author: Mr. Presiding Justice Matchett

text:
    The People of the State of Illinois ex rel. Oscar Nelson, Auditor of Public Accounts of the State of Illinois, Complainant, v. First State Bank of Barrington, Defendant. Hayden N. Bell and Mary F. Bell, Appellees, v. William Busse, Jr., Receiver of First State Bank of Barrington, Appellant.
    Gen. No. 37,094.

      Opinion filed March 5, 1934.
    Heard in the first division of this court for the first district at the October term, 1933.
    Edwin D. Lawlor, for appellant; Samuel L. Jacobson, of counsel.
    James A. Sprowl, for appellees.
   Mr. Presiding Justice Matchett

delivered the opinion of the court.

This is an appeal by Busse, receiver of the First State Bank of Barrington, from an order granting the prayer of the petition of Hayden M. Bell and Mary F. Bell filed June 29, '1933, that the balance of a deposit made by them in the bank on January 22, 1932, should be allowed as a preferred claim. The judgment order was entered on July 14, 1933. It finds in conformity with the allegations of the petition that petitioners deposited in the bank on January 22, 1932, $1,071.58 in checks drawn on Chicago banks; that at the time this deposit was received the bank was insolvent; that the officers of the bank who received the deposit knew of the insolvency and knew that the bank could not remain open longer than the close of business on January 26, 1932, and that the officers and directors took action on January 26,1932, and delivered the assets of the bank over to the auditor of public accounts; that the deposits were collected by the bank in full and the proceeds of the deposited checks, in the sum of $978.63, were among the cash assets of the bank which came into the possession of the receiver; that the deposit was received in trust, and that the depositors were entitled to a preference and should be paid first in full before the payment of the general depositors or other general claims. It was therefore ordered that the receiver pay the preferred claim pro rata with other preferred claims, which had been or might be allowed, prior to the payment of any general claims.

It is the contention of the receiver that the court erred in finding that the bank was insolvent when the deposit was made, in finding that the officers and directors of the bank knew of this condition and in finding that a fraud had been perpetrated upon petitioners in accepting their deposit. On the other hand, petitioners contend that the evidence shows conclusively that the bank was insolvent when the deposit was made; that the officers and directors of the bank knew it was insolvent, and that a trust arose in favor of the depositors for that reason.

As was stated by the second division of this court in People v. Michigan Ave. Trust Co., 242 Ill. App. 579:

“The rule is well settled that the acceptance of deposits by a bank at a time when, to the knowledge of its managing officers, it is hopelessly insolvent, is a fraud upon the depositors such as will entitle them to rescind the transactions and reclaim their deposits, so far as they can be identified. (St. Louis & S. F. Ry. Co. v. Johnston, 133 U. S. 566; Cragie v. Hadley, 99 N. Y. 131; Orme v. Baker, 74 Ohio St. 337; Knaffl v. Knoxville Banking & Trust Co., 130 Tenn. 336; American Trust & Savings Bank v. Gueder S Paeschke Mfg. Co., 150 Ill. 336; Board of Sup’rs of Lunenburg Co. v. Prince Edward-Lunenburg County Bank, 138 Va. 333, and notes in 20 A. L. R. 1206, and 37 A. L. R. 604.)”

The above is a conservative statement of the general rule. In an annotation to Forsythe v. First State Bank of Mentor, 185 Minn. 255, 81 A. L. R. 1078. the authorities from the different jurisdictions are cited and summarized.

■In Illinois since the act of June 4, 1879 (see Laws of 1879, p. 113) the law of this State has denounced as a criminal offense the action of any hanker or broker who receives from any person or persons any money, check, draft, bill of exchange, etc., “when at the time of receiving such deposit, said banker, broker, banking company or incorporated bank is, in his or its knowledge, insolvent, whereby the deposit so made shall be lost to the depositor. ’ ’ The law was amended in 1903 (see Laws of 1903, p. 156) and before, as well as since the amendment (see Meadowcroft v. People, 163 Ill. 56) has been held constitutional and numerous cases are found in the reports of this State construing it. One of the latest is People v. Colegrove, 354 Ill. 164.

The theory of equity courts is that a banker by receiving a deposit represents himself to be solvent, and that if he is insolvent to his knowledge at such time, the receipt of the deposit is a fraud upon the depositor; that a court of equity in order to protect a depositor from the fraud will raise a trust ex maleficio and allow the depositor to follow and recover the specific money deposited so long as it can be traced.

The first and controlling question here is whether, as a matter of fact, on January 22, 1932 (when petitioners made their deposit), the First State Bank of Barrington was hopelessly insolvent to the knowledge of its officers. The deposit was made in the form of two checks which were credited to the account of the Bells, and these checks (as well as other checks received by the bank on this particular day) were indorsed by the bank and deposited by it in the usual course of business with the Central Republic Bank & Trust Co. on the following day, January 23, 1932. These checks were presented by the Central Republic Bank at the Clearing House in Chicago on Monday, January 25, 1932, and were paid at that time by the drawee banks. The amount of the checks was credited to the account of the First State Bank of Barrington at that time by the Central Republic Bank & Trust Co. Petitioners in the meantime made certain withdrawals against their deposit so that the balance to their credit when the bank closed on January 27,1932, was $978.63, the amount for which they were allowed a preferred claim.

It is elementary that fraud is never presumed and that the burden of proving it always rests upon him who asserts it.

As tending to show insolvency on January 22, 1932, petitioners point out that the evidence shows the following facts:

On October 2, 1931, the total deposits of the bank amounted to $514,789.43. It was indebted to other banks $75,770 on collateral loans, and its cash resources totaled $88,325.20, including cash on hand and cash on deposit with other banks. The bank’s records show that on October 1, 1931, the officers of the bank listed 75 per cent ($312,182.85) of the total loans and discounts as slow, doubtful or worthless; that 22 per cent ($97,553.47) of the total loans and discounts had been made to officers and directors of the bank and their interests, and that 84 per cent of the loans and discounts were entirely unsecured.

During the month of October, 1931, the depositors of the bank began to make heavy withdrawals and continued to do so through November, and by December 1st the total deposits had been reduced by approximately $65,000. The withdrawal of the deposits imposed a heavy strain upon the cash resources of the bank which decreased from nearly $90,000 on October 2nd to $50,208.60 on December 31, 1931, a decline of nearly 50 per cent within a period of less than three months. After January 1,1932, the deposits continued to decrease from day to day in amounts ranging from $2,000 to $7,500. The withdrawals exceeded the deposits by these amounts, and the trend was consistent and continuous.

After January 1, 1932, the bank’s cash position became more acute. The cash on hand totaled slightly over $50,000 on January 1st, but on January 11th the total cash resources had dropped to $26,198.90. Three days later the cash balance had declined to $24,203. Day by day the cash disbursements exceeded daily cash receipts, and it was apparent that unless conditions radically changed the money remaining on hand would soon give out. On January 18th the bank procured a cash loan of $28,000 from the National Credit corporation and to secure this loan put up collateral ip the principal sum of $50,432.40, bringing the cash resources of the bank up to $51,094.79 on January 18th. Thereafter, the cash resources again dropped day by day and on January 21st amounted to about $24,000. When the bank suspended on January 27, 1932, all the realizable assets of the bank of value or credit had been pledged for loans to maintain cash reserves. The bank’s collateral borrowings on January 18, 1932, amounted to $128,566.76. The situation was that unless these loans could be paid the collateral would be lost to the bank. There was no cash available to redeem the collateral, and there was not even sufficient cash available to meet the demands of depositors for more than a very few days. As a result of this situation, on January 22, 1932, the officers of the bank decided that unless the relation of withdrawals to deposit was materially improved from unexpected sources, the bank could not possibly remain open longer than January 26,1932, and would then be closed. As a matter of fact, the bank ceased to function at the close of that day and was turned over to the auditor of public accounts the next morning. By February 25, 1932, it was apparent the bank could not be reorganized ; the receiver was appointed. A decree of dissolution was entered on August 13, 1932.

The evidence shows that the income received by the receiver up to the time of the hearing of the petition had been used in recovering pledged assets of the bank, and as a result no dividends have been received by any of the depositors. The report of the receiver as to assets and liabilities was received in evidence over his objection and shows a summary of the assets and liabilities of the bank as of April 1, 1932. It shows total assets of $470,857.01, reserve for depreciation on bonds of $7,200, and liabilities of $302,034.63.

The record does not disclose who were the officers, the directors or the stockholders of the bank. The printed statement which appears in the record as of January 22, 1932 (the date upon which the deposit was made) shows assets and liabilities of $640,954.43. A statement as of January 23, 1932, the day after these deposits were made, shows assets and liabilities respectively of $632,546.55. Included in the liabilities as of January 22nd and 23rd are capital stock of $100,000, surplus of $50,000 and undivided profits of $17,062.95.

The decree entered by the circuit court on August 13, 1932, which dissolved the bank, found “that from such examination of said bank and such report so made to him said auditor found and determined that its capital stock had become impaired in that items of assets included in said amount of resources, in an amount in excess of $114,205.99, were doubtful or wholly worthless, and that the aforesaid amount in said resources of said bank were then in excess of the aggregate amount of its surplus, reserve and undivided profits and that the condition of said bank was such that said impairment could not be made good.”

In People v. Clark, 329 Ill. 104, our Supreme Court undertook to define the term “insolvency” within the meaning of the statute. The authorities of this and other States were reviewed, and it was pointed out that the term is used in different senses. Analyzing Ellis v. State, 138 Wis. 513, 20 L. R. A. (N. S.) 444, the opinion states:

“The court held that the term ‘insolvent,’ as used in such a statute, does not mean insolvent in the limited sense of inability to pay indebtedness in the ordinary course of business, but that the term means insolvent in the broad general sense of a deficit of one’s assets in realizable cash available within a reasonable time, treated as an ordinarily prudent person would generally conduct his business under the same or similar circumstances, to pay his liabilities; and that a bank is insolvent, within the meaning of such a statute, when the cash value of its assets realizable in a reasonable time, in case of liquidation by its proprietors, as ordinarily prudent persons would generally close up their business, is not equal to its liabilities, exclusive of stock liabilities. This definition of, the word ‘insolvent, ’ as employed in the connection stated, expresses the common, ordinary meaning of the word, and for that reason must be taken to have been intended by the General Assembly in the enactment of the statute upon which the instant indictment is based.” The opinion reviews People v. Hartenbower, 283 Ill. 591; People v. Dubia, 289 Ill. 276, and People v. Belt, 271 Ill. 342 (cases on which claimants here rely) saying that in those cases the fact of insolvency was “clearly and indisputably established.” .

In People v. Gould, 345 Ill. 288, the Supreme Court in considering the question of whether the bank was in fact insolvent when a deposit was received stated distinctly that impairment of capital did not necessarily mean insolvency and that in determination of that question the original amount of the capital stock, the surplus and the undivided profits should be deducted from the total liabilities.

It is apparent that if these items in amounts as stated above are deducted from the liabilities of the First State Bank of Barrington, the proof falls short of showing that it was in fact insolvent upon the date the deposit was made.

In the Gould case the court went on to say that the value of commercial paper could not be shown by the opinions merely of experts, but that an inquiry should be made as to the solvency of the makers, as such facts were capable of proof. There is an entire absencé of such evidence in this record either as to commercial paper or as to other assets of the bank. It is true, the evidence shows something over $90,000 of assets which consisted of indebtedness of officers and directors upon loans made to an illegal amount, but there is no proof that the persons liable for these loans were insolvent and the fact that a loan was for an illegal amount would not in any way tend to prevent its collection. Only four days before this deposit was made, the bank procured a cash loan of $28,000 by putting up collateral of the face value of about twice that amount, and the whole record indicates that its officers and directors were not without reasonable hope that the institution might be saved. It is apparent that no bank can continue to do business when all its customers demand their money at the same time, however solvent it may be in fact. We hold the proof here fails to show that this bank was in fact insolvent at the time the deposit of claimants was made, and, of course, its officers could not have had knowledge of any such insolvency.

Since claimants have failed to prove insolvency, it follows that the claim cannot be preferred, and it is unnecessary to consider the further contention of the receiver that the claim cannot be identified. We have, however, given consideration to this point also. The evidence shows that the Barrington Bank maintained a deposit account with the Central Republic Bank of Chicago through which it cleared its Chicago checks by depositing them in that account. The checks of claimants deposited on January 22nd were credited to their account by the Barrington Bank which indorsed the checks and on the following day, the 23rd, sent the same to the Central Republic Bank. The Central Republic Bank presented these, with other checks, through the Chicago Clearing House, to the banks on which the checks were drawn. The checks were paid through the Chicago Clearing House on January 25th, and we presume the Republic Bank credited the account of the Barrington Bank with the proceeds.

The evidence tends to show that on January 22, 1932, the Barrington Bank had a credit to its account with the Central Republic Bank to the amount of $9,382.52, on January 23rd, a similar credit to the amount of $6,030.45 (January 24th was Sunday), on January 25th, a credit of $6,105.42, on January 26th, a credit of $2,359.69, and on January 27th, a credit of $1,812.04. The claimants say that at no time after the deposit was made was the balance in the account of the Central Republic Bank less than $1,071.58, which was the face amount of the two checks deposited, and that at no time was the total cash resources of the Barrington Bank (that is, the total amount of cash on hand and cash in other banks) less than this amount. However, it appears that on the 25th, namely, the day the checks cleared there were checks drawn against the Barrington Bank and paid by its clearinghouse agent, the Central Republic Bank, to an amount greater than was credited to the account of the Barrington Bank with the Central Republic Bank. On that day it appears there was deposited $2,447.99 and $5,804.51 was paid out.

The receiver contends, plausibly we think, that in that transaction the identity of the fund upon which the claimants seek to impress a trust was destroyed. The res had disappeared.

Claimants cite Woodhouse v. Crandall, 197 Ill. 104, where our Supreme Court, following the reasoning in In re Hallett’s Estate, 13 L. R. Ch. D. 696, laid down the general rule that the placing of a trust fund in a bank with a large sum of money, did not destroy its identity, where enough money always remained in the bank to satisfy the trust fund. This rule was based upon the presumption that the bank would withdraw its own money before appropriating that which was impressed with a trust and which it had no right to take. In the Woodhouse case a deposit was made under circumstances which disclosed the intention of both parties that it should not be mingled under any condition with the funds of the bank. There are no such circumstances here.

Indeed, under circumstances substantially similar to those which appear in this record, this court held in People v. Michigan Ave. Trust Co., 242 Ill. App. 579, that the trust fund could not be traced and a preference was denied. In Lanterman v. Travous, 174 Ill. 459 (where the bank made a voluntary assignment) the Supreme Court held, distinguishing American Trust & Savings Bank v. Gueder & Paeschke Mfg. Co., 150 Ill. 336, that a person who had deposited a check for which he received credit when the officers knew the bank was insolvent, could not (where his money had been mingled with other funds of the bank) have his claim preferred.

Claimants contend that if the receiver’s interpretation of these cases is correct, the cases are inconsistent with later cases. They cite Woodhouse v. Crandall, 197 Ill. 104; People v. Bates, 351 Ill. 439; People v. Auburn State Bank, 215 Ill. App. 133; People v. American Trust S Savings Bank, 262 Ill. App. 458. In the Bates case, as in the Crandall case (and unlike this case) the deposit was special in its nature, and not intended by the parties to be mingled with- the general assets of the bank, and those cases, we think, may be distinguished upon that ground.

The latest case of which we have knowledge is People v. Peoples State Bank of Maywood, 354 Ill. 519, where the court citing 7 University of Cincinnati Law Review, p. 201, sums up the law applicable as follows:

“Since the right to reclaim a trust fund is founded on the right of property, and not on the ground of compensation for its loss, the beneficiary must be able to point out the particular property into which the fund has been converted. When he is'unable to do so, the trust fails and his claim becomes one for compensation only and stands on the same basis as the claims of general creditors. It is as necessary to trace the proceeds of a check or draft constituting part of a trust fund, as it is to trace the proceeds of any other species of personal property; and a trust fund traced into a bank account, if its identity can be established, and no superior rights of innocent parties have intervened, will be held for the benefit of the cestui que trust. The question in every case where it is sought to trace trust property is whether it can be identified in its, original or altered form.” The opinion says that the classic statement of the rule is by the Supreme tiourt of Pennsylvania in Thompson’s Appeal, 22 Pa. St.-16, which was approved in Union Nat. Bank of Chicago v. Goetz, 138 Ill. 127.

Professor Bogert has pointed out (see Bogert on Trusts, p. 533) that the tendency of the later decisions of the courts is back to what is known as the “specific property” rule as distinguished from the “increased assets” theory in this class of cases, and that the “specific property” rule has been either accepted or so modified and limited “as to make it differ from the opposing rule only in words.” As the Supreme Court of Rhode Island said in Slater v. Oriental Mills, 18 R. I. 352, while one who has been wronged may follow and take his own property, or its visible product, it is quite a different thing to say that he may take the property of somebody else.

There is no reason on this record why these claimants should have a preference as against the general creditors, many of whom (if we assume insolvency) are precisely in the same situation as claimants.

The order will be reversed and the cause remanded with directions that the claim against the bank he allowed as a general claim only.

Reversed and remanded with directions.

McSurely and O’Connor, JJ., concur.


source: Caselaw Access Project

author: Mr. Presiding Justice Niehaus

license: Public Domain

text:
    Alonzo L. Rudy, Defendant in Error, v. Chicago National Life Insurance Company and James M. Crume, Receiver, Plaintiffs in Error.
    Gen. No. 8,744.

      Opinion filed January 12, 1934.
    Heard in this court at the April term, 1933.
    Rehearing stricken April 3, 1934.
    E. R. Elliott, for plaintiffs in error.
    J. N. Moore, for defendant in error.
   Mr. Presiding Justice Niehaus

delivered the opinion of the court.

Alongo L. Rudy, the defendant in error herein, commenced this suit in the circuit court of Vermilion county against Chicago National Life Insurance Company, the plaintiff in error, and James M. Crume, as receiver of the company who had been appointed and had taken over the assets of the company previous to the suit; and was in charge of its business, finances and affairs, under the order and direction of the federal court. The suit was brought to recover the sum of $3,000 and accrued interest thereon, which the defendant in error claimed was due him as beneficiary of an insurance policy and a rider concerning permanent disability attached thereto, which policy had been issued by the plaintiff in error company to his wife, Julia E. Rudy, on July 13, 1926. The company had refused to. pay, after the wife’s death, on the ground that the policy had lapsed for nonpayment of the last premium, which had become due July 13, 1930, prior to the death of the insured.

The parties waived a jury trial; and entered into a stipulation concerning the facts, which was submitted to the court for consideration in determination of the issues involved, in the ease. The stipulation embraces all the material matters and facts upon which defendant in error’s claim is based; also the defense to a recovery by the defendant in error on the policy. The trial of the case resulted in the court’s finding the issues in favor of the defendant in error; and the court’s assessment of his damages at $3,037.50; and the court rendered judgment for that amount against the plaintiff in error. This writ of error is prosecuted for reversal of the judgment.

The stipulation by the parties concerned of the evidentiary facts, is as follows:

1.

“It is hereby stipulated by and between J. N. Moore, attorney for Alonzo L. Rudy, and E. R. Elliott, attorney for the Pacific States Life Insurance Company, and James M. Grume, Receiver for the Chicago National Life Insurance Company, a corporation, hereinafter referred to as the company, that the parties to this stipulation admit the truth of all the facts hereinafter set forth and admit that if witnesses were called and oral and documentary evidence offered and received in evidence, such evidence would establish the truth of every fact covered by this stipulation.

2.

“That no party to this stipulation is to be deemed, because of entering thereinto, to admit the relevancy, competency or materiality of any fact stipulated to be true; and every party to this stipulation shall have the same benefit and advantage at the argument before the court upon the trial of this cause as if such party had objected and excepted to the admission of the evidence respecting such fact.

3.

“That this stipulation shall be filed with the court and read to and considered by it as part of the evideuce in the case and that no further proof shall be required upon the part of any party herein stipulated to be true; provided, either party may offer cumulative evidence of such fact or relating to such fact if he may be so advised.

4.

“That the Chicago National Life Insurance Company on July 13th, 1926, for and in consideration of an annual premium of Seventy-three Dollars and Sixty-five Cents ($73.65) then and there paid by Julia E. Rudy, hereinafter called the assured, executed and delivered to the assured its policy of life insurance with Total Disability rider thereto attached, a photostatic copy of which is hereto attached, marked ‘Exhibit A’, and made a part of this stipulation.

5.

“That the premium on said policy was paid in full by the assured according to the terms of said policy, for four years beginning respectively July 13th, 1926, July 13th, 1927, July 13th, 1928 and July 13th, 1929.

6.

“That the annual premium which fell due July 13th, 1929, was not paid in cash when due, but on August 13th, 1929, and while said policy was in full force and effect and in the grace period thereof, assured gave the company her note for Seventy-three Dollars and Sixty-five Cents ($73.65), due November 13th, 1929. That said note was not paid when due, but the prompt payment of the same was waived by the company and the policy was continued in force by it after said date, the same as if the premium had been paid in cash or the note paid when due. A true copy of the said note is hereto attached, marked ‘Exhibit B’, and made a part hereof. That afterwards on the 7th day of July, 1930, assured tendered and the company accepted in full payment of said note her check for the sum of Seventy-three Dollars and Sixty-five Cents ($73.65), which check was in due course paid in full to the company; a true copy of ‘the said check is hereto attached, marked ‘Exhibit C’ and made a part hereof.

7.

“That on the 13th day of July, 1930, when the annual premium on said policy appeared to be due, the same was not paid in full in cash; but on July 31st, 1930, and while said policy was in full force and effect and during the grace period thereof, assured tendered and the company accepted the check of A. L. Rudy for Thirty-three Dollars and Sixty-five Cents ($33.65), which check was duly paid on August 7th, 1930, to the company, and at the time of the delivery of the said check, assured tendered and the company accepted as further payment on the said premium, the promissory note of the said Alonzo L. Rudy, made payable to the company in the sum of Forty Dollars ($40.00), dated July 13th, 1930, due November 13th, 1930, with interest at six per cent from date until paid. A true copy of the said check is hereto attached, marked ‘Exhibit D’, and made a part hereof. A true copy of said note for Forty Dollars ($40) is also hereto attached, marked ‘Exhibit E’, and made a part hereof.

8.

“That said note for Forty Dollars ($40) was not paid when due, but the maker requested an extension of time of the payment of the said note to March 13th, 1931, which extension was granted by the company, and the note was changed on its face by the company to show such extension, as will more fully appear by an examination of ‘Exhibit E’, a photo static copy of the letter of the maker of said note requesting such extension is hereto attached, marked ‘Exhibit X’ and made a part of this stipulation. Likewise, a photostatic copy of the letter of the company granting such extension is hereto attached marked ‘Exhibit Z’, and made a part of this stipulation. That said note for"Forty Dollars ($40) was not paid on March 13th, 1931, and on April 14th, 1931, the company noted on its policy card, containing a history of said policy that said policy was, on said date, lapsed on the account of nonpayment of said note, which is more fully shown by a photostatic copy of said policy card hereto attached, marked ‘Exhibit F’, and made a part hereof.

8a.

“That relative to said Forty Dollar note, ‘Exhibit E’, the company wrote Julia E. Rudy on March 4th, 1931, the following letter:
“ ‘Julia E. Rudy,
1221 Robinson St.,
Danville, 111.
“ ‘Dear Madam:
“ ‘This is to notify you that your note for $40.00, plus interest at 6% from July 13th, 1930, will be due on March 13th, 1931.
“ ‘This note was given as an extension of time for the payment of the premium on your policy #8441, and for this reason it is most essential that the matter be given your prompt attention.
“ ‘Kindly let us hear from you on or before the due date of the note.
Yours very truly,
Chicago Nat’l Lies Ins. Co. .
By -
Assistant Treasurer.
hr’
“A photostatic copy of said letter is also hereto attached, marked ‘Exhibit Gr’, and made a part of this stipulation.

9.

“That no notice of the lapsing of said policy was given to the assured or the plaintiff until May 5th, 1931; that on said May 5th, 1931, the company wrote to Julia E. Rudy the following letter:
“ ‘Julia E. Rudy,
1221 Robinson St.,-
Danville, 111.
“ ‘Dear Madam:
“ ‘We have written you several times in regard to the payment of the premium note of $40.00, given for the extension of the premium due July 13th, 1930, on your policy #8441.
“ ‘We have not had the pleasure of receiving your remittance, Therefore Your Policy Has Lapsed on Our Records, according to the terms of this note. You are now without this valuable protection. If you desire to reinstate this policy, kindly advise us at once and we will give the matter our prompt attention.
“ ‘But whether or not you wish to reinstate the policy, it is necessary that you pay the note pro rata for the time which we have held your insurance in force on this extension note.
“ ‘Do not delay this matter any longer, as oftentimes delays are disastrous.
“ ‘ Thanking you for your past patronage and hoping to hear from you by return mail, we are
Yours very truly,
Chicago Nat’l Life Ins. Co.
By -
Assistant Treasurer.
hr’
“A photostatic copy of said letter is also hereto attached, marked ‘Exhibit H’, and made a part of this stipulation.

9a.

“That after Exhibit H had been received by plaintiff and Julia E. Rudy, plaintiff wrote, on May 16th, 1931, to the company, the following letter:
“ ‘1221 Robinson St., Danville, Ill.,
May 16-31
“ ‘ Chicago National,
Chicago, Ill.
“ ‘Dear Sir:—
“ ‘In regard to Mrs. Julia E. Rudy Ins. on P. 8441— I wrote you a long time ago asking for a note to be filled out, that I could not pay it and I got no note, and now I am just as hard up as I was then. I got 3 days work last week the first since last Sept, but I will renew the note if you are willing.
“ ‘Yours truly,
A. L. Rudy’
(Going through the)
(April Statement on)
(Extended Insurance)
( )
(#8441 7-14 )
“The notation on the left hand lower corner of the said letter was made by the company.
“A photo static copy of said letter, showing said notation in parenthesis, is hereto attached, marked ‘Exhibit I’, and made a part of this stipulation.
“That in answer to the letter of plaintiff marked ‘Exhibit I’, the company, on May 20th, 1931, answered as follows:
“ ‘Mr. A. L. Rudy,
1221 Robinson St.,
Danville, Ill.
“ ‘Dear Sir:
“ ‘Your letter of the 16th received and will say we are very sorry that we did not receive your previous letter.
“ ‘We are enclosing a reinstatement blank for your wife to fill out and sign and if you will sign this and return we will extend the note until July 13th, which is the anniversary date of this policy.
“ ‘ Thanking you for your continued patronage, we are
“ ‘Tours very truly,
Chicago National Life Ins. Co.
By -
Assistant Treasurer.
ref/p
ene. ’
“A photostatic copy of said letter is hereto attached, marked ‘Exhibit J’, and made a part of this stipulation.
‘ ‘ That afterwards, on June 5th, 1931, plaintiff wrote the company as follows:
“ ‘1221 Robinson St., Danville, Ill.
June 5-31
“ ‘ Chicago National Life,
Chicago, Ill.
“ ‘Dear Sir:—
“ ‘In regards to Mrs. Rudy’s Policy — No. 8441 — I would like to know what her premiums are that she owes up to present time.
Tours truly,
A. L. Rudy. ’
“A photo static copy of said letter is hereto attached, marked ‘Exhibit K’, and made a part of this stipulation.
“That afterwards, on June 14th, 1931, plaintiff wrote the company the following letter:
“ ‘June 14 — 31
1221 Robinson St., Danville, Ill.
“ ‘Chicago National Life Chicago, Ill.,
“ ‘Dear Sir: — ■
( “ ‘In regard to Mrs. Julia E. Rudy’s policy)
(#8441, will say she can not sign a reinstatement) (application blank. She has not been able to do a) (day’s work since last March a year ago, ‘March) (1930’ and since I looked the policy over I find she) (has T. D. and D. D. )
“ ‘Yours truly,
A. L. Rudy’
Policy Lapsed
“A photostatic copy of said letter, including large parenthesis and the legend, ‘Policy Lapsed’ made by the company on receipt of said letter, is hereto attached, marked ‘Exhibit L’ and made a part of this stipulation.
“That on receipt of Exhibit L, the company, by its actuary, on June 16th, 1931, wrote the plaintiff the following letter:
“ ‘Mr. A. L. Rudy,
1221 Robinson St.,
Danville, Ill.
“ ‘Dear Sir:—
“ ‘Your letter to the Chicago National Life Insurance Company has been handed over to me for reply. Policy #8441 issued on the life of Julia E. Rudy
was lapsed for non-payment of the note due November 13, 1930.
“ ‘It is impossible to reinstate this policy without a reinstatement blank having been made out and submitted to this Company in the regular form, and unless Mrs. Rudy can do so the policy, will lapse according to its terms.
“ ‘Yours very truly, Actuary.
jol:hk’
“A photostatic copy of said letter, marked ‘Exhibit M’ is hereto attached, and made a part of this stipulation.

10.

“That answering the letter marked ‘Exhibit K’, the company wrote the plaintiff the following letter:
“ ‘June 9th, 1931.
“ ‘Mr. A. L. Rudy,
1221 Robinson St.,
Danville, Ill.
“ ‘Dear Sir:—
“ ‘In reply to yours of the 5th, kindly be advised that your wife’s policy #8441 lapsed for non-payment of the note due November 13th, 1930.
“ ‘If you desire to reinstate this policy, kindly have your wife sign the enclosed reinstatement blank and return with your remittance of $42.20. If the reinstatement is approved by our Medical Department, we will reinstate the policy and forward you the note can-celled, otherwise we will return your remittance to you.
“ ‘Tours very truly,
Chicago National Life Ins. Co. By R. E. Furrow,
Assistant Treasurer.
ref/p
enc.’
“A true copy of said letter is hereto attached, marked ‘Exhibit N’, and made a part hereof, the original letter being in the possession of the plaintiff and will be produced on the trial, if demand is made therefor.

11.

‘ ‘ That assured departed this life on the 31st day of March, 1932, and that any proof of death, other than already furnished by plaintiff, is waived.

12.

“That on May 18th, 1932, the said Alonzo L. Rudy, wrote and mailed to the company, the following letter:
“ ‘May 18-1932 1221 Robinson St., Danville, Ill.
“ ‘Chicago National Life Insurance Co.,
1400 W. Washington Blvd.,
Chicago, Ill.
“ ‘ G-entlemen:—
“ ‘My wife, Julia Rudy passed away on March 31st, this year. She held a policy in your company No. 8441, for Three Thousand Dollars. Please send me your blank proof of loss so that I may get it fixed up and sent in.
“ ‘Yours truly,
Alonzo L. Rudy.’
“A photostatic copy of said letter is hereto attached, marked ‘Exhibit O’, and made a part of this stipulation. ■
“That upon receipt of the said letter by the company, on May 20th, 1932, the company, by one W. D. Hunnell, the manager of its claim department, wrote the plaintiff as follows:
“ ‘Mr. Alonzo L. Rudy,
1221 Robinson Street,
Danville, Illinois.
Re: Julia E. Rudy, Dec’d.- “ ‘Dear Mr. Rudy:—
“ ‘We have your letter of May 19th, reporting the death of your wife, who held policy #8441.
“ ‘We were very sorry to learn of your loss, and it is also with reluctance that we must inform you that this policy is lapsed and that the Extended Insurance expired on January 13th, 1932.
“ ‘Yours very truly,
W. D. Hunnell, Manager, Claim Dept.
wdh/mv’
“A true copy of said letter is hereto attached, marked ‘Exhibit P’, and made a part of this stipulation. The original letter is in the possession of the plaintiff, and will be produced at the trial if demanded.

13.

“That the Pacific States Life Insurance Company is a corporation organized and existing under and by virtue of the laws of the State of Colorado, and duly licensed to transact the business of life insurance and of accident and health insurance in the State of Illinois.

14.

“That on June 3rd, 1932, a certain decree was entered in the Superior Court of Cook County in case #558236, of which decree a true copy is hereto attached and made a part of this stipulation as ‘Exhibit Q’. That in obedience to the decretal order therein contained, James M. Grume was appointed receiver of all the assets of every nature whatsoever and wheresoever situated belonging or in any manner pertaining to the Chicago National Life! Insurance Company as shown in clause ‘c’ of paragraph 7 of said decree; that in obedience to the decretal order aforesaid, the Pacific States Life Insurance Company executed a re-insurance contract with the Chicago National Life Insurance Company with the approval of Leo H. Lowe, Director of the Department of Trade and Commerce of the state of Illinois; that a certified copy of the said re-insurance contract was duly filed for record in the office of the said Leo H. Lowe and by him approved and the same is now of record in said office.

15.

“That in obedience to said decretal order, the said James M. Grume, as receiver for the Chicago National Life Insurance Company has transferred and set over to the Pacific States Life Insurance Company, all the assets of the Chicago National Life Insurance Company heretofore received by him as such receiver, and stands ready to transfer to the said Pacific States Life Insurance Company any and all of the assets of the Chicago National Life Insurance Company that may hereafter come into his hands as such Receiver.

16.

1 ‘ That this stipulation shall be effective when signed by the parties hereto by their respective attorneys.
“Witness our hands in triplicate this the-day
of September, 1932.
Attorney for A. L. Rudy.
“Attorney for James M. Grume, Receiver, Chicago National Life Insurance Company and Pacific States Life Insurance Company.”
Two questions are presented for review under the assignment of errors, namely:
“1. Did the total and permanent disability rider attached to and forming a part of the policy exonerate Mrs. Rudy (the insured) from the payment of future premiums ? ”
“2. Did the payment of the cash item of $33.65; and the giving of a note for the balance of the premium due continue the insurance in force until July 13, 1931!”
Counsel for plaintiff in error make the following statements explanatory of their position in this controversy; and the questions referred to:
“If the cash payment plus the note amounted to a payment of the premium for the policy year beginning July 13, 1930 and ending July 13, 1931, there was enough extended insurance value to keep the policy in force until the time of Mrs. Rudy’s death. If on the other hand the payment of the cash and the giving of the note did not amount to a payment of the premium for the policy year in question, the automatic extended insurance was insufficient to maintain the insurance in force up to the time of her death.”

The rider concerning permanent disability which has been referred to, is as follows:

“That if, while the policy is in full force and before default in the payment of any premium thereunder, the insured shall become wholly and permanently disabled by bodily injury or by disease so as to be wholly, continuously, and permanently prevented thereby for life from engaging in any gainful occupation, and, if satisfactory proof of such disability is furnished to the company, then the company will pay the succeeding premiums under this policy as they become due during the period of such disability. The premiums to be paid by the company are in addition to other benefits offered by the policy.”

It is admitted by the plaintiff in error as a part of the evidentiary facts to be considered by the stipulation, that the daughter of the insured, Catherine Monroe, would have testified, if called as a witness, that the insured became wholly and permanently disabled from engaging in any useful occupation, about March 24, 1930; also, that the insured’s physician, Dr. C. W. Allison, would have testified to the same facts. What the doctor’s testimony would have been concerning this feature of the case, is set forth in the abstract as follows:

“She was totally disabled because of cancer from March 24,1930; that I did not know until many months thereafter that her disability would be permanent. I recall that at times her condition showed improvement, but these better periods were followed by lapses into worse condition, and in the late fall or winter of 1930 I became convinced that her case was incurable, but did not impart that information to her husband, Alonzo L. Rudy, or to the deceased for some time after I had become convinced of it myself.”

It is contended by counsel for plaintiff in error upon this feature of the case, that before the obligation of the plaintiff in error company concerning permanent disability could become effective and binding, it was necessary that the insured should have furnished the company with satisfactory proof of such permanent disability; and that she failed to do so; that the furnishing of such satisfactory proof was a condition precedent to the right of the beneficiary to recover upon the policy. It is pertinent to state on this point that the stipulated evidentiary facts disclose, however, that the company had been notified, and therefore had knowledge, of the disabled condition of the insured; and did not, at any time, express any dissatisfaction with the proof contained in the notice of the insured’s disabled condition, nor require further proof of this fact. Therefore, in this connection, we will first consider the matter of permanent disability with reference to the right of recovery, namely, whether or not, under the stipulated facts, the insurance provided for, was in force at the time the permanent disability occurred. The permanent disability, under the provisions of the policy, when it occurred, absolved the insured from the payment of further premiums; and therefore, in view of this provision, the policy automatically remained in force, without further payments of premiums, until the death of the insured which occurred on March 31, 1932. As has been stated, the fifth payment of the premium provided for in the policy, became due on July 13, 1930; and was settled for by a cash payment of $33.65, and the giving of a promissory note for $40, which was made and delivered to the plaintiff in error company, by Alonzo L. Rudy, the defendant in error herein and the beneficiary of the policy. The note, under its terms, became due November 13th following; but by mutual agreement, the time for payment was extended to March 13, 1931. The note was not paid, nor was it paid at the date to which it was extended; and remained unpaid.

It is contended by counsel for the plaintiff in error that the note cannot be regarded as a part payment. While we cannot agree with counsel in this contention, we desire to point out the fact that even though the note cannot legally be regarded as part payment, certainly the $33.65 paid in cash to the company and accepted by the company as a part payment of the premium, had the effect of extending the insurance in force for at least five months; that the insured under the provisions of the policy, after the four annual payments of premiums which had been paid, was entitled to an automatic extension of the insurance for one year and two months more (not counting the days of grace) which kept the policy in force until September 13,1931. Surely it cannot be justly contended that the insured forfeited or waived her right of the automatically extended insurance provided for, by the cash payment made of part of the premium due on July 13, 1930. It is not questioned in the stipulation of evidentiary facts, and therefore admitted, that under the provisions of the policy, she was entitled to the right to have the insurance automatically extended, at the time the cash payment was made. It seems apparent, therefore, that, adding the automatic extension period provided for, to the extension to which she was entitled by the payment of the $33.65 cash payment, the insurance remained in force until February 13, 1932. The insured became permanently disabled in March, 1930, but did not die until March, 1932; so we conclude that the correct solution of the question raised by counsel for the plaintiff in error in his brief is that the policy was in force at the time of the death of the insured, whether the $40 note in question can be regarded as a part payment or not.

It is evident from the stipulation of evidentiary facts that the plaintiif in error company never, at any time, had the right to lapse, or avoid, or forfeit the policy during the lifetime of the insured. Taking this view of the matters involved in this' controversy, we deem it unnecessary to determine the other questions, which have been raised in the case; and therefore conclude that the court properly found, that the defendant in error had a right to recover under the policy sued on. The judgment is therefore affirmed.

Judgment affirmed.


text:
    The Prudential Insurance Company of America, Appellant, v. Arthur S. Bass and Jennie E. Bass, Appellees.
    Gen. No. 8,789.
    Opinion filed January 12, 1934.
    Heard in this court at the October term, 1933.
    Rehearing withdrawn from files and records on motion February 17, 1934.
    George E. Drach and J. C. Martindale, for appellant.
    Rearick & Rearick, for appellees.
   Mr. Presiding Justice Niehaus

delivered the opinion of the court.

On the 10th day of December, A. D. 1921, Arthur S. Bass and Jennie E. Bass borrowed the sum of $22,000 from the Prudential Insurance Company of America, the appellant herein. A note for that sum, evidencing the debt, and a first mortgage on the farm land described therein in Pike county, were executed and delivered to the appellant company. The principal sum in the note was payable December 10, 1926, with interest from December 10, 1921, at the rate of six per cent per annum, and the makers of the note have the privilege of paying on the principal sum multiples of $100 at any interest maturity date, said payments not to exceed one-fifth of the principal sum during any one year.

On the 26th day of October, 1924, the appellees conveyed the mortgaged premises by warranty deed to Harry E. Buckles and 0. It. Hawkins; which conveyance was made, “Subject, however, to the mortgage indebtedness in question, with the interest thereon paid to March 1, 1924; and which the grantees assumed and agreed to pay as a part of the purchase price.” Thereafter, on the 29th day of December, 1926, the grantees of the conveyance in question, together with their wives, executed an agreement with the appellant company, by which they agreed to pay the principal sum of $22,000 on December 10, 1931, with the interest from December 10, 1926, at the rate of five per cent per annum; and with the privilege of paying on the principal sum multiples of $100 at any interest maturity date, without limit or restriction; the note and mortgage to remain in force except as modified by the agreement.

It appears from the testimony of the appellees, which is uncontradicted, that they had no notice or knowledge of the extension agreement until Decernher 30, 1931; and that they nor either one of them, gave no consent at any time to the extension or the extension agreement. The grantees of the conveyance hereinbefore referred to did not pay the interest on the mortgage debt which became due June 10, 1931, in full; and paid no part of the interest due December 10, 1931. The appellant company as mortgagee in the meantime had advanced and paid the real estate taxes and drainage assessments for the year 1930; also the real estate taxes for the year 1931; and the fire and tornado insurance premiums for the protection of the property against loss by damage to the buildings; and had not been reimbursed for the expenditures referred to. These advancements and expenditures were permitted by the terms of the mortgage ; and by the terms of the mortgage became a part of the principal sum secured by the mortgage, which principal sum was then also due and unpaid. The appellant company thereupon brought this suit for the foreclosure of the mortgage, to the June term, 1932, of the circuit court of Pike county, making the appellees, the original mortgagors, and their grantees, parties defendant.

The bill of complaint prayed a personal decree against the appellees, the original mortgagors, as well as against the grantees in the conveyance mentioned. The master in chancery, in his findings, reported that the appellees inter alios, were jointly and severally obligated to pay the mortgage debt; and that they were not released by the extension agreement between the grantees and the appellant company, which had extended the maturity of the note representing the mortgage debt. The appellees filed objections to the master’s report, which were overruled by the master, but were allowed by the court to stand as exceptions, and upon the hearing, the exceptions were sustained by the court; and the court thereupon entered a decree for foreclosure and sale of the mortgaged premises. The decree expressly discharges the appellees as original mortgagors from personal liability, because of the extension agreement made with the appellant company by the grantees of the conveyance mentioned. The appellant company is now prosecuting this appeal for reversal of the decree.

The only question presented for review in the foreclosure decree is whether or not the extension agreement entered into by the grantees and the appellant company had the legal effect of discharging the appellees as original mortgagors from personal liability for the mortgage debt. While there has been some conflict in the decisions of the Appellate Courts of this State, and no decision directly in point involved in this case, by the Supreme Court, the case of Albee v. Gross, 250 Ill. App. 98, appears to be conclusive on the question presented for review. The facts in that case appear to be practically the same as in the case under consideration. In that case, one Albert Albee was, on June 30, 1914, the owner of 246 acres of land in Winnebago county, which he sold on that day to one E. A. Gross, taking back a purchase money mortgage for $22,000. A few days later Gross and wife deeded this land to Charles F. Brandt, by a warranty deed containing a covenant to the effect that the grantee assumed and agreed to pay the mortgage debt. Still later, Brandt and wife conveyed the land by deed containing a like covenant to one George A. Allen. When the debt matured Allen and the mortgagee entered into an extension agreement for one year, without the knowledge or consent of Gross or Brandt. A foreclosure suit was instituted to which all of the persons above named were parties, in which it was claimed in the bill of complaint that these persons were liable for a deficiency in case of a foreclosure sale for an amount less than the debt, interest and costs. The master in chancery so held. The exceptions to his report on that point were sustained by the trial court. The Appellate Court says, on page 102, that the only issue was whether the extension agreement operated as a release of Gross and Brandt.

The Albee case was taken to the Supreme Court on a petition for certiorari, and the petition was denied. We therefore conclude that the Albee case settles the controverted question in this case in accordance with the contention of the appellees. The Albee case has been followed by the Appellate Courts in this State in Metz v. Dionne, 250 Ill. App. 369; Douglass v. Ullsperger, 251 Ill. App. 145; Binga v. Bell, 259 Ill. App. 361; Farmers & Merchants Bank v. Narvid, 259 Ill. App. 554.

For the reasons stated the decree is affirmed.

Affirmed.


author: Mr. Justice Davis

text:
    Edith Hamson, Appellee, v. The Travelers’ Insurance Company, Hartford, Connecticut, Appellant.
    Gen. No. 8,787.

      Opinion filed January 12, 1934.
    Heard in this court at the October term, 1933.
    Rehearing denied April 3, 1934.
    Jesse Black, Jr., for appellant.
    William A. Potts and Robert H. Allison, for appellee.
   Mr. Justice Davis

delivered the opinion of the court.

Edith Hamson recovered a judgment in the sum of $2,000 against appellant in an action of assumpsit, based upon an insurance policy issued to her brother and in which she was named beneficiary.

The declaration consists of a special count in which the certificate of insurance is set out in haec verba and it is alleged that the defendant promised to pay plaintiff, as beneficiary, the initial sum of $1,500 on the death of the said Henry L. Hamson, and an increased amount from year to year in consideration of the continued service of the said Henry L. Hamson to the Corn Products Refining Company; that the amount of said insurance was increased to $2,000 by defendant on January 16, 1928; that on August 25, 1930, said Hamson, while working for Corn Products Refining Company, became sick and while said certificate of insurance was in full force and effect departed this life on October 10, 1931, and that the plaintiff gave notice to defendant of his death on November 10,1931.

It is further alleged in said special count that said certificate states on its face that it is subject to the terms and conditions of Group Life Policy No. G-2632, issued and delivered to Corn Products Refining Company, and plaintiff has never had access thereto; that said Hamson during his lifetime complied with all the terms of said certificate of insurance on his part to be performed; and that plaintiff has at all times since performed all the terms and provisions of said policy ■ upon her part by the terms thereof to be kept and performed.

In addition to said special count the common counts were added and to which declaration the defendant filed a plea of the general issue and the parties thereupon stipulated that ‘ ‘ all proof may be offered by the respective parties in said cause under the declaration and plea of the general issue Avhich would be competent under a declaration and plea, either general or special, well pleaded, and also proof competent under any subsequent pleadings which might have been well pleaded by the respective parties.”

The certificate of insurance originally issued to said Henry L. Hamson was for the sum of $1,500, and under the terms of which this amount was increased $100 per year during the period of continuous service of said Hamson’ to said Corn Products Refining Company until the maximum of $2,000 was reached. Each year a new certificate was issued to the insured which included the additional $100, and when Henry L. Ham-son died he held a certificate for the maximum amount of $2,000. The beneficiary in the certificate of insurance is Edith Hamson, sister of the assured and appellee in this court.

The certificate contains the folloAving provisions: “The insurance of any employee coA^ered hereunder shall end when his employment Avith the employer shall end or prior thereto when the employee shall notify the employer to make no further deduction from his pay, except in a case, where at the time of termination of employment the employee shall be wholly disabled and prevented, by bodily injury or disease, from engaging in any occupation or employment for wage or profit. In such case the insurance will remain in- force as to such employee during the continuance of such disability for the period of three months from the date upon which the employee ceased to work and thereafter during the continuance of such disability and while this policy shall remain in force until the employer shall notify the company to terminate the insurance as to such employee.”

The group policy contains the following provision: “4. Reports of Registration Data by Employer: The employer shall furnish the company monthly with the names of all employees who shall become eligible to insurance hereunder together with the names of the beneficiaries of such employees and such data as may be necessary to determine the amount of insurance and the amount of premium therefor, and the employer shall likewise furnish the company with the names of employees whose insurance shall be terminated with the date of termination of insurance.

“5. Termination of Insurance: The insurance of any employee covered hereunder shall end when his employment with the Employer shall end, except in a case where at the time of such termination the Employee shall be wholly disabled and prevented by bodily injury or disease from engaging in any occupation or employment for wage or profit. In such case the insurance will remain in force as to such Employee during the continuance of such disability for the period of three months from the date upon which the Employee ceased to work and thereafter during the continuance of such disability and while this policy shall remain in force until the Employer shall notify the Company to terminate the insurance as to such Employee. Nothing in this paragraph contained shall limit or extend the Permanent Total Disability Benefit to which an Employee shall become entitled under this policy.

“Temporary lay-off or leave of absence for reasons other than physical disability as aforesaid shall not be considered as termination of employment for the purpose of this insurance unless the Employer shall so elect. ’ ’
“14. Entire Contract: This policy, the application of the Employer and the individual applications, if any, of the Employees insured shall constitute the entire contract between the parties.”

The group plan of insurance was adopted by the Corn Products Refining Company on March 15, 1923, and on April 9, 1923, appellant issued to it the above mentioned group policy. This policy was issued by appellant in consideration of the application of the Corn Products Refining Company and the payment by it of the premium provided to be paid by the terms of said group policy. At the beginning- of the policy year the Corn Products Refining Company pays the premium in advance for the entire amount covered by the .group of employees at each plant. The full amount of the premium is never collected back from the employees, the rate charged by it to its employees being 50 cents per month regardless of the face amount of the certificate of insurance held by such employee. The deceased had entered the employ of the Corn Products Refining Company on January 26, 1918, and had been a continuous employee of said company for over five years, when he made his application for a certificate of insurance, and was entitled to and did receive one insuring him in the sum of $1,500.

In his original application for a certificate of insurance he authorized his employer to deduct the sum of 50 cents per month from his wages to apply toward the premium for insurance provided for in the policy of group insurance, issued by appellant to the Corn Products Refining Company, and this amount was deducted each month from his wages by his employer. The proofs show that such deductions from his wages were made up to the 22nd day of August, 1930. In July, 1930, the assured became ill and for a time was unable to work during that month and a portion of the month of August, 1930. In August, 1930, he returned to his employment and worked for about three weeks, when he again became ill and unable to work; and from August 22, 1930, on account of such .illness he was disabled from engaging in any occupation or employment for wage or profit during the remainder of his life. Thereafter he made payment in cash upon his insurance assessments up to and including the month of April, 1931. These monthly payments were sometimes made by the insured, and sometimes by his sister, the appellee, and were frequently collected by Mr. Hough, who was paymaster of the Corn Products Refining Company and had entire charge for that company of the group insurance of its employees.

He testified that he sent the money, so collected, to the New York office of the Corn Products Refining Company and that the insurance was allowed to get behind as he did not like to send a check or draft for an amount under one dollar, and he would let the insurance build up until it was at least a dollar or a dollar and a half and then get a draft. During all this time the assured was carried on the books of the Corn Products Refining Company as an employee, although he was receiving no wages.

On July 13, 1931, Mr. Hough went to the home of the assured, who tendered him $1.50 for assessments due on insurance for the months of May, June and July, 1931. The tender was -made in cash. Mr. Hough testified that he told the assured and appellee at that time that he would not take the money as he was going to cancel the policy on August 1, 1931, and would waive the amount due for May, June and July. He further testified that the insurance was not canceled because the payments were not kept up by the assured. The assured died October 10, 1931. On September 9, 1931, the Corn Products Refining Company reported to appellant that it had canceled the assured’s certificate on August 1, 1931, and on that date he was removed from their inactive employees’ list.

It is claimed that the liability of appellant ceased on August 1, 1931, because he ceased at that time to be an employee of the Corn Products Refining Company and was not such an employee on October 10, 1931, when he died.

We cannot agree with this contention. Both the certificate of insurance and the group policy provide that the insurance of any employee shall end when his employment with the employer shall end, except in a case where at the time of termination of employment the employee shall be wholly disabled and prevented by bodily disease from engaging in any occupation or employment for wage or profit, and, in such case, the insurance will remain in force as to such employee during the continuance of such disability for the period of three months from the date upon which the employee ceased to work.

There is no contention but that on August 1, 1931, the time when appellant claims this certificate was canceled and the assured ceased to become an employee of the Corn Products Refining Company, the assured was wholly so disabled by disease.

Appellant also contends that because the provision of the certificate and of the group policy provides, further: “In such case the insurance will remain in force as to such employee during the continuance of such disability for the period of three months from the date upon which the employee ceased to work, etc.,” and as the assured ceased to work in August, 1930, that the word “employment” theretofore used in this provision means actual work, and as assured ceased working in August, 1930, that the provision for the extension of time of the life of the certificate for three months after the end of his employment does not apply.

It is a familiar rule in the construction of insurance policies, where the meaning of the language used therein is uncertain or an ambiguity exists, that the construction will be adopted which is most favorable to the assured, and, therefore, the words “cease to work” will be construed to mean cease to be employed, otherwise they would be in contradiction with the provision that the insurance of any employee shall end when his employment with the employer shall end.

According to appellant’s own proofs the Corn Products Defining Company carried the assured on its books as an employee until August 1, 1931, and collected all of the monthly instalments due from him up to that date, except the instalments for the months of May, June and July, 1931, the payment of which was waived by it, and thereby recognized that his certificate of insurance was in full force.

The certificate of insurance and the group policy both provide that the insurance shall end when the employment ends and not when he ceases to work. They further provide that the insurance shall also continue until the employer shall notify the company to terminate the insurance as to such employee, and the Corn Products Defining Company did not notify appellant to terminate the insurance until September 9, 1931, and then gave as a reason that he had left the company August 1, 1931. The words “left the company” can only mean that the employment of the assured ceased on August 1, 1931, but the certificate of insurance and the group policy specifically provide that if at such time the employee shall be wholly disabled and prevented by bodily disease from engaging in any occupation or employment, for wage or profit, the insurance will remain in force during the continuance of such disability for the period of three months, and the assured on August 1, 1931, being wholly disabled and prevented by bodily disease from engaging in any occupation or employment for wage or profit, said certificate of insurance remained in force during the continuance of such disability for a period of three months or until October 31, 1931.

The judgment of the circuit court is affirmed.

Judgment affirmed.


author: Mr. Justice Fulton

text:
    Leroy Lawson, Appellee, v. Eugene E. Fayart and Louis E. Fayart, Appellants.
    Gen. No. 8,771.

      Opinion filed January 12, 1934.
    Heard in this court at the April term, 1933.
    Rehearing denied April 3, 1934.
    Hicks & Folonie, A. M. Fitzgerald and H. C. Moore, for appellants.
    John I. Magill and Hoopes & Pefferle, for appellee.
   Mr. Justice Fulton

delivered the opinion of the court.

This is an appeal from a judgment of the circuit court of Sangamon county against appellants in an action of assumpsit brought by appellee to recover damages for destruction by fire of appellee’s household furniture based upon an alleged insurance agreement.

The suit was commenced on October 25, 1929, and the common counts filed on that date. On January 28, 1932, an additional count was filed and on October 15, 1932, 12 more additional counts were filed. At the close of appellee’s evidence the court directed a verdict on motion of appellants to the original declaration, the additional count filed January 28, 1932, and all but the fifth, sixth, seventh and twelfth additional counts filed October 15, 1932.

Counts 5 and 12 charge that appellants represented they had authority to bind an undisclosed insurance company-bo a Contract for insurance; that they did purport to bind such company by a contract of insurance on appellee’s household furniture for one year from May 11,1929; that the appellants lacked such authority and by reason thereof they agreed to' indemnify the appellee against loss of the property by fire in the same manner as they pretended to bind the insurance company. The sixth count alleged a personal agreement to insure on the part of appellants and the seventh count is based upon an alleged agreement on the part of appellants to procure insurance for appellee. The general issue was filed and also special pleas to the additional counts to the effect that any policy that would have been procured would have contained the usual provision that no suit could prevail unless commenced within 12 months next after the fire and that the additional counts stated entirely new and different causes of action from those stated in the common counts and were not filed within 12 months next after the fire. Demurrers to these pleas were sustained by the trial court.

Prior to May 11, 1929, appellee resided in Springfield, Illinois, and on that date moved to a farmhouse about six miles outside the said city. He had an insurance policy procured from appellants covering his household furniture at the location in Springfield and on May 10, 1929, applied for a removal permit at the office of appellants. He was told that they could not issue permits outside the fire limits on his policy and it would be necessary for him to take out some other kind of a policy. Appellee was told to secure a description of the property and return the next day, which .he did. He testified that he told appellants he did not want to move until he was insured, that he paid appellants the sum of $17.25 and was informed by them that he was insured and was given the following receipt :

“Springfield, Illinois, May 11, 1929'.
“Received of L. R. Lawson $17.25 as insurance on household goods.
Eugene E. Fayart and Son, by M. Gfrieme.”

He further testified that Eugene E. Fayart asked him to sign a couple of applications for insurance and was told that he was insured and that the premium was paid on the policy they were to procure for him. The property was destroyed by fire on the night of May 14th. The applications signed by appellee were dated May 11th. One was returned to appellants with letter dated May 14th rejecting the application. The other was mailed out by appellants on May 15th and never accepted by the insurance company. Appellants’ testimony was to the effect that the applications would not be binding until approved by the insurance company, and that it was doubtful whether the company would accept the application and issue a policy. Both at the close of appellee’s testimony and at the close of all the evidence, the court denied appellants’ motions for directed verdict and the jury returned a verdict for appellee in the sum of $850, upon which judgment was entered.

Appellants urge among other reasons for reversal that the court erred in sustaining demurrers to appellants ’ special pleas of limitation. The original declaration contained merely the common counts and if it be determined that the preliminary contract was subject to all the terms and conditions of the usual form of policy to be subsequently issued, including the provision limiting the time for commencement of suit to 12 months next after the fire, then the additional counts filed more than 12 months after the fire, stated a new cause of action and were barred by the contract limitation set up in the special pleas. Trichelle v. Sherman & Ellis, Inc., 259 Ill. App. 346. If in this case the testimony had only included the payment of the $17.25 by appellee for insurance on household goods as indicated by appellants’ receipt, it might be argued that this judgment could be affirmed upon a contract or to enforce a contract “to insure.” The appellee, however, signed two written applications for the insurance, and further testified that he paid the above named sum of money tp Eugene E. Fayart, one of appellants, “for the policy he was to get for me.” Both the signing of the applications and the oral testimony of appellee expressly refer to a policy to be delivered.- We are of the opinion that the rule of law stated in the Trichelle case, supra, is applicable to the facts in this case. In that case the action was brought upon a binder which did not state any of the terms of the insurance. It did, however, make reference to a policy and the court held that 'the terms of the usual insurance policy issued by the defendants were a part of the contract. The question in that case was very similar to the one discussed here, and the court said on page 357: ‘ ‘ One of the provisions of defendant’s form of policy, set up in its eighth plea, is that any suit or action thereon for the recovery of any claim shall not be sustainable unless commenced within twelve months next after the fire. It is undisputed that the warehouse was destroyed by fire on April 10, 1924, and that this suit was commenced . by plaintiff on April 21,1926. The suit was, therefore, barred by this limitation of the contract. (Hartsell v. Maryland Casualty Co., 163 Ill. App. 221, and cases there cited.) ’’ The same situation obtains in this case. The suit was instituted within the 12 months but only the common counts were filed and the additional counts were all filed after the 12 months’ limitation had expired. -The appellee could not recover upon any alleged contract for insurance set forth in any of the common counts. Heffron v. Rochester German Ins. Co., 220 Ill. 514. The question becomes one of law, therefore; as to whether there may be read into the preliminary contract the terms and conditions of the contemplated policy. The doctrine announced in the Trichelle case is supported by Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454; Sherri v. National Surety Co., 243 N. Y. 266, and Cottingham v. National Mut. Church Ins. Co., 290 Ill. 26. Appellee contends that the above question is not properly before this court because the abstract only contains the four counts upon which the suit was tried, whereas there were 13 counts filed. The record contains the 13 counts and the special pleas were to each of the counts, and it is proper for the court to consider the pleas as to each count. Therefore, if the pleas were good as to any of the counts which the court permitted to stand and go to the jury, it was error to sustain the demurrers to the pleas.

The conclusion reached by the court on this question renders it unnecessary to consider the other assigned errors and the judgment of the circuit court of Sangamon county is reversed as a matter of law.

Reversed.


text:
    Martha E. Shaw et al., Appellees, v. Personal Finance Company of Champaign and John C. Hauck, Appellants.
    Gen. No. 8,790.

      Opinion filed January 12, 1934.
    Heard in this court at the October term, 1933.
    Rehearing denied April 3, 1934.
    Roy C. Freeman and Green & Palmer, for appellants; Henry I. Green, Charles R. Napier and Oris Barth, of counsel.
    Dobbins & Dobbins, for appellees.
   Mr. Justice Fulton

delivered the opinion of the court.

This is an appeal from a judgment of the circuit court of Champaign county, in favor of appellees for $500 against appellants, entered on a verdict of a jury. Appellees were husband and wife and on December 26, 1931, executed a chattel mortgage covering their household goods and a Hudson automobile to secure the payment of $300, payable to the Personal Finance Company of Champaign. In March, 1932, appellees testify that Mrs. Shaw became sick and was taken to her mother’s home in the same city, while her husband went to stay with his parents and later followed Ms wife to her mother’s home. Their household goods were stored temporarily in a warehouse and appellees further testified that in July of the same year they rented another home and then found that all of their personal property placed in storage had been taken by the Finance Company. Appellee Avery Shaw testified that sometime before he had asked the Finance Company to sell the. automobile and apply the proceeds on the mortgage; that appellant Hauck, who was the manager of the Finance Company, asked him to sign a release upon the automobile for the purposes of sale which Shaw signed. Later a representative of the same company took a paper to Mrs. Shaw and asked her to sign on the representation that it was a release to sell the car. Both appellees testify that nothing was said to them about the sale of any other property except the automobile; also that they knew nothing about and had no notice of the sale of the household goods. These facts were denied by Hauck for the appellants. He produced written waivers and releases signed by appellees which contained consents to the sale and also testified that the sale was made at the request of appellee Avery Shaw, and that the signatures to the above instruments were placed thereon willingly by appellees.

The declaration consisted originally of four counts but during the taking of the appellees’ testimony the first three counts were withdrawn and the case tried wholly upon the fourth count which was in the following language:

“Fourth Count. And for that whereas, on, to-wit, the 28th day of December, A. D. 1931, the plaintiff, together with Avery F. Shaw, the husband of the plaintiff, did make and execute to the defendant, Personal Finance Company of Champaign, its successors and assigns, one certain chattel mortgage upon the necessary household goods, wearing apparel, and mechanic’s tools of the plaintiff, which chattel mortgage was then and there in the words and figures following, to-wit: (Here follows copy of Chattel Mortgage.)
“And the defendants on, to-wit, the first day of December, A. D. 1932, did then and there seize the said goods and chattels covered by the said chattel mortgage and take the same from the possession of this plaintiff as mortgagor without procuring from any judge of a court of record any order directing any Sheriff to seize such household goods, wearing apparel, or mechanic’s tools, and to hold the same subject to the order of the court and without foreclosure of said mortgage in any court of record, all contrary to the statute in such case made and provided, and the plaintiff further avers that said goods and chattels of the plaintiff were then and there of the value, to-wit, One Thousand ($1000.00) Dollars, and by means thereof the said defendants have unlawfully deprived the plaintiff of her said goods and chattels to the damage of the plaintiff of, to-wit, One Thousand ($1000.00) Dollars, therefore she brings this suit, etc.”

Defendant filed a plea of the general issue. On the trial of the case the court proceeded on the theory that the above count was a trespass count whereas appellants contend that the court’s ruling on this count was erroneous and that the action was in trover. While other questions are argued in the briefs, this was the main contention on the trial. Appellants sought to introduce in evidence the written waivers or consents of appellees to the sale of the mortgaged property as a defense upon the merits to the charge of conversion and that the statute had been violated. The court held that in an action of trespass they were not entitled to such defense unless the same was specially pleaded and admitted the exhibits only in connection with appellees’ claim for exemplary damages. Written instructions given by the court expressly limited the consideration of the consents by the jury to the determination of whether or not the trespass, if proven, was wanton or otherwise. We are inclined to believe that the ruling of the court was correct. The count is similar to the count for trespass de bonis asportatis, except that it omits the words “with force and arms” which was a matter of form and should have been pointed out by special demurrer. The count charges the seizure of the goods without procuring an order from a court of record as required by statute, the value of the goods and the depriving of the appellees from the possession of "same.

The statutory provision reads as follows: “That no chattel mortgage on the necessary household goods, wearing apparel or mechanic’s tools of any person or family shall be foreclosed except in a court of record. No such household goods, wearing apparel or mechanic’s tools covered by a chattel mortgage shall be seized or taken out of the possession óf the mortgagor before foreclosure, except by a sheriff. . . .” Cahill’s St. ch. 95, If 25.

No conversion of the goods is expressly charged in the count, and the usual language of a trover count is not followed. Being an action of trespass the defense of leave or license should have been specially pleaded. Richardson v. O’Brien, 44 Ill. App. 243, 246; Chicago Title & Trust Co. v. Core, 223 Ill. 58, 63.

The appellees were in constructive possession of the mortgaged property at the time the same was taken by the appellants, even though there was a lien against them, the jury have passed upon the facts which were in conflict and we see no substantial reason for reversing the judgment of the circuit court. The refusal of the court to permit the filing of a special plea after the testimony was closed was not error. The judgment is therefore affirmed.

Affirmed.


author: Mr. Justice Huffman

text:
    James W. Mahannah, Appellee, v. Rodney Bergfeld and Vacuum Oil Company, Appellants.
    Gen. No. 8,719.

      Opinion filed January 19, 1934.
    Heard in this court at the October term, 1933.
    Rehearing denied April 2, 1934.
    Hunter, kavanagh & McLaughlin, for appellants.
    John E. Cassidy, for appellee.
   Mr. Justice Huffman

delivered the opinion of the court.

Appellee, plaintiff below and hereinafter called plaintiff, brought suit against appellants, hereinafter called defendants, for personal injuries sustained as a result of a collision between one of defendants’ automobiles and plaintiff’s. Issues were joined on a plea of general issue, and upon a trial before a jury, verdict was returned for the sum of $3f,000 in favor of plaintiff, upon which verdict judgment was rendered by the trial court. Defendants prosecute this appeal and urge three causes for reversal. The first ground urged is the refusal of the court to admit defendants’ Exhibit 1 in evidence; second, that the hypothetical questions propounded to Dr. Cooper were improper; and third, that the verdict is excessive.

The accident in question occurred in the residential section of the City of Pekin, Illinois, at about 2:30 p. m., on September 4, 1931. While crossing a street intersection, plaintiff’s car was struck by defendants’ car, overturned and knocked some 40 to 50 feet in the distance. Plaintiff was caught in the wreckage of his overturned automobile and was lying on his back at the time he was extricated therefrom. He complained that his back was hurt. He was removed to the hospital where X-rays were taken of his lower spine, the pictures disclosing that plaintiff had sustained a fractured transverse process of the fourth lumbar vertebra on the right side. Plaintiff was put to bed for a period of two months following the accident, under a physician’s care and observation. After this period of time he moved about with the aid of crutches. On December 10, 1931, he attempted to work in an automobile garage, and claimed that he was unable to perform such work, due to a rigidity of the back muscles and accompanying pain upon performing labor underneath automobiles, and that remaining in such position for any considerable time, produced a temporary paralyzed condition of his back and back muscles. In December 1932, approximately 15 months after the accident, plaintiff obtained his first employment following the injury, at which he has worked. This position was as a station attendant at a gasoline filling station. He claims that this work requires no lifting and that his duties are confined to putting gasoline and oil in cars. He claims that after a busy day at this work his back pains him to the extent that he cannot lie down until after several hours ’ sitting position in a chair.

Upon cross-examination of plaintiff, counsel for defendants submitted to plaintiff two full-sized sheets of paper, with writing upon both sides of each sheet, and claimed to be a written statement of the accident, made by plaintiff. These sheets of paper were identified as defendants’ Exhibits 1 and 1-a. Plaintiff was asked if it was his signature at the bottom of said exhibits, to which he responded that it was. After the conclusion of the evidence on behalf of plaintiff and during the defendants’ evidence in chief, defendants offered in evidence what is claimed to be a p.ortion of one of such sheets of paper, as defendants’ Exhibit 1. This exhibit as offered is a mutilated piece of paper upon which certain parts of the writing thereof have been obliterated. The trial court, upon objection, denied defendants the right to introduce said exhibit in the condition as offered. This is defendants’ first ground urged for reversal. Said exhibit as offered was certified to this court for inspection. A portion of the order of the trial judge certifying the exhibit is as follows:

“It is further certified that during plaintiff’s case in chief and upon cross examination by defendant’s counsel of plaintiff, James Mahannah, that defendant’s counsel presented to plaintiff as a witness 2 sheets of paper which were then identified by the reporter marking thereon Defendant’s Exhibit 1 and Defendant’s Exhibit 1-A and that said sheets of paper contained writings on both sides of each sheet.
“It is certified that plaintiff was interrogated and responded that his signature appeared on the sheets of paper marked Defendant’s Exhibit 1 and Defendant’s Exhibit 1-A. That at the time plaintiff was so interrogated Defendant’s Exhibit 1 was not in the same physical condition and appearance as at the time it was offered in evidence.
“It is certified that at the time Defendant’s Exhibit 1 was presented to plaintiff as a witness that it was in appearance a full sized sheet of paper and that at the time it was offered in evidence during defendant’s case in chief, Defendant’s Exhibit 1 was a piece of paper as and in the condition of the original paper hereto attached and was at the time it was offered in evidence only a portion of defendant’s Exhibit 1 as it existed at the time plaintiff testified that his signature appeared thereon.
“It is further certified that the original paper hereto attached and marked Defendant’s Exhibit 1 has on one side pencilled markings, that is, obliterations or apparent destruction of a portion of the diction thereon by means of the written words covered by pencilled markings.
“It is certified that at the time the original defendant’s Exhibit 1 was shown to plaintiff upon cross examination when he admitted his signature was thereon that such Exhibit did not contain such obliterations or pencilled markings which are on the paper hereto attached.
“It is certified that between the time Defendant’s Exhibit 1 was presented to plaintiff witness on cross examination and between the time it was offered in evidence that such Exhibit was changed on account of a portion of the sheet of paper being cut away and also by means of pencilled markings or obliterations being drawn through the written words as appears on the attached original paper.”

The above statement very aptly sets out and describes the exhibit as offered. The plaintiff’s attention at the time defendants’ Exhibits 1 and 1-a were submitted to him upon his cross-examination, was not directed to any part thereof that defendants claimed to be inconsistent with his testimony. Plaintiff was merely shown the Exhibits 1 and 1-a, and asked if he had seen the same and if his name was signed thereto, to which he responded in the affirmative. In order for defendants to lay the proper foundation to impeach plaintiff as a witness, they should have called his attention to such portions of the written statement as they considered to be inconsistent with his testimony, and given him the opportunity to explain such inconsistencies. Helgesen v. Chicago Suburban Water & Light Co., 156 Ill. App. 541.

Written or printed exhibits, when composed of one single instrument and when identified as such by a witness who has signed same, should not be permitted to be mutilated and cut or torn into portions, thus destroying the identity of the several portions toward the exhibit as a whole, and then some one of such portions be offered in evidence, after it has lost its identity as a part of the exhibit as identified. There is nothing in this record to indicate or disclose what the original exhibit contained. Part of the writing upon the exhibit as offered has been obliterated by marking over the words previously written thereon, so that the exhibit as offered was not only mutilated and altered from the original exhibit as identified, but had portions thereof obliterated and destroyed. The paper offered by defendants as their Exhibit 1 is so vastly different from their said Exhibits 1 and 1-a as identified, that its identity as a part of the whole has been destroyed. The exhibit as offered must speak for itself and it does not appear therein from what writing it had been extracted. Defendants possessed the entire exhibit and by their own acts destroyed the relationship of the piece of paper as offered in evidence to the exhibit as identified. Its admissibility in evidence was thereby destroyed and the court did not err in refusing to admit same. Documentary exhibits should not be mutilated, altered and obliterated between the time of their identification and such time as they are offered in evidence.

Defendants’ contention that the court erred in permitting Dr. Cooper to answer certain hypothetical questions is not deemed sufficient for reversal. After an examination of the evidence in the case and of the question put to the doctor, which is very extended and comprehensive, we are of the opinion that such question included the essential elements as shown by the evidence and incorporated facts necessary to a fair presentation of the question. We do not consider that sufficient material facts in the case were omitted to constitute reversible error. Defendants had the right to call to the attention of counsel by objection, any omission. Allen Son & Co. v. Industrial Commission, 349 Ill. 71, 79; Chicago & E. I. R. Co. v. Wallace, 202 Ill. 129, 135; Riverton Coal Co. v. Shepherd, 207 Ill. 395, 397.

Defendants do not claim that the plaintiff failed to make out his cause of action, or that the verdict is contrary to the evidence or that the jury was not properly instructed. They urge as their third ground for reversal that the verdict is excessive, which brings before the court for its consideration the sufficiency of the evidence as to the amount of damages. The evidence is undisputed as to the nature of plaintiff’s injury, the period of time that he was unable to do any work, and the effect that it has had upon his ability to perform labor. The evidence shows that at the time of the injury, plaintiff’s average weekly wage was $45. There is nothing to indicate that the verdict of the jury was the result of passion or prejudice and the damages cannot be said to be so excessive as to indicate that the jury was actuated by improper motives. Considering the nature of the plaintiff’s injuries, we are unable to say that the verdict is excessive. The question of damages was a matter properly for the jury to pass upon and in the absence of anything to indicate that the jury was moved by passion or prejudice or improper motives, or that the damages are so grossly excessive within themselves as to clearly demonstrate such fact, this court will not disturb the verdict.

Finding no error in the record, the judgment of the trial court is affirmed.

Judgment affirmed.