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    Securities Realization Company, Appellant, v. Peabody and Company et al., Appellees.
    Gen. No. 40,325.

      Opinion filed April 26, 1939.
    Frederick A. Brown, of Chicago, for appellant; Daniel F. Kemp, of counsel.
    D’Ancona, Pflaum & Kohlsaat, of Chicago, for certain appellee.
    Chapman & Cutler, of Chicago, for certain other appellees; Ralph F. Buck, of Chicago, of counsel.
    Sonnenschein, Berkson, Lautmann, Levinson & Morse, of Chicago, for certain other appellees; Maurice Berkson, Ben Rothbaum and Isaac E. Ferguson, all of Chicago, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

Plaintiff prosecutes this appeal from a decree of the superior court of Cook county, dismissing the complaint, as amended, for want of equity.

Peabody Houghteling & Company and its predecessors had been engaged in the mortgage and securities business for 65 years. In 1919 a corporation was formed, and the partners who had theretofore conducted the business were given $500,000 of preferred stock for the good-will of the partnership. On April 3, 1929, the corporation entered into an agreement with Augustus S. Peabody, A. J. Hennings, F. A. Thulin, William C. Gribson, Edgar A. Peck and John J. Weishel. The preamble recited that the corporation desired to sell its good-will, furniture, fixtures, leasehold, records and the entire inventory of live marketable securities and to retire from active investment banking business, and that the other parties referred to as “the syndicate,” were interested in organizing a corporation under the laws of Delaware, to be known as Peabody, Hennings & Co., which was to have a paid-in cash capital of $1,000,000, and that the parties comprising the syndicate desired to acquire for the syndicate, or the corporation to be formed, the “good will, furniture, fixtures, leasehold, records and the entire inventory of live marketable securities of the company.” In the first article of the contract the corporation agreed to sell to the syndicate its goodwill, furniture, fixtures, records and the leasehold of the second floor space of the Otis Building for $500,000, payable in cash in equal monthly instalments over a period of five years without interest. The corporation agreed to sell to the syndicate certain assets listed in schedules, for which assets the syndicate agreed to pay by assuming certain listed liabilities, and pay the difference in cash. The syndicate also agreed to pay an additional sum of $40,000. The corporation agreed not to engage actively in the investment banking business for a period of 15 years. The seventh clause of the contract provided that:

“In the event of a default by the parties of the second part in the payments herein specified, or in the performance of the other covenants herein contained to be performed, the parties of the second part shall, after thirty days’ written notice from the Company, redeliver the property conveyed to them under the terms of Article First hereof. It is further mutually agreed and understood that in such event of default, and a continuance thereof after the giving of thirty days’ written notice by the Company, said Company shall be relieved of its obligation contained in Article Sixth and immediately thereupon may engage actively in the investment banking business.” On the day the contract was executed, it was assigned by Peabody, Hennings, Thulin, Gibson, Peck and Weishel to Peabody, Hennings & Co., a Delaware corporation. On the same day and in the same instrument, Peabody, Houghteling & Company consented to the assignment. The business of Peabody, Houghteling & Company was turned over by the syndicate to the new corporation known as Peabody, Hennings & Co., which was organized on March 20,1929, under the law of Delaware. On August 9, 1929, the name of the new corporation was changed to Peabody & Company. On November 18,

1933, in the superior court of Cook county, a judgment in the sum of $466,052.85 and costs was entered in favor of Peabody, Houghteling & Company against Peabody & Company, on which execution was issued. The judgment was grounded on the failure of Peabody & Company to make the payments called for by the contract of April 3, 1929. The complaint in the case at bar was filed by Peabody, Houghteling & Co., on January 8, 1934. On May 19, 1936, on petition of the Securities Realization Company, a corporation, an order was entered permitting that corporation, which is the present plaintiff, to be substituted as plaintiff in place of Peabody, Houghteling & Co. The order permitting the substitution was based on a petition filed by the present plaintiff, setting out the assignment of the judgment and the contract of April 3,1929 from Peabody, Houghteling & Co. to it. For brevity, we will refer to Peabody, Houghteling & Co., and the Securities Realization Company as plaintiff. On May 31, 1933, plaintiff served notice on Peabody & Company, reciting that default having been made in the payment specified in the contract of April 3, 1929, plaintiff demanded a redelivery to it of such of the properties conveyed in Article First of said contract to said parties of the second part ‘ ‘ as you now hold, that is to say, furniture, fixtures and records of Peabody Houghteling & Co., conveyed to said parties of the second part under the said contract.” In the same notice plaintiff stated that if the default continued 30 days thereafter, plaintiff would consider itself relieved of its obligation not to engage actively in the investment banking business for a period of 15 years. On November 20, 1933, in the chancery court of the State of Delaware in an action entitled Ross G. Byron v. Peabody & Company, a corporation, the court found that said corporation was insolvent; that the corporation had filed an answer consenting to the appointment of a receiver; that the answer was filed by authority of the board of directors of the corporation; and the chancellor ordered that Harold B. Howard of Wilmington, Delaware, be appointed receiver for Peabody & Company, and that he file a bond in the sum of $5,000. The receiver qualified.

The original complaint in the instant case asked for the appointment of a receiver and that defendants be required to return to plaintiff the items mentioned in Article First, including the good-will. After the case was presented before the master, plaintiff, upon leave granted, filed an amendment known as paragraph 19, which reads as follows:

“This action is brought on behalf of plaintiff and all other creditors of Peabody & Company similarly situated.” and by amending the prayer of said complaint to read as follows:

“Plaintiff asks: 1. That some suitable person be appointed receiver to take possession of all the property in this State of Peabody & Company, and all its books, records, papers and copies thereof, and all moneys recovered from any of the defendants herein.

“2. That the defendants, W. C. Gibson & Company, First Management Corporation, T. F. Murchison, O. P. Alford, E. A. Peck, Ross G. Byron and H. A. Bray, be required to account for and turn over to the receiver appointed by this Court: (a) All cash and property received by them or any of them from the customers or clients of Peabody & Company or Peabody, Houghteling & Company; (b) All moneys received by them or any of them in reorganizing or attempting to reorganize any properties or corporations under bond issues underwritten by Peabody, Houghteling & Company or Peabody & Company, or otherwise; (c) All profits or other income received by them or from the use or operation of any property and any business formerly belonging to or operated by Peabody & Company or Peabody, Houghteling & Company; (d) All furniture and physical property coming into the possession of them or any of them and formerly belonging to Peabody, Houghteling & Company or Peabody & Company; and that the moneys and proceeds thus recovered from said defendants and paid to said receiver be distributed as directed by this Court.

“3. That this Court shall fix a sum or sums representing the value of the business and good will theretofore belonging to Peabody & Company and taken over by W. C. Gibson & Company and defendant First Management Corporation, or any other defendant in this action, and that said defendants may be ordered to pay such sums, respectively, as may be found, to the receiver appointed by this Court, and the same distributed as directed by this Court.

“4. That plaintiff may have such other and further or different relief as equity shall require and to this Court may seem meet.” On May 31, 1933, at a meeting of the board of directors of Peabody & Company, the president, T. F. Murchison, stated that “there would be no opportunity to engage in the underwriting business for a period of at least six months”; that it was highly advisable to reduce expenses to a minimum and conserve the assets in the hope that it would be prepared to engage in the underwriting business, when business was generally resumed; that a number of the employees of the corporation had associated themselves with Mr. Gibson in organizing W. C. Gibson & Company for the purpose of conducting a trading business which was only identical to the business of Peabody & Company; that Mr. Gibson and the employees desired to do what they could do to conserve Peabody & Company; that he recommended that the 'offer of Mr. Gibson and his associates be accepted and he presented a draft of agreement prepared, which if acceptable to W. C. Gibson & Company would bring about a great reduction in expenses, and that if the board were in agreement the only business which Peabody & Company would discontinue engaging in would be that of trading its securities. Mr. Murchison then read the draft of the agreement and the board of directors voted to adopt it. Hence, Peabody & Company suspended active operations as of May 31,1933. Plaintiff maintains that O. P. Alford, individually and through the First Management Corporation, which he controlled, and W. C. Gibson, individually, and W. C. Gribs on & Company, which he controlled, and other individuals, violated their duties as officers and directors in taking over the business and good-will of Peabody & Company; that their actions constituted a fraud on the creditors; that their actions were for their own, profit and in violation of the contract of April 3, 1929; that the First Management Corporation and W. C. Gribson & Company should account for the value of the property taken over by them, including the good-will and profits made by them on the business, and that the individual directors of Peabody & Company who took over the reorganization of property on which bonds had been issued, should account for' the moneys received by them.

Plaintiff and defendants objected to the master’s report, and the objections were permitted to stand as exceptions. The chancellor overruled the exceptions of plaintiff and sustained the exceptions of defendants and entered a decree dismissing* the complaint (as amended and supplemented), for want of equity. Plaintiff urges that the officers and directors of Peabody & Company were acting in a fiduciary capacity, and that they took advantage of their relationship to their own gain and to the detriment of the corporation. Defendants respond by declaring that they acted in good faith. Therefore, it has been necessary to carefully examine the record. We agree with defendants that in order to understand the situation, it was necessary to present evidence showing the difficulties that Peabody, Houghteling & Co. faced at the time the agreement of April 3, 1929, was made. The finding that the sale of plaintiff’s business to the syndicate was occasioned by the financial difficulties facing plaintiff is supported by the evidence. A few months after the sale occurred the stock market collapsed, which was the start of the depression. The effect on the affairs of the new corporation is shown by the fact that whereas bonds and stock sales of plaintiff amounted to $37,781,717.50 in 1928, defendant corporation sold $12,254,196.33 in stocks and bonds in 1930; $5,875,000 in 1931, $1,598,000 in 1932, and suffered a net loss of over $145,000 in 1930, and corresponding net losses in 1931 and 1932. In the spring of 1933, the new company became involved in certain transactions reflecting upon its integrity, and particularly in connection with the attempted reorganization of Pettibone Mulliken Company, and the consequent newspaper notoriety, and the suit filed against Peabody & Company and others had an adverse effect on the affairs of the new corporation.

Plaintiff contends that when Peabody & Company suspended operations on May 31,1933, the “real estate department taken over by O. P. Alford was always profitable. In 1930 after deducting from the gross profits the commissions, salaries of officers, general payroll and miscellaneous, etc., amounting' to $73,606.-43, it left a net profit of $31,822.02. For 1931 the gross profit was $28,799.78, and after deducting salaries and miscellaneous expenses of $23,909.87, it left a net profit of $4,809.91. The net profit for 1932, after deducting $18,173.80 expenses, was $16,174.35. All this Alford and his First Management Corporation took over without paying a dollar for it. Of course, Alford could not have gotten this business if he had not been a director of Peabody & Company.” In 1929 Peabody & Company paid one quarterly dividend of 1% per cent, on its preferred stock. .Thereafter, nothing was paid on account of dividends or principal. We find that there is no justification for the charge of bad management. The gross sales by the old company for the year 1928 amounted to $37,781,717.50. The gross sales for the new company in 1930 amounted to $15,776,641.33; in 1931 $5,875,934.85 and in 1932, $1,598,604.76. In 1928 the old company had a net profit of $51,646.60. In 1930 the new company had a net loss of $145,656.15; in 1931 a net loss of $121,497.37, and in 1932 a net loss of $5,488.76. These were the dark years of the depression, and the mortgage, bond and securities business suffered even more than most other lines. Because of the diminishing business, it was decided to reduce salaries and expenses. The salary of Boss Byron, vice president, was reduced from $1,000 per month to $150 per month; that of Joseph M. King, comptroller (and later secretary) from $416 per month to $250; that of H. A. Bray, vice president in charge of the statistical department, from $6,000 per year to $3,600 per year, and that of William C. Gibson, vice president and sales manager from $1,000 per month to $450 per month. The total expenses of the old company in 1928 were $1,013,874.10, and the expenses of the new company in 1930 were $833,833.57. In 1931 they were $423,401.70 and in 1932, $119,686.92. The officers’ salaries of the old company in 1928 were $179,774.72, and of the new company in 1930, $88,484.88. In 1931 they were $43,406.57 and in 1932, $28,800. Other expenses were curtailed accordingly. The sales of mortgages from January 1, 1933, to May 1,1933, totalled $64,000. As conditions became worse, defendants endeavored to bring new capital into the company, but their endeavors met with failure. The findings of the master that the new company was handicapped from the start, that by the middle of 1931 “there was much trouble and bondholders created disturbances about defaulted issues,” that the management did its best to reduce expenses, that the officers and directors attempted to carry on until they could not do so without new capital, that plaintiff refused to co-operate in obtaining new capital, that new capital could not be obtained without the co-operation of plaintiff, and that finally the “point was reached in the early part of 1933 when it became apparent that Peabody & Company could not go on,” were justified by the evidence. His findings that there was no evidence of any conspiracy, bad faith or misconduct, and that there was nothing disloyal in the acts of any of the defendants, are also supported by the record. An examination of the statements reveals that the new corporation sought to reduce the trust fund items, the responsibility for which was taken over by the new company. W. C. Gibson was a director, vice president and sales manager of the securities department of Peabody & Company. On June 1, 1933, he organized W. G. Gibson & Co., with a capital of $5,000, borrowing the money from Ross G. Byron, vice president of Peabody & Company. All of the stockholders were connected with Peabody & Company. Plaintiff argues that the suspension of business and the formation of W. C. Gibson & Company were disloyal acts, conceived by the desire of the purchasers for personal profit and to the detriment of Peabody & Company and its creditors. Plaintiff states that Gibson & Company “took over the accounts, lists of customers, etc-., together with eleven employees of Peabody & Company, and is still conducting that business.” The motive that actuated the parties concerned in suspending the business of Peabody & Company may be gleaned from the minutes of the meeting of the board of directors of Peabody & Company, held on May 31, 1933, as follows:

“Mr. Murchison stated that in his opinion there would be no opportunity to engage in the underwriting-business. ... It was therefore highly advisable for the corporation to reduce its expenses to a mi-mmum and to conserve its assets in the hope that it would be prepared to engage in the underwriting business when such businesses would generally resume. He also stated that a number of the employees of the corporation had associated themselves with Mr. Gibson in organizing a corporation under the name of W. C. Gibson & Co. for the purpose of conducting a trading business. . . . That Mr. Gibson and the other employees retained friendly and loyal feelings to Peabody & Company and desired to do what they could to serve. ... In anticipation . . . he, Mr. Murchison, had a draft of agreement prepared which, if acceptable to W. C. Gibson & Co., would bring about a great reduction in expenses for Peabody & Company and would enable Peabody & Company to carry on such activities as it now ought to indulge in without the hazard and responsibility of maintaining a large office and a large personnel. . . . Thereupon on motion duly made, seconded and carried the following resolution was adopted:

“Whereas, because of adverse economic conditions generally obtaining there are virtually no security offerings to be underwritten or participated in; and “Whereas, it is the opinion of the Board of Directors of this corporation that no underwritings of securities be undertaken by this corporation during the> period of six months next ensuing; that during said period of six months the activities of this corporation be confined to reducing the said indebtedness for which said collateral is held as security . . . and that all expenses of this corporation be reduced during said period of six months, with a view to realizing . . . a sum sufficient, at the end of said six months’ period, to enable this corporation to resume the business of underwriting and selling securities . . .; and,

“Whereas, W. C. Gibson & Co. . . . has recently been created . . . and

“Whereas, said persons formerly employed by this corporation have offered to render such services as may be reasonably required of them to enable this corporation to carry out a plan by which this corporation may conserve its resources for a period of six months beginning with June 1, 1933;

“Now, Therefore, be it resolved:

“Second: That all leases of this corporation be terminated as of June 1, 1933, and that the President and Secretary be and they hereby are authorized to lease for this corporation such space as in their judgment may be necessary, provided the rental for such space be not more than One Hundred Dollars ($100) per month, until otherwise ordered by the Board of Directors of this corporation; . . .

“Sixth: That the President and Secretary be and they hereby are authorized and empowered to enter into an agreement with W. C. Gibson & Co., substantially in words and figures next following, to wit”; At that time, substantially all of the assets of Peabody & Company were pledged with banks, who were insisting on protecting their rights. The contract with Gibson & Company contemplated that for a period of six months the latter would collect and remit all outstanding accounts receivable, answer correspondence and do such other things as Peabody & Company might from time to time direct. Gibson & Company was to be paid $2,500 for this service, such payment to be made only out of collections. In view of the finding, in which we concur, that Peabody & Company could not continue in business at that time, the action of the board of directors was reasonable. There is no evidence of fraud. The record does not establish that Gibson & Company was formed to enter into the contract with Peabody & Company, or for the purpose of possessing the business of Peabody & Company. At that time it became necessary to suspend the business of Peabody & Company. As Gibson and his associates were acting in good faith, they had a right to form their own company in order to carry on the security business. That was the business they understood. The employees and officers of Peabody & Company, faced with the necessity of earning a living, also had a right to become employees of Gibson & Company. So long as they were acting in good faith, Peabody & Company cannot complain, nor did it suffer any loss because the employees went with the new company. Apparently, Gibson & Company carried out its contract with Peabody & Company. Whether Peabody & Company could successfully re-engage in business will never to any degree of certainty be known because before the expiration of the six-months’ period, and following the judgment taken by plaintiff, the Delaware receiver was appointed. The petition for the appointment of the Delaware receiver was signed by Boss G. Byron. Necessarily, the dissolution and winding up of the corporation would have to be under the orders of the Delaware court, the corporate charter having been issued by that commonwealth. If there was anything fraudulent in the action of Byron in asking the Delaware court to appoint a receiver and wind up the affairs of the corporation, that court was open to any person who wished to be heard. No one presented any charges before the chancellor of Delaware. Gibson & Company surrendered to the Delaware receiver all of the property that it had of Peabody & Company. While Gibson & Company was formed 12 days before Peabody & Company suspended operations, it was apparent for some period that it would be necessary for some action to be taken. Gibson & Company did not give employment to all of the old employees of Peabody & Company; most of them went with other investment houses. The record sustains the master’s findings that Gibson & Company did not take over the business of Peabody & Company. Gibson & Company entered into a new lease, removed the name of “Peabody & Company” from the door, obtained a new and different telephone line and number, and new letterheads were procured which did not contain any reference to the old firm of Peabody & Company. Gibson was not a large stockholder of plaintiff. He was a director for the period from December, 1932, until May, 1933. Prior to that time, he was connected with the sales end of the business. During the period he was director he was one of fifteen directors. After Peabody & Company suspended business he had nothing to do with its affairs. There were many conferences and negotiations between plaintiff and Peabody & Company relative to the payment of the unpaid portion of the purchase price of $500,000. After plaintiff took judgment, it became apparent that Peabody & Company could not resume business. The Delaware receiver came to Chicago and took possession of the property of Peabody & Company, including documents, books and records, under the direction of the Delaware chancellor; an appraisal was made and the receiver offered the furniture, fixtures and equipment for sale at not less than the appraised value. At the sale Gibson & Company purchased office equipment, filing cabinets, smoking stands, and one item described as “Lot. No. 291, one 5 and 6 drawer steel card cabinet with contents.” Voluminous testimony was offered as to whether Gibson & Company unlawfully took possession of cards and other records of Peabody & Company. On motion of plaintiff, the court appointed J. Howard Branch as receiver. Branch, the receiver appointed by the chancellor, has in his possession 18 bond indexes and card indexes of customers, and books of account. An inventory filed by him lists over 260 various files pertaining to customers. Plaintiff cannot attack the validity of the transaction whereby Gibson & Company purchased from the Delaware receiver ; in fact, .plaintiff has not attacked the validity of the Delaware proceedings. It will also be noted that plaintiff filed a claim in the Delaware dissolution proceedings and received a dividend on its claim in the sum of $15,500. At the time of the sale, Gibson & Company was not in any way connected with Peabody & Company, nor was the sale conducted by Peabody & Company. The sale was conducted by the receiver and there is no charge that the purchase price was not reasonable. We are of the opinion that the purchase is not subject to attack by plaintiff. In addition to the items purchased from the Delaware receiver, the defendants have possession of only such data with respect to sales and customers as accrued to them as their own property while employed by Peabody & Company and during the period of the contract between Gibson & Company and Peabody & Company. It was the custom with Peabody & Company for the salesmen to make up their own records. New salesmen who were hired were expected to bring lists of prospective customers with them. It is plain that the lists in use were not confidential ones. Gibson & Company had lists made up of a compilation of the lists of salesmen that went with Gibson & Company. These lists were not confidential information. Peabody & Company had no property right therein.

Plaintiff asserts that the defendants unlawfully seized and took over the good-will of Peabody & Company. Defendants say they did not take over such “good will,” and secondly that in fact, there was no good-will to take over. There is no doubt that in April, 1929, the members of the syndicate valued the goodwill of plaintiff very highly. Good-will value is based upon earning potentiality in excess of normal return on tangible assets. It means the existence of intangible values in the business, such as a trade name -of good repute, location, or uniqueness of product. We are sensible of the fact that a corporation may possess “good will” even when for a period of time it operates at a loss. However, it is apparent from the recitation as to the situation that confronted plaintiff in 1933, that it did not possess any “good will.” If the name Peabody & Company carried “good will” with it at that time, it is strange that neither the Delaware nor the Illinois receiver made any attempt to sell the same.

One of the conditions imposed by the Penn Mutual Life Insurance Company when business was commenced with Alford was that the name Peabody Management Company be changed so as to eliminate the word Peabody. To that request, Alford assented, and accordingly the name was changed to First Management Corporation. From a consideration of the entire record, we find that Gribson did not violate any duty that he owed to Peabody & Company, and that he had a right to organize the corporation of W. C. Gribson & Co., and to conduct it in the manner disclosed by the record.

In considering the charges against O. P. Alford and the First Management Corporation, it will be unnecessary to repeat what has been said previously. Penn Mutual Life Insurance Company was a good customer of plaintiff, and after April 3, 1929, of Peabody & Company. Plaintiff and Peabody & Company placed mortgages on real estate and sold the mortgages to the insurance company. The commission was paid by the mortgagor. There was no agency contract. As a matter of practice, however, it was expected that plaintiff and Peabody & Company would continue to service the mortgages until maturity. The mortgages generally ran for terms of 5 or 10 years. For this service no compensation was paid by the insurance company. No reserve was set up out of the commissions received to" cover the future cost of servicing the mortgages. The volume of mortgages sold by Peabody & Company to Penn Mutual shrank from $3,522,000 in 1930 to $1,239,000 in 1931, $502,000 in 1932 and only $64,000 during the first five months of 1933. Nevertheless, the servicing of the mortgages extended to the large volume sold to the insurance company during the previous years. Notices were sent to mortgagors of payments due, tax payments checked, properties periodically inspected, interest and principal maturities collected and remitted to the insurance company. The cost of this work was substantial. During the depression collections became increasingly difficult. While earnings of Peabody & Company on current business approached the vanishing point, there was no proportionate decrease in the cost of servicing the past business. By the end of 1932 it became apparent that Peabody & Company would have to abandon the Penn Mutual business unless some subvention could be obtained from the insurance company. Alford was requested to go to Philadelphia to confer with the officers of the Penn Mutual. For many years this insurance on the Chicago properties covered by mortgages held by Penn Mutual, had been placed through Alford & Company, general agents for a large number of insurance companies. Hence, he was acquainted with the officers of the insurance company. He tried to obtain an allowance of $1,000 for expenses of the Detroit office of Peabody & Company, but was allowed $150 or $200 per month. Later the Detroit office was taken over by the insurance company, and the office of Peabody & Company in Detroit was closed in February, 1933. Alford was requested to go to Philadelphia to request an allowance for the Chicago office of $1,000 a month. The representatives of the insurance company told him that they were considering the advisability of taking over the business in Chicago, the same as they had in Detroit, and that they had received unsatisfactory reports concerning the financial standing of Peabody & Company. Alford replied that although the finances of Peabody & Company were not in the best of shape, provision had been made to protect the interests of Penn by segregation of funds. Finally, he obtained a commitment of the insurance company to allow $500 a month on the expenses of the Chicago office as a month to month arrangement. Accordingly, during the last three or four months that Peabody & Company carried on active business operations, it received $500 per month from Penn for servicing the Chicago mortgages held by the insurance company. This allowance was less than the cost of the work to Peabody & Company. In September, 1932, an officer of plaintiff went to Philadelphia and solicited the return to plaintiff of the Penn Mutual loan agency in Chicago. Neither plaintiff nor Peabody & Company ever did any real estate agency or building management business. There was a bookkeeping segregation under the heading of “real estate department,” which represented income and expenses of the mortgage business as distinguished from the underwriting and sale of stocks and bonds. The income thus segregated included commission on insurance, and certain “real estate management” fees, which in fact were received for supervising the operations of certain properties on which bond issues had been defaulted. Peabody & Company did not actually manage properties. In 1932 there were mortgage sales of $502,000 and a gross profit of $15,692.50, and commission on insurance and loan renewals of $16,141.31. The statement shows a net profit in this department for the Chicago office of $16,174.35. In the 1930 and 1931 statements there was a charge for overhead of $1,000 per month. No such charge appears in the 1933 statement. If such charge were included, the net profit of the Chicago office ‘ real estate department” for the year 1932 would appear at $4,174.35. The comptroller, Joseph M. King, explains that the omission of the overhead charge against the real estate department in the 1932 statement was immaterial, since the departmental figures were only set up as a matter of convenience and were finally merged in the general profit and loss statement, which reflected all income and all the expenses of the entire business. The profits of the real estate department primarily depended upon income from the sale of mortgages. The mortgages sold from January 1, 1933, to May 1, 1933, totaled $64,000. The gross profits on sales of this amount of mortgages would be very little. It was therefore necessary to solicit the Penn Mutual for a subvention in order to keep the real estate department in existence. The record shows that by the middle of 1931 there were great numbers of defaults in bonds and notes sold by plaintiff and Peabody & Company. The officers and salesmen of the latter company were overwhelmed with complaints of customers. It was deemed advisable to set up some kind of an organization that might meet the needs of the situation. Murchison and Peabody of Peabody & Company suggested that a corporation with a limited capital be organized to take over the servicing of the defaulted bond issues, the capital of the new company to be put up by the stockholders of Peabody & Company. Pursuant to the discussion, Alford organized the Peabody Management Corporation. Murchison, president of Peabody & Company, agreed to subscribe $500. The other directors did not subscribe. Peabody Management Corporation was organized August 14, 1931. It did not transact business until the early part of 1932, when it began to manage about one-half dozen properties on which Penn Mutual held mortgages. Until Peabody & Company went out of business, Peabody Management Corporation had but a single employee. The money earned went to pay $100 per month for space occupied by Peabody & Company. Peabody & Company did not contribute anything toward the capital, cost of organization or expenses of operation of Peabody Management Corporation. Peabody Management Corporation, during the time Peabody & Company remained in business, limited its activities solely to real estate management. At the meeting of the board of directors of Peabody & Company on May 31, 1933, Alford inquired what arrangement was going to be made about the Penn Mutual agency. Murchison answered that since Penn Mutual wanted to take the business over, Peabody & Company might as well discontinue it. Around the middle of May, 1933, Alford went to Philadelphia and had a talk with the representatives of Penn Mutual and told them what was happening. They indicated that they already knew what was happening and asked Alford if he would take the “Penn Mutual Agency.” Alford replied that he could not take it personally, but that if the agency were given to Peabody Management Corporation, he could set up an organization to take care of the business. One of the representatives responded that if the name of Peabody were eliminated, such an arrangement would be satisfactory. Alford stated that he would have to ask for a continuation of the $500 monthly subvention and the Penn Mutual representatives consented. Alford reported to the officers of Peabody & Company the proposed arrangement, and when it was finally decided that the business of Peabody & Company would be suspended, he took up with some of the employees the matter of working for the management corporation. The name Peabody Management Corporation was then changed to First Management Corporation. On July 18, 1933, Penn Mutual sent a letter to the mortgagors in Chicago that arrangements for servicing loans had been made with the First Management Corporation. When Peabody & Company suspended operations on May 31, 1933, it claimed no control and sought to exercise no control over the disposition of the Penn Mutual agency. It is manifest that the Penn Mutual had sole control over its own business. The insurance company could exercise its discretion to handle the servicing of the loans direct, or it could make arrangements with any individual or corporation that it.chose. There is abundant evidence that the action of Alford & Company in taking over the so-called “Penn Mutual Agency” was in good faith and not violative of any duty that Alford or the other defendants owed to Peabody & Company.

Plaintiff also asserts that Alford & Company unlawfully took over the insurance brokerage business of Peabody & Company. The latter corporation as a subbroker placed through O. P. Alford & Company, as general agent for about 25 insurance companies, insurance on properties on which Peabody & Company made loans. At no time did Peabody & Company undertake a general insurance brokerage business. Under the Illinois license law passed in 1931, it would be necessary for Peabody & Company, in order to continue to receive insurance commissions, to apply for a license as an insurance broker. The act prohibits the payment of brokerage to an unlicensed broker. A license for the year 1932 was issued to Peabody & Company. Upon application for a renewal of the license in 1933, the commissioner of insurance noted that the certificate of authority issued to Peabody & Company to do business in Illinois did not authorize it to carry on an insurance brokerage business in Illinois. Thereupon the commissioner declined to renew the license. On June 14, 1933, the charter of the First Management Corporation was amended so as to authorize it to conduct a general insurance agency and brokerage business, and on June 22, 1933, it obtained specific authorization to conduct an insurance agency business in Illinois. Thereafter, the First Management Corporation, through O. P. Alford & Company, began to receive part of the commission on the insurance placed on properties mortgaged by Penn Mutual. We do not see anything to criticize in this transaction. Alford purchased at the appraised value of $1,432.75, various items of furniture, sold by the receiver. No testimony was offered attacking the values as fixed by the appraiser. Among the items purchased were filing cabinets which contained some of the papers of Peabody & Company and cards relating to the Penn Mutual loans. The receiver stated that they were of no value to him and that they could go with the cabinets. When J. Howard Branch, the local receiver, was appointed, Alford called his attention to the contents of the filing cabinets. Branch stated that as the Delaware receiver did not consider the records of any value, he did not care to take possession of them. The only records of Peabody & Company of interest to Alford were the cards and correspondence relating to the Penn Mutual loans and the cards showing insurance expirations. It appears that Penn Mutual kept its own record of loans and had as complete a record as Peabody & Company. The insurance cards were duplicate copies of the cards prepared by Alford & Company, the general agents. On these points, we find that the chancellor' was justified in finding that there was no breach of duty by defendants and that they acted in good faith.

Plaintiff also contends that Peabody & Company took the initiative in organizing various bondholders’ committees, and that the various defendants who were appointed on the committees should account to the creditors of Peabody & Company for the compensation they received for serving- on the committees. It is undoubtedly true that it was through the efforts of Peabody & Company that the committees were organized. Each committee acted under a separate deposit agreement, setting forth the duties and powers of the committee and provided for the payment of compensation for the members. Peabody & Company was designated as depositary under some of the agreements. When Peabody & Company made disbursements or performed clerical services for any committees, charges against the committee were entered on the books of the company and collected when funds became available. Peabody & Company did not assert any claim to fees of the committee members who happened to be officers or employees of the company. It appears that the possibility of earning fees as committee members was held out as an offset to cuts in salaries. In our opinion, the fees of the members of the committees belonged solely to them, and therefore the creditors of defendant corporation cannot claim any part thereof.

A thorough examination of the record in this case convinces us that the chancellor was right in dismissing the complaint for want of equity. There is abundant competent evidence to support the decree. Therefore, the decree should be and it is affirmed.

Decree affirmed.

Denis E. Sullivan, P. J., and Hebel, J., concur.


source: Caselaw Access Project

author: Mr. Justice Burke

license: Public Domain

text:
    In re Estate of Anna T. Grant, Deceased. Trenton Trust Company, Appellant, v. George E. Grant, Administrator of Estate of Anna T. Grant, Deceased, Appellee.
    Gen. No. 40,344.

      Opinion filed April 26, 1939.
    Bussian & DeBolt, of Chicago, for appellant.
    Tell & Dorgan, of Chicago, for appellee.
   Mr. Justice Burke

delivered the opinion of the court.

Anna T. Grant was indebted to the Trenton Trust Company of Trenton, N. J., in the sum of $15,000, and on April 25, 1927, executed two promissory notes payable to that company on demand, one in the sum of $12,000 and the other in the sum of $3,000. She -died on October 13, 1933, and on October 31, 1933, Edward E. Grant and George E. Grant, husband and son respectively, were appointed administrators with the will annexed. An inventory was filed and approved on May 3, 1934. The sole heirs and next of kin were the father and son. On May 18,1934, George E. Grant, the son, presented his final account and report, which showed a disbursement to his father, Edward E. Grant, of $1,919.42, and a like amount to himself. The account was approved. George E. Grant, in a verified report accompanying the account, stated that “said co-administrator further represents that there are no claims against the estate, and that all necessary disbursements, both as [to] the expenses incurred and as [to] the distribution under the Will have been made as shown in the Final Account which is filed herewith, and said coadministrator submits this as his Final Report and asks that he be discharged as ctiadministrator.” Accordingly, George E. Grant was discharged as coadministrator and Edward E. Grant continued to act as the sole administrator until his death in February, 1935. On October 2, 1935, George E. Grant was appointed administrator de bonis non with the will annexed, and is now the administrator of the estate. Publication for claims was duly made. The Trenton Trust Company did not file its claim in the probate court of Cook county within one year from the granting of letters. On June 1,1936, it filed a petition in the probate court in which it claimed that Edward E. Grant and George E. Grant were guilty of fraud and that because of their conduct the claim was not filed within the time limited; that the effect of such fraud, if no relief is granted, will be to enrich the Grants, and prayed that it be permitted to file its claim nunc pro tunc as of July 20, 1934. Issue was joined and after a full hearing, the request of claimant for leave to file its claim was denied. Appeal was perfected to the circuit court of Cook county, where a trial de novo was had, which resulted in an order that the petition of claimant for leave to file its claim be denied, and that the petition be dismissed. This appeal followed.

The first point urged by the claimant is that the probate court is a court of general jurisdiction in matters of administration of estates, and that as such it exercises certain equitable powers. That court must however, administer estates in accordance with the provisions of the statute. It has power to relieve against fraud committed in proceedings before it. It is agreed that the essential question for us to determine is whether the trial court erred in denying petitioner leave to file its claim and in dismissing the petition. Therefore, it is necessary to consider the facts as applied to sec. 71, ch. 3, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 110.071] (section 70 of Administration Act) the first part of which reads as follows:

“All claims and demands of whatever class not exhibited to the court within one year from the granting of letters as aforesaid shall be forever barred as to property and estate of the deceased which has been inventoried or accounted for by the executor or administrator.” It is unnecessary to consider the remaining portion of the section as it does not apply to the facts confronting us.

George E. Grant sent a letter from Woodstock, Illinois to claimant at Trenton, N. J., on November 23, 1933, advising the latter that the estate of Anna T. Grant was being administered by Edward E. Grant and himself, and giving the address of both of them. A telegram signed by George E. Grant was received by claimant on December 26,1933. It read: ‘ For Probate Court purposes estate of Anna T. Grant estimated worth Thirty Thousand at fair valuation Expect to be Trenton within week Will see you.” George E. Grant, visited at the offices of the claimant in Trenton the latter part of December, 1933, or the fore part of January, 1934, and talked with Allen W. Bowers, vice president of the bank. He informed Mr. Bowers that he did not know the value of his mother’s estate, but would endeavor to find out. Mr. Bowers testified that George E. Grant came to his office in Trenton, on January 3, 1934, and informed him that the estate owed no debts with the exception of the two notes of the bank, gave him a list of the assets of the estate and told him that he believed the loan would be paid from the estate. On March 20,1934, May 10,1934, and July 11, 1934, claimant addressed letters of inquiry to George E. Grant. On July 20,1934, claimant addressed a letter to George and Edward Grant, administrators with the will annexed, inclosing its claim against the estate of Anna T. Grant, deceased. The claim, received in evidence, bears the words: “Received the above proof of claim. Edward E. Grant, Administrator.” The claim appears to be in proper form. It was not filed in the probate court of Cook county. On August 3, 1934, Mr. Justus Chancellor, attorney for the administrator, addressed a letter to claimant stating that Edward E. Grant had handed to him a claim that Anna T. Grant was indebted to claimant in the sum of $15,000 on two promissory notes supported by collateral. The letter continues as follows: 0

“Mr. Grant advises that there was other collateral deposited with these notes. If not shown in the note, at any rate deposited with your company. If you present your claim, is it your intention to surrender this collateral so that the estate may have the benefit? No action having been taken during the lifetime of Mrs. Grant, of course, this is her property.

“Please advise us with reference to these matters, and oblige.” On August 6, 1934, claimant wrote Mr. Chancellor answering his inquiry as to the collateral and stated that claimant would be pleased to surrender the collateral provided its loan, plus interest to date, was paid. On August 29, 1934, claimant addressed another letter to Mr. Chancellor, asking for specific information concerning the total assets and probable date of settlement. On January 17,1935, June 28,1935, and November 4,1935, claimant addressed letters of inquiry to Mr. Chancellor, who replied under date of November 6, 1935, to the effect that he was no longer acting as the attorney for the estate of Anna T. Grant, and that William K. Tell of Weil & Tell, whose address he gave, represented the estate. On inquiry to Weil & Tell, claimant learned that its claim had not been filed. Thereupon it filed its petition in the probate court, which initiated the proceedings now here for review.

Claimant argues that the evidence establishes that the Grants were guilty of fraud upon the petitioner; that their course of conduct, beginning with the visit of George E. Grant and continuing with the correspondence described, justified the contention that the object they had in view was to lull the petitioner into a sense of security by stating to it at various times that the estate was worth at least $30,000, and that there were sufficient assets in the estate to pay all claims including that of the bank. It contends that as a part of the plan, George E. Grant and his father withdrew from the estate $1,919.42 each, and at the same time George E. Grant filed his final report as coadministrator and that without the misrepresentation that there were no debts, the probate court would not have permitted the Grants to take unto themselves practically the entire estate. It maintains that the actions of the Grants constitute a fraud in equity. The administrator resists the contentions by stating that there is no evidence of fraud. The record falls far short of establishing fraud. The letter written by Mr. Chancellor on August 3, 1934, followed the receipt of the claim by Edward E. Grant. Chancellor’s letter inquires of claimant, “if you present your claim is it your intention to surrender the collateral so that the estate may have the benefit?” That inquiry clearly put claimant on notice that the attorney for the estate did not consider that the claim had been exhibited to the court. As a lawyer, he knew it was necessary for claimant to file the claim within a year. The letter of August 3,1934, was received by claimant in ample time for it to file its claim in the probate court. A careful analysis of the testimony and exhibits satisfies us that no fraud was committed.

Section 71, ch. 3, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 110.071], requires that all claims and demands be exhibited to the court within one year, or be forever barred. It is the established law that the knowledge of the personal representative that there was a claim made by creditors, does not take the case out of the statute, which requires a claim to be exhibited in court. See Morse v. Pacific Ry. Co., 191 Ill. 356; Roberts v. Flatt, 142 Ill. 485; Ankrom v. Doss, 270 Ill. App. 464. The administrator is under no duty to file creditors ’ claims with the clerk of the court. In the case of Pittsburgh Plate Glass Co. v. Blue Island Trust & Savings Bank, 272 Ill. App. 85, the bank acted as administrator of an estate. A claimant delivered to the bank his claim which was not filed within the year allowed by the statute. He sued the bank in trespass, claiming damages because of the neglect of the bank as administrator to file his claim. In a trial before the court without a jury, the defendant was found guilty and damages assessed in the sum of $1,000 and judgment rendered on the finding. It was conceded that the estate was solvent and able to pay the claim had it been filed in apt time, and that the claim was a meritorious one. This court reversed the judgment without remanding the cause. Clearly in the case at bar, there was no obligation imposed on the Grants to file the claim for the creditor.

We agree with the contention of the administrator that the partial distribution in May, 1934, did not interfere with the right to file claims in the probate court within the prescribed time. Claimant did not know until November, 1935, that its claim had not been filed. As there was no duty on the part of the administrator to file the claim, and as no fraud was committed, the fact that partial distribution was made does not have any bearing on the case. It is a fact that in his report at the time the partial distribution was approved, George E. Grant reported to the court that there were no debts against the estate. If, within the year in which claims could be filed, claimant herein or other claimants filed their claims, then the matter of requiring the administrator and his sureties to turn back the amounts received by them, would arise. As no claim was filed, that proposition does not arise.

The final point urged by claimant is that there was a premature discharge of one coadministrator, and that therefore, the statutory time for filing a claim of a creditor who had no notice thereof is suspended during the period of prematurity. When the probate court on July 20, 1934, discharged one of the coadministrator-s, it did not in any way limit the right to file claims. The estate was still open and the right of any creditor to exhibit his claim to the court within a year from the granting of letters was fully preserved.

Because of the views expressed, the orders of the circuit court of Cook county and the probate court of Cook county are affirmed.

Order affirmed.

Denis E. Sullivan, P. J., and Hebel, J., concur.


text:
    Richard H. Thomas, Jr., Appellee, v. Pullman Trust and Savings Bank et al., Defendants. Appeal of Herman Block, Appellant.
    Gen. No.. 40,509.
    Opinion filed April 26, 1939.
    Rehearing denied May 8, 1939.
    McCarthy & Toomey and Jacob Stagmar, all of Chicago, for appellant; Jacob Stagmar and James C. O’Brier, Jr., of Chicago, of counsel.
    Louis Hershman and Bradburr & Dammann, all of Chicago, for appellee; Louis Hershman, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

On April 5, 1934, Albert Blue filed his complaint in the circuit court of Cook county asking for the appointment of a successor trustee under a trust agreement dated April 22, 1929, between John Blue and John A. Schmidt, and for other relief. On August 31, 1934, Richard H. Thomas, Jr., was appointed successor trustee. On September 8,1936, he executed a lease to Herman Block for the building known as 4737-39 Prairie Avenue, Chicago, for a term commencing October 1, 1936, and ending September 30, 1939, at a rental of $90 per month for the first year, $100 per month for the second year and $110 per month for the last year. The seventh clause of the lease reads as follows:

“Seventh. On or after October 1, 1937, in the event the described premises should change ownership by reason of sale or otherwise, this lease may be can-celled by lessor upon ninety (90) days’ notice in writing to the lessee.” The premises contained two 7-room apartments, four 6-room apartments and one 3-room basement apartment. The tenant continued to pay the rent. In September, 1937, plaintiff, as trustee, and Philip Wernick, a bachelor, executed an agreement wherein plaintiff is described as the “seller” and Wernick as the ‘ purchaser. ’ ’ The agreement provides that “if the purchaser shall make the payments and perform the covenants hereinafter mentioned on his part to be made and performed, said seller hereby covenants and agrees to convey or cause to be conveyed to said purchaser, by his Trustee’s Deed, all his right, title and interest in and to the following described real estate, . . . subject to existing leases, if any.” On September 30, 1937, the trustee caused to be served on the lessee Block a notice in writing .as follows:

“Please be advised that the building at the above address has been sold. As per one of the provisions of the lease that you now hold on said property, we are hereby cancelling said lease as of December 31st, 1937. The new owner will take possession on January 1st, 1938.

(Signed) Richard H. Thomas, Jr., Trustee, John Blue Trust.”

On January 7, 1938, the successor trustee filed a petition in the circuit court of Cook county in the same case in which his appointment had been made, and set up the above facts. The petition also stated that Block had failed and refused to deliver possession of the premises and prayed that the court direct the clerk to issue a writ of assistance directed to the sheriff, commanding him to evict Block and all persons claiming under him. No summons was issued, but one of the attorneys for the plaintiff served a notice on Block on January 5, 1938, that the petition would be presented to the court on January 7, 1938. On January 14, 1938, Block filed his answer. No question was raised as to the regularity of the proceedings. After a trial before the chancellor an order was entered on April 28, 1938, reciting that the cause coming on to be heard on the petition of the successor trustee for writ of assistance, it is ordered that the clerk forthwith issue the writ of assistance. There is no finding such as would ordinarily be made in the trial of a forcible entry and detainer case. The evidence consisted of the documents mentioned. This appeal is prosecuted by Herman Block.

The first point urged is that there was no change of ownership and that hence the trustee did not have the right to terminate the lease. The only evidence as to change of ownership is the contract for a deed. It will be observed that such contract provides that “if the purchaser shall make the payments and perform the covenants hereinafter mentioned on his part to be made and provided,” the seller agrees to convey his title, and that such title will be conveyed subject to existing leases, if any. The purchaser was to pay $100 on January 1, 1938, and $100 each month thereafter for 23 consecutive months, and $125 on the first of each and every month thereafter until the purchase price and interest and all other charges were paid. Wernick does not become the owner until the purchase price is paid. The agreement also requires the purchaser to pay the taxes and to secure insurance, and gives seller the right to cancel and forfeit the agreement if the same is violated.

In the case of Capps v. National Union Fire Ins. Co., 318 Ill. 350, the policy of insurance involved provided that the same should be void if the insured was not the owner. As a matter of fact, he was a contract purchaser as in the instant case. A judgment rendered in favor of the insured in the sum of $1,800, was reversed, and the Supreme Court said:

“It is definitely established by decisions of this court that the vendee under an executory contract of sale has neither the legal nor equitable title to the property covered by the contract. (Budelman v. American Ins. Co., 297 Ill. 222; National Fire Ins. Co. v. Three States Lumber Co., 217 id. 115; Phenix Ins. Co. v. Caldwell, 187 id. 73; Langlois v. Stewart, 156 id. 609; Chappell v. McKnight, 108 id. 570.) ”

In deciding the question we, of course, must confine ourselves to the evidence presented, which consists of the lease, contract and notice. There is nothing in the record to indicate that the parties in using the language “in the event the described premises should change ownership by reason of sale or otherwise,” intended that the word ownership should convey any pnusual meaning. The purchaser Wernick may never become the owner of the property. Hence, we agree with the contention of Herman Block that under the factual situation the purchase contract could pot be a basis for the termination of the lease, as the event contemplated, namely, the change of ownership, did not occur. The tenant also maintains that the action, if any lies, should be brought by the person entitled to possession. Finally, he insists that under the terms of clause seven, the notice could not be given until .“on or after October 1, 1937.” On March 4, 1938, Philip Wernick, the contract purchaser, filed his petition asking leave to intervene. The record does not show as to what action was taken on this petition. The name of the attorney who appeared for him before the chancellor is noted as of counsel on the appellee’s brief.

While the question was not raised by the parties, we do not wish to be understood as approving the practice followed by the parties in filing the petition in this case. Normally, the trustee would file an action in forcible entry and detainer, and the defendant would be served with summons in the usual way. The defendant would then have an opportunity for a trial by jury. Here the parties treated the petition as a part of the original proceeding wherein the successor trustee was appointed, and there was no service of process. The question arises as to what action would have been taken had Block failed to appear in response to the notice served on him by one of the attorneys. It will also be observed that there was no finding in the case. The order merely directs the clerk to issue a writ of assistance.

In view of our finding on the first point urged by appellee, it is unnecessary for us to rule on the second and third points. For the reasons stated, the order of the circuit court of Cook county directing the issuance of a writ of assistance, is reversed.

Order reversed.

Denis E. Sullivan, P. J., and IIebel, J., concur.


text:
    Kraus Bond and Mortgage Organization, Inc., Appellee, v. Salvatore Vicari et al., Appellants.
    Gen. No. 40,525.

      Opinion filed April 26, 1939.
    Louis T. Herzon, of Chicago, for appellants.
    Love & Love, of Chicago, for appellee; Stuart N. Arkih, of Chicago, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

On January 7, 1930, the director of trade and commerce issued a license to Marek Kraus, doing business as Industrial Loan Service (not incorporated), to engage in the business of making loans in sums of $300 or less, secured or unsecured, at a greater rate of interest than 7 per cent per annum, in accordance with the Small Loans Act, ch. 74, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 67.01 et seq.], at 1726 West Chicago avenue, Chicago. On June 18,1930, the licensee loaned defendants the sum of $200, and on that day defendants executed a combined promissory note and trust deed. This instrument is printed on one sheet. The first part conveys certain real estate in Chicago to Marek Kraus, as trustee. It recites that the grantors are indebted upon their principal promissory judgment note of even date, payable to Marek Kraus, doing business as Industrial Loan Service, in the sum of $200, payable in weekly instalments of $4, with interest at 3½/% per cent per month, payable weekly, on the entire balance, which from time to time remains unpaid, and that the payee is licensed by the State of Illinois to make loans in the sum of $300 or less at rates of interest not exceeding 3½/% per cent per month. Following that recitation, appears a printed form of note of the same date, which reads: “For value received we promise to pay Marek Kraus $200.00.” The note then contains the usual form authorizing confession of judgment. The note is signed and sealed by defendants. Below their signatures appears the remainder of the printed form of the trust deed, which provides that grantors shall pay the taxes, etc. The defendants signed and acknowledged the note, which was recorded. The note is an integral part of the trust deed. It appears that Marek Kraus was also interested in a mortgage business, through the instrumentality of a corporation named the Kraus Bond & Mortgage Organization, Inc. The charter for that organization was issued by the Secretary of State on July 18, 1930, and was recorded in the recorder’s office on July 19,1930. On July 26,1930, the director of trade and commerce issued a license to the corporation under the Small Loans Act. The certificate of incorporation shows that Marek Kraus subscribed for one share of stock, Walter Demkowski one share and Joseph O. Kraus for 498 shares of stock. The capital stock was paid in full in the medium of $1,000 in cash and $49,000 in property transferred to the corporation. The instrument constituting the combined mortgage and note was among the property turned over to the corporation as part of its capital. The note does not contain any indorsement by the payee, Marek Kraus.

On January 9, 1937, plaintiff filed its amended complaint in chancery, seeking a foreclosure of the lien of the trust deed. The amended complaint asserted that there was a balance due on the principal of the trust deed and note of $68.18 and interest of $108.52, or a total of $176.70, and that plaintiff was the legal holder and owner of the joint trust deed and note, a copy of which was attached to the amended complaint. An answer was filed and the cause was referred to a master, who recommended a decree in accordance with the prayer of the amended complaint. Objections were filed and overruled, and the objections were permitted to stand as exceptions before the chancellor who overruled the same and entered the decree. At the master’s sale, the property was bid in by plaintiff for $397.03. Defendants filed objections to the approval of the sale. The objections were supported by an affidavit by the attorney. Affiant stated that the premises are located at 4108 Carroll avenue, Chicago, improved with a two-story frame building containing two apartments of five rooms each, being used for residential purposes; that the premises are situated in a substantially built up residential district; that all general taxes and special assessments against the premises have been paid in full to date; that the premises are incumbered with a lien of a first mortgage securing an indebtedness of $1,000, leaving a balance due of $750; that “affiant has had considerable experience in determining the fair cash market value of properties of like nature in and about the location of the instant property”; that affiant personally saw and examined the property and states that the fair and reasonable cash market value is approximately $3,500, and that the equity is reasonably worth $2,750, and that the bid was grossly inadequate, unfair and unreasonable and entirely out of proportion to the fair, ordinary cash market value of the premises in question.

The first criticism leveled at the decree is that “a mortgage purporting to secure a note which does not exist cannot be foreclosed, even though an indebtedness actually existed at the time it was executed, as the note evidencing the debt is the principal consideration and the mortgage but the incident.” The mortgage and the note are one instrument and are construed together. There is no doubt that the loan of $200 was made to defendants and that they gave the note and mortgage to secure the payment of the same. The amended complaint seeks the foreclosure of the lien of the trust deed. While the note does not say anything about interest, the trust deed does provide for the payment of interest. If the note is disregarded, plaintiff may still sue to enforce all of the terms of the trust deed. However, an examination of the instrument shows that the note and mortgage are combined so as to form one.

The second point urged is that the allegations and proof must agree or no recovery can be had. It is obvious that the proof supports the allegations.

The third point argued is that “a promissory note made payable to a person therein named cannot be transferred by mere delivery without endorsement so as to vest the legal title in the holder and give him the right to sue thereon in his own name. ’ ’ This is a complaint in equity to enforce the trust deed. The record shows that the combined note and mortgage was delivered to plaintiff with the intent of transferring title. Marek Kraus testified, without objection, that “the Kraus Mortgage & Bond Organization took over all the assets whatever Marek Kraus had or possessed and all the securities and funds were assigned to the Kraus Mortgage & Bond Organization . . . for the stock which was given to Marek Kraus by the corporation.” In view of the fact that defendants did not object to the introduction of the quoted testimony and that there is no evidence to the contrary, the master had a right to find that the combined mortgage and note of defendants was assigned to the corporation. The plaintiff, therefore, was in equity the holder and owner of the instrument sued on. Here it may be of interest to note that we examined the objections to the master’s report (which were permitted to stand as exceptions before the chancellor) and do not find that they raise the point urged, namely, that a promissory note made payable to a person therein named cannot be transferred by mere delivery without indorsement so as to vest the legal title in the holder and give him the right to sue thereon in his own name. The ninth exception approaches closest to the proposition. It reads: “For that the Master further erred in failing to conclude from the evidence that Kraus Bond & Mortgage Organization, Inc., plaintiff in this cause is merely an assignee of Marek Kraus, and that as assignee it is not entitled to an interest rate exceeding the statutory seven (7) per cent per annum.” This exception admits that plaintiff is at least an assignee, but maintains that as such assignee it cannot recover interest exceeding the rate of 7 per cent. Defendants do not in their exceptions make any point under section 22 of the Civil Practice Act (sec. 146, ch. 110, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 104.022]) that plaintiff in its pleading on oath (of an officer or agent) does not allege that it is the actual bona fide owner of the instrument sued on, and does not set forth how and when it acquired title thereto. The well established rule in this State is that a point not raised in the exceptions filed to the master’s report is waived. (Dreger v. Boyer, 297 Ill. App. 581.)

Defendants maintain as a fourth point that one who takes notes without indorsements, takes them subject to the same defenses that they would have been subject to had they remained in the payee’s hands. Plaintiffs concede the point. Defendants do not show how they are in any way harmed by the fact that the complaint is brought by plaintiff. The combined note and mortgage was offered in evidence and stamped as an exhibit by the master. Therefore, it cannot hereafter be used in any way to the detriment of the defendants.

The fifth point advanced is that a license under the Small Loans Act must comply with the provisions of the statute regulating the business of making loans in order to avail himself of the special interest rate permitted by statute, otherwise the loan is usurious, illegal and void. Defendants cite what they say are, six infractions of the Small Loans Act. We are satisfied that there was a substantial compliance with the act in the making of the loan.

The sixth point is that a license under the Small Loans Act approved June 14, 1917, and in force July 1, 1917, is not transferable or assignable, nor are the rights and privileges thereof assignable or transferable. Section 5, par. 23 of ch. 74, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 75.37(5)], provides that “the license shall not be transferable or assignable. ’ ’ Plaintiffs agree that such is the law. Defendants, however, insist that the license to plaintiff was not issued until July 26,1930, whereas the transfer of the assets to the corporation occurred on July 18, 1930. They argue that at the time plaintiff acquired the instrument and until July 26, 1930, a period of eight days, plaintiff was without a license to transact a small loans business. At the time the loan was made, the lender, Marek Kraus, was licensed and during the time the payments on the loan were made, plaintiff was licensed. Hence, plaintiff and his predecessor had a right to demand and receive the 3½ per cent interest contracted for.

The seventh point presented is that a suit in foreclosure should be dismissed for want of equity where it appears that the indebtedness evidenced by the note secured by the mortgage has been fully paid and discharged. As a general rule, the statement is correct. There are cases, however, where despite the payment of the note the mortgagor may still be required to fulfill the covenants of the mortgage, which was the situation in the case of Washingtonian Home of Chicago v. Van Meter, 297 Ill. App. 591. The point here urged is founded on defendants ’ argument that the collection of 3½ per cent per month constituted usury, and that therefore, the payments made both on principal and interest should be credited to principal. From our discussion of the proposition previously advanced, it follows that the decree is correct in finding that the defendants are indebted under the instrument in the sum therein stated. Finally defendants contend that the amount bid at the sale was inadequate and that the chancellor should have disapproved the sale. The burden is on defendants to establish that the sale price was so grossly inadequate as to require that it be disapproved. No evidence was presented. All that appears is an affidavit made by the attorney for defendants, and it does not appear that this affidavit was accepted as evidence. Assuming that we have a right to consider the affidavit, we observe that the age of the building is not given, the dimensions of the lot are not stated, the rentals not stated or the character of the tenants, or the amount of taxes usually assessed against the property; nor is the extent of depreciation given. The expense of operation is not stated. There is no statement as to how the building is heated, or the kind of plumbing, or how the flats are decorated. While affiant states as a conclusion that the cash market value of the equity is $2,750, no facts are given to show on what that opinion is based. He does not tell of sales of property in the vicinity within a reasonable time, and he does not attempt to give a value based on economic consideration. If he took the stand, he could be cross-examined on all these matters, and also on his experience as a real estate appraiser. The record is barren of any evidence that would warrant us in saying that the sale price was so inadequate as to justify us in setting aside the order confirming the sale.

For the reasons stated, the decrees of the superior court of Cook county are affirmed.

Decrees affirmed.

Denis E. Sullivan, P. J., and Hebel, J., concur.


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    Chicago Title and Trust Company, Appellant, v. Barnett Vincennes Hotel Corporation et al., Appellees.
    Gen. No. 40,540.
    Opinion filed April 26, 1939.
    Altheimer, Woods & Smith and Woods, Woods, Brown & Slater, all of Chicago, for appellant; Walter B. Smith and Charles H. Blumenfeld, of Chicago, of counsel.

      Harry A. Biossat, of Chicago, certain for appellee.
   Mr. Justice Burke

delivered the opinion of the court.

On October 6, 1931, on motion of the plaintiff, Richard M. O’Brien was appointed receiver of the premises known as the Vincennes Hotel, located in Chicago. He was directed to collect the rents, manage the premises and perform the usual duties of a receiver under a complaint for the foreclosure of the lien of the trust deed. On November 14, 1936, a decree of foreclosure was entered. Pursuant to the decree, the property was sold by a master in chancery on November 14, 1936. On January 6, 1937, the court confirmed the sale and directed that the receiver continue in possession of the premises until the expiration of the period of redemption. After crediting the amount received in the sale, there was a deficiency in the sum of $114,609.34. On February 3, 1937, the court entered a deficiency judgment against the Barnett Vincennes Hotel Corporation, a corporation, for the amount of the deficiency. On March 24,1938, the attorney for the receiver served notice on the attorneys for plaintiff that on March 25, 1938, he would appear before Judge James F. Fardy and “present the petition and final report and account of the receiver herein, said report being for the- period from December 1,1937, to March 16, 1938, copy of said petition being herewith served upon you, and ask for the entry of an order approving same, and for the allowance of fees to said receiver and to the attorney for the receiver herein.” As stated, a copy of the petition was at the same time delivered to the attorneys for plaintiff. The notice, petition and final account were presented to the court on March 25, 1938. The petition recites inter alia that the period of redemption had expired and that he had received $2,209.61 and disbursed $265, leaving a balance on hand of $1,944.61. He prayed that an order be entered “approving his twelfth and final report and account herewith presented, allowing him such fees as the court may fix on account of his services as such receiver herein, and allowing Charles P. Hansen, his attorney herein, such fees on account of his services as such attorney herein, as the Court may fix, directing- your petitioner with respect to the balance in his hands after the payment of said fees, discharging your petitioner as receiver herein, and canceling the liability upon your petitioner’s bond.” On March 29, 1938, the court entered an order approving the final report and account, allowed fees to the receiver and his solicitor, and ordered that said Richard M. O’Brien, receiver, shall pay the balance in his hands after the payment of the above fees to himself and his attorney on the general taxes levied on the premises herein, and that the said Richard M. O ’Brien be discharged and the liability on- his bond' canceled. On April 25, 1938, plaintiff presented a petition in which it recited that the notices served upon its solicitors did not state that any request would be made for the entry of an order directing the payment of taxes; that the attorney whose name was signed to the notice served on it on March 24, 1938, was not the attorney who had theretofore appeared for the receiver; that it had no notice of any substitution of solicitors for the receiver; that the receiver on November 18, 1937, paid $1,000 on account of 1935 taxes and on April 1, 1938, paid $1,819.61 on account of 1936 taxes; that by reason of the latter payment on taxes, the entire net earnings of the receivership during the period of redemption were exhausted and nothing remained to be applied upon the deficiency; that the payment of taxes after the sale was improper and illegal, and prayed that the orders entered subsequent to the sale directing payment on account of taxes, be vacated, and that the receiver be directed to pay plaintiff for the benefit of the bondholders the sums so paid on .account of taxes, crediting such payments to the deficiency decree. On May 5, 1938, the receiver answered to the effect that on January 6, 1937, an order was entered directing him to pay the moneys that he then had on hand, on delinquent taxes; that pursuant to the order and on November 18, 1937, he paid $1,000 on account of 1935 taxes and on April 1, 1938, he paid $1,819.61 on account of 1936 taxes; that in making such payments on account of taxes, he followed the orders and directions of the court, and that his actions in making the payments were proper. On June 9, 1938, the court decreed that the petition of complainant be denied and dismissed its petition, to reverse which this appeal is prosecuted.

The rents, issues and profits were pledged as security for the payment of the debt. Plaintiff had a clear right to insist that the balance in the hands of the receiver be applied on the deficiency. The parties are not in dispute as to that proposition. The receiver asserts that it was his duty as an officer of the court to comply with the order directing the payment of the balance on account of taxes. Plaintiff replies that it had the right to appear within 30 days after the entry of the order and to move that the order be vacated, and that when the receiver paid the taxes before the 30-day period had expired, he did so at his peril. The order was entered March 29, 1938; the taxes were paid by the receiver on April 1, 1938, and the petition by the plaintiff was presented on April 25, 1938. Section 174, ch. 110, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 104.050] (section 50, Civil Practice Act), provides that the court “may within thirty days after, entry thereof set aside any judgment or decree upon good cause shown by affidavit, upon such terms and conditions as shall be reasonable. ’ ’ The instant appeal is from the order wherein the court declined to grant the prayer of plaintiff’s petition. While it is not an appeal from the order of March 29,1938, if the position of plaintiff is sustained, the effect would be to set aside that part of the order of March 29, 1938, which directed the receiver to pay the balance on hand on account of taxes. The question to be determined here is whether in dismissing the petition presented by plaintiff, the chancellor abused the discretion reposed in him. The petition recites that there was a substitution of solicitors for the receiver without notice to plaintiff, but it does not indicate that plaintiff was in any way harmed by such lack of notice of the substitution. The petition, a copy of which was served on plaintiff’s attorney on March 24, 1938, sets out the receipts and disbursements and states that there was a balance on hand of $1,944.61. Plaintiff was given notice that the receiver was asking the direction of the court as to what to do with the balance on hand after the payment of fees. Hence, plaintiff had notice that the court would enter an order disposing of the balance. While the petition filed by plaintiff sought to charge the receiver with the $1,000 paid on November 18, 1937, as well the $1,819.61 paid on April 1, 1938, the notice of appeal affects only the payment of April 1, 1938. Plaintiff knew that it was the duty of the receiver to comply with the order of the court, yet it waited until April 25, 1938, before taking any steps to indicate that it objected to the receiver paying the funds on hand on account of taxes.

In Reardon v. Youngquist, 189 Ill. App. 3, this court said, p. 12:

“A receiver is an officer of the court and subject to its orders. The real custody of the property in his hands is in the court, of which he is an officer. Coates v. Cunningham, 80 Ill. 467. As such officer, he has no discretion or personal control over the property in his hands. Fields v. United States, 27 App. Cas. D. C., 433. He must obey the orders of the court so long as they are unimpeached. People v. United States Mut. Acc. Ass’n, 88 App. Div. (N. Y.) 597. Expenditures made in pursuance to such orders cannot be questioned on the receiver’s accounting. People v. Manhattan Fire Ins. Co., 41 Misc. (N. Y.) 611; State v. Port Royal & A. Ry. Co., 45 S. C. 464; People v. United States Mut. Acc. Ass’n, 88 App. Div. 597. Neither can the propriety of entering the order be challenged on exceptions to the master’s report on the receiver’s account. Woolsey v. Cummings Car Works, 33 N. J. Eq. 432. Obedience to such orders is his sufficient protection. How & Co. v. Jones, 60 Iowa, 70; In re Home Provident Safety Fund Ass’n, 129 N. Y. 288; Id., 60 Hun. 584; Willis v. Sharp, 124 N. Y. 406; Pfeffer v. Kling, 58 App. Div. 179, affirmed in 171 N. Y. 668; Pierce v. Lees, 17 App. Div. 346; State v. Port Royal & A. Ry. Co., 45 S. C. 464. And this is true even if the order is erroneous and is subsequently reversed. Platt v. New York & S. B. Ry. Co., 170 N. Y. 451; Coe v. Patterson, 122 App. Div. 76, and 123 App. Div. 914; Lesster v. Lawyers’ Surety Co., 50 App. Div. 181.

“Having had notice of the various petitions of the receiver for direction and authority to pay the various items now objected to, they are chargeable with notice of the orders entered. It was clearly the duty of appellees, if they desired to oppose the payment of those various items by the receiver out of the funds in his hands, to have opposed the entry of the order by showing to the court why it should not or could not legally be entered, or at least to have sought its vacation on motion and a showing. Failing in this they should have notified the receiver that they would hold him responsible for a misapplication of the funds, if he obeyed the order. Having done none of these things, but on the contrary having acquiesced in what was done by absolute silence, even if not by actual consent, their conduct savors of an attempt to entrap the receiver and should be and in our judgment is enough to estop them from now complaining. We think the receiver should have credit for all moneys paid out by him in pursuance to the orders of the court above referred to.”

There is no contention that the receiver acted in bad faith. Had plaintiff, prior to the time when the receiver paid the taxes, given notice that it would appear and ask that the order directing the payment of taxes be vacated, the situation might be different. Here the receiver acted pursuant to the order of the court. He presented his petition and account to the court and asked the court for directions. He was not required to wait 30 days before obeying' the court. The court directed him to pay the balance in his possession on account of taxes. Under the circumstances, it would be an injustice to require him to pay plaintiff (for application on the deficiency decree) the sum which he paid on account of taxes. Therefore, the decree of the superior court of Cook county is affirmed.

Decree affirmed.

Denis E. Sullivan, P. J., and Hebel, J., concur.


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    Henry P. Urbanus, Appellee, v. Irene Burns et al., Appellants.
    Gen. No. 40,607.
    Opinion filed April 26, 1939.
    Rehearing denied May 8, 1939.
    John F. Haas, Albert N. Charles and Willis B. Wood, all of Chicago, for appellants.
    Harry S. Greenstein, of Chicago, for appellee; Harry F. Brewer, of Chicago, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

There is competent evidence to establish that in 1914 plaintiff became engaged to Loretta Burns, in token of which he gave her a diamond ring; that in 1917, their engagement having come to an end, she returned the engagement ring and there ensued a period of estrangement for some six years; that on Christmas Eve, 1921, plaintiff gave Loretta a dinner ring; that on Christmas Eve, 1926, he gave her a wrist watch; that on Christmas Eve, 1927, he gave her an onyz ring; that on Christmas Eve, 1928, he gave her a diamond ring; that on June 1, 1935, Loretta Burns died intestate leaving her surviving as her only heirs at law and next of kin, her three sisters and one brother; that subsequent to her death, plaintiff made claim to the gifts, contending that each of them had-been given to Loretta in contemplation of marriage, and that their marriage relation not having been consummated because of her death, he was by law entitled to the return of the gifts. On June 4,1936, plaintiff filed a replevin suit for the recovery of the jewelry from the brother and sisters of decedent. On June 25, 1936, he filed a declaration in trover and conversion, asserting that the defendants on June 1, 1935, took the jewelry described and unlawfully became possessed of the same and unjustly detained the same, well knowing the chattels to be the property of plaintiff. Defendants filed their answer and averred that the gifts were Christmas gifts; that plaintiff did not make any demand for the return of the same upon deceased in her lifetime; that more than five years elapsed between the "date of the last gift and the date of the death of Loretta Burns; that on June 12, 1936, letters of administration were taken out in the probate court and issued to Irene Burns as administratrix of the estate of Loretta Burns; that on June 22, 1936, the items of jewelry were included in the inventory of the estate; that said jewelry was never in the physical possession or control of the defendants but was in the custody of the administratrix, and that they had no knowledge of the accuracy of the description or the value of the articles of jewelry mentioned in the complaint; that the gifts were made to Loretta Burns in her lifetime as absolute gifts, and that upon her death they became the property of her estate, and that the proceedings, if any, should have been instituted against the administratrix and not against the heirs. On a trial before a jury a verdict was rendered finding the defendants guilty of unlawfully withholding the property and assessing plaintiff’s damages at the sum of «$750. Motions for a new trial and for a judgment notwithstanding the verdict, were made by defendants and overruled. Thereupon the court entered judgment on the verdict, from which defendants prosecute this appeal.

At the trial the defendant Irene Burns produced in open court four pieces of jewelry which she stated she found in the safety deposit box held jointly by Loretta and herself. Plaintiff admits that the dinner ring, wrist watch and onyx ring were given to Loretta by him. He contended, however, that the fourth item, a diamond ring, was not the diamond ring he gave to Loretta on Christmas Eve, 1928. Plaintiff introduced testimony showing that on January 1, 1935, the fair and reasonable market value of the diamond ring which he gave her on Christmas Eve, 1928, was $750. There was testimony to the effect that the value of the onyx ring on June 1, 1935, was $40, the dinner ring $65 and the wrist watch $65. There does not seem to be any doubt that the diamond ring which Irene Burns produced in court was not the diamond ring which was given to Loretta on Christmas Eve, 1928. The diamond ring given to Loretta was worth $750, and the diamond ring produced in court, which plaintiff says was not the ring he gave to Loretta, is worth $100. Loretta and Irene had a joint safety deposit box, to which both had access. Irene visited the box about July 26, 1935. Plaintiff infers that the defendants substituted a cheaper ring for the $750 ring. A sister-in-law of plaintiff testified that she saw Loretta wearing the ring a couple of weeks before she died. It does not follow that Loretta placed the ring in the safety deposit box or that she had the ring at the time of her death. Defendant Irene Burns testified positively that the ring was not in the box. There was not sufficient evidence to warrant the court in submitting to the jury the proposition as to whether defendants unlawfully possessed the diamond engagement ring. As to the dinner ring, the onyx ring and the wrist watch, there is no evidence that would warrant the court in submitting a verdict as to defendants James H. Burns, Helen Burns and Mazzie Small. The latter three persons did not at any time have possession or control of the jewelry.

The dinner ring, onyx ring and wrist watch have a total value of $170. The dinner ring was given in 1921, the wrist watch in 1926 and the onyx ring in 1927. Defendants argue that these articles were given to their sister as Christmas gifts. Plaintiff, however, maintains that they were gifts made in contemplation of marriage, stating that a gift made by a donor in contemplation of marriage to a donee to whom she is engaged to be married, is a conditional gift, and upon the termination of such marriage engagement without the fault of the donor, he is entitled to recover such property. Plaintiff’s position is that he was engaged to Loretta at the time of her death, and that because a marriage was not solemnized, he is entitled to a return of the gifts. Defendants contend that there was no engagement at the time of her death. From the evidence submitted to the jury, we are satisfied that the jury had the right to find that there was an engagement. There can be little doubt that if the engagement to marry was terminated because of the fault of the donee that he would be entitled to the return of the gifts that he made in contemplation of marriage. Under the facts of the instant case, there was no fault on either side. There was evidence to the effect that the marriage was to be solemnized toward the end of the month in which Loretta died.

In Rochafellow v. Newcomb, 57 Ill. 186, it appeared that Abraham Rockafellow had conveyed land to Mary Newcomb in contemplation of their marriage, and that Mary Newcomb had refused to marry him. The court said:

“The party failing to comply has no right, either in morals or law, to property thus acquired. The contract was sacred, having the sanction of both Divine and human law. The party in default should not be allowed to reap benefits from its violation. This would disregard the long settled principles of equity and jurisprudence. ’ ’

The cases that we have examined wherein the courts of review have considered that the donee should return the jewelry given in consideration of marriage, are cases where the lady refused to carry out the contract.

In the case of Schultz v. Duitz, 253 Ky. 135, Carl Schultz delivered an engagement ring to Clara Duitz. Subsequently, the parties went out hunting squirrels, and while sitting under a tree, he took the ring off her finger and put it in his pocket. She demanded that he return it, and on his refusal, brought an action to recover. She recovered a judgment in the sum of $450, which was affirmed by the court of appeals of Kentucky. The court said:

“Appellant voluntarily gave appellee the engagement ring as an additional consideration for her promise of marriage and thereafter voluntarily breached the contract, and now attempts to invoke the aid of the law to relieve him of the situation in which he, without legal excuse, voluntarily placed himself.”

At the time the articles of jewelry were presented, both parties knew, that according to the course of nature, either one of them might die before the marriage was consummated. Had Loretta lived and had plaintiff declined to marry her, he could not recover the jewelry or the value thereof. Had he died before they became married, his personal representatives could not recover the jewelry for the benefit of his estate. At the time of her death, Loretta had a right to the possession of the jewelry as against all persons. She did not at any time break the contract to marry plaintiff or refuse to marry him. She was the owner of the jewelry at the time of her death and she did not breach the marriage troth. Hence, plaintiff had no right to claim the recovery of the same as against her brother and sisters or personal representative.

In answer to the defense of the statute of limitations, asserted by defendants, plaintiff states that in the case of a contract to marry, the statute of limitations does not begin to run until the time of the definite breach of such contract. While it is unnecessary to pass on that defense, we call attention to the fact that plaintiff recognizes that in order to recover, he must establish a breach of the contract. Certainly there was no breach of contract by defendant, and we understand that plaintiff does not contend that there was a breach. His position is that the marriage could not be carried out because of her death, and that therefore, the jewelry should be returned to him. Because of the views expressed, the motion for a judgment notwithstanding the verdict should have been allowed. Therefore, the judgment of the superior court is reversed and a judgment notwithstanding the verdict is entered here for defendants and against plaintiff for costs.

Judgment reversed and judgment notwithstanding the verdict here for defendants and against plaintiff for costs.

Denis E. Sullivan, P. J., and Hebel, J., concur.