text:
    Chicago Trust Company, Appellee, v. 12-14 West Washington Street Building Corporation et al., Appellees. Stanley Field et al., Appellants.
    Gen. No. 37,405.

      Opinion filed December 19, 1934.
    Wilson & McIlvaine, of Chicago, for appellants.
    Howe, Rademaoher, Kreamer & Stalling, of Chicago, for appellee Chicago Trust Co.
    J. Lester Williams and Marvin Wallace:, both of Chicago, for appellee Bondholders Protective Committee.
   Mr. Justice Wilson

delivered. the opinion of the court.

The Chicago Trust Company, as trustee", filed its hill to foreclose a trust deed on certain premises known as 12-14 West Washington street. Thé" trust deed was given to secure an issue of $375,000 worth of bonds on a leasehold of the premises in question. The lease was executed February 13, 1920 and was for a term of 99 'years. May 6, 1930, an order was entered in the foreclosure proceedings appointing one Arthur Dean receiver, with directions to apply the income from the building to the payment of the expenses and charges of operating and maintaining the mortgaged property, including taxes, rents, etc.

The premises at the time of the execution of the lease were improved with a 10-story building of permanent construction containing a store on the gTound floor and offices above. The leasehold rental was $25,000 a year, payable in quarterly instalments of $6,250. No rent was due at the time the foreclosure proceedings were instituted and the first default after the receivership was for the quarter beginning September 1, 1932, and none was thereafter paid. The general taxes also became in default and on October 31, 1932, the owners, Stanley Field, individually, and Stanley Field, James Simpson and the Northern Trust Company, as trustees under the last will of Joseph N. Field, deceased, gave notice of default at the expiration of the 60-day period, and the default not having been made good, declared the term ended.

April 6, 1933, the owners filed their intervening petition, asking for possession of the premises and an order was entered in the cause December 20, 1933, granting the prayer of the intervenors and giving them possession. At the same time the court entered a supplemental decree finding that the sum of $100,000, paid by the lessees at the time of the execution of the lease, Was, in fact, a cash deposit in trust to secure the payment of the rent, and that on account of the default by the lessees, the owners should account for said deposit. The supplemental decree then found that the default in rent and taxes amounted to $73,891.01, and that the, balance of the $100,000 in the hands of the intervenors amounting to $26,108.99, should be paid by the owners to the complainant for the benefit of the bondholders. The decree also provided that the receiver should pay to complainant for the benefit of the bondholders, all of the rents collected by him from the premises on or before April 6, 1933 (the date upon which the lessors intervened), after deducting all the costs, charges and expenses of operation and the pro rata part of the fees of the receiver and his solicitor, the intervenors to receive rents collected after April 6,1933, but after the deduction of costs of operation and a pro rata part of the fees. The receiver’s last account which was for the period from November 1, 1932 to September 30, 1933, showed a previous balance of $6,376.78. The receipts for this period were for $41,159.69. Disbursements for the period (including no ground rent) were $34,113.23. The balance (including $4,158.81 in closed bank) was $13,423.24. Rents accrued and uncollected, $39,921.47, of which $19,921.47, was estimated as uncollectible.

Intervenors assign as error the action of the chancellor in construing the original payment of $100,000 at the time the lease was procured as a trust fund to secure the payment of the rent and urge that the lease is not open to construction but clearly indicates that tills amount was paid for the building for the purpose of obtaining the lease and that the lease was to be construed as though the tenant had, himself, erected the building upon the premises. The intervenors further contend that they are entitled to the full amount in the hands of the receiver because there was not sufficient in his hands to pay intervenors all of the defaulted rent and taxes and that nothing should be paid to the owners of the leasehold or the bondholders while the lease was not kept alive. This last contention is based upon the theory that the law provides that the lessee shall pay the rent to keep the lease alive, as well as the taxes, and that, moreover, the order appointing the receiver directed him to pay the rents and taxes and that these are part of the operating expense.

Cross error is assigned on behalf of the bondholders ’ protective committee on the ground that the taxes for 1931 and 1932 should be disallowed as a charge against the $100,000 deposit. This, upon the ground that they were neither delinquent nor ripe for a protest and should not be estimated. To this assignment of cross error intervenors reply by stating that the lease provides that these taxes became due and payable by the lessees when levied or assessed and that these taxes had already been levied prior to the date of the decree. Furthermore, that the original decree provided for the payment of these taxes and it was the duty of the receiver to have followed the instructions in the decree.

The principal question before us is the action of the chancellor in finding the $100,000 payment a deposit, as security for the rents. The only other question is as to whether or not the balance in the hands of the receiver should go to the intervener because of unpaid taxes and defaulted rent.

Article IV of the lease relates to the sale of the building and involves the sum of $100,000 paid upon its execution. In view of the importance of this particular clause we set it out in full:

“In consideration of the sum of one hundred thousand dollars ($100,000), the receipt whereof is hereby acknowledged, and of the covenants and agreements of the lessees herein, said lessors hereby sell and assign to the said lessees the buildings and improvements now situated on said demised premises, subject, however, to the covenants herein contained on the part of said lessees to be kept, observed and performed, the interests and rights of the lessees in said buildings and improvements to be the same as though said buildings and improvements had been placed on said demised premises by said lessees subsequent to the execution of this lease.
“It is understood and agreed that said premises are demised subject to all existing leases thereon, and said lessees hereby expressly covenant and agree to be bound by and to fully observe and perform all the conditions, undertakings and agreements in said existing leases contained which extend to and bind the lessors therein.”

Article XX of said lease should also be read and considered in connection with Article IV. Article XX reads as follows:

“The said lessees covenant and agree to and with the said lessors that upon the termination of this lease by forfeiture or lapse of time the said lessees will at once surrender and deliver up to the lessors the above described premises, together with all the improvements thereon, and that all buildings, fixtures and improvements then standing upon the said demised Ipremises, shall belong to the said lessors, and that no compensation shall be allowed or paid therefor.”

The language of Article IY of the lease is not ambiguous. It specifically provides that the building has been sold to the lessees for the sum of $100,000. In order that there might be no misunderstanding of this particular clause it moreover, contains the additional provision that the rights of the lessees in the building were to be the same as if said building had been erected on the premises by the lessees subsequent to the execution of the lease. This particular clause deals definitely with the subject of the building and none other and should be controlling in so far as the relationship of the lessors and the lessees is concerned with regard to this particular subject. While the lease contains certain provisions defining the relationship of the lessors and lessees in the event of the destruction of the premises, the maintaining of insurance and other provisions, we find none which would indicate that the $100,000 was paid as a trust fund for the benefit of the lessees. In the case of Wolf v. DeWolf & Co., 53 F. (2d) 999, which was a suit in which the income from this identical lease was concerned, in referring to this lease it is stated that the owners granted a 99-year leasehold to William H. and Henry K. Browning and “at the same time sold to said Brownings the building situated thereon.” While the construction of this lease was not necessarily involved in that case, it nevertheless indicated the natural view that a court would take of this particular section of Article IV of the lease upon examination.

A careful consideration of the lease in question seems to bear out the proposition that the lessors attempted to clearly indicate that the $100,000 was paid as a consideration for the giving of the lease and that it was attempted to expressly define this position by calling it a sale of the building. The further provision in the lease, namely, that the building was to bear the same relation to the real estate as if it had been built subsequent to the execution of the lease indicates the intention of the parties to have this building attached to the realty in such a maimer as to belong to the lessors in case of default. The law does not favor forfeitures, but neither will it rewrite the contract of the parties.

At the common law by the weight of authority, a tenant lost his right to remove fixtures from the real estate if by any act or omission he had forfeited his interest under the lease. Tiffany on Real Property, vol. 1, pp. 932 and 938. This rule was clearly expressed in Article IV of the lease as well as Article XX hereinbefore set forth. Only under a strained construction could it be possible in our opinion to place an interpretation upon the lease finding the payment of $100,000 to be security for the lessees in the event of default. We believe the chancellor was in error in attempting to do this by the supplemental decree. This fund belonged to the intervenors, and the lessees, or those holding under them, are not entitled to any part of this fund.

It was stipulated by and between the parties that the 1929 general taxes were for $20,460.32, of which the receiver paid $16,278.13. It was also stipulated that the general taxes for 1930 were $22,423.18, of which the receiver paid $4,348.93. These figures indicate that a considerable amount of unpaid taxes existed which were a lien on the premises. The original decree appointing a receiver provided that he should pay these taxes out of the funds coming into his hands. Moreover, the lease itself provided that the lessees should pay these taxes and this proviso was obligatory upon the bondholders as well as any others operating under the lease. The payment of taxes, moreover, is an operating expense. Union Trust Co. v. Great Eastern Lumber Co., 248 Fed. 46. If the receiver did not pay, the owners would be compelled to. The lessees could not claim a fund in the hands of a receiver so long as any part of the rent or taxes remained unpaid and this applies in our opinion to taxes and rent due prior to the default as well as after. The fund in the hands of the receiver became impressed with an obligation to satisfy these claims of the owners before any distribution could be made to the lessees or those claiming under them. Rent is something which a tenant renders out of the profits of the land which he enjoys. Equitably a lessee ought not to take profits out of his leasehold without a due discharge of the rents. Otis v. Conway, 114 N. Y. 13, 20 N. E. 628.

We agree with the chancellor that the actual costs of administration by the receiver should first be deducted from the fund in his hands. This would include attorneys’ fees, receiver’s fees, court costs and such other incidental costs of administration. After the payment of these items of administration the balance in the hands of the receiver should be applied in satisfaction of taxes and rentals due, the owners of the property and the balance, if any remaining, distributed among the bondholders. These payments to the owners of rentals and taxes apply as well to the amount due prior to the filing of the intervening petition as well as after.

We are not impressed with the assignment of cross errors of the bondholders. The court found the amount of the taxes for 1931 and 1932 and credited the amount of these taxes to the intervenors. It is insisted under the assignment of cross errors that it does not appear in the record that these taxes had accrued. We gather from the record, however, that they had been levied against the property and therefore became a lien. The fact that there might have been a right to protest did not prevent the taxes levied from remaining a lien upon the premises in question. Neither are we impressed with the argument that the lessor did not ask for rents prior to January 20, 1933. The original decree provided that such rents should be paid and the owners of the property had a right to rely upon the terms of that decree. It was not until a default in the payments that they filed their intervening petition and took possession of the property. The obligation on the part of the receiver, to pay these rents to the owner under the terms of the lease and under the decree of the court, still existed.

For the reasons expressed in this opinion, the supplemental decree of the superior court entered December 20, 1933, is reversed and the cause remanded to the superior court with directions to enter a proper decree in conformity with the views expressed in this opinion.

Judgment reversed and cause remanded with directions.

Hebel, P. J., and Hall, J., concur.


source: Caselaw Access Project

author: Mr. Justice Wilson

license: Public Domain

text:
    Buildings Development Company, Appellee, v. B/G Sandwich Shops, Inc., Appellant.
    Gen. No. 37,463.
    Opinion filed December 19, 1934.
    Markheim & Allie, of Chicago, for appellant; A. R. Miller, of Chicago, of counsel.
    Wind, Wind & Can an, of Chicago, for appellee; Michael M. Wind, of counsel.
   Mr. Justice Wilson

delivered the opinion of the court.

This is an appeal from a judgment of the municipal court of Chicago for the sum of $2,200, in four cases which were consolidated in the trial court by agreement. Each of the four cases was a suit by the plaintiff, Buildings Development Company, for rent for certain premises occupied by the .defendant, B/G Sandwich Shops', Inc. in the City of Milwaukee in the State of Wisconsin. The first case was for rent for the month of December, 1932; the second for rent for January, 1933; the third for rent for February, 1933, and the fourth for rent for the month of March, 1933. All claimed to be due under the same written lease. The instrument sued on was for a term of 15 years commencing May 1, 1929, and defendant entered into possession and paid the rent until the first day of December, 1932. From the pleadings in the cause it can be inferred that the defendant continued in possession of the premises after that date and did not repudiate the lease.

March 28,1927, the plaintiff, Buildings Development Company, executed a certain trust deed in which one M. Ernest Greenebaum, Jr. was named as trustee, which deed of trust was recorded in the office of the registrar of deeds in Milwaukee county, Wisconsin, and mortgaged the premises in question as security for the indebtedness described in said trust deed.

May 25,1932, an action was instituted by the trustee in the circuit court of Milwaukee county, Wisconsin, to foreclose the lien of said trust deed, which foreclosure suit is still pending and undisposed of.

Plaintiff in its additional statement of claim sets out the fact that the lease in question was assigned to the trustee named in the trust deed but for the sole and only purpose of securing the payment of the amount accrued and to become due under such mortgage; that it was expressly understood that said assignment was for the purpose of further securing the trust deed on the premises; that no default has been declared by the assignee; that no demand for the delivery' of said lease has been made by the assignee; that said assignment has never been acted upon or exercised by the assignee nor has the defendant been called upon to make payments to the assignee thereunder; that the assignee has made no claim for rent from the plaintiff under said assignment and that the defendant at all times has paid the rent accruing under said lease to the plaintiff, Buildings Development Company.

The defendant in its amended affidavit of merits denies none of these allegations, but charges that the facts are within the knowledge of the plaintiff and that it is, therefore, unable to specifically answer the same. The amended affidavit of merits further sets forth the statute in the State of Wisconsin which provides that conveyances of land by a corporation must be signed by its president and countersigned by its secretary and charges that said lease was not countersigned by the secretary as required by statute, and craved oyer.

An order was granted giving plaintiff leave to file a copy of the lease and assignment and on September 26, 1933, a photostatic copy of the lease sued on was filed. This lease bears the signature of the president and of the secretary of the plaintiff corporation.

Upon the hearing of the cause in the trial court a motion to strike the amended affidavit was sustained and upon defendant’s election to stand by its amended affidavit of merits judgment was entered in favor of the plaintiff.

First, it is assigned as error in this court that the lease in question shows on its face that it was assigned possibly by the plaintiff on October 26, 1932, to the trustee under the trust deed and that it does not appear that it has been reassigned to the plaintiff;

Second, that the plaintiff being a Wisconsin corporation, and the premises leased situated in that State, the lease was not countersigned by the secretary and therefore void; and

Third, that the trustee under the trust deed, prior to the accrual of the rent sued on, took possession of the demised premises because of defects existing under the terms of the trust deed and that such taking resulted in a constructive eviction and terminated the lease.

Since the filing of the appeal in this court the Supreme Court of Wisconsin has passed upon a similar question, as a result of which it has been conceded that the third and last objection is untenable. The case referred to is Zimmermann v. Walgreen Co., 215 Wis. 491, 255 N. W. 534. The action in that case is very much like the one at bar. The trust deed in that case contained the identical clauses contained in the trust deed here. The action was for rent and was brought by the Buildings Development Company which is also the plaintiff in this proceeding and the trust deed was to Greenebaum, as trustee. Prior to the bringing of the suit for rent, Greenebaum, as trustee, had started foreclosure proceedings under the trust deed and held the lease under an assignment as collateral security. After stating the law in that State to the effect that the legal title does not pass under a trust deed, but only a lien right, the court in its opinion says:

“Neither the court’s order, nor the assignment of the lease as collateral, deprived the Buildings Development Company, as mortgagor, of its legal title under its 99-year leasehold, or enlarged the landlord’s rights, in view of the lease held by the defendant, from mere constructive possession to actual possession, so as to deprive the defendant, as lessee under the Buildings Development Company, of its right under its lease to continue in the actual possession of the premises described in that lease.
“It is the settled law of this state that the legal title and right of possession does not vest in the mortgagee, but continues in the mortgagor until terminated by a sale on foreclosure, or by contract between the parties, and that even when a receiver is appointed in a foreclosure action to prevent waste, the- collected rents and income of the mortgaged land do not belong to the mortgagee or to the receiver, but they are conserved and applied on the mortgage debt for the mortgagor’s benefit. Likewise, as is stated in a note in 14 A. L. E. 664, ‘Whether a lease of real estate previously mortgag*ed is terminated by a foreclosure action and sale is held by the majority of the decisions to depend on the joinder of the lessee as a party to the foreclosure action’; and it has been held in a number of cases that such termination does not occur until the premises are actually sold on foreclosure in such action.”

The lessee in the case at bar was not joined as a party to the foreclosure proceedings and in view of the allegations in the amended statement of claim the rent was still due and payable to the owner of the fee, námely, Buildings Development Company, plaintiff herein. There is no allegation in the affidavit of merits to the effect that the tenant, B/Gf Sandwich Shops, Inc., had been notified to pay its rent to any other than the plaintiff.

The second assignment of error is based on the proposition that the lease was not signed by the secretary of the corporation. The photostatic copy of the lease, after order of court and after oyer craved, shows that it was so signed. It is insisted, however, that it was not signed at the time of the execution but only after suit was started.

We are referred to the case of Wineburgh v. Toledo Corp., 125 Ohio St. 219. A reading of this case, however, discloses the facts to be that the tenant there vacated the premises and refused to pay the accruing instalments due under the lease. In the case at bar, however, there was no repudiation of the lease at any time and so far as the record discloses the tenant may still be in possession.

The case of Galloway v. Hamilton, 68 Wis. 651, cited by both sides was an action by a third party who recovered a judgment and sought equitable relief to set aside the .conveyance on the ground that it was not signed by the secretary. The court in its opinion says:

“In this case the deed was never countersigned by the secretary, and, as we understand his testimony, he subsequently refused to sign the instrument when presented to him some few weeks after its date. It is claimed that the act of the president in executing the deed was subsequently ratified. But, if it was, the ratification could not affect the plaintiff’s lien, which had previously attached. For ‘the general rule as to the effect of ratification by one of the unauthorized acts of another respecting the property of the former, is well settled. The ratification operates upon the act ratified precisely as though authority to do the act had been previously given, except where the rights of third parties have intervened between the act and the ratification. The retroactive efficacy of the ratification is subject to this qualification. The intervening rights of third persons cannot be defeated by the ratification. In other words, it is essential that the party ratifying should be able not merely to do the act ratified at the time the act was done, but also at the time the ratification was made.’ Cook v. Tullis, 18 Wall. 332, 338; Taylor v. Robinson, 14 Cal. 401; Story on Agency, §§ 241-244."

It will be noted in the case at bar that no intervening rights had accrued and a reading of the opinion in the case cited would indicate that a ratification by the subsequent signing of the secretary of the corporation and before repudiation would be effective. A number of cases have been cited by counsel for plaintiff to the effect that the statute is not mandatory, but we do not believe it necessary to pass upon that question.

We are of the opinion that the ratification by the secretary, with the tenant still in possession and the lease in operation, ivas a sufficient ratification to validate the instrument.

We see no reason for disturbing the judgment of the municipal court and for .the reasons stated in this opinion, the judgment is affirmed.

Judgment affirmed.

Hebel, P. J., and Haul, J., concur.


text:
    George E. Hart, Inc., Appellant, v. Board of Education of the City of Chicago, Appellee.
    Gen. No. 37,503.
    Opinion filed December 19, 1934.

      John R. McSweeney, Harry A. Silverstein and Ben Copple, all of Chicago, for appellant.
    Richard S. Folsom, of Chicago, for appellee; Frank S. Righeimer, Ralph W. Condee, Frank R. Schneberger and Harry L. Yale, all of Chicago, of counsel.
   Mr. Justice Wilson

delivered the opinion of the court.

This was an action of trespass on the case on promises brought by George E. Hart, Inc., against the Board of Education of the City of Chicago. To plaintiff’s declaration the defendant filed a demurrer which was sustained and plaintiff electing to abide by its declaration, a judgment was entered against plaintiff for costs, from which judgment this appeal has been taken.

The declaration consisted of one special count and the common counts. No point is made concerning the common counts and we are only interested in the allegations of the special count of the declaration.

Plaintiff alleges in this count that it became the legal OAvner of certain warrants commonly known as tax anticipation warrants issued by the Board of Education of the City of Chicago and payable to bearer at the office of the treasurer of the City of Chicago out of taxes levied for the year 1931, for school building purposes. The special count further charges that on the 11th day of April, 1932, plaintiff intrusted to one James C. Terry the aforesaid warrants for the purpose of depositing the same in the Merchants Bank and Trust Company for safe-keeping; that said James C. Terry deposited said warrants in said bank and received in return a receipt made out to said James C. Terry and signed by the Merchants Bank and Trust Company; that James C. Terry delivered the aforesaid receipt to the plaintiff and, thereafter, with intent to defraud the plaintiff, fraudulently executed an affidavit stating that he had lost the aforementioned receipt and thereupon received possession of said warrants from the said bank; that plaintiff notified the defendant corporation, Board of Education of the City of Chicago, of the loss of the aforesaid warrants as set out, giving a list of the warrants and the identification numbers and that the defendant having received funds to retire said warrants commenced making payments in accordance with the terms of the warrants. Plaintiff further alleges that it was the duty of the defendant not to redeem from any person other than the plaintiff any of the warrants, possession of which had been wrongfully taken from the plaintiff, but regardless of its duty paid out moneys to certain persons on some of the warrants so belonging to the plaintiff; that although the plaintiff has made numerous demands for the payment of this indebtedness the defendant refused and still refuses to pay plaintiff the sum of $13,450 due it.

Plaintiff insists that these tax anticipation warrants are non-negotiable and that the defendant paid them at its peril. The defendant takes the position that they are negotiable instruments in the hands of third persons without notice, subject only to the defenses of the municipality to the tax levy. In addition defendant insists that the plaintiff by intrusting the warrants to Terry, its agent, made it possible for him to commit the wrong complained of. in the declaration and that, therefore, by its conduct it made it possible for him to dispose of the warrants to innocent parties and that as between the owner and innocent parties, the one who made it possible to commit the wrong should be made to suffer the consequences.

No question is raised as to the power of the Board of Education to issue the warrants in question, payable out of 75 per cent of the taxes levied, in the payment of expenditures for educational and building purposes. It is a matter of common knowledge that such warrants pass from hand to hand. The instrument itself is payable to bearer at the office of the treasurer of the City of Chicago on presentation.

The Negotiable Instruments Act, Cahill’s Illinois Revised Statutes, 1933, ch. 98, if 21, provides:

“An instrument payable in money, to be negotiated, must conform to the following requirements:
“1. It must be in writing and signed by the maker or drawer.
“2. Must contain an unconditional promise or order to pay a sum certain in money.
“3. Must be payable on demand or at a fixed or determinable future time.
“4. Must be payable to the order of a specified person or to bearer.”

Paragraph 23 of the same act provides:

“When promise to pay is unconditional. § 3. An unqualified order or promise to pay is unconditional within the meaning of this Act, though coupled with:
“1. An indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited with the amount; or
“2. A statement of the transaction which gives rise to the instrument.” This section then goes on as follows:
“But an order or promise to pay out of a particular fund is not unconditional.”

The foregoing provisions are a reannouncement of the common law governing negotiable instruments. The courts have differed on the question as to whether or not a tax warrant is a negotiable instrument. A number of the courts are not in accord with the proposition that such an instrument is negotiable in all respects, except as to the defenses of the municipality. In other words, the holder of the warrant on presentation may find himself faced with the same difficulty on attempting collection as the original owner of the warrant would have encountered. Hornblower v. City of Pierre, 231 Fed. 496.

In the case of Woodworth v. School District No. 2, 103 Wash. 677, it was held that school warrants issued in payment of supplies to an agent having apparent authority to make collection, and assigned to a bona fide purchaser prior to any notice of want of authority, shall be paid by the municipality to an innocent holder even after it had received notice that the agent had no authority to accept the warrants. The court in its opinion adopts the following as the rule:

“The great weight of authority is that a county or city warrant possesses all of the qualities of negotiable paper but one, viz., that it is open to any defense which might have been made to the claim upon which it is founded. For all purposes involving its title, it must be treated as negotiable. ’ ’ See also Marcus v. Ofner, 103 Wash. 478. This court appears to have adopted the rule that the tax warrants are negotiable for all purposes except as to the defenses of the municipality. That the "holder is protected, however, in the same manner as he would be if he were a holder of a promissory note before maturity without notice of any defects, even though it had been stolen from the original owner. In other words, the negotiability of the instrument is complete except as to such defenses as the municipality may have when the warrant is presented .for collection. The passage of such warrants has become such a matter of common occurrence that we are of the opinion that ultimately this rule may be generally adopted, but this State has passed flatly upon the question in the case of Morrison v. Austin State Bank, 213 Ill. 472. The Supreme Court of this State, quoting from the opinion of First Nat. Bank v. Gates, 66 Kan. 505, takes the position as stated in that opinion, as follows:
“ . . . The question is, therefore, is a county warrant, which is negotiable in form but non-negotiable in the sense that the county issuing it may defend against it, nevertheless negotiable as between successive holders, so that a thief may vest title to it in a bona fide taker of it? That one so acquiring ordinary commercial paper would be protected is not questioned. An innocent purchaser, in good faith, of commercial paper gets a good title, even though he purchase from a thief. (Citing authorities.) This is so because of the law merchant. . . . But paper nonnegotiable for any reason is not thus protected. The very fact of its being non-negotiable is a sign of warning to the prospective purchaser and places him on his guard. Municipal warrants, though negotiable in form, are non-negotiable in fact, hence they are not within the protection of the rule which guards commercial paper. ’ To the same effect, is Keller v. Hicks, 22 Cal. 457; 83 Am. Dec. 78.” See also Marshall State ex rel. Sartain, 88 Fla. 329. Judge Hand dissenting in the case of Morrison v. Austin State Bank, supra, says:
“I think the warrants in question were so far negotiable as to vest title in the Austin State Bank against all persons except the town of Cicero. To hold otherwise would be to impair the commercial value of such warrants, and increase the cost to the property owner of all local improvements in municipalities in this State.” The dissenting opinion hereinabove set forth takes the position that such instruments are negotiable in all respects in the hands of an innocent purchaser for value as to title, but subject only to the defenses of the municipality.

While we are not thoroughly in accord with the rule laid down in Morrison v. Austin State Bank, supra, we are, nevertheless, constrained to follow it.

Coming to defendant’s proposition to the effect that the warrants having been intrusted to an agent of the plaintiff for the purpose of depositing the same with the Merchants Bank and Trust Company and after-wards withdrawing the warrants on his affidavit to the effect that he had lost the receipt, we are confronted with the question as to whether or not the • plaintiff had put it within the power of its agent to commit the wrong perpetrated and had clothed him with such indicia of ownership with reference to the warrants that the bank could deliver them believing him to be the owner, and that his act in disposing of them for a valuable consideration to bona fide purchasers, estopped the plaintiff from setting up its claim to the proceeds. In this connection we find that the declaration alleges that the plaintiff intrusted the warrants to Terry for the purpose of his depositing them with the Merchants Bank and Trust Company; that Terry took the receipt in his own name and afterwards disposed of the warrants to innocent purchasers. There is no allegation in the declaration to the effect that the bank knew that Terry , was not-the owner nor knew that the plaintiff was the real owner of the warrants in question. The warrants were deposited by Terry in his own name and it would have been an easy matter for the plaintiff upon the return of the receipt to have notified the bank that it was the owner and to have required a receipt in its own name. The failure to do this left open the very avenue for wrong which Terry took in obtaining possession of the warrants. When these warrants were presented to Terry he was intrusted with them for a specific purpose and, so far as the outside world was concerned, was the actual owner and holder. This court in the case of Delfosse v. Metropolitan Nat. Bank, 98 Ill. App. 123, in its opinion says:

“The warrant in question is payable to bearer, and is besides indorsed by the payee as well as by the appellant, who claims to be the true owner. If it be true, as claimed by Delfosse, that he only permitted the warrant to go into Baillargeon’s hands for a specific purpose, viz., to be by him used as security to Graham, and for no other purpose, still, by the indorsement and placing it in Baillargeon’s hands, he put it within the power of the latter to assume the ownership of the warrant. He thus gave to Baillargeon the possession of the property, with every outward indication of ownership, making his possession equally rightful as if he had made an outright sale of the warrant to him. There is no claim, nor is there any evidence to support it, that Ferris knew or that any one representing the bank knew that Baillargeon had not a perfect right to sell the warrant. In fact, it is in evidence, and not denied, that on a previous occasion Délfosse told Ferris that whatever Baillargeon would do in the way of offering paper for discount would be all right. Delfosse should now, the bank having bought the warrant in good faith for value, be estopped to deny that the bank took title to the warrant. ’ ’

In the case of Otis v. Gardner, 105 Ill. 436, the court in its opinion says: “The intestate placed the certificates in the hands of Chauncey T. Bowen, with a blank assignment written thereon, authorizing an absolute transfer of the stock to the assignee, under the by-laws of the company. The exact use the assignee should make of the stock does not appear from anything in the record, but as the use he might make of it was in no way limited by the terms of the assignment, it is reasonable to presume the assignee was authorized to make any legitimate use of it that a rightful owner might, — that is, he might sell it or pledge it, in the usual, course of business. That was done in this case. It was pledged to Gardner, in the usual course of business, as collateral security for the indebtedness of the holder, and was taken in good faith, without the slightest knowledge that any one other than the pledgor claimed or had any interest in the stock represented by the certificates.” To the same effect see Young Men’s Christian Ass’n Gymnasium Co. v. Rockford Nat. Bank, 179 Ill. 599.

Daniel on Negotiable Instruments, 7 Ed. vol. 1, sec. 315, lays down the rule: “So, the principal will be bound in all cases where there is a misappropriation of funds obtained under a power exercised by the agent in conformity with his authority, unless the holder had notice. And, however much an agent may betray his trust, a bona fide holder of the bill or note, without notice, may hold the principal liable. The principal would, therefore, be bound on an accommodation indorsement made by the agent in his name, in the general scope of agency, to a bona fide holder without notice.” Again Daniel on Negotiable Instruments, 7 Ed. vol. 2, sec. 981, states:

‘ ‘ § 981. There are numerous cases in which the line of demarcation between the fraud which does not affect the bona fide holder for value, and without notice, and that which utterly vitiates the instrument in all hands whatsoever, is narrow and difficult to distinguish. The distinctions taken are frequently very refined and metaphysical; but the test questions to be applied, we think, are these: (1) Has the party sought to be charged created an agency or trust, by means of which the fraud has been committed ! (2) Has he deliberately given the appearance of validity to the instrument! (3) Has he committed negligence respecting it, by means of which an opportunity for the fraud has been created! And whenever either of these questions can be answered affirmatively upon a fair consideration of all the circumstances of the case, the balance of equity is in favor of the bona fide holder for value and without notice, the axiomatic principle of law then applying, that, where one of two innocent persons must suffer, the one who creates the trust, or does the act from which the loss results, must bear it A

The warrants involved in this proceeding were payable to bearer and there was nothing upon their face which indicated that they were the property of any one other than the holder. These instruments have been passing from time to time as a regular business transaction, particularly in later days when municipalities have been compelled to anticipate their tax collections. If Terry had sold the warrants after they came into his possession and before he deposited them with the bank, we believe there would be no question but that an innocent purchaser would be protected. In view of the fact that, upon obtaining a receipt from the bank, the plaintiff was able to ascertain that it was in the name of Terry and took no steps to correct it, leaving an opportunity for the fraud which was committed, the fault was that of the plaintiff. This receipt was given by the bank April 11, 1932. Suit was started in November, 1933, nearly a year and a half after the warrants had been deposited for safe-keeping with the Merchants Bank and Trust Company.

In view of the common practice of the barter and sale of these warrants in the open market in this community, we believe that the plaintiff failed to take such steps as were necessary to protect its interest and should be estopped from making á claim against the defendant which would be superior to that of an innocent purchaser of these warrants for value. Under the circumstances, the defendant, Board of Education of the City of Chicago, and the treasurer of the City, would have no light to refuse payment of these warrants when presented.

The demurrer to the special count of the declaration in our judgment was properly sustained and, for the reasons stated herein, the judgment of the circuit court is affirmed.

Judgment affirmed.

Hbbel, P. J., and Hall, J., concur.


text:
    Henry F. Amelong and Anna M. Amelong, Appellants, v. Robert E. Peacock and Walter C. Peacock, Appellees.
    Gen. No. 37,533.
    Opinion filed December 19, 1934.
    Rehearing denied January 9, 1935.

      William J. McGah, of Chicago, for appellants.
    Daws & Kraci-ce, of Chicago, for appellees; Charles B. Sercomb and Thomas S. Dougherty, both of Chicago, of counsel.
   Mr. Justice Wilson

delivered the opinion of the court.

Henry F. Amelong and Anna M. Amelong, the plaintiffs, on April 12, 1921, leased certain premises in the City of Chicago from Bobert E. Peacock and Walter C. Peacock, as agents and trustees, defendants herein. The term of the lease was for 10 years, running from May 1,1921 to April 30, 1931 and the rental was $1,000 per month, payable in advance. By the terms of the lease plaintiffs were to deposit $4,000 with the owners, which was to be deemed and taken to operate as payment for and on account of the last four months of the term of the lease. The Amelongs, the lessees, at the time of the execution of the lease deposited $2,500, but failed to pay the additional $1,500 as provided in the lease. Lessees entered upon and remained in possession of the premises until the 5th day of October, 1925, and paid the rent in full up to and until that date, at which time they entered into a written agreement with one Abe Bernstein whereby the remainder of the leasehold was demised to said Bernstein, which was consented to by the defendants in writing, and thereupon Bernstein entered into the possession of the premises.

December 20, 1927, Bernstein executed a written assignment of all his right, title and interest to one Nate Jacobs and this assignment was consented to by the owners of the premises in writing dated December 20, 1927. In May, 1928, Jacobs executed a written assignment of his interest in the lease to one Morris Panijel who accepted the assignment in writing and entered into possession of the" premises. This assignment from Jacobs to Panijel was made with the knowledge of the owners and they subsequently accepted rent from him as the tenant. The rent for the last three months of the term, and while Panijel was in possession, was not paid. This rent amounted to the sum of $3,000.

The foregoing facts were stipulated to by the parties and the lease and assignments thereof were introduced in evidence.

Plaintiffs brought this, action to recover the $2,500 originally deposited with the owners. Their claim is based upon the proposition:

First, that the defendants in their dealings with Panijel, by consenting to his occupation of the premises and receiving the rent therefor, released plaintiffs from their obligation under the lease; and

Second, that at the time Bernstein sublet the premises to Jacobs they, the plaintiffs, consented to such assignment in writing with a provision therein “that no further assignment of said lease or sub-letting of the premises should be made without the written consent of the plaintiffs.”

To the claim of the plaintiffs, defendants filed a set-off in which they claimed that the rent for the last three months of the term of the lease not having been paid, they were entitled to a judgment for the rent during that period. The cause was tried by the court ' without a jury upon a stipulation of the facts and on written documents, and the court found that the defendants were entitled to retain $2,500 deposited as rent for the latter part of the term, and were entitled ' to $500 additional, and entered judgment for $500 in favor of the defendants on their, set-off, from which judgment this appeal has been taken.

It may be stated as a general proposition of law that where an original lessee makes an assignment of his lease he is not thereby released from the payment of the rent covenanted by him to be paid, but still remains liable therefor. The assignee of the lease becomes liable on the same covenants because of his privity of estate, and because the covenant to pay rent runs with the land, and the original landlord may. sue either the original lessee or the assignee, upon such covenant. Sexton v. Chicago Storage Co., 129 Ill. 318.

After the transfer from the plaintiffs to Bernstein there no longer existed a privity of estate between the plaintiffs and the defendants, but by the assignment and acceptance of rent by the owners from Bernstein a privity of estate was created between the defendants and Bernstein, the assignee. The relation then existing between the plaintiffs and the defendants after the execution of the assignment of the lease to Bernstein was that based upon privity of contract. The plaintiffs were still liable under their agreement for rent. Taylor v. Marshall, 255 Ill. 545.

The acceptance of rent from an assignee of the lessee does not discharge the original lessee. The contract of the latter continues in force. Grommes v. St. Paul Trust Co., 147 Ill. 634. In order to release the lessee after an assignment by him of his interest in the lease, there must be a release by the lessor or an agreement to absolve the lessee from his obligation.

We are referred to the case of McCormick v. Brennan, 224 Ill. App. 251, in support of the proposition that such a release may be inferred from the conduct of the parties. We have no quarrel with this pronouncement. The Supreme Court, however, in the case of Grommes v. St. Paul Trust Co., 147 Ill. 634, says that in order to absolve the lessee it must appear that there was á clear intent to discharge the lessee from further liability.

In the case of Barnes v. Northern Trust Co., 169 Ill. 112, the court sustained an instruction given in the case as follows: ‘ ‘ . . . although a landlord may have given his consent to an assignment by the lessee, and accepted the assignee as his tenant, and received rent from him, yet the lessee is not released from his express covenant to pay rent, unless the landlord has accepted the surrender of the lessee and released him.” The same rule applies when the assignee of the lease again assigns his interest in the lease to another. The acceptance of rent from the new tenant neither releases the original lessee nor his assignee under the lease. The case of McCormick v. Brennan, supra, relied upon by plaintiffs, is not in conflict with this rule, but held that upon demurrer the allegation of the declaration sufficiently charged a surrender of the lease by the lessee in that case and its acceptance by the lessor. The fact that Bernstein assigned to Jacobs and Jacobs to Panijel and Panijel entered into possession and continued to pay the rent, did not release the original lessees even though the defendant accepted rent from Panijel and knew that he was in possession. The fact is that every month Panijel paid rent it lessened the financial obligation of the plaintiffs.

' It is insisted, however, that on the 20th day of December, 1927, at the time Bernstein sublet to Jacobs, the plaintiffs consented to the assignment on the express condition that the assignor should remain liable for the prompt payment of rent and that no further assignment of said lease or subletting of the premises should be made without the written consent of the plaintiffs. We regard this restriction as one between the lessee and his assignee and for the benefit of the lessee alone. It is not binding in our Opinion upon the original owners and lessors. The right of action, if any, of the plaintiffs would be under this agreement with Bernstein and Jacobs and against them or either of them. The owners of the premises were not concerned with what was done between the lessee and his assignees with reference to the tenancy of the premises so long as the rent was paid and the covenants of the lease not violated.. Any agreements between them, however, could not be binding upon the lessor. The provision found in the consent of the Amelongs to the assignment of the lease from Bernstein to Jacobs, which provided that there should be no further assignment, was for the benefit of the Amelongs and they would have their right of action, if any, for the violation of the agreement against the assignees of the lease if any contractual rights were violated. As a general rule a covenant or clause in a lease, to the effect that the lessee will not assign, is for the benefit of the lessor alone. He may waive it if he will, but if he does not set it up, no one else can use it against him. Sexton v. Chicago Storage Co., 129 Ill. 318.

The provision for the nonassignment by Jacobs was for the benefit, in this instance, of the lessee and not the lessor.

The judgment of the circuit court was proper and, for the reasons expressed in this opinion, is affirmed.

Judgment affirmed.

Hebel, P. J., and Hall, J., concur.


author: Mr;- Justice Wilson

text:
    Fidelity Trust and Savings Bank v. Walter G. Ahlgrim et al. Fidelity Trust and Savings Bank, Appellee, Robert B. Cook, Receiver, Appellee, v. Adolph J. Krasa, Appellant.
    Gen. No. 37,554.

      Opinion filed December 19, 1934.
    Adolph J. ICrasa, of Chicago, pro se.

    Erhest A. Eklund, of Chicago, for appellee Fidelity Trust &• Savings Bank; John 1ST. Thornburn, of Chicago, of counsel.
   Mr;- Justice Wilson

delivered the opinion of the court.'

The Fidelity Trust and Savings Bank, a corporation, as trustee, filed its bill of complaint in the superior court tó foreclose a certain trust deed on real estate situated in Chicago, and named as defendants Walter Gk Ahlgrim and Flora Ahlgrim, his wife, the makers of the note secured by the trust deéd in question. Thé defendants not being found, service was had by publication.

The trust deed involved in this proceeding, in additión to mortgaging the real, estate, also mortgaged the rents, issues and profits. . A receiver was appointed for the purpose of managing the property and collecting rents, and the suit proceeded to foreclosure. - The decree for' foreclosure was in the usual form, but recited that the defendants were not found in Cook coun- ’ ty and proceeded to show the manner of service which was by publication. The decree then proceeds as follows:

‘ “In case any deficiency is shown in the amount due the said complainant, the trust deed securing the indebtedness due to the complainant shall continue as a lien, prior and superior to that of all parties thereto, upon the rents, issues and profits of the premises hereinabove described, as security for said deficiency until said deficiency shall be satisfied in full, but no longer than the fifteen months’ period from the date of sale allowed by statute for redemption in any event;

The decree further provided that the court should retain jurisdiction of the case for the 15-month period of redemption for the purpose of satisfying the deficiency out of such rents, issues and profits. Upon the sale a deficiency was found due the complainants in the amount of $5,531.73, and thereupon the court in its decree approving the master’s report and, sale entered a deficiency decree in this amount and ordered that it should have execution therefor as upon a judgment at law.

The decree further provided that the receiver should remain in possession of the premises for the purpose of collecting the rents for the period of redemption and that the same should be applied on the deficiency, and that the court would retain jurisdiction of the cause and of the parties for the purposes of enforcing the decree.

The receiver continued in charge of the property and collected the rents, paid the insurance and filed his reports from time to time and made disbursements under order of court. The final report and accounting of the receiver was filed May '5, 1933, and the objections of the defendant Krasa were filed May 25, 1933.

We gather from the record that the defendant Krasa had become the owner of the equity, but when, is not clear. He is now here insisting that the chancellor of the superior court had no power to find a lien on the rents, issues, and profits in case of a deficiency and that he was without power to render a deficiency decree where the makers of the note and trust deed were not before the court on personal service or by entry of their appearances. If his contention is correct, then as the owner of the equity, he would be entitled to the rents and profits collected before the foreclosure sale and during the period of redemption. If he is not correct in his contention, then a number of his objections to the receiver’s report necessarily fail. No cases are cited by either side in which this question is directly involved.

Counsel cite Powell v. Voight, 348 Ill. 605, upon the proposition that during the redemption period the rents belong to the owner of the equity of redemption. We have no quarrel with this rule. Where, however, the trust deed mortgages the rents, issues and profits, the court has a right to enter a conditional judgment to satisfy any deficiency after sale for the benefit of the mortgagee and to apply the rents collected on the judgment. Henry v. Woolf, 187 Ill. App. 129; Owsley v. Neeves, 179 Ill. App. 61.

It is insisted, however, that the court had no power to enter a deficiency decree without personal service or the entry of the appearances of the defendants. The statute of this State, chapter 95, par. 17, Cahill’s Illinois Revised Statutes for 1933, provides as follows:

“In all decrees hereafter to .be made in suits in equity directing foreclosure of mortgages, a decree may be rendered for any balance of money that may be found due to the complainant over and above the proceeds of the sale or sales, and execution may issue for the collection of such balance the same as when the decree is solely for the payment of money. And such decree may be rendered conditionally at the time of decreeing the foreclosure, or it may be rendered after the sale and the ascertainment of the balance due: Provided, that such execution shall issue only in cases where personal service shall have been had upon the defendant or defendants personally liable for the mortgage debt, unless their appearance shall be entered in such suits.”

There is no question but that under the authority of this statute a chancellor could enter a decree for any balance found due the complainant after the sale. The proviso to the effect that no execution should issue, however, except where there was personal service to collect the unpaid balance from the defendants, is clear and in conformity with the common law. The original owner of the equity and the mortgagor having, however, mortgaged the rents, issues and profits in the instrument on which the bill of complaint is based, has granted to the mortgagee a right which he can enforce in a court of equity and the only way in which this can be done is by the court decreeing the payment of the rents, issues and profits during the period of redemption to the mortgagee until the deficiency has been exhausted or the period of time has elapsed. This is.not in the nature of a personal judgment in so far as the rents, issues and profits are concerned, but is an enforcement of the lien granted by the trust deed to an interest in the real estate consisting of the rents and profits ' derived therefrom. In • our opinion the decree in this respect was proper, even though the final decree after sale ordered execution to issue to satisfy the deficiency. This part of the final decree ivas invalid for want of poAver in the chancellor, but the balance of the decree was valid and should be sustained.

The receivership was properly continued under the power of the court, which retained jurisdiction for that purpose, and the receiver’s duties required him to col-loot the rents to apply on the deficiency and to apply on the upkeep of the property. It necessarily follows that the items contained in his report, such as commissions for collecting rents and payments of insurance on the buildings, are necessary expenses incident to his receivership.

The sum of $850 objected to by counsel on the ground that it was paid to the Uptown State Bank, is explained in the brief of plaintiff filed herein, in that this bank was the assignee and successor to the Fidelity Trust and Savings Bank. An examination of the order shows that a clause authorizing the payment of this amount was contained in the decree approving the master’s sale, but directed that it be paid to the Fidelity Trust and Savings Bank. It appears to have been credited on the deficiency decree and, therefore, defendant cannot complain.

Finding no error in the proceedings and for the reasons expressed in this opinion, the decree of the superior court is affirmed.

Decree affirmed.

Hebel, P. J., and Hall, J., concur.


text:
    Mary Rooth and Fred C. Ulrich, Complainants, v. Harry J. Kusel et al., Defendants. Mary Rooth et al., Appellees, v. Fred C. Ulrich, Appellant.
    Gen. No. 37,648.

      Opinion filed December 19, 1934.
    Shulman, Shulman & Abrams, of Chicago, for appellant ; Meter Abrams, of counsel.
    Sonnenschein, Berkson, Lautmann, Levinson & Morse, of Chicago, for appellee First Nat. Bank of Chicago; David Levinson and Jerome S. Weiss, both of Chicago, of counsel.
   Mr. Justice Wilson

delivered the opinion of the court.

This matter was before us on an interlocutory appeal from an order appointing a receiver. (273 Ill. App. 526.) The order appointing a receiver was reversed and upon the filing of the mandate in the superior court, Fred C. Ulrich (appellant here) made his motion to dismiss his own petition and thereupon appealed from the order which he had obtained and which had been entered at his solicitation. The following facts appear of record:

April 21, 1933, the complainant, Mary Booth, filed her bill of complaint in the superior court of Cook county to foreclose the lien of a trust deed, alleging that she was the holder and owner of certain bonds maturing July 1, 1936, and coupons which had become due January 31,1933. The total bond issue aggregated $210,000. Nothing was done with this bill and no receiver appointed or asked for.

November 7, 1933, The First National Bank of Chicago, as successor-trustee under the trust deed, filed a bill of complaint in the circuit court of Cook county to foreclose the lien on the same property. The bill filed by Mary Booth was on behalf of herself and other bondholders similarly situated.

November 21, 1933, solicitors for the complainant and defendant in the cause pending in the superior court appeared in that court and presented a consent order dismissing the suit. On the same day Fred Ulrich, a bondholder, served notice that he would appear in the superior court on the following day and present his petition praying to be permitted to join as cocomplainant. Pursuant to this petition Ulrich, by his counsel, appeared in the superior court and filed his petition in which it was asserted that the suit was dismissed after notice had been received by the complainant of the intention of the petitioner Ulrich to be joined as cocomplainant. Thereupon the chancellor vacated the order dismissing the suit, permitted the petitioner to be made an additional party complainant and appointed Oscar Weiner receiver for the premises, as prayed for in the petition.

November 24, 1933, solicitors for the original complainant, Mary Rooth, and the defendant presented their petition to the Honorable Judge John P. Mc-Goorty," before whom this cause was pending, praying that the order of Judge Robert E. Gentzel be vacated and this matter was referred to Judge Gentzel who had entered the order vacating the order of dismissal.

On December 9,1933, the matter was heard by Judge Robert E. Gentzel on the sworn petitions filed therein, evidence taken, and arguments of counsel, and the motion to vacate was denied.

From the record as shown by the verified petition of the complainant Mary Rooth and the defendant Kusel and the testimony taken, it appears that by agreement of the trustee, the complainant in the suit pending in the circuit court, and the defendant Kusel, the appointment of a receiver was waived upon condition that the rents and profits of the property which might accrue be paid to the complainant, as trustee, and that a monthly accounting be made of the rents together with all the expenditures made in the operation of the premises by the defendant Kusel. It also appears that as part of this agreement and understanding, the complainant Mary Rooth in the suit pending in the superior court was to dismiss that proceeding without costs. This agreement was entered into on November 11, 1933, and an order of dismissal of said cause in the superior court prepared. From this it appears that the agreement between the parties had been entered into several days prior to the time notice was served by Ulrich, in which he asked to be made a cocomplainant in the suit in the superior court.

The rights of the defendant in the proceeding seem to have been lost sight of in the desire of certain parties and counsel to control the litigation.

The question for consideration is whether or not complainant had a right to dismiss her bill before Ulrich had intervened and became a party to the suit. It has long been the settled rule in this State with some exceptions, that a complainant can dismiss his bill at any time. Among these exceptions is where a bill is filed on behalf of the complainant and others, and snch others have intervened and have been made parties complainant. Counsel for Ulrich insists that by the service of notice before the suit was dismissed, he had secured rights which entitled him to have the order of dismissal vacated and to continue the proceedings on his own behalf.

The original action had been pending from April 21, 1933, up to and until November 22, 1933, a period of seven months. Up to the time of making the motion in open court and an order permitting this new eoeomplainant to intervene, he had not subjected himself to the payment of any of the costs of the prosecution of the proceeding and assumed no liability for its expenses. The mere service of notice did not make him a party of record. The original complainant, Mary Booth, still had the right to dominate the proceeding in any way she desired, even to the extent of dismissing the suit. The original complainant had entered into an agreement with the defendant to dismiss the suit because of the understanding that the rents and profits were to be turned over to the trustee in the proceeding in the circuit court for the benefit of all the bondholders, and this agreement was not a nullity. This understanding, entered into before the service of notice and in good faith, should have been carried out. Agreements between the parties to a litigation should be recognized by the court, especially where it would result in a saving to the litigants.

In the case of Piedmont & Arlington Life Ins. Co. v. Maury, 75 Va. 508, it appears that certain petitions had already been filed in the cause brought on behalf of the complainant and others similarly situated, but no order had been entered thereon, The complainant Maury thén moved to dismiss his suit, which was allowed, and an appeal taken from that order on the ground that the petitioners were in court asking to be made cocomplainants. The court in its opinion says:

“But it is thoroughly well settled, that while such a bill may be filed as a matter of convenience to prevent a multitude of suits and accumulation of costs, and for the ascertainment, adjustment and payment of all claims chargeable on the common fund, and where a sale is necessary that such sale may be so made as to be most advantageous, yet the creditors described but not named in the bill are not parties thereto in any sense, nor do they become so unless and until further action be had in the cause. Until such action the suit is the suit of the plaintiff on the record — he is sole dominus litis — has the absolute dominion of the suit— and therefore may dismiss it at his will and pleasure. But this sole dominion ceases when and as soon as the creditors become parties. They become parties in a general sense as soon as a decree or order for a general account is entered under which they may come in and prove their demands. Until such decree is made, unless previously admitted as parties on the record upon special application, they have no such interest in the suit as entitled them to any control of it.
“The contention of the appellants, that the. mere filing of the petitions made the petitioners parties, and put it out of the power of the original plaintiff then to dismiss, cannot be maintained upon either principle or authority. It is conceded, so far as the petitioners are concerned, that up to the. very instant of the application to be made parties, Maury had the indutiable right to dismiss his bill. When they made their application to come into the cause, Maury at once announced his purpose to dismiss, and asked liberty to do so. If he had suffered the petitions to be filed Avithout objection, and the cause had been subsequently proceeded in as if the petitioners had been duly admitted parties, though no order to that effect had been made, by acquiescence he might have lost his right to dismiss at a subsequent time. Such Avas the case in Myers v. Fenn, 5 Wall. 205, 207.” To the same effect see Beadleston v. Alley, 7 N. Y. S. 747; Lee v. City of Casey, 269 Ill. 604.

We are of the opinion that the original complainant, Mary Eooth, had the right to control the litigation including the agreement of settlement Avith the defendant, the OAvner of the property,- and to dismiss her bill at any time up to and until the other cocomplainants had been created as a matter of record or until a final decree had been reached.

If, as the record discloses, there is a suit by the trustee pending in the circuit court, Ulrich’s interest Avill be taken care of. The owner of the property should not be harassed by different proceedings, in different courts, involving the same subject'matter.

The order from Avhich this appeal is prayed Avas entered on the motion of Ulrich, appellant here, and there is serious doubt as to Avhether or not he could question the order of decree Avhich he procured. Kellner v. Schmidt, 328 Ill. 426.

In our opinion there Avas no fraud on the part of the complainant in obtaining the dismissal of the bill, as the facts shoAV that she had been negotiating Avith the defendant for several days prior to the service of notice for the purpose of obtaining the very dismissal that Avas afterAvards obtained.

For the reasons stated in this opinion the order of the superior court is affirmed.

Order affirmed.

Hebel, P. J., and Hall, J., concur.


author: Mr. Justice Sullivan Mr. Justice Sullivan

text:
    Elsie Mae Faubel, Executrix of the Last Will and Testament of Will R. Neff, Deceased, Appellee, v. Michigan Boulevard Building Company et al., Appellants.
    Gen. No. 37,358.

      Opinion filed November 27, 1934.
    Rehearing denied and supplemental opinion filed January 15, 1935.
    Sumner C. Palmer and Cloyes & Klingler, all of Chicago, for appellants.
    Arnd, Gavin, Tearney & Hanley, of Chicago, for appellee; Frederick Arnd, of counsel.
   Mr. Justice Sullivan

delivered the opinion of the court.

This appeal seeks to reverse a judgment of the municipal court for $1,700.50 entered in favor of plaintiff, Elsie Mae Faubel, executrix of the estate of Will R Neff, deceased, and against the Michigan Boulevard Building Company (hereinafter referred to as the Building Company), Wallace G. Clark and J. Milton Trainer, defendants, in an action of trover tried by the court without a jury.

Plaintiff’s statement of claim alleged that prior to and at the time of his death, October 31, 1931, Will R Neff was a dentist occupying suite 1716 and 1717, 30 North Michigan boulevard, in which he had installed and owned a large quantity of equipment, fixtures, furnishings and furniture, used by him in connection with the practice of his profession; that Neff left a will in and by which plaintiff was named executrix and sole devisee; that July 11, 1932, his will was admitted to probate by the probate court and plaintiff was appointed executrix thereof; that the order of the probate court admitting the will to probate and appointing plaintiff executrix was appealed to the circuit court by one George R Neff, and on June 8, 1933, the circuit court entered judgment admitting the will to probate, and July 13, 1933, letters testamentary were issued to plaintiff as executrix; that in June, 1932, plaintiff was lawfully possessed of the goods and property heretofore referred to, valued at $4,000; and that June 15, 1932, defendants wrongfully took such goods and chattels out of the possession of plaintiff, well knowing that same was the property of plaintiff as executrix of Neff’s estate, and converted the property to their own use.

Wallace G. Clark filed an affidavit of merits on behalf of all the defendants in which he admitted that Neff occupied rooms 1716 and 1717, 30 North Michigan boulevard, and that he was the owner at the time of his death of the equipment, etc., contained in such rooms; that Neff left a will in which plaintiff was named executrix of his estate; that the equipment, etc., remained in said rooms; and that the building at 30 North Michigan boulevard was owned by the Building Company.

Clark then alleged that plaintiff took possession of Neff’s personal property located in said rooms immediately after his death and assigned the lease of the suite to one Dr. Bell, and that Bell occupied the rooms for three months; that Neff with his equipment occupied the rooms under a ten-year lease beginning- May 1, 1923, and ending April 30, 1933, at a term rental of $18,800, payable at the rate of $156.66 monthly; that plaintiff never demanded of defendants or any of them such goods and equipment; that the defendants did not on June 15, 1932, nor at any other time wrongfully take the said goods and chattels out of the possession of plaintiff, and that they did not at any time convert them to their own use; that the equipment was not of the value of $4,000 on June 15, 1932; and that defendant Building Company, under the terms of Neff’s lease, leased the premises covered by such lease, after they were vacated- by Dr. Bell, to one Dr. Prinz, and received as rent from him $313.32, which was credited to the rent accruing under the terms of Neff’s lease. Except as to the value of the property defendants are charged with converting, the material facts in this case are either admitted or undisputed.

It appeared that Neff entered into a lease with the building company of the premises described for the period and rental set forth in defendants’ affidavit of merits; that he occupied said premises as his dental offices and paid the specified rent therefor until his death October 31, 1931; that he left a will in which he nominated plaintiff as executrix of his estate; that immediately after Neff’s death she entered into possession of his suite of offices and took charge of the personal property located therein; that a short time thereafter she entered into an arrangement with one Dr. Bell for his purchase of the lease and equipment, furniture, etc.; that he took possession of the premises and continued to occupy same until about February 1, 1932, when, because of his failure to comply with the terms of his agreement, plaintiff repossessed herself of the offices and personal property therein contained; that with the aid and assistance of another dentist she carried on the dental business of the deceased and continued to do so up to and including June 14, 1932; that between the time plaintiff closed the offices for the day on June 14, 1932, and the usual hour for opening same for business the next morning, June 15, 1932, the building company, through its agents, changed the locks on the doors of the offices and deprived plaintiff of access to them; and that defendants still retain the personal property located therein, which belonged to Neff at the time of his death.

Clark and Trainer, who were disclosed by the evidence to be half owners of the building, as Avell as agents for the building company, Avrote the following letter to plaintiff June 27, 1932:

“This is to advise you that because of your failure as executrix of the estate of Dr. Will R Neff, deceased, to pay rent for Suite 1716-17, on the seventeenth floor of the Peoples Trust & Savings Bank Building, Avhich you have occupied since the death of Dr. Will R Neff, up to and including a recent date, and have been carrying on the business of the deceased as executrix, and during which period you have obligated the estate in the sum of $798.17 as per statement herein enclosed, we have on the 15th day of June, 1932, closed said premises, and will not let you reopen same until this obligation shall have been paid. ’ ’

Defendants in their brief state their contentions as follows: (1) That the finding and judgment are contrary to the law and evidence; (2) that the judgment is excessive; (3) that there is no evidence to support the joint judgment against the building company and the individual defendants, Wallace Gr. Clark and J. Milton Trainer; and (4) that the court erred in excluding proper evidence offered by them.

It is sufficient answer to defendants’ first contention to say that the law applied to the admitted facts sustains plaintiff’s right to recovery.

We find no merit in defendants’ second contention that the judgment was excessive. It is true that there was a sharp conflict in the evidence as to the value of the property converted, but the trial judge heard and saw the witnesses and, in our opinion, his finding and judgment as to such value was not against the manifest weight of the evidence. There was ample evidence in the record to sustain the damages awarded.

Defendants have not argued their contention that there was no evidence to support the joint judgment against the building company and the individuals, Wallace G-. Clark and J. Milton Trainer, and it is therefore unnecessary to consider it.

It is sufficient answer to defendants’ fourth contention that the trial court erred in excluding proper evidence to state that no assignment of error is predicated on such ruling or rulings.

It has been rather difficult to follow defendants’ brief and argument. Certain definite contentions are made by them, some of which are either abandoned in their argument or not covered by the errors assigned.

However, defendants’ real contention, in so far as we are able to glean it from their argument, is that they were justified under the terms of Neff’s lease in seizing his equipment, etc., as they did, because rent had accrued under the lease subsequent to his death and was due and owing to them on June 15, 1932, when they locked plaintiff out of the premises and denied her right to the possession of Neff’s property.

It is urged that plaintiff’s action must fail because there was no demand made upon defendants to return the property and no refusal by them to do so. If a demand were necessary the evidence clearly shows that plaintiff made such demand for the return of the property which defendants refused to comply with. But the law is firmly established that no demand is required as a condition precedent to recovery in an action of trover where the property has been wrongfully taken. It is only Avhere a party comes rightfully into possession but his possession has become wrongful that a demand and refusal are necessary to prove that he has converted the property to his ovm use. When the possession is taken under a wrongful claim of oAvnership the taking is of itself a conversion and no demand is required. (Bruner v. Dyball, 42 Ill. 34.) Even the cases cited by defendants adhere to this rule and we have been unable to find a case that holds to the contrary.

Defendants cannot justify their unlawful seizure of the property on the ground that there AAas rent due and owing to them under Neff’s lease. They urge that they had a right under the terms of the lease to seize and sell it. The lease gave them no such right. We have carefully examined the lease and find no right or authority granted therein to the lessor to seize and sell lessee’s property found in the premises except in ease of abandonment or vacation thereof by the lessee. Defendant building company might have proceeded legally to distrain the property for the unpaid rent or it might have enforced its lien upon the property, provided for in the lease, by a foreclosure in equity. It saw fit to pursue neither its legal or equitable remedy, but Avrongfully and unlawfully seized and detained the property and still retains it. In our opinion the defendants cannot escape liability for so doing.

Defendants then urge that plaintiff had no such right of property June 15, 1932, in the equipment, etc., converted by them as justify the maintenance of this action by her, inasmuch as letters testamentary were not issued to her as executrix of Neff’s will until July 13, 1933, pursuant to the judgment of the circuit court June 8, 1933, admitting Neff’s will to probate.

To maintain her action of trover plaintiff must show not only a tortious conversion of the personal property by defendants, but also that at the time of the alleged conversion she had the right of property, general or special, in the chattels converted, and also the possession or a right to the immediate possession thereof. There must be a concurrence both of the right of property, general or special, and of the actual possession or the right to immediate possession, and this concurrence must exist at the time of the conversion. (Union Stock Yard & Transit Co. v. Mallory, Son & Zimmerman Co., 157 Ill. 554.)

All of these elements concur in this cause. The tortious conversion has been shown. Plaintiff’s possession of the property is admitted, and, although letters were not finally issued to her as executrix of Neff’s estate until July 13, 1933, she had by virtue of her nomination as executrix by Neff a special right of property in the equipment, etc., under section 4, chapter 3, Cahill’s Illinois Revised Statutes, which provides in part as follows:

“The power of the executor over the testator’s estate, before probate of the will and obtaining letters testamentary, shall extend to the burial of the deceased, the payments of necessary funeral charges, and the taking care of the estate; . . . .” It was her duty under the statute to preserve the property of the testator prior to the issuance of letters to her as executrix. In any event, when the will is admitted to probate the grant of letters relates back to the date of the testator’s- death and validates all acts of the executrix which are otherwise lawful and proper. (Wheeler v. Chicago Title & Trust Co., 217 Ill. 128; Globe Accident Ins. Co. v. Gerisch, 163 Ill. 625; Am. & Eng. Ency. of Law, 2nd Ed. 907.)

It is clear that under the statute and cited authorities plaintiff had a right of property in the chattels converted. The conclusion is inevitable that defendants are guilty of the unwarranted and unlawful conversion of property belonging to Neff’s estate.

For the reasons indicated herein the judgment of the municipal court is affirmed.

Affirmed.

G-ridley, P. J., and Scanlan, J., concur.

Supplemental Opinion Upon Petition for Rehearing.

Mr. Justice Sullivan

delivered the opinion of the court.

Defendants filed a petition for a rehearing in which points are urged which were raised neither in the trial court nor in the brief and argument filed in support of their appeal. Although under the rules of this court we might have disregarded the questions thus presented, we have given them careful consideration.

In their petition defendants contend that the lien provision in the lease in this cause is in the nature of a chattel mortgage and that the rights of the parties thereunder are governed by the rules of law applicable to chattel mortgages; that after default in the payment of rent the lessors had the legal title to the property contained in the demised premises by reason of their lien and also had the immediate right of possession of said property without the consent of the mortgagor (lessee); that after such default the only restriction on the right and mode of taking possession was that the lessors must act in an orderly manner and must not commit a breach of the peace; that their right to take possession of said property, without the consent of the lessee and without process of law, arises by operation of law and exists without regard to any power of seizure in the lease; and that the right to take possession exists without regard to the right of distraint and that the levy of a distress warrant is not the only means for the assertion, protection or enforcement of the landlord’s lien.

We think that such contentions, predicated upon the lease lien in this case, are unique in so far as the relation of landlord and tenant is concerned. If the law is as contended by defendants, then, if any tenant occupying an apartment under a similar lease is in arrears for the stipulated rent for a day, a week, a month or any other period, the lessor, during the temporary absence of such tenant, may, without process of law, change the locks on the doors of his apartment, refuse him entrance to same, deny him access to his furniture or other property contained therein and the use thereof and thus compel him to pay his unpaid rent or resort to a court of equity to establish his right to redeem his property.

We are of the opinion that this never was the law of this State and is not now. We have carefully examined every case cited by counsel and many others in this connection, and, while some of them hold that the lien of a landlord reserved in a lease is in the nature of a chattel mortgage for the purpose of determining the rights of conflicting lienors or claimants to the property of the tenant involved in the respective cases, we have been unable, after diligent search, to. find any authority that holds that as between the lessor and the lessee a lien provision in a lease may be construed as a chattel mortgage, or as being in the nature of a chattel mortgage, with the result that the landlord has the right to seize the tenant’s property without process of any kind upon default in the payment of rent. In every case cited the lienors resorted to the orderly processes of law in their efforts to establish their liens and right to preference as to the property of the tenant on the demised premises because of such lien. None of the cited cases bears upon the right of a lessor to enter the premises of a lessee with force and seize his property, or the lessor’s right to reduce such property to his possession, or the manner in which the lease lien may be foreclosed or enforced against the lessee.

Under the law of this State where a chattel mortgage is given, the title in the mortgagee, upon condition broken, becomes absolute and he may reduce the property to his possession, and as a general rule, in the absence of a statutory provision, or where there is no language in the mortgage to restrain or control, the mortgagee has the right to immediate possession. This right arises by virtue of the fact that the title to the property is vested in him. (11 C. J. 550, par. 247.) In the instant case the lease vests no title, either absolute or conditional, in the lessors and gives them no right to the possession of the premises in question except as set forth in section 10 of the lease.

As stated in our former opinion neither under the provisions of section 10, nor in any other provision of the lease in this case, are the lessors vested with any right either to seize and dispose of, or to seize and withhold the lessee’s property, except in the event the lessee vacated or abandoned the premises.

We think that the only purpose served by the injection of the chattel mortgage theory into this case is to confuse the issues. The law governing chattel mortgages cannot possibly be applicable to the determination of the questions presented on this appeal. The rules and principles governing the relations between landlord and tenant are controlling.

Independently of the provisions of a lease a landlord in this State has no common law lien upon the property of his tenant for rent; and he has no statutory lien except as to growing crops. (Herron v. Grill, 112 Ill. 247; First Nat. Bank of Joliet v. Adam, 138 Ill. 483.) If a lien is given by statute it exists independently of the remedy to enforce it; but in the absence of a statutory lien it is necessary to take proceedings to acquire a lien on the property of the tenant. (36 C. J. 470, par. 461.)

Defendants not only unlawfully converted the lessee’s property but their forcible invasion of the tenant’s premises was unwarranted under the established law of this State. Even if there were rent due and unpaid the landlord had no right to forcibly enter into possession of the demised premises without proper process. (Hubner v. Feige, 90 Ill. 208.) If defendants had the right to possession they should have gone about recovering it by the orderly processes of law. (Mitchell v. Tosetti Brewing Co., 189 Ill. App. 163.)

In the case of Schwartz v. McQuaid, 214 Ill. 357, where, in the tenant’s absence, the landlord or his agent pushed aside an obstruction over a hole in the window, reached through and opened the door, and thereafter changed the locks on the doors and barred the tenant from the premises, the court held that, even though the tenant was wrongfully in possession, the landlord had no right to oust him unless' he could do so without force, and that, even though the premises were being used for illegal purposes, the lessee was entitled to his day in court before he could be deprived of the benefits of his lease.

Any entry against the will of the lessee must be considered an entry by force. (Phelps v. Randolph, 147 Ill. 335.)

In the case of Friedman v. Kappel, 257 Ill. App. 568, this court, after citing Kellogg Newspaper Co. v. Peterson, 162 Ill. 158, and Powell v. Daily, 163 Ill. 646, to the effect that at common law the goods of a tenant were free from the landlord’s lien until they were actually taken under a distress warrant and that, except as to crops grown or growing on the demised premises, the landlord in this State can acquire a lien only by commencing proper proceedings, held, after reciting the lien provision of the lease in that case which was similar to the one in this case, that, if it created a lien, it contemplated its enforcement in a proceeding in equity. In the instant case the lease specifically provided for foreclosure in equity of the lien therein reserved. "While this remedy was not exclusive the provision for such foreclosure is conclusive of the fact that defendants contemplated, when they drew the lease,, that the lien therein provided for could only attach to tenant’s property through appropriate proceedings.

Under the rule announced in Lillard v. Noble, 159 Ill. 311, it is doubtful if a proceeding in distraint will lie against the administrator or executor of a deceased tenant for the reason there announced that “its only use is to obtain possession of the property where the tenant might otherwise dispose of it to defeat the lien. There is no such danger from the administrator and, therefore, no use for such proceeding against it.” In that case the claim for the unpaid rent was filed against the estate of the deceased tenant with a prayer for preference because of the landlord’s lien, and appropriately so, the court held. If the rule announced in the Lillard case precluded defendants in this case from distraint against the tenant’s property, at least two other remedies were available to them to assert and enforce their lien for the unpaid rent. They could have filed- their claim, seeking preference because of their lien, against Neff’s estáte in the probate court, or they could have proceeded to foreclose in equity against the tenant’s property as provided in the lease. They did" neither, but unlawfully invaded lessee’s premises and seized and withheld the property con-tamed therein. For such conversion they cannot escape liability for the value of the property.

We see no reason to change our former opinion and the petition for rehearing is denied.

Petition for rehearing denied.

G-ridley, P. J., and Scanlan, J., concur.


author: Mr. Presiding Justice

text:
    Max Wolman, Trading as Chicago Legal Loan Company, Appellant, v. Joseph Raphael and Beach Garage Company. Beach Garage Company, Appellee.
    Gen. No. 37,597.

      Opinion filed December 24, 1934.
    Jacob Kosbie, of Chicago, for appellant.
    Guy C. Baltz, of Chicago, for appellee.
   Mr. Presiding Justice

O’Connor delivered the opinion of the court.

Defendant, Joseph Raphael, Avho was not served in this case, owned an automobile and on December 26, 1933, executed a chattel mortgage to plaintiff to secure a loan of $234. Raphael defaulted in making payment of an instalment on the $234 and plaintiff brought an action of replevin to recover possession of the automobile which was then in the garage of the defendant Beach Garage Company, a corporation. The automobile was taken on the Avrit by the bailiff of the municipal court and delivered to plaintiff. The garage company claimed it had a lien on the automobile for $183.90, $149 of which was for storage at $15 a month, and the remaining $34.90 for material and repairs. There was a trial before the court Avithout a jury; the court found plaintiff was entitled to retain the automobile but subject to the garage company’s lien of $183.90, and the judgment was that plaintiff pay the garage company Avithin 20 days or the property would be returned to it. Plaintiff appeals from this judgment, claiming the garage company was not entitled to a lien as against him.

There is no dispute as to the facts in the case, and in brief compass they are that plaintiff, under the name of Chicago Legal Loan Company, was engaged in the business of making loans of $300 or less at the rate of 3% per cent per month, pursuant to a license issued in accordance Avith the provisions of the Act of 1917, ch. 74, p. 1703, Cahill’s 1933 Statutes; that December 26, 1933, he lent Joseph Raphael $234 and to evidence this Raphael executed his promissory note for that amount, payable in monthly instalments of $20 each, the first instalment being due and payable January 26, 1934; to secure the payment Raphael executed his chattel mortgage conveying the automobile in question. The mortgage was recorded in the recorder’s office of Cook county December 30, 1933. No part of the indebtedness was paid and February 26, 1934, plaintiff brought replevin to obtain possession of the automobile. The evidence further shows that Raphael had kept this automobile in the Beach company’s garage for a period of about three years prior to the replevin suit; that he ivas to pay $15 a month at the end of each month; that he made all these pay-. ments until March 1, 1933, and from that time on he failed to make the payments of $15 a month; that from April 9, 1933, until December 20, 1933, the garage company, at Raphael’s request, furnished material and labor on the car at a reasonable charge of $34.90; that from the time the car was put in the garage Raphael used it daily until about the first of February, 1934, when the garage company refused to let him take it out of the garage until he paid it what he owed.

The defendant claims a lien by virtue of the provisions of sections 1 and 2 of an act of the legislature passed July 1, 1921, entitled, “An Act for the better protection of any person, firm or corporation expending labor, shill or materials upon, or furnishing storage for, any chattel, creating a lien upon such chattel, and providing for the enforcement of such lien.” (Pars. 45 and 46, p. 1775, Cahill’s 1933 Statutes.), Sec. 1 of the Act provides that, Á Every person, firm or corporation who has expended labor, skill or materials upon any chattel, or has furnished storage for said chattel, at the request of its owner, reputed owner, or authorized agent of the owner, or lawful possessor thereof, shall have a lien upon such chattel beginning on the date of the commencement of such expenditure of labor, skill and materials or of such storage . . . for a period of one year from and after the completion of such expenditure of labor, skill or materials, or of such storage, notwithstanding the fact that the possession-of such chattel has been surrendered to the owner, or lawful possessor thereof.”

Sec. 2. “Such lien shall cease at the expiration of sixty (60) days from the date of delivery of such chattel to the owner thereof, or his duly authorized agent, unless the lien claimant shall within said sixty (60) days, file in the office of the recorder of deeds of the county in which said labor, skill and materials were expended on such chattel, or storage furnished for such chattel, a lien notice.” Then follows a provision as to the contents of such notice.

Plaintiff contends that the word “storage” as used in the two sections above quoted from, should not be construed to cover the charge of $15 a month made by the garage company since the owner of the car was permitted to take the car from the garage daily. This contention is hypercritical and cannot he sustained. We think the legislature intended to give one who conducts a garage a lien on an automobile kept in the garage for the charges made, whether the automobile was kept for a stated time or was taken out daily by the owner.

Plaintiff further contends that the garage company lost its right of lien because it failed to filé notice of its claim within 60 days, as provided by section 2 of the Act. We think this contention is of no importance here because the first item claimed by the garage company against Raphael was due March 1,1933, less than one year before the beginning of replevin and the automobile was in the possession of the garage company. The statute gives a lien upon the chattel for a period of one year “from and after the completion of such expenditure of labor, skill or materials, or of such storage, notwithstanding the fact that the possession of such chattel has been surrendered to the owner,” provided the notice for lien is filed within 60 days after the chattel is delivered to its owner, but we think no notice need be given where the chattel is in the possession of the garage company.

These provisions of the statute giving garage keepers and repairmen a lien for services or supplies do not apply where the owner is permitted to take the automobile away and mortgage it to an innocent purchaser for value without notice. Lanterman v. Luby, 96 N. J. L. 255. In that case, in speaking of the word “lien” as used in the Garage Keepers’ Lien Act of that State, it is said (p. 257): “In its pure legal sense it ‘implies one is in possession of property of another, and that he detains it as security for some demand which he has in respect to it. A lien, therefore, implies, first, possession by the creditor; second, title in the debtor, and third, a debt arising out of the specific property. ’ ... A lien differs from a mortgage, in that a mortgage is a transfer of title as security . . . whereas a lien confers no title; it differs from a pledge, in that a pledge is a transfer of possession as security, whereas in the case of the lien the transfer of possession is not for the purpose of security, but in order that the service may be rendered to the chattel in question, and the lien arises from the rendering of that service if such service be not paid for. It is essentially a right to detain. . . .

“Where, however . . . the parties themselves agree with each other that the owner may take the chattel away from the possession or control of the lien claimant, and that the lien shall nevertheless continue, such agreement, as against the owner, who was a party to it, will be good; but it will not be binding against a subsequent innocent purchaser for value without notice.” And continuing the court said (p. 259): “Secret liens upon chattels are an obstruction and a menace to trade and as such are against the policy of the law. They attempt to contradict and to destroy the universally accepted and natural as well as legal badge of ownership of chattels, which is possession. The law is most jealous in its protection of an innocent purchaser of a chattel for value without notice, who has relied upon possession as the badge of ownership. If the property has been stolen, his title may be bad, but, short of that, if he has looked for liens or incumbrances where the law has told him to look, as, for instance, for chattel mortgages in the record where they are required to be recorded, and he finds none, he is entitled to rely upon what the possession tells him. ’ ’ In that case the court held that where a garage keeper permitted an automobile for which he had furnished services and supplies at his garage to be taken away by the owner without receiving payment, and while away from the garage the owner sells it to an innocent purchaser for value without notice, the right to a lien was gone. To the same effect is Huie v. Soo Hoo, 132 Cal. App. 787.

In the instant case the record discloses that the automobile was taken out of the garage every day and returned at night, and it must be presumed on this record that the automobile was out of the garage at the time of the execution of the chattel mortgage to plaintiff; therefore plaintiff was an innocent purchaser for value without notice, and the defendant garage company had no right to claim a lien on the automobile as against plaintiff’s chattel mortgage.

The judgment of the municipal court of Chicago is reversed and the cause remanded with directions to enter a judgment in favor of plaintiff in accordance with what we have said in this opinion.

Reversed and remanded with directions.

McSurely and Hatchett, JJ., concur.