bill in chancery, but the same should have been raised by answer to the bill. The bill sets forth the facts but does not charge that the appellees had any notice aside from the record of the deed of trust that the lots released were not free and clear of all incumbrances. We think the question was squarely presented to the court on the bill and demurrer and need not be raised by answer.

There is another serious defect in the bill, that it does not state when the appellants became the owners of the notes in question, whether before or after the maturity of the debt. It is our opinion that the trial court properly sustained the demurrer to the bill of complaint.

The decree of the circuit court of Winnebago county should be, and is, hereby affirmed.

Judgment affirmed.