author: Mr. Presiding Justice Barnes

text:
    Jacob L. Kesner, Appellant, v. Consumers Company, Appellee.
    Gen. No. 32,540.

      Opinion filed December 31, 1929.

      Mayer, Meyer, Austrian & Platt, for appellant.
    Winston, Strawn & Shaw, for appellee; Edward W. Everett and George. T. Evans, of counsel.
   Mr. Presiding Justice Barnes

delivered the opinion of the court.

This is an action to recover rent after August 1,1917, under leases from plaintiff Kesner to defendant company running to 1933, and covering the 20th and 21st floors and additional rooms of the Consumers Building at the Northwest corner of South State and Quincy Streets, Chicago. Defendant paid the rent to August 1, 1917, and vacated the premises July 27, 1917, under a claim of constructive eviction. Under the pleadings and stipulations the case went to trial upon that as the controlling issue and resulted in a verdict and judgment for defendant. This appeal followed.

A former trial resulted in a judgment for plaintiff for $73,962.34. The judgment was reversed by this court and the cause remanded for a new trial (239 Ill. App. 92), for errors in giving and refusing instructions and in the admission of evidence. So far as the case was tried in conformity with the views there expressed, we are, of course, bound by them.

The evidence is* voluminous. The points raised are discussed at great length. But as we view the record, the main question is: Did.the leasing by plaintiff of other parts of the building to film exchange companies and, in view of the character of their business, permitting them to conduct the same therein — especially after the fire hereinafter referred to — operate to deprive defendant of the beneficial use or enjoyment of the demised premises so as to justify its vacating the same? We shall recite the facts that seem pertinent to that question.

After the execution of the leases to defendant, plaintiff executed leases to film exchange companies for space oij. the 4th, 14th, 15th, 18th and 19th floors of said - building “for office, sales and work room or motion picture film exchange.” Substantially all of the 19th floor and the entire 15th and 18th floors were used for such purposes. Two exchanges, the Pathé and another, occupied space on the 4th floor.

On July 1, 1917, about 3 a. m., when few, if any others than employees of such exchanges were in the building, a fire broke out in the vaults of the Pathé exchange containing films, and was accompanied by a series of explosions. The fire was described as of a fierce character, a “roaring furnace,” the flames shooting out like a blow torch from the vault window across a 12-foot alley where they set fire to another building, and also across Quincy Street, breaking windows on its south side. It heated the fire escape to a white heat, warping it and the standpipe attached thereto and melted off the hose connections to the 4th and 5th floors on the outside standpipe and also glass in the windows of one of defendant’s rooms on the 5th floor immediately above the Pathé vaults. The film vaults were wrecked. Poisonous gases were emitted and one man overcome by them.

It is unnecessary to elaborate upon other effects of this particular fire. The important and controlling facts for consideration, in our opinion, are the inherent danger of fire from the ignitible nature and explosive ingredients of films and the poisonous and highly dangerous gases they give off when burning or decomposing. These facts bear directly on the main question above stated.

While the precise cause of the fire was not ascertained, several experts testified to the highly ignitible and combustible character of the films and to the dangers of fire and the hazards arising from handling and storing them, particularly from explosions and the evolving of toxic gases. A film is a thin strip of cellulose coated with photographic emulsion. It is less than 2 inches wide and from 10 to 25 one-thousandths of an inch thick. A reel of film contains 1,000 feet and weighs 5- pounds. At times the vaults of these exchanges contained many tons of thesé films, which in the course of their business were carried back and forth from their rooms to exhibition places.

Testifying to their characteristics and the attendant dangers of handling them and stating them in the order of their importance, plaintiff’s" own and only expert described them as follows: Ease of ignition; combustibility; rapidity of burning; ease of transmission of fire; difficulty in extinguishing when thoroughly burning ; the possibility of explosions of gas mixtures. He stated that an open flame or spark may be supplied by the most “trivial circumstances,” — a match that may be carelessly dropped or trod upon, a broken electric light globe, a short-circuited electric wire, unprotected steam pipes, a lit cigar or cigarette, and the like.

It appeared from the testimony of one of plaintiff’s witnesses that in the course of conducting the film exchange business, which required bringing in, storing and taking out films by their employees, there was much confusion during the rush hours between 11 p. m. and 3 a. m., and that often cans of film were then strewn around the floor, reels of film exposed, vaults left open, reels “slammed” into them and piled around on shelves or on the counter without can or metal containers, and that smoking at night in the rooms was a common practice. Some of these acts would be deemed negligence and some were in violation of the ordinance, with which, as we say later, plaintiff would be chargeable.

There was no substantial dispute as to the dangers and hazards attending the handling and storing of such films, or of plaintiff’s actual or at least constructive knowledge of them. It was shown that to a certain point a film has the same ingredients as gunpowder and other explosives, that it ignites at a comparatively low temperature and more easily than any common substance except gunpowder and like explosives, that it burns with extreme rapidity and does not require air to burn because the substance itself has sufficient oxygen, that when thoroughly burning there is no means of extinguishing the fire, that water will not do it, that it will burn 10 to. 15 times faster than paper in similar form, that the heat so generated is so intense that it will pass through a brick wall and start the decomposition of films on the other side of it, that a film will decompose without flame and in an air-tight compartment and also under water, that the gases therefrom may cause explosions or disruption from pressure, that decomposing in a vault creates pressure which may be sufficient to blow out its walls and to force gases out into the room where mixing with oxygen they may burst into flame, that when burning, a film gives off highly toxic gases, carbon monoxide and carbon dioxide, that breathing air containing a small percentage of carbon monoxide is often fatal to the human system, sometimes in a few minutes, that one-hundredth of one per cent mixed with air would be fatal in five minutes, that these gases will go through any aperture or opening, through the crevices around doors, and in case of fire (there were grilled doors to elevators and open stairways in the building) would under pressure of heat therefrom permeate all open space above to the highest floor of the building, and might be released in sufficient quantities to cause death to occupants of the higher floors.

While plaintiff offered evidence tending somewhat to minimize the extent and imminence of these dangers, yet their inherent nature and the necessity for extreme precautions for safety, whether in transporting, handling or storing films in large numbers or quantities, must be recognized as indisputable facts.

It was undoubtedly with reference to these dangerous characteristics that the ordinance of the City of Chicago creating the Bureau of Fire Prevention and Public Safety provided many requirements intended to guard against the inherent dangers of the business of storing and handling films, and recognized it might be a nuisance. It required the chief to make an investigation “for the purpose of ascertaining whether or not the building or place at which it is desired or intended to store or use motion picture films is so situated that the storing or using of motion picture films therein would not be so dangerous as to constitute a nuisance, or to be a menace to the safety of the public or to the adjoining property, and also whether the conditions under which such motion picture films are to be checked or used, are such as to provide the maximum of safety.”

It provided, among other things, that the films be kept in individual tin cans, metal or galvanized boxes with tight fitting covers and when not in use be stored in fireproof vaults, that only 20 films be exposed when being inspected or examined, and not exceeding 5 be kept or stored in a room where there was a projecting machine; that the walls of the .vaults (in a fireproof building) be of brick not less than 8 inches thick, or hollow tile not less than 12 inches thick, laid in cement, the top and bottom to be waterproof and made of brick, tile or concrete 8 inches thick, that the vaults be ventilated to the outside air by an open area of at least 50 square inches, and the repairing room have outside ventilation and be separated from the rest of the building by tight partitions of noncombustible material. There was evidence tending to show that some of these provisions also were violated, and that plaintiff knew or was charged with knowledge of some of such violations.

The briefs in this case discuss at great length the doctrine of constructive eviction and cite many authorities, ancient and modern, bearing upon nearly every phase of the doctrine. It would require too much space to discuss-the cited cases and note their distinguishing features. In the view we take of this case it is not necessary so to do nor to recite in detail the evidence bearing upon specific violations of the ordinance. We are disposed to base our opinion mainly upon the view that the facts support the conclusion that permitting the conduct of a business which subjected plaintiff’s other tenants to such inherent dangers constituted a nuisance which it was the duty of plaintiff to abate, and that his failure, or what was his refusal, in practical effect, to do so, violated the covenant implied in every lease for quiet enjoyment (16 R. C. L. 763, sec. 259; Russell v. Clark, 173 Ill. App. 461) and constituted a constructive eviction.

Whatever differences of view may be advanced respecting the landlord’s duty before the fire we think there is no room for any difference of opinion as to his duty when the fire and the investigation as to its causes had unquestionably revealed to him and his tenants knowledge of the inherent dangers attendant on the conduct of the business of storing and handling films. Not until then had defendant become apprised of the dangerous situation to which its employees .and property were subjected by the conduct of such business. Had defendant known of these dangers before that time it would hardly have been willing to expose its force of about 300 employees, one-fourth women, occupying floors above the exchanges, to the sleeping dangers of death from fire or toxic gases. Accordingly, • immediately after the fire, defendant’s,president notified plaintiff that unless the film exchanges were removed from the building defendant would vacate its rooms. Plaintiff thought him too easily “scared” and said he could not terminate their leases but suggested that he. might give defendant space on floors below those occupied by the film exchanges. While defendant’s president indicated a willingness to make such a change if satisfactory space could be furnished, after conferences and correspondence on the subject he deemed the offered space unsatisfactory for defendant’s needs and conveniences, and on July 21, notified plaintiff by letter of defendant’s election to cancel the leases and vacate its rooms on or before midnight of July 31, up to which time it had paid rent, basing its action on the untenantability of the rooms because its property and the lives of its employees were rendered unsafe by such film exchanges.

Without detailing more particularly these negotiations, we find nothing in them, as urged by plaintiff, • that operated as an estoppel or that justifies the claim of bad faith on the part of defendant in conducting them. If the facts and circumstances justify the conclusion of a constructive eviction defendant had a reasonable time within which to vacate the premises (Giddings v. Williams, 336 Ill. 482), and the time taken under the circumstances was not unreasonable. It was for defendant to say whether or not the space offered below the floors occupied by the film exchanges was adequate to its needs, and the negotiations with regard thereto had no legitimate bearing on the sole question here involved, whether the housing of such a dangerous business beneath defendant’s rooms was a breach of the covenant for peace and quiet enjoyment.

Nuisances were classified by onr Supreme Court in Laugel v. City of Bushnell, 197 Ill. 20, as “first, those which in their nature are nuisances per se, or are so denounced by the common law or by statute; second, those which in their nature are not nuisances but may become so by reason of their locality, surroundings or the manner in which they may be conducted, managed, etc.; third, those which in their nature may be nuisances, but as to which there may be honest differences of opinion in impartial minds.” While perhaps the business itself of storing and handling films may not come within the first classification, it may easily fit under either of the other two classifications. If it was not in its nature a nuisance it may well be said to have become so when conducted in such surroundings and in such a manner as to imperil the property and lives of others. And if there may be an honest difference of opinion respecting whether it may have been regarded as a nuisance in its nature prior to the fire, we think no impartial mind would be in doubt on the subject after the fire.

One of the definitions of a private nuisance is any condition created by one which causes another reasonably to be constantly apprehensive of injury to his life or property.” Zeppenfeld v. Franklin Motor Service Co. (Ind.), 134 N. E. 487. In Henderson v. Sullivan, 159 Fed. 46, it was defined as “anything which annoys and disturbs one in the possession of his property, rendering its ordinary use and occupation physically uncomfortable to him.”

It would seem that after the fire defendant might well have been apprehensive of future fires, explosions and deadly gases with possible fatal consequences, no matter what precautionary measures for safety might be taken. The very fact that the fire in question took place from an unascertained cause while the several film exchanges were being conducted under what plaintiff claims was a general compliance with ordinance restrictions and provisions, might well justify such fear and the apprehension of another fire with more disastrous consequences. In Laflin & Rand Powder Co. v. Tearney, 131 Ill. 322, in an action to recover damages resulting from an. explosion of gunpowder on property adjacent to plaintiff’s dwelling house, the court said that the explosive was so situated with reference thereto “that it was liable to inflict serious injury upon her person or property in case of an explosion,” and that the keeping of the explosive “considered with reference to ‘the locality, the quantity and the surrounding circumstances,’ constituted a nuisance per se.” While that was not a case of landlord and tenant the views of the court thus expressed are none the less applicable to the analogous condition of dangers to a landlord’s tenants from explosions and gases incident to the business of storing and handling films which he permits to be conducted on the premises.

In this connection it is well to note that the very nature of the business is such that the ordinance contemplated that it might constitute a nuisance. Another section of the ordinance declared that “any building, ... or premises perilous to life or property by reason of the nature, condition or quantity of its contents or its use ... is hereby declared to be a nuisance, and in such a case directs the Chief of Fire Prevention and Public Safety to cause its abatement. ’ ’ The recognized fact that the nature of the business is such that it may nevertheless be or become a nuisance and render the premises such, seemingly would cast upon the landlord a duty to investigate and know whether conditions in his building were such as would deprive his tenants of the beneficial use and enjoyment of their leaseholds and require abatement. That plaintiff was chargeable with knowledge of the provisions of the ordinance and of the dangers to be averted is not open to question. His leases to the film exchanges required him to do structural work for housing the exchanges and contemplated that the same should be in conformity with the ordinances, and the work was done under his direction or superintendence, and in some respects was not in .conformity with the ordinance provisions. In our former opinion we said and again repeat that the duty to comply with the ordinances was upon the owner of the building as well as upon the tenants and that plaintiff had the power under his leases to the film exchanges to compel observance by them of all city ordinances.

That the business was lawful and might be licensed does not affect the question.- As said in Halligan v. Wade, 21 Ill. 470: “There are lawful trades which are nevertheless treated as nuisances in particular places and localities.” As recognized in Barnard Realty Co. v. Benwit, 139 N. Y. S. 1050, we think the changed conditions incident to modern buildings require elasticity in the application of the doctrine of constructive eviction. The storage and handling of films in large quantities is comparatively a recent business and the dangers attending it have only lately become generally known. These dangers are particularly menacing to occupants of our modern high structures like that in question where escape may be impossible. Even while this case has been under consideration the whole country has been apprised through the press of a sudden ánd disastrous fire resulting, as alleged, from gases generated from films stored in a hospital in the City of Cleveland, Ohio, that was accompanied by loss of life to many of its inmates. We do not pretend to take judicial notice of the direct causes thereof, but the generally accepted accounts that the fire emanated from stored films and spread so suddenly as to foreclose escape of many of the inmates of the building may at least be referred to as justifying apprehension and fear on the part of those who incur the dangers attending the storage of films. And even while we write this observation is emphasized by reports of another fire in a film studio in New York in which ten persons lost their lives and others were severely burned. No one would question defendant’s right to vacate the premises had plaintiff leased space beneath the floor occupied by it for storing other forms of explosives, even under regulatory provisions, yet the films, according to the testimony, possessed characteristics that made them equally dangerous and unsafe to tenants of the building occupying floors above where they were stored.

The general principles underlying the doctrine of constructive eviction are too well established and understood to call for special discussion. As is frequently the case, the difficulty is in the application of settled principles to an unusual or novel state of facts. Reviewing the authorities cited by appellant we are impressed that in the discussion of them appellant has stressed points and conditions therein that are not applicable to the distinguishing features of the case at bar.

While no case of constructive eviction based upon a state of facts similar to those at bar has been called to our’attention, yet we think that under the facts and circumstances disclosed in this case the conducting of these film exchanges, storing and handling many tons-of films in a building where others were subjected to the imminent dangers therefrom of fire, explosions and toxic gases, rendered the business a nuisance which plaintiff was bound to abate, and that upon his failure to do so defendant was justified in vacating the premises and released from further payment of rent.

Appellant has devoted some 50 pages of its brief to an extensive and technical discussion of numerous instructions given and refused. It would extend this opinion beyond reasonable- limits to take up .each one of the various points discussed. We have already expressed views which should obviate the necessity of rehearsing many of the points made. Suffice it to say if our views are correct we find nothing sufficiently misleading or erroneous in the instructions- given when taken as a whole, or in the action of the court in refusing plaintiff’s instructions, that calls for a reversal of the judgment.

In view of the conclusion reached we would not, but for alleged errors in the giving or refusing of instructions relating to the charge of negligence on the part of plaintiff to see to it that the provisions of the ordinance were complied with, discuss more particularly that subject. As before stated, there was evidence tending to show negligence in that respect by the film exchanges and also knowledge thereof, actual or constructive, on the part of plaintiff. We shall not review the numerous details relating to that subject. If the business constituted a nuisance then negligence was not a necessary element to the defense. (20 R C. L. 381, sec. 3.) There was a basis for the instructions on the subject, however, in plaintiff’s neglect of duty as aforesaid.

In this connection plaintiff invokes the rule that the landlord cannot be held liable for the negligent conduct of a business by one of his tenants whereby another tenant suffers injury unless he actively participates therein. As before stated, and as held in' our prior decision, under the ordinances and the facts of the case the duty rested upon plaintiff as owner of the premises, regardless of the technical relationship of landlord and tenant, to see that the ordinances were complied . with. He was, therefore, directly chargeable with any omission of his duty in that respect, and in view of the nature of the business permitted by him to be conducted by his tenants and his said duty, could not shift his responsibility on them. For that reason we do not think there was any room in this case for the application of the doctrine invoked. It is incompatible with the facts of the case and the theories upon which it was tried.

The judgment is affirmed.

Affirmed.

Scanlan and Gridley, JJ., concur,


source: Caselaw Access Project

license: Public Domain

text:
    Charles T. Corwin, Defendant in Error, v. Jacob N. Tillman, Plaintiff in Error.
    Gen. No. 33,496.

      Opinion filed December 31, 1929.
    Walter F. Cooling, for plaintiff in error; Michael B. Roderick, of counsel.
    Schimberg & Harrison, for defendant in error.
   Mr. Presiding Justice Barnes

delivered the opinion of the court.

This writ of error seeks review of the decree canceling and declaring null and void a quitclaim, deed to an interest in a lot in Miami,- Florida, and for a return of the purchase money paid therefor of $5,250.

The gist of the bill is that defendant induced complainant by fraudulent representations to enter into the transaction whereby he received said deed.

Numerous errors are assigned which may be summed up as questioning the right to equitable relief, the sufficiency of the bill and of the evidence, and the refusal to quash a capias ad satisfaciendum issued upon the decree.

The main contention against the' right to equitable relief is that complainant could, on his claim óf fraud, have repudiated the transaction and sued at law for the return of his money. But when one repudiates a . contract by rescinding it on the ground of fraud he must, under a well established principle in equity, restore the other party to the condition in which he stood before the contract was made. (Rigdon v. Walcott, 141 Ill. 649.) Complainant having received an unrecorded deed for the lot and defendant having, as alleged in the bill, refused complainant’s offer to return the same and also the demand for the return of his purchase money, complainant in order to effect a restoration of the status quo clearly had a right to resort to equity to have the deed canceled and thus restore to defendant his legal title to the lot, which on the face of the deed still remained, in complainant. The restoration of defendant to the' status quo was a condition precedent to complainant’s right to the return of the purchase money. So long as defendant took the attitude of rejecting any attempt to reinvest him with the legal title he is in no position to complain of complainant’s resort to a court of equity to have the deed canceled and declared void. We think, therefore, the demurrers to the bill which in one form or another rested upon the theory that complainant had a complete remedy at law, were properly overruled, and the cause was properly submitted on the main issue of fact raised by the answer to the bill, as amended in certain formal particulars, whether complainant was induced to accept the deed on the false representations. A bill in equity .based on a very similar state of facts was upheld in Bunn v. Schnellbacher, 163 Ill. 328.

While there were express denials and contradictions of complainant’s version of the transaction and of the representations on which the bill was founded, we think the claim of fraud and misrepresentation was amply sustained, not only by oral but documentary evidence. It tended strongly to prove that defendant about the beginning of October, 1925, approached complainant with reference to taking a one-fourth interest in said lot representing that he and two others were negotiating for its purchase at the price of $35,000, $21,000 in cash, subject to a mortgage of $14,000, and that each of the four purchasers would be required to put up $5,250 in cash. Induced by these statements complainant paid defendant $5,195 for his fourth share in the form of checks (subsequently cashed) and $55 cash a few days later, for which defendant gave his receipt, dated October 5, 1925, stating it was for a one-fourth interest in equity in said lot, and that defendant would procure for complainant the necessary papers to be signed by both the other two parties. At later conferences defendant undertook to explain the delay in giving title and in July, 1926, handed complainant a quitclaim deed signed by himself and wife conveying an undivided one-fourth interest in said lot. It having been handed to complainant in the dark without his examination of it, as he testified, the next morning when he noticed it was not signed by the other two parties he requested of defendant a deed signed by them. Defendant kept promising the required papers until the following October when complainant learned for the first time from Stephenson, one of the other parties, that the purchase price of the property was $25,000 and not $35,000.

Two days later, after defendant received complainant’s check, he paid $3,000 of his share and about ten days later entered into a written agreement with the other two parties, stating that each of the three had paid in his proportionate share of the purchase price of $25,000, and that the title was to be held by one of them, Stephenson, and that each would be entitled to one-third of the proceeds of the sale of the lot and was to pay one'-third of the encumbrances, interest and taxes thereon.

Defendant claimed that what he sold and agreed to sell complainant was an undivided one-fourth interest out of his one-third interest. Stephenson testified that defendant told him to tell complainant that $35,000 was paid for the property. "When asked with regard to that defendant testified he did not remember whether he so told him or not. Such an uncertain state of mind upon such an important fact in a litigation involving his integrity does not commend his evidence to favorable consideration. In his letter of October 7, 1925, remitting to Stephenson the $3,000, he said: ‘ ‘ Can sell one-fourth interest in the lot for $5,250 cash, so that would make us a profit of $2,500 to be divided between you, Newman and myself. . . . You will have to hold the purchase price at $35,000 on the lot and the profits over and above to be divided four ways. ’ ’ These statements are inconsistent with his claim that he was selling complainant one-fourth of the lot out of his interest of one-third, and tend to confirm the alleged fraudulent representations. Without referring specifically to other testimony of a corroborative character we have no doubt as to the sufficiency of the evidence to establish the alleged fraud and that through it complainant was induced to part with his money.

It is urged that the deed should have been set forth in the bill. It was set out in the original bill, but on some theory the court on its own motion after hearing the demurrer struck the same from the bill. It was not necessary, however, to set out the deed in full or in substance so long as it was sufficiently identified and described to warrant its introduction in evidence. And it was sufficiently described in the decree. The gist of the case was fraudulent representation whereby complainant was induced to accept the deed, and not its sufficiency to pass title under the Florida laws.

The contention that Tillman’s wife was a necessary party to the bill possesses no merit. The contract for the deed was with Tillman and he received the consideration therefor. Her signature to the deed was apparently for the purpose of conveying her dower rights. The decree on the prayer asked for took nothing from her, but, on the contrary, the cancellation of the deed thereunder would restore whatever rights she had lost.

• Nor was it necessary that the bill should ask for the cancellation of the contract. If its repudiation was all that was necessary, complainant could have sued at law for the return of the money he paid upon it. But, as before stated, before he was entitled to its return he •was bound to restore defendant to his former status. A court of law could not nullify the effect of the execution and delivery of the quitclaim deed. Resort to equity to have it rendered void and canceled was necessary. Law cases cited by plaintiff in error brought to recover money paid upon false representations in which it was held that the plaintiff need not tender what he received therefor when it was worthless, have no application here where it is not questioned that plaintiff in error had some title to the lot his deed purported to convey. That a court of equity had jurisdiction we have no doubt.

Defendant filed a petition for a rehearing on the ground of newly discovered evidence supported by certain affidavits. We have carefully examined both the petition and the affidavits and think the petition was properly denied. The most that can be said of the affidavits is that they tend merely to impeach the credibility of complainant and one of his witnesses on immaterial issues, namely, as to where the money was paid and whether complainant was ever alone in Tillman ’s house. It is not questioned that the money was paid. The gist of the case is that the payment was induced by fraud. There is nothing in the alleged newly discovered evidence that purports to controvert that claim. None of the affiants claimed to have overheard the conversations upon which that claim is predicated. The petition and affidavits do not set forth anything which if true should produce on another trial of the issue a different result on the merits, one of the main requisites to entitle one to a rehearing on newly discovered evidence.- Such evidence must not only be material to the issues but of a controlling and conclusive character. (Crane Co. v. Parker, 304 Ill. 331.) The evidence relied on as such is not of that character.

Át a subsequent term defendant made a motion td vacate the decree and to dismiss the amended bill for want of equity on the ground that the court was without jurisdiction of the subject matter. As before stated, that ground of the motion was ill-founded, and if there was any alleged error which involved the merits of the case it was too late to entertain such a motion. (Tosetti Brewing Co. v. Koehler, 200 Ill. 369.)

After entry of the decree defendant was taken into custody on a writ of capias ad satisfaciendum issued by the clerk of the court. There was no express provision therefor in the decree. The claim of error in the court’s ruling is based on the contention (1) that no writ can be issued upon a chancery decree for money, whatever the findings of fact, and (2) if the writ may-issue the clerk had no authority to issue it without an express provision in the decree therefor.

The first contention is predicated upon the claim that malice is not the gist of the action as is required to authorize such a writ upon a common law judgment. In the case of Whalen v. Billings, 104 Ill. App. 281, there was involved consideration of the power to award such writ under a decree in chancery wherein were findings that certain property was obtained upon false and fraudulent representations, and it was held that it was an appropriate writ under our statute (Cahill’s St. ch. 77, § 5) with reference to an execution against the body, and is “a final process according to the nature of the case” in accordance with sec. 47 of the Chancery Act, Cahill’s St. ch. 22, jf 47, and authorized under the power conferred by sec. 42 thereof. The court there cited also from Freeman on Executions to the effect that where a decree is for the payment of money, and a statute gives authority to issue writs appropriate for its enforcement, satisfaction of such a decree may be sought by “capias ad satisfaciendum, in any case where such writ would be proper, had the recovery been in law instead of equity.” The court there recognized the general and well-recognized rule that where a court of chancery has obtained jurisdiction it would retain the case for final determination of all matters at issue arising therefrom, and in its discretion may proceed to establish purely legal rights and grant legal remedies, and that the same remedies to enforce the collection of a chancery decree for money may be resorted to as in the case of a judgment at law. We concur in all that was there said upon that subject.

But it is argued that the decree referred to in that case expressly provided for the execution of such a writ. That fact, however, does not affect the right to the process for carrying the decree into effect. Under sec. 47 of the Chancery Act, Cahill’s St. ch. 22, H 47, that right depends upon “the nature of the case.” While the action is in form for equitable relief the gravamen and gist of the action is a tort clearly set out in the second amended bill, namely, the perpetration of a malicious fraud. Had complainant brought an ex delicto action of deceit based upon the same state of facts and obtained judgment there would be no question as to malice being the gist of such action and that a ca. sa. would issue to enforce the judgment. Upon the same facts malice is none the less the gist of the action because relief is sought in equity, and under the principles stated in Whalen v. Billings, supra, resort may be had to the same remedy as at law to enforce the collection of the decree for money. The allegations in the amended bill and the finding in the decree are that defendant falsely and fraudulently made the misrepresentations to complainant therein recited for the purpose and with the intention of deceiving- and defrauding him. It cannot be doubted, therefore, that malice was the gist of the action. The test is not the form of the action (Barney v. Chapman, 21 Fed. 903) nor the specific relief asked, but whether the facts upon which the right of action rests imply malice.

What we have said is sufficient to indicate, we think, that a jury trial is not necessary in oyder to justify such a writ, as contended by plaintiff in error, and that no order of court is necessary for the issuance of the writ where the record shows the judgment is based on the commission of a malicious tort. In People v. Walker, 286 Ill. 541, where there was a judgment in an action of trespass for assault and battery and a ca. sa. was issued, the court held that no court order therefor was necessary, and aas the statute authorized it in the same terms as an execution against the defendant’s property, it was the duty of the clerk to issue the writ on the request of the plaintiff.

We think, therefore, the motion to quash the writ was properly overruled and that the decree should be affirmed.

Affirmed.

Scanlan and Gridley, JJ., concur.


author: Mr. Justice Gridley Mr. Justice Scanlan

text:
    Edward J. Hanley, Administrator of the Estate of Edward F. Hanley, Deceased, Defendant in Error, v. George Waters and Anna V. Waters, Plaintiffs in Error.
    Gen. No. 33,520.

      Scanlan, J., specially concurring.
    Opinion filed December 31, 1929.
    Nelson & Ricker, for plaintiffs in error; Joseph B. Hermes, of counsel.
    Robert S. Cook, for defendant in error.
   Mr. Justice Gridley

delivered the opinion of the court.

By this writ of error defendants seek to reverse a judgment for $10,000, rendered against them after verdict in an action for damages for negligently causing the death, on October 27, 1925, of plaintiff’s intestate, Edward F. Hanley, a boy about 8 years of age.

On October 11, 1929, this Appellate Court entered an order reversing said judgment and filed an opinion stating reasons for such action. On October 22, upon plaintiff’s petition, a rehearing was granted and subsequently defendants filed a brief and argument in answer to the petition. In the light of the additional arguments of opposing counsel we have given further consideration to the case.

Plaintiff’s action was begun on September 24, 1926. In his original declaration, consisting of one count, he ■ alleged that on October 27,1925, defendants, being the owners of an automobile, were driving the same along and upon East 55th Place, a public highway in Chicago, at a point a few hundred feet west of South Park Avenue; that plaintiff’s intestate, while in the exercise of due care for his own safety, was walking across East 55th Place; and that defendants so negligently operated their automobile that it ran into and against plaintiff’s intestate, throwing him with great force and violence to the ground and killing him. There was no allegation in the declaration that plaintiff’s intestate left him surviving any next of kin who sustained pecuniary loss as the result of his death. On December 30, 1926, to the declaration defendants filed a general demurrer which was sustained by the court on March 24, 1928, and plaintiff was granted leave to file an amended declaration.

On April 9, 1928, more than two years after said death, plaintiff filed an amended declaration, consisting of four counts, in each of which he alleged that the deceased at the time of his death left him surviving as his only heirs-at-law and next of kin his father, Edward' J. Hanley, his mother, Lillian E. Hanley, and his brother, George William Hanley, “who were not guilty of any negligence contributing to the death of said deceased, and who suffered pecuniary loss as a result of his death.” In the first count the charge is general negligence in the driving of the automobile; in the second, wilful and wanton negligence; and in the third and fourth counts negligence in driving the automobile at an excessive rate of speed in a business or residential portion of the city in violation of the statute.

On April 19,1928, to the amended declaration defendants filed a special plea, viz., that “the several supposed causes of action . . . did not . . . accrue to the plaintiff at any time within one year next before the commencement'of this suit.” To this plea plaintiff filed a general demurrer which the court subsequently sustained, and on February 9, 1929 (defendants refusing to plead over and electing to stand by said plea) entered a default against them. Subsequently a jury was called to assess damages and they returned a" verdict against defendants for $10,000, which was followed by the entry of the judgment in question on March 5, 1929.

The main contentions of counsel for defendants are that the court erred in sustaining plaintiff’s demurrer to defendants’ said special plea and that the judgment entered in plaintiff’s favor is against the law.

It is provided in section 2 of the Injuries Act (Cahill’s St. 1927 ch. 70, p. 1410) that every action, such as the present one, “shall be commenced within one year after the death of such person.” The present action was commenced within one year after the death of plaintiff’s intestate, but the declaration did not state a good cause of action, in that it did not allege that the deceased left him surviving any next of kin who had suffered pecuniary loss because of his death, and the court properly sustained defendants’ demurrer to the declaration. It was not until more than two years after the death that plaintiff filed an amended declaration, in which it was alleged that deceased had left him surviving next of kin (naming them), who had suffered pecuniary loss as the result of his death, and in which a good cause of action against defendants was stated for the first time. In Devaney v. Otis Elevator Co., 251 Ill. 28, 33, it is said: ‘ The rule is familiar that when

a cause of action is stated for the first time in an amended or additional count the suit is regarded, as to such cause of action, as having been commenced at the time when such amended or additional count is filed, and if the period fixed by the Statute of Limitations has run when such a count is filed, the plea setting up the statute is a proper plea and a good defense for such newly stated cause of action.” (See, also, Eylenfeldt v. Illinois Steel Co., 165 Ill. 185, 189; Bahr v. National Safe Deposit Co., 234 Ill. 101, 103; Allis-Chalmers Mfg. Co. v. City of Chicago, 297 Ill. 444, 449.) In numerous decisions in this State it has been held that, in an action brought under the Injuries Act, Cahill’s St. ch. 70, the fact of the survival of a widow or next of kin is an essential element of the cause of action and, hence, must be alleged and proved. (Chicago & R. I. R. Co. v. Morris, 26 Ill. 400, 402; Quincy Coal Co. v. Hood, 77 Ill. 68, 72; Lake Shore & M. S. Ry. Co. v. Hessions, 150 Ill. 546, 556.) And the familiar rule above mentioned has been applied to such an action, where an amended count or declaration, filed after the expiration of the time limited by the statute for the bringing of the action, for the first time stated that there were surviving next of kin, etc. (Foster v. St. Luke’s Hospital, 191 Ill. 94, 95-96, affirming 86 Ill. App. 282, 285-6.)

But it is contended by plaintiff’s counsel that, because of an amendment to section 39 of our Practice Act, passed by the legislature at its last session and in force July 1, 1929, (Laws 1929, p. 578; Cahill’s St. 1929, ch. 110, p. 2021) said decisions and holdings are no longer of binding force as applied to the present case. The paragraph added by the amendment to said section is as follows:

“Any amendment to any pleading shall be held to relate back to the date of filing the original pleading so amended, and the cause of action or defense set up in the amended pleading shall not be barred by laches, or lapse of time under any statute prescribing or limiting the time within which an action may be brought or right asserted, if the time prescribed or limited had not expired when the original pleading was filed, and if it shall appear from the original and amended pleading that the cause of action asserted, or the defense interposed in the amended pleading grew out of the same transaction or occurrence, and is substantially the same as set up in the original pleading, even though the original pleading was defective in that it failed to allege the performance of some act or the existence of some fact, or some other matter or matters, which are necessary conditions precedent to the right of recovery or defense asserted when such conditions precedent have been in fact performed.”

It will be'noticed that the amendment is to be applicable “if it shall appear from the original and amended pleading that the cause of action asserted . . . in the amended pleading grew out of the same transaction or occurrence, and is- substantially the same as set up in the original pleading. ’ ’ But in the original declaration in the present case no cause of action vi as asserted because essential facts (viz., that deceased had left him surviving next of kin who had suffered' pecuniary loss because of the death) were not alleged. And, hence, we do not think that the cause of action asserted in the amended declaration can be considered as being substantially the same as that stated in the original declaration. There is in the amendment the further clause, viz., “even though the original pleading was defective in that it failed to allege the performance of some act or the existence of some fact, or some other matter or matters, which are necessary conditions precedent to the right of recovery . . . when such conditions precedent have been in fact performed.” But we think that plaintiff’s failure to allege in the - original declaration the fact of the survival of next of kin, etc., amounted to more than a mere defect in the pleading. Such allegation as to such survival is an essential element of the cause of action under the statute. We regard it as just as essential as that a declaration show on its face that the action is brought within one year after the death. In Hartray v. Chicago Rys. Co., 290 Ill. 85, an action under the Injuries Act was begun on November 28, 1910 and the declaration alleged that the injury resulting in death occurred June 27,1909. The defendant filed a plea of the general issue and there was a trial resulting in a verdict for plaintiff. The defendant on motion in arrest of judgment contended that the declaration, not showing on its face that the action was brought within one year after the death, stated no cause of action and was insufficient to support any judgment in the plaintiff’s favor. The motion was overruled and judgment on the verdict was entered against the defendant. One of the Appellate Courts of this district reversed the judgment, and upon certiorari our Supreme Court affirmed the action of the appellate court, saying (p. 86): “This suit was brought under the Injuries Act, and the time fixed for commencing an action arising under that act is a condition of the liability and operates as a limitation of the liability itself and not of the remedy, alone. (Carlin v. Peerless Gas Light Co., 283 Ill. 142; Goldstein v. Chicago City Ry. Co., 286 Ill. 297.) Since the right of action for death by wrongful act is wholly statutory and must be taken with all the conditions imposed upon it, the burden being upon plaintiff to bring himself within the requirements of the statute, it is almost universally held that a provision in the statute creating the right, requiring an action thereon to be brought within a specified time, is more than an ordinary statute of limitations and goes to the existence of the right itself. It is a condition attached to the right to sue at all. (The Harrisburg, 119 U. S. 199, 214. . . .)” In view of the particular language of said amendment to the Practice Act, and of the decisions and holdings referred to, we do not think that said amendment is applicable to the present' case.

And there is another reason why in our opinion said amendment to said act cannot properly be applied to the present case. The amendment does not specifically state that it is to be given a retrospective effect. And it did not become in force until nearly four months after the judgment in question was entered or until nearly three months after the present writ of error was sued out by defendants. “It is a well settled rule of statutory construction that a statute will not be given a retrospective effect unless the intention of the legislature to give it such effect is clearly shown.” (Miner v. Stafford, 326 Ill. 204, 207; Thompson v. Alexander, 11 Ill. 54, 55; In re Tuller, 79 Ill. 99, 107; People v. Deutsche Gemeinde, 249 Ill. 132, 137; People v. Chicago & A. R. Co., 289 Ill. 282, 286; Mather v. Parhhurst, 302 Ill. 236, 238.) In the last cited case it is said (p. 238): “The general rule is that statutes are not to be given retroactive effect unless it is manifest that the legislature intended that they should have such operation. . . . Such effect may, however, be given to statutes where to do so will not affect existing* or vested rights.” (Citing City of Chicago v. Collin, 302 Ill. 270, 274; Dobbins v. First Nat. Bank of Peoria, 112 Ill. 553, 562.)

And we are further of the opinion that if said amendment to the Practice Act, Cahill’s St. ch. 110, If 39, were to be construed as having a retrospective effect, and to be applied to the present case, it would deprive defendants of a vested right, to wit, that of making the good defense that they made by their said special plea to plaintiff’s amended declaration. In Cooley’s .Constitutional Limitations, 6th Ed., p. 454, the author, under'the heading “Retrospective Laws,” says:

“Regarding the circumstances under which a man may be said to have a vested right to a defense against a demand made by another, it is somewhat difficult to lay down a comprehensive rule which the authorities will justify. It is certain that he who has satisfied a demand cannot have it revived against him, and he who has become released from a demand by the operation of the statute of limitations is equally protected. In both eases the demand is gone, and to restore it would be to create a new contract for the parties — a thing quite beyond the power of legislation.”

In Board of Education of Normal School Dist. v. Blodgett, 155 Ill. 441, our Supreme Court said (p. 447):

“In almost all of the States of the Union in which the question has arisen, it has been held that the right to set up the bar of a statute of limitations as a defense to a cause of action, after the statute has run, is a vested right, and cannot be taken away by legislation, either by a repeal of the statute without saving clause or by an affirmative act, and that it is immaterial whether the action is for the recovery of real or personal property, or for the recovery of a money demand, or for the recovery of damages for a tort.” (Citing-many cases in other jurisdictions.)

The court then refers to the majority opinion in Campbell v. Holt, 115 U. S. 620, where it was held that a debtor has no property in the bar of the statute of limitations as a defense to a promise to pay a debt, and that such bar, after it has become complete, may be removed by a statute; but our Supreme Court further said (p. 448):

“The decision, however, was by a divided court, there being a vigorous dissenting opinion by Justice Bradley, which was concurred in by Justice Harlah. The doctrine of the dissenting* opinion is most in consonance with former decisions of this court, and is supported by the great weight of authority. That opinion seems to us to present the better view.”

The court then quotes at considerable length from said dissenting opinion, portions of the quotations being as follows (pp. 449-50):

“Now, an exemption from a demand or an immunity from prosecution in a suit is as valuable to the one party as the right to the demand or to prosecute the' suit is to the other. The two things are correlative, and to say that the one is protected by constitutional guaranties and that the other is not, seems to me almost an absurdity. One right is as valuable as the other. My property is as much imperiled by an action against me for money, as it is by an action against me for my land or my goods. It may involve and sweep away all that I have in the world. Is not a right of defense to such an action of the greatest value to me? . . . The immunity from suit which arises by operation of the' Statute of Limitations is as valuable a right as the right to bring the suit itself. It is a right founded upon a wise and just policy; . . . and, when vested, is as much to be protected as any other right that a man has.' The fact that this defense pertains to the remedy does not alter the case. Eemedies are the life of rights, and are equally protected by the constitution. . . . And, as before said, the right of defense is just as valuable as the right of action. It is the defendant’s remedy.”

The Blodgett case is cited with approval in Fish v. Farwell, 160 Ill. 236, 252, where it is said: “A right of defense against a money demand, arising from the complete running of the Statute of Limitations, is property within the protection of the constitutional guaranty of due process of law.” (See, also, Danger & Co. v. Gulf & Ship Island R. Co., 268 U. S. 633.)

Tor the reasons indicated, and in view of the above decisions and holdings, we are of the opinion that the trial court erred in not overruling plaintiff’s demurrer to defendants’ said special plea and that the judgment in question must be reversed. And following the decision in Foster v. St. Luke’s Hospital, 86 Ill. App. 282, 286, affirmed in 191 Ill. 94, 97, inasmuch as no cause of action can now be stated upon which a recovery by plaintiff can be sustained, the cause is not remanded.

Reversed.

Barnes, P. J., concurs.

Mr. Justice Scanlan

specially concurring: In my

judgment, the amendment to section 39 of the Practice Act, Cahill’s St. ch. 110, ft 39, has no application to the question before us. That section, in so far as it bears on the pleadings of a plaintiff, applies to a situation where the amended declaration asserts a cause of action substantially the same as it was set up in the original declaration, “even though the original pleading was defective in that it fails to allege the performance of some act or the existence of some fact, or some other matter or matters, which are necessary conditions precedent to the right of recovery . . . when such conditions precedent have been in fact performed.” The purpose of the statute was to permit a defect in a declaration, that pertained to conditions precedent, to be cured in an amended declaration, even after the stat- , ute had run. The failure to allege, in the original declaration in the instant case, that the deceased left him surviving next of kin, was not a mere failure to allege a necessary condition precedent to the right of recovery. The statute, in my judgment, was intended to apply to cases similar or analogous to Erford v. City of Peoria, 229 Ill. 546, and Walters v. City of Ottawa, 240 Ill. 259, wherein the Supreme Court held that the notice required by section 2 of the Act of 1905, “concerning suits at law for personal injuries and against cities, villages and towns,” was a condition precedent to the right of recovery. To adopt the interpretation of the statute contended for by the plaintiff would clearly require a holding that the legislature intended to take away a vested right from a -defendant. However, if the interpretation of the statute for which I contend be the correct one, in view of the opinion in Walters v. City of Ottawa, supra, such a statutory provision would doubtless also deprive a defendant of a vested right. The judgment, in any view, should be reversed.


author: Mr. Justice Gridley

text:
    William A. Paine et al., Trading as Paine, Webber & Co., Plaintiffs in Error, v. Sheridan Trust & Savings Bank, Defendant in Error.
    Gen. No. 33,575.

      Opinion filed December 31, 1929.
    Poppenhusen, Johnston, Thompson & Cole, for plaintiffs in error; Floyd E. Thompson, of counsel.
    Kirkland, Fleming, Green & Martin, for defendant in error; Weymouth Kirkland, Charles F. Rathbun and William H. Symmes, of counsel.
   Mr. Justice Gridley

delivered the opinion of the court.

In an action in assumpsit, commenced in the circuit court on June 25,1927, to recover the proceeds of plaintiffs’ check for $3,303.85, dated May 11,1927, made payable to defendant’s order, and received by it in payment of a personal indebtedness of plaintiffs’ defaulting cashier, there was a trial without a jury, resulting in the court entering a finding in defendant’s favor. On April 15, 1929, judgment was entered on the finding against plaintiffs for costs, and subsequently they sued out the present writ of error.

Plaintiffs, copartners as Paine, Webber & Co., were engaged in a stock brokerage business in Chicago and elsewhere. Defendant was a corporation, doing a general banking business in Chicago. During May, 1927, and prior thereto, plaintiffs were acting as brokers for defendant anddts customers in the buying and selling of securities. On May 11, 1927, and for several years prior thereto, plaintiffs had in their employ as cashiers in their Chicago office C. E. Carlson and J. J. Collum, who were known by defendant to be such. In December, 1926, Carlson, at the request of Collum, borrowed from defendant $5,500, giving his (Carlson’s) note therefor, secured by the deposit with defendant of 600 shares of the preferred stock of the Julian Petroleum Corporation. Carlson borrowed said sum for the accommodation of Collum, and the stock, so deposited as security, was the property of Collum. About, the same time Collum, who personally had a checking account with defendant, borrowed a like sum from defendant, pledging as security for his note an additional 600 shares of said stock. Prom time to time thereafter Collum made payments on both notes to defendant, usually in cash but on one or two occasions by his personal check. On May 10,1927, there was due to defendant on each note a balance of $1,650, and the market value of the collateral thereto had so rapidly declined that defendant, determined to call the loans. On that day Joseph H. Hartman, a note teller for defendant, notified Collum (but not Carlson) by telephone that the balance due on both notes, $3,300, together with accrued interest of $3.85, must be paid at once. During this* telephone conversation Collum said to Hartman that if defendant would deliver the two notes, and the stock deposited as collateral, to the “cashier’s cage” in plaintiffs’ Chicago office, he (Collum) would give defendant a check for the amount due on the notes. On the following morning, May 11, Hartman gave to a messenger of defendant the two notes, and the 1,200 shares of said stock, with instructions to deliver them to Collum at plaintiffs ’ office upon receipt of a check for $3,303.85. Later in the day the mes- • senger returned with the check in question, which defendant accepted and applied the proceeds to the payment of the balance due on the two notes. The check is drawn by plaintiffs, viz., “Paine, Webber & Co.,” by “Walter Brunton” and “C. E. Carlson.” It is dated May 11, 1927, and it directs the drawee, the Standard Trust and Savings Bank of Chicago, to “pay to the order of Sheridan Trust and Savings Bank” (defendant) the sum -of $3,303.85. On the back is the indorsement “Sheridan, May 11, 1927”; and the further indorsement, “Sheridan Trust and Savings Bank; paid through Chicago Clearing House, May 13, 1927.” Perforated through the check are the words and figures: ‘ ‘ Paid, 5-13-27. ’ ’ Hartman testified that the first of these indorsements means that defendant received the check on May 11th; and that the second indorsement and the perforations mean that the check reached the clearing house ori May 13, and was on that day presented to and paid by the drawee bank.

Neither when defendant accepted the check, nor before it received the proceeds thereof, did it make any inquiry as to Collum’s authority to use a check of plaintiffs to pay his personal indebtedness. On May 11, plaintiffs did not owe defendant $3,303.85, but they did owe it the sum of $1,058.97, which sum they paid on the same day by another check, also accepted by defendant. We find no evidence in the record tending to show that Collum had authority to use plaintiffs ’ funds to pay his personal indebtedness, or. that plaintiffs ever said or did anything which could have led defendant to believe that Collum had any such authority. The evidence discloses that Carlson and Collum each had authority to draft and sign checks in payment of plaintiffs’ obligations. Such checks, however, were required to be signed also by either M. J. O’Brien (a resident co-partner of plaintiffs’ firm) or Walter Brunton (plaintiffs’ head bookkeeper) or C. J. Bridgen (plaintiffs’ office manager.) The evidence further discloses that Collum drafted the check in question, that he entered in the check register a false statement that the check was issued “in payment of 100 shares of Warner A” stock, that he obtained the signatures of Carlson and Brunton on the check by misrepresentations, and that as cashier he drew many of plaintiffs ’ checks each day. Brunton testified that, as head bookkeeper, he was accustomed to sign 100 to 150 checks every business day, that when he signed the check in question there “was nothing to attract my attention to it particularly, ’ ’ and that he did not then have any knowledge or suspicion of Collum’s misappropriations or embezzlements, as were exposed shortly thereafter.' The evidence further discloses that prior to May 11,1927, Collum had abused his authority to draft'and sign checks and had embezzled large sums of plaintiffs ’ money, that by making-false entries he had concealed his misappropriations, but that, on May 11, no one connected with plaintiffs Chicago office had any knowledge or suspicion of these facts and Collum then was a trusted employee. On that day an audit of the accounts of plaintiffs ’ 'Chicago office was in progress, in charge of one Kelly, who, during the forenoon of May 12, discovered an irregularity in Collum’s accounts and who advised O’Brien thereof, and an investigation was immediately commenced. On the afternoon of May 13, during the progress of the investigation, Collum confessed to O’Brien that he was short in his accounts. Several days were consumed in the cheeking of accounts, etc., and finally the giving of the check in question, not in payment of any “Warner A” or other stock but in payment of Collum’s personal indebtedness to defendant, was discovered. On June 6, 1927, plaintiffs ’ attorneys by letter advised defendant of the discovery and requested information “as to the circumstances under which this check was used by Collum to pay his personal obligation.” About this time plaintiffs demanded of defendant that it return to them the proceeds of the check, $3,303.85, which demand defendant refused, and on June 25, 1927, plaintiffs commenced the present action.

Counsel for plaintiffs here contend that the trial court erred in entering a judgment against plaintiffs; and that, under the undisputed material facts, the court should have found the issues in plaintiffs’ favor and entered a judgment against defendant for the face amount of the check, together with legal interest thereon from June 6, 1927. And counsel argue, in substance, that the decision in the case at bar is controlled by the law of agency; that when defendant accepted plaintiffs’ check from Collum in payment of his and Carlson’s personal indebtedness to it, without making any inquiry as to Collum’s authority to so pay such indebtedness with plaintiffs’ funds, defendant acted at its peril; that the check itself was sufficient notice to require such an inquiry, and constituted a warning to defendant that the check was not the property of Collum; that when defendant received the check, then knowing that plaintiffs were not indebted to it in the sum of $3,303.85, it became its duty either to return the check or to collect the amount of it and hold the proceeds subject to plaintiffs’ order; that defendant cannot be considered to be an innocent party, and that the well known rule, that where one of two innocent parties must suffer, the one who has put it in the power of a third party to cause a loss must bear it, is not applicable to the facts of the present case: and that no estoppel can properly arise against plaintiffs because of their claimed negligence in their method of conducting business and issuing checks, and for the reason that such negligence (if any there was), did not induce defendant to accept the proceeds of plaintiffs’ check.

After considering the evidence and after reviewing many adjudicated cases, we are of the opinion that the contention and arguments of counsel are sound, that the judgment of the trial court against plaintiffs cannot stand, and that they are entitled in this court to a, judgment against defendant for the amount of the check, $3,303.85, with legal interest thereon from June 6, 1927.

We agree with plaintiff’s counsel that the present case is to" be decided under well settled principles of the law of agency. In Merchants’ Nat. Bank v. Nichols & Shepard Co., 223 Ill. 41, 49, it said: “It is to be remembered that persons dealing with an assumed agent are bound, at their peril, to ascertain not only the fact of the agency, but the extent of .the agent’s . authority. They are put upon their guard by the very fact that they are dealing with an agent, and must, at their peril, see to it that the act done by him is within his power. . . . An agent cannot confer power upon himself, and therefore his agency or authority cannot be established by showing either what he said or did. ’ ’ In Hurley v. Watson, 68 Mich. 531, 537, it is said: “The duty of the"defendant to make inquiry in this case, notwithstanding the apparent general management of plaintiff’s business by Clark, is conclusively established by another well-recognized principle of law, and that is, that a party dealing with an agent who has general authority to sell goods or collect debts is bound to know that the agent has . no authority by virtue of his agency to apply or offset his own private debt to such third party in payment of the debt to the principal. . . . No overweening confidence of the principal in the agent can excuse the duty of the third party to ascertain whether the agent has authority from his principal to pay the agent’s debts in that way. It is presumptively a violation of the agent’s authority, and a fraud upon his principal, and the party collecting his debt from the agent in that way participates in the fraud, and cannot shield himself behind any presumed or implied authority of the agent, because none exists in such case. The party so dealing takes upon himself the burthen of showing an express authority in the agent, or ratification of the transaction by the principal.” In Farrington v. South Boston R. Co., 150 Mass. 406, plaintiff took in pledge a certificate of some shares of stock of defendant corporation, as security to him for the personal debt of Reed, defendant’s treasurer. Reed, by fraud, had caused the certificate to be issued in plaintiff’s name. It was held that plaintiff could not be protected as an innocent holder for value of the certificate. The court said (pp. 409-10): “An agent cannot properly act for his principal and himself when their interests are adverse, and any person dealing with an agent in a matter affecting his principal, and knowing that the interests of the agent are adverse to those of his principal, ought to be held to the duty of ascertaining that the acts of the agent are authorized by his principal. ... We are of the opinion that the facts were such that the plaintiff was reasonably put upon inquiry as to the title of Reed to the certificate of stock which he undertook to pledge, and that the plaintiff is to be affected with notice of whatever he might have found out, if he had made proper inquiry. . . . The plaintiff cannot rely upon any representations of Reed, because he knew that Reed was acting for himself in borrowing the money and in pledging the stock.” In City of Newbury-port v. Fidelity Mut. Life Ins. Co., 197 Mass. 596, in an action for money had and received, the city, recovered a judgment against the insurance company for the amount of six checks, drawn without authority by the city’s treasurer on its funds in a bank, and paid to the insurance company as premiums for six successive years upon a life policy issued to said treasurer. In affirming the judgment the reviewing court said (pp. 602-3): “The checks were on their face the checks of the plaintiff, a municipal corporation. . . . The defendant therefore must be held to have known this; and it knew further that they were delivered to the defendant in payment of the individual debt of the treasurer. In short, .the defendant knew that it was receiving in payment of the individual debt of the treasurer checks of the municipal corporation, and therefore that upon the face of the transaction the treasurer was using the funds of the city to pay his own debt. No citation of authorities is needed in support of the proposition that in the absence of proof of authority on the part of the treasurer such a check is invalid. The payee is charged with notice of a possible want of authority on the part of the agent or officer to bind the principal, and cannot recover upon the check or retain the proceeds without showing that the execution of the paper was duly authorized.” (See, also, Rothstein v. Grossberg, 303 Ill. 619, 622-3; Bowles Co. v. Clark, 59 Wash. 336, 339; Anderson v. Kissam, 35 Fed. 699, 703; Lamson v. Beard, 94 Fed. Rep. 30, 42-3; St. Charles Sav. Bank v. Edwards, 243 Mo. 553, 564; Sims v. United States Trust Co., 103 N. Y. 472, 475-6; Gerard v. McCormick, 130 N. Y. 261, 267-8.)

The facts in Milano v. Sheridan Trust & Sav. Bank, 242 Ill. App. 362, are similar to those in the present case. There plaintiffs were employees of L. Klein & Co. (who conducted a department store in Chicago) and had organized themselves as an association, known as “L. Klein Employees’ Savings and Loan Association.” In August, 1922, the association drew a check ' on its account with a Chicago bank for $750, payable to the order of the defendant bank, and delivered the check to one Tresidder, bookkeeper and auditor of the association, with instructions to purchase certain bonds for the association from the defendant bank. Tresidder, who was a customer and depositor of said bank, mailed the check together with a deposit slip and requested that the check be credited to his - individual account. The bank did this and in due course collected the proceeds through the clearing house from the drawee bank.. In January, 1923, the association delivered to Tresidder another similar check for $1,500, giving him like instructions and the check took the same course. On neither occasion did Tresidder purchase any bonds for the association as instructed, but the proceeds of the checks were converted to his personal use. The association had no knowledge of these transactions until about May 2,1923, when it demanded of the bank that it pay to the association the proceeds of the two checks, aggregating $2,250, together with legal interest, but the demand was refused and thereafter the suit was brought. When the bank received the two checks it did not then, or at any other time, make any inquiry of the association, or of any person, as to the authority of Tresidder to deposit the checks to his said personal account. Prior to May 2, Tresidder had withdrawn all moneys on deposit in. his account, including the proceeds of said checks, except the sum of $7.74. On the trial without a jury, upon stipulated facts, the court gave judgment against the bank for only $7.74. On writ of error the First Division of this Appellate Court reversed said judgment and entered a judgment against the bank for $2,652.18. This sum is made up of the aggregate amount of the two checks, $2,250, and legal interest thereon from May 2, 1923, when the association made the demand for the return of said aggregate amount. Our Supreme Court denied the bank’s application for a writ of certiorari (242 Ill. App. xiv). The Appellate Court in its opinion held (p. 370) that “the weight of authority and reasoning support the position- of plaintiffs and that the bank, in neglecting to hold the proceeds of the checks subject to the directions of the .plaintiffs and in permitting Tresidder, a third party, to withdraw the amount, was negligent and in law did not take the checks in.good faith.” The court in the course of its opinion further said (p. 367):

“We have concluded that, as the checks upon their face showed that they were drawn by the association to the order of the defendant, with which the association had no account and to which it was not indebted, it became the duty of the bank, if it accepted said checks, to collect the proceeds thereof and hold the same subject to the order of the association, and that the bank was negligent in crediting the proceeds of said checks to the personal account of Tresidder.”

The bank’s counsel strenuously contend that the present judgment in its favor should be affirmed, because the bank, the payee of the check in question, was a holder in due course without notice of any infirmity or defect in it through the default of Collum, or for any other reason,” and that, hence, the bank “was legally entitled to take the check for Collum’s indebtedness to it.” To support the contention great reliance is placed upon the holdings and decision in the case of Drumm Const. Co. v. Forbes, 305 Ill. 303 (affirming 224 Ill. App. 271.) But we think the facts in the Drumm case are to be distinguished from those of the present case. The Drumm case also was relied upon by the defendant bank in the Milano case, supra, but was there distinguished, the Appellate Court saying (p. 369):

“But it is said that under the Negotiable Instruments Act the bank took the checks in good faith and for value, without notice of any infirmity in the instrument or defect in the title of the person negotiating it, . . . and that therefore it is a holder in uue course and will be protected. In Drumm Const. Co. v. Forbes, 305 Ill. 303, it was held that Forbes, the payee in the check, took it in due course and was protected from any infirmity in the title of Lamberton, who gave it to him, and that the plaintiff, who drew the check, could not recover from Forbes. But this case can be clearly distinguished from the one at bar, in that Lamberton was indebted to Forbes, who took the check, which was drawn for the exact amount of this indebtedness, in discharge and payment of the same. It was a private transaction between individuals. Forbes was not in the banking business and did not receive funds for deposit. The present Negotiable Instruments Act has not voided the requirement of good faith by the acceptor of commercial paper.”

And from the Supreme Court’s opinion in the Drumm case, another feature, distinguishing that case from the present one, appears. The court says (p. 308): “The check here in question was complete when Forbes received it from Lamberton, and there was nothing in the character of the' instrument to charge him with knowledge of any infirmity or put him on inquiry.” In the present case we think that the check itself, together with the transaction, were sufficient to put the defendant bank upon inquiry. The check, drawn by plaintiffs, was payable to the order of the bank, to which plaintiffs were not then indebted to the amount of the check. And the check was delivered to the bank by Collum, known by the bank to be an agent and cashier of plaintiffs’ with limited authority, in payment of his personal indebtedness to the bank, and was accepted by the bank in discharge thereof.

The bank’s counsel further contend that the bank “was an innocent party in the case, and, as plaintiffs put it in the power of Collum to commit the act,- they must bear the loss.” We cannot agree with counsel that the bank was an innocent party in the transaction, or that the “two innocent parties” rule has any application under the facts herein in favor of the bank. (St. Charles Sav. Bank v. Edwards, 243 Mo. 553, 570; Quincy Mut. Fire Ins. Co. v. International Trust Co., 217 Mass. 370, 374.) And we do not think that plaintiffs’ claimed negligence, if any there was, in their method of conducting business and issuing checks, and in not discovering Collum’s misappropriations before they did discover them, should militate against their recovering from the bank the amount of the check in question, by way of estoppel or otherwise. (People v. Bank of North America, 75 N. Y. 547, 561; Merchants Nat. Bank v. Nichols & Shepard Co., 223 Ill. 41, 53; Wheeler v. McGuire, 86 Ala. 398.) In the last cited case it is said (p. 406): “Though mere negligence, mere want of ordinary diligence, may furnish the agent an opportunity of undue assumption of authority, it does not, of itself, work an estoppel. A principal is not required to distrust his agent, nor to keep a vigilant watch over the manner in which he exercises his authority and to see that his instructions are obeyed. He may act on the presumption that third parties, dealing with his agent, will not be negligent in ascertaining the extent of his authority, as well as the existence of his agency.”

The judgment of the circuit court against plaintiffs is reversed and judgment will be entered here in their favor and against the defendant bank for $3,303.85 (the amount of the check in question), plus'interest thereon at the rate of 5 per cent per annum from June 6, 1927, to the date this opinion is filed, which interest will be computed by the clerk of this court.

Reversed with finding of facts, and judgment here against defendant for $3,303.85, plus interest thereon at the rate of 5 per cent per annum from June 6,1927.

Barnes, P. J., and Scanlan, J., concur.

We find as facts in this case that Collum, plaintiffs’ agent and cashier, was not authorized by plaintiffs to use their funds to pay. a personal indebtedness of his, and’that he was not authorized by them to issue their said check for $3,303.85, payable to the order of defendant bank and to deliver the same to said bank in liquidation of an indebtedness then owing to said bank by him, or by him and Carlson; that defendant bank had notice or was put upon notice of these facts; that plaintiffs never by word, act or deed advised defendant bank, or in any way held out to the bank, that Collum had any such authority; and that plaintiffs never ratified Collum’s acts in issuing and delivering said'check.